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CB Financial Services, Inc. Announces Second Quarter and Year-to-Date 2018 Financial Results

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WASHINGTON, Pa., July 30, 2018 (GLOBE NEWSWIRE) -- CB Financial Services, Inc. ("CB" or the "Company") (NASDAQGM: CBFV), the holding company of Community Bank (the "Bank") and Exchange Underwriters, Inc., a wholly-owned insurance subsidiary of Community Bank, today announced its second quarter and year-to-date 2018 financial results.  

Second Quarter 2018 Highlights

  • The Company merged with First West Virginia Bancorp ("FWVB"), and the Bank merged with Progressive Bank, National Association ("FWVB merger"), as of April 30, 2018. The timing of the merger allowed the Company to meet the Russell 2000 reconstitution date and now trades within this small-cap stock market index.
  • Net income for the three months ended June 30, 2018 was $1.1 million, compared to $1.8 million for the three month ended June 30, 2017. Primarily impacting net income were one-time merger expenses of $614,000 and various costs associated with strengthening the Bank's back office infrastructure to handle additional volume of organic growth, and the FWVB merger for the quarter ended June 30, 2018.
  • The Bank continued robust loan growth; excluding the addition of $96.3 million of acquired loans due to FWVB merger, total loans had organic growth of $16.5 million in the second quarter and an annualized net loan growth rate of 8.5%.
  • Provision for loan losses increased $300,000, or 100.0%, to $600,000 for the three months ended June 30, 2018, compared to $300,000 for the three months ended June 30, 2017. This increase was related to loan growth and net charge-offs.
  • Noninterest income increased $159,000 for the three months ended June 30, 2018, as compared to the three months ended June 30, 2017. This was mainly attributed to a loan referral fee for an Assumable Rate Conversion ("ARC") loan and the liquidation of a partnership interest in the West Virginia Bankers Title Company.
  • Net interest income for the second quarter increased $2.0 million, to $9.2 million as compared to $7.1 million for the second quarter of 2017. This is due to increases in loans and investment securities as a result of the FWVB merger and organic loan growth of $93.6 million since the third quarter of 2017.

The quarterly and year-to-date results were primarily impacted by the FWVB merger that closed in the current quarter. The merger brought approximately $283.7 million in low-cost deposits, $96.3 million in loans and eight branch locations in the Ohio Valley and Buckhannon, WV regions. In addition, we have added branch and back office personnel to accommodate the increased customer traffic and transaction volumes due to the FWVB merger. Our year-to-date financial results were impacted approximately $638,000 pre-tax for merger-related expenses.

Net income for the six months ended June 30, 2018 was $2.5 million, compared to $3.5 million for the six months ended June 30, 2017. Diluted earnings per share for the three and six months ended June 30, 2018 were $0.22 and $0.53, respectively, compared to $0.44 and $0.85 for the three and six months ended June 30, 2017, respectively. As mentioned in the previous narrative above, the FWVB merger had a significant impact to net income for the quarter and year-to-date. Removing the one-time, non-recurring merger expenses would have a beneficial impact to net income. Net income minus merger impact and various discreet one-time items would have been approximately $2.0 million and $3.3 million for the three and six months ended June 30, 2018. The diluted earnings per share impact of the removal of these items would have been $0.39 and $0.72 per share for the three and six months ended June 30, 2018, which would have been increases of $0.17 and $0.19 per share, for the aforementioned time periods, respectively.

"We are pleased to report on our second quarter and year-to-date financial performance for 2018. The second quarter recognized the closing of the FWVB merger," said Patrick G. O'Brien, President and Chief Executive Officer. "Our combined organization has continued our momentum in both loan and deposit growth. Thanks to the employees of our combined organization, we are now poised to take the 'Community Bank' story and high-level of customer service to the Ohio Valley and Buckhannon, WV markets. The combination of these two like-minded and community-oriented financial organizations, will yield benefits for shareholders and customers for years to come. We look forward to the challenge of becoming the premier 'Community Bank' of choice in the tri-state region."

STATEMENT OF INCOME REVIEW

Second Quarter Results

Net Interest Income.  Net interest income increased $2.0 million, or 28.6%, to $9.2 million for the three months ended June 30, 2018 compared to $7.1 million for the three months ended June 30, 2017.

Interest and dividend income increased $2.7 million, or 34.5%, to $10.7 million for the three months ended June 30, 2018 compared to $7.9 million for the three months ended June 30, 2017. Interest income on loans increased $2.0 million for the three months ended June 30, 2018, compared to the three months ended June 30, 2017. Average loans increased by $4.4 million for the three months ended June 30, 2018, compared to the three months ended June 30, 2017. This was primarily due to organic loan growth and the FWVB merger.  The FWVB merger not only affected the average loan balance, it also contributed to an increase of 9 basis points in loan yield. The credit mark recorded for the acquired loans in the FWVB merger was approximately $1.3 million. The impact of the accretion from both the FWVB and FedFirst Financial Corporation ("FFCO") acquired loan portfolios for the three months ended June 30, 2018 was $93,000, or 5 basis points, compared to $173,000, or 11 basis points, for the three months ended June 30, 2017. The remaining credit mark balance for both acquired loan portfolios was $2.0 million as of June 30, 2018. Interest income on taxable securities increased $602,000 mainly due to an increase of $71.5 million in the average balance and 69 basis points in yield in the current period. This is a result of the FWVB merger, new purchases with higher prevailing yields replacing security calls and maturities with lower yields within the portfolio. Interest income on securities exempt from federal income tax increased by $84,000 in the current period. This was due to the FWVB merger that generated an average balance increase of $10.6 million. In addition, other interest and dividend income increased $14,000 as a result of increased interest earned on correspondent deposit banks and FHLB dividends in the current period.

Interest expense increased $703,000, or 86.4%, to $1.5 million for the three months ended June 30, 2018 compared to $814,000 for the three months ended June 30, 2017. Interest expense on deposits increased $511,000 due to an increase in average interest-bearing deposits of $158.9 million, primarily due to increases in deposits as a result of the FWVB merger. The average cost of interest-bearing deposits increased 18 basis points. This was primarily related to an interest rate hike in the current quarter by the Federal Reserve Board ("FRB"). Interest expense on short-term borrowings increased $188,000 primarily due to FHLB overnight borrowings that had an increase in average balance of $33.6 million during the current quarter due to funding loan growth pre-merger.

Provision for Loan Losses.  The provision for loan losses was $600,000 for the three months ended June 30, 2018 compared to $375,000 for the three months ended June 30, 2017. Net charge-offs for the three months ended June 30, 2018 were $125,000, which included $113,000 of net charge-offs on automobile loans, compared to $2,000 of net charge-offs for the three months ended June 30, 2017, which included $49,000 of net charge-offs on automobile loans. The increase in net charge-offs during the current period was due to reduced recoveries in the current period and higher automobile loan charge-offs. 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. The increase in the quarterly provision was primarily due to loan growth. This was partially offset by improvements in the local economy and industry conditions which had a positive impact on the qualitative factors within the allowance calculation.

Noninterest Income.  Noninterest income increased $159,000, or 8.1%, to $2.1 million for the three months ended June 30, 2018 compared to $1.8 million for the three months ended June 30, 2017. Other commissions increased $156,000 due to the current quarter recognition of the ARC loan referral fee and liquidation of a partnership interest in the West Virginia Bankers Title Company, an item that was resolved from the FWVB merger. Service fees on deposit accounts decreased $19,000 due to increased ATM and check card fees in the current quarter. The fair value of equity securities increased $44,000 due to the first quarter adoption of Accounting Standard Update ("ASU") 2016-01, Financial Instruments – Overall (Subtopic 825-10), which requires equity investments (except those accounted for under the equity method or are that consolidated) to be measured at fair value with changes in fair value recognized in net income. As required, the $44,000 gain was recognized due to current market conditions. Insurance commissions from Exchange Underwriters increased $38,000 due to increased direct bill commercial and personal lines commission and fee income as a result of the revenue recognition standard adopted in the first quarter, partially offset by a decrease in 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. There was a decrease in the net gains on the sales of residential mortgage loans of $116,000. 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 and an increase in mortgage rates. 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. Net gains on the sales of investments decreased $70,000 due to the sale of equity securities in the prior year.

Noninterest Expense.  Noninterest expense increased $3.0 million, or 48.2%, to $9.3 million for the three months ended June 30, 2018 compared to $6.3 million for the three months ended June 30, 2017. Salaries and employee benefits increased $1.4 million primarily due to the addition of Progressive Bank-retained employee salaries, salary increases related to back office personnel,  health care and retirement benefits expenses mostly related to the FWVB merger. In addition, incentive compensation related to loan origination semi-annual bonus matrix payout.  Merger-related expenses increased $614,000 due to the FWVB merger. Amortization of Core Deposit Intangible ("CDI") increased $267,000 due to the CDI recorded for the FWVB merger. Other noninterest expense increased $210,000 primarily due to loan expenses, office supplies, telephone, travel, and meals and entertainment expenses. Occupancy increased $184,000 primarily due to increases in property contracted services, rent expense and real estate taxes due to the FWVB merger and completion of the Barron P. ("Pat") McCune Corporate Center ("BPMCC") in Washington, PA. Equipment expense increased $33,000 primarily due to equipment maintenance contracts and data processing expense related to the FWVB merger. The Federal Deposit Insurance Corporation ("FDIC") assessment expense increased $76,000 due to an assessment factor increase by the FDIC in the computation of the insurance assessment and average asset growth related to the FWVB merger. Legal and professional fees increased $43,000 primarily due to prior year quarter refund of legal fees from delinquent loans.

Income Tax Expense.  Income taxes decreased $430,000 to $266,000 for the three months ended June 30, 2018 compared to $696,000 for the three months ended June 30, 2017. The effective tax rate for the three months ended June 30, 2018 was 19.6% compared to 27.9% for the three months ended June 30, 2017. The decrease in income taxes was due to a decrease of $1.1 million in pre-tax income and the reduction of the federal statutory income tax rate from 34% in the prior year quarter to 21% in the current year quarter, due to the enactment of the new federal tax law titled "Tax Cuts and Jobs Act of 2017" on December 22, 2017.

Year-to-Date Results

Net Interest Income.  Net interest income increased $2.7 million, or 18.8%, to $16.8 million for the six months ended June 30, 2018 compared to $14.1 million for the six months ended June 30, 2017.

Interest and dividend income increased $3.7 million, or 23.2%, to $19.4 million for the six months ended June 30, 2018 compared to $15.7 million for the six months ended June 30, 2017. Interest income on loans increased $2.9 million primarily due to an increase in average loans outstanding of $127.3 million for the six months ended June 30, 2018. The increase in average loans was mainly due to the FWVB merger and organic loan growth of approximately $53.2 million the current period. This was partially offset by a decrease of $247,000 in accretion on the acquired loan portfolios credit mark for the six months ended June 30, 2018. Credit mark accretion of $159,000, or 9 basis points, was recognized in the six months ended June 30, 2018 compared to $406,000, or 25 basis points, for the six months ended June 30, 2017.  Interest income on taxable securities increased $675,000 in the current period. In addition, an increase of 48 basis points in yield resulted from securities acquired in the FWVB merger. The average balance for taxable securities increased $3.3 million for the year ended June 30, 2018. Interest income on securities exempt from federal tax increased $103,000 due to securities acquired in the FWVB merger with higher prevailing yields. There was an increase of $7.1 million in the average balance on securities exempt from federal tax and a decrease of 55 basis points in yield as a result of the prior year reduction in the federal statutory income tax rate from 34% to 21%.

Interest expense increased $1.0 million, or 62.5%, to $2.6 million for the six months ended June 30, 2018 compared to $1.6 million for the six months ended June 30, 2017. Interest expense on deposits increased $644,000 due to current year rate increases and an increase in average interest-bearing deposits of $92.7 million, which is attributed primarily to the FWVB merger. The average cost of interest-bearing deposits increased 13 basis points. In addition, short-term borrowings increased $366,000 in the current period due to increased interest rates on FHLB overnight borrowings that had an average balance increase of $38.0 million, and on securities sold under agreements to repurchase.

Provision for Loan Losses.  The provision for loan losses increased $1.4 million, to $2.1 million, for the six months ended June 30, 2018, compared to $720,000 of provision for loan losses for the six months ended June 30, 2017, of which $250,000 was attributed to the FFSB acquired loan portfolio. Net charge-offs for the six months ended June 30, 2018 were $1.5 million, which included $200,000 of net charge-offs on automobile loans, compared to net charge-offs of $440,000 for the six months ended June 30, 2017, which included $287,000 of net charge-offs on automobile loans. The increase in net charge-offs for the current year was due to charge-offs of $496,000, $443,000 and $238,000 for three commercial and industrial relationships. The provision for loan losses was impacted in the current period by the recording of $2.1 million of provision for the originated loan portfolio due to the above-mentioned loan charge-offs and to appropriately reflect risk associated with the originated loan portfolio as of June 30, 2018. Additionally, this was due to growth in the loan portfolio and average loan balances, partially offset by the local economy which had a positive impact on the qualitative factors within the allowance calculation. The acquired loan portfolio from the FWVB merger recorded an approximate credit mark of $1.3 million. Management analyzes the loan portfolio on a quarterly basis to determine the adequacy of the allowance for loan losses and credit mark on acquired loan portfolios, with the possible need for additional provisions for loan losses.

Noninterest Income.  Noninterest income increased $169,000, or 4.2%, to $4.2 million for the six months ended June 30, 2018 compared to $4.0 million at June 30, 2017. There was an increase of $485,000 for other commissions due to insurance proceeds recognized by a claim on a bank-owned life insurance policy due to the death of a former officer of the Bank, current quarter recognition of the ARC loan referral fee and liquidation of a partnership interest in the West Virginia Bankers Title Company, an item that was resolved from the FWVB merger. Service fees on deposit accounts increased $101,000 primarily due to increased ATM fees due to an increased volume of customer transactions and check card fees. There was a decrease in the net gains on sales of residential mortgage loans of $198,000. 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 and an increase in mortgage rates. 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. Net gains on the sales of investments decreased $122,000 due to the sale of equity securities in the prior period. There was an $117,000 decrease in insurance commissions from Exchange Underwriters mainly due to a decrease in contingency fees received in the current period.

Noninterest Expense.  Noninterest expense increased $3.5 million, or 27.8%, to $16.0 million for the six months ended June 30, 2018 compared to $12.5 million for the six months ended June 30, 2017. Salaries and employee benefits increased $1.6 million, primarily due to additional employees, salary increases, and retirement benefits as a direct result of the FWVB merger, incentive compensation due to loan origination semi-annual bonus matrix payout, employee group health insurance and employee stock options. Merger-related expenses increased $638,000 due to the FWVB merger. Amortization of Core Deposit Intangible ("CDI") increased $267,000 due to the CDI recorded for the FWVB merger.  Other noninterest expense increased $265,000 primarily due to office supplies, telephone, loan expenses, travel and meals, and entertainment. Equipment and occupancy increased $218,000 and $206,000, respectively, primarily due to equipment purchases, and new maintenance contracts related to the FWVB merger and the BPMCC. FDIC assessment fees increased $131,000 due to an assessment factor increase by the FDIC in the computation of the insurance assessment and average asset growth related to the FWVB merger. Legal and professional fees increased $14,000 due to increased consultation fees in connection with Exchange Underwriters. Advertising increased $35,000 related to increases in print/media advertising and promotional items to promote the FWVB merger.

Income Tax Expense.  Income taxes decreased $993,000 to $433,000 for the six months ended June 30, 2018 compared to $1.4 million for the six months ended June 30, 2017. The effective tax rate for the six months ended June 30, 2018 was 15.0% compared to 28.9% for the six months ended June 30, 2017. The decrease in income taxes was primarily due to a decrease of $2.0 million in pre-tax income. The expected effective tax rate for the current year 2018 is 18.1%, which was calculated by excluding the one-time income on a bank-owned life insurance claim of approximately $421,000, which represents a discrete tax item for Q1 2018. The decrease in income taxes was due to the enactment of the Tax Cuts and Jobs Act of 2017, which reduced the corporate statutory federal income tax rate from 34% to 21% effective January 1, 2018.

STATEMENT OF FINANCIAL CONDITION REVIEW

Assets.  Total assets increased $297.2 million, or 31.8%, to $1.2 billion at June 30, 2018 compared to $934.5 million at December 31, 2017.

Cash and due from banks increased $3.6 million, or 17.2%, to $24.2 million at June 30, 2018 compared to $20.6 million at December 31, 2017. This is primarily the result of cash acquired due to the FWVB merger.

Investment securities classified as available-for-sale increased $101.5 million, or 82.2%, to $225.1 million at June 30, 2018 compared to $123.6 million at December 31, 2017. This increase was primarily the result of securities acquired the FWVB merger.

Loans, net, increased $146.7 million, or 19.9%, to $882.3 million at June 30, 2018 compared to $735.6 million at December 31, 2017. This was primarily due to the Progressive Bank acquired loan portfolio of $96.3 million and net organic loan originations of $47.7 million on commercial real estate loans and $9.3 million on residential mortgage loans, partially offset by decreases of $4.0 million on commercial and industrial loans and $3.3 million on construction loans.

Premises and equipment, net, increased $16.2 million, or 96.8%, to $32.9 million at June 30, 2018 compared to $16.7 million at December 31, 2017. This is due to the additions related to the eight branch locations from the FWVB merger with a fair market value of approximately $13.0 million, including a purchase accounting adjustment of approximately $8.0 million. In addition, there was $3.5 million related to the new BPMCC that was placed into service in the second quarter. Total premises and equipment capitalized for the new Corporate Center totaled $5.9 million. The Corporate Center building was previously taken into premises and equipment from a previously defaulted loan relationship in the first quarter of 2016.

Liabilities.  Total liabilities increased $256.6 million, or 30.5%, to $1.1 billion at June 30, 2018 compared to $841.2 million at December 31, 2017.

Total deposits increased $251.2 million, or 32.5%, to $1.0 billion at June 30, 2018 compared to $773.3 million at December 31, 2017. There were increases of $73.8 million in savings accounts, $59.4 million in demand deposits, $45.0 million in time deposits, $43.0 million in money market accounts and $32.9 million in NOW accounts, partially offset by a decrease of $3.0 million in brokered deposits. This increase is due to approximately $283.7 million deposits acquired in the FWVB merger with a decrease of $2.5 million in deposits as of June 30, 2018. The legacy Community Bank deposit portfolio had approximately $30.0 million decrease in deposits. In addition, school district and municipal deposits decreased $20.5 million mainly due to a local government depositor withdrawing funds in the first quarter of approximately $17.0 million. 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.

Short-term borrowings increased $7.6 million, or 19.1%, to $47.2 million at June 30, 2018 compared to $39.6 million at December 31, 2017. At June 30, 2018, short-term borrowings were comprised of $29.2 million of securities sold under agreements to repurchase and $18.0 million of FHLB overnight borrowings, compared to $25.8 million of securities sold under agreement to repurchase and $13.8 million of FHLB overnight borrowing at December 31, 2017. The increase is related to loan originations that exceeded available cash reserves and an increase in 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 $1.2 million due to a $3.5 million maturing FHLB long-term borrowing that was retired in the current period, partially offset by $2.3 million of amortizing fixed-rate FHLB borrowings that were acquired in the FWVB merger. As a result of current period activity, the weighted average interest rate on long-term borrowings increased by 37 basis points to 2.29%.

Stockholders' Equity.  Stockholders' equity increased $40.6 million, or 43.5%, to $133.8 million at June 30, 2018 compared to $93.3 million at December 31, 2017. During the period, 1,317,647 shares of CBFV stock were issued to shareholders of FWVB in the merger. The approximate value of this stock issuance was $42.0 million. Net income was $2.5 million for the six months ended June 30, 2018. The Company paid $2.1 million in dividends to stockholders, and the unrealized loss on investment securities increased by $1.5 million due to the addition of the FWVB securities portfolio of approximately $102.0 million due to merger and current market conditions.

About CB Financial Services, Inc

CB Financial Services, Inc. is the bank holding company for Community Bank, a Pennsylvania-chartered commercial bank headquartered in Washington, Pennsylvania. Community Bank operates sixteen offices in Greene, Allegheny, Washington, Fayette, and Westmoreland Counties in southwestern Pennsylvania, seven offices in Brooke, Marshall, Ohio, Upshur and Wetzel Counties in West Virginia, and one office in Belmont County in Ohio. Community Bank offers a broad array of retail and commercial lending and deposit services, and provides commercial and personal insurance brokerage services through Exchange Underwriters, Inc., its wholly owned subsidiary. Financial highlights of the Company are attached.

For more information about CB and Community Bank, visit our website at www.communitybank.tv.

Statements contained in this press release that are not historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 and such forward-looking statements are subject to significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions contained in the Act. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, changes in market interest rates, general economic conditions, changes in federal and state regulation, actions by our competitors, loan delinquency rates, our ability to control costs and expenses, and other factors that may be described in the Company's periodic reports as filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

 
SELECTED FINANCIAL INFORMATION 
 
    (Unaudited)              
(Dollars in thousands, except share and per share data)   June 30,   December 31,          
Selected Financial Condition Data:     2018       2017          
Total Assets   $   1,231,660     $   934,486          
Cash and Cash Equivalents       24,178         20,622          
Securities Available-for-Sale       225,125         123,583          
                   
Loans                  
Real Estate:                  
Residential       328,628         273,438          
Commercial       284,588         209,037          
Construction       32,975         36,149          
Commercial and Industrial       107,464         107,835          
Consumer       121,175         114,557          
Other       16,860         3,376          
Total Loans       891,690         744,392          
Allowance for Loan Losses       9,371         8,796          
Loans, Net        882,319         735,596          
                   
Premises and Equipment, Net       32,894         16,712          
Goodwill and Core Deposit Intangible       31,023         8,237          
Deposits       1,024,560         773,344          
Borrowings       70,461         64,105          
Stockholders' Equity       133,806         93,256          
 
    (Unaudited)   (Unaudited)  
    Three Months Ended   Six Months Ended  
    June 30,   June 30,  
Selected Operations Data:     2018       2017     2018       2017  
Interest and Dividend Income   $   10,690     $   7,949   $   19,397     $   15,740  
Interest Expense       1,517         814       2,616         1,610  
Net Interest Income       9,173         7,135       16,781         14,130  
Provision for Loan Losses       600         300       2,100         720  
Net Interest Income After Provision for Loan Losses       8,573         6,835       14,681         13,410  
Noninterest Income:                  
Service Fees on Deposit Accounts       719         625       1,310         1,209  
Insurance Commissions       880         842       1,811         1,928  
Other Commissions       263         107       696         211  
Net Gains on Sales of Loans       46         162       54         252  
Net Gains on Sales of Investments       -          70       -          122  
Fair Value of Equity Securities       44         -        19         -   
Net Gains on Purchased Tax Credits       11         15       22         29  
Income from Bank-Owned Life Insurance       127         116       235         232  
Other       35         29       64         59  
Total noninterest income       2,125         1,966       4,211         4,042  
                   
Noninterest Expense:                  
Salaries and Employee Benefits       4,865         3,424       8,560         6,913  
Occupancy       788         604       1,358         1,152  
Equipment       632         473       1,130         912  
FDIC Assessment       158         82       294         163  
PA Shares Tax       197         186       396         376  
Contracted Services       171         157       310         289  
Legal and Professional Fees       145         102       285         243  
Advertising       211         182       342         307  
Bankcard Processing Expense       139         131       268         254  
Other Real Estate Owned Expense        (19 )       1       (12 )       6  
Amortization of Core Deposit Intangible       400         133       534         267  
Merger-Related       614         -        638         -   
Other       1,039         829       1,904         1,639  
Total noninterest expense       9,340         6,304       16,007         12,521  
Income Before Income Taxes       1,358         2,497       2,885         4,931  
Income Taxes       266         696       433         1,426  
Net Income   $   1,092     $   1,801   $   2,452     $   3,505  
                   
Dividends Per Share   $   0.22     $   0.22   $   0.44     $   0.44  
Earnings Per Share - Basic       0.22         0.44       0.54         0.86  
Earnings Per Share - Diluted       0.22         0.44       0.53         0.85  
                   
Weighted Average Shares Outstanding - Basic       5,000,209         4,088,025       4,550,580         4,087,659  
Weighted Average Shares Outstanding - Diluted       5,061,788         4,105,338       4,601,134         4,101,861  
                   
    (Unaudited)   (Unaudited)  
    Three Months Ended   Six Months Ended  
    June 30,   June 30,  
Selected Financial Ratios(1):     2018       2017     2018       2017  
Return on Average Assets       0.38   %     0.82 %     0.47   %     0.82 %
Return on Average Equity       3.83         7.87       4.77         7.76  
Average Interest-Earning Assets to Average Interest-Bearing Liabilities        133.00         135.89       133.59         134.89  
Average Equity to Average Assets       9.98         10.49       9.93         10.52  
Net Interest Rate Spread       3.33         3.42       3.34         3.45  
Net Interest Margin       3.52         3.56       3.53         3.59  
Net Charge-Offs to Average Loans       0.06         0.00       0.38         0.13  
Efficiency Ratio       82.67         69.27       76.25         68.90  
 
    (Unaudited)              
    June 30,   December 31,          
      2018       2017          
Allowance For Loan Losses to Total Loans (2)       1.05   %     1.18 %        
Allowance For Loan Losses to Nonperforming Loans (2) (6)       129.81         121.31          
Allowance For Loan Losses to Noncurrent Loans (2) (7)       223.01         215.17          
Allowance For Loan Losses and Accrued Credit Mark to Total Loans (3)       1.27         1.28          
Allowance For Loan Losses and Accrued Credit Mark to Nonperforming Loans (3) (6)       18.48         137.24          
Allowance For Loan Losses and Accrued Credit Mark to Noncurrent Loans (3) (7)       31.74         243.42          
Nonperforming Loans to Total Loans (6)       0.81         0.97          
Noncurrent Loans to Total Loans (7)       0.47         0.55          
Nonperforming Assets to Total Assets       0.66         0.81          
Common Equity Tier 1 Capital (to Risk Weighted Assets) (4)       12.02         12.22          
Tier 1 Capital (to Risk Weighted Assets) (4)       12.02         12.22          
Total Capital (to Risk Weighted Assets) (4)       13.12         13.47          
Tier 1 Leverage (to Adjusted Total Assets) (4)       9.23         9.27          
Common Equity Tier 1 Capital (to Risk Weighted Assets) (5)       12.43         12.62          
Tier 1 Capital (to Risk Weighted Assets) (5)       12.43         12.62          
Total Capital (to Risk Weighted Assets) (5)       13.53         13.89          
Tier 1 Leverage (to Adjusted Total Assets) (5)       9.48         9.58          
Book Value Per Share   $   24.71     $   22.77          
Outstanding Shares       5,414,299         4,095,957          
 
(1) Interim period ratios are calculated on an annualized basis. 
(2) Loans acquired in connection with the mergers with FedFirst Financial Corporation and First West Virginia Bancorp were recorded at their estimated fair value at the 
  acquisition date and did not include a carryover of the pre-merger allowance for loan losses.
(3) Accrued credit mark for loans acquired at fair market value in connection with the mergers with FedFirst Financial Corporation and First West Virginia Bancorp have 
  been included  in the calculation of the ratios.
(4) Capital ratios are for Community Bank only.
(5) Capital ratios are for CB Financial Services, Inc.
(6) Nonperforming loans consist of nonaccrual loans, accruing loans that are 90 days or more past due, and troubled debt restructured loans.
(7) Noncurrent loans consist of nonaccrual loans and accruing loans that are 90 days or more past due.
 
Note:
Certain items previously reported may have been reclassified to conform with the current reporting period's format.
 

AVERAGE BALANCES AND YIELDS

The following tables present 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 21% for 2018 and 34% for 2017. 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, and include nonaccrual loans. The yields and costs for the periods indicated are derived by dividing annualized 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,
  2018   2017
      Interest             Interest      
  Average   and   Yield/   Average   and   Yield/
  Balance   Dividends   Cost (4)   Balance   Dividends   Cost (4)
Assets:                          
Interest-Earning Assets:                          
  Loans, Net $ 840,537   $ 9,288   4.43 %   $ 670,231   $ 7,251   4.34 %
  Investment Securities                          
    Taxable   152,867     988   2.59       81,409     386   1.90  
    Exempt From Federal Tax   46,101     371   3.22       35,529     325   3.66  
  Other Interest-Earning Assets   17,102     142   3.33       30,666     115   1.50  
    Total Interest-Earning Assets   1,056,607     10,789   4.10       817,835     8,077   3.96  
Noninterest-Earning Assets   89,250               57,904          
    Total Assets $ 1,145,857             $ 875,739          
                           
Liabilities and                          
  Stockholders' equity:                          
Interest-Bearing Liabilities:                          
  Interest-Bearing Demand Deposits $ 163,801     139   0.34 %   $ 125,695     78   0.25 %
  Savings   188,628     124   0.26       129,719     60   0.19  
  Money Market   159,898     201   0.50       136,026     88   0.26  
  Time Deposits   197,281     722   1.47       159,309     449   1.13  
    Total Interest-Bearing Deposits   709,608     1,186   0.67       550,749     675   0.49  
                           
  Borrowings   84,834     331   1.56       51,070     139   1.09  
    Total Interest-Bearing Liabilities   794,442     1,517   0.77       601,819     814   0.54  
                           
Noninterest-Bearing Demand Deposits   231,491               178,478          
Other Liabilities   5,527               3,617          
    Total Liabilities   1,031,460               783,914          
                           
Stockholders' Equity   114,397               91,825          
    Total Liabilities and                          
      Stockholders' Equity $ 1,145,857             $ 875,739          
                           
Net Interest Income     $ 9,272             $ 7,263      
                           
Net Interest Rate Spread (1)         3.33 %           3.42 %
Net Interest-Earning Assets (2) $ 262,165             $ 216,016          
Net Interest Margin (3)         3.52             3.56  
Return on Average Assets         0.38             0.82  
Return on Average Equity         3.83             7.87  
Average Equity to Average Assets         9.98             10.49  
Average Interest-Earning Assets to                          
  Average Interest-Bearing Liabilities         133.00             135.89  
                           
(1) 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.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
(4) Annualized.
  (Dollars in thousands) (Unaudited)
  Six Months Ended June 30,
  2018   2017
      Interest           Interest    
  Average   and   Yield/   Average   and   Yield/
  Balance   Dividends   Cost (4)   Balance   Dividends   Cost (4)
Assets:                          
Interest-Earning Assets:                          
  Loans, Net $ 795,872   $ 17,295   4.38 %   $ 668,606   $ 14,415   4.35 %
  Investment Securities                          
    Taxable   119,720     1,422   2.38       78,741     747   1.90  
    Exempt From Federal Tax   42,672     660   3.09       35,561     648   3.64  
  Other Interest-Earning Assets   12,417     208   3.38       25,147     186   1.49  
    Total Interest-Earning Assets   970,681     19,585   4.07       808,055     15,996   3.99  
Noninterest-Earning Assets   73,859               57,107          
    Total Assets $ 1,044,540             $ 865,162          
                           
Liabilities and                          
  Stockholders' equity:                          
Interest-Bearing Liabilities:                          
  Interest-Bearing Demand Deposits $ 147,790     241   0.33 %   $ 122,141     147   0.24 %
  Savings   161,610     186   0.23       127,141     116   0.18  
  Money Market   148,667     320   0.43       139,273     181   0.26  
  Time Deposits   181,751     1,227   1.36       158,610     886   1.13  
    Total Interest-Bearing Deposits   639,818     1,974   0.62       547,165     1,330   0.49  
                           
  Borrowings   86,782     642   1.49       51,894     280   1.09  
    Total Interest-Bearing Liabilities   726,600     2,616   0.73       599,059     1,610   0.54  
                           
Noninterest-Bearing Demand Deposits   209,713               171,507          
Other Liabilities   4,472               3,550          
    Total Liabilities   940,785               774,116          
                           
Stockholders' Equity   103,755               91,046          
    Total Liabilities and                          
      Stockholders' Equity $ 1,044,540             $ 865,162          
                           
Net Interest Income     $ 16,969             $ 14,386      
                           
Net Interest Rate Spread (1)         3.34 %           3.45 %
Net Interest-Earning Assets (2) $ 244,081             $ 208,996          
Net Interest Margin (3)         3.53             3.59  
Return on Average Assets         0.47             0.82  
Return on Average Equity         4.77             7.76  
Average Equity to Average Assets         9.93             10.52  
Average Interest-Earning Assets to                          
  Average Interest-Bearing Liabilities         133.59             134.89  
                           
(1) 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.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
(4) Annualized.
 

Contact:
Patrick G. O'Brien
President and Chief Executive Officer
Phone: (724) 225-2400
Fax: (724) 225-4903

2111 N. Franklin Dr.
Washington, PA  15301
www.communitybank.tv

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