CB Financial Services, Inc. - Quarter Report: 2015 March (Form 10-Q)

f10q_051115.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 001-36706

	CB FINANCIAL SERVICES, INC.
	(Exact name of registrant as specified in its charter)

Pennsylvania		51-0534721
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 N. Market Street, Carmichaels, PA		15320
(Address of principal executive offices)		(Zip Code)

	(724) 966-5041
	(Registrant’s telephone number, including area code)

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.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer o	Accelerated filer o
	Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 15, 2015, the number of shares outstanding of the Registrant’s Common Stock was 4,071,462.

FORM 10-Q

INDEX

Page

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.	1
Consolidated Statement of Financial Condition	1
Consolidated Statement of Income (Unaudited)	2
Consolidated Statement of Comprehensive Income (Unaudited)	3
Consolidated Statement of Changes In Stockholders’ Equity (Unaudited)	3
Consolidated Statement of Cash Flows (Unaudited)	4
Notes to Unaudited Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	24
Item 3. Quantitative and Qualitative Disclosure about Market Risk.	30
Item 4. Controls and Procedures.	30
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.	30
Item 1A. Risk Factors.	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	31
Item 3. Defaults Upon Senior Securities.	31
Item 4. Mine Safety Disclosures.	31
Item 5. Other Information.	31
Item 6. Exhibits	31
SIGNATURES	32

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

	(Unaudited)
(Dollars in thousands, except share data)	March 31, 2015			December 31, 2014

ASSETS
Cash and Due From Banks:
Interest Bearing	$	6,722		$	5,933
Non-Interest Bearing		9,180			5,818
Total Cash and Due From Banks		15,902			11,751

Investment Securities:
Available-for-Sale		101,217			105,449
Held-to-Maturity		502			504
Loans Held For Sale		26,149			-
Loans, Net		659,557			680,451
Premises and Equipment, Net		10,537			10,593
Bank-Owned Life Insurance		17,853			17,735
Goodwill		5,632			5,632
Core Deposit Intangible		4,754			4,888
Accrued Interest and Other Assets		9,354			9,311
TOTAL ASSETS	$	851,457		$	846,314

LIABILITIES
Deposits:
Demand Deposits	$	164,959		$	163,488
NOW Accounts		94,954			98,919
Money Market Accounts		163,020			160,747
Savings Accounts		123,683			118,332
Time Deposits		149,171			151,594
Brokered Deposits		13,651			4,414
Total Deposits		709,438			697,494

Short-Term Borrowings		24,013			46,684
Other Borrowed Funds		29,080			15,136
Accrued Interest and Other Liabilities		5,243			5,088
TOTAL LIABILITIES		767,774			764,402

STOCKHOLDERS' EQUITY
Preferred Stock, No Par Value; 5,000,000 Shares Authorized		-			-
Common Stock, $0.4167 Par Value; 35,000,000 Shares Authorized, 4,363,346 Shares Issued and 4,071,462 Shares Outstanding at March 31, 2015 and December 31, 2014, Respectively		1,818			1,818
Capital Surplus		41,762			41,762
Retained Earnings		44,206			42,766
Treasury Stock, at Cost (291,884 Shares at March 31, 2015 and December 31, 2014, Respectively)		(4,999	)		(4,999	)
Accumulated Other Comprehensive Income		896			565
TOTAL STOCKHOLDERS' EQUITY		83,683			81,912
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	851,457		$	846,314

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

	Three Months Ended March 31,
(Dollars in thousands, except per share data)	2015		2014

INTEREST AND DIVIDEND INCOME
Loans, Including Fees	$	7,481	$	3,968
Federal Funds Sold		1		3
Investment Securities:
Taxable		242		232
Exempt From Federal Income Tax		296		355
Other Interest and Dividend Income		155		20
TOTAL INTEREST AND DIVIDEND INCOME		8,175		4,578

INTEREST EXPENSE
Deposits		598		429
Federal Funds Purchased		1		1
Short-Term Borrowings		30		9
Other Borrowed Funds		90		31
TOTAL INTEREST EXPENSE		719		470

NET INTEREST INCOME		7,456		4,108
Provision For Loan Losses		300		-
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		7,156		4,108

NONINTEREST INCOME
Service Fees on Deposit Accounts		577		455
Insurance Commissions		931		3
Other Commissions		121		87
Net Gains on Sale of Loans		71		86
Income from Bank-Owned Life Insurance		118		58
Other		8		35
TOTAL NONINTEREST INCOME		1,826		724

NONINTEREST EXPENSE
Salaries and Employee Benefits		3,148		1,874
Occupancy		471		319
Equipment		405		272
FDIC Assessment		138		96
PA Shares Tax		183		97
Contracted Services		137		96
Legal Fees		131		159
Advertising		225		89
Bankcard Processing Expense		111		62
Other Real Estate Owned Expense		20		-
Amortization of Core Deposit Intangible		134		-
Other		644		393
TOTAL NONINTEREST EXPENSE		5,747		3,457

Income Before Income Taxes		3,235		1,375
Income Taxes		940		296
NET INCOME	$	2,295	$	1,079

EARNINGS PER SHARE
Basic	$	0.56	$	0.46
Diluted		0.56		0.46

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		4,071,462		2,344,477
Diluted		4,071,462		2,354,977

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended March 31,
(Dollars in thousands)	2015		2014

Net Income	$	2,295	$	1,079

Other Comprehensive Income:
Unrealized Gains on Available-for-Sale Securities Net of Income Tax of $170 and $395 for the Three Months Ended March 31, 2015 and 2014, Respectively		331		767
Other Comprehensive Income, Net of Income Tax		331		767
Total Comprehensive Income	$	2,626	$	1,846

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(Dollars in thousands, except per share data)	Shares Issued		Common Stock		Capital Surplus		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity

December 31, 2013		2,626,864	$	1,095	$	5,969	$	40,807		$	(2,103	)	$	(763	)	$	45,005
Comprehensive income:
Net income		-		-		-		1,079			-			-			1,079
Other comprehensive income		-		-		-		-			-			767			767
Exercise of stock options		4,015		1		55		-			-			-			56
Purchase of common stock, at cost (133,000 shares)		-		-		-		-			(2,896	)		-			(2,896	)
Dividends paid ($0.21 per share)		-		-		-		(491	)		-			-			(491	)
March 31, 2014		2,630,879	$	1,096	$	6,024	$	41,395		$	(4,999	)	$	4		$	43,520

(Dollars in thousands, except share data)	Shares Issued		Common Stock		Capital Surplus		Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income		Total Stockholders' Equity

December 31, 2014		4,363,346	$	1,818	$	41,762	$	42,766		$	(4,999	)	$	565	$	81,912
Comprehensive income:
Net income		-		-		-		2,295			-			-		2,295
Other comprehensive income		-		-		-		-			-			331		331
Dividends paid ($0.21 per share)		-		-		-		(855	)		-			-		(855	)
March 31, 2015		4,363,346	$	1,818	$	41,762	$	44,206		$	(4,999	)	$	896	$	83,683

The accompanying notes are an integral part of these consolidated financial statements

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

	Three Months Ended March 31,
(Dollars in thousands)	2015			2014

OPERATING ACTIVITIES
Net Income	$	2,295		$	1,079
Αdjustmеnts to Rеconcilе Net Income to Net Cash Provided By Operating Activities:
Net Amortization on Investments		184			377
Depreciation and Amortization		622			118
Provision for Loan Losses		300			-
Income from Bank-Owned Life Insurance		(118	)		(58	)
Proceeds From Mortgage Loans Sold		2,738			4,628
Originations of Mortgage Loans for Sale		(2,667	)		(4,542	)
Gains on Sale of Loans		(71	)		(86	)
Gains on Sales of Other Real Estate Owned and Repossessed Assets		(7	)		-
Decrease (Increase) in Accrued Interest Receivable		173			(11	)
Decrease in Taxes Payable		(553	)		(77	)
Increase in Accrued Interest Payable		46			-
Other, Net		108			(733	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		3,050			695

INVESTING ACTIVITIES
Investment Securities Available for Sale:
Proceeds From Principal Repayments and Maturities		10,803			18,013
Purchases of Securities		(6,252	)		(4,309	)
Investment Securities Held-to-Maturity:
Proceeds From Principal Repayments and Maturities		-			495
Net Increase in Loans		(6,092	)		(6,214	)
Purchase of Premises and Equipment		(173	)		(131	)
Proceeds From Sale of Other Real Estate Owned and Repossessed Assets		15			59
Decrease (Increase) in Restricted Equity Securities		438			(130	)
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(1,261	)		7,783

FINANCING ACTIVITIES
Net Increase in Deposits		11,944			8,448
Net Decrease in Short-Term Borrowings		(22,671	)		(1,834	)
Principal Payments on Other Borrowed Funds		(1,056	)		(1,000	)
Proceeds from Other Borrowed Funds		15,000			-
Cash Dividends Paid		(855	)		(491	)
Treasury Stock, Purchases at Cost		-			(2,896	)
Exercise of Stock Options		-			56
NET CASH PROVIDED BY FINANCING ACTIVITIES		2,362			2,283

INCREASE IN CASH AND CASH EQUIVALENTS		4,151			10,761
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR		11,751			16,417
CASH AND DUE FROM BANKS AT END OF PERIOD	$	15,902		$	27,178

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest on deposits and borrowings (including interest credited to deposit accounts of $601 and $427 respectively)		674			470
Income taxes		31			-

Transfer of loans to loans held for sale		26,149			-
Real estate acquired in settlement of loans		307			-

The accompanying notes are an integral part of these consolidated financial statements

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of CB Financial Services, Inc. (“CB Financial”) and its wholly owned subsidiary, Community Bank, (the “Bank”), and the Bank’s wholly-owned subsidiary, Exchange Underwriters, Inc. (“Exchange Underwriters”). CB Financial and the Bank are collectively referred to as the “Company”. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, evaluation of securities for other-than-temporary impairment including related cash flow projections, goodwill impairment, and the valuation of deferred tax assets.

In the opinion of management, the accompanying unaudited interim financial statements include all adjustments considered necessary for a fair presentation of the Company’s financial position and results of operations at the dates and for the periods presented. All of these adjustments are of a normal, recurring nature, and they are the only adjustments included in the accompanying unaudited interim financial statements. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Interim results are not necessarily indicative of results for a full year.

The Company evaluated subsequent events through the date the consolidated financial statements were filed with the Securities and Exchange Commission and incorporated into the consolidated financial statements the effect of all material known events determined by Accounting Standards Codification (“ASC”) Topic 855, Subsequent Events, to be recognizable events.

Nature of Operations

The Company derives substantially all its income from banking and bank-related services which include interest earnings on commercial, commercial mortgage, residential real estate and consumer loan financing, as well as interest earnings on investment securities and fees generated from deposit services to its customers. The Company provides banking services primarily to communities in Greene, Allegheny, Washington, Fayette, and Westmoreland Counties located in southwestern Pennsylvania. The Company also conducts insurance brokerage activities through Exchange Underwriters.

Loans Held For Sale

Loans held for sale consist primarily of residential real estate loans intended for sale and are carried at the lower of cost or estimated fair market value using the aggregate method. These loans are generally sold with servicing rights released. Gains and losses recognized on loan sales are recorded in noninterest income and are based upon the cash proceeds received and the cost of the related loans sold.

Acquired Loans

Loans that were acquired in the merger with FedFirst Financial Corporation were recorded at fair value with no carryover of the related allowance for credit losses. The fair value of the acquired loans was estimated by management with the assistance of a third party valuation specialist.

The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable discount and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable discount. The nonaccretable discount represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require an evaluation to determine the need for an allowance for loan losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the nonaccretable discount which is then reclassified as accretable discount that is recognized into interest income over the remaining life of the loan using the interest method. The evaluation of the amount of future cash flows that is expected to be collected is performed in a similar manner as that used to determine our allowance for credit losses. Charge-offs of the principal amount on acquired loans would be first applied to the nonaccretable discount portion of the fair value adjustment.

Reclassifications

Certain comparative amounts for the prior year have been reclassified to conform to the current year presentation. Such reclassifications did not affect net income or stockholders’ equity.

Recent Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard for virtually all industries under U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. ASU 2014-09 specifies that an entity shall recognize revenue when, or as, the entity satisfies a performance obligation by transferring a promised good or service (i.e. an asset) to a customer. An asset is transferred when, or as, the customer obtains control of the asset. Entities are required to disclose qualitative and quantitative information on the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, with early adoption not permitted. In April 2015, the FASB tentatively decided to defer for one year the effective date of this ASU to December 15, 2017 and also tentatively decided to allow entities to early adopt the standard. The Company is evaluating the provisions of ASU 2014-09, but does not believe that its adoption will have a material impact on the Company’s financial condition and results of operations.

In January 2015, the FASB issued ASU 2015-01, Income Statement-Extraordinary and Unusual Items (Subtopic 225-20) – Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ASU 2015-01 eliminates the requirement in ASC Subtopic 225-20 to consider whether an underlying event or transaction is extraordinary, and if so, to separately present the item in the income statement net of tax, after income from continuing operations. Items that are either unusual in nature or infrequently occurring will continue to be reported as a separate component of income from continuing operations. Alternatively, these amounts may still be disclosed in the notes to the financial statements. The same requirement has been expanded to include items that are both unusual and infrequent. ASU 2015-01 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted from the beginning of the fiscal year of adoption. The Company is evaluating the provisions of ASU 2015-01, but does not believe that its adoption will have a material impact on the Company’s financial condition and results of operations.

Note 2. Earnings Per Share

There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share; therefore, net income as presented on the Consolidated Statement of Operations is used as the numerator.

The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings per share computation.

	Three Months Ended March 31,
	2015			2014
Weighted-Average Common Shares Outstanding		4,363,346			2,633,405
Average Treasury Stock Shares		(291,884	)		(288,928	)
Weighted-Average Common Shares and Common Stock Equivalents Used to Calculate Basic Earnings Per Share		4,071,462			2,344,477
Additional Common Stock Equivalents (Stock Options) Used to Calculate Diluted Earnings Per Share		-			10,500
Weighted-Average Common Shares and Common Stock Equivalents Used to Calculate Diluted Earnings Per Share		4,071,462			2,354,977

Earnings per share:
Basic	$	0.56		$	0.46
Diluted		0.56			0.46

Note 3. Investment Securities

The following table presents the amortized cost and fair value of investment securities available-for-sale at the dates indicated:

	(Dollars in thousands) March 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

U.S. Government Agencies	$	52,814	$	293	$	(14	)	$	53,093
Obligations of States and Political Subdivisions		41,934		1,016		(76	)		42,874
Mortgage-Backed Securities - Government-Sponsored Enterprises		4,031		70		-			4,101
Equity Securities - Mutual Funds		500		19		-			519
Equity Securities - Other		581		53		(4	)		630
Total	$	99,860	$	1,451	$	(94	)	$	101,217

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

U.S. Government Agencies	$	57,669	$	139	$	(157	)	$	57,651
Obligations of States and Political Subdivisions		41,611		886		(116	)		42,381
Mortgage-Backed Securities - Government-Sponsored Enterprises		4,240		33		-			4,273
Equity Securities - Mutual Funds		500		14		-			514
Equity Securities - Other		573		58		(1	)		630
Total	$	104,593	$	1,130	$	(274	)	$	105,449

The following table presents the amortized cost and fair value of investment securities held-to-maturity at the dates indicated:

	(Dollars in thousands) March 31, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of States and Political Subdivisions	$	502	$	-	$	-	$	502

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Obligations of States and Political Subdivisions	$	504	$	-	$	-	$	504

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position at the dates indicated:

	(Dollars in thousands) March 31, 2015
	Less than 12 months							12 Months or Greater							Total
	Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses
U.S. Government Agencies		2	$	5,484	$	(14	)		-	$	-	$	-			2	$	5,484	$	(14	)
Obligations of States and Political Subdivisions		8		4,219		(27	)		13		7,347		(49	)		21		11,566		(76	)
Equity Securities - Other		1		133		(4	)		-		-		-			1		133		(4	)
Total		11	$	9,836	$	(45	)		13	$	7,347	$	(49	)		24	$	17,183	$	(94	)

	December 31, 2014
	Less than 12 months							12 Months or Greater							Total
	Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses			Number of Securities		Fair Value		Gross Unrealized Losses
U.S. Government Agencies		10	$	26,101	$	(144	)		1	$	2,987	$	(13	)		11	$	29,088	$	(157	)
Obligations of States and Political Subdivisions		5		2,123		(9	)		22		13,590		(107	)		27		15,713		(116	)
Equity Securities - Other		1		48		(1	)		-		-		-			1		48		(1	)
Total		16	$	28,272	$	(154	)		23	$	16,577	$	(120	)		39	$	44,849	$	(274	)

For debt securities, the Company does not believe any individual unrealized loss as of March 31, 2015 and December 31, 2014 represents an other-than-temporary impairment. The Company performs a review of the entire securities portfolio on a quarterly basis to identify securities that may indicate an other-than-temporary impairment. The Company’s management considers the length of time and the extent to which the fair value has been less than cost, and the financial condition of the issuer. The securities that are temporarily impaired at March 31, 2015 and December 31, 2014 relate principally to changes in interest rates subsequent to the acquisition of the specific securities. The Company does not intend to sell or it is not more likely than not that it will be required to sell any of the securities in an unrealized loss position before recovery of its amortized cost or maturity of the security.

The following table presents the scheduled maturities of investment securities available-for-sale and held-to-maturity as of the dates indicated:

	(Dollars in thousands) March 31, 2015
	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in One Year or Less	$	3,212	$	3,238	$	502	$	502
Due after One Year through Five Years		32,974		33,128		-		-
Due after Five Years through Ten Years		48,293		49,002		-		-
Due after Ten Years		15,381		15,849		-		-
Total	$	99,860	$	101,217	$	502	$	502

Equity Securities – Mutual Funds and Equity Securities – Other do not have a scheduled maturity date, but have been included in the Due After Ten Years category.

Note 4. Loans and Related Allowance for Loan Loss

The Company’s loan portfolio is made up of four segments: real estate loans, commercial and industrial loans, consumer loans and other loans. These segments are further segregated between loans accounted for under the amortized cost method (“Originated Loans”) and acquired loans that were originally recorded at fair value with no carryover of the related pre-merger allowance for loan losses (“Loans Acquired at Fair Value”). The following table presents the major classifications of loans as of the dates indicated.

	(Dollars in thousands)
	March 31, 2015						December 31, 2014
	Amount			Percent			Amount			Percent
Originated Loans
Real estate:
Residential	$	170,461			40.2	%	$	169,485			41.3	%
Commercial		100,940			23.8			97,228			23.8
Construction		11,241			2.7			10,039			2.5
Commercial and Industrial		50,412			11.9			48,701			11.9
Consumer		82,790			19.6			76,242			18.6
Other		7,470			1.8			7,636			1.9
Total Originated Loans		423,314			100.0	%		409,331			100.0	%
Allowance for Loan Losses		(5,478	)					(5,195	)
Loans, Net	$	417,836					$	404,136

Loans Acquired at Fair Value
Real estate:
Residential	$	138,106			57.1	%	$	162,388			58.7	%
Commercial		70,622			29.2			77,037			27.9
Construction		10,544			4.4			12,158			4.4
Commercial and Industrial		21,777			9.0			23,363			8.5
Consumer		672			0.3			1,369			0.5
Total Loans Acquired at Fair Value		241,721			100.0	%		276,315			100.0	%

Total Loans
Real estate:
Residential	$	308,567			46.3	%	$	331,873			48.5	%
Commercial		171,562			25.8			174,265			25.4
Construction		21,785			3.3			22,197			3.2
Commercial and Industrial		72,189			10.9			72,064			10.5
Consumer		83,462			12.6			77,611			11.3
Other		7,470			1.1			7,636			1.1
Total Loans		665,035			100.0	%		685,646			100.0	%
Allowance for Loan Losses		(5,478	)					(5,195	)
Loans, Net	$	659,557					$	680,451

Real estate loans serviced for others, which are not included in the Consolidated Statement of Financial Condition, totaled $63.0 million and $62.3 million at March 31, 2015 and December 31, 2014, respectively.

The following table presents loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of the dates indicated.

	(Dollars in thousands)
	March 31, 2015
	Pass		Special Mention		Substandard		Doubtful		Total
Originated Loans
Real Estate:
Residential	$	169,555	$	620	$	279	$	7	$	170,461
Commercial		83,257		12,618		4,408		657		100,940
Construction		10,134		-		775		332		11,241
Commercial and Industrial		46,536		2,528		1,050		298		50,412
Consumer		82,766		-		24		-		82,790
Other		7,470		-		-		-		7,470
Total Originated Loans	$	399,718	$	15,766	$	6,536	$	1,294	$	423,314

Loans Acquired at Fair Value
Real Estate:
Residential	$	135,771	$	-	$	2,335	$	-	$	138,106
Commercial		66,180		2,399		2,043		-		70,622
Construction		10,544		-		-		-		10,544
Commercial and Industrial		20,494		1,283		-		-		21,777
Consumer		672		-		-		-		672
Total Loans Acquired at Fair Value	$	233,661	$	3,682	$	4,378	$	-	$	241,721

Total Loans
Real Estate:
Residential	$	305,326	$	620	$	2,614	$	7	$	308,567
Commercial		149,437		15,017		6,451		657		171,562
Construction		20,678		-		775		332		21,785
Commercial and Industrial		67,030		3,811		1,050		298		72,189
Consumer		83,438		-		24		-		83,462
Other		7,470		-		-		-		7,470
Total Loans	$	633,379	$	19,448	$	10,914	$	1,294	$	665,035

	December 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Total
Originated Loans
Real Estate:
Residential	$	168,957	$	194	$	315	$	19	$	169,485
Commercial		81,772		10,944		3,820		692		97,228
Construction		8,805		101		789		344		10,039
Commercial and Industrial		45,258		2,758		383		302		48,701
Consumer		76,238		-		4		-		76,242
Other		7,636		-		-		-		7,636
Total Originated Loans	$	388,666	$	13,997	$	5,311	$	1,357	$	409,331

Loans Acquired at Fair Value
Real Estate:
Residential	$	160,460	$	-	$	1,928	$	-	$	162,388
Commercial		72,453		2,429		2,155		-		77,037
Construction		12,158		-		-		-		12,158
Commercial and Industrial		21,913		1,450		-		-		23,363
Consumer		1,369		-		-		-		1,369
Total Loans Acquired at Fair Value	$	268,353	$	3,879	$	4,083	$	-	$	276,315

Total Loans
Real Estate:
Residential	$	329,417	$	194	$	2,243	$	19	$	331,873
Commercial		154,225		13,373		5,975		692		174,265
Construction		20,963		101		789		344		22,197
Commercial and Industrial		67,171		4,208		383		302		72,064
Consumer		77,607		-		4		-		77,611
Other		7,636		-		-		-		7,636
Total Loans	$	657,019	$	17,876	$	9,394	$	1,357	$	685,646

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of the dates indicated.

	(Dollars in thousands)
	March 31, 2015
	Loans Current		30-59 Days Past Due		60-89 Days Past Due		Past Due		Total Past Due		Non- Accrual		Total Loans
Originated Loans
Real Estate:
Residential	$	169,874	$	308	$	-	$	-	$	308	$	279	$	170,461
Commercial		98,211		2,222		-		-		2,222		507		100,940
Construction		10,909		-		-		-		-		332		11,241
Commercial and Industrial		50,257		155		-		-		155		-		50,412
Consumer		82,361		344		56		5		405		24		82,790
Other		7,470		-		-		-		-		-		7,470
Total Originated Loans	$	419,082	$	3,029	$	56	$	5	$	3,090	$	1,142	$	423,314

Loans Acquired at Fair Value
Real Estate:
Residential	$	135,031	$	1,682	$	-	$	-	$	1,682	$	1,393	$	138,106
Commercial		70,044		124		-		-		124		454		70,622
Construction		10,544		-		-		-		-		-		10,544
Commercial and Industrial		21,755		22		-		-		22		-		21,777
Consumer		600		72		-		-		72		-		672
Total Loans Acquired at Fair Value	$	237,974	$	1,900	$	-	$	-	$	1,900	$	1,847	$	241,721

Total Loans
Real Estate:
Residential	$	304,905	$	1,990	$	-	$	-	$	1,990	$	1,672	$	308,567
Commercial		168,255		2,346		-		-		2,346		961		171,562
Construction		21,453		-		-		-		-		332		21,785
Commercial and Industrial		72,012		177		-		-		177		-		72,189
Consumer		82,961		416		56		5		477		24		83,462
Other		7,470		-		-		-		-		-		7,470
Total Loans	$	657,056	$	4,929	$	56	$	5	$	4,990	$	2,989	$	665,035

	December 31, 2014
	Loans Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Non- Accrual		Total Loans
Originated Loans
Real Estate:
Residential	$	168,911	$	249	$	16	$	-	$	265	$	309	$	169,485
Commercial		94,250		2,397		-		-		2,397		581		97,228
Construction		9,695		-		-		-		-		344		10,039
Commercial and Industrial		48,697		-		-		-		-		4		48,701
Consumer		75,839		369		24		10		403		-		76,242
Other		7,636		-		-		-		-		-		7,636
Total Originated Loans	$	405,028	$	3,015	$	40	$	10	$	3,065	$	1,238	$	409,331

Loans Acquired at Fair Value
Real Estate:
Residential	$	159,403	$	1,364	$	18	$	369	$	1,751	$	1,234	$	162,388
Commercial		76,425		128		-		-		128		484		77,037
Construction		12,158		-		-		-		-		-		12,158
Commercial and Industrial		23,356		7		-		-		7		-		23,363
Consumer		1,341		28		-		-		28		-		1,369
Total Loans Acquired at Fair Value	$	272,683	$	1,527	$	18	$	369	$	1,914	$	1,718	$	276,315

Total Loans
Real Estate:
Residential	$	328,314	$	1,613	$	34	$	369	$	2,016	$	1,543	$	331,873
Commercial		170,675		2,525		-		-		2,525		1,065		174,265
Construction		21,853		-		-		-		-		344		22,197
Commercial and Industrial		72,053		7		-		-		7		4		72,064
Consumer		77,180		397		24		10		431		-		77,611
Other		7,636		-		-		-		-		-		7,636
Total Loans	$	677,711	$	4,542	$	58	$	379	$	4,979	$	2,956	$	685,646

The following table sets forth the amounts and categories of our nonperforming assets at the dates indicated. Included in nonperforming loans and assets are troubled debt restructurings (“TDRs”), which are loans whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties. Nonaccrual TDRs are included in their specific loan category in the nonaccrual loans section.

	(Dollars in Thousands)
	March 31, 2015			December 31, 2014
Nonaccrual loans:
Real estate:
Residential	$	1,672		$	1,543
Commercial		961			1,065
Construction		332			344
Commercial and Industrial		-			4
Consumer		24			-
Total non-accrual loans		2,989			2,956

Accruing loans past due 90 days or more:
Real estate:
Residential		-			369
Consumer		5			10
Total accruing loans 90 days or more past due		5			379
Total nonaccrual loans and accruing loans 90 days or more past due		2,994			3,335

Troubled debt restructurings, accruing
Originated loans:
Real Estate - Commercial		429			246
Commercial and Industrial		306			310
Total originated loans		735			556
Loans acquired at fair value:
Real Estate - Residential		1,325			1,337
Real Estate - Commercial		1,758			1,800
Total loans acquired at fair value		3,083			3,137
Total troubled debt restructurings, accruing		3,818			3,693

Total nonperforming loans		6,812			7,028

Real estate owned:
Residential		403			104
Other		174			174
Total real estate owned		577			278

Total nonperforming assets	$	7,389		$	7,306

Nonperforming loans to total loans		1.02	%		1.03	%
Nonperforming assets to total assets		0.87			0.86

The recorded investment of residential real estate loans for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction was $3.5 million and $2.7 million at March 31, 2015 and December 31, 2014, respectively.

Loans classified as TDRs consisted of 12 loans totaling $4.1 million and 13 loans totaling $4.0 million at March 31, 2015 and December 31, 2014, respectively. Originated loans classified as TDRs consisted of 4 loans totaling $1.0 million and $830,000, respectively at March 31, 2015 and December 31, 2014. Loans acquired at fair value as TDRs consisted of 8 loans and 9 loans, respectively, totaling $3.1 million at March 31, 2015 and December 31, 2014. During the three months ended March 31, 2015, one commercial TDR acquired at fair value paid off and one commercial loan previously identified as an originated TDR was refinanced in a new TDR transaction. No TDRs have subsequently defaulted during the three months ended March 31, 2015 and 2014, respectively. The following table presents the volume and recorded investment at the time of modification of the TDRs by class and type of modification that occurred during the periods indicated.

	(Dollars in thousands)
	Three Months Ended March 31, 2015
	Modification of Payment and Other Terms
	Number of Contracts		Recorded Investment
Originated Loans
Real Estate
Commercial		1	$	430
Total		1	$	430

	Three Months Ended March 31, 2014
	Temporary Rate Modification				Extension of Maturity
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Originated Loans
Real Estate
Commercial		1	$	282		1	$	254
Total		1	$	282		1	$	254

The following table presents a summary of the loans considered to be impaired as of the dates indicated.

	(Dollars in thousands)
	March 31, 2015
	Recorded Investment		Related Allowance		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Originated Loans
Real Estate:
Residential	$	13	$	-	$	25	$	31	$	1
Commercial		4,046		-		4,046		4,086		42
Construction		774		-		774		782		8
Commercial and Industrial		602		-		602		578		6
Total With No Related Allowance Recorded	$	5,435	$	-	$	5,447	$	5,477	$	57

Loans Acquired at Fair Value
Real Estate:
Residential	$	942	$	-	$	942	$	944	$	12
Commercial		1,685		-		1,724		1,729		20
Total With No Related Allowance Recorded	$	2,627	$	-	$	2,666	$	2,673	$	32

Total Loans
Real Estate:
Residential	$	955	$	-	$	967	$	975	$	13
Commercial		5,731		-		5,770		5,815		62
Construction		774		-		774		782		8
Commercial and Industrial		602		-		602		578		6
Total With No Related Allowance Recorded	$	8,062	$	-	$	8,113	$	8,150	$	89

With A Related Allowance Recorded:
Originated Loans
Real Estate:
Commercial	$	1,377	$	456	$	1,387	$	1,391	$	12
Construction		332		28		332		339		-
Commercial and Industrial		747		481		747		749		10
Total With A Related Allowance Recorded	$	2,456	$	965	$	2,466	$	2,479	$	22

Total Impaired Loans:
Originated Loans
Real Estate:
Residential	$	13	$	-	$	25	$	31	$	1
Commercial		5,423		456		5,433		5,477		54
Construction		1,106		28		1,106		1,121		8
Commercial and Industrial		1,349		481		1,349		1,327		16
Total Impaired Loans	$	7,891	$	965	$	7,913	$	7,956	$	79

Loans Acquired at Fair Value
Real Estate:
Residential	$	942	$	-	$	942	$	944	$	12
Commercial		1,685		-		1,724		1,729		20
Total Impaired Loans	$	2,627	$	-	$	2,666	$	2,673	$	32

Total Loans
Real Estate:
Residential	$	955	$	-	$	967	$	975	$	13
Commercial		7,108		456		7,157		7,206		74
Construction		1,106		28		1,106		1,121		8
Commercial and Industrial		1,349		481		1,349		1,327		16
Total Impaired Loans	$	10,518	$	965	$	10,579	$	10,629	$	111

	December 31, 2014
	Recorded Investment		Related Allowance		Unpaid Principal Balance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance Recorded:
Originated Loans
Real Estate:
Residential	$	45	$	-	$	70	$	55	$	-
Commercial		3,352		-		3,366		4,300		149
Commercial and Industrial		369		-		369		426		17
Total With No Related Allowance Recorded	$	3,766	$	-	$	3,805	$	4,781	$	166

Loans Acquired at Fair Value
Real Estate:
Residential	$	947	$	-	$	947	$	957	$	51
Commercial		1,846		-		1,885		1,926		93
Total With No Related Allowance Recorded	$	2,793	$	-	$	2,832	$	2,883	$	144

Total Loans
Real Estate:
Residential	$	992	$	-	$	1,017	$	1,012	$	51
Commercial		5,198		-		5,251		6,226		242
Commercial and Industrial		369		-		369		426		17
Total With No Related Allowance Recorded	$	6,559	$	-	$	6,637	$	7,664	$	310

With A Related Allowance Recorded:
Originated Loans
Real Estate:
Commercial	$	1,382	$	519	$	1,389	$	1,427	$	51
Construction		1,133		100		1,133		1,366		41
Commercial and Industrial		317		254		317		319		17
Total With A Related Allowance Recorded	$	2,832	$	873	$	2,839	$	3,112	$	109

Total Loans
Originated Loans
Real Estate:
Residential	$	45	$	-	$	70	$	55	$	-
Commercial		4,734		519		4,755		5,727		200
Construction		1,133		100		1,133		1,366		41
Commercial and Industrial		686		254		686		745		34
Total Impaired Loans	$	6,598	$	873	$	6,644	$	7,893	$	275

Loans Acquired at Fair Value
Real Estate:
Residential	$	947	$	-	$	947	$	957	$	51
Commercial		1,846		-		1,885		1,926		93
Total Impaired Loans	$	2,793	$	-	$	2,832	$	2,883	$	144

Total Loans
Real Estate:
Residential	$	992	$	-	$	1,017	$	1,012	$	51
Commercial		6,580		519		6,640		7,653		293
Construction		1,133		100		1,133		1,366		41
Commercial and Industrial		686		254		686		745		34
Total Impaired Loans	$	9,391	$	873	$	9,476	$	10,776	$	419

The following table presents the activity in the Allowance for Loan Loss summarized by major classifications and segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for potential impairment for the dates indicated.

	(Dollars in thousands)
	Real Estate Residential			Real Estate Commercial			Real Estate Construction		Commercial and Industrial		Consumer			Unallocated		Total
Originated Loans
December 31, 2014	$	2,690		$	582		$	122	$	684	$	1,015		$	102	$	5,195
Charge-offs		-			(6	)		-		-		(47	)		-		(53	)
Recoveries		3			2			-		-		31			-		36
Provision		(180	)		30			23		229		12			186		300
March 31, 2015	$	2,513		$	608		$	145	$	913	$	1,011		$	288	$	5,478

Individually Evaluated for Impairment	$	-		$	456		$	28	$	481	$	-		$	-	$	965
Collectively Evaluated for Potential Impairment	$	2,513		$	152		$	117	$	432	$	1,011		$	288	$	4,513

	Real Estate Residential			Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer			Unallocated		Total
Originated Loans
December 31, 2013	$	1,481		$	1,703	$	355	$	1,013	$	592		$	238	$	5,382
Charge-offs		-			-		-		-		(36	)		-		(36	)
Recoveries		1			-		-		1		24			-		26
Provision		(1	)		-		-		-		-			1		-
March 31, 2014	$	1,481		$	1,703	$	355	$	1,014	$	580		$	239	$	5,372

Individually Evaluated for Impairment	$	-		$	785	$	249	$	252	$	-		$	-	$	1,286
Collectively Evaluated for Potential Impairment	$	1,481		$	918	$	106	$	762	$	580		$	239	$	4,086

December 31, 2014	Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Unallocated		Total
Originated Loans
Individually Evaluated for Impairment	$	-	$	519	$	100	$	254	$	-	$	-	$	873
Collectively Evaluated for Potential Impairment	$	2,690	$	63	$	22	$	430	$	1,015	$	102	$	4,322

The following table presents changes in the accretable discount on the loans acquired at fair value for the dates indicated.

	Accretable Discount
Balance at December 31, 2014	$	4,359
Accretable yield		(347	)
Balance at March 31, 2015	$	4,012

The following table presents the major classifications of loans summarized by individually evaluated for impairment and collectively evaluated for potential impairment as of the dates indicated.

	(Dollars in thousands)
	March 31, 2015
	Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Total
Originated Loans
Individually Evaluated for Impairment	$	13	$	5,423	$	1,106	$	1,349	$	-	$	-	$	7,891
Collectively Evaluated for Potential Impairment		170,448		95,517		10,135		49,063		82,790		7,470		415,423
	$	170,461	$	100,940	$	11,241	$	50,412	$	82,790	$	7,470	$	423,314

Loans Acquired at Fair Value
Individually Evaluated for Impairment	$	942	$	1,685	$	-	$	-	$	-	$	-	$	2,627
Collectively Evaluated for Potential Impairment		137,164		68,937		10,544		21,777		672		-		239,094
	$	138,106	$	70,622	$	10,544	$	21,777	$	672	$	-	$	241,721

Total Loans
Individually Evaluated for Impairment	$	955	$	7,108	$	1,106	$	1,349	$	-	$	-	$	10,518
Collectively Evaluated for Potential Impairment		307,612		164,454		20,679		70,840		83,462		7,470		654,517
	$	308,567	$	171,562	$	21,785	$	72,189	$	83,462	$	7,470	$	665,035

	December 31, 2014
	Real Estate Residential		Real Estate Commercial		Real Estate Construction		Commercial and Industrial		Consumer		Other		Total
Originated Loans
Individually Evaluated for Impairment	$	45	$	4,734	$	1,133	$	686	$	-	$	-	$	6,598
Collectively Evaluated for Potential Impairment		169,440		92,494		8,906		48,015		76,242		7,636		402,733
	$	169,485	$	97,228	$	10,039	$	48,701	$	76,242	$	7,636	$	409,331

Loans Acquired at Fair Value
Individually Evaluated for Impairment	$	947	$	1,846	$	-	$	-	$	-	$	-	$	2,793
Collectively Evaluated for Potential Impairment		161,441		75,191		12,158		23,363		1,369		-		273,522
	$	162,388	$	77,037	$	12,158	$	23,363	$	1,369	$	-	$	276,315

Total Loans
Individually Evaluated for Impairment	$	992	$	6,580	$	1,133	$	686	$	-	$	-	$	9,391
Collectively Evaluated for Potential Impairment		330,881		167,685		21,064		71,378		77,611		7,636		676,255
	$	331,873	$	174,265	$	22,197	$	72,064	$	77,611	$	7,636	$	685,646

Note 5. Deposits

The following table shows the maturities of time deposits for the next five years and beyond at the date indicated (dollars in thousands).

Maturity Period:	March 31, 2015
One Year or Less	$	63,144
Over One Through Two Years		31,407
Over Two Through Three Years		15,915
Over Three Through Four Years		14,021
Over Four Through Five Years		13,223
Over Five Years		11,461
Total	$	149,171

The balance in time deposits that meet or exceed the FDIC insurance limit of $250,000 totaled $27.2 million and $26.9 million as of March 31, 2015 and December 31, 2014, respectively.

Note 6. Short-Term Borrowings

The following table sets forth the components of short-term borrowings as of the dates indicated.

	(Dollars in thousands)
	March 31, 2015					December 31, 2014
	Amount		Weighted Average Rate			Amount		Weighted Average Rate
Short-term Borrowings
Federal Funds Purchased:
Average Balance Outstanding During the Period	$	766		0.53	%	$	375		0.46	%
Maximum Amount Outstanding at any Month End		100					1,850

FHLB Borrowings:
Balance at Period End		-		-			25,800		0.32
Average Balance Outstanding During the Period		19,611		0.35			4,283		0.31
Maximum Amount Outstanding at any Month End		30,950					25,800

Securities Sold Under Agreements to Repurchase:
Balance at Period End		24,013		0.18			20,884		0.17
Average Balance Outstanding During the Period		21,600		0.24			17,525		0.26
Maximum Amount Outstanding at any Month End		24,013					25,893

Securities Collaterizing the Agreements at Year-End:
Carrying Value		27,052					23,244
Market Value		27,205					23,243

Note 7. Other Borrowed Funds

Other borrowed funds consist of fixed rate advances from the FHLB. The following table sets forth the scheduled maturities of other borrowed funds at the dates indicated.

	(Dollars in thousands)
	March 31, 2015				December 31, 2014
	Amount		Weighted Average Rate		Amount		Weighted Average Rate
Due in One Year	$	14,080	3.85	%	$	15,136	3.78	%
Due After One Year to Two Years		3,500	0.94			-	-
Due After Two Years to Three Years		3,500	1.35			-	-
Due After Three Years to Four Years		3,000	1.68			-	-
Due After Four Years to Five Years		3,000	1.88			-	-
Due After Five Years		2,000	2.12			-	-
Total	$	29,080	2.65		$	15,136	3.78

As of March 31, 2015, the Company maintained a credit arrangement with a maximum borrowing limit of approximately $339.3 million with the FHLB. This arrangement is subject to annual renewal, incurs no service charge, and is secured by a blanket security agreement on outstanding residential mortgage loans and the Company’s investment in FHLB stock. Under this arrangement the Company had available a variable rate Line of Credit in the amount of $20.0 million as of March 31, 2015 and December 31, 2014.

The Company also maintains a Borrower-In-Custody of Collateral line of credit agreement with the Federal Reserve Bank for $40.0 million. This credit agreement requires quarterly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by Commercial and Consumer Indirect Loans. As of March 31, 2015 and December 31, 2014, no draws had been taken on this facility.

Note 8. Commitments and Contingent Liabilities

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business primarily to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby and performance letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Statement of Financial Condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby and performance letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The following table presents the unused and available credit balances of financial instruments whose contracts represent credit risk at the dates indicated.

	(Dollars in thousands)
	March 31, 2015		December 31, 2014
Standby Letters of Credit	$	17,510	$	18,260
Performance Letters of Credit		2,208		2,986
Construction Mortgages		16,982		12,241
Personal Lines of Credit		5,860		5,675
Overdraft Protection Lines		6,401		6,505
Home Equity Lines of Credit		13,630		13,253
Commercial Lines of Credit		62,665		54,301
	$	125,256	$	113,221

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.

Performance letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These instruments are issued primarily to support bid or performance-related contracts. The coverage period for these instruments is typically a one-year period with an annual renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized upon expiration of the letter. For secured letters of credit, the collateral is typically Company deposit instruments or customer business assets.

Note 9. Fair Value Disclosure

FASB ASC 820 “Fair Value Measurement” defines fair value and provides the framework for measuring fair value and required disclosures about fair value measurements. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability at the market date. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in valuation methods to determine fair value.

The three levels of fair value hierarchy are as follows:

Level I –

Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.

Level II –

Fair value is based on significant inputs, other than Level I inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level II inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets, and other observable inputs.

Level III –

Fair value would be based on significant unobservable inputs. Examples of valuation methodologies that would result in Level III classification include option pricing models, discounted cash flows, and other similar techniques.

This hierarchy requires the use of observable market data when available. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

The following table presents the financial assets measured at fair value on a recurring basis and reported on the Consolidated Statement of Financial Condition as of the dates indicated, by level within the fair value hierarchy. The majority of the Company’s securities are included in Level II of the fair value hierarchy. Fair values for Level II securities were primarily determined by a third party pricing service using both quoted prices for similar assets, when available, and model-based valuation techniques that derive fair value based on market-corroborated data, such as instruments with similar prepayment speeds and default interest rates. The standard inputs that are normally used include benchmark yields of like securities, reportable trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications.

		(Dollars in thousands)
	Valuation Technique	March 31, 2015		December 31, 2014
Available for Sales Securities:
U.S. Government Agencies	Level II	$	53,093	$	57,651
Obligations of States and Political Subdivisions	Level II		42,874		42,381
Mortgage-Backed Securities - Government-Sponsored Enterprises	Level II		4,101		4,273
Equity Securities - Mutual Funds	Level I		519		514
Equity Securities - Other	Level I		630		630
Total Available for Sale Securities		$	101,217	$	105,449

The following table presents the financial assets measured at fair value on a nonrecurring basis on the Consolidated Statement of Financial Condition as of the dates indicated by level within the fair value hierarchy. The table also presents the significant unobservable inputs used in the fair value measurements. Impaired loans that are collateral dependent are written down to fair value through the establishment of specific reserves. Techniques used to value the collateral that secure the impaired loans include: quoted market prices for identical assets classified as Level I inputs; observable inputs, employed by certified appraisers, for similar assets classified as Level II inputs. In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level III inputs.

		(Dollars in thousands) Fair Value at
Financial Asset	Valuation Technique	March 31, 2015		December 31, 2014		Valuation Techniques	Significant Unobservable Inputs	Significant Unobservable Input Value
Impaired Loans	Level III	$	1,491	$	1,959	Market Comparable Properties	Marketability Discount	10%	to	30%	(1)
OREO	Level III		307		77	Market Comparable Properties	Marketability Discount	10%	to	50%	(1)

(1) Range includes discounts taken since appraisal and estimated values.

Impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or fair value. Fair value is measured based on the value of the collateral securing these loans and is classified as Level III in the fair value hierarchy. At March 31, 2015 and December 31, 2014, the fair value of impaired loans consists of the loan balance of $2.5 million and $2.8 million less their specific valuation allowances of $965,000 and $873,000, respectively.

Financial instruments are defined as cash, evidence of an ownership in an entity, or a contract which creates an obligation or right to receive or deliver cash or another financial instrument from/to a second entity on potentially favorable or unfavorable terms.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. If no readily available market exists, the fair value estimates for financial instruments should be based upon management’s judgment regarding current economic conditions, interest rate risk, expected cash flows, future estimated losses and other factors, as determined through various option pricing formulas or simulation modeling. As many of these assumptions result from judgments made by management based upon estimates which are inherently uncertain, the resulting estimated fair values may not be indicative of the amount realizable in the sale of a particular financial instrument. In addition, changes in the assumptions on which the estimated fair values are based may have significant impact on the resulting estimated fair values.

As certain assets such as deferred tax assets and premises and equipment are not considered financial instruments, the estimated fair value of financial instruments would not represent the full value of the Company.

The Company employs simulation modeling in determining the estimated fair value of financial instruments for which quoted market prices are not available, based upon the following assumptions:

Cash and Due From Banks, Restricted Stock, Bank-Owned Life Insurance, Accrued Interest Receivable, Short-Term Borrowings, and Accrued Interest Payable

The fair value is equal to the current carrying value.

Investment Securities

The fair value of investment securities is equal to the available quoted market price. If no quoted market price is available, fair value is estimated using the quoted market price for similar securities or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted prices.

Loans Held For Sale

The fair value of loans held for sale that were transferred from the loans receivable portfolio is based on the expected sales price of the loans in currently pending sales transactions. If a sales agreement has been executed, the fair value is equal to the sales price.

Loans Receivable

For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for certain mortgage loans, credit card loans, and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for other loans are estimated using discounted cash flow analyses, using market interest rates for comparable loans. Fair values for nonperforming loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

Deposit Liabilities

The fair values disclosed for demand deposits, are, by definition, equal to the amount payable on demand at the reporting date. The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on comparable instruments to a schedule of aggregated expected monthly maturities on time deposits.

Borrowed Funds

Fair values of borrowed funds are estimated using discounted cash flow analyses based on current market rates for similar types of borrowing arrangements.

Commitments to Extend Credit

These financial instruments are generally not subject to sale and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment or letter of credit, and the fair value determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure. The contractual amounts of unfunded commitments and letters of credit are presented in Note 8.

The following table presents the estimated fair values of the Company’s financial instruments at the dates indicated.

		(Dollars in thousands)
		March 31, 2015				December 31, 2014
	Valuation Method Used	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial Assets:
Cash and Due From Banks:
Interest Bearing	Level I	$	6,722	$	6,722	$	5,933	$	5,933
Non-Interest Bearing	Level I		9,180		9,180		5,818		5,818
Investment Securities:
Available for Sale	See Above		101,217		101,217		105,449		105,449
Held-to-Maturity	Level II		502		502		504		504
Loans Held For Sale	Level II		26,149		26,429		-		-
Loans, Net	Level III		659,557		676,043		680,451		695,844
Restricted Stock	Level II		2,952		2,952		3,390		3,390
Bank-Owned Life Insurance	Level II		17,853		17,853		17,735		17,735
Accrued Interest Receivable	Level II		2,362		2,362		2,535		2,535

Financial Liabilities:
Deposits	Level II		709,438		710,355		697,494		698,418
Short-term Borrowings	Level II		24,013		24,013		46,684		46,684
Other Borrowed Funds	Level III		29,080		29,267		15,136		15,305
Accrued Interest Payable	Level II		394		394		348		348

Off-Balance Sheet Instruments:
Commitments to Extend Credit	Level III		-		-		-		-

Note 10. Subsequent Event

On April 29, 2015, the Bank sold $26.1 million of residential real estate loans at an approximate gain of $100,000.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion should be read in conjunction with the unaudited consolidated financial statements, notes and tables included in this report. For further information, refer to the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Forward-Looking Statements

This report contains certain “forward-looking statements” within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the Company’s current expectations regarding its business strategies, intended results and future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors which could affect actual results include the following:

·	General and local economic conditions;

·	Changes in interest rates, deposit flows, demand for loans, real estate values and competition;

·	Competitive products and pricing;

·	The ability of our customers to make scheduled loan payments;

·	Loan delinquency rates;

·	Our ability to manage the risks involved in our business;

·	Our ability to integrate the operations of businesses we acquire;

·	Inflation, market and monetary fluctuations;

·	CB Financial’s ability to control costs and expenses;

·	Changes in federal and state legislation and regulation (i.e. the effect of new capital standards to be imposed by banking regulators and the implementation of the Dodd-Frank Act).

The Company assumes no obligation to update any forward-looking statements.

General

CB Financial Services, Inc. (“CB Financial”) is a bank holding company established in 2006. CB Financial’s business activity is conducted through its wholly owned banking subsidiary Community Bank (“the Bank”). All significant intercompany transactions have been eliminated.

The Bank is a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. Community Bank operates from 16 offices in Greene, Allegheny, Washington, Fayette and Westmoreland Counties in southwestern Pennsylvania. The Bank is a community-oriented institution offering residential and commercial real estate loans, commercial and industrial loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area. Property and casualty, commercial liability, surety and other insurance products are offered through Exchange Underwriters, Inc, the Bank’s wholly-owned subsidiary that is a full-service, independent insurance agency.

The Bank’s website address is www.communitybank.tv. Information on the website is not and should not be considered a part of this Form 10-Q.

Overview

The following discussion and analysis is presented to assist in the understanding and evaluation of our consolidated financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on our consolidated financial condition as of March 31, 2015 compared to the financial condition as of December 31, 2014 and the consolidated results of operations for the three months ended March 31, 2015 and 2014.

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan losses, noninterest income and noninterest expense. Noninterest income consists primarily of fees and service charges on deposit accounts, fees and charges on loans, insurance commissions, income from bank-owned life insurance and other income. Noninterest expense consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, contracted services, legal fees, other real estate owned, advertising and promotion, stationery and supplies, deposit and general insurance and other expenses.

Financial institutions like us, in general, are significantly affected by economic conditions, competition, and the monetary and fiscal policies of the federal government. Lending activities are influenced by the demand for and supply of housing, competition among lenders, interest rate conditions, and funds availability. Our operations and lending are principally concentrated in the southwestern Pennsylvania market area where we have seen moderate growth in recent years.

Balance Sheet Analysis

Assets. Total assets increased $5.1 million, or 0.6%, to $851.5 million at March 31, 2015 compared to $846.3 million at December 31, 2014. During the three months ended March 31, 2015, funds generated from deposit growth and maturities and calls of available-for-sale securities were used to paydown short-term borrowings and fund loan growth.

Investment securities classified as available-for-sale decreased $4.2 million, or 4.0%, to $101.2 million at March 31, 2015 compared to $105.4 million at December 31, 2014. This decrease was primarily the result of security maturities and calls that were utilized to fund loans and were partially reinvested in U.S. government agency securities and obligations of states and political subdivisions.

Loans, net, when including the transfer of $26.1 million of loans to loans held for sale, increased $5.3 million, or 0.8%, to $685.7 million at March 31, 2015 compared to $680.5 million at December 31, 2014 primarily due to increases of $5.9 million in consumer loans (mainly indirect auto loans) and $2.8 million in residential loans, partially offset by a $2.7 million decrease in commercial loans.

Liabilities. Total liabilities increased $3.4 million, or 0.4%, to $767.8 million at March 31, 2015 compared to $764.4 million at December 31, 2014.

Total deposits increased $11.9 million, or 1.7%, to $709.4 million at March 31, 2015 compared to $697.5 million at December 31, 2014. There were increases of $9.2 million in broker deposits, $5.4 million in savings, $2.3 million in money market accounts and $1.5 million in demand deposits, partially offset by decreases of $4.0 million in NOW accounts and $2.4 million in certificates of deposit. Broker deposits increased primarily due to the Bank participating in a reciprocal deposit network, which allows participating institutions to both send and receive identical amounts simultaneously and provides increased FDIC insurance coverage on customer deposit amounts greater than $250,000. The reciprocal deposit network does not share the same characteristics of traditional broker deposits because they are based on actual customer relationships. In addition, during the first quarter, municipal deposit balances increased due to cyclical collections of property tax receipts. Due to the low interest rate environment, the Bank has been selective on promotional interest rates and has concentrated its efforts on increasing noninterest-bearing accounts by building strong customer relationships. The Bank attributes the decrease in certificates of deposit primarily to customer hesitancy to commit to long-term financial instruments in the prevailing low interest rate environment.

Short-term borrowings decreased $22.7 million, or 48.6%, to $24.0 million at March 31, 2015 compared to $46.7 million at December 31, 2014. Conversely, other borrowed funds increased $13.9 million, or 92.1%, to $29.1 million at March 31, 2015 compared to $15.1 million at December 31, 2014. Funds generated from deposit growth were utilized to paydown a portion of short-term borrowings whereas another portion of short-term borrowings were replaced with long-term borrowings to decrease the Company’s susceptibility to interest rate risk in the event of rising interest rates.

Stockholders’ Equity. Stockholders’ equity increased $1.8 million, or 2.2%, to $83.7 million at March 31, 2015 compared to $81.9 million at December 31, 2014. During the period, net income was $2.3 million and the unrealized gain position of the security portfolio increased $331,000. The Company also paid $855,000 in dividends to stockholders.

Results of Operations for the Three Months Ended March 31, 2015 and 2014

Overview. The Company’s net income increased $1.2 million to $2.3 million for the three months ended March 31, 2015 compared to $1.1 million for the three months ended March 31, 2014. The increase is primarily due to the merger with FedFirst Financial Corporation in the fourth quarter of 2014.

Net Interest Income. Net interest income increased $3.3 million, or 81.5%, to $7.5 million for the three months ended March 31, 2015 compared to $4.1 million for the three months ended March 31, 2014.

Interest and dividend income increased $3.6 million, or 78.6%, to $8.2 million for the three months ended March 31, 2015 compared to $4.6 million for the three months ended March 31, 2014. Interest income on loans increased $3.5 million due to an increase in average loans outstanding of $304.8 million primarily due to the merger. Other interest and dividend income increased $135,000 primarily due to an increase in FHLB stock dividends which included the payment of a special dividend in the first quarter of 2015 of $56,000. Interest income on securities exempt from federal tax decreased $59,000 due to deploying proceeds from security calls and maturities into loans and for merger-related funding purposes.

Interest expense increased $249,000, or 53.0%, to $719,000 for the three months ended March 31, 2015 compared to $470,000 for the three months ended March 31, 2014. Interest expense on deposits increased $169,000 due to an increase in average deposits of $178.2 million primarily due to the merger. Despite the increase in average balances, the average cost of interest-bearing deposits decreased 4 basis points, primarily related to the repricing of maturing certificates of deposit to lower rates. Interest expense on other borrowed funds and short-term borrowings increased $59,000 and $21,000, respectively, primarily due to an increase in average borrowings of $44.0 million.

Average Balances and Yields. The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. Average balances are derived from daily balances over the periods indicated. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Tax-equivalent yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal tax rate of 34%. As such, amounts will not agree to income as reported in the consolidated financial statements. Average balances for loans are net of the allowance for loan losses, but include non-accrual loans. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented and are expressed in annualized rates.

	(Dollars in thousands) Three Months Ended March 31,
	2015							2014
(Dollars in thousands)	Average Balance		Interest and Dividends		Yield/ Cost (1)			Average Balance		Interest and Dividends		Yield/ Cost (1)
Assets:
Interest-Earning Assets:
Loans	$	682,292	$	7,503		4.46	%	$	377,491	$	3,983		4.28	%
Investment Securities
Taxable		61,302		242		1.58			77,880		232		1.19
Exempt From Federal Tax		42,073		441		4.19			50,740		529		4.17
Other Interest-Earning Assets		8,961		156		7.06			9,206		23		1.01
Total Interest-Earning Assets		794,628		8,342		4.26			515,317		4,767		3.75
Noninterest-Earning Assets		56,361							28,097
Total Assets	$	850,989						$	543,414

Liabilities and
Stockholders' equity:
Interest-Bearing Liabilities:
Interest-Bearing Demand Deposits	$	102,576		39		0.15	%	$	75,328		37		0.20	%
Savings		120,960		53		0.18			87,562		40		0.19
Money Market		159,101		90		0.23			108,438		74		0.28
Time Deposits		152,457		416		1.11			85,530		278		1.32
Total Interest-Bearing Deposits		535,094		598		0.45			356,858		429		0.49

Borrowings		62,706		121		0.78			18,721		41		0.89
Total Interest-Bearing Liabilities		597,800		719		0.49			375,579		470		0.51

Noninterest-Bearing Demand Deposits		163,248							121,484
Other Liabilities		6,819							2,997
Total Liabilities		767,867							500,060

Stockholders' Equity		83,122							43,354
Total Liabilities and
Stockholders' Equity	$	850,989						$	543,414

Net interest income			$	7,623						$	4,297

Net Interest Rate Spread (2)						3.77	%						3.24	%
Net Interest-Earning Assets (3)	$	196,828						$	139,738
Net Interest Margin (4)						3.89							3.38
Return on Average Assets						1.09							0.81
Return on Average Equity						11.20							10.09
Average Equity to Average Assets						9.77							7.98
Average Interest-Earning Assets to
Average Interest-Bearing Liabilities						132.93							137.21

________________

(1)	Annualized.

(2)	Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3)	Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)	Net interest margin represents net interest income divided by average total interest-earning assets.

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the years indicated. Tax-equivalent yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal tax rate of 34%. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. The total column represents the sum of the prior columns.

	(Dollars in thousands) Three Months Ended March 31, 2015 Compared To Three Months Ended March 31, 2014
	Increase (Decrease) Due to
	Volume			Rate			Total

Interest and Dividend Income:
Loans, net	$	3,345		$	175		$	3,520
Investment Securities:
Taxable		(56	)		66			10
Exempt From Federal Tax		(91	)		3			(88	)
Other Interest-Earning Assets		-			133			133
Total Interest-Earning Assets		3,198			377			3,575

Interest Expense:
Deposits		207			(38	)		169
Borrowings		86			(6	)		80
Total Interest-Bearing Liablities		293			(44	)		249
Change in Net Interest Income	$	2,905		$	421		$	3,326

Provision for Loan Losses. The provision for loan losses was $300,000 for the three months ended March 31, 2015. There was no provision for loan losses in the three months ended March 31, 2014. Net charge-offs for the three months ended March 31, 2015 were $17,000 compared to net charge-offs of $10,000 for the three months ended March 31, 2014. Management analyzes the loan portfolio on a quarterly basis to determine the adequacy of the allowance for loan losses and the need for additional provisions for loan losses and determined a provision of $300,000 was necessary due to loan growth, primarily in indirect auto loans, and an increase in substandard-rated loans.

Noninterest Income. Noninterest income increased $1.1 million to $1.8 million for the three months ended March 31, 2015 compared to $724,000 for the three months ended March 31, 2014 primarily due to a $928,000 increase in insurance commission from the acquisition of Exchange Underwriters, Inc., an insurance brokerage subsidiary, as part of the merger. Included in insurance commissions are $211,000 of contingency fees, which are commissions that are contingent upon several factors including, but not limited to, eligible written premiums, earned premiums, incurred losses and stop loss charges. These contingency fees are typically earned in the first quarter of the year. Service fees on deposit accounts increased $122,000 primarily due to check card fees from deposit accounts acquired in the merger. In addition, income from bank owned life insurance increased $60,000 due to the acquisition of policies in the merger.

Noninterest Expense. Noninterest expense increased $2.3 million, or 66.2%, to $5.7 million for the three months ended March 31, 2015 compared to $3.5 million for the three months ended March 31, 2014. Salaries and employee benefits increased $1.3 million primarily due employees retained as a result of the merger as well as normal salary increases. Occupancy and equipment increased $152,000 and $133,000, respectively, primarily due to the acquisition of branches in the merger and increased costs associated with the prior year upgrade of the data processing system to accommodate additional account activity. Advertising increased $136,000 related to a cooperative marketing agreement at Exchange Underwriters, Inc. and advertising initiatives to promote the merger. Amortization of core deposit intangible increased $134,000 due to amortization of the core deposit intangible from the merger. PA shares tax increased $86,000 due to an increase in stockholders’ equity as a result of the merger.

Income Tax Expense. Income taxes increased $644,000 to $940,000 for the three months ended March 31, 2015 compared to $296,000 for the three months ended March 31, 2014. The effective tax rate for the three months ended March 31, 2015 was 29.1% compared to 21.5% for the three months ended March 31, 2014. The increase in income taxes and effective tax rate was due to an increase of $1.9 million in net income before income tax expense.

Off-Balance Sheet Arrangements.

Other than loan commitments, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a significant current or future effect on our financial condition, revenues, expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors. Refer to Note 8 in the Notes to Consolidated Financial Statements for a summary of commitments outstanding as of March 31, 2015.

Liquidity and Capital Management

Liquidity. Liquidity is the ability to meet current and future financial obligations of a short-term nature. The Company’s primary sources of funds consist of deposit inflows, loan repayments and maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

The Company regularly adjusts its investments in liquid assets based upon its assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities, and the objectives of its asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits with other banks and short- and intermediate-term securities. The Company believes that it had sufficient liquidity at March 31, 2015 to satisfy its short- and long-term liquidity needs at that date.

The Company’s most liquid assets are cash and due from banks, which totaled $15.9 million at March 31, 2015. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. Unpledged securities, which provide an additional source of liquidity, totaled $21.0 million. In addition, at March 31, 2015, the Company had the ability to borrow up to $339.3 million from the FHLB of Pittsburgh, of which $29.0 million was outstanding, and up to $40.0 million from the Federal Reserve Bank of Cleveland, none of which was outstanding.

At March 31, 2015, time deposits due within one year of that date totaled $63.1 million, or 42.3% of total time deposits. If these time deposits do not remain with the Company, the Company will be required to seek other sources of funds. Depending on market conditions, the Company may be required to pay higher rates on such deposits or other borrowings than it currently pays on these certificates of deposit. The Company believes, however, based on past experience, that a significant portion of its certificates of deposit will remain with it, either as certificates of deposit or as other deposit products. The Company has the ability to attract and retain deposits by adjusting the interest rates offered.

CB Financial Services, Inc. is a separate legal entity from the Bank and must provide for its own liquidity to pay any dividends to its shareholders and for other corporate purposes. Its primary source of liquidity is dividend payments it receives from the Bank. The Bank’s ability to pay dividends to the Company is subject to regulatory limitations. At March 31, 2015, the Company (on an unconsolidated, stand-alone basis) had liquid assets of $754,000.

We are committed to maintaining a strong liquidity position; therefore, we monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. The marginal cost of new funding, however, whether from deposits or borrowings from the Federal Home Loan Bank, will be carefully considered as we monitor our liquidity needs. Therefore, in order to minimize our cost of funds, we may consider additional borrowings from the Federal Home Loan Bank in the future.

Capital Management. The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, each must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

At March 31, 2015 and December 31, 2014, the Company was categorized as well capitalized under the regulatory framework for prompt corrective action. The following table presents the Bank’s regulatory capital amounts and ratios, as well as the minimum amounts and ratios required to be well capitalized as of the dates indicated.

	(Dollars in thousands)
	March 31, 2015					December 31, 2014
	Amount		Ratio			Amount		Ratio
Common Equity Tier 1 (to risk weighted assets)
Actual	$	74,375		12.42	%		N/A		N/A
For Capital Adequacy Purposes		26,955		4.50			N/A		N/A
To Be Well Capitalized		38,935		6.50			N/A		N/A

Tier 1 Capital (to risk weighted assets)
Actual		74,375		12.42		$	69,340		11.63	%
For Capital Adequacy Purposes		35,940		6.00			23,840		4.00
To Be Well Capitalized		47,920		8.00			35,760		6.00

Total Capital (to risk weighted assets)
Actual		79,853		13.33			74,484		12.50
For Capital Adequacy Purposes		47,920		8.00			47,680		8.00
To Be Well Capitalized		59,900		10.00			59,600		10.00

Tier 1 Leverage (to adjusted total assets)
Actual		74,375		8.85			69,340		9.33
For Capital Adequacy Purposes		33,630		4.00			29,719		4.00
To Be Well Capitalized		42,037		5.00			37,149		5.00

Item 3. Quantitative and Qualitative Disclosure about Market Risk.

The Company believes that as of March 31, 2015, there was no material change in the quantitative and qualitative disclosure about market risk data as of December 31, 2014, as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Item 4. Controls and Procedures.

CB Financial’s management, including CB Financial’s principal executive officer and principal financial officer, have evaluated the effectiveness of CB Financial’s “disclosure controls and procedures” as such term is defined in Rule 13a-15(c) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by the report, CB Financial’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that CB Financial files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to CB Financial’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

There have been no changes in CB Financial’s internal control over financial reporting during the quarter ended March 31, 2015, that has materially affected, or is reasonably likely to materially affect, CB Financial’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On April 21, 2014, a class action complaint, captioned Sutton v. FedFirst Financial Corp., et al., was filed under Case No. 24C14002331, in the Circuit Court in Baltimore City, Maryland (the “Court”), against FedFirst Financial Corp., each of FedFirst Financial’s directors, and CB Financial. The complaint alleged, among other things, that the FedFirst Financial directors breached their fiduciary duties to FedFirst Financial and its stockholders by agreeing to sell to CB Financial without first taking steps to ensure that FedFirst Financial stockholders would obtain adequate, fair and maximum consideration under the circumstances, by agreeing to terms with CB Financial that benefit themselves and/or CB Financial without regard for the FedFirst Financial stockholders and by agreeing to terms with CB Financial that discourages other bidders. The plaintiff also alleged that CB Financial aided and abetted the FedFirst Financial directors’ breaches of fiduciary duties. The complaint sought, among other things, an order declaring the Merger Agreement unenforceable and rescinding and invalidating the Merger Agreement, an order enjoining the defendants from consummating the merger, as well as attorneys’ and experts’ fees and certain other damages. On June 20, 2014, FedFirst Financial and the individual defendants filed a Motion to Dismiss the complaint. On July 29, 2014 the plaintiff filed an amended complaint adding an additional claim that the Form S-4 filed by CB Financial in connection with the merger contained material misstatements and omissions. On September 22, 2014, the Court dismissed all claims as to all defendants with prejudice, including claims against FedFirst Financial and its directors as well as claims against CB Financial. The plaintiff has appealed the dismissal of the complaint. Oral argument is expected to be held in October 2015. CB Financial continues to believe that the factual allegations in the complaint, as amended, are without merit.

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, claims seeking damages for improper collection procedures or misrepresentations, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any other pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

31.1

Rule 13a-14(a) / 15d-14(a) Certification (President and Chief Executive Officer)

31.2

Rule 13a-14(a) / 15d-14(a) Certification (Chief Financial Officer)

32.1

Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Chief Financial Officer Certification pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.0

The following materials for the quarter ended March 31, 2015, formatted in XBRL (Extensible Business Reporting Language); (i) the Consolidated Statement of Financial Condition, (ii) the Consolidated Statement of Operations, (iii) the Consolidated Statement of Comprehensive Income, (iv) the Consolidated Statement of Stockholders’ Equity, (v) the Consolidated Statement of Cash Flows and (vi) the Notes to the Unaudited Consolidated Financial Statements

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		CB FINANCIAL SERVICES, INC.
		(Registrant)

Date:	May 15, 2015	/s/ Barron P. McCune, Jr.
		Barron P. McCune, Jr.
		President and Chief Executive Officer

Date:	May 15, 2015	/s/ Kevin D. Lemley
		Kevin D. Lemley
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Chief Accounting Officer)