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BUSINESS COMBINATION | 9 Months Ended
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Sep. 30, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract] |
BUSINESS COMBINATION | BUSINESS COMBINATION On July 23, 2025, the Corporation completed its previously announced acquisition of ESSA and its subsidiary bank, ESSA Bank & Trust Company ("ESSA Bank"), pursuant to the definitive merger agreement (the "Merger Agreement") dated as of January 9, 2025. The Corporation's acquisition of ESSA was an all-stock transaction. Under the terms of the Merger Agreement, ESSA merged with and into the Corporation, with the Corporation as the surviving entity, and immediately thereafter, ESSA Bank merged with and into CNB Bank, with CNB Bank as the surviving bank (the "Merger"). Banking offices of ESSA Bank operate under the trade name ESSA Bank, a division of CNB Bank. Pursuant to the Merger Agreement, each outstanding share of ESSA common stock was converted into the right to receive 0.8547 shares of the Corporation's common stock. The total consideration paid to ESSA shareholders was approximately $202.6 million, comprised of approximately 8,359,430 shares of the Corporation's common stock, valued at approximately $202.5 million based on the July 23, 2025 closing price of $24.23 per share of the Corporation's common stock, and $21 thousand in cash in lieu of fractional shares. The Merger has extended CNB Bank’s branch network into the Northeastern Region including the Lehigh Valley of Pennsylvania through the addition of ESSA’s 20 community offices. As a result of the Merger, the Corporation recorded preliminary goodwill totaling $49.9 million at July 23, 2025, which reflects anticipated synergies and strategic benefits from combining operations. While the Corporation believes the information available on July 23, 2025, provided a reasonable basis for estimating fair value, the Corporation may obtain additional information and evidence within the one-year measurement period that could result in changes to the estimated fair values amounts and associated goodwill. Valuations subject to change include, but are not limited to, loans receivable, premises and equipment, identified intangible assets, certain deposits, and deferred income taxes. Subsequent adjustments, if necessary, will be reflected in future filings. Merger and integration related costs associated with the Merger were $4.2 million and $6.0 million for the three and nine months ended September 30, 2025, respectively. Such costs include employee severance, professional fees, system conversion, and lease and contract termination expenses, which have been expensed as incurred, and are recorded in “Merger and integration costs” on the Corporation's condensed Consolidated Statements of Income. Goodwill is not deductible for income tax purposes as the transaction qualifies as a tax free “reorganization” within the meaning of Section 368(a). The following tables provides a summary of the consideration transferred and the fair value of the assets acquired, and liabilities assumed as of the date of the Merger, (dollars in thousands):
| July 23, 2025
Merger consideration |
Value of stock consideration assigned to ESSA common shares exchanged for stock paid to shareholders | $ | 202,549 |
Value of cash consideration for ESSA common stock exchanged for cash | 21 |
Total merger consideration | $ | 202,570 |
| July 23, 2025
Identifiable net assets acquired, at fair value |
Assets acquired |
Cash and cash equivalents | $ | 27,424 |
Debt securities available-for-sale | 229,098 |
Loans receivable | 1,651,056 |
Premises and equipment | 16,019 |
Operating lease right of use assets | 3,706 |
Accrued interest receivable and other assets | 45,810 |
FHLB interests | 24,218 |
Bank owned life insurance | 40,835 |
Core deposit intangible | 35,335 |
Goodwill | 49,899 |
Total assets acquired | 2,123,400 |
Liabilities assumed |
Deposits | 1,455,805 |
Short-term borrowings | 437,000 |
Accrued interest payable and other liabilities | 24,424 |
Operating lease liabilities | 3,601 |
Total liabilities assumed | 1,920,830 |
Net assets acquired | $ | 202,570 |
The Corporation accounted for the Merger using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed, and consideration exchanged were recorded at estimated fair value on the acquisition date, in accordance with purchase accounting. The Corporation assessed the fair values based on the following methods for the significant assets acquired and liabilities assumed: Cash and cash equivalents: The fair value was determined to approximate the carrying amount based on the short-term nature of these assets. Debt securities AFS: The fair value of the investment portfolio was based on quoted market prices and dealer quotes and pricing obtained from independent pricing services. Following the completion of the Merger, the Corporation sold approximately $204.1 million of $229.1 million in debt securities it acquired through the Merger. These debt securities were sold at fair value and therefore no gain or loss was recognized upon the sale. Loans receivable: The fair value of loans acquired from ESSA were estimated using the discounted cash flow method on an individual loan basis. To estimate the value of the loans, each loans’ contractual cash flows were projected, adjusted for expected prepayments and credit losses. Assumptions for credit losses were based off the risk characteristics of each loan. For loans specifically evaluated by the Corporation, credit losses were based on the estimated loss identified by the Corporation. The projected cash flows were then discounted to present value using a discount rate based on the relative risk of the cash flows. In connection with the acquisition, the Corporation has purchased Purchase Credit Deteriorated ("PCD") loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An allowance for credit loss is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through the provision for credit loss expense. The Corporation evaluated acquired loans for deterioration in credit quality based on any of, but not limited to, the following: (1) non-accrual status; (2) modifications for borrowers experiencing financial difficulty; (3) risk ratings of watch, special mention, substandard or doubtful; and (4) loans greater than 60 days past due. Of the $1.7 billion net loans held for investment acquired, $132.2 million were identified as PCD loans on the acquisition date. The following table provides a summary of these PCD loans at acquisition:
| July 23, 2025
Par value of acquired loans at acquisition | $ | 138,153 |
Allowance for credit losses at acquisition | (1,857) |
Non-credit discount at acquisition | (4,121) |
Total merger consideration | $ | 132,175 |
Premises and equipment: The fair value of bank premises and equipment held for use was valued by obtaining recent market data for similar property types with adjustments for characteristics of individual properties. The Corporation acquired 20 branches from ESSA, 10 of which were owned premises. Operating lease right of use (“ROU”) assets and lease liabilities: The fair value of the lease ROU assets was measured at an amount equal to the lease liability and evaluated for favorable or unfavorable lease terms when compared with market terms on a lease-by-lease basis. Accrued interest receivable and other assets: Consists mainly of accrued interest receivable, accounts receivable, and deferred tax assets. The accrued interest receivable and accounts receivable was fair valued based on the cash value expected to be received. Deferred taxes represent the expected book and tax differences which approximate fair value. FHLB interests: Included in the identifiable assets acquired is FHLB stock, which represents the acquired entity’s required membership stock in the Federal Home Loan Bank system, carried at par value (cost) with no readily determinable fair market value, consistent with ASC 942-325. Bank owned life insurance (“BOLI”): The fair value of BOLI is carried at its current cash surrender value, which is the most reasonable estimate of fair value. Core deposit intangibles (“CDI”): CDI represents the future economic benefit of acquired customer deposits. The fair value of the CDI was estimated based on a discounted cash flow methodology that incorporated expected customer attrition rates, cost of deposit base, net maintenance cost associated with customer deposits, and the cost for alternative funding sources. The discount rates used were based on market rates. Deposits: The fair value of interest bearing and non-interest bearing deposits is the amount payable on demand at the acquisition date. The fair value of time deposits was estimated using a discounted cash flow calculation that includes a market rate analysis of the current rates offered by market participants for certificates of deposits that mature in the same period. Short-term Borrowings: Acquired other borrowings consisted of FHLB short-term borrowings. The carrying amount of short-term borrowings was determined to approximate fair value. Subsequent to the completion of the acquisition, the Corporation repaid $265.4 million of $437.0 million in FHLB borrowings. Accrued interest payable and other liabilities: Accrued interest payable and other liabilities were fair valued using the expected amount of cash to be paid. Supplemental Pro Forma Financial Information The following table presents supplemental pro forma information as if the Merger had occurred as of January 1, 2024. The unaudited pro forma information combines the historical results of the Corporation and ESSA in the Corporation’s Consolidated Statements of Income and includes adjustments for the estimated impact of certain fair value adjustments such as interest income on loans and securities acquired, amortization of intangibles arising from the merger, depreciation expense on property acquired, interest expense on deposits acquired, and the related income tax effects. The pro forma information is not indicative of the results of operations that would have occurred had the transactions been effected on the assumed dates. The Corporation expects to realize additional operating cost savings and business synergies from the acquisition; however, such anticipated benefits are not reflected in the pro forma amounts presented below (dollars in thousands).
|  | Pro Forma Three Months Ended |  | Pro Forma Nine Months Ended
|  | September 30, 2025 |  | September 30, 2024 |  | September 30, 2025 |  | September 30, 2024
|  | (Unaudited) |  | (Unaudited) |  | (Unaudited) |  | (Unaudited)
CNB Standalone Revenues |  | $ | 77,695 |  |  | $ | 58,459 |  |  | $ | 195,838 |  |  | $ | 167,218 |
ESSA Standalone Revenues |  | 4,419 |  |  | 16,516 |  |  | 37,306 |  |  | 49,661 |
Loan Accretion |  | 6,422 |  |  | 7,706 |  |  | 19,265 |  |  | 23,118 |
Total revenues(1) |  | 88,536 |  |  | 82,681 |  |  | 252,409 |  |  | 239,997 |
Net income available to common shareholders |  | $ | 13,313 |  |  | $ | 23,428 |  |  | $ | 55,315 |  |  | $ | 71,145 |
(1) Includes net interest income and non-interest income.

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