CNB Bank Shares : Independent Auditors' Review Report - 06/30/2022

Independent Auditors' Review Report

Board of Directors

CNB Bank Shares, Inc.

Carlinville, Illinois

Results of Review of Interim Financial Information

We have reviewed the accompanying interim condensed consolidated financial statements of CNB Bank Shares, Inc. and subsidiary, which comprise the interim condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021, and the related interim condensed consolidated statements of income for the three and six months ended June 30, 2022 and 2021, and the interim condensed consolidated statements of comprehensive income, stockholders' equity, and cash flows for the three and six months ended June 30, 2022 and 2021, and the related notes to the interim condensed consolidated financial statements.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed interim financial information for it to be in accordance with generally accepted accounting principles in the United States of America for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

Basis for Review Results

We conducted our reviews in accordance with auditing standards generally accepted in the United States of America (GAAS) applicable to reviews of interim financial information. A review of condensed interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. A review of condensed interim financial information is substantially less in scope that an audit conducted in accordance with GAAS, the objective of which is the expression of an opinion regarding the financial statements as a whole, and accordingly, we do not express such an opinion. We are required to be independent of CNB Bank Shares, Inc. and to meet our ethical responsibilities in accordance with the relevant ethical requirements relating to our review. We believe that the results of the review procedures provide a reasonable basis for our conclusion.

Responsibilities for Management for the Interim Financial Information

Management is responsible for the preparation and fair presentation of the interim condensed consolidated financial information in accordance with generally accepted accounting principles in the United States of America for interim financial information and the instructions to Form 10- Q and Rule 10-01 of Regulation S-X and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of interim financial information that is free from material misstatement, whether due to fraud or error.

Report on Interim Condensed Balance Sheet

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of CNB Bank Shares, Inc. and subsidiary as of December 31, 2021, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the year then ended (not presented herein); and we expressed our unmodified audit opinion on those audited consolidated financial statements in our report dated February 25, 2022. In our opinion, the accompanying interim condensed consolidated balance sheet of CNB Bank Shares, Inc. and subsidiary as of December 31, 2021 is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

July 29, 2022

CNB BANK SHARES, INC. AND SUBSIDIARY

Interim Condensed Consolidated Balance Sheets

June 30, 2022 and December 31, 2021

ASSETS				June 30,			December 31,
		2022			2021
Cash and due from banks	$	25,357,249		27,221,301
Interest-earning deposits in other financial institutions		31,207,582		79,360,329
Cash and cash equivalents			56,564,831			106,581,630
Investments in available-for-sale debt securities,
at fair value		460,649,348		502,225,565
Mortgage loans held for sale		402,388		284,993
Loans		929,943,128		908,652,367
Less deferred loan fees, net of related costs		(1,340,521)	(1,509,878)
Less reserve for possible loan losses		(12,193,385)	(11,448,685)
Net loans			916,409,222			895,693,804
Bank premises and equipment, net		18,439,173	18,811,266
Accrued interest receivable		8,300,977	8,785,085
Bank-owned life insurance		13,012,177		12,907,510
Identifiable intangible assets, net		4,125,508		4,599,414
Goodwill		21,415,712		21,415,712
Deferred tax asset, net		15,168,651		1,963,089
Other assets	$	11,112,170		10,762,656
		1,525,600,157			1,584,030,724
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits	$	320,402,602		319,142,332
Interest-bearing deposits		1,037,175,155		1,038,316,082
Total deposits		1,357,577,757	1,357,458,414
Short-term borrowings		24,895,135	34,235,199
Accrued interest payable		298,000	344,607
Federal Home Loan Bank borrowings		9,250,000	14,250,000
Notes payable		3,752,397	4,394,437
Other liabilities		16,940,468		16,353,517
Total liabilities			1,412,713,757			1,427,036,174
Commitments and contingencies
Stockholders' equity:
Preferred stock and related surplus, $0.01 par value; 200,000
shares authorized, 9,745 shares issued and outstanding		19,352,310		19,352,310
Common stock, $0.05 par value; 20,000,000 shares authorized;
5,779,659 shares issued; 5,398,882 and 5,377,912 shares		288,983		288,983
outstanding at June 30, 2022 and December 31, 2021, respectively
Surplus		18,464,728		18,896,783
Retained earnings		128,155,573		122,065,157
Accumulated other comprehensive income (loss)		(45,622,282)	4,056,416
Treasury stock at cost - 380,777 and 401,747 shares
at June 30, 2022 and December 31, 2021, respectively		(7,752,912)	(7,665,099)
Total stockholders' equity			112,886,400			156,994,550
	$	1,525,600,157		1,584,030,724
Book value per common share	$	17.32		25.59

See accompanying notes to the interim condensed consolidated financial statements and accountants' review report.

CNB BANK SHARES, INC. AND SUBSIDIARY

Interim Condensed Consolidated Statements of Income

Three and Six Months Ended June 30, 2022 and 2021

			Three Months Ended			Six Months Ended
			June 30,			June 30,
			2022		2021					2022		2021
Interest income:
Interest and fees on loans	$ 10,595,703		10,452,380		20,634,231	20,834,705
Interest on debt securities:
Taxable	1,353,722	789,467	2,474,787	1,659,247
Exempt from federal income taxes	1,218,149	1,038,227	2,382,015	1,992,542
Interest on short-term investments	103,672		29,624		146,343	57,931
Total interest income		13,271,246		12,309,698				25,637,376		24,544,425
Interest expense:
Interest on deposits	724,063		1,032,496		1,456,916	2,284,030
Interest on short-term borrowings	13,574	14,919	27,043	40,752
Interest on Federal Home Loan Bank borrowings	46,340	99,929	92,172	198,761
Interest on notes payable	37,919		61,198		78,368	113,561
Total interest expense		821,896		1,208,542				1,654,499		2,637,104
Net interest income		12,449,350		11,101,156		23,982,877	21,907,321
Provision for possible loan losses	701,674		1,624,753		701,674	2,107,405
Net interest income after
provision for possible loan losses	11,747,676	9,476,403	23,281,203	19,799,916
Noninterest income:
Service charges on deposit accounts	590,749		378,574		1,112,592	742,306
Card-based revenue	477,035	610,306	941,217	1,109,662
Income from fiduciary activities	603,760	580,859	1,156,626	1,036,047
Mortgage banking revenue	447,374	842,136	1,001,341	1,898,576
Increase in cash surrender value of life insurance policies	52,041	52,610	104,667	105,312
Brokerage commissions	468,084	476,324	966,015	1,001,636
Other noninterest income	223,148		396,384		374,800	673,024
Total noninterest income		2,862,191		3,337,193				5,657,258		6,566,563
Noninterest expense:
Salaries and employee benefits	5,530,810		5,578,504		11,353,253	11,137,700
Occupancy and equipment expense	1,488,021	1,465,715	3,008,363	2,952,738
Legal and professional fees	277,585	264,804	588,248	416,500
Postage, printing, and supplies	192,723	185,788	357,997	351,239
Amortization of intangible assets	326,484	342,970	662,035	675,089
Advertising expense	233,677	198,498	415,013	363,631
FDIC insurance assessments	161,741	145,524	339,112	291,749
Other noninterest expense	1,138,828		1,074,774		2,361,831	2,053,009
Total noninterest expense	9,349,869		9,256,577		19,085,852	18,241,655
Income before applicable income taxes	5,259,998		3,557,019		9,852,609	8,124,824
Applicable income taxes	1,141,528		588,102		2,105,575	1,446,250
Net income	$ 4,118,470		2,968,917		7,747,034	6,678,574

See accompanying notes to the interim condensed consolidated financial statements and accountants' review report.

CNB BANK SHARES, INC. AND SUBSIDIARY

Interim Condensed Consolidated Statements of Comprehensive Income (Loss)

Six Months Ended June 30, 2022 and 2021

		2022		2021
Net income	$	7,747,034	6,678,574
Other comprehensive loss, before tax:
Market value adjustment for cash flow hedge		132,538	59,391
Net unrealized losses on available-for-sale debt securities		(63,016,799)	(4,046,496)
Other comprehensive loss, before tax		(62,884,261)	(3,987,105)
Income tax related to items of other comprehensive loss		(13,205,563)	(837,292)
Total other comprehensive loss		(49,678,698)	(3,149,813)
Total comprehensive income (loss)	$	(41,931,664)	3,528,761

See accompanying notes to the interim condensed consolidated financial statements and accountants' review report.