CB Financial Services, Inc. - Quarter Report: 2017 June (Form 10-Q)

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 June 30, 2017

☐

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)

	N/A
	(Former name, former address and former fiscal year, if changed since last report)

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 ☒ No ☐

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 ☒ No ☐

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

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☐	(Do not check if a smaller reporting company)	Smaller reporting company ☐
Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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

As of August 7, 2017, the number of shares outstanding of the Registrant’s Common Stock was 4,088,025.

FORM 10-Q

INDEX

Page

PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).	1
Consolidated Statement of Financial Condition	1
Consolidated Statement of Income	2
Consolidated Statement of Comprehensive Income	3
Consolidated Statement of Changes In Stockholders’ Equity	3
Consolidated Statement of Cash Flows	4
Notes to Unaudited Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	31
Item 3. Quantitative and Qualitative Disclosure about Market Risk.	40
Item 4. Controls and Procedures.	41
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.	41
Item 1A. Risk Factors.	41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	41
Item 3. Defaults Upon Senior Securities.	41
Item 4. Mine Safety Disclosures.	41
Item 5. Other Information.	41
Item 6. Exhibits	41
SIGNATURES	42

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED STATEMENT OF FINANCIAL CONDITION

	(Unaudited)
	June 30,			December 31,
(Dollars in thousands, except share data)	2017			2016
ASSETS
Cash and Due From Banks:
Interest Bearing	$	17,464		$	7,699
Non-Interest Bearing		11,209			6,583
Total Cash and Due From Banks		28,673			14,282

Investment Securities:
Available-for-Sale		116,545			106,208
Loans, Net		674,262			674,094
Premises and Equipment, Net		16,544			14,132
Bank-Owned Life Insurance		18,919			18,687
Goodwill		4,953			4,953
Core Deposit Intangible, Net		3,551			3,819
Accrued Interest and Other Assets		8,942			9,900
TOTAL ASSETS	$	872,389		$	846,075

LIABILITIES
Deposits:
Demand Deposits	$	180,991		$	165,400
NOW Accounts		121,615			105,962
Money Market Accounts		132,510			141,674
Savings Accounts		131,174			121,520
Time Deposits		157,351			155,028
Brokered Deposits		3,418			8,634
Total Deposits		727,059			698,218

Short-Term Borrowings		25,450			27,027
Other Borrowed Funds		24,500			28,000
Accrued Interest and Other Liabilities		3,480			3,361
TOTAL LIABILITIES		780,489			756,606

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 4,088,025 and 4,086,625 Shares Outstanding at June 30, 2017 and December 31, 2016, Respectively		1,818			1,818
Capital Surplus		42,041			41,863
Retained Earnings		53,420			51,713
Treasury Stock, at Cost (275,321 and 276,721 Shares at June 30, 2017 and December 31, 2016, Respectively)		(4,722	)		(4,746	)
Accumulated Other Comprehensive Loss		(657	)		(1,179	)
TOTAL STOCKHOLDERS' EQUITY		91,900			89,469
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	872,389		$	846,075

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

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands, except share and per share data)	2017		2016		2017		2016
INTEREST AND DIVIDEND INCOME
Loans, Including Fees	$	7,229	$	7,323	$	14,371	$	14,820
Federal Funds Sold		41		8		56		13
Investment Securities:
Taxable		386		307		747		631
Exempt From Federal Income Tax		219		266		436		526
Other Interest and Dividend Income		74		46		130		83
TOTAL INTEREST AND DIVIDEND INCOME		7,949		7,950		15,740		16,073

INTEREST EXPENSE
Deposits		675		560		1,330		1,121
Federal Funds Purchased		-		-		-		1
Short-Term Borrowings		20		15		39		29
Other Borrowed Funds		119		127		241		254
TOTAL INTEREST EXPENSE		814		702		1,610		1,405

NET INTEREST INCOME		7,135		7,248		14,130		14,668
Provision For Loan Losses		300		300		720		1,150
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		6,835		6,948		13,410		13,518

NONINTEREST INCOME
Service Fees on Deposit Accounts		625		606		1,209		1,192
Insurance Commissions		842		743		1,928		1,615
Other Commissions		107		112		211		229
Net Gains on Sales of Loans		162		185		252		309
Net Gains on Sales of Investments		70		58		122		58
Net Gains on Purchased Tax Credits		15		-		29		-
Income from Bank-Owned Life Insurance		116		119		232		239
Other		29		45		59		73
TOTAL NONINTEREST INCOME		1,966		1,868		4,042		3,715

NONINTEREST EXPENSE
Salaries and Employee Benefits		3,424		3,285		6,913		6,654
Occupancy		604		438		1,152		912
Equipment		473		432		912		854
FDIC Assessment		82		115		163		241
PA Shares Tax		186		203		376		405
Contracted Services		157		156		289		289
Legal and Professional Fees		102		114		243		255
Advertising		182		189		307		354
Bankcard Processing Expense		131		122		254		234
Other Real Estate Owned Expense (Income)		1		10		6		(535	)
Amortization of Core Deposit Intangible		133		133		267		267
Other		829		891		1,639		1,672
TOTAL NONINTEREST EXPENSE		6,304		6,088		12,521		11,602

Income Before Income Taxes		2,497		2,728		4,931		5,631
Income Taxes		696		790		1,426		1,648
NET INCOME	$	1,801	$	1,938	$	3,505	$	3,983

EARNINGS PER SHARE
Basic	$	0.44	$	0.48	$	0.86	$	0.98
Diluted		0.44		0.48		0.85		0.98

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		4,088,025		4,081,017		4,087,659		4,081,017
Diluted		4,105,338		4,084,695		4,101,861		4,083,313

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(Dollars in thousands)	2017			2016			2017			2016

Net Income	$	1,801		$	1,938		$	3,505		$	3,983

Other Comprehensive Income:
Unrealized Gains on Available-for-Sale Securities Net of Income Tax of $198 and $28 for the Three Months Ended June 30, 2017 and 2016, Respectively, and $309 and $164 for the Six Months Ended June 30, 2017 and 2016, Respectively		385			55			603			316

Reclassification Adjustment for Gains on Securities:
Included in Net Income, Net of Income Tax of $23 and $20 for the Three Months Ended June 30, 2017 and 2016, Respectively, and $41 and $20 for the Six Months Ended June 30, 2017 and 2016, Respectively (1)		(47	)		(38	)		(81	)		(38	)
Other Comprehensive Income, Net of Income Tax		338			17			522			278
Total Comprehensive Income	$	2,139		$	1,955		$	4,027		$	4,261

⁽¹⁾ The gross amount of gains on securities of $70 and $58 for the Three Months Ended June 30, 2017 and 2016, Respectively and $122 and $58 for the Six Months Ended June 30, 2017 and 2016, Respectively are reported as Net Gains on Sales of Investments on the Consolidated Statement of Income. The income tax effect is included in Income Taxes on the Consolidated Statement of Income.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

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

December 31, 2015		4,363,346	$	1,818	$	41,614	$	47,725		$	(4,836	)	$	575	$	86,896
Comprehensive Income:
Net Income		-		-		-		3,983			-			-		3,983
Other Comprehensive Income		-		-		-		-			-			278		278
Stock-Based Compensation Expense		-		-		174		-			-			-		174
Dividends Paid ($0.22 Per Share)		-		-		-		(1,796	)		-			-		(1,796	)
June 30, 2016		4,363,346	$	1,818	$	41,788	$	49,912		$	(4,836	)	$	853	$	89,535

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

December 31, 2016		4,363,346	$	1,818	$	41,863	$	51,713		$	(4,746	)	$	(1,179	)	$	89,469
Comprehensive Income:
Net Income		-		-		-		3,505			-			-			3,505
Other Comprehensive Income		-		-		-		-			-			522			522
Stock-Based Compensation Expense		-		-		171		-			-			-			171
Exercise of stock options		-		-		7		-			24			-			31
Dividends Paid ($0.22 Per Share)		-		-		-		(1,798	)		-			-			(1,798	)
June 30, 2017		4,363,346	$	1,818	$	42,041	$	53,420		$	(4,722	)	$	(657	)	$	91,900

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

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

	Six Months Ended
	June 30,
(Dollars in thousands)	2017			2016

OPERATING ACTIVITIES
Net Income	$	3,505		$	3,983
Αdjustmеnts to Rеconcilе Net Income to Net Cash Provided By Operating Activities:
Net Amortization on Investments		171			116
Depreciation and Amortization		1,305			1,510
Provision for Loan Losses		720			1,150
Income from Bank-Owned Life Insurance		(232	)		(239	)
Proceeds From Mortgage Loans Sold		10,620			11,574
Originations of Mortgage Loans for Sale		(10,368	)		(11,265	)
Gains on Sales of Loans		(252	)		(309	)
Gains on Sales of Investment Securities		(122	)		(58	)
Gains on Sales of Other Real Estate Owned and Repossessed Assets		-			(49	)
Noncash Expense for Stock-Based Compensation		171			174
Decrease in Accrued Interest Receivable		91			32
Valuation Adjustment on Foreclosed Real Estate		-			(566	)
(Decrease) Increase in Taxes Payable		(1,743	)		1,605
Increase (Decrease) in Accrued Interest Payable		4			(19	)
Net Payment of Federal/State Income Taxes		(1,495	)		(1,450	)
Other, Net		4,078			237
NET CASH PROVIDED BY OPERATING ACTIVITIES		6,453			6,426

INVESTING ACTIVITIES
Investment Securities Available for Sale:
Proceeds From Principal Repayments and Maturities		4,588			36,894
Purchases of Securities		(17,787	)		(35,388	)
Proceeds from Sales of Securities		3,603			302
Net Increase in Loans		(1,502	)		(79	)
Purchase of Premises and Equipment		(3,150	)		(281	)
Retirements of Premises and Equipment		152			-
Proceeds From Sales of Other Real Estate Owned and Repossessed Assets		-			175
Decrease in Restricted Equity Securities		37			571
NET CASH USED IN INVESTING ACTIVITIES		(14,059	)		2,194

FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits		28,841			(4,033	)
Net Decrease in Short-Term Borrowings		(1,577	)		(918	)
Principal Payments on Other Borrowed Funds		(3,500	)		-
Cash Dividends Paid		(1,798	)		(1,796	)
Treasury Stock, Purchases at Cost		24			-
Exercise of Stock Options		7			-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		21,997			(6,747	)

INCREASE IN CASH AND CASH EQUIVALENTS		14,391			1,873
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR		14,282			11,340
CASH AND DUE FROM BANKS AT END OF PERIOD	$	28,673		$	13,213

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest on deposits and borrowings (including interest credited to deposit accounts of $1,323 and $1,137 respectively)	$	1,606		$	1,423
Income taxes		1,495			1,450

Real estate acquired in settlement of loans		155			3,236
Transfer of real estate acquired in settlement of loans to premise and equipment		-			2,350
Securities sold not settled		-			(70	)
Securities purchased not settled		-			60

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” or “EU”). 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 (“SEC”) 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 GAAP 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 any material respect. 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 audited consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Interim results are not necessarily indicative of results for a full year.

The Company will continue to evaluate the provisions of Accounting Standards Codification (“ASC”) Topic 280 for segment reporting information related to Exchange Underwriters. During the prior quarter, Exchange Underwriters insurance commissions comprised of approximately 11% of combined interest and noninterest income but less than 10% of the combined assets of the Company. While EU exceeded the 10% threshold of combined interest and noninterest income, this was primarily related to a unique income event of increased contingency income. Contingency fees are commissions that are contingent upon several factors including, but not limited to, eligible written premiums, earned premiums, incurred losses and stop loss charges. During the current quarter, Exchange Underwriters fell below the 10% threshold of combined interest and noninterest income.

Except as disclosed in Note 4 on page 24, 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 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.

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.

For performing loans acquired in the merger, 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. For purchased credit impaired (“PCI”) loans acquired in the merger, 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 July 2017, the FASB issued Accounting Standards Update ("ASU") 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 amendments simplify the accounting for certain financial instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Companies that provide earnings per share (EPS) data will adjust their basic EPS calculation for the effect of the feature when triggered and will also recognize the effect of the trigger within equity. ASU 2017-11 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2018, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2019 and for all other entities for annual periods beginning after December 15, 2020 with early adoption permitted. The Company is evaluating the provisions of ASU 2017-11 but believes that its adoption will not have a material impact on the Company's consolidated financial condition or results of operations.

In May 2017, the FASB issued ASU 2017-10, Service Concession Arrangements (Topic 853): Determining the Customer of the Operation Services. ASU 2017-10 amendments clarify that the grantor in a service concession arrangement is the customer of the operation services in all cases for those arrangements. ASU 2017-10 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2017, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2018 and for all other entities for annual periods beginning after December 15, 2019 with early adoption permitted, including within an interim period, subject to specific transition requirements depending on whether an entity adopted Topic 606 before or after the issuance of ASU 2017-10. The Company is evaluating the provisions of ASU 2017-10 but believes that its adoption will not have a material impact on the Company's consolidated financial condition or results of operations.

In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under ASU Topic 718. ASU 2017-09 is effective for all entities for annual periods, including interim periods within those annual periods beginning after December 15, 2017 with early adoption permitted. The Company is evaluating the provisions of ASU 2017-09 but believes that its adoption will not have a material impact on the Company's consolidated financial condition or results of operations.

In March 2017, the FASB issued ASU 2017-08, Receivables- Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchases of Callable Debt Securities. ASU 2017-08 amends guidance on the amortization period of premiums on certain purchases of callable debt securities. The amendments shorten the amortization period of premiums on certain purchases of callable debt securities to the earliest call date. ASU 2017-08 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2018, and interim periods within those annual periods, for public entities that are not SEC filers for annual periods beginning after December 15, 2019 and for all other entities for annual periods beginning after December 15, 2020 with early adoption permitted. The Company is evaluating the provisions of ASU 2017-08 but believes that its adoption will not have a material impact on the Company's consolidated financial condition or results of operations.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the second step of the goodwill impairment test. Instead, an entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. ASU 2017-04 is effective for public business entities that are SEC filers for annual periods beginning after December 15, 2019, and interim periods within those annual periods, with early adoption permitted, and is to be applied on a prospective basis. The Company is currently evaluating the provisions of ASU 2017-04, but does not believe that its adoption will have a material impact on the Company's consolidated financial condition or results of operations.

Recent Accounting Standards (continued)

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flow (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted and the amendments should be applied using a retrospective transition method to each period presented. The Company is currently evaluating the provisions of ASU 2016-15, but does not believe that its adoption will have a material impact on the Company's consolidated financial condition or results of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, ASU 2016-13 eliminates the probable initial recognition threshold in current GAAP; and instead requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however this ASU will require that credit losses be presented as an allowance rather than as a write-down. ASU 2016-13 affects companies holding financial assets and net investment in leases that are not accounted for at fair value through net income. The ASU 2016-13 amendments affect loans, debt securities, trade receivables, net investments in leases, off balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the provisions of ASU 2016-13, but does not believe that its adoption will have a material impact on the Company's consolidated financial condition or results of operations.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 introduces amendments intended to simplify the accounting for stock compensation. ASU 2016-09 requires all excess tax benefits and tax deficiencies to be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits and assess the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period. The ASU also requires excess tax benefits be classified along with other income tax cash flows as an operating activity in the statement of cash

flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, with early adoption permitted. The adoption of ASU 2016-09 as of January 1, 2017, had no effect on the Company's consolidated financial condition or results of operations.

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which increases the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet, and disclosing key information about leasing arrangements. ASU 2016-02 will require lessees to recognize a right-of-use (ROU) asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation for leases with terms of more than twelve months. Both the ROU asset and lease liability will initially be measured at the

present value of the future minimum lease payments over the lease term. Subsequent measurement, including the presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Accounting by lessors will remain largely unchanged from current U.S. GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted, and is to be applied as of the beginning of the earliest period presented using a modified retrospective approach. The Company is currently evaluating the provisions of ASU 2016-02, but expects to report increased assets and liabilities as a result of reporting additional leases on the Company's consolidated statement of financial condition or results of operations.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10), which enhances the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. ASU 2016-01 (i) requires equity investments (except those accounted for under the equity method or that are consolidated) to be measured at fair value with changes in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for an entity to disclose the methods and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost; (iv) requires an entity to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and (v) requires separate

Recent Accounting Standards (continued)

presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or in the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied using a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The Company is currently evaluating the provisions of ASU 2016-01, but does not believe that its adoption will have a material impact on the Company's consolidated financial condition or results of operations.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which establishes a comprehensive revenue recognition standard for virtually all industries under 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. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09. The guidance is effective for the Company’s financial statements beginning January 1, 2018. The guidance allows an entity to apply the new standard either retrospectively or through a cumulative effect adjustment as of January 1, 2018. This guidance does not apply to revenue associated with financial instruments, including loans, securities, and derivatives that are accounted for under other U.S. GAAP guidance. For that reason, we do not expect it to have a material impact on our consolidated results of operations for elements of the statement of income associated with financial instruments, including securities gains, interest income, and interest expense. However, we do believe the new standard will result in new disclosure requirements. We are currently in the process of reviewing contracts to assess the impact of the new guidance on our service offerings that are in the scope of the guidance included in non-interest income, such as insurance commission fees, service charges, payment processing fees, trust services fees and brokerage services fees. The Company is continuing to evaluate the effect of the new guidance on revenue sources other than financial instruments on its consolidated financial position or 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 Income 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						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Weighted-Average Common Shares Outstanding		4,363,346			4,363,346			4,363,346			4,363,346
Average Treasury Stock Shares		(275,321	)		(282,329	)		(275,687	)		(282,329	)
Weighted-Average Common Shares and Common Stock Equivalents Used to Calculate Basic Earnings Per Share		4,088,025			4,081,017			4,087,659			4,081,017
Additional Common Stock Equivalents (Stock Options and Restricted Stock) Used to Calculate Diluted Earnings Per Share		17,313			3,678			14,202			2,296
Weighted-Average Common Shares and Common Stock Equivalents Used to Calculate Diluted Earnings Per Share		4,105,338			4,084,695			4,101,861			4,083,313

Earnings per share:
Basic	$	0.44		$	0.48		$	0.86		$	0.98
Diluted		0.44			0.48			0.85			0.98

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)
	June 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

U.S. Government Agencies	$	66,620	$	1	$	(1,335	)	$	65,286
Obligations of States and Political Subdivisions		36,423		394		(90	)		36,727
Mortgage-Backed Securities - Government-Sponsored Enterprises		12,907		9		(33	)		12,883
Equity Securities - Mutual Funds		500		7		-			507
Equity Securities - Other		1,091		74		(23	)		1,142
Total	$	117,541	$	485	$	(1,481	)	$	116,545

	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

U.S. Government Agencies	$	67,944	$	18	$	(1,806	)	$	66,156
Obligations of States and Political Subdivisions		35,856		366		(487	)		35,735
Mortgage-Backed Securities - Government-Sponsored Enterprises		2,588		31		-			2,619
Equity Securities - Mutual Funds		500		7		-			507
Equity Securities - Other		1,106		91		(6	)		1,191
Total	$	107,994	$	513	$	(2,299	)	$	106,208

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)
	June 30, 2017
	Less than 12 months							12 Months or Greater							Total
	Number				Gross			Number				Gross			Number				Gross
	of		Fair		Unrealized			of		Fair		Unrealized			of		Fair		Unrealized
	Securities		Value		Losses			Securities		Value		Losses			Securities		Value		Losses
U.S. Government Agencies		21	$	57,265	$	(1,335	)		-	$	-	$	-			21	$	57,265	$	(1,335	)
Obligations of States and Political Subdivisions		18		9,097		(78	)		4		1,629		(12	)		22		10,726		(90	)
Mortgage-Backed Securities - Government Sponsored Enterprises		5		10,639		(33	)		-		-		-			5		10,639		(33	)
Equity Securities - Other		5		373		(23	)		-		-		-			5		373		(23	)
Total		49	$	77,374	$	(1,469	)		4	$	1,629	$	(12	)		53	$	79,003	$	(1,481	)

	December 31, 2016
	Less than 12 months							12 Months or Greater							Total
	Number				Gross			Number				Gross			Number				Gross
	of		Fair		Unrealized			of		Fair		Unrealized			of		Fair		Unrealized
	Securities		Value		Losses			Securities		Value		Losses			Securities		Value		Losses
U.S. Government Agencies		23	$	62,853	$	(1,806	)		-	$	-	$	-			23	$	62,853	$	(1,806	)
Obligations of States and Political Subdivisions		39		19,749		(485	)		1		260		(2	)		40		20,009		(487	)
Equity Securities - Other		2		160		(6	)		-		-		-			2		160		(6	)
Total		64	$	82,762	$	(2,297	)		1	$	260	$	(2	)		65	$	83,022	$	(2,299	)

For debt securities, the Company does not believe any individual unrealized loss as of June 30, 2017 and December 31, 2016 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 June 30, 2017 and December 31, 2016 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 as of the date indicated:

	(Dollars in thousands)
	June 30, 2017
	Available-for-Sale
	Amortized		Fair
	Cost		Value
Due in One Year or Less	$	1,576	$	1,588
Due after One Year through Five Years		17,826		17,898
Due after Five Years through Ten Years		84,604		83,467
Due after Ten Years		13,535		13,592
Total	$	117,541	$	116,545

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 classifications: 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)
	June 30, 2017						December 31, 2016
	Amount			Percent			Amount			Percent
Originated Loans
Real Estate:
Residential	$	189,189			35.0	%	$	186,077			35.4	%
Commercial		140,652			26.1			139,894			26.7
Construction		20,186			3.7			10,646			2.0
Commercial and Industrial		75,665			14.1			71,091			13.5
Consumer		110,113			20.4			114,007			21.7
Other		3,508			0.7			3,637			0.7
Total Originated Loans		539,313			100.0	%		525,352			100.0	%
Allowance for Loan Losses		(7,468	)					(7,283	)
Loans, Net	$	531,845					$	518,069

Loans Acquired at Fair Value
Real Estate:
Residential	$	78,358			54.8	%	$	85,511			54.7	%
Commercial		55,628			39.0			61,116			39.0
Commercial and Industrial		8,849			6.1			9,721			6.2
Consumer		197			0.1			197			0.1
Total Loans Acquired at Fair Value		143,032			100.0	%		156,545			100.0	%
Allowance for Loan Losses		(615	)					(520	)
Loans, Net	$	142,417					$	156,025

Total Loans
Real Estate:
Residential	$	267,547			39.2	%	$	271,588			39.8	%
Commercial		196,280			28.8			201,010			29.5
Construction		20,186			2.9			10,646			1.6
Commercial and Industrial		84,514			12.4			80,812			11.9
Consumer		110,310			16.2			114,204			16.7
Other		3,508			0.5			3,637			0.5
Total Loans		682,345			100.0	%		681,897			100.0	%
Allowance for Loan Losses		(8,083	)					(7,803	)
Loans, Net	$	674,262					$	674,094

Total unamortized net deferred loan fees were $872,000 and $818,000 at June 30, 2017 and December 31, 2016, respectively.

Real estate loans serviced for others, which are not included in the Consolidated Statement of Financial Condition, totaled $90.4 million and $83.9 million at June 30, 2017 and December 31, 2016, 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. At June 30, 2017 and December 31, 2016, there were no loans in the criticized category of Loss within the internal risk rating system.

	(Dollars in thousands)
	June 30, 2017
			Special
	Pass		Mention		Substandard		Doubtful		Total
Originated Loans
Real Estate:
Residential	$	187,741	$	1,061	$	387	$	-	$	189,189
Commercial		123,544		14,037		2,821		250		140,652
Construction		19,562		-		565		59		20,186
Commercial and Industrial		62,712		10,189		1,312		1,452		75,665
Consumer		110,084		-		29		-		110,113
Other		3,508		-		-		-		3,508
Total Originated Loans	$	507,151	$	25,287	$	5,114	$	1,761	$	539,313

Loans Acquired at Fair Value
Real Estate:
Residential	$	76,342	$	-	$	2,016	$	-	$	78,358
Commercial		52,920		1,997		511		200		55,628
Commercial and Industrial		8,418		13		320		98		8,849
Consumer		197		-		-		-		197
Total Loans Acquired at Fair Value	$	137,877	$	2,010	$	2,847	$	298	$	143,032

Total Loans
Real Estate:
Residential	$	264,083	$	1,061	$	2,403	$	-	$	267,547
Commercial		176,464		16,034		3,332		450		196,280
Construction		19,562		-		565		59		20,186
Commercial and Industrial		71,130		10,202		1,632		1,550		84,514
Consumer		110,281		-		29		-		110,310
Other		3,508		-		-		-		3,508
Total Loans	$	645,028	$	27,297	$	7,961	$	2,059	$	682,345

	December 31, 2016
			Special
	Pass		Mention		Substandard		Doubtful		Total
Originated Loans
Real Estate:
Residential	$	184,721	$	1,050	$	306	$	-	$	186,077
Commercial		122,811		14,118		2,035		930		139,894
Construction		9,944		-		595		107		10,646
Commercial and Industrial		65,612		2,720		1,322		1,437		71,091
Consumer		113,847		-		160		-		114,007
Other		3,637		-		-		-		3,637
Total Originated Loans	$	500,572	$	17,888	$	4,418	$	2,474	$	525,352

Loans Acquired at Fair Value
Real Estate:
Residential	$	83,044	$	-	$	2,467	$	-	$	85,511
Commercial		58,411		2,358		347		-		61,116
Commercial and Industrial		9,117		42		441		121		9,721
Consumer		197		-		-		-		197
Total Loans Acquired at Fair Value	$	150,769	$	2,400	$	3,255	$	121	$	156,545

Total Loans
Real Estate:
Residential	$	267,765	$	1,050	$	2,773	$	-	$	271,588
Commercial		181,222		16,476		2,382		930		201,010
Construction		9,944		-		595		107		10,646
Commercial and Industrial		74,729		2,762		1,763		1,558		80,812
Consumer		114,044		-		160		-		114,204
Other		3,637		-		-		-		3,637
Total Loans	$	651,341	$	20,288	$	7,673	$	2,595	$	681,897

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)
	June 30, 2017
			30-59		60-89		90 Days
	Loans		Days		Days		Or More		Total		Non-		Total
	Current		Past Due		Past Due		Past Due		Past Due		Accrual		Loans
Originated Loans
Real Estate:
Residential	$	188,747	$	-	$	17	$	66	$	83	$	359	$	189,189
Commercial		140,364		-		-		-		-		288		140,652
Construction		20,127		-		-		-		-		59		20,186
Commercial and Industrial		73,241		532		-		-		532		1,892		75,665
Consumer		108,813		1,179		75		17		1,271		29		110,113
Other		3,508		-		-		-		-		-		3,508
Total Originated Loans	$	534,800	$	1,711	$	92	$	83	$	1,886	$	2,627	$	539,313

Loans Acquired at Fair Value
Real Estate:
Residential	$	76,978	$	165	$	-	$	88	$	253	$	1,127	$	78,358
Commercial		55,428		-		-		-		-		200		55,628
Commercial and Industrial		8,832		-		-		-		-		17		8,849
Consumer		197		-		-		-		-		-		197
Total Loans Acquired at Fair Value	$	141,435	$	165	$	-	$	88	$	253	$	1,344	$	143,032

Total Loans
Real Estate:
Residential	$	265,725	$	165	$	17	$	154	$	336	$	1,486	$	267,547
Commercial		195,792		-		-		-		-		488		196,280
Construction		20,127		-		-		-		-		59		20,186
Commercial and Industrial		82,073		532		-		-		532		1,909		84,514
Consumer		109,010		1,179		75		17		1,271		29		110,310
Other		3,508		-		-		-		-		-		3,508
Total Loans	$	676,235	$	1,876	$	92	$	171	$	2,139	$	3,971	$	682,345

	December 31, 2016
			30-59		60-89		90 Days
	Loans		Days		Days		Or More		Total		Non-		Total
	Current		Past Due		Past Due		Past Due		Past Due		Accrual		Loans
Originated Loans
Real Estate:
Residential	$	183,939	$	1,638	$	72	$	120	$	1,830	$	308	$	186,077
Commercial		139,821		-		-		-		-		73		139,894
Construction		10,539		-		-		-		-		107		10,646
Commercial and Industrial		68,310		952		-		-		952		1,829		71,091
Consumer		112,232		1,311		296		8		1,615		160		114,007
Other		3,637		-		-		-		-		-		3,637
Total Originated Loans	$	518,478	$	3,901	$	368	$	128	$	4,397	$	2,477	$	525,352

Loans Acquired at Fair Value
Real Estate:
Residential	$	82,523	$	893	$	307	$	223	$	1,423	$	1,565	$	85,511
Commercial		60,437		332		-		-		332		347		61,116
Commercial and Industrial		9,577		121		23		-		144		-		9,721
Consumer		197		-		-		-		-		-		197
Total Loans Acquired at Fair Value	$	152,734	$	1,346	$	330	$	223	$	1,899	$	1,912	$	156,545

Total Loans
Real Estate:
Residential	$	266,462	$	2,531	$	379	$	343	$	3,253	$	1,873	$	271,588
Commercial		200,258		332		-		-		332		420		201,010
Construction		10,539		-		-		-		-		107		10,646
Commercial and Industrial		77,887		1,073		23		-		1,096		1,829		80,812
Consumer		112,429		1,311		296		8		1,615		160		114,204
Other		3,637		-		-		-		-		-		3,637
Total Loans	$	671,212	$	5,247	$	698	$	351	$	6,296	$	4,389	$	681,897

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)
	June 30,			December 31,
	2017			2016
Nonaccrual Loans:
Originated Loans:
Real Estate:
Residential	$	359		$	308
Commercial		288			73
Construction		59			107
Commercial and Industrial		1,892			1,829
Consumer		29			160
Total Originated Nonaccrual Loans		2,627			2,477

Loans Acquired at Fair Value:
Real Estate:
Residential		1,127			1,565
Commercial		200			347
Commercial and Industrial		17			-
Total Loans Acquired at Fair Value Nonaccrual Loans		1,344			1,912
Total Nonaccrual Loans		3,971			4,389

Accruing Loans Past Due 90 Days or More:
Originated Loans:
Real Estate:
Residential		66			120
Consumer		17			8
Total Originated Accruing Loans 90 Days or More Past Due		83			128

Loans Acquired at Fair Value:
Real Estate:
Residential		88			223
Total Loans Acquired at Fair Value Accruing Loans 90 Days or More Past Due		88			223
Total Accruing Loans 90 Days or More Past Due		171			351
Total Nonaccrual Loans and Accruing Loans 90 Days or More Past Due		4,142			4,740

Troubled Debt Restructurings, Accruing:
Originated Loans:
Real Estate - Commercial		1,298			1,325
Commercial and Industrial		5			6
Other		3			4
Total Originated Loans		1,306			1,335
Loans Acquired at Fair Value:
Real Estate - Residential		1,279			1,299
Real Estate - Commercial		457			660
Commercial and Industrial		303			393
Total Loans Acquired at Fair Value		2,039			2,352
Total Troubled Debt Restructurings, Accruing		3,345			3,687

Total Nonperforming Loans		7,487			8,427

Real Estate Owned:
Residential		208			-
Commercial		174			174
Total Real Estate Owned		382			174
Total Nonperforming Assets	$	7,869		$	8,601

Nonperforming Loans to Total Loans		1.10	%		1.24	%
Nonperforming Assets to Total Assets		0.90			1.02

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 $795,000 and $2.2 million at June 30, 2017 and December 31, 2016, respectively.

TDRs typically are the result of our loss mitigation activities whereby concessions are granted to minimize loss and avoid foreclosure or repossession of collateral. The concessions granted for the TDRs in the portfolio primarily consist of, but are not limited to, modification of payment or other terms, temporary rate modification and extension of maturity date. Loans classified as TDRs consisted of 14 loans totaling $4.3 million and 15 loans totaling $4.7 million at June 30, 2017 and December 31, 2016, respectively. Originated loans classified as TDRs consisted of 6 loans totaling $2.3 million at June 30, 2017 and December 31, 2016, respectively. Loans acquired at fair value classified as TDRs consisted of 8 loans totaling $2.0 million and 9 loans totaling $2.4 million at June 30, 2017 and December 31, 2016, respectively.

During the six months ended June 30, 2016, one commercial loan previously identified as an acquired loan at fair value TDR paid off, an originated consumer loan modified terms in a new TDR transaction and one commercial and one residential real estate loan that were acquired at fair value modified terms into new TDR transactions. No TDRs have subsequently defaulted during the three or six months ended June 30, 2017 and 2016, respectively.

The following table presents information at the time of modification related to loans modified as TDRs during the periods indicated. No loans were modified for the three and six months ended June 30, 2017 and the three months ended June 30, 2016. The following table presents information at the time of modification related to loans modified in a TDR during the six months ended June 30, 2016.

	(Dollars in thousands)
	Six Months Ended June 30, 2016
			Pre-		Post-
			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded		Related
	Contracts		Investment		Investment		Allowance
Originated Loans
Real Estate
Other		1	$	7	$	7	$	-
Total		1	$	7	$	7	$	-

Loans Acquired at Fair Value
Real Estate
Residential		1	$	37	$	45	$	-
Commercial		1		539		539
Total		2	$	576	$	584	$	-

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

	(Dollars in thousands)
	June 30, 2017
					Unpaid		Average		Interest
	Recorded		Related		Principal		Recorded		Income
	Investment		Allowance		Balance		Investment		Recognized
With No Related Allowance Recorded:
Originated Loans
Real Estate:
Residential	$	101	$	-	$	102	$	104	$	2
Commercial		1,947		-		1,947		2,003		46
Construction		624		-		624		652		13
Commercial and Industrial		664		-		664		666		17
Other		3		-		3		3		-
Total With No Related Allowance Recorded	$	3,339	$	-	$	3,340	$	3,428	$	78

Loans Acquired at Fair Value
Real Estate:
Residential	$	1,279	$	-	$	1,279	$	1,289	$	33
Commercial		1,168		-		1,168		1,317		23
Commercial and Industrial		320		-		320		380		8
Total With No Related Allowance Recorded	$	2,767	$	-	$	2,767	$	2,986	$	64

Total Loans
Real Estate:
Residential	$	1,380	$	-	$	1,381	$	1,393	$	35
Commercial		3,115		-		3,115		3,320		69
Construction		624		-		624		652		13
Commercial and Industrial		984		-		984		1,046		25
Other		3		-		3		3		-
Total With No Related Allowance Recorded	$	6,106	$	-	$	6,107	$	6,414	$	142

With A Related Allowance Recorded:
Originated Loans
Real Estate:
Commercial	$	1,508	$	425	$	1,508	$	1,523	$	33
Commercial and Industrial		2,105		815		2,155		2,271		52
Total With A Related Allowance Recorded	$	3,613	$	1,240	$	3,663	$	3,794	$	85

Loans Acquired at Fair Value
Commercial and Industrial	$	98	$	16	$	98	$	109	$	3
Total With A Related Allowance Recorded	$	98	$	16	$	98	$	109	$	3

Total Loans
Real Estate:
Commercial	$	1,508	$	425	$	1,508	$	1,523	$	33
Commercial and Industrial		2,203		831		2,253		2,380		55
Total With A Related Allowance Recorded	$	3,711	$	1,256	$	3,761	$	3,903	$	88

	June 30, 2017 (cont.)
					Unpaid		Average		Interest
	Recorded		Related		Principal		Recorded		Income
	Investment		Allowance		Balance		Investment		Recognized
Total Impaired Loans:
Originated Loans
Real Estate:
Residential	$	101	$	-	$	102	$	104	$	2
Commercial		3,455		425		3,455		3,526		79
Construction		624		-		624		652		13
Commercial and Industrial		2,769		815		2,819		2,937		69
Other		3		-		3		3		-
Total Impaired Loans	$	6,952	$	1,240	$	7,003	$	7,222	$	163

Loans Acquired at Fair Value
Real Estate:
Residential	$	1,279	$	-	$	1,279	$	1,289	$	33
Commercial		1,168		-		1,168		1,317		23
Commercial and Industrial		418		16		418		489		11
Total Impaired Loans	$	2,865	$	16	$	2,865	$	3,095	$	67

Total Loans
Real Estate:
Residential	$	1,380	$	-	$	1,381	$	1,393	$	35
Commercial		4,623		425		4,623		4,843		102
Construction		624		-		624		652		13
Commercial and Industrial		3,187		831		3,237		3,426		80
Other		3		-		3		3		-
Total Impaired Loans	$	9,817	$	1,256	$	9,868	$	10,317	$	230

	December 31, 2016
					Unpaid		Average		Interest
	Recorded		Related		Principal		Recorded		Income
	Investment		Allowance		Balance		Investment		Recognized
With No Related Allowance Recorded:
Originated Loans
Real Estate:
Commercial	$	2,112	$	-	$	2,112	$	2,228	$	100
Construction		702		-		702		843		28
Commercial and Industrial		825		-		825		891		45
Other		4		-		4		6		1
Total With No Related Allowance Recorded	$	3,643	$	-	$	3,643	$	3,968	$	174

Loans Acquired at Fair Value
Real Estate:
Residential	$	1,300	$	-	$	1,300	$	1,320	$	68
Commercial		660		-		660		763		47
Commercial and Industrial		441		-		441		543		21
Total With No Related Allowance Recorded	$	2,401	$	-	$	2,401	$	2,626	$	136

Total Loans
Real Estate:
Residential	$	1,300	$	-	$	1,300	$	1,320	$	68
Commercial		2,772		-		2,772		2,991		147
Construction		702		-		702		843		28
Commercial and Industrial		1,266		-		1,266		1,434		66
Other		4		-		4		6		1
Total With No Related Allowance Recorded	$	6,044	$	-	$	6,044	$	6,594	$	310

With A Related Allowance Recorded:
Originated Loans
Real Estate:
Commercial	$	1,249	$	360	$	1,249	$	1,277	$	66
Commercial and Industrial		1,940		655		1,946		1,951		27
Total With A Related Allowance Recorded	$	3,189	$	1,015	$	3,195	$	3,228	$	93

Loans Acquired at Fair Value
Real Estate:
Commercial	$	347	$	114	$	437	$	367	$	-
Commercial and Industrial		121		31		121		141		6
Total With A Related Allowance Recorded	$	468	$	145	$	558	$	508	$	6

Total Loans
Real Estate:
Commercial	$	1,596	$	474	$	1,686	$	1,644	$	66
Commercial and Industrial		2,061		686		2,067		2,092		33
Total With A Related Allowance Recorded	$	3,657	$	1,160	$	3,753	$	3,736	$	99

	December 31, 2016 (cont.)
					Unpaid		Average		Interest
	Recorded		Related		Principal		Recorded		Income
	Investment		Allowance		Balance		Investment		Recognized
Total Impaired Loans
Originated Loans
Real Estate:
Commercial	$	3,361	$	360	$	3,361	$	3,505	$	166
Construction		702		-		702		843		28
Commercial and Industrial		2,765		655		2,771		2,842		72
Other		4		-		4		6		1
Total Impaired Loans	$	6,832	$	1,015	$	6,838	$	7,196	$	267

Loans Acquired at Fair Value
Real Estate:
Residential	$	1,300	$	-	$	1,300	$	1,320	$	68
Commercial		1,007		114		1,097		1,130		47
Commercial and Industrial		562		31		562		684		27
Total Impaired Loans	$	2,869	$	145	$	2,959	$	3,134	$	142

Total Loans
Real Estate:
Residential	$	1,300	$	-	$	1,300	$	1,320	$	68
Commercial		4,368		474		4,458		4,635		213
Construction		702		-		702		843		28
Commercial and Industrial		3,327		686		3,333		3,526		99
Other		4		-		4		6		1
Total Impaired Loans	$	9,701	$	1,160	$	9,797	$	10,330	$	409

The following table presents the activity in the allowance for loan losses 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 periods indicated.

	(Dollars in thousands)
	June 30, 2017
	Real			Real			Real		Commercial
	Estate			Estate			Estate		and
	Residential			Commercial			Construction		Industrial			Consumer			Other		Unallocated			Total
Originated Loans
March 31, 2017	$	1,089		$	1,898		$	83	$	1,598		$	2,256		$	-	$	282		$	7,206
Charge-offs		-			-			-		-			(118	)		-		-			(118	)
Recoveries		1			-			-		25			53			-		-			79
Provision		(150	)		119			59		137			32			-		103			300
June 30, 2017	$	940		$	2,017		$	142	$	1,760		$	2,223		$	-	$	385		$	7,467

Loans Acquired at Fair Value
March 31, 2017	$	-		$	471		$	-	$	114		$	-		$	-	$	(6	)	$	579
Charge-offs		-			(3	)		-		-			-			-		-			(3	)
Recoveries		38			1			-		-			1			-		-			40
Provision		(38	)		144			-		(5	)		(1	)		-		(100	)		-
June 30, 2017	$	-		$	613		$	-	$	109		$	-		$	-	$	(106	)	$	616

Total Allowance for Loan Losses
March 31, 2017	$	1,089		$	2,369		$	83	$	1,712		$	2,256		$	-	$	276		$	7,785
Charge-offs		-			(3	)		-		-			(118	)		-		-			(121	)
Recoveries		39			1			-		25			54			-		-			119
Provision		(188	)		263			59		132			31			-		3			300
June 30, 2017	$	940		$	2,630		$	142	$	1,869		$	2,223		$	-	$	279		$	8,083

Originated Loans
December 31, 2016	$	1,106		$	1,942		$	65	$	1,579		$	2,463		$	-	$	128		$	7,283
Charge-offs								-		-			(445	)		-		-			(445	)
Recoveries		5						-		36			118			-		-			159
Provision		(171	)		75			77		145			87			-		257			470
June 30, 2017	$	940		$	2,017		$	142	$	1,760		$	2,223		$	-	$	385		$	7,467

Loans Acquired at Fair Value
December 31, 2016	$	-		$	365		$	-	$	120		$	-		$	-	$	35		$	520
Charge-offs		(64	)		(132	)		-		-						-		-			(196	)
Recoveries		38			1			-		-			3			-		-			42
Provision		26			379			-		(11	)		(3	)		-		(141	)		250
June 30, 2017	$	-		$	613		$	-	$	109		$	-		$	-	$	(106	)	$	616

Total Allowance for Loan Losses
December 31, 2016	$	1,106		$	2,307		$	65	$	1,699		$	2,463		$	-	$	163		$	7,803
Charge-offs		(64	)		(132	)		-		-			(445	)		-		-			(641	)
Recoveries		43			1			-		36			121			-		-			201
Provision		(145	)		454			77		134			84			-		116			720
June 30, 2017	$	940		$	2,630		$	142	$	1,869		$	2,223		$	-	$	279		$	8,083

	June 30, 2017
	Real		Real		Real		Commercial
	Estate		Estate		Estate		and
	Residential		Commercial		Construction		Industrial		Consumer		Other		Unallocated			Total
Originated Loans
Individually Evaluated for Impairment	$	-	$	425	$	-	$	815	$	-	$	-	$	-		$	1,240
Collectively Evaluated for Potential Impairment	$	940	$	1,592	$	142	$	945	$	2,223	$	-	$	385		$	6,227

Loans Acquired at Fair Value
Individually Evaluated for Impairment	$	-	$	-	$	-	$	16	$	-	$	-	$	-		$	16
Collectively Evaluated for Potential Impairment	$	-	$	613	$	-	$	93	$	-	$	-	$	(106	)	$	600

Total Allowance for Loan Losses
Individually Evaluated for Impairment	$	-	$	425	$	-	$	831	$	-	$	-	$	-		$	1,256
Collectively Evaluated for Potential Impairment	$	940	$	2,205	$	142	$	1,038	$	2,223	$	-	$	279		$	6,827

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

	June 30, 2016
	Real			Real			Real			Commercial
	Estate			Estate			Estate			and
	Residential			Commercial			Construction			Industrial		Consumer			Other			Unallocated			Total
Originated Loans
March 31, 2016	$	1,259		$	2,036		$	117		$	1,103	$	2,176		$	2		$	244		$	6,937
Charge-offs		-			-			-			-		(120	)		(14	)		-			(134	)
Recoveries		3			-			-			-		53			5			-			61
Provision		(152	)		(80	)		(35	)		365		34			8			51			191
June 30, 2016	$	1,110		$	1,956		$	82		$	1,468	$	2,143		$	1		$	295		$	7,055

Loans Acquired at Fair Value
March 31, 2016	$	-		$	-		$	-		$	-	$	-		$	-		$	36		$	36
Charge-offs		(14	)		-			-			-		-			-			-			(14	)
Recoveries		3			1			-			-		1			-			-			5
Provision		11			10			-			115		(1	)		-			(26	)		109
June 30, 2016	$	-		$	11		$	-		$	115	$	-		$	-		$	10		$	136

Total Allowance for Loan Losses
March 31, 2016	$	1,259		$	2,036		$	117		$	1,103	$	2,176		$	2		$	280		$	6,973
Charge-offs		(14	)		-			-			-		(120	)		(14	)		-			(148	)
Recoveries		6			1			-			-		54			5			-			66
Provision		(141	)		(70	)		(35	)		480		33			8			25			300
June 30, 2016	$	1,110		$	1,967		$	82		$	1,583	$	2,143		$	1		$	305		$	7,191

Originated Loans
December 31, 2015	$	1,623		$	2,045		$	137		$	784	$	1,887		$	-		$	14		$	6,490
Charge-offs		(20	)		-			-			-		(310	)		(26	)		-			(356	)
Recoveries		4			-			-			-		80			11			-			95
Provision		(497	)		(89	)		(55	)		684		486			16			281			826
June 30, 2016	$	1,110		$	1,956		$	82		$	1,468	$	2,143		$	1		$	295		$	7,055

Loans Acquired at Fair Value
December 31, 2015	$	-		$	-		$	-		$	-	$	-		$	-		$	-		$	-
Charge-offs		(16	)		(180	)		-			-		(4	)		-			-			(200	)
Recoveries		5			2			-			-		5			-			-			12
Provision		11			189			-			115		(1	)		-			10			324
June 30, 2016	$	-		$	11		$	-		$	115	$	-		$	-		$	10		$	136

Total Allowance for Loan Losses
December 31, 2015	$	1,623		$	2,045		$	137		$	784	$	1,887		$	-		$	14		$	6,490
Charge-offs		(36	)		(180	)		-			-		(314	)		(26	)		-			(556	)
Recoveries		9			2			-			-		85			11			-			107
Provision		(486	)		100			(55	)		799		485			16			291			1,150
June 30, 2016	$	1,110		$	1,967		$	82		$	1,583	$	2,143		$	1		$	305		$	7,191

	June 30, 2016
	Real			Real			Real		Commercial
	Estate			Estate			Estate		and
	Residential			Commercial			Construction		Industrial		Consumer		Other		Unallocated		Total
Originated Loans
Individually Evaluated for Impairment	$	-		$	392		$	-	$	647	$	-	$	-	$	-	$	1,039
Collectively Evaluated for Potential Impairment	$	1,110		$	1,564		$	82	$	821	$	2,143	$	1	$	295	$	6,016

Loans Acquired at Fair Value
Individually Evaluated for Impairment	$	81		$	133		$	-	$	-	$	-	$	-	$	-	$	214
Collectively Evaluated for Potential Impairment	$	(81	)	$	(122	)	$	-	$	115	$	-	$	-	$	10	$	(78	)

Total Allowance for Loan Losses
Individually Evaluated for Impairment	$	81		$	525		$	-	$	647	$	-	$	-	$	-	$	1,253
Collectively Evaluated for Potential Impairment	$	1,029		$	1,442		$	82	$	936	$	2,143	$	1	$	305	$	5,938

	December 31, 2016
	Real		Real		Real		Commercial
	Estate		Estate		Estate		and
	Residential		Commercial		Construction		Industrial		Consumer		Other		Unallocated		Total
Originated Loans
Individually Evaluated for Impairment	$	-	$	360	$	-	$	655	$	-	$	-	$	-	$	1,015
Collectively Evaluated for Potential Impairment	$	1,106	$	1,582	$	65	$	924	$	2,463	$	-	$	128	$	6,268

Loans Acquired at Fair Value
Individually Evaluated for Impairment	$	-	$	114	$	-	$	31	$	-	$	-	$	-	$	145
Collectively Evaluated for Potential Impairment	$	-	$	251	$	-	$	89	$	-	$	-	$	35	$	375

Total Allowance for Loan Losses
Individually Evaluated for Impairment	$	-	$	474	$	-	$	686	$	-	$	-	$	-	$	1,160
Collectively Evaluated for Potential Impairment	$	1,106	$	1,833	$	65	$	1,013	$	2,463	$	-	$	163	$	6,643

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, 2016	$	1,640
Accretable Yield		(407	)
Nonaccretable Discount		(194	)
Balance at June 30, 2017	$	1,039

On August 4, 2017, the Company received mortgage insurance proceeds related to an acquired loan that was previously paid-off as of June 30, 2017 from the Mortgage Guaranty Insurance Corporation ("MGIC") for approximately $218,000. This gain contingency will be recorded in the 2017 third quarter consolidated financial statements.

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)
	June 30, 2017
	Real		Real		Real		Commercial
	Estate		Estate		Estate		and
	Residential		Commercial		Construction		Industrial		Consumer		Other		Total
Originated Loans
Individually Evaluated for Impairment	$	101	$	3,455	$	624	$	2,769	$	-	$	3	$	6,952
Collectively Evaluated for Potential Impairment		189,088		137,197		19,562		72,896		110,113		3,505		532,361
	$	189,189	$	140,652	$	20,186	$	75,665	$	110,113	$	3,508	$	539,313

Loans Acquired at Fair Value
Individually Evaluated for Impairment	$	1,279	$	1,168	$	-	$	418	$	-	$	-	$	2,865
Collectively Evaluated for Potential Impairment		77,079		54,460		-		8,431		197		-		140,167
	$	78,358	$	55,628	$	-	$	8,849	$	197	$	-	$	143,032

Total Loans
Individually Evaluated for Impairment	$	1,380	$	4,623	$	624	$	3,187	$	-	$	3	$	9,817
Collectively Evaluated for Potential Impairment		266,167		191,657		19,562		81,327		110,310		3,505		672,528
	$	267,547	$	196,280	$	20,186	$	84,514	$	110,310	$	3,508	$	682,345

	December 31, 2016
	Real		Real		Real		Commercial
	Estate		Estate		Estate		and
	Residential		Commercial		Construction		Industrial		Consumer		Other		Total
Originated Loans
Individually Evaluated for Impairment	$	-	$	3,361	$	702	$	2,765	$	-	$	4	$	6,832
Collectively Evaluated for Potential Impairment		186,077		136,533		9,944		68,326		114,007		3,633		518,520
	$	186,077	$	139,894	$	10,646	$	71,091	$	114,007	$	3,637	$	525,352

Loans Acquired at Fair Value
Individually Evaluated for Impairment	$	1,300	$	1,007	$	-	$	562	$	-	$	-	$	2,869
Collectively Evaluated for Potential Impairment		84,211		60,109		-		9,159		197		-		153,676
	$	85,511	$	61,116	$	-	$	9,721	$	197	$	-	$	156,545

Total Loans
Individually Evaluated for Impairment	$	1,300	$	4,368	$	702	$	3,327	$	-	$	4	$	9,701
Collectively Evaluated for Potential Impairment		270,288		196,642		9,944		77,485		114,204		3,633		672,196
	$	271,588	$	201,010	$	10,646	$	80,812	$	114,204	$	3,637	$	681,897

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).

	June 30,
Maturity Period:	2017
One Year or Less	$	46,093
Over One Through Two Years		60,182
Over Two Through Three Years		20,309
Over Three Through Four Years		12,893
Over Four Through Five Years		9,156
Over Five Years		8,718
Total	$	157,351

The balance in time deposits that meet or exceed the FDIC insurance limit of $250,000 totaled $45.0 million and $46.0 million as of June 30, 2017 and December 31, 2016, 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)
	June 30, 2017					December 31, 2016
			Weighted					Weighted
			Average					Average
	Amount		Rate			Amount		Rate
Short-term Borrowings
Federal Funds Purchased:
Average Balance Outstanding During the Period	$	17		-	%	$	307		0.65	%
Maximum Amount Outstanding at any Month End		550					6,000

FHLB Borrowings:
Balance at Period End		-		-			-		-
Average Balance Outstanding During the Period		-		-			596		0.67
Maximum Amount Outstanding at any Month End		-					6,160

Securities Sold Under Agreements to Repurchase:
Balance at Period End		25,450		0.25			27,027		0.24
Average Balance Outstanding During the Period		26,332		0.30			26,311		0.26
Maximum Amount Outstanding at any Month End		26,460					30,095

Securities Collaterizing the Agreements at Period-End:
Carrying Value		32,499					33,785
Market Value		31,834					32,931

Note 7. Other Borrowed Funds

Other borrowed funds consist of fixed rate advances from the Federal Home Loan Bank of Pittsburgh (“FHLB”). The following table sets forth the scheduled maturities of other borrowed funds at the dates indicated.

	(Dollars in thousands)
	June 30, 2017					December 31, 2016
			Weighted					Weighted
			Average					Average
	Amount		Rate			Amount		Rate
Due in One Year	$	3,500		1.35	%	$	-		-%
Due After One Year to Two Years		4,000		1.67			3,500		0.94
Due After Two Years to Three Years		6,000		1.88			4,500		1.41
Due After Three Years to Four Years		5,000		2.09			6,000		1.78
Due After Four Years to Five Years		3,000		2.23			6,000		1.97
Due After Five Years		3,000		2.41			8,000		2.27
Total	$	24,500		1.92		$	28,000		1.80

As of June 30, 2017, the Company maintained a credit arrangement with a maximum borrowing limit of approximately $285.0 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 $143.1 million and $148.5 million as of June 30, 2017 and December 31, 2016, respectively.

The Company maintains a Borrower-In-Custody of Collateral line of credit agreement with the Federal Reserve Bank (“FRB”) for $87.9 million that requires quarterly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by commercial and consumer indirect auto loans. The Company also maintains multiple line of credit arrangements with various unaffiliated banks totaling $40.0 million. As of June 30, 2017 and December 31, 2016, no draws had been taken on these facilities.

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.

Commitments and conditional obligations are evaluated the same as on-balance-sheet instruments but do not have a corresponding reserve recorded. The Company’s opinion on not implementing a corresponding reserve for off-balance-sheet instruments is supported by historical factors of no losses recorded due to these items. The Company is continually evaluating these items for credit quality and any future need for the corresponding reserve.

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)
	June 30,		December 31,
	2017		2016
Standby Letters of Credit	$	41,147	$	36,657
Performance Letters of Credit		4,396		2,471
Construction Mortgages		32,485		21,363
Personal Lines of Credit		6,139		5,905
Overdraft Protection Lines		6,183		5,680
Home Equity Lines of Credit		15,286		14,722
Commercial Lines of Credit		64,303		51,725
	$	169,939	$	138,523

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 transaction 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)
	Fair Value		June 30,		December 31,
	Hierarchy		2017		2016
Available for Sales Securities:
U.S. Government Agencies		Level II	$	65,286	$	66,156
Obligations of States and Political Subdivisions		Level II		36,727		35,735
Mortgage-Backed Securities - Government-Sponsored Enterprises		Level II		12,883		2,619
Equity Securities - Mutual Funds		Level I		507		507
Equity Securities - Other		Level I		1,142		1,191
Total Available for Sale Securities			$	116,545	$	106,208

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 or 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

Significant

Financial Asset

Fair Value
Hierarchy

June 30,
2017

December 31,
2016

Valuation
Techniques

Significant
Unobservable Inputs

Unobservable
Input Value

Impaired Loans

Level III

2,455

2,497

Market Comparable Properties

Marketability Discount

10%

30%

⁽¹⁾

OREO

Level III

155

Market Comparable Properties

Marketability Discount

10%

50%

⁽¹⁾

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

Impaired loans are evaluated when a loan is identified as impaired and valued at the lower of cost or fair value at that time. 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 June 30, 2017 and December 31, 2016, the fair value of impaired loans consists of the loan balances of $3.7 million and $3.7 million, respectively, less their specific valuation allowances of $1.3 million and $1.2 million, respectively.

Other real estate owned (OREO) properties are evaluated at the time of acquisition and recorded at fair value, less estimated selling costs. After acquisition, other real estate owned is recorded at the lower of cost or fair value, less estimated selling costs. The fair value of an other real estate owned property is determined from a qualified independent appraisal and is classified as Level III in the fair value hierarchy. During the six months ended June 30, 2017, one residential real estate loan for $155,000 moved into OREO. During the six months ended June 30, 2016, two commercial real estate properties for $3.2 million were foreclosed on, moved into OREO, evaluated for fair value and recorded a prior first quarter gain on the valuation adjustment on foreclosed real estate for approximately $566,000. This recognized gain on the valuation adjustment was supported by independent appraisals of the two properties. One property was subject to a tentative sales agreement with a current customer which closed in the prior year. The other property was transferred into premises and equipment of the Company due to its location and the Company’s need of a new headquarters location.

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 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 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)
			June 30, 2017				December 31, 2016
	Fair Value		Carrying		Fair		Carrying		Fair
	Hierarchy		Value		Value		Value		Value
Financial Assets:
Cash and Due From Banks:
Interest Bearing		Level I	$	17,464	$	17,464	$	7,699	$	7,699
Non-Interest Bearing		Level I		11,209		11,209		6,583		6,583
Investment Securities:
Available for Sale		See Above		116,545		116,545		106,208		106,208
Loans, Net		Level III		674,262		685,730		674,094		684,777
Restricted Stock		Level II		3,628		3,628		3,665		3,665
Bank-Owned Life Insurance		Level II		18,919		18,919		18,687		18,687
Accrued Interest Receivable		Level II		2,350		2,350		2,441		2,441

Financial Liabilities:
Deposits		Level II		727,059		706,817		698,218		697,806
Short-term Borrowings		Level II		25,450		25,450		27,027		27,027
Other Borrowed Funds		Level II		24,500		24,644		28,000		28,098
Accrued Interest Payable		Level II		338		338		334		334

Note 10. Other Noninterest Expense

In accordance with SEC Regulation S-X, other noninterest expense that exceeds 10% of total noninterest expense is required to be disclosed by detailed expenses. The details for other noninterest expense for the Company’s consolidated statement of income for the three and six months ended June 30, 2017 and 2016, are as follows:

	(Dollars in thousands)
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Other Noninterest Expense
Non-employee compensation	$	100	$	134	$	200	$	267
Printing and supplies		100		134		202		208
Postage		64		44		130		103
Telephone		99		97		188		181
Charitable contributions		56		41		80		69
Dues and subscriptions		55		46		118		93
Loan expenses		86		73		160		143
Meals and entertainment		43		34		68		58
Travel		43		40		69		70
Training		9		6		20		18
Miscellaneous		174		242		404		462
Total Other Noninterest Expense	$	829	$	891	$	1,639	$	1,672

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, 2016.

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, but are not limited to, 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;

Our ability to control costs and expenses; and

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

The Company uses the current statutory tax rate of 34.0% to value its deferred tax assets and liabilities. On April 26, 2017, the Trump Administration announced a comprehensive tax reform proposal that includes a reduction in the U.S. corporate income tax rate to 15.0%. If corporate tax rates were reduced, management expects the Company would be required to record an initial charge against earnings to lower the carrying amount of its net deferred tax asset, and then, going forward, would record lower tax provisions on an ongoing basis. The proposal is at the beginning stages of negotiations and will need to be addressed by both houses of Congress. It is too early in the process to determine if any of the proposals are actionable. Accordingly, management cannot assess the effect a change in the corporate tax rate would have on Company’s operating results or financial position at the present time.

The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

General

CB Financial Services, Inc. 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 is a Pennsylvania-chartered commercial bank headquartered in Carmichaels, Pennsylvania. The 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.

On October 31, 2014, the Company completed its merger with FedFirst Financial Corporation (“FedFirst” or the “merger”), the holding company for First Federal Savings Bank, a community bank based in Monessen, Pennsylvania. The merger resulted in the addition of five branches and expanded the Company’s reach into Fayette and Westmoreland counties in southwestern Pennsylvania.

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 June 30, 2017 compared to the financial condition as of December 31, 2016 and the consolidated results of operations for the three months ended June 30, 2017 and 2016.

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.

Statement of Financial Condition Analysis

Assets. Total assets increased $26.3 million, or 3.1%, to $872.4 million at June 30, 2017 compared to $846.1 million at December 31, 2016.

Investment securities classified as available-for-sale increased $10.3 million, or 9.7%, to $116.5 million at June 30, 2017 compared to $106.2 million at December 31, 2016. This increase was primarily the result of security purchases funded by deposit growth.

Loans, net, increased $168,000, or 0.02%, to $674.3 million at June 30, 2017 compared to $674.1 million at December 31, 2016. This was primarily due to net loan originations of $9.5 million of construction loans and $3.7 million of commercial and industrial loans, partially offset by net loan payoffs of $4.7 million on commercial real estate loans, $4.0 million on residential mortgage loans and $3.9 million on consumer loans (mainly indirect auto loans). The net loan originations offset normal loan payoffs throughout the current period.

Premises and equipment, net, increased $2.4 million, or 17.1%, to $16.5 million at June 30, 2017 compared to $14.1 million at December 31, 2016. This is due to the additions related to the new Operations Center that was placed into service in the current period.

Liabilities. Total liabilities increased $23.9 million, or 3.2%, to $780.5 million at June 30, 2017 compared to $756.6 million at December 31, 2016.

Total deposits increased $28.8 million, or 4.1%, to $727.1 million at June 30, 2017 compared to $698.2 million at December 31, 2016. There were increases of $15.7 million in NOW accounts, $15.6 million in demand deposits, $9.7 in savings accounts and $2.3 million in time deposits, partially offset by decreases of $9.2 million in money market accounts and $5.2 million in brokered deposits. Due to the rising interest rate environment, the Bank has been selective on offering promotional interest rates and has concentrated its efforts on increasing noninterest-bearing accounts by building strong customer relationships. In addition, school district and municipal deposits increased $9.0 million due to building stronger customer relationships with these depositors and new accounts.

Short-term borrowings decreased $1.6 million, or 5.8%, to $25.5 million at June 30, 2017 compared to $27.0 million at December 31, 2016. At June 30, 2017, short-term borrowings were comprised of $25.5 million of securities sold under agreements to repurchase compared to $27.0 million at December 31, 2016. The decrease is related to business deposit customers whose funds, above designated target balances, are transferred into an overnight interest-earning investment account by purchasing securities from the Bank’s investment portfolio under an agreement to repurchase. Other borrowed funds decreased by $3.5 million due to a maturing FHLB long-term borrowing that was retired in the current period. As a result of current period activity, the weighted average interest rate on long-term borrowings increased by 12 basis points to 1.92%.

Stockholders’ Equity. Stockholders’ equity increased $2.4 million, or 2.7%, to $91.9 million at June 30, 2017 compared to $89.5 million at December 31, 2016. During the period, net income was $3.5 million and the Company paid $1.8 million in dividends to stockholders.

Results of Operations for the Three Months Ended June 30, 2017 and 2016

Overview. Net income decreased $137,000, to $1.8 million, for the three months ended June 30, 2017 compared to $1.9 million for the three months ended June 30, 2016. The quarterly results benefited from an increase in noninterest income related to continued insurance commissions and additional contingency fees received by Exchange Underwriters in the current quarter. Detracting from the quarterly results were an increase in noninterest expense and a decrease in net interest income. In addition, a charitable donation of a former Bank building to a local municipality resulted in additional tax benefit in the current quarter. Quarterly pre-tax income decreased by $231,000 due in part by the pre-tax gain recognized in the first quarter of 2016 because of the successful resolution of two problem commercial real estate loans. In the case of each of these loans, the Bank took ownership of the collateral, then sold one property at a gain and took the other property into fixed assets based on an appraised fair market value. As a result of these two events OREO expense decreased by $566,000 in the first quarter of 2016.

Net Interest Income. Net interest income decreased $113,000, or 1.6%, to $7.1 million for the three months ended June 30, 2017 compared to $7.2 million for the three months ended June 30, 2016.

Interest and dividend income decreased $1,000, or 0.01%, to $7.9 million for the three months ended June 30, 2017 compared to $8.0 million for the three months ended June 30, 2016. Interest income on loans decreased $94,000 for the three months ended June 30, 2017 compared to the three months ended June 30, 2016. Despite the overall increase in average loans of $697,000, the loan portfolio had a decrease of 8 basis points in yield. Contributing to the yield decrease this quarter was the accretion on the acquired loan portfolio credit mark. The positive impact of the accretion for the three months ended June 30, 2017 was $173,000, or 10 basis points compared to $381,000, or 23 basis points for the three months ended June 30, 2016. The remaining credit mark balance for acquired loans was $1.0 million as of June 30, 2017. Loan payoffs within the entire loan portfolio have also been a factor in the interest income on loans decrease. Interest income on securities exempt from federal tax decreased $47,000 due to deploying proceeds from security calls and maturities into higher yielding taxable security purchases in the current period. There was a decrease of $3.5 million in the average balance on securities exempt from federal tax and a decrease of 40 basis points in yield as a result of security calls and maturities that had higher yields. Interest income on taxable securities increased $79,000 mainly due to an increase of $27.7 million in the average balance for taxable securities in the current period. The increase in the average balance offset a decrease of 39 basis points in yield on taxable securities. This is a result of new purchases with lower prevailing yields replacing security calls and maturities with higher yields within the portfolio. Interest income on Federal funds sold increased to $41,000 for the three months ended June 30, 2017 compared to $8,000 for the three months ended June 30, 2016. This is the result of the increase in interest rates in the last year and the increases in the average interest-earning balances of $14.1 million for the three months ended June 30, 2017. In addition, other interest and dividend income increased $28,000 as a result of increased interest earned with correspondent deposit banks and FHLB dividends in the current period.

Interest expense increased $112,000, or 16.0%, to $814,000 for the three months ended June 30, 2017 compared to $702,000 for the three months ended June 30, 2016. Interest expense on deposits increased $115,000 due to an increase in average interest-bearing deposits of $30.4 million, primarily due to increases in time deposits, interest-bearing demand deposit and savings accounts. The average cost of interest-bearing deposits increased 6 basis points collectively. This was related to the multiple interest rate hikes over the last year by the Federal Reserve Board (“FRB”). Interest expense on short-term borrowings increased $5,000 mainly due to increased interest rates on securities sold under agreements to repurchase. Interest expense on other borrowed funds decreased $8,000 primarily due to a FHLB long-term borrowing for $3.5 million that matured in the prior quarter.

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.

	(Dollars in thousands) (Unaudited)
	Three Months Ended June 30,
	2017							2016
			Interest							Interest
	Average		and		Yield/			Average		and		Yield/
	Balance		Dividends		Cost ⁽¹⁾			Balance		Dividends		Cost ⁽¹⁾
Assets:
Interest-Earning Assets:
Loans, Net	$	670,231	$	7,251		4.34	%	$	669,534	$	7,352		4.42	%
Investment Securities
Taxable		81,409		386		1.90			53,716		307		2.29
Exempt From Federal Tax		35,529		325		3.66			39,016		396		4.06
Other Interest-Earning Assets		30,666		115		1.50			16,579		54		1.31
Total Interest-Earning Assets		817,835		8,077		3.96			778,845		8,109		4.19
Noninterest-Earning Assets		57,904							52,616
Total Assets	$	875,739						$	831,461

Liabilities and Stockholders' equity:
Interest-Bearing Liabilities:
Interest-Bearing Demand Deposits	$	125,695		78		0.25	%	$	114,549		49		0.17	%
Savings		129,719		60		0.19			124,473		57		0.18
Money Market		136,026		88		0.26			144,195		91		0.25
Time Deposits		159,309		449		1.13			137,174		363		1.06
Total Interest-Bearing Deposits		550,749		675		0.49			520,391		560		0.43

Borrowings		51,070		139		1.09			53,443		142		1.07
Total Interest-Bearing Liabilities		601,819		814		0.54			573,834		702		0.49

Noninterest-Bearing Demand Deposits		178,478							164,750
Other Liabilities		3,617							3,765
Total Liabilities		783,914							742,349

Stockholders' Equity		91,825							89,112
Total Liabilities and
Stockholders' Equity	$	875,739						$	831,461

Net Interest Income			$	7,263						$	7,407

Net Interest Rate Spread ⁽²⁾						3.42	%						3.70	%
Net Interest-Earning Assets ⁽³⁾	$	216,016						$	205,011
Net Interest Margin ⁽⁴⁾						3.56							3.82
Return on Average Assets						0.82							0.94
Return on Average Equity						7.87							8.75
Average Equity to Average Assets						10.49							10.72
Average Interest-Earning Assets to Average Interest-Bearing Liabilities						135.89							135.73

(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. Interest income and yields are on a fully tax equivalent basis utilizing a marginal tax rate of 34%.

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods 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 June 30, 2017
	Compared To
	Three Months Ended June 30, 2016
	Increase (Decrease) Due to
	Volume			Rate			Total

Interest and Dividend Income:
Loans, net	$	33		$	(134	)	$	(101	)
Investment Securities:
Taxable		138			(59	)		79
Exempt From Federal Tax		(34	)		(37	)		(71	)
Other Interest-Earning Assets		52			9			61
Total Interest-Earning Assets		189			(221	)		(32	)

Interest Expense:
Deposits		33			82			115
Borrowings		(6	)		3			(3	)
Total Interest-Bearing Liabilities		27			85			112
Change in Net Interest Income	$	162		$	(306	)	$	(144	)

Provision for Loan Losses. The provision for loan losses was $300,000 for the three months ended June 30, 2017 and for the three months ended June 30, 2016. Net charge-offs for the three months ended June 30, 2017 were $2,000, which included $49,000 of net charge-offs on automobile loans, compared to $83,000 of net charge-offs, which included $66,000 of net charge-offs on automobile loans for the three months ended June 30, 2016. The decrease in net charge-offs during the current period was due to recoveries of $46,000 on automobile loans, $39,000 for residential mortgages and $25,000 for a commercial and industrial loan relationship. 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. It was determined that the current quarter provision remained constant for the three months ended June 30, 2017 and 2016. This was due to improvements in the loan department along with loan personnel experience, and the local economy which had a positive impact on the qualitative factors within the allowance calculation. In addition, average loans increased marginally during the current period compared to the prior period, which was a contributing factor in keeping the provision constant.

Noninterest Income. Noninterest income increased $98,000, or 5.2% to $2.0 million for the three months ended June 30, 2017 compared to $1.9 million for the three months ended June 30, 2016. Insurance commissions from Exchange Underwriters increased $99,000 due to increased commercial lines commission and fee income and contingency fees received in the current period. Contingency fees are commissions that are contingent upon several factors including, but not limited to, eligible written premiums, earned premiums, incurred losses and stop loss charges. Service fees on deposit accounts increased $19,000 due to increased non sufficient funds (“NSF”) fees due to customer overdrafts of deposit accounts. Net gains on purchased tax credits increased $15,000 due to the purchased Pennsylvania shares tax credits being recognized in the current period. Net gains on the sales of investments increased $12,000 due to the sale of equity securities. These sales were transacted to recognize capital gains that will be offset by a capital loss carry forward deferred tax asset that was acquired in the merger with FedFirst. The capital loss carry forward deferred tax asset has been has been fully recognized in the current period. Partially offsetting these increases was a decrease in the net gains on the sales of residential mortgage loans of $23,000. The decrease in gains was primarily due to a decrease in the number of loans originated and subsequently sold to the FHLB as part of the Mortgage Partnership Finance® (“MPF®”) program. The MPF® program enables member financial institutions to offer competitive interest rates for fixed-rate mortgage loans without assuming any of the interest rate risk associated with a long-term asset. In addition, there was a decrease of $16,000 in other income due to FHLB sold loan services fees recognized in the current quarter.

Noninterest Expense. Noninterest expense increased $216,000, or 3.5%, to $6.3 million for the three months ended June 30, 2017 compared to $6.1 million for the three months ended June 30, 2016. Occupancy increased $166,000 primarily due to accelerated depreciation taken on leasehold improvements in the Bank’s former operations center that did not transfer over to the new Ralph J. Sommers Jr. Operations Center (“Operations Center”). The new Operations Center was completed and placed into bank operations during the current quarter. Other increases in occupancy were related to property insurance, moving and landscaping expenses. Salaries and employee benefits increased $139,000 primarily due to normal salary increases, retirement benefits expense and employee stock options. This increase was partially offset by decreases in restricted stock awards and miscellaneous compensation expenses. Equipment increased $41,000 due to equipment purchases and new maintenance contracts for the Operations Center. This was partially offset by other noninterest expense which decreased $62,000 primarily due to reduced overdraft and debit card fraud losses, customer supplies and non-employee restricted stock awards. The Federal Deposit Insurance Corporation (“FDIC”) assessment expense decreased $33,000 due to an assessment factor reduction by the FDIC in the computation of the insurance assessment. Pennsylvania shares tax decreased $17,000 due to the prior period shares tax accrual that anticipated a shares tax rate increase in 2016 that subsequently became effective in 2017.

Income Tax Expense. Income taxes decreased $94,000 to $696,000 for the three months ended June 30, 2017 compared to $790,000 for the three months ended June 30, 2016. The effective tax rate for the three months ended June 30, 2017 was 27.9% compared to 29.0% for the three months ended June 30, 2016. The decrease in income taxes was partially due to a decrease of $231,000 in pre-tax income. The decrease in the effective tax rate was related to a favorable tax preference charitable donation of a former First Federal Savings Bank building to the City of Monessen, Pennsylvania that was acquired in the merger with FedFirst.

Results of Operations for the Six Months Ended June 30, 2017 and 2016

Overview. Net income decreased $478,000, to $3.5 million, for the three months ended June 30, 2017 compared to $4.0 million for the three months ended June 30, 2016.

Net Interest Income. Net interest income decreased $538,000 , or 3.7%, to $14.1 million for the six months ended June 30, 2017 compared to $14.7 million for the six months ended June 30, 2016.

Interest and dividend income decreased $333,000, or 2.1%, to $15.7 million for the six months ended June 30, 2017 compared to $16.1 million for the six months ended June 30, 2016. Interest income on loans decreased $449,000 primarily due to a decrease in average loans outstanding of $5.9 million. The decrease in average loans was due to loan runoff within the commercial and installment loan portfolios, partially offset by increases in indirect auto, line of credit, student and mortgage loans mainly due to loan originations. The accretion on the acquired loan portfolio credit mark for the six months ended June 30, 2017 was $406,000, or 12 basis points compared to $773,000, or 23 basis points for the six months ended June 30, 2016. Interest income on securities exempt from federal tax decreased $90,000 due to deploying proceeds from security calls and maturities into purchasing taxable securities with higher earning yields in the current year. There was a decrease of $3.1 million in the average balance on securities exempt from federal tax and a decrease of 42 basis points in yield as a result of security calls and maturities that had higher yields. Interest income on taxable securities increased $116,000 despite a decrease of 41 basis points in yield from new purchases and from higher yields on the existing securities in the portfolio. The average balance for taxable securities increased $24.1 million for the six months ended June 30, 2017. Other interest and dividend income increased $47,000 primarily due to increased interest earned with correspondent deposit banks and FHLB dividends in the current period. Federal Funds sold increased $43,000 for the six months ended June 30, 2017. This is the direct result of the end of the historically low interest rates in the last year and the increases in the average interest-earning balances to $12.5 million for the six months ended June 30, 2017.

Interest expense increased $205,000, or 14.6%, to $1.6 million for the six months ended June 30, 2017 compared to $1.4 million for the six months ended June 30, 2016. Interest expense on deposits increased $209,000 due to increases in the discount interest rate by the FRB and average interest-bearing deposits of $21.6 million which we attribute primarily to time deposits, interest-bearing demand deposits and savings accounts. The average cost of interest-bearing deposits increased 6 basis points. In addition, short-term borrowings increased $10,000 in the current period due to increased interest rates on securities sold under agreements to repurchase. Interest expense on other borrowed funds decreased $13,000 due to a decrease in long-term borrowings as a result of a FHLB long-term borrowing for $3.5 million that matured in the current period.

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%. 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) (Unaudited)
	Six Months Ended June 30,
	2017							2016
			Interest							Interest
	Average		and		Yield/			Average		and		Yield/
(Dollars in thousands)	Balance		Dividends		Cost ⁽¹⁾			Balance		Dividends		Cost ⁽¹⁾
Assets:
Interest-Earning Assets:
Loans, Net	$	668,606	$	14,415		4.35	%	$	674,513	$	14,878		4.44	%
Investment Securities
Taxable		78,741		747		1.90			54,651		631		2.31
Exempt From Federal Tax		35,561		648		3.64			38,636		784		4.06
Other Interest-Earning Assets		25,147		186		1.49			12,664		96		1.52
Total Interest-Earning Assets		808,055		15,996		3.99			780,464		16,389		4.22
Noninterest-Earning Assets		57,107							53,463
Total Assets	$	865,162						$	833,927

Liabilities and Stockholders' equity:
Interest-Bearing Liabilities:
Interest-Bearing Demand Deposits	$	122,141		147		0.24	%	$	116,112		97		0.17	%
Savings		127,141		116		0.18			123,908		113		0.18
Money Market		139,273		181		0.26			145,240		181		0.25
Time Deposits		158,610		886		1.13			140,260		730		1.05
Total Interest-Bearing Deposits		547,165		1,330		0.49			525,520		1,121		0.43

Borrowings		51,894		280		1.09			52,886		284		1.08
Total Interest-Bearing Liabilities		599,059		1,610		0.54			578,406		1,405		0.49

Noninterest-Bearing Demand Deposits		171,507							163,002
Other Liabilities		3,550							4,028
Total Liabilities		774,116							745,436

Stockholders' Equity		91,046							88,491
Total Liabilities and Stockholders' Equity	$	865,162						$	833,927

Net interest income			$	14,386						$	14,984

Net Interest Rate Spread ⁽²⁾						3.45	%						3.73	%
Net Interest-Earning Assets ⁽³⁾	$	208,996						$	202,058
Net Interest Margin ⁽⁴⁾						3.59							3.86
Return on Average Assets						0.82							0.96
Return on Average Equity						7.76							9.05
Average Equity to Average Assets						10.52							10.61
Average Interest-Earning Assets to Average Interest-Bearing Liabilities						134.89							134.93

(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)

Rate/Volume Analysis. The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. 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)
	Six Months Ended June 30, 2017
	Compared To
	Six Months Ended June 30, 2016
	Increase (Decrease) Due to
(Dollars in thousands)	Volume			Rate			Total

Interest and Dividend Income:
Loans, net	$	(164	)	$	(299	)	$	(463	)
Investment Securities:
Taxable		242			(126	)		116
Exempt From Federal Tax		(58	)		(78	)		(136	)
Other Interest-Earning Assets		92			(2	)		90
Total Interest-Earning Assets		112			(505	)		(393	)

Interest Expense:
Deposits		48			161			209
Borrowings		(7	)		3			(4	)
Total Interest-Bearing Liabilities		41			164			205
Change in Net Interest Income	$	71		$	(669	)	$	(598	)

Provision for Loan Losses. The provision for loan losses decreased $430,000 to $720,000, for the six months ended June 30, 2017, of which $250,000 was attributed to the acquired loan portfolio, compared to $1.2 million of provision for loan losses for the six months ended June 30, 2016. Net charge-offs for the six months ended June 30, 2017 were $440,000, which included $287,000 of net charge-offs on automobile loans, compared to net charge-offs of $450,000, which included $229,000 of net charge-offs on automobile loans, for the six months ended June 30, 2016. Management analyzes the loan portfolio on a quarterly basis to determine the adequacy of the allowance for loan losses and the need for an increase or reduction in provision for loan losses for the six months ended June 30, 2017. There was minimal loan growth and increased loan portfolio performance compared to the prior year. As the acquired loan portfolio has loan payoffs, paydowns and accretion of the credit mark, the need for additional provision may be required based on our loan loss analysis.

Noninterest Income. Noninterest income increased $327,000, or 8.8%, to $4.0 million for the six months ended June 30, 2017 compared to $3.7 million at June 30, 2016. There was a $313,000 increase in insurance commissions from Exchange Underwriters due to additional contingency fees received and an increase in commercial commission and fee income received in the current period. Net gains on the sales of investments increased $64,000 due to the sale of equity securities. These sales were transacted to recognize capital gains that will be offset by a capital loss carry forward deferred tax asset that was acquired in the merger. The capital loss carry forward deferred tax asset has been fully recognized in the current period. Net gains on purchased tax credits increased $29,000 due to purchased Pennsylvania shares tax credits being recognized in the current period. Service fees on deposit accounts increased $17,000 primarily due to increased NSF fees due to customer overdrafts of deposit accounts. There was a decrease in the net gains on sales of residential mortgage loans of $57,000. The decrease in gains was primarily due to a decrease in the number of loans originated and subsequently sold to the FHLB as part of the MPF® programs. Other commissions decreased $18,000 primarily due to decreases in merchant services and check sales fees in the current period. Other miscellaneous income decreased $14,000 primarily due to increases in amortization on mortgage servicing rights related to loans sold to the FHLB. This was partially offset by an increase in the servicing income received from mortgage loans sold to the FHLB as part of the MPF® program.

Noninterest Expense. Noninterest expense increased $919,000, or 7.9%, to $12.5 million for the six months ended June 30, 2017 compared to $11.6 million for the six months ended June 30, 2016. Salaries and employee benefits increased $259,000, primarily due to additional employees, normal salary increases, retirement benefits and employee stock options. This was partially offset by decreases in group health insurance expense and restricted stock awards expense. Occupancy and equipment increased $240,000 and $58,000, respectively, primarily due to accelerated depreciation taken on leasehold improvements in the Bank’s former operations center that will not transfer over to the new Operations Center that was placed into service in the current period. Other increases for occupancy were related to real estate taxes, moving expenses, utilities and property insurance. Equipment expense increases were mainly due to equipment purchases and new maintenance contracts for the Operations Center. Other real estate owned expense was $6,000 in the current period compared to $535,000 of income in the prior period resulting in an increase of $541,000 in expense. This change is primarily due to the $566,000 pre-tax gain recognized due to the foreclosure procedures on two commercial real estate loans that moved into other real estate owned properties in the first quarter of 2016. The FDIC assessment decreased $78,000 due to an assessment factor reduction by the FDIC in the computation of the insurance assessment. Advertising decreased $47,000 related to decreases in print/media advertising and promotional items as a cost savings initiative. Other noninterest expense decreased $33,000 primarily due to decreases in various miscellaneous expenses, such as donations, non-employee restricted stock awards and a Pennsylvania state sales tax refund as a result of a Bank initiated reverse audit. Pennsylvania shares tax, which is calculated based on the Bank’s stockholders’ equity, decreased $29,000 due to the prior period shares tax accrual that anticipated a shares tax rate increase in 2016 that subsequently became effective in 2017.

Income Tax Expense. Income taxes decreased $222,000 to $1.4 million for the six months ended June 30, 2017 compared to $1.6 million for the six months ended June 30, 2016. The effective tax rate for the six months ended June 30, 2017 was 28.9% compared to 29.3% for the six months ended June 30, 2016. The decrease in income taxes was primarily due to a decrease of $700,000 in pre-tax income. The decrease in the effective tax rate was related to the favorable tax preference charitable donation of a former First Federal Savings Bank building to the City of Monessen, Pennsylvania, partially offset by the decrease in tax exempt income and the expiration of the low income housing tax credit program in the current period.

Off-Balance Sheet Arrangements.

Other than loan commitments and standby and performance letters of credit, 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 June 30, 2017.

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, calls 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 June 30, 2017 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 $28.7 million at June 30, 2017. 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 $36.0 million at June 30, 2017. In addition, at June 30, 2017, the Company had the ability to borrow up to $285.0 million from the FHLB of Pittsburgh, of which $24.5 million was outstanding and $39.9 million was utilized toward standby letters of credit. The Company also has the ability to borrow up to $87.9 million from the FRB through its Borrower-In-Custody line of credit agreement and $40.0 million from multiple line of credit arrangements with various banks, none of which were outstanding.

At June 30, 2017, time deposits due within one year of that date totaled $46.1 million, or 29.3% 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 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 CB Financial is subject to regulatory limitations. At June 30, 2017, CB Financial (on an unconsolidated, stand-alone basis) had liquid assets of $1.8 million.

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 FHLB, 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 FHLB 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.

Under the Regulatory Capital Rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier I capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets. The capital conservation buffer, which is composed of common equity Tier I capital, began on January 1, 2017 at the 0.625% level and will be phased in over a three year period (increasing by that amount on each January 1, until it reaches 2.5% on January 1, 2019).

At June 30, 2017 and December 31, 2016, 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)
	June 30, 2017					December 31, 2016
	Amount		Ratio			Amount		Ratio
Common Equity Tier 1 (to risk weighted assets)
Actual	$	83,099		13.44	%	$	81,845		13.38	%
For Capital Adequacy Purposes		27,822		4.50			27,533		4.50
To Be Well Capitalized		40,188		6.50			39,770		6.50

Tier 1 Capital (to risk weighted assets)
Actual		83,099		13.44			81,845		13.38
For Capital Adequacy Purposes		37,097		6.00			36,711		6.00
To Be Well Capitalized		49,462		8.00			48,947		8.00

Total Capital (to risk weighted assets)
Actual		90,834		14.69			89,497		14.63
For Capital Adequacy Purposes		49,462		8.00			48,947		8.00
To Be Well Capitalized		61,828		10.00			61,184		10.00

Tier 1 Leverage (to adjusted total assets)
Actual		83,099		9.58			81,845		9.80
For Capital Adequacy Purposes		34,710		4.00			33,390		4.00
To Be Well Capitalized		43,387		5.00			41,738		5.00

Item 3. Quantitative and Qualitative Disclosure about Market Risk.

The Company believes that as of June 30, 2017, there was no material change in the quantitative and qualitative disclosure about market risk data as of December 31, 2016, as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

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 this 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 June 30, 2017, 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.

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, 2016, 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 (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 June 30, 2017, 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

Pursuant to 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:	August 9, 2017	/s/ Barron P. McCune, Jr.
		Barron P. McCune, Jr.
		Chief Executive Officer

Date:	August 9, 2017	/s/ Kevin D. Lemley
		Kevin D. Lemley
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Chief Accounting Officer)