Mar 1, 2020 7 min read

2019 was a transformational year of growth for Community Bank in many ways. Community Bank is confident that this transformation will create long term value for both its customers and itself.

Continued growth through acquisition

On April 30, 2018, Community Bank closed on the merger of First West Virginia Bancorp (“FWVB”) and its wholly-owned subsidiary, Progressive Bank, located in Wheeling, WV, into the Community Bank (“CBFV”). This transaction added eight more branch offices, approximately $350 million in assets.

Community Bank focused on the growth of these branches and its overall reach in this region. The FWVB merger provided approximately $281.6 million in low-cost deposits, $95.5 million in loans and eight branch locations in the Upper Ohio Valley and Buckhannon, West Virginia regions. In response, the Bank added branch and back-office personnel to accommodate the increased customer traffic and transaction volumes.

The FWVB merger was the primary reason for the increase in volume-based service fee income and changes to various non-interest expenses year over year. In addition, although deposits increased $31.7 million in the fourth quarter of 2019, the FDIC assessment expense decreased $173,000 due to $308,000 of DIF credits.

The general economy of this footprint of this new market in West Virginia and Eastern Ohio (contiguous to the Southwestern Pennsylvania market) has a generally positive outlook for 2020 with robust shale gas development and the momentum for petrochemical industry investment.

In addition to the acquisition of FWVB, the subsidiary of CBFV, Exchange Underwriters (“EU”), acquired Beyon Insurance (“Beynon”) on Aug. 1, 2018. Insurance commissions increased $761,000 due to the full-year impact from the acquisition of the customer list, combined with organic growth and a $237,000 increase in contingency fees.

“We are pleased to report on the wonderful year experienced by CB in 2019.” said Barron P. McCune, Jr., President and Chief Executive Officer. “The first full year of operations after the FWVB merger and the acquisition of Beynon has boosted our overall financial performance. The 8% increase in annual dividend and stock repurchase program provided further opportunity to increase shareholder value. There will always be competition, but while other organizations may be leveraged, we have the advantage of a strong base of low-cost deposits and available liquidity to lend across our expanded market area. A solid fourth quarter of loan growth combined with the resolution of a large problem credit that improved our already strong credit quality numbers creates momentum into the new year.”

Continued growth through internal productionFrom a capital management perspective, the Company announced its first stock repurchase program to repurchase up to $5.0 million of the Company’s outstanding common stock in the fourth quarter of 2019, and annualized dividends increased $0.07 per share or 7.9%. As of December 31, 2019, the Company had repurchased 2,150 shares of common stock at an average price of $29.28 per share.

Total loans increased $39.6 million, or 4.3%, in 2019, driven by commercial and residential real estate production. Credit quality remains strong with the nonperforming loans to total loans ratio decreasing 12 basis points year-over-year to 0.57% as of Dec. 31, 2019. An $851,000 payoff of a residential troubled debt restructuring contributed to the improved annual metric. As a result of strong credit quality and a large decline in net charge-offs, the provision for loan losses was $725,000 for the year ended Dec. 31, 2019, compared to $2.5 million for the year ended December 31, 2018. Net charge-offs for the year ended Dec. 31, 2019 were $416,000, which included $398,000 of net charge-offs on automobile loans, compared to net charge-offs of $1.8 million for the year ended Dec. 31, 2018, which were primarily due to charge-offs of $1.2 million for three commercial and industrial relationships in the first quarter of 2018. Net charge-offs to average loans decreased from 0.21% to 0.05% year-over-year, with the allowance for loan losses to total loans ratio declining slightly to 1.04% at Dec. 31, 2019, compared to 1.05% at Dec. 31, 2018.

Total deposits increased $31.7 million, or 2.9%, to $1.12 billion at Dec. 31, 2019, compared to $1.09 billion at Dec. 31, 2018. Average non-interest-bearing demand deposits increased $34.4 million, or 14.8%, year-over-year, and represent 24% of the total deposit portfolio. The Bank has been selective on offering promotional interest rates and continues to evaluate its rate structure in light of rate decreases by the Federal Reserve.

Net interest margin increased five basis points year over year to 3.64% for the year ended Dec. 31, 2019. Interest income on loans increased $5.2 million due to an increase in average loans outstanding of $69.7 million combined with a 23 basis points increase in average loan yield. In addition, interest income on securities increased $1.4 million year over year. A portion of the investment portfolio was restructured in the current year to mitigate deteriorating investment-credit risk and to reinvest in higher-yielding, longer-term investments as well as to mitigate call risk in a declining interest rate environment. The Bank realized additional income from accelerated accretion of discounts on security calls. This was partially offset by a $2.3 million increase in interest expense on deposits due to an increase in average interest-bearing deposits of $118.7 million. The average cost of interest-bearing deposits increased 18 basis points in the current period, driven by higher cost municipal and time deposits. Although recent interest rate cuts have occurred, higher cost certificates of deposit will continue to impact interest expense until maturity.

In addition, the Bank has raised its brand awareness in the Pittsburgh and greater Southwestern Pennsylvania markets through a more robust marketing plan that utilized various media outlets and allowed the Bank to share their story and services with current and potential customers throughout the region. Some of these strategies included video marketing, low-cost social media advertising and branded, sponsored editorial content that helps educate the local community on how the Bank can serve as a resource to them. This same model has been implemented throughout their new West Virginia and Eastern Ohio markets to continue sharing their story and services as they fully begin presenting themselves in these regions.

Continued growth through community engagement

Throughout 2019, Community Bank continued to serve the local community through unique and meaningful ways – like its Community Bank Cares program. Community Bank Cares is a program where for every loan Community Bank makes, the Bank will donate $100 to the customer’s favorite charity or church in their honor.

Through 2019, Community Bank has donated XXXX to local charities and churches in honor of its customers. Since its inception, the Community Bank Cares program has donated XXX to local causes. This specialized program allows Community Bank to give back, engage with their client base and truly listen to what is important to the people they serve, as well as the communities they are involved in.

In addition to these donations, the community-minded employees of Community Bank logged thousands of hours of service to the many communities within the market through their churches, economic development organizations and service clubs.

Community Bank has strived since to serve as a community partner since its inception in 1901. Its award-winning services are frequently adjusted to serve the needs of its clientele best. In 2019, it was named the “Best Local Bank” in the Observer-Reporter best of the best competition. They were also listed as honorable mentions in the “Best Mortgage Lender” and “Best Overall Business in Greene County” categories.

CB Financial Services, Inc. is the bank holding company for Community Bank, a Pennsylvania-chartered commercial bank headquartered in Washington, Pennsylvania. Community Bank operates twenty offices in Greene, Allegheny, Washington, Fayette, and Westmoreland Counties in southwestern Pennsylvania, seven offices in Brooke, Marshall, Ohio, Upshur and Wetzel Counties in West Virginia, and one office in Belmont County in Ohio. Community Bank offers a broad array of retail and commercial lending and deposit services and provides commercial and personal insurance brokerage services through Exchange Underwriters, Inc., its wholly-owned subsidiary. Consolidated financial highlights of the Company are attached.

For more information about CB and Community Bank, visit our website at communitybank.tv.