CBFV 10-Q Quarter ended June 30, 2017

		(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

1

		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

2

		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

																						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

3

		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

4

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.

8

Note 3. Investment Securities

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

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:

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:

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.

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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.

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.

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.

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.

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.

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

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.

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

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

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.