As filed with the Securities and Exchange Commission on July 28, 2014.February 16, 2018.

RegistrationNo. 333-196749333-222512

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

PRE-EFFECTIVE AMENDMENT NO. 1

TO THE

FORMS-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CB Financial Services, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Pennsylvania 

6022

 51-0534721

(State or other jurisdiction of


incorporation or organization)

 

(Primary Standard Industrial


Classification Code Number)

 

(I.R.S. Employer

Identification Number)

100 North Market Street

100 North Market Street

Carmichaels, Pennsylvania 15320

(724)966-5041

Carmichaels, Pennsylvania 15320

(724) 966-5041

Barron P. McCune, Jr.

President and Chief Executive Officer

90 West Chestnut Street, Ste. 100

Washington, Pennsylvania 15301

(724) 225-2400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Barron P. McCune, Jr.

Chief Executive Officer

100 North Market Street

Carmichaels, Pennsylvania 15320

(724)966-5041

(Name, address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

 

 

Copies to:

 

Eric Luse, Esq.

Victor L. Cangelosi, Esq.

Jeffrey Cardone, Esq.

Luse Gorman, Pomerenk & Schick, P.C.PC

5335 Wisconsin Avenue, N.W.

Suite 780

Washington, DC 20015


(202)274-2000


Facsimile: (202)362-2902

 

AaronSandra M. Kaslow,Murphy, Esq.

Kilpatrick Townsend & StocktonBenjamin R. Thomas, Esq.

Bowles Rice LLP

607 14th600 Quarrier Street NW

Suite 900Charleston, WV 25301

Washington, DC 20005(304)347-1100

(202) 508-5800

(202) 508-5858Facsimile: (304)343-2867

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement and the conditions to the consummation of the merger described herein have been satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨

  Accelerated filer ¨
Non-accelerated filer x  (Do not check if a smaller reporting company)  Smaller reporting company ¨
Emerging growth company

¨If an emerging growth company, indicate by check mark whether the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☒

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule13e-4(i) (Cross-Border Issuer Tender Offer)  ¨

Exchange Act Rule14d-1(d) (Cross-Border Third-Party Tender Offer)  ¨

 

 

CALCULATION OF REGISTRATION FEE

Title of Each Class of

Securities to be Registered

 

Amount

to be

Registered (1)

 

Proposed

Maximum

Offering Price

Per Unit

 

Proposed

Maximum
Aggregate

Offering Price (2)

 

Amount of

Registration Fee (3)

 

Amount

to be

Registered (1)

 

Proposed

Maximum

Offering Price

Per Unit

 

Proposed

Maximum
Aggregate
Offering Price (2)

 

Amount of

Registration Fee (3)

Common Stock, par value $0.4167 per share

 1,744,615 Not applicable $33,078,451 $4,261 (4) 1,317,648 Not applicable $38,293,305 $4,768 (4)

(1)Represents the estimated maximum number of shares of common stock issuable by CB Financial Services, Inc. upon the consummation of the merger with FedFirst Financial Corporation,First West Virginia Bancorp, Inc., based on the product of (x) the number of shares of FedFirst Financial CorporationFirst West Virginia Bancorp, Inc. common stock outstanding or reserved for issuance upon the exercise of outstanding stock options as of May 8, 2014,January 11, 2018, (y) an exchange ratio of 1.1590:0.9583:1, and (z) 65%80% (the maximum portion of the merger consideration consisting of CB Financial Services, Inc. common stock issuable in the merger). Pursuant to Rule 416, this Registration Statement also covers an indeterminate number of shares of common stock as may become issuable as a result of stock splits, stock dividends or similar transactions.
(2)In accordance with Rule 457(c) and Rule 457(f), the proposed maximum aggregate offering price was calculated by multiplying (A) the average of the highbid and lowask prices per share of the common stock of FedFirst Financial CorporationFirst West Virginia Bancorp, Inc. as reported on the Nasdaq Capital MarketOTCQX on June 6, 2014,January 8, 2018, or $21.975$27.98 per share, by (B) 2,315,810,1,718,730, the maximum number of shares of FedFirst Financial CorporationFirst West Virginia Bancorp, Inc. common stock (including shares issuable pursuant to the exercise of outstanding options to purchase FedFirst Financial Corporation common stock) that may be exchanged for the merger consideration and reduced by the amount of cash to be paid by CB Financial Services, Inc. for such shares.
(3)Computed in accordance with Section 6(b) of the Securities Act of 1933 by multiplying 0.00012880.0001245 by the proposed maximum aggregate offering price.
(4)Previously paid.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Information contained in this joint proxy statement/prospectus is subject to completion or amendment. A registration statement relating to the shares of CB Financial Services, Inc. common stock to be issued in the merger has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This joint proxy statement/prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS,

SUBJECT TO COMPLETION, DATED FEBRUARY 16, 2018

LOGOLOGO

Proxy StatementLOGO

  ProspectusLOGO
PROXY STATEMENT/PROSPECTUSPROXY STATEMENT

MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

Dear FedFirst Stockholder:

Your board of directors has agreed unanimously on a proposed transaction that, if completed, will result in the merger of FedFirst Financial Corporation (“FedFirst”) with and intoOn November 16, 2017, CB Financial Services, IncInc. (“CB”). You are being asked to approve the merger by approving and First West Virginia Bancorp, Inc. (“First West Virginia”) entered into an Agreement and Plan of Merger between FedFirst and CB (which we refer to as the merger agreement) at a special meeting of stockholders“merger agreement”) pursuant to be held on                     , 2014.

If the merger agreement is approved at the special meeting,which First West Virginia will merge with and subject to the other conditions of the merger agreement, FedFirst will be merged into CB, with CB as the surviving entity. As a result, youentity (which we refer to as the “merger”). Immediately following the merger, Progressive Bank, National Association (“Progressive Bank”), the wholly-owned subsidiary of First West Virginia, will havemerge with and into Community Bank, the rightwholly-owned subsidiary of CB, with Community Bank as the surviving entity (which we refer to as the “bank merger”). Before we can complete the merger, the stockholders of CB and of First West Virginia must vote to approve the merger agreement.

If the merger is completed, First West Virginia stockholders will be entitled to elect to receive for each share of your shares of FedFirstFirst West Virginia common stock:stock that they own: (1) $23.00$28.50 in cash or (2) 1.15900.9583 shares of CB common stock. YouFirst West Virginia stockholders may elect to receive cash, CB common stock, or a combination of cash and CB common stock for yourtheir shares of FedFirstFirst West Virginia common stock. Regardless of your election, however, itHowever, individual elections will be limited by the requirement in the merger agreement that 65%80% of the total shares of FedFirstFirst West Virginia common stock ismust be exchanged for CB common stock and 35% is20% must be exchanged for cash. Therefore, allocationsthe amount of CB common stock andand/or cash that you receiveeach First West Virginia stockholder receives will depend on the elections made by other FedFirstFirst West Virginia stockholders. Based upon the number of1,718,730 shares of FedFirstFirst West Virginia common stock outstanding as of February 28, 2018, CB expects to pay $20.2approximately $9.8 million in cash (which includes $1.9 million in settlement of Fed First stock options) and issue a total of 1,744,615approximately 1,317,647 shares of CB common stock upon completion of the merger. The federal income tax consequences of the merger to youFirst West Virginia stockholders will depend on whether youthey receive cash, CB common stock or a combination of cash and CB common stock in exchange for yourtheir shares of FedFirstFirst West Virginia common stock. We expect theThe merger has been structured to betax-free for federal income tax purposes to youFirst West Virginia stockholders with respect to any shares of CB common stock youthat they receive in exchange for yourtheir shares of FedFirstFirst West Virginia common stock.

TheCB’s common stock of CB is quotedtrades on the OTCNasdaq Stock Market under the symbol “CBFV.” The closing price of CB common stock on April 14, 2014,November 15, 2017, the trading day before the proposed merger was publicly announced, was $19.75,$30.44, which, based on the 1.15900.9583 exchange ratio, represented a value of $22.89$29.17 per share of FedFirstFirst West Virginia common stock. The closing price of CB common stock on , 2014,February 15, 2018, the most recent practicable trading date before the date of this document, was $$30.55 per share, which represented a value of $$29.28 per share of FedFirstFirst West Virginia common stock based on the exchange ratio. The market prices for both CB common stock and FedFirstFirst West Virginia common stock will fluctuate before the merger. We urge you to obtain current market quotations for both CB common stock and FedFirstFirst West Virginia common stock (Nasdaq:(OTCQX: trading symbol “FFCO”“FWVB”).

After careful consideration, the board of directors of FedFirst has determined that the merger is in the best interests of stockholders and recommends that FedFirst stockholders vote “FOR” the proposal to approve the merger agreement and“FOR” each of the other items to be considered at the FedFirst special meeting. Approval of the merger agreement requires theThe affirmative vote of a majority of the holdersvotes cast at a meeting of CB stockholders at which a majority of the outstanding shares of FedFirstCB common stock.stock is present is required to approve the merger agreement and the transactions contemplated thereby, including the issuance of CB common stock to First West Virginia stockholders. CB stockholders will vote on the merger agreement and the other matters described in this joint proxy statement/prospectus at a special meeting of stockholders to be held at 4:00 p.m., local time, on April 11, 2018 at the Hampton Inn, 227 Greene Plaza, Waynesburg, Pennsylvania.

CB’s board of directors unanimously recommends that CB stockholders vote “FOR” the approval of the merger agreement proposal and “FOR” the other matters to be considered at the CB special meeting.

The affirmative vote of a majority of the votes cast at a meeting of First West Virginia stockholders at which a majority of the outstanding shares of First West Virginia common stock is present is required to approve the merger agreement. First West Virginia stockholders will vote to approve the merger agreement and on the other matters described in this joint proxy statement/prospectus at a special meeting of stockholders to be held at 11:00 a.m., local time, on April 11, 2018 at First West Virginia’s corporate office at 590 National Road, Wheeling, West Virginia.

First West Virginia’s board of directors unanimously recommends that First West Virginia stockholders vote “FOR” the approval of the merger agreement and “FOR” the other matters to be considered at the First West Virginia special meeting.


This document contains information that you should consider in evaluating the merger agreement and the proposed merger.In particular, you should carefully read the section captioned Risk Factors“Risk Factors” beginning on page9 for a discussion of certain risk factors relating to the merger agreementmerger. You may also obtain additional information about CB and First West Virginia as described under the merger.section entitled “Where You Can Find More Information.”

We cannot completelook forward to seeing you at the merger unless FedFirst’s stockholders approve the merger agreementstockholder meetings and we receive all applicable regulatory approvals. Whether or not you plan to attend the special meeting of stockholders of FedFirst, please complete, sign, date and return the enclosed proxy card.Your vote is important. If you do not returnappreciate your proxy card, it will have the same effect as a vote against the merger.continued support.

 

PatrickLOGO

LOGO

Barron P. McCune, Jr.

William G. O’BrienPetroplus

Vice Chairman and Chief Executive Officer

CB Financial Services, Inc.

Chairman, President and Chief Executive Officer

FedFirst Financial Corporation

First West Virginia Bancorp, Inc.

The shares of CB common stock to be issued in the merger are not deposits or savings accounts or other obligations of any bank subsidiary of CB or of First West Virginia, and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securitiesthe merger described in this document or the CB common stock to be issued in the merger, or passed upon the adequacy or completenessaccuracy of this proxy statement/prospectus.document. Any representation to the contrary is a criminal offense.

The securities to be issued in the merger are not savings or deposit accounts or other obligationsdate of any bank or nonbank subsidiary of either CB or FedFirst, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

Thisthis joint proxy statement/prospectus is             dated                     , 20142018, and it is first being mailed or otherwise delivered to FedFirst stockholders of CB and of First West Virginia on or about , 2014.March 9, 2018.


LOGOABOUT THIS DOCUMENT

565 Donner AvenueThis joint proxy statement/prospectus forms part of a registration statement on FormS-4 filed with the Securities and Exchange Commission by CB and constitutes a prospectus of CB under the Securities Act of 1933, as amended (which we refer to as the “Securities Act”) with respect to the shares of CB common stock to be issued to First West Virginia stockholders pursuant to the merger agreement. This document also constitutes a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”), and a notice of meeting with respect to the special meeting of stockholders of CB and the special meeting of stockholders of First West Virginia.

Monessen,REFERENCES TO ADDITIONAL INFORMATION

This document incorporates by reference important business and financial information about CB from documents that are not included in or delivered with this document.

You can obtain documents incorporated by reference in this document free of charge through the Securities and Exchange Commission website (www.sec.gov) or by requesting them in writing or by telephone from CB at the following address:

CB Financial Services, Inc.

100 North Market Street

Carmichaels, Pennsylvania 1506215320

Attention: Deborah Sabocheck, Corporate Secretary

You will not be charged for any of these documents that you request. CB stockholders requesting documents should do so by April 4, 2018, in order to receive them before their special meeting. First West Virginia stockholders requesting documents should do so by April 4, 2018, in order to receive them before their special meeting.

You should rely only on the information contained in this document. Neither CB nor First West Virginia has authorized anyone to give any information or make any representation about the merger or the companies that is different from, or in addition to, that contained in this joint proxy statement/prospectus or in any of the materials that have been incorporated in this joint proxy statement/prospectus by reference. Therefore, if anyone gives you different information, you should not rely on it. This document is dated             , 2018. You should not assume that the information contained in this document is accurate as of any other date. Neither the mailing of this document to either CB stockholders or First West Virginia stockholders nor the issuance by CB of its common stock in connection with the merger will create any implication to the contrary.

This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, to or from any person in any jurisdiction where it is unlawful to make any such offer or solicitation. Information contained in this document regarding CB has been provided by CB and information contained in this document regarding First West Virginia has been provided by First West Virginia.

Information on the website of CB or First West Virginia, or any subsidiary of CB or First West Virginia, is not part of this document. You should not rely on that information in deciding how to vote.

See “Where You Can Find More Information” on page 131.


LOGO

100 North Market Street

Carmichaels, Pennsylvania 15320

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

A special meeting of stockholders of FedFirstCB Financial CorporationServices, Inc. (“CB”) will be held at ,         ,         ,the Hampton Inn, 227 Greene Plaza, Waynesburg, Pennsylvania, at .m.4:00 p.m., local time, on , 2014.Wednesday, April 11, 2018.

At the special meeting, you will be asked to:

 

 1.Consider and vote uponon a proposal to approve the Agreement and Plan of Merger, dated as of April 14, 2014,November 16, 2017, by and between CB Financial Services, Inc. and FedFirst Financial Corporation;First West Virginia Bancorp, Inc., and the transactions contemplated thereby, including the issuance of CB common stock;

 

 2.Consider and vote upon a non-binding, advisory proposal to approve the compensation to be paid to the named executive officers of FedFirst Financial Corporation if the merger contemplated by the Agreement and Plan of Merger, described above, is consummated (the “Merger-Related Executive Compensation”);

3.Consider and vote uponon a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger agreement; and

 

 4.3.Transact such other business as may be properly presented at the special meeting and any adjournments or postponements of the special meeting.

A copy of the Agreement and Plan of Merger which is referred(which we refer to as the “merger agreement,”agreement”) is included asAnnex Appendix A to the accompanyingjoint proxy statement/prospectus. The joint proxy statement/prospectus describes the merger agreement and the proposed merger in detail. We urge you to read it carefully. The joint proxy statement/prospectus forms a part of this notice.

The board of directors of FedFirst Financial CorporationCB unanimously recommends that FedFirstCB stockholders vote “FOR” the proposal to approveapproval of the merger agreement “FOR” the proposal to approve the Merger-Related Executive Compensation, and “FOR” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies to vote in favor of the merger agreement.agreement proposal.

FedFirst’sCB’s board of directors has fixed the close of business on , 2014February 28, 2018 as the record date for determining the stockholders entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting. FedFirst stockholders do not have dissenters’ rights of appraisal in connection with the merger.

Your vote is very important. Your proxy is being solicited by FedFirst’sCB’s board of directors. The proposal to approve the merger agreement must be approved by the affirmative vote of a majority of the holdersvotes cast at a meeting of CB stockholders at which a majority of the outstanding shares of FedFirstCB common stock in order to complete the proposed merger.is present. Whether or not you plan to attend the special meeting please complete and mailin person, we urge you to vote in advance of the enclosedmeeting by internet, telephone or mail. You should follow the instructions on the proxy card inthat accompanies this joint proxy statement/prospectus or the accompanying envelope, which requires no postage if mailed in the United States.voting instruction card that you receive from your bank or broker. You may revoke your proxy at any time before the special meeting. If you attend the special meeting and vote in person, your proxy vote will not be used.

If you have questions about the merger,special meeting, or how to submit your proxy,if you need assistance with voting, please contact ,our proxy solicitation agent, Alliance Advisors LLC, at (        )                     (855)486-7903 (toll free).

 

By Order of the Board of Directors

Jennifer L. George

LOGO

Deborah Sabocheck

Corporate Secretary

Carmichaels, Pennsylvania

March 9, 2018


LOGO

1701 Warwood Avenue

Wheeling, West Virginia 26003

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

A special meeting of stockholders of First West Virginia Bancorp, Inc. will be held at First West Virginia’s corporate office at 590 National Road, Wheeling, West Virginia, at 11:00 a.m., local time, on Wednesday, April 11, 2018.

At the special meeting, you will be asked to:

1.Consider and vote on a proposal to approve the Agreement and Plan of Merger, dated as of November 16, 2017, by and between CB Financial Services, Inc. and First West Virginia Bancorp, Inc.; and

2.Consider and vote on a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger agreement.

A copy of the Agreement and Plan of Merger (which we refer to as the “merger agreement”) is included as Appendix A to the joint proxy statement/prospectus. The joint proxy statement/prospectus describes the merger agreement and the proposed merger in detail. We urge you to read it carefully. The joint proxy statement/prospectus forms a part of this notice.

The board of directors of First West Virginia Bancorp, Inc. unanimously recommends that First West Virginia stockholders vote “FOR” the proposal to approve the merger agreement and “FOR” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies to vote in favor of the merger agreement.

You are entitled to dissent to the merger and receive payment for the fair value of your shares if you comply with all requirements of Sections31D-13-1301 through31D-13-1331 of the West Virginia Business Corporation Act (the “WVBCA”). We have included a copy of Sections31D-13-1301 through31D-13-1331 of the WVBCA as Appendix D to the attached joint proxy statement/prospectus, and a summary of these provisions can be found under the section of the joint proxy statement/prospectus entitled “Appraisal Rights of First West Virginia Stockholders.”

First West Virginia’s board of directors has fixed the close of business on February 28, 2018 as the record date for determining the stockholders entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting.

Your vote is very important. Your proxy is being solicited by First West Virginia’s board of directors. In order to complete the proposed merger, the proposal to approve the merger agreement must be approved by a majority of the votes cast at a meeting of First West Virginia stockholders at which a majority of the outstanding shares of First West Virginia common stock is present. Whether or not you plan to attend the special meeting in person, we urge you to vote in advance of the meeting by internet, telephone or mail. You should follow the instructions on the proxy card that accompanies this joint proxy statement/prospectus or the voting instruction card that you receive from your bank or broker. You may revoke your proxy at any time before the special meeting. If you attend the special meeting and vote in person, your proxy vote will not be used.

If you have questions about the special meeting, or if you need assistance with voting, please contact our proxy solicitation agent, Alliance Advisors LLC, at (855) 486-7903 (toll free).

Monessen, Pennsylvania

By Order of the Board of Directors

                    , 2014

LOGO

Deborah A. Kloeppner

Corporate Secretary

Wheeling, West Virginia

March 9, 2018


TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGMEETINGS

  1

SUMMARY

  4

The Companies

  4

Special Meeting of CB Stockholders; Required Vote (page     )

  4

Special Meeting of First West Virginia Stockholders; Required Vote

4

The Merger and the Merger Agreement (page    )

  5

What FedFirstWill First West Virginia Stockholders will Receive in the Merger (page     )

  5

Appraisal Rights

5

Comparative Market Prices (page     )

  5

Recommendation of FedFirstCB Board of Directors (page    )

  5

FedFirst’sOpinion of CB’s Financial Advisor Believes the Merger Consideration is Fair to Stockholders (page     )

  5

Regulatory Approvals (page    )Recommendation of First West Virginia Board of Directors

  56

Conditions to the Merger (page    )Opinion of First West Virginia’s Financial Advisor

  6

Termination (page     )Regulatory Approvals

  6

Termination Fee (page     )Conditions to Completing the Merger

  76

Termination

7

Termination Fee

7

Expense Reimbursement

7

Interests of FedFirstFirst West Virginia Officers and Directors in the Merger that are Different from Yours (page      )the Interests of First West Virginia Stockholders

  7

Accounting Treatment of the Merger (page     )

  78

Certain Differences in ShareholderStockholder Rights (page     )

  78

Material U.S. Federal Income Tax Consequences of the Merger (page     )to First West Virginia Stockholders

  78

RISK FACTORS

  9

Risks Related to the Merger

 9

Risks Related to CB

12

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

  1813

SELECTED HISTORICAL FINANCIAL INFORMATION OF CB AND FIRST WEST VIRGINIA

  1915

Selected Historical Consolidated Financial Data of CB

  1915

Selected Historical Consolidated Financial Data of FedFirstFirst West Virginia

  2016

SUMMARY SELECTED PRO FORMA CONDENSED COMBINED DATA

  2117

COMPARATIVE PER SHARE DATA

  2218

MARKET PRICE AND DIVIDEND INFORMATION

  2319

SPECIAL MEETING OF FEDFIRSTCB STOCKHOLDERS

  2420

Date, Place and Time of the Meeting

  2420

Matters to be Considered

20

Who Can Vote at the Meeting

  2420

Quorum; Vote Required

  2420

Shares Held by FedFirst’sCB’s Officers and Directors

  2420

Voting and Revocability of Proxies

  2520

Solicitation of Proxies

  2521

CB Proposals

21

SPECIAL MEETING OF FIRST WEST VIRGINIA STOCKHOLDERS

22

Date, Place and Time of the Meeting

22

Matters to be Considered

22

i


Quorum; Vote Required

22

Shares Held by First West Virginia’s Officers and Directors

22

Voting and Revocability of Proxies

22

Solicitation of Proxies

23

First West Virginia Proposals

23

APPRAISAL RIGHTS OF FIRST WEST VIRGINIA STOCKHOLDERS

25

DESCRIPTION OF THE MERGER

  2728

General

  2728

Background of the Merger

  2728

FedFirst’sCB’s Reasons for the Merger; Recommendation of FedFirst’sCB’s Board of Directors

  3031

Opinion of FedFirst’sCB’s Financial Advisor in Connection with the Merger

  32

First West Virginia’s Reasons for the Merger; Recommendation of First West Virginia’s Board of Directors

41

Opinion of First West Virginia’s Financial Advisor in Connection with the Merger

43

Unaudited Prospective Financial Information

  4054

CB’s Reasons for the Merger

41

Consideration to be Received in the Merger

  4155

Cash, Stock or Mixed Election

  4155

Treatment of FedFirst Stock Options and Restricted Stock AwardsAllocation Procedures

  4556

Election Procedures; Surrender of Stock Certificates

  4558

Accounting Treatment

  4659

Material U.S. Federal Income Tax Consequences of the Merger

  4659

Regulatory Matters Relating to the Merger

  4862

Interests of Certain Persons in the Merger that are Different from Yours

  4963

Merger-Related Executive Compensation for FedFirst’s Named Executive OfficersEmployee Matters

  5264

Employee MattersOperations of Progressive Bank after the Merger

  5365

Operations of First Federal Savings Bank After the Merger

54

Restrictions on Resale of Shares of CB Common Stock

  5465

Time of Completion of the Merger

  5465

Conditions to Completing the Merger

  5465

Conduct of Business Before the Merger

66

Covenants of First West Virginia and CB in the Merger Agreement

70

Representations and Warranties Made by CB and First West Virginia in the Merger Agreement

72

Terminating the Merger Agreement

72

Termination Fee

72

Expenses

73

Changing the Terms of the Merger Agreement

73

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL DATA

74

DESCRIPTION OF CB CAPITAL STOCK

80

COMPARISON OF RIGHTS OF STOCKHOLDERS

81

MANAGEMENT AND OPERATIONS AFTER THE MERGER

84

INFORMATION ABOUT CB

85

General

85

Stock Ownership

85

Director Compensation

86

Executive Compensation

86

INFORMATION ABOUT FIRST WEST VIRGINIA

91

General

91

Supervision and Regulation

91

Lending Activities

92

ii


Conduct of Business Before the MergerInvestment Activities

  55103

CovenantsSources of FedFirst and CB in the Merger AgreementFunds

  59106

RepresentationsManagement’s Discussion and Warranties Made by CBAnalysis of Financial Condition and FedFirst in the Merger AgreementResults of Operations of First West Virginia

  61111

Terminating the Merger AgreementStock Ownership

  62127

Termination FeeBiographical Information for Certain Executive Officers and Directors of First West Virginia

  62129

Expenses

63

Changing the Terms of the Merger Agreement

63

Pending Litigation Regarding the Merger

63

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL DATA

64

DESCRIPTION OF CB CAPITAL STOCK

72

General

72

Common Stock

72

Preferred Stock

72

Transfer Agent and Registrar

72

COMPARISON OF RIGHTS OF SHAREHOLDERS

73

MANAGEMENT AND OPERATIONS AFTER THE MERGER

76

Board of Directors

76

Executive Officers Who are Not Directors

77

Executive Compensation of CB

78

Employment Agreements

79

Non-Equity Bonus Program

81

Outstanding Equity Awards at Fiscal Year End

81

Benefit Plans

81

Director Compensation of CB

82

Board Fees

82

Director Plans

83

Executive Compensation for Certain Executive Officers of FedFirstFirst West Virginia

  83129

Outstanding Equity Awards at Fiscal Year-End for Certain Executive Officers of FedFirst

84

Retirement Benefits for Certain Executive Officers of FedFirst

84

Other Potential Post-Termination Benefits for Certain Executive Officers of FedFirst

85

Director Compensation for Certain Directors of FedFirstFirst West Virginia

  86129

Related Party Transactions

130

INFORMATION ABOUT CBSTOCKHOLDER NOMINATIONS AND PROPOSALS

  87

Business of CB Financial Services, Inc.

131
 87

Business of Community Bank

87

Supervision and Regulation

88

Federal and State Taxation

94

Management’s Discussion of Financial Condition and Results of Operations

95

Critical Accounting Policies

95

Average Balance Sheet

97

Rate/Volume Analysis

99

Comparison of Financial Condition at March 31, 2014 and December 31, 2103

99

Comparison of Financial Condition at December 31, 2013 and 2012

100

Comparison of Results of Operations for the Three Months Ended March 31, 2014 and 2013

100

Results of Operations for the Year Ended December 31, 2013 and 2012

102

Comparison of Results of Operations for the Year Ended December 31, 2012 and 2011

103

Loan Portfolio

105

Asset Quality

107

Investments

112

Sources of Funds

114

Management of Market Risk

115

Liquidity and Capital Resources

116

Off-Balance Sheet Arrangements and Contractual Obligations

117

Recent Accounting Pronouncements

118

Impact of Inflation and Changing Prices

118

Stock Ownership

118

INFORMATION ABOUT FEDFIRSTLEGAL MATTERS

  120

Business of FedFirst

131
 120

Lending Activities

121


Investment Activities

124

Insurance Activities

125

Deposit Activities and Other Sources of Funds

126

Regulation and Supervision

126

FedFirst’s Management Discussion And Analysis Of Financial Condition And Results Of Operations

132

Critical Accounting Policies

133

FedFirst Results of Operations for the Three Months Ended March 31, 2014 and 2013

135

FedFirst Results of Operations for the Years Ended December 31, 2013 and 2012

138

Risk Management

148

Stock Ownership

155

MERGER-RELATED EXECUTIVE COMPENSATIONEXPERTS

  156131

ADJOURNMENT OF SPECIAL MEETING

157

LEGAL MATTERS

157

EXPERTS

157

WHERE YOU CAN FIND MORE INFORMATION

  158131

CONSOLIDATED FINANCIAL STATEMENTS OF CBFIRST WEST VIRGINIA

  F-1

CONSOLIDATED FINANCIAL STATEMENTS OF FEDFIRST

F 1
 F-37

Annex A

Agreement and Merger Agreement

Annex BAppendix A          Agreement and Plan of Merger

  FairnessA-1

Appendix B          Opinion of Mufson Howe HunterKeefe, Bruyette & Company LLCWoods, Inc.

B-1

Appendix C          Opinion of D.A. Davidson & Co

C-1

Appendix D          West Virginia Appraisal Rights Statute

D-1

iii


QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGMEETINGS

General Questions about the Merger

 

Q:What am I being asked to vote on? What is the proposed transaction?

 

A:YouOn November 16, 2017, CB Financial Services, Inc. (“CB”) entered into an Agreement and Plan of Merger (the “merger agreement”) with First West Virginia Bancorp, Inc. (“First West Virginia”). The merger agreement provides for the merger of First West Virginia with and into CB, with CB as the surviving corporation (the “merger”). A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A. In order to complete the merger, CB and First West Virginia stockholders are being asked to vote on the approval of a merger agreement that provides for the merger of FedFirst Financial Corporation with and into CB Financial Services, Inc. and a non-binding proposal regarding the Merger-Related Executive Compensation. The FedFirst board of directors has unanimously determined that the proposed merger is in the best interests of FedFirst stockholders, has unanimously approvedto approve the merger agreement and unanimously recommends that FedFirstthe transactions contemplated thereby. First West Virginia and CB will each hold a special meeting of stockholders vote “FOR”to obtain the approval ofrequired stockholder approvals to complete the merger. This joint proxy statement/prospectus contains important information about the merger agreement, “FOR” the approval ofmerger, the non-binding proposal regarding the Merger-Related Executive Compensationstockholder meetings, and “FOR” theother related matters, and you should read it carefully. First West Virginia stockholders and CB stockholders are also being asked to vote on a proposal to adjourn the special meeting,meetings, if necessary.necessary, in order to permit further solicitation of proxies in favor of the merger agreement and the transactions contemplated thereby.

 

Q:What will I be entitled toFirst West Virginia stockholders receive in the merger?

 

A:Under the merger agreement, each holder of FedFirst common stockFirst West Virginia stockholder will have the right to elect to receive for each share of his or her shares:First West Virginia common stock that they own: (1) $23.00$28.50 in cash or (2) 1.15900.9583 shares of CB common stock. However, individual elections will be limited by the requirement that 80% of the total shares of First West Virginia common stock is exchanged for CB common stock and 20% is exchanged for cash. CB will not issue fractional shares in the merger. Instead, youmerger; instead, First West Virginia stockholders will receive a cash payment, without interest, for the value of any fraction of a share of CB common stock that youthey would otherwise be entitled to receive. See the sections of this joint proxy statement/prospectus entitled “Description of the Merger—Consideration to be Received in the Merger” and “Description of CB Capital Stock.”Stock” for more information.

 

Q:What dividends will my dividends beFirst West Virginia stockholders receive after the merger?

 

A:After the merger, former First West Virginia stockholders will be entitled to receive dividends declared on the shares of CB common stock that they receive in the merger. Currently, CB pays a quarterly dividend of $0.21$0.22 per share. See “Comparative Per Share Data.” However, there is no guarantee that CB will continue to pay dividends at this level or at all. All dividends on CB common stock are declared at the discretion of the CB board of directors.

Q:How do I elect to receive cash, CB common stock or both See the sections of this joint proxy statement/prospectus entitled “Comparative Per Share Data” and “Market Price and Dividend Information” for my FedFirst common stock?

A:A form for making an election will be sent to you separately on or about the date this document is mailed. For your election to be effective, your properly completed election form, along with your FedFirst stock certificates or an appropriate guarantee of delivery, must be sent to and received by the exchange agent for the merger, Computershare Limited, on or before 5:00 p.m., Eastern time, on                     , 2014.Do not send your election form or stock certificates with your proxy card. Instead, use the separate envelope specifically provided for the election form and your stock certificates. If you own shares of FedFirst common stock in “street name” through a bank, broker or other nominee and you wish to make an election, you should seek instructions from the bank, broker or other nominee holding your shares. If you do not make a timely or proper election you will be allocated CB common stock and/or cash depending on the elections made by other stockholders.

Q:How do I exchange my stock certificates?

A:If you make an election, you must return your FedFirst stock certificates or an appropriate guarantee of delivery with your election form. Shortly after the merger, CB’s transfer agent will allocate cash and CB common stock among FedFirst stockholders, consistent with their elections and the allocation and proration procedures in the merger agreement. If you do not submit an election form, CB’s exchange agent will send you instructions on how and where to surrender your FedFirst stock certificates after the merger is completed.Please do not send your FedFirst stock certificates with your proxy card.

Q:What do I do if I lost my stock certificates?

A:If you have lost your stock certificates, the election form will contain specific instructions.

Q:What are the tax consequences of the merger to me?

A:If you exchange your shares of FedFirst common stock solely for CB common stock, you should not recognize any gain or loss except with respect to the cash you receive instead of any fractional share of CB common stock. If you exchange your shares of FedFirst common stock solely for cash, you should recognize gain or loss on the exchange. If you exchange your shares of FedFirst common stock for a combination of CB common stock and cash, you should recognize capital gain, but not any loss, on the exchange. Because the allocations of cash and CB common stock that you receive will depend on the elections made by other FedFirst stockholders, you will not know the actual tax consequences of the merger to you until the allocations are completed.

Q:Am I entitled to appraisal rights?

A:No. As permitted by Maryland law, FedFirst’s articles of incorporation provide that the holders of FedFirst common stock are not entitled to exercise any rights of an objecting stockholder provided for under Maryland law.more information.

 

Q:Why do FedFirstFirst West Virginia and CB want to merge?

 

A:FedFirstFirst West Virginia believes that the proposed merger will provide FedFirstits stockholders with substantial benefits, and CB believes that the merger will further its strategic growth plans in its market area. As a larger company, CB can provide the capital and resources that FedFirst needs to compete more effectively in its market area.plans. To review the reasons for the merger in more detail, see the sections entitled “Description of the Merger—CB’s Reasons for the Merger”Merger; Recommendation of CB’s Board of Directors” and “Description of the Merger—FedFirst’sFirst West Virginia’s Reasons for the Merger andMerger; Recommendation of theFirst West Virginia’s Board of Directors.”

 

Q:What vote is required to approveIs completion of the merger agreement?subject to any conditions besides First West Virginia and CB stockholder approval?

 

A:Yes. The holders of a majoritymerger must receive the required regulatory approvals, and there are other customary closing conditions that must be satisfied. To review the conditions to completing the merger in more detail, see “Description of the outstanding shares of FedFirst common stock entitledMerger—Conditions to vote must vote in favor ofCompleting the proposal to approve the merger agreement. CB’s shareholders are not required to vote, and will not be voting, on the merger agreement.Merger.”

 

Q:Why are FedFirst stockholders being askedWhen is the merger expected to approve, on a nonbinding advisory basis, certain Merger-Related Executive Compensation?be completed?

 

A:The federal securities laws require FedFirstCB and First West Virginia will try to seekcomplete the merger as soon as possible. Before this happens, the merger agreement must be approved by CB’s stockholders and by First West Virginia’s stockholders, and CB and First West Virginia must obtain the necessary regulatory approvals. Assuming CB and First West Virginia obtain all necessary stockholder and regulatory approvals in a nonbinding advisory vote with respecttimely fashion, we expect to certain payments that may be made to FedFirst’s named executive officerscomplete the merger in connection with the merger.second quarter of 2018.

 

Q:What will happen if FedFirst stockholders do not approve certain Merger-Related Executive Compensation at the special meeting?Who can answer my other questions?

 

A:The voteIf you have more questions about the CB special meeting or the First West Virginia special meeting, or if you need assistance with respect to the Merger-Related Executive Compensation is an advisory vote and will not be binding on FedFirst. Therefore, if the merger agreement is approved by FedFirst’s stockholders, the Merger-Related Executive Compensation may still be paid to the FedFirst named executive officers if and to the extent required or allowed under applicable law even if FedFirst stockholders do not approve the Merger-Related Executive Compensation.voting, contact our proxy solicitation agent, Alliance Advisors LLC, at (855)486-7903 (toll-free).

Questions for CB Stockholders

Q:Will the Merger-Related Executive Compensation be paid if the merger is not consummated?

A:No. Payment of the Merger-Related Executive Compensation is contingent upon the consummation of the merger.

 

Q:When and where is the FedFirstCB special meeting?

 

A:The special meeting of FedFirstCB stockholders is scheduled to take place at the Hampton Inn, 227 Greene Plaza, Waynesburg, Pennsylvania at :        .m.4:00 p.m., local time, on , 2014.Wednesday, April 11, 2018.

 

Q:Who is entitled to vote at the FedFirstCB special meeting?

 

A:Holders of shares of FedFirstCB common stock at the close of business on , 2014,February 28, 2018, which is the record date, are entitled to vote at the special meeting. As of the record date, 4,096,452 shares of FedFirstCB common stock were outstanding and entitled to vote.

 

Q:What vote is required to approve the merger agreement proposal?

A:Approval of the merger agreement and the transactions contemplated thereby, including the issuance of CB common stock to First West Virginia stockholders, requires the affirmative vote of a majority of the votes cast at a meeting of CB stockholders at which a majority of the outstanding shares of CB common stock is present.

Q:If I plan to attend the FedFirstCB special meeting in person, should I still return my proxy?proxy card?

 

A:Yes. Whether or not you plan to attend the FedFirstCB special meeting, you should complete and return the enclosed proxy card. The failure of a FedFirst stockholder to vote in person or by proxy will have the same effect as a vote “AGAINST” the merger agreement.

 

Q:What do I need to do now to vote my shares of FedFirstCB common stock?

 

A:

After you have carefully read and considered the information contained in this document, please complete, sign, date and mail your proxy card in the enclosed return envelope as soon as possible.possible, or vote by telephone or internet by following the instructions on the enclosed proxy card. This will enable your shares to be represented at the special meeting. You may also vote in person at the special meeting. If you do not return a properly

executed proxy card and do not vote at the special meeting, this will have the same effect as a vote against the merger agreement. If you sign, date and send in your proxy card, but you do not indicate how you want to vote, your proxy will be voted in favor of approval of the merger agreement and the proposal regarding Merger-Related Executive Compensation.transactions contemplated thereby, including the issuance of CB common stock. You may change your vote or revoke your proxy before the special meeting by filing with the Corporate Secretary of FedFirstCB a duly executed revocation of proxy, submitting a new proxy card with a later date, or voting in person at the special meeting.

 

Q:If my shares are held in “street name” by my broker, will my broker automatically vote my shares for me?

 

A:No. Your broker willis not be able to vote your shares of FedFirst common stock on either the proposal to approve the merger agreement or the proposal to approve the Merger-Related Executive Compensation unless you provide instructions on how to vote. PleaseYou should instruct your broker how to vote your shares by following the directions that your broker provides. If you do not provide instructions to your broker, your shares will not be voted. You should check the voting form used by your broker to see if your broker allows you to vote by telephone or via the Internet.

Questions for First West Virginia Stockholders

Q:When and where is the First West Virginia special meeting?

A:The special meeting of First West Virginia stockholders is scheduled to take place at First West Virginia’s corporate office at 590 National Road, Wheeling, West Virginia at 11:00 a.m., local time, on Wednesday, April 11, 2018.

Q:Who is entitled to vote at the First West Virginia special meeting?

A:Holders of shares of First West Virginia common stock at the close of business on February 28, 2018, which is the record date, are entitled to vote at the special meeting. As of the record date, 1,718,730 shares of First West Virginia common stock were outstanding and entitled to vote.

Q:What vote is required to approve the merger agreement?

A:Approval of the merger agreement requires the affirmative vote of a majority of the votes cast at a meeting of First West Virginia stockholders at which a majority of the outstanding shares of First West Virginia common stock is present.

Q:If I plan to attend the First West Virginia special meeting in person, should I still return my proxy card?

A:Yes. Whether or not you plan to attend the First West Virginia special meeting in person, you should complete and return the enclosed proxy card.

Q:What do I need to do now to vote my shares of First West Virginia common stock?

A:After you have carefully read and considered the information contained in this document, please complete, sign, date and mail your proxy card in the enclosed return envelope as soon as possible, or vote by telephone or internet by following the instructions in the enclosed proxy card. This will enable your shares to be represented at the special meeting. You may also vote in person at the special meeting of First West Virginia stockholders. If you sign, date and send in your proxy card, but you do not indicate how you want to vote, your proxy will be voted in favor of approval of the merger agreement. You may change your vote or revoke your proxy before the special meeting by filing a duly executed revocation of proxy with the Corporate Secretary of First West Virginia, submitting a new proxy card with a later date, or voting in person at the special meeting.

Q:If my shares are held in “street name” by my broker, will my broker automatically vote my shares for me?

A:No. Your broker is not able to vote your shares of common stock on the proposal to approve the merger agreement orunless you provide instructions on how to vote. You should instruct your broker how to vote your shares by following the Merger-Related Executive Compensation,directions that your broker provides. If you do not provide instructions to your broker, your shares will not be voted, and this will have the same effect as a vote “AGAINST” the merger agreement, but will not affect the proposal regarding Merger-Related Executive Compensation or the proposal regarding adjournment of the special meeting. Pleasevoted. You should check the voting form used by your broker to see if your broker allows you to vote by telephone or via the Internet.

 

Q:When is the merger expectedAm I entitled to be completed?appraisal rights?

 

A:We will try to completeYes. Under West Virginia law, First West Virginia stockholders may dissent from the merger as soon as possible. Before this happens,and elect to have the fair market value of their shares appraised and be paid in cash. In order to perfect these appraisal rights, a stockholder must comply with the provisions of West Virginia law, which include giving notice of dissent in writing before to the First West Virginia stockholder vote to approve the merger agreement, must be approved by FedFirst’s stockholders and we must obtain the necessary regulatory approvals. Assuming holders of at least a majority of the outstanding shares of FedFirst common stock votenot voting in favor of the merger agreementagreement. For further information see the section entitled “Appraisal Rights of First West Virginia Stockholders” and we obtain all necessary regulatory approvals, we expectAppendix D to complete the merger late in the third quarter or early in the fourth quarter of 2014.this joint proxy statement/prospectus.

 

Q:Is completionWhat are the U.S. federal income tax consequences of the merger subject to any conditions besides FedFirst stockholder approval?First West Virginia stockholders?

 

A:Yes. The transaction mustIf you exchange your shares of First West Virginia common stock solely for CB common stock, you should not recognize any gain or loss except with respect to the cash you receive instead of any fractional share of CB common stock. If you exchange your shares of First West Virginia common stock solely for cash, you generally will recognize gain or loss on the required regulatory approvals,exchange equal to the difference between the amount of cash received and there arethe adjusted tax basis in your shares of First West Virginia common stock exchanged in the merger. If you exchange your shares of First West Virginia common stock for a combination of CB common stock and cash, you generally will not recognize any loss but will recognize gain, if any, equal to the lesser of (1) the excess, if any, of the sum of the cash received and the fair market value of the CB common stock you receive pursuant to the merger over your adjusted tax basis in your shares of First West Virginia common stock surrendered, and (2) the amount of cash consideration you receive pursuant to the merger. Because the allocations of cash and CB common stock that you receive will depend on the elections made by other customary closing conditions that must be satisfied. To reviewFirst West Virginia stockholders, you will not know the conditionsactual federal income tax consequences of the merger in more detail,to you until the allocations are completed. For further information see “Descriptionthe section of this joint proxy statement/prospectus entitled “Material U.S. Federal Income Tax Consequences of the Merger—ConditionsMerger.” This tax treatment may not apply to Completingall First West Virginia stockholders. First West Virginia’s counsel is not able to provide an opinion regarding whether this tax treatment will apply to any individual stockholder. Determining the Merger.”actual tax consequences of the merger to First West Virginia stockholders can be complicated.First West Virginia stockholders should consult their own tax advisor for a full understanding of the merger’s tax consequences that are particular to each stockholder.

 

Q:Who can answerHow do I elect to receive cash, CB common stock or both in exchange for my First West Virginia common stock?

A:An election form will be sent to you separately on or about the date this document is mailed. For your election to be effective, your properly completed election form, along with your First West Virginia stock certificates or an appropriate guarantee of delivery, must be sent to and received by the exchange agent for the merger, Computershare Trust Company, N.A., on or before 5:00 p.m., local time, on April 23, 2018.Do not send your election form or stock certificates with your proxy card. Instead, use the separate envelope specifically provided for the election form and your stock certificates. If you own shares of First West Virginia common stock in “street name” through a bank, broker or other questions?nominee and you wish to make an election, you should seek instructions from the bank, broker or other nominee holding your shares. If you do not make a timely or proper election, you will be allocated CB common stock and/or cash depending on the elections made by other stockholders. See the section of this joint proxy statement/prospectus entitled “Description of the Merger—Allocation Procedures” for more information.

Q:How will I exchange my First West Virginia stock certificates for CB common stock?

 

A:If you have more questions aboutmake an election, you must return your First West Virginia stock certificates or an appropriate guarantee of delivery with your election form. Shortly after the merger, or aboutthe exchange agent will allocate cash and CB common stock among First West Virginia stockholders, consistent with their elections and the allocation and proration procedures in the merger agreement. If you do not submit an election form, the exchange agent will send you instructions on how and where to submitsurrender your First West Virginia stock certificates after the merger is completed.Do not send your First West Virginia stock certificates with your proxy please contact                      at (    )         card.

Q:What do I do if I have lost my First West Virginia stock certificate(s)?

A:The election form will contain specific instructions on what you should do if you have lost your stock certificate(s).

SUMMARY

This summary highlights selected information in this joint proxy statement/prospectus and may not contain all of the information important to you. To understand the merger more fully, you should read this entire document carefully, including the documents attached to this proxy statement/prospectus.appendices.

The Companies

CB Financial Services, Inc.

100 N.North Market Street

Carmichaels, Pennsylvania 15320

(724)966-5041

CB Financial Services, Inc., a Pennsylvania corporation incorporated in February 2005, is a bank holding company headquartered in Carmichaels, Pennsylvania. Currently, CB’s common stock is quoted on the OTC MarketsNasdaq Global Market under the symbol “CBFV.” CB conducts its operations primarily through its wholly owned subsidiary, Community Bank, a Pennsylvania-chartered commercial bank. Community Bank operates from eleventhrough its main office in Carmichaels, Pennsylvania, and fifteen branch offices in Greene, Allegheny, Washington and WashingtonFayette Counties in southwestern Pennsylvania. Community Bank is a community-oriented institution offering residential and commercial real estate loans, commercial, industrial, and agricultural loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area. Community Bank has one subsidiary, Exchange Underwriters, Inc., which is a full-service, independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products. At March 31, 2014,September 30, 2017, CB, on a consolidated basis, had total assets of $550.2$908.3 million, total deposits of $488.8$762.4 million and shareholders’stockholders’ equity of $43.5$93.2 million.

FedFirst Financial CorporationFirst West Virginia Bancorp, Inc.

565 Donner1701 Warwood Avenue

Monessen, Pennsylvania 15062Wheeling, West Virginia 26003

(724) 684-6800(304)277-1101

FedFirst Financial Corporation, a Maryland corporation,First West Virginia is a savingsWest Virginia corporation incorporated in July 1973 and loan holding company headquartered in Monessen, Pennsylvania. FedFirst’sWheeling, West Virginia. First West Virginia’s common stock is quoted on the Nasdaq Capital MarketOTCQX under the symbol “FFCO.“FWVB.FedFirst conducts its operations primarilyFirst West Virginia offers a full line of business-related loan, deposit and cash management products through its wholly owned subsidiary, First Federal Savings Bank, a federally-chartered savings bank. Through a wholly-owned subsidiary Progressive Bank, National Association (“Progressive Bank”). Progressive Bank is a community bank and operates eight full-service branch offices, including seven offices in West Virginia and one office in Ohio. As of September 30, 2017, First Federal Savings Bank, First Federal Savings Bank has an 80% controlling interest in Exchange Underwriters, Inc., a full-service insurance agency. First Federal Savings Bank operates as a community-oriented financial institution from seven locations in southwestern Pennsylvania. It offers residential, multi-family and commercial mortgage loans, consumer loans and commercial business loans as well as a variety of deposit products for individuals and businesses. At March 31, 2014, FedFirst, on a consolidated basis,West Virginia had total assets of $323.3$343.1 million, total deposits of $233.6$285.4 million, and stockholders’ equity of $51.0$33.6  million.

Special Meeting of CB Stockholders; Required Vote (page )20)

A special meeting of FedFirstCB stockholders is scheduled to be held at the Hampton Inn, 227 Greene Plaza, Waynesburg, Pennsylvania at :          .m.4:00 p.m., local time, on , 2014.April 11, 2018. At the special meeting, youCB stockholders will be asked to vote on (i) a proposal to approve the merger agreement between CB and FedFirstFirst West Virginia and on a non-binding, advisory proposalthe transactions contemplated thereby, including the issuance of CB common stock to approve the Merger-Related Executive Compensation. You also will be asked to vote onFirst West Virginia stockholders, and (ii) a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the meeting to approve the merger agreement.

Only FedFirstCB stockholders of record as of the close of business on , 2014February 28, 2018 are entitled to notice of and to vote at the FedFirstCB special meeting and any adjournments or postponements of the meeting.

Approval of the merger agreement proposal by CB stockholders requires the affirmative vote of a majority of the holdersvotes cast at a meeting of CB stockholders at which a majority of the outstanding shares of FedFirstCB common stock.stock is present. As of the , 2014February 28, 2018 record date, there were 4,096,452 shares of FedFirstCB common stock issued and outstanding. ApprovalAs of the Merger-Related Executive Compensation proposal is determined by a majority of the votes cast, without regard to broker non-votes or abstentions. TheSeptember 30, 2017, directors and executive officers of FedFirstCB (and their affiliates), as a group, beneficially owned 398,399 shares of FedFirstCB common stock (excluding shares that may be acquired upon the exercise of stock options), representing %9.75% of the outstanding shares of FedFirstCB common stock.

Special Meeting of First West Virginia Stockholders; Required Vote (page 22)

A special meeting of First West Virginia stockholders is scheduled to be held at First West Virginia’s corporate office at 590 National Road, Wheeling, West Virginia at 11:00 a.m., local time, on April 11, 2018. At the special meeting, First West Virginia stockholders will be asked to vote on (i) a proposal to approve the merger agreement between CB and First West Virginia, and (ii) a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the meeting to approve the merger agreement. Only First West Virginia stockholders of record as of the close of business on February 28, 2018 are entitled to notice of and to vote at the First West Virginia special meeting and any adjournments or postponements of the meeting.

Approval of the merger agreement requires the affirmative vote of a majority of the votes cast at a meeting of First West Virginia stockholders at which a majority of the outstanding shares of First West Virginia common stock is present. As of the February 28, 2018 record date, there were 1,718,730 shares of First West Virginia common stock issued and outstanding. As of September 30, 2017, directors and executive officers of First West Virginia (and their affiliates), as a group, beneficially owned 270,444 shares of , 2014.First West Virginia common stock, representing 15.7% of the outstanding shares of First West Virginia common stock. The

directors of FedFirst, whoFirst West Virginia have collectively ownagreed to vote 256,669 shares of FedFirstFirst West Virginia common stock (    %over which they have sole voting power (14.9% of the issued and outstanding shares of FedFirstFirst West Virginia common stock as of , 2014) have agreed to vote their sharesSeptember  30, 2017) in favor of the merger agreement at the special meeting. This amount does include shares that may be acquired upon the exercise of stock options. No approval of the merger or the merger agreement by CB shareholders is required.

The Merger and the Merger Agreement (page )28)

The merger of FedFirstFirst West Virginia with and into CB is governed by athe merger agreement.agreement, which is attached asAppendix A to this joint proxy statement/prospectus. The merger agreement provides that if all of the conditions are satisfied or waived, FedFirstFirst West Virginia will be merged with and into CB, with CB as the surviving entity.We encourage you to read the merger agreement, which is included asAnnex A to this document.agreement.

What FedFirstWill First West Virginia Stockholders will Receive in the Merger (page )55)

The merger agreement provides that each holder of FedFirst common stockFirst West Virginia stockholder will be entitled to elect to receive for each share of his or her shares:First West Virginia common stock that they own: (1) $23.00$28.50 in cash or (2) 1.15900.9583 shares of CB common stock. Regardless of your election, however, itHowever, individual elections will be limited by the requirement in the merger agreement that 65%80% of the total shares of FedFirstFirst West Virginia common stock is exchanged for CB common stock and 35%20% is exchanged for cash. Therefore, allocations of CB common stock and cash that you receivea First West Virginia stockholder receives will depend on the elections made by other FedFirstFirst West Virginia stockholders.

Appraisal Rights (page 25)

Under West Virginia law, the holders of First West Virginia common stock are entitled to dissent from approval of the merger agreement and to receive the fair value of their shares if the merger is consummated, provided they follow certain procedures. These procedures are described at page 25 in the section entitled “Appraisal Rights of First West Virginia Stockholders” and set forth inAppendix D to this joint proxy statement/prospectus.

Comparative Market Prices (page )19)

The following table shows the closing price per share of CB common stock, the closing price per share of FedFirstFirst West Virginia common stock, and the equivalent price per share of FedFirstFirst West Virginia common stock, giving effect to the merger, on March 31, 2014,November 15, 2017, which is the last day on which shares of CB common stock traded preceding the public announcement of the proposed merger, and on , 2014,February 15, 2018, the most recent practicable date before the printing of this document. The equivalent price per share of FedFirstFirst West Virginia common stock was computed by multiplying the price of a share of CB common stock multiplied by the 1.15900.9583 exchange ratio. See the section of this joint proxy statement/prospectus entitled “Description of the Merger—Consideration to be Received in the Merger.Merger” for more information.

 

   CB Common Stock   FedFirst
Common Stock
   Equivalent Price
Per Share of
FedFirst Common
Stock
 

March 31, 2014

  $19.75    $19.98    $22.89  

                    , 2014

      
   CB Common Stock   First West Virginia
Common Stock
   Equivalent Price
Per Share of
First West
Virginia Common
Stock
 

November 15, 2017

  $30.44   $21.90   $29.17 

February 15, 2018

  $30.55   $28.00   $29.28 

Recommendation of FedFirstCB Board of Directors (page )31)

The FedFirstCB board of directors has unanimously approved the merger agreement and the proposed merger, including the proposed issuance of shares of CB common stock to First West Virginia stockholders in exchange for their shares of First West Virginia common stock pursuant to the terms of the merger agreement. The CB board of directors believes that the merger agreement, including the issuance of CB common stock contemplated by the merger agreement, is fair to, and in the best interests of, CB and its stockholders, and thereforeunanimously recommends that CB stockholders vote “FOR” the approval of the merger agreement proposal. In reaching this decision, CB’s board of directors considered many factors, which are described in the section captioned “Description of the Merger—CB’s Reasons for the Merger; Recommendation of CB’s Board of Directors.”

Opinion of CB’s Financial Advisor (page 32)

In connection with the merger, CB’s financial advisor, Keefe, Bruyette & Woods, Inc. (“KBW”), delivered a written opinion, dated November 16, 2017, to the CB board of directors as to the fairness, from a financial point of view and as of the date of the

opinion, to CB of the aggregate merger consideration in the proposed merger. The full text of KBW’s opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion, is attached asAppendix B to this joint proxy statement/prospectus.The opinion was for the information of, and was directed to, the CB board of directors (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion did not address the underlying business decision of CB to engage in the merger or enter into the merger agreement or constitute a recommendation to the CB board of directors in connection with the merger, and it does not constitute a recommendation to any holder of CB common stock or any stockholder of any other entity as to how to vote in connection with the merger or any other matter.

Recommendation of First West Virginia Board of Directors (page 41)

The First West Virginia board of directors has unanimously approved the merger agreement and the proposed merger. The FedFirstFirst West Virginia board of directors believes that the merger agreement, including the merger contemplated by the merger agreement, is fair to, and in the best interests of, FedFirstFirst West Virginia and its shareholders,stockholders, and thereforeunanimously recommends that FedFirstFirst West Virginia stockholders vote “FOR” the proposal to approve the merger agreement and “FOR” the non-binding proposal regarding the Merger-Related Executive Compensation.agreement. In reaching this decision, FedFirst’sFirst West Virginia’s board of directors considered many factors, which are described in the section captioned “Description of the Merger—FedFirst’sFirst West Virginia’s Reasons for the Merger andMerger; Recommendation of theFirst West Virginia’s Board of Directors.”

FedFirst’sOpinion of First West Virginia’s Financial Advisor Believes the Merger Consideration is Fair to Stockholders (page )43)

In deciding to approveconnection with the merger, agreement, FedFirst’sFirst West Virginia’s financial advisor, D.A. Davidson & Co. (“D.A. Davidson”), delivered a written opinion, dated November 16, 2017, to the First West Virginia board of directors considered the opinion, dated April 14, 2014, of Mufson Howe Hunter & Company LLC, which served as financial advisor to FedFirst’s board of directors, that the merger consideration is fair to the holders of FedFirst common stockfairness, from a financial point of view. A copyview and as of this opinion is included asAnnex B to this document. You should readthe date of the opinion, carefullyof the aggregate merger consideration in the proposed merger to understandholders of First West Virginia common stock. The full text of D.A. Davidson’s opinion, which describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by D.A. Davidson in preparing the opinion, is attached asAppendix C to this document.The opinion was for the information of, and was directed to, the First West Virginia board of directors (in its capacity as such) in connection with its consideration of the review conducted by Mufson Howe Hunter  & Company LLC.financial terms of the merger. The opinion did not address the underlying business decision of First West Virginia to engage in the merger or enter into the merger agreement or constitute a recommendation to the First West Virginia board of directors in connection with the merger, and it does not constitute a recommendation to any holder of First West Virginia common stock or any stockholder of any other entity as to how to vote in connection with the merger or any other matter.

Regulatory Approvals (page )62)

Under the terms of the merger agreement, theThe merger cannot be completed unless it is first approved by the Federal Deposit Insurance Corporation (the “FDIC”) and the Pennsylvania Department of Banking and Securities (the

“Pennsylvania “Pennsylvania Banking Department”). In addition, the merger cannot be completed without the approval of the Board of Governors of the Federal Reserve System (the “Federal Reserve”) pursuant to the Bank Holding Company Act, or a waiver ofby the Federal Reserve of any requirement for an application.application, and thenon-objection of the West Virginia Division of Financial Institutions. CB has filed the required applications with the FDIC and the Pennsylvania Banking Department. CB expects to fileDepartment, a notice with the West Virginia Division of Financial Institutions, and a waiver request with the Federal Reserve requesting confirmation that it may acquire FedFirstFirst West Virginia without the filing of a formal application. CB received the waiver from the Federal Reserve on January 25, 2018. As of the date of this document, CB has not received the required regulatory approvals or waiverandnon-objection for the merger from the FDIC, Pennsylvania Banking Department or West Virginia Division of Financial Institutions, but does not know of any reason why it would not be able to obtain these approvals and waivernon-objection in a timely manner. CB cannot be certain when or if it will receive the approvals of the FDIC and Pennsylvania Banking Department approvals and the waiver to filing an application fromnon-objection of the Federal Reserve.West Virginia Division of Financial Institutions.

Conditions to Completing the Merger (page )65)

The completion of the merger is subject to the fulfillment of a number of conditions, including:

 

approval of the merger agreement by a majority of the votes cast at the speciala meeting by the holders of First West Virginia stockholders at which a majority of the outstanding shares of FedFirstFirst West Virginia common stock entitled to vote;are present;

 

approval of the merger agreement by a majority of the votes cast at a meeting of CB stockholders at which a majority of the outstanding shares of CB common stock is present;

approval of andnon-objection to the merger by the appropriate regulatory authorities without conditions that would have a material adverse effect on CB or FedFirst;First West Virginia;

 

receipt by CB and FedFirstFirst West Virginia of an opinion from their respective legal counsel to the effect that the merger will be treated for federal income tax purposes as atax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code;Code of 1986, as amended (the “Code”);

approvalauthorization by the Nasdaq Stock Market of the listing of the shares of CB common stock for listing on the Nasdaq Stock Marketto be issued to First West Virginia stockholders upon notice of issuance; and

 

FedFirst Exchange Corporation,not more than 10% of the wholly-owned subsidiaryoutstanding shares of common stock of First Federal Savings Bank, becomingWest Virginia have perfected their right to dissent under the sole owner of Exchange Underwriters, Inc.West Virginia Business Corporation Act (the “WVBCA”).

Termination (page )72)

The merger agreement may be terminated by mutual written consent of CB and FedFirstFirst West Virginia at any time before the completion of the merger. Additionally, subject to conditions and circumstances described in the merger agreement, either CB or FedFirstFirst West Virginia may terminate the merger agreement if, among other things, any of the following occur:

 

the merger has not been consummated by March 31, 2015;September 30, 2018;

 

FedFirstFirst West Virginia stockholders do not approve the merger agreement at the FedFirstFirst West Virginia special meeting;meeting of stockholders, or CB stockholders do not approve the merger agreement at the CB special meeting of stockholders;

 

a required regulatory approval is denied or a governmental authority prohibits the consummation of the merger; or

 

there is a breach by the other party of any representation, warranty, covenant or agreement contained in the merger agreement, which cannot be cured, or has not been cured within 30 days after the giving of written notice to such party of such breach.

CB may terminate the merger agreement if FedFirstFirst West Virginia has received a superior proposal for anbreached its covenant not to solicit alternative acquisition transaction withproposals from a party other than CB, and has entered into an agreement with respect to the superior proposal, or if the FedFirstFirst West Virginia board of directors does not convene the First West Virginia special meeting of stockholders or recommend approval of the merger to its stockholders, or modifies or qualifies its recommendation to stockholders in a manner adverse to CB.

In addition, FedFirstFirst West Virginia may terminate the merger agreement if it has received a superior acquisition proposal for an acquisition transaction withfrom a party other than CB and FedFirst’sFirst West Virginia’s board of directors has determined to accept the superior proposal, after determining in good faith, based on advice of its outsideafter consultation with legal counsel, that failing to terminate the merger agreementtake such action would constitute a breach of its fiduciary duties. If FedFirst intends to terminate the merger agreement in this circumstance, at least five (5) business days before such termination FedFirst must give written notice to CB of its intent, specifying the terms and conditions of the superior proposal and identifying the person making such proposal, and negotiate in good faith with CB so as to enable FedFirst to proceed with the merger with CB on adjusted terms consistent with FedFirst’s board of directors’ determination in good faith that proceeding based upon such adjusted terms would not constitute a breach of its fiduciary duties.

Termination Fee (page )72)

Under certain circumstances described in the merger agreement, CBFirst West Virginia may demand from FedFirst, and FedFirst may demand frombe required to pay to CB a $2.75$2.5 million termination fee in connection with the termination of the merger agreement.

Expense Reimbursement (page 73)

CB and First West Virginia will each pay its own costs and expenses incurred in connection with the merger. However, First West Virginia may require CB to reimburse First West Virginia for its actual and documentedout-of-pocked expenses, not to exceed $500,000, if the merger agreement is terminated because CB’s board of directors breaches its obligation to recommend the merger to its stockholders or if CB’s stockholders fail to approve the merger agreement as a result of a breach of CB’s obligations with respect to holding its stockholders meeting.

Interests of FedFirstFirst West Virginia Officers and Directors in the Merger that are Different from Yoursthe Interests of First West Virginia Stockholders (page )63)

You should be aware that some of FedFirst’sFirst West Virginia’s directors and officers may have interests in the merger that are different from, or in addition to, the interests of FedFirst’sFirst West Virginia’s stockholders generally. These include:

 

the ability to cancel stock options with an exercise pricecontinued indemnification of less than $23.00 in exchange for a cash payment equal to $23.00 minus the exercise price for each option;

the acceleration of vesting of outstanding restricted stock awards, which will be exchanged for shares of CB common stock;

provisions incurrent and former directors and executive officers under the merger agreement relating to indemnification of directors and officersproviding these individuals with directors’ and officers’ insurance for directors and officers of FedFirst for events occurring beforesix years after the merger;

 

the appointment of John J. LaCarte, John M. Swiatek, PatrickWilliam G. O’BrienPetroplus, Roberta Robinson Olejasz and Richard B. Boyer,Jonathan A. Bedway, each of whom currently is a director of FedFirstFirst West Virginia and First Federal SavingsProgressive Bank, to the boards of directors of CB and Community Bank following the completion of the merger;

 

continued employmentthe appointment of certain members of First West Virginia’s board of directors to an advisory board for the markets of CB and Community Bank formerly served by First West Virginia and Progressive Bank, to be created upon completion of the merger; and

a retention and consulting agreement for Mr. O’BrienPetroplus, and Jennifer L. Georgeretention agreements for Frances P. Reppy and Brad D. Winwood, each of which was entered into with CB and Community Bank concurrently with the execution of the merger agreement, that provide for certain payments subject to and continued employment for Mr. Boyer with Community Bank and Exchange Underwriters, Inc. following theupon completion of the merger, including new employment agreements for Messrs. O’Brien and Boyer and a new change in control agreement for Ms. George that will supersede and replace his or her existing employment or change in control agreement with FedFirst;

severancehave additional contingent payments that certain executive officers may receive under their existing change in control agreements with FedFirst and thereafter.

First Federal Savings Bank; and

the buy-out by FedFirst Exchange Corporation of Mr. Boyer’s 20% minority interest in Exchange Underwriters, Inc. immediately before the completion of the merger.

FedFirst’sWest Virginia’s board of directors was aware of these interests and took them into account in approving the merger. See “Description of the Merger—Interests of Certain Persons in the Merger that areThat Are Different fromFrom Yours.”

Accounting Treatment of the Merger (page )59)

CB will account for the merger under the “acquisition” method of accounting in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Using the acquisition method of accounting, CB will record the assets and liabilities of FedFirstFirst West Virginia at their respective fair values at the time of the completion of the merger. The difference between the purchase price and the net fair value of the assets acquired and liabilities assumed will be recorded as goodwill or bargain purchase gain.

Certain Differences in ShareholderStockholder Rights (page )81)

When the merger is completed, FedFirstFirst West Virginia stockholders who receive shares of CB common stock will become CB shareholdersstockholders and their rights will be governed by Pennsylvania law and by CB’s articles of incorporation and bylaws. See “Comparison of Rights of Shareholders”Stockholders” for a summary of the material differences between the respective rights of CB shareholdersstockholders and FedFirstFirst West Virginia stockholders.

Material U.S. Federal Income Tax Consequences of the Merger to First West Virginia Stockholders (page )59)

If you exchange your shares of FedFirstFirst West Virginia common stock solely for CB common stock, you shouldgenerally will not recognize any gain or loss except with respect to the cash you receive instead of any fractional share of CB common stock. Any cash received in lieu of a fractional share interest will generally be treated as received in full payment for such fractional share of stock and as capital gain or loss. If you exchange your shares of FedFirstFirst West Virginia common stock solely for cash, you shouldgenerally will recognize gain or loss on the exchange.exchange equal to the difference between the amount of cash received and the adjusted tax basis in of First West Virginia common stock exchanged in the merger. If you exchange your shares of FedFirstFirst West Virginia common stock for a combination of CB common stock and cash, you should

generally will not recognize capital gain, but not any loss onbut will recognize gain, if any, equal to the exchange.lesser of (1) the excess, if any, of the sum of the cash received and the fair market value of the CB common stock you receive pursuant to the merger over your adjusted tax basis in your shares of First West Virginia common stock surrendered, and (2) the amount of cash consideration you receive pursuant to the merger. Because the allocations of cash and CB common stock that you receive will depend on the elections made by other FedFirstFirst West Virginia stockholders, you will not know the actual federal income tax consequences of the merger to you until the allocations are completed. FedFirst’s

This tax treatment may not apply to all First West Virginia stockholders. First West Virginia’s counsel is not able to provide an opinion regarding whether this tax treatment will apply to any individual shareholder. However, any cash received in lieu of a fractional share interest (all fractional share interests will be aggregated and only whole shares will be received by FedFirst stockholders) will be treated as received in full payment for such fractional share of stock and as capital gain or loss.

This tax treatment may not apply to all FedFirst stockholders.stockholder. Determining the actual tax consequences of the merger to FedFirstFirst West Virginia stockholders can be complicated. FedFirstFirst West Virginia stockholders should consult their own tax advisor for a full understanding of the merger’s tax consequences that are particular to each stockholder.

RISK FACTORS

In addition to the other information included in this joint proxy statement/prospectus, you should consider carefully the risk factors described below in deciding how to vote. You should keep these risk factors in mind when you read forward-looking statements in this document.joint proxy statement/prospectus. Please refer to the section of this joint proxy statement/prospectus titled “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to the Merger

Because the market price of CB common stock will fluctuate, FedFirstFirst West Virginia stockholders cannot be certain of the market value of the merger consideration they will receive.

Upon completion of the merger, each share of FedFirstFirst West Virginia common stock will be converted into either 1.15900.9583 shares of CB common stock or $23.00$28.50 in cash. The market value of the stock consideration may vary from the value on the date CB announced the merger, on the date that this joint proxy statement/prospectus is mailed to FedFirstFirst West Virginia stockholders, on the date of the special meeting of FedFirstFirst West Virginia stockholders, and on the date the merger is completed and thereafter. Any change in the market price of CB common stock prior to the completion of the merger will affect the market value of the merger consideration that FedFirstFirst West Virginia stockholders will receive upon completion of the merger, and there will be no adjustment to the merger consideration for changes in the market price of either shares of CB common stock or shares of FedFirstFirst West Virginia common stock. Stock price changes may result from a variety of factors that are beyond the control of CB and FedFirst,First West Virginia, including, but not limited to, general market and economic conditions, changes in their respective businesses, operations and prospects and regulatory considerations. Therefore, at the time of the FedFirstFirst West Virginia special meeting you will not know the precise market value of the consideration you will receive at the effective time of the merger. You should obtain current market quotations for shares of CB common stock and for shares of FedFirstFirst West Virginia common stock.

The price of CB common stock might decrease after the merger.

Following the merger, many holders of FedFirstFirst West Virginia common stock will become shareholdersstockholders of CB. CB common stock could decline in value before or after the merger. For example, during the twelve-month period ended , 2014February 15, 2018 (the most recent practicable date before the printing of this document), the closing price of CB common stock varied from a low of $$25.10 to a high of $$31.90 and ended that period at $        .$30.55. The market value of CB common stock fluctuates based upon general market economic conditions, CB’s business and prospects, and other factors, many of which CB cannot control.

FedFirstFirst West Virginia stockholders may receive a form of consideration different from what they elect.

The consideration to be received by FedFirstFirst West Virginia stockholders in the merger is subject to the requirement that 65%80% of the shares of FedFirstFirst West Virginia common stock be exchanged for CB common stock and 35%20% be exchanged for cash. The merger agreement contains proration and allocation procedures to achieve this desired result. If you elect all cash and the available cash is oversubscribed, then you will receive a portion of the merger consideration in CB common stock. If you elect all stock and the available stock is oversubscribed, then you will receive a portion of the merger consideration in cash.

CB and Community Bank may be unable to successfully integrate FedFirst’sFirst West Virginia’s operations and retain FedFirst’sFirst West Virginia’s employees.

The merger involves the integration of two companies that have previously operated independently. The difficulties of combining the operations of the two companies include integrating personnel with diverse business backgrounds, combining different corporate cultures, and retaining key employees. The process of integrating operations could interrupt or impair the momentum in,of the business and activitiesoperations of CB and FedFirstFirst West Virginia, and could lead to the loss of key personnel. The diversion of management’s attention and any delays or difficulties encountered in connection with the merger and the integration of the two companies’ operations could have an adverse effect on the business and results of operations of CB following the merger.

Additionally, CB may not be able to successfully achieve the level of cost savings, revenue enhancements, and other synergies that it expects, and may not be able to capitalize upon the existing customer relationships of FedFirstFirst West Virginia to the extent anticipated, or it may take longer, or be more difficult or expensive than expected, to achieve these goals. This could have an adverse affecteffect on CB’s business, results of operationoperations and stock price.

The termination fee and the restrictions on solicitation contained in the merger agreement may discourage other companies from trying to acquire FedFirst.First West Virginia.

Until the completion of the merger, FedFirstFirst West Virginia is prohibited from soliciting, initiating, encouraging or taking any other action to facilitate any inquiries, discussions or the making of any proposals that may lead to an acquisition proposal, such as a merger or other business combination transaction, with any person other than CB. In addition, FedFirstFirst West Virginia has agreed to pay a termination fee to CB in specified circumstances. These provisions could discourage other companies from trying to acquire FedFirstFirst West Virginia even though those other companies may be willing to offer greater value to FedFirst’sFirst West Virginia’s stockholders than what CB has offered in the merger. The payment of the termination fee also could have a material adverse effect on FedFirst’sFirst West Virginia’s financial condition and results of operations.

Certain of FedFirst’sFirst West Virginia’s officers and directors have interests that are different from, or in addition to, interests of FedFirst’sFirst West Virginia’s stockholders generally.

The directors and officers of FedFirstFirst West Virginia have interests in the merger that are different from, or in addition to, the interests of FedFirstFirst West Virginia stockholders generally. These include: the cancellation of stock options with an exercise price of less than $23.00 in exchange for a cash payment equal to $23.00 minus the exercise price for each option; accelerated vesting of restricted stock; provisions in the merger agreement relating to indemnification of directors and officers and insurance for directors and officers of FedFirstFirst West Virginia for events occurring before the merger; the appointment of four directors of FedFirstWilliam G. Petroplus, Roberta Robinson Olejasz and Jonathan A. Bedway to the boards of directors of CB and Community Bank; continued employment withthe appointment of certain members of First West Virginia’s board of directors to an advisory board for the markets of CB and Community Bank formerly served by First West Virginia and Progressive Bank; and a retention and consulting agreement for Mr. Petroplus and retention agreements for Frances P. Reppy and Brad D. Winwood, each of which was entered into with CB and Community Bank concurrently with the execution of the merger agreement and provides for certain executive officers of FedFirst; severance payments that certain officers may receive under existing change in control agreements;subject to and the buy-out by FedFirst Exchange Corporation of Mr. Boyer’s 20% minority interest in Exchange Underwriters, Inc. immediately beforeupon the completion of the merger.

merger and additional contingent payments thereafter. For a more detailed discussion of these interests, see “Description of the Merger—Interests of Certain Persons in the Merger that areThat Are Different from Yours.”

First West Virginia and CB will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on First West Virginia or CB. These uncertainties may impair First West Virginia’s or CB’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with First West Virginia and CB to change their existing business relationships. Retention of certain employees by First West Virginia or CB may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with First West Virginia or CB. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with First West Virginia or CB, First West Virginia’s business, CB’s business or First West Virginia’s business assumed by CB following the completion of the merger could be harmed. In addition, subject to certain exceptions, First West Virginia has agreed to operate its business in the ordinary course pending the closing of the merger. See “Description of the Merger—Covenants of First West Virginia and CB in the Merger Agreement” for a description of the restrictive covenants applicable to First West Virginia and CB.

Failure to complete the merger could negatively impact the stock prices and future businesses and financial results of CB and FedFirst.First West Virginia.

If the merger is not completed, the ongoing businesses of CB and FedFirstFirst West Virginia may be adversely affected and CB and FedFirstFirst West Virginia will be subject to several risks, including the following:

 

CB and FedFirstFirst West Virginia will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, financial advisor and printing fees;

 

under the merger agreement, FedFirstFirst West Virginia is subject to certain restrictions on the conduct of its business before completingpending the completion of the merger, which may materially and adversely affect its ability to fully execute certain of its business strategies;plan;

 

under the merger agreement, FedFirstFirst West Virginia is required to pay a termination fee in specified circumstances if the merger agreement is terminated under specific circumstances, including if FedFirstFirst West Virginia accepts an acquisition proposal from a third party other than CB;

 

under the merger agreement, CB ismay be required to pay a termination fee in specified circumstancesreimburse First West Virginia for its expenses, not to exceed $500,000, if the merger agreement is terminated including if CB accepts an acquisition proposal from a third party;because CB’s board of directors breaches certain of its obligations under the merger agreement; and

 

matters relating to the merger may require substantial commitments of time and resources by CB and FedFirstFirst West Virginia management, which could otherwise have been devoted to other opportunities that may be beneficial to CB and FedFirstor First West Virginia as independent companies, as the case may be.companies.

In addition, the financial markets as well as customers and employees of CB and/or FedFirstFirst West Virginia may react unfavorably if the merger is not completed. CB and/or FedFirstFirst West Virginia also couldmay be subject to litigation related to any failure to complete the merger.

FedFirstBoth CB and First West Virginia stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management of the combined organization.

FedFirstEach of CB and First West Virginia stockholders currently have the right to vote to electin the FedFirst boardelection of their respective boards of directors and to vote on various other matters affecting FedFirst.their respective companies. Upon the completion of the merger, FedFirstFirst West Virginia stockholders who receive CB common stock in the merger will become shareholdersstockholders of CB with a percentage ownership interest in the combined organization that is substantially less than their percentage ownership of FedFirst.First West Virginia. Further, because shares of CB common stock will be issued to First West Virginia stockholders, existing CB common stockholders will have their ownership and voting interests diluted by approximately 24.4%. Accordingly, FedFirstCB and First West Virginia stockholders will not be able to exercise as much influence over the management and policies of CBthe combined organization as they currently can with respect to FedFirst.can.

FedFirst will be subject to business uncertainties and contractual restrictions whileIf the merger is pending.

Uncertainty about the effectdoes not constitute a reorganization under Section 368(a) of the merger on employees and customersCode, then each First West Virginia stockholder may have an adverse effect on FedFirst. These uncertaintiesbe responsible for payment of U.S. income taxes related to the merger.

The Internal Revenue Service (“IRS”) may impair FedFirst’s ability to attract, retain and motivate key personnel untildetermine that the merger is completed, and could cause customers and othersdoes not qualify as a nontaxable reorganization under Section 368(a) of the Code. In that deal with FedFirst to seek to change existing business relationships with FedFirst. Retention of certain employees by FedFirst may be challenging while the merger is pending, as certain employees may experience uncertainty about their future roles with FedFirstcase, each First West Virginia stockholder would recognize a gain or CB. If key employees depart because of issues relatingloss equal to the uncertainty and difficulty of integration or a desire not to remain with FedFirst or CB, FedFirst’s business or FedFirst’s business assumed by CB followingdifference between the merger could be harmed. In addition, subject to certain exceptions, FedFirst has agreed to operate its business in(i) the ordinary course prior to closing. See “The Merger Agreement—Covenants and Agreements” for a descriptionsum of the restrictive covenants applicable to FedFirst.

Pending litigation against FedFirstfair market value of CB common stock and CB could resultthe amount of cash consideration, if any, received by the First West Virginia stockholder in an injunction preventing the completion of the merger or a judgment resulting in the payment of damages.

In connection with the merger, a FedFirst stockholder has filed a putative stockholder class action lawsuit against FedFirst, each of FedFirst’s directors, and CB. Among other remedies, the plaintiff seeks to enjoin the merger. The outcome of any such litigation is uncertain. If the case is not resolved, the lawsuit could prevent or delay completion of the merger and result(ii) the First West Virginia stockholder’s adjusted tax basis in substantial costs to FedFirst and CB, including any costs associated with the indemnificationshares of directors and officers. Additional lawsuits may be filed against FedFirst, CB and/or the directors and officers of either company in connection with the merger. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect CB’s and FedFirst’s respective business, financial condition, results of operations and cash flows. See “The Merger—Pending Litigation Regarding the Merger.”First West Virginia common stock exchanged therefor.

In certain circumstances, cash merger consideration received may be taxed as a dividend rather than capital gains and FedFirst’sFirst West Virginia’s counsel is not able to provide an opinion regarding whether this tax treatment will apply to any individual shareholder.stockholder.

In certain circumstances, the cash merger consideration received by a FedFirstFirst West Virginia stockholder who receives CB common stock and cash may be taxed as a dividend, rather than as capital gain. This could arise if there has not been a meaningful reduction in the stockholder’s interest in CB as a result of the exchange. For purposes of this determination, the shareholderstockholder generally will be treated as if the shareholderstockholder first exchanged all of the shareholdersstockholder’s shares of FedFirstFirst West Virginia common stock solely for CB common stock and then CB immediately redeemed a portion of the CB common stock in exchange for the cash the stockholder actually received. Moreover, under Section 318 of the FedFirstCode, the First West Virginia stockholder may be deemed to constructively own shares of CB common stock held by certain members of the stockholder’s family, by certain estates and trusts of which the stockholder is a beneficiary or by certain entities in which the stockholder has an ownership or beneficial interest, and certain stock options actually or constructively owned by the stockholder or such other persons may be aggregated with the stockholder’s shares of CB common stock. Receipt of cash in such deemed redemption will generally be treated as a capital gain and will not have the effect of a dividend to you if such deemed redemption is “not essentially equivalent to a dividend” or “substantially disproportionate,” each within the meaning of Section 302(b) of the Code. For further information see the section of this joint proxy statement/prospectus entitled “Material U.S. Federal Income Tax Consequences of the Merger.”

Because the determination as to whether you will recognize a stockholder’s interest has been meaningfully reducedcapital gain or dividend income as a result of your exchange of First West Virginia common stock for a combination of CB common stock and cash in the merger is based on facts and circumstances unique to each stockholder, the opinion received from FedFirst’sFirst West Virginia’s legal counsel will not opine as to such treatment at the individual stockholder level. Accordingly, we urge you to consult your own tax advisor with respect to any such determination that is applicable to your individual situation.

FedFirstFirst West Virginia stockholders who make elections may be unable to sell their shares in the market pending the merger.

FedFirstFirst West Virginia stockholders may elect to receive cash, stock or mixed consideration in the merger by completing an election form that will be sent under separate cover. Making an election will require that stockholders who hold their shares in certificate form turn in their FedFirstFirst West Virginia stock certificates. This means that during the time between when the election is made and the date the merger is completed, FedFirstFirst West Virginia stockholders will be unable to sell their FedFirstFirst West Virginia common stock. If the merger is unexpectedly delayed, this period could extendbe extended for a significant period of time. FedFirstFirst West Virginia stockholders can shorten the period during which they cannot sell their shares by delivering their election shortly before the election deadline. However, elections received after the election deadline will not be accepted or honored.

The fairness opinion obtainedopinions received by FedFirstthe respective boards of directors of First West Virginia and CB from itsthe parties’ respective financial advisor willadvisors prior to the execution of the merger agreement do not reflect changes in circumstances subsequent tooccurring after the date of the fairness opinion.opinions.

Mufson Howe Hunter & Company LLC, FedFirst’sD.A. Davidson, First West Virginia’s financial advisor in connection with the merger, has delivered its opinion to the board of directors of FedFirstFirst West Virginia on November 16, 2017. KBW, CB’s financial advisor in connection with the merger, also delivered its opinion dated as of April 14, 2014. The opinion of Mufson Howe Hunter stated that as of such date, and based upon and subject to the factors and assumptions set forth therein, the merger consideration to be paid to

the holdersboard of the outstanding sharesdirectors of FedFirst common stock pursuant to the merger agreement was fair from a financial point of view to such holders. The opinion doesCB on November 16, 2017. These opinions do not reflect changes that may occur or may have occurred after the date of the opinion,such opinions, including changes to the operations and prospects of CB or FedFirst,First West Virginia, changes in general market and economic conditions or regulatory or other factors. Any such changes or changes in other factors on which the opinion is based, may materially alter or affect the value of CB and FedFirst.First West Virginia. The opinions speak only as of November 16, 2017, the date that they were rendered, and do not speak as of the date of this joint proxy statement/prospectus or any other date.

Risks RelatedThe shares of CB common stock to CBbe received by First West Virginia stockholders as a result of the merger will have different rights than shares of First West Virginia common stock.

Changes in interest ratesFollowing completion of the merger, First West Virginia stockholders will no longer be stockholders of First West Virginia but will instead be stockholders of CB. There are differences between the current rights of First West Virginia stockholders and the rights of CB stockholders that may reduce CB’s profitsbe important to First West Virginia stockholders. See “Comparison of Rights of Stockholders” for a discussion of the different rights associated with CB common stock and impair asset values.First West Virginia common stock.

CB’s earnings and cash flows depend primarily on its net interest income. Interest rates are highly sensitive

Regulatory approvals may not be received, may take longer to many factorsreceive than expected, or may impose conditions that are beyond CB’s control, including general economic conditions and the policies of various governmental and regulatory agencies, particularly the Federal Reserve. Changes in market interest ratesnot presently anticipated or that could have an adverse effect on the combined company following the merger.

Before the merger may be completed, CB and First West Virginia must obtain the approval,non-objection or waiver of the Pennsylvania Banking Department, the FDIC, the West Virginia Division of Financial Institutions and the Federal Reserve. In determining whether to grant these approvals,non-objections or waivers, the regulators consider a variety of factors, including the regulatory standing of each party. An adverse development in either party’s regulatory standing or other factors could result in an inability to obtain approvals or delay their receipt. These regulators may impose conditions on the completion of the merger or the bank merger or require changes to the terms of the merger or the bank merger. Such conditions or changes could have the effect of delaying or preventing completion of the merger or the bank merger or imposing additional costs on or limiting the revenues of the combined company following the merger and the bank merger, any of which might have an adverse effect on the combined company following the merger.

Goodwill incurred in the merger may negatively affect CB’s financial condition.

To the extent that the merger consideration, consisting of shares of CB common stock and cash to be issued in the merger, exceeds the fair value of the net assets, including identifiable intangibles, of First West Virginia, that amount will be reported as goodwill by CB. In accordance with current accounting guidance, goodwill will not be amortized but will be evaluated for impairment annually. A failure to realize expected benefits of the merger could adversely impact the carrying value of the goodwill recognized in the merger, and in turn negatively affect CB’s financial condition.

The unaudited pro forma combined condensed financial statements included in this document are preliminary and the actual financial condition and results of operations.operations of CB after the merger may differ materially.

The unaudited pro forma combined condensed financial statements in this document are presented for illustrative purposes only and are not necessarily indicative of what CB’s interest-bearingactual financial condition or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma combined condensed financial data, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. The unaudited pro forma combined condensed financial statements reflect adjustments, which are based upon preliminary estimates, to record the First West Virginia identifiable assets acquired and liabilities generally reprice or mature more quickly than its interest-earning assets. If rates increase rapidly, CB may have to increaseassumed at fair value and the rates paidresulting goodwill recognized. The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based on deposits, particularly higher cost time depositsthe actual purchase price and borrowed funds, more quickly than any changes in interest rates earned on loans and investments, resulting in a negative effect on interest rate spreads and net interest income. Increases in interest rates may also make it more difficult for borrowers to repay adjustable rate loans.

Conversely, should market interest rates fall below current levels, CB’s net interest margin also could be negatively affected if competitive pressures keep it from further reducing rates on deposits, while the yields on CB’s interest-earning assets decrease more rapidly through loan prepayments and interest rate adjustments. Decreases in interest rates often result in increased prepayments of loans and mortgage-related securities, as borrowers refinance their loans to reduce borrowings costs. Under these circumstances, CB is subject to reinvestment risk to the extent it is unable to reinvest the cash received from such prepayments in loans or other investments that have interest rates that are comparable to the interest rates on existing loans and securities.

Changes in interest rates also affect the value of CB’s interest-earning assets, and in particular its securities portfolio. Generally, the value of fixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on securities available for sale determined to be temporary in nature are reported as a separate component of equity. Decreases in the fair value of securities available for sale resulting from increases in interest rates therefore could have an adverse effect on CB’s shareholders’ equity.

A large percentagethe assets and liabilities of CB’s loans are collateralized by real estate, and further disruptions in the real estate market may result in losses and reduce CB’s earnings.

A substantial portion of CB’s loan portfolio consists of loans collateralized by real estate. Continued weak economic conditions have caused a decrease in demand for real estate, which has resulted in an erosion of some real estate values in CB’s markets. Further disruptions in the real estate market could significantly impair the value of CB’s collateral and its ability to sell the collateral upon foreclosure. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. If real estate values decline further, it is likely that CB would be required to increase its allowance for loan losses. If, during a period of lower real estate values, CB is required to liquidate the collateral securing a loan to satisfy debts or to increase its allowance for loan losses, it could materially reduce its profitability and adversely affect its financial condition.

Strong competition within CB’s market area could adversely affect CB’s earnings and slow growth.

CB faces intense competition both in making loans and attracting deposits. Price competition for loans and deposits might result in CB earning less on its loans and paying more on its deposits, which reduces net interest income. Some of CB’s competitors have substantially greater resources than CB has and may offer services that it does not provide. CB expects competition to increase in the futureFirst West Virginia as a result of legislative, regulatory and technological changes and the continuing consolidation in the financial services industry. CB’s profitability will depend upon its continued ability to compete successfully in its market areas.

Government responses to economic conditions may adversely affect CB’s operations, financial condition and earnings.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) has changed the bank regulatory framework. For example, the law created an independent Consumer Financial Protection Bureau that has assumed

the consumer protection responsibilities of the various federal banking agencies, established more stringent capital standards for banks and bank holding companies, and gave the Federal Reserve exclusive authority to regulate both banking holding companies and savings and loan holding companies. The legislation also has resulted in numerous new regulations affecting the lending, funding, trading and investment activitiesdate of banks and bank holding companies. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions (including Community Bank), including the authority to prohibit “unfair, deceptive or abusive” acts and practices. Banks and savings institutions with $10.0 billion or less in assets will continue to be examined by their applicable bank regulators. The Dodd-Frank Act also requires the federal banking agencies to promulgate rules requiring mortgage lenders to retain a portion of the credit risk related to loans that are securitized and sold to investors, and in 2013 the federal bank agencies proposed a rule regarding retention of credit risk on loan sales. CB expects that these rules would make it more difficult for it to sell loans in the secondary market. Bank regulatory agencies also have been responding aggressively to any safety and soundness or compliance concerns identified in examinations, and such agencies have broad discretion and significant resources to initiate enforcement actions against financial institutions and their directors and officers in connection with their examination authority. Ongoing uncertainty and adverse developments in the financial services industry and in the domestic and international credit markets, and the effect of new legislation and regulatory actions in response to these conditions, may adversely affect CB’s operations by restricting business activities, including the ability to originate or sell loans, modify loan terms, or foreclose on property securing loans.

The full impact of the Dodd-Frank Act on CB’s business will not be known until all key regulations implementing the statute are adopted and implemented. As a result, CB cannot, at this time, determine the extent to which the Dodd-Frank Act will impact its business, operations or financial condition. However, compliance with these new laws and regulations has required and will continue to require changes to its business and operations and may result in additional costs and divert management’s time from other business activities, any of which may adversely impact its results of operations, liquidity or financial condition.

Furthermore, the Federal Reserve, in an attempt to improve the overall economy, has, among other things, adopted a low interest rate policy through its targeted federal funds rate and the purchase of mortgage-backed securities known as “quantitative easing.” Because of improvements in the national economy over the past few years, the Federal Reserve has begun to reduce its mortgage-backed securities purchases. Any reduction or termination of the mortgage-backed bond purchases or increases in the federal funds rate may result in an increase in market interest rates, which may negatively affect the housing markets, the U.S. economic recovery and CB’s results of operations, liquidity or financial condition.

Proposed and final regulations would restrict Community Bank’s ability to originate and sell loans.

The Consumer Financial Protection Bureau has issued a rule designed to clarify for lenders how they can avoid legal liability under the Dodd-Frank Act, which holds lenders accountable for ensuring a borrower’s ability to repay a mortgage. Loans that meet this “qualified mortgage” definition will be presumed to have complied with the new ability-to-repay standard. Under the Consumer Financial Protection Bureau’s rule, a “qualified mortgage” loan must not contain certain specified features, including:

excessive upfront points and fees (those exceeding 3% of the total loan amount, less “bona fide discount points” for prime loans);

interest-only payments;

negative-amortization; and

terms of longer than 30 years.

Also, to qualify as a “qualified mortgage,” a loan must be made to a borrower whose total monthly debt-to-income ratio does not exceed 43%. Lenders must also verify and document the income and financial resources relied upon to qualify the borrower on the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments. Although the significant majority of CB’s historical loan originations would qualify as qualified mortgages under the new rule on qualified mortgages, the new rule may limit CB’s ability or desire to make certain types of loans or loans to certain borrowers, and may make it more costly and/or time consuming to make these loans, which could limit CB’s growth and/or profitability. The new rule may also alter CB’s residential mortgage loan origination mix between qualified and non-qualified mortgage loans, which could reduce gain on sale fees from secondary market loan sales and affect interest rate risk related to non-qualified loans that are originated and held in CB’s portfolio.

A worsening of economic conditions could adversely affect CB’s financial condition and results of operations.

Although the U.S. economy has emerged from the severe recession that occurred in 2008 and 2009, recent economic growth has been slow and uneven, and unemployment levels remain high compared to long-term, historical averages. Recovery by many businesses has been impaired by lower consumer spending and a notable portion of new jobs created nationally have been in lower wage positions. A return to prolonged deteriorating economic conditions could significantly affect the markets in which CB operates, the value of loans and investments, and ongoing operations, costs and profitability. Further declines in real estate values and sales volumes and continued elevated unemployment levels may result in higher than expected loan delinquencies, increases in nonperforming and criticized classified assets and a decline in demand for CB’s products and services. These events may cause CB to incur losses and may adversely affect its financial condition and results of operations.

If CB’s allowance for loan losses is not sufficient to cover actual loan losses, CB’s results of operations would be negatively affected.

In determining the amount of the allowance for loan losses, CB analyzes its loss and delinquency experience by loan categories and considers the effect of existing economic conditions. In addition, CB makes various assumptions and judgments about the collectability of the loan portfolio, including the creditworthiness of its borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of the loans. If the results of these analyses are incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in the portfolio, which would require additions to the allowance and would reduce net income.

In addition, bank regulators periodically review CB’s allowance for loan losses and may require it to increase the allowance for loan losses or recognize further loan charge-offs. Any increase in the allowance for loan losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on CB’s financial condition and results of operations.

Because CB emphasizes commercial real estate and commercial loan originations, its credit risk may increase and continued downturns in the local real estate market or economy could adversely affect its earnings.

Commercial real estate and commercial loans generally have more inherent risk than the residential real estate loans. Because the repayment of commercial real estate and commercial loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy. Commercial real estate and commercial loans also may involve relatively large loan balances to individual borrowers or groups of related borrowers. A downturn in the real estate market or the local economy could adversely affect the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the risk of nonperforming loans. As CB’s commercial real estate and commercial loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase. Furthermore, it may be difficult to assess the future performance of newly originated commercial loans, as such loans may have delinquency or charge-off levels above CB’s historical experience, which could adversely affect CB’s future performance.

The impact of the changing regulatory capital requirements and new capital rules is uncertain.

In July 2013, the FDIC and the other federal bank regulatory agencies issued a final rule that will revise their risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The final rule applies to all depository institutions (such as Community Bank), top-tier bank holding companies with total consolidated assets of $500 million or more (such as CB following the merger) and top-tier savings and loan holding companies. Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4.0% to 6.0% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rule becomes effective for Community

Bank and CB on January 1, 2015. The capital conservation buffer requirement will be phased in at 0.625% per year beginning January 1, 2016 and ending January 1, 2019, when the full 2.5% capital conservation buffer requirement will be effective.

The application of the new capital requirements for Community Bank and CB could, among other things, result in lower returns on invested capital, require raising additional capital, and result in regulatory actions if they are unable to comply with such requirements. The changes under the new capital requirements could also result in management modifying its business strategy, and limit CB’s ability to make distributions (including paying dividends) or repurchasing its shares.

There may be a limited market for CB’s common stock, which may adversely affect its stock price.

It is a condition to the completion of the mergermerger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. For more information, please see “Unaudited Pro Forma Combined Condensed Consolidated Financial Data.”

Risks Related to CB’s Business

You should read and consider risk factors specific to CB’s business that CB’s common stock be approved for listing onwill affect the Nasdaq Stock Market upon notice of issuance. There is no guarantee that there will be an active trading marketcombined company after the merger. These risks are described in the section entitled “Risk Factors” in CB’s common stock. If an active trading market does not develop, you may not be able to sell all of your shares of common stockAnnual Report on short notice or at a desirable price, and the sale of a large number of shares at one time by another shareholder could temporarily depress the market price.

CB’s ability to pay dividends is subject to the ability of Community Bank to make capital distributions to CB, and also may be limited by Federal Reserve policy.

CB’s long-term ability to pay dividends to its shareholders depends primarily on the ability of Community Bank to make capital distributions to CB and on the availability of cash at the holding company level if Community Bank’s earnings are not sufficient to pay dividends. In addition, the Federal Reserve has issued a policy statement regarding the payment of dividends by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the holding company’s net incomeForm10-K for the past four quarters, net of dividends paid over that period, is insufficient to fully fundfiscal year ended December 31, 2016 and in other documents incorporated by reference into this document. See the dividend or the holding company’s overall rate or earnings retention is inconsistent with the its capital needs and overall financial condition. These regulatory policies may adversely affect CB’s ability to pay dividends or otherwise engage in capital distributions.

Changes in CB’s accounting policies or in accounting standards could materially affect how CB reports its financial condition and results of operations.

CB’s accounting policies are essential to understanding its financial condition and results of operations. Some of these policies require the use of estimates and assumptions that may affect the value of CB’s assets and liabilities, and financial results. Some of CB’s accounting policies are critical because they require management to make difficult, subjective, and complex judgments about matters that are inherently uncertain, and because it is likely that materially different amounts would be reported under different conditions or using different assumptions. If such estimates or assumptions underlying CB’s financial statements are incorrect, it may experience material losses.

From time to time, the Financial Accounting Standards Board and the Securities and Exchange Commission change the financial accounting and reporting standards or the interpretation of those standards that govern the preparation of CB’s financial statements. These changes are beyond CB’s control, can be difficult to predict and could materially affect how CB reports its financial condition and results of operations. CB could also be required to applysection entitled “Where You Can Find More Information” for a new or revised standard retroactively, resulting in restating prior period financial statements in material amounts.

The need to account for certain assets at estimated fair value, such as loans held for sale and investment securities, may adversely affect CB’s financial condition and results of operations.

CB reports certain assets, such as loans held for sale and investment securities, at estimated fair value. Generally, for assets that are reported at fair value, CB uses quoted market prices or valuation models that utilize observable market inputs to estimate fair value. Because CB carries these assets on its books at their estimated fair value, it may incur losses even if the asset in question presents minimal credit risk.

Because the naturedescription of the financial services business involves a high volume of transactions, CB faces significant operational risks.

CB operates in diverse markets and relies on the ability of its employees and systems to process a significant number of transactions. Operational risk is the risk of loss resulting from operations, including the risk of fraudinformation incorporated by employees or persons outside a company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of the internal control system and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity. If a breakdown occurs in the internal controls system, improper operation of systems or improper employee actions, CB could incur financial loss, face regulatory action, and suffer damage to its reputation.

Risks associated with system failures, interruptions, or breaches of security could negatively affect CB’s earnings.

Information technology systems are critical to CB’s business. CB uses various technology systems to manage customer relationships, general ledger, securities investments, deposits, and loans. CB has established policies and procedures to prevent or limit the effect of system failures, interruptions, and security breaches, but such events may still occur or may not be adequately addressed if they do occur. In addition, any compromise of CB’s systems could deter customers from using its products and services. Security systems may not protect systems from security breaches.

In addition, CB outsources some of its data processing to certain third-party providers. If these third-party providers encounter difficulties, or if CB has difficulty communicating with them, CB’s ability to adequately process and account for transactions could be affected, and business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any system failures, interruption, or breach of security could damage CB’s reputation and result in a loss of customers and business thereby subjecting it to additional regulatory scrutiny, or could expose is to litigation and possible financial liability. Any of these events could have a material adverse effect on its financial condition and results of operations.

CB’s risk management framework may not be effective in mitigating risk and reducing the potential for significant losses.

CB’s risk management framework is designed to minimize risk and loss to the company. CB seeks to identify, measure, monitor, report and control exposure to risk, including strategic, market, liquidity, compliance and operational risks. While CB uses a broad and diversified set of risk monitoring and mitigation techniques, these techniques are inherently limited because they cannot anticipate the existence or future development of currently unanticipated or unknown risks. Economic conditions and heightened legislative and regulatory scrutiny of the financial services industry, among other developments, have increased CB’s level of risk. Accordingly, CB could suffer losses if it fails to properly anticipate and manage these risks.

Being a public company will increase CB’s expenses and administrative workload and will expose it to risks relating to evaluation of its internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002.

As a public company, CB will need to comply with additional laws and regulations, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act, and related rules of the SEC and requirements of The Nasdaq Stock Market. CB was not required to comply with these laws and requirements as a private company. Complying with these laws and regulations will require the time and attention of CB’s board of directors and management and will increase CB’s expenses. Among other things, CB will need to: design, establish, evaluate and maintain a system of internal controls over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board; prepare and distribute periodic reports in compliance with CB’s obligations under the federal securities laws; establish new internal policies, principally those relating to disclosure controls and procedures and corporate governance; institute a more comprehensive compliance function; and involve to a greater degree CB’s outside legal counsel and accountants in the above activities.

CB is in the process of evaluating its internal control systems to allow management to report on its internal controls over financial reporting. CB plans to perform the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification requirements of Section 404 of the Sarbanes-Oxley Act. CB will be required to comply with Section 404 in its annual report for the year ending December 31, 2014. However, CB cannot be certain as to the timing of completion of its evaluation, testing and remediation actions or the impact of the same on its operations. Furthermore, upon completion ofreference into this process, CB may identify control deficiencies of varying degrees of severity under applicable SEC and Public Company Accounting Oversight Board rules and regulations that remain unremediated.

If CB fails to implement the requirements of Section 404 in a timely manner, CB might be subject to sanctions or investigation by regulatory agencies such as the SEC. In addition, failure to comply with Section 404 or the report by CB of a material weakness may cause investors to lose confidence in its financial statements or the trading price of its common stock to decline. If CB fails to remediate any material weakness, CB’s financial statements may be inaccurate, its access to the capital markets may be restricted and the trading price of its common stock may decline.

As a public company, CB will be required to report, among other things, control deficiencies that constitute a “material weakness” or changes in internal controls that materially affect, or are reasonably likely to materially affect, internal controls over financial reporting. A “control deficiency” exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A “significant deficiency” is a control deficiency, or combination of control deficiencies, that adversely affects the ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles that results in more than a remote likelihood that a misstatement of financial statements that is more than inconsequential will not be prevented or detected. A “material weakness” is a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

CB is an emerging growth company within the meaning of the Securities Act, and if it decides to take advantage of certain exemptions from various reporting requirements applicable to emerging growth companies, its common stock could be less attractive to investors.

CB is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as modified by the JOBS Act. CB is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, reduced disclosure about CB’s executive compensation and omission of compensation discussion and analysis, and an exemption from the requirement of holding a non-binding advisory vote on executive compensation. In addition, CB will not be subject to certain requirements of Section 404 of the Sarbanes Oxley Act, including the additional level of review of its internal control over financial reporting that may occur when outside auditors attest to its internal control over financial reporting. As a result, CB’s stockholders may not have access to certain information they may deem important. Taking advantage of any of these exemptions may adversely affect the value and trading price of CB’s common stock. For additional information on CB’s status as an emerging growth company, see “Supervision and Regulation—Emerging Growth Company Status.”document.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

CertainForward-Looking Statements

This joint proxy statement/prospectus contains forward-looking statements, contained in this document that are not historical facts may constitute forward-looking statements. The sectionswhich can be identified by the use of this document which containwords such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

statements of CB’s and First West Virginia’s respective goals, intentions and expectations;

statements regarding CB’s and First West Virginia’s respective business plans, prospects, growth and operating strategies;

statements regarding the asset quality of CB’s and First West Virginia’s respective loan and investment portfolios; and

estimates of CB’s and First West Virginia’s respective risks and future costs and benefits.

These forward-looking statements are based on current beliefs and expectations and are inherently subject to “Questions And Answers About the Mergersignificant business, economic and the Special Meeting,” “Summary,” “Risk Factors,” “Descriptioncompetitive uncertainties and contingencies, many of the Merger—Background of the Merger,” “Description of the Merger—which are beyond CB’s Reasons for the Merger,” “Description of the Merger—FedFirst’s Reasons for the Merger and Recommendation of the Board of Directors” and “Description of the Merger—CB and FedFirst Unaudited Prospectus Financial Information.” You can identifyFirst West Virginia’s control. In addition, these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

These forward-looking statements are subject to significant risks, assumptions with respect to future business strategies and uncertainties,decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

failure to complete the merger due to the failure of CB and/or First West Virginia stockholders to approve the merger agreement, failure to obtain applicable regulatory approvals or the failure to satisfy other closing conditions;

failure to complete the merger in a timely manner or on the expected terms and schedule;

the potential impact of announcement or consummation of the proposed merger with First West Virginia on relationships with third parties, including amongcustomers, employees, and competitors;

business disruption following the merger, including the challenges of integrating, retaining, and hiring key personnel;

difficulties and delays in integrating the CB and First West Virginia businesses or fully realizing expected cost savings and other things, benefits;

CB’s potential exposure to unknown or contingent liabilities of First West Virginia;

failure to attract new customers and retain existing customers in the manner anticipated;

the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the merger;

any interruption or breach of security resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems;

changes in general economicCB’s stock price before the closing of the merger, including as a result of the financial performance of CB and/or First West Virginia before the closing of the merger;

operational issues stemming from, or capital spending necessitated by, the potential need to adapt to industry changes in information technology systems, on which CB and business conditionsFirst West Virginia are highly dependent;

changes in legislation, regulation, policies, or administrative practices, whether by judicial, governmental, or legislative action, and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection, and insurance, and the risks and other factors set forthability to comply with such changes in a timely manner;

changes in the “Risk Factors” section.monetary and fiscal policies of the U.S. government, including policies of the U.S. Department of the Treasury and the Federal Reserve;

changes in interest rates, which may affect CB’s and/or First West Virginia’s net income or cash flows, or the market value of CB’s and/or First West Virginia’s assets;

changes to the federal tax code;

changes in accounting principles, policies, practices, or guidelines;

changes in CB’s credit ratings or in CB’s ability to access the capital markets;

natural disasters, war, or terrorist activities; and

other economic, competitive, governmental, regulatory, technological, and geopolitical factors affecting CB’s or First West Virginia’s operations, pricing, and services.

Because of these and a wide variety of other uncertainties, CB’s actual results, performance or achievements, or industry results may be materially different from the expected results indicated by these forward-looking statements. In addition,Additionally, CB and First West Virginia are under no duty to and do not undertake any obligation to update any of their respective forward-looking statements after the date of this joint proxy statement/prospectus. Accordingly, you should not assume that CB’s and FedFirst’s combined future results will reflect the past results of operations of either entity. You should not place undue reliance on any forward-looking statements, which speak only as of the dates on which they were made. CB undertakes no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under federal securities law. CB qualifies all of its forward-looking statements by these cautionarysuch statements.

Further information on other factors which could affect the financial condition, results of operations, liquidity or capital resources of CB before and after the merger is included in this proxy statement/prospectus under “Information About CB—Business” and “Information About CB—Management’s Discussion and Analysis and Results of Operations.”

SELECTED HISTORICAL FINANCIAL INFORMATION OF CB AND FIRST WEST VIRGINIA

Selected Historical Consolidated Financial Data of CB

The following tables show summarized historical consolidated financial data for CB. You should read this summary financial information in connection with CB’s consolidated financial statements, which appear elsewhere in this document.

Thepresent selected historical consolidated financial data for CB as of December 31, 2013 and 2012 and for each of the five years ended December 31, 2011, 2012 and 2013 is2016. This information has been derived from CB’sand should be read in conjunction with the audited consolidated financial statements that areof CB. The following tables also present selected historical consolidated financial data for CB as of September 30, 2017 and for the nine months ended September 30, 2017 and 2016, which include only normal, recurring adjustments necessary to fairly present the data for those periods. This information has been derived from and should be read in conjunction with the unaudited consolidated financial statements of CB. You should read these tables together with the historical consolidated financial information contained in CB’s consolidated financial statements and related notes and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in CB’s Annual Report on Form10-K for the year ended December 31, 2016 and Quarterly Report on Form10-Q for the quarter ended September 30, 2017, which have been filed with the Securities and Exchange Commission and are incorporated by reference in this document.joint proxy statement/prospectus. See “Where You Can Find More Information.”

   At September 30,
2017
   At December 31, 
     2016   2015   2014   2013   2012 
   (In thousands) 

Selected Financial Condition Data:

            

Total assets

  $908,329   $846,075   $830,677   $846,314   $546,486   $546,753 

Cash and due from banks

   43,745    14,282    11,340    11,751    16,417    25,295 

Investment securitiesavailable-for-sale

   115,889    106,208    95,863    105,449    133,810    155,331 

Loans, net

   695,718    674,094    676,864    680,451    373,764    342,226 

Deposits

   762,374    698,218    679,299    697,494    480,335    470,148 

Short-term borrowings

   24,662    27,027    32,448    46,684    15,384    23,374 

Other borrowings

   24,500    28,000    28,000    15,136    4,000    7,000 

Total stockholders’ equity

   93,154    89,469    86,896    81,912    45,005    44,470 

   For the Nine Months
Ended September 30,
  For the Years Ended December 31, 
   2017  2016  2016  2015  2014  2013  2012 
   (Dollars in thousands, except per share amounts) 

Selected Operating Data:

        

Interest and dividend income

  $23,953  $23,756  $32,018  $31,917  $20,841  $17,905  $18,549 

Interest expense

   2,470   2,113   2,870   2,715   1,960   2,236   3,093 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income

   21,483   21,643   29,148   29,202   18,881   15,669   15,456 

Provision for loan losses

   1,020   1,600   2,040   2,005   —     100   450 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income after provision for loan losses

   20,463   20,043   27,108   27,197   18,881   15,569   15,006 

Noninterest income

   5,860   5,537   7,362   7,595   3,818   3,205   3,533 

Noninterest expenses

   18,418   17,767   23,778   22,929   16,798   13,358   13,287 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   7,905   7,813   10,692   11,863   5,901   5,416   5,252 

Income taxes

   2,336   2,255   3,112   3,443   1,609   1,160   1,035 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

  $5,569  $5,558  $7,580  $8,420  $4,292  $4,256  $4,217 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Common Share Data:

        

Basic net income per share

  $1.36  $1.36  $1.86  $2.07  $1.63  $1.73  $1.73 

Diluted net income per share

   1.36   1.36   1.86   2.07   1.63   1.72   1.70 

Dividends declared per share

   0.66   0.66   0.88   0.85   0.84   0.84   0.84 

Weighted average shares outstanding (basic)

   4,087,783   4,081,017   4,081,247   4,071,855   2,633,871   2,463,571   2,438,281 

Weighted average shares outstanding (diluted)

   4,104,157   4,084,730   4,086,190   4,071,855   2,635,090   2,478,086   2,476,601 

Selected Financial
Ratios (1):

        

Return on average assets

   0.85  0.89  0.91  1.01  0.72  0.79  0.78

Return on average equity

   8.12   8.34   8.48   9.89   8.60   9.43   9.60 

(1)Annualized for the nine month periods.

Selected Historical Consolidated Financial Data of First West Virginia

The following tables set forth selected historical consolidated financial data for First West Virginia as of and for each of the five years ended December 31, 2016, which has been derived from its audited consolidated financial statements. The selected historical financial data for CBFirst West Virginia as of March 31, 2014September 30, 2017 and for the threenine months ended March 31, 2014September 30, 2017 and 20132016 is derived from CB’sFirst West Virginia’s unaudited consolidated financial statements, which include only normal, recurring adjustments necessary to fairly present the data for those periods. The unaudited data is not necessarily indicative of expected results for any future period.

Selected Historical Consolidated Financial Data of CB

   At March 31,
2014
   At December 31, 
     2013   2012   2011   2010   2009 
   (In thousands) 

Selected Financial Condition Data:

            

Total assets

  $550,173    $546,486    $546,753    $533,635    $497,260    $463,349  

Cash and due from banks

   27,178     16,417     25,295     42,462     32,351     20,375  

Investment securities available-for-sale

   120,891     133,810     155,331     132,465     131,018     124,996  

Investment securities held-to-maturity

   511     1,006     2,032     3,286     2,880     8,850  

Loans, net

   379,978     373,764     342,226     334,378     309,152     288,233  

Deposits

   488,783     480,335     470,148     450,140     406,736     386,731  

Short-term borrowings

   13,550     15,384     23,374     28,018     34,189     22,513  

Other borrowings

   3,000     4,000     7,000     11,461     15,955     15,455  

Total stockholders’ equity

   43,520     45,005     44,470     42,092     38,551     36,920  

  For the Three Months
Ended March 31,
  For the Years Ended December 31, 
  2014  2013  2013  2012  2011  2010  2009 
  (In thousands) 

Selected Operating Data:

       

Interest and dividend income

 $4,578   $4,346   $17,757   $18,311   $19,964   $21,343   $21,302  

Interest expense

  470    604    2,236    3,093    4,492    5,575    6,296  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income

  4,108    3,742    15,521    15,218    15,472    15,768    15,006  

Provision for loan losses

  —      100    100    450    975    1,650    1,725  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net interest income after provision for loan losses

  4,108    3,642    15,421    14,768    14,497    14,118    13,281  

Other operating income

  724    738    3,174    3,515    3,180    3,270    3,158  

Other operating expenses

  3,457    3,329    13,179    13,031    12,386    12,368    11,984  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

  1,375    1,051    5,416    5,252    5,291    5,020    4,455  

Income taxes

  296    188    1,160    1,035    894    845    941  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

 $1,079   $863   $4,256   $4,217   $4,397   $4,175   $3,514  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Common Share Data:

       

Basic net income per share

 $0.46   $0.35   $1.73   $1.73   $1.82   $1.75   $1.48  

Diluted net income per share

 $0.46   $0.35   $1.72   $1.70   $1.78   $1.69   $1.42  

Dividends declared per share

 $0.21   $0.21   $0.84   $0.84   $0.84   $0.83   $0.77  

Outstanding common shares

  2,344,477    2,454,827    2,463,571    2,438,281    2,409,494    2,384,386    2,381,001  

Selected Financial Ratios (1):

       

Return on average assets

  0.80  0.66  0.78  0.78  0.88  0.88  0.70

Return on average equity

  10.05  7.79  9.48  9.60  10.79  10.85  9.61

(1)Annualized for the three month periods.

Selected Historical Consolidated Financial Data of FedFirst

The following tables show summarized historical consolidated financial data for FedFirst. You should read this summary financial information in connection with FedFirst’sFirst West Virginia’s consolidated financial statements, which appear elsewhere in this document.

The selected historical consolidated financial data for FedFirst as of December 31, 2013 and 2012 and for the years ended December 31, 2011, 2012 and 2013 is derived from FedFirst’s audited consolidated financial statements that are included in this document. The selected historical financial data for FedFirst as of March 31, 2014 and for the three months ended March 31, 2014 and 2013 is derived from FedFirst’s unaudited consolidated financial statements, which include only normal, recurring adjustments necessary to fairly present the data for those periods. The unaudited data is not necessarily indicative of expected results for any future period.joint proxy statement/prospectus.

 

  At March 31,
2014
   At December 31,   At September 30,
2017
   At December 31, 
  2013   2012   2011   2010   2009   2016   2015   2014   2013   2012 
  (In thousands)   (In thousands) 

Selected Financial Condition Data:

                        

Total assets

  $323,283    $319,027    $318,760    $335,274    $343,073    $353,293    $343,126   $335,255   $345,394   $332,390   $342,145   $306,547 

Cash and due from banks

   5,993     5,552     5,874     14,571     9,320     7,496  

Cash and cash equivalents

   19,282    2,877    25,929    20,396    31,875    15,877 

Investment securities available-for-sale

   25,477     26,772     42,582     52,448     78,708     79,559     205,244    197,206    203,579    197,079    199,955    178,208 

Investment securities held-to-maturity

   —       —       —       —       —       —    

Loans, net

   274,255     268,812     249,530     245,277     230,055     240,387     99,471    95,295    98,300    97,404    91,537    97,206 

Deposits

   233,636     219,232     214,057     221,540     203,562     193,581     285,378    275,706    282,287    272,143    285,877    246,462 

Short-term borrowings

   24,750     33,860     19,120     8,406     22,159     31,778     21,058    22,531    23,619    21,051    20,215    18,767 

Other borrowings

   11,774     11,731     29,558     40,883     54,734     80,733     2,213    3,216    3,320    3,420    3,516    3,606 

Stockholders’ equity

   50,959     51,746     53,234     58,761     58,503     42,364  

Noncontrolling interest in subsidiary

   46     105     60     40     84     79  

Total stockholders’ equity

  $51,005    $51,851    $53,294    $58,801    $58,587    $42,443     33,642    33,059    35,364    34,872    30,790    35,703 

 

 For the Three Months
Ended March 31,
 For the Years Ended December 31,   For the Nine Months
Ended September 30,
 For the Years Ended December 31, 
 2014 2013 2013 2012 2011 2010 2009   2017 2016 2016 2015 2014 2013 2012 
 (Dollars in thousands, except per share data)   (Dollars in thousands, except per share data) 

Selected Operating Data:

               

Interest and dividend income

 $3,220   $3,244   $12,920   $13,949   $15,532   $16,795   $18,051    $7,391  $6,915  $9,203  $10,384  $9,601  $9,414  $9,838 

Interest expense

 590   714   2,694   3,632   4,920   6,734   8,661     703  929  1,191  1,377  1,449  1,524  1,789 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net interest income

  2,630    2,530    10,226    10,317    10,612    10,061    9,390     6,688  5,986  8,012  9,007  8,152  7,890  8,049 

Provision for loan losses

  75    —      740    310    850    850    1,090  

Provision (credit) for loan losses

   1,075   —     —    30   —    (400 (248
 

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net interest income after provision for loan losses

  2,555    2,530    9,486    10,007    9,762    9,211    8,300     5,613  5,986  8,012  8,977  8,152  8,290  8,297 

Other operating income

  999    1,269    4,317    3,475    3,306    2,452    3,219  

Other operating expenses

  2,679    2,612    10,305    9,944    11,765    10,613    10,553  

Noninterest income

   743  1,906  2,152  2,113  1,877  1,440  2,352 

Noninterest expense

   6,183  6,200  8,307  8,315  8,060  7,672  7,604 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Income before income taxes and noncontrolling interest in net income of consolidated subsidiary

  875    1,187    3,498    3,538    1,303    1,050    966  

Income taxes

  323    351    1,186    1,251    432    386    358  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

  552    836    2,312    2,287    871    664    608  

Noncontrolling interest in net income of consolidated subsidiary

  18    42    77    32    12    56    51  

Income before income taxes

   173  1,692  1,857  2,775  1,969  2,058  3,045 

Income tax expense (benefit)

   (228 232  247  383  65  (183 507 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net income

 $534   $794   $2,235   $2,255   $859   $608   $557    $401  $1,460  $1,610  $2,392  $1,904  $2,241  $2,538 
 

 

  

 

  

 

  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Common Share Data:

               

Basic net income per share

 $0.24   $0.32   $0.93   $0.81   $0.30   $0.21   $0.19  

Diluted net income per share

  0.23    0.32    0.91    0.80    0.30    0.21    0.19  

Earnings per share

  $0.23  $0.85  $0.94  $1.39  $1.11  $1.30  $1.48 

Dividends declared per share

  0.06    0.04    0.22    0.15    0.12    0.03    —       0.60  0.60  0.80  0.80  0.80  0.76  0.73 

Special dividend declared per share

  0.25    —      —      0.25    —      —      —    

Outstanding common shares

  2,316,093    2,525,341    2,357,293    2,540,341    2,957,302    2,991,461    2,995,584     1,718,730  1,718,730  1,718,730  1,718,730  1,718,730  1,718,730  1,718,730 

Dividend payout ratio

  134.8  12.5  24.2  50.0  40.0  14.3  —       260.87 70.59 85.11 57.55 72.07 58.46 49.32

SUMMARY SELECTED PRO FORMA CONDENSED COMBINED DATA

The following table shows selected financial information on a pro forma combined basis giving effect to the merger (which is known as “pro forma” information) as if the merger had become effective as of the date presented, in the case of the balance sheet information, and at the beginning of the period presented, in the case of the income statement information. The pro forma information reflects the acquisition method of accounting.

CB anticipates that the merger will provide the combined company with financial benefits that include reduced operating expenses and greater revenue. The pro forma information, while helpful in illustrating the financial characteristics of CB following the merger under one set of assumptions, does not reflect these anticipated benefits and, accordingly, does not attempt to predict or suggest future results. The pro forma information also does not necessarily reflect what the historical results of CB would have been had itsthe companies been combined during these periods.

The exchange ratio of 1.15900.9583 was used in preparing this selected pro forma information. You should read this summary pro forma information in conjunction with the information under “Pro“Unaudited Pro Forma Combined Condensed Consolidated Financial Information”Data” and with the historical information in this document on which it is based.

 

   Three Months Ended
March 31, 2014
   Year Ended
December 31, 2013
 
   (In thousands, except per share data) 

Pro forma condensed combined income statement data:

    

Interest income

  $7,717    $30,348  

Interest expense

   815     4,113  
  

 

 

   

 

 

 

Net interest income

   6,901     26,235  

Provision (benefit) for loan losses

   75     840  
  

 

 

   

 

 

 

Net interest income after provision (benefit) for loan losses

   6,826     25,395  

Other income

   1,723     7,491  

Other expense

   6,229     23,856  
  

 

 

   

 

 

 

Income before income taxes

   2,320     9,030  

Provision for income taxes

   643     2,386  
  

 

 

   

 

 

 

Net income (loss)

  $1,677    $6,644  
  

 

 

   

 

 

 

Pro forma per share data:

    

Basic earnings

  $0.41    $1.59  

Diluted earnings

  $0.41    $1.58  
   March 31, 2014     
   (In thousands)     

Pro forma combined balance sheet data:

    

Total assets

  $857,379    

Loans held to maturity, net

   654,025    

Deposits

   723,754    

Total shareholders’ equity

   76,792    
   At September 30, 2017 
   (In thousands) 

Pro forma combined balance sheet data:

  

Total assets

  $1,254,435 

Investment securities

   319,081 

Loans receivable

   802,596 

Deposits

   1,047,844 

Total stockholders’ equity

   130,755 

   Nine Months Ended
September 30, 2017
   Year Ended
December 31, 2016
 
   (Dollars in thousands, except per share data) 

Pro forma condensed combined income statement data:

    

Interest and dividend income

  $31,780   $41,803 

Interest expense

   3,100    3,964 
  

 

 

   

 

 

 

Net interest income

   28,680    37,839 

Provision for loan losses

   2,095    2,040 
  

 

 

   

 

 

 

Net interest income after provision for loan losses

   26,585    35,700 

Noninterest income

   6,603    9,514 

Noninterest expense

   25,099    32,583 
  

 

 

   

 

 

 

Income before income taxes

   8,089    12,730 

Income tax expense

   2,112    3,422 
  

 

 

   

 

 

 

Net income

  $5,977   $9,308 
  

 

 

   

 

 

 

Pro forma per share data:

    

Basic earnings

  $1.11   $1.72 

Diluted earnings

   1.10    1.72 

Weighted average shares outstanding (1):

    

Basic

   5,405,672    5,398,894 

Fully diluted

   5,426,730    5,403,837 

(1)Basic and fully diluted earnings per share were computed utilizing CB’s reported information and First West Virginia’s average outstanding shares, modified to reflect that, following the proposed merger, 80% of the outstanding shares of First West Virginia common stock will be converted to shares of CB common stock at an exchange ratio of 0.9583.

COMPARATIVE PER SHARE DATA

The following table shows information about CB’s and FedFirst’sFirst West Virginia’s respective income per common share, dividends per share and book value per share, and similar information giving effect to the merger. In presenting the comparative pro forma information for the time periods shown, weit is assumed that the merger occurred as of the date presented, in the case of the book value per share information, and the beginning of the period presented, in the case of the dividend and income (loss) information. See “Pro“Unaudited Pro Forma Combined Condensed Consolidated Financial Information.Data.

The information listed as “per equivalent FedFirstFirst West Virginia share” was obtained by multiplying the pro forma amounts by the exchange ratio of 1.1590,0.9583, and does not reflect the receipt of cash by holders of FedFirstFirst West Virginia common stock. CB anticipates that the merger will provide the combined company with financial benefits that include reduced operating expenses and greater revenue. The pro forma information, while helpful in illustrating the financial characteristics of CB following the merger under one set of assumptions, does not reflect these anticipated benefits and, accordingly, does not attempt to predict or suggest future results. The pro forma information also does not necessarily reflect what the historical results of CB would have been had itsthe companies been combined during these periods.

The information in the following table is based on, and should be read together with, the historical financial information that we have presented in this document. See “Pro Forma Financial Information.”

 

   FedFirst
Historical
  CB Historical   Pro Forma
Combined (1)
  Per Equivalent
FedFirst Share
 

Book value per share:

      

At March 31, 2014

  $22.02   $18.61    $18.91   $21.91  

At December 31, 2013

  $22.00   $18.24    $18.68   $21.65  

Cash dividends declared per share:

      

Three months ended March 31, 2014

  $0.31(2)  $0.21    $0.21(3)  $0.24  

Year ended December 31, 2013

  $0.22   $0.84    $0.84(3)  $0.97  

Earnings per share—basic:

      

Three months ended March 31, 2014

  $0.24   $0.46    $0.41   $0.48  

Year ended December 31, 2013

  $0.93   $1.73    $1.59   $1.84  

Earnings per share—diluted:

      

Three months ended March 31, 2014

  $0.23   $0.46    $0.41   $0.48  

Year ended December 31, 2013

  $0.91   $1.73    $1.58   $1.83  
   First West
Virginia
Historical
   CB Historical   Pro Forma
Combined (1)
   Per Equivalent
First West Virginia
Share
 

Book value per share:

        

At September 30, 2017

  $19.57   $22.79   $24.19   $23.18 

At December 31, 2016

   19.23    21.89    23.51    22.53 

Cash dividends declared per share (2):

        

Nine months ended September 30, 2017

  $0.60   $0.66   $0.66   $0.63 

Year ended December 31, 2016

   0.80    0.88    0.88    0.84 

Earnings per share—basic:

        

Nine months ended September 30, 2017

  $0.23   $1.36   $1.11   $1.06 

Year ended December 31, 2016

   0.94    1.86    1.72    1.65 

Earnings per share—diluted:

        

Nine months ended September 30, 2017

  $0.23   $1.36   $1.10   $1.05 

Year ended December 31, 2016

   0.94    1.86    1.72    1.65 

 

(1)The pro forma combined book value per share of CB common stock is based upon the pro forma combined common shareholders’stockholders’ equity for CB and FedFirstFirst West Virginia divided by total pro forma common shares of the combined entity. The combined pro forma common shareholders’ equity for CB and FedFirst as of December 31, 2013 was $78,898,000. The total pro forma common shares of the combined entity are 4,224,049.
(2)Includes a specialThe pro forma combined cash dividend of $0.25 per share.
(3)Assumesinformation assumes continuation of CB’s historical dividend.

MARKET PRICE AND DIVIDEND INFORMATION

Currently, CB common stock is quoted on the OTC Markets under the symbol “CBFV.” FedFirst common stock is quotedtraded on the Nasdaq Capital Market under the symbol “FFCO.“CBFV. First West Virginia common stock is quoted on the OTCQX under the symbol “FWVB.” The closing sale price reported for CB common stock on November 15, 2017, the last trading day before the proposed merger was publicly announced, was $30.44 and the closing price for First West Virginia common stock on such date was $21.90. The following table lists the high and low sales prices per share for CB common stock and FedFirstFirst West Virginia common stock and the dividends declared for the periods indicated.

 

   FedFirst Common Stock   CB Common Stock 
   High   Low   Dividends   High   Low   Dividends 

Quarter Ended

            

September 30, 2014 (through                     , 2014)

  $            $            $            $            $            $          

June 30, 2014

   22.20     20.06     0.08     20.75     19.50     0.21  

March 31, 2014

   21.75     19.48     0.31     19.70     19.70     0.21  

December 31, 2013

   20.49     19.00     0.06     19.75     19.75     0.21  

September 30, 2013

   19.45     18.50     0.06     19.91     19.91     0.21  

June 30, 2013

   19.75     17.50     0.06     19.00     18.75     0.21  

March 31, 2013

   23.00     16.07     0.04     20.30     20.30     0.21  

December 31, 2012

   16.58     15.00     0.29     19.50     19.00     0.42  

September 30, 2012

   15.25     14.20     0.04     19.00     19.00     —    

June 30, 2012

   14.31     13.58     0.04     18.75     18.75     0.42  

March 31, 2012

   14.00     13.20     0.03     21.45     21.45     —    
   CB Common Stock   First West Virginia Common Stock 
   High   Low   Dividends   High   Low   Dividends 

Quarter Ended

            

March 31, 2018 (through February 15, 2018)

  $31.90   $29.05   $   $29.20   $27.65   $ 

December 31, 2017

   31.50    27.52    0.22    28.25    21.00    0.20 

September 30, 2017

   29.60    25.50    0.22    21.50    19.65    0.20 

June 30, 2017

   28.90    25.10    0.22    21.50    20.10    0.20 

March 31, 2017

   29.40    25.10    0.22    21.45    18.60    0.20 

December 31, 2016

   26.90    22.30    0.22    22.00    18.00    0.20 

September 30, 2016

   23.40    21.21    0.22    18.70    17.50    0.20 

June 30, 2016

   22.17    19.72    0.22    20.00    17.35    0.20 

March 31, 2016

   22.90    19.05    0.22    20.00    17.12    0.20 

You should obtain current market quotationsprices for CB common stock because the market price of CB common stock will fluctuate between the date of this document and the date on which the merger is completed, and thereafter. You can obtain these quotations from a newspaper, on the Internet or by calling your broker.

As of , 2014,February 16, 2018, there were approximately 518 holders of record of CB common stock. As of , 2014,February 16, 2018, there were approximately 202 holders of record of FedFirstFirst West Virginia common stock. These numbers do not reflect the number of persons or entities who may hold their stock in nominee or “street name” through brokerage firms.

Following the merger, the declaration of dividends will be at the discretion of CB’s board of directors and will be determined after consideration of various factors, including earnings, cash requirements, the financial condition of CB, applicable federal and state law and government regulations, and other factors deemed relevant by the CB board of directors. All dividends on CB common stock are declared at the discretion of the CB board of directors. See the sections of this joint proxy statement/prospectus entitled “Comparative Per Share Data” and “Market Price and Dividend Information” for more information.

SPECIAL MEETING OF FEDFIRSTCB STOCKHOLDERS

This joint proxy statement/prospectus is being provided to holders of FedFirstCB common stock as FedFirst’sCB’s proxy statement in connection with the solicitation of proxies by and on behalf of its board of directors to be voted at the special meeting of FedFirstCB stockholders to be held on , 2014,April 11, 2018, and at any adjournment or postponement of the special meeting. This proxy statement/prospectus is also being provided to you as CB’s prospectus in connection with the offer and sale by CB of its shares of common stock as a result of the proposed merger.

Date, Place and Time of the Meeting

FedFirst’sCB’s board of directors is sending you this document for the purpose of requesting that you allow your shares of FedFirstCB common stock to be represented at the special meeting by the persons named in the enclosed proxy card. The special meeting will be held at the Hampton Inn, 227 Greene Plaza, Waynesburg, Pennsylvania at :                 .m.4:00 p.m., local time, on , 2014.April 11, 2018.

Matters to be Considered

At the special meeting, the FedFirstCB board of directors will ask you to vote on a proposal to approve the merger agreement and a proposalthe transactions contemplated thereby, including the issuance of CB common stock to approve the Merger-Related Executive Compensation.First West Virginia stockholders. You also may be asked to vote on a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the meeting to approve the merger agreement.

Who Can Vote at the Meeting

You are entitled to vote if the records of FedFirstCB showed that you held shares of FedFirstCB common stock as of the close of business on , 2014.February 28, 2018. As of the close of business on that date, a total of 4,096,452 shares of FedFirstCB common stock were issued and outstanding. Each share of FedFirstCB common stock has one vote. If you are a beneficial owner of shares of FedFirstCB common stock held by a broker, bank or other nominee (i.e., in “street name”) and you want to vote your shares in person at the meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.

Quorum; Vote Required

The special meeting will conduct business only if a majority of the outstanding shares of FedFirstCB common stock entitled to vote (a “quorum”) is represented in person or by proxy at the meeting. If you return valid proxy instructions or attend the meeting in person, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting. Brokernon-votes also will be counted for purposes of determining the existence of a quorum. A brokernon-vote occurs when a broker, bank or other nominee holding shares of FedFirstCB common stock for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

Approval of the merger agreement and the transactions contemplated thereby will require the affirmative vote of a majority of the votes cast at a meeting of CB stockholders at which a quorum is present. The affirmative vote of a majority of the votes cast at a meeting at which a quorum is present is also required to approve the proposal to adjourn the meeting, if necessary, to permit further solicitation of proxies on the proposal to approve the merger agreement. Brokernon-votes and abstentions from voting will have no effect on these matters.

Shares Held by CB’s Officers and Directors

As of February 16, 2018, directors and executive officers of CB beneficially owned 432,474 shares of CB common stock, excluding shares that may be acquired upon the exercise of stock options. This equals 10.6% of the issued and outstanding shares of CB common stock.

Voting and Revocability of Proxies

You may vote in person at the special meeting or by proxy. To ensure your representation at the special meeting, CB recommends that you vote by proxy even if you plan to attend the special meeting in person. You can always change your vote at the special meeting.

CB stockholders whose shares are held in “street name” by their broker, bank or other nominee must follow the instructions provided by their broker, bank or other nominee to vote their shares. Your broker or bank may allow you to deliver your voting instructions via telephone or Internet.

Voting instructions are included on your proxy form. If you properly complete and timely submit your proxy, your shares will be voted as you have directed. You may vote for, against, or abstain with respect to the approval of the merger agreement and the transactions contemplated thereby. If you are the record holder of your shares of CB common stock and submit your proxy without specifying a voting instruction, your shares will be voted“FOR” the approval of the merger agreement proposal and“FOR” the proposal to adjourn the meeting, if necessary, to permit further solicitation of proxies on the proposal to approve the merger

agreement. CB’s board of directors unanimously recommends a vote“FOR” the approval of the merger agreement proposal and“FOR” the approval of the proposal to adjourn the meeting, if necessary, to permit further solicitation of proxies on the proposal to approve the merger agreement.

You may revoke your proxy before it is voted by:

filing with CB’s Corporate Secretary a duly executed revocation of proxy;

submitting a new proxy at a later date; or

voting in person at the special meeting.

Attendance at the special meeting will not, in and of itself, constitute a revocation of a proxy. Address written notices of revocation and other communication with respect to the revocation of proxies to:

Deborah Sabocheck, Corporate Secretary

CB Financial Services, Inc.

100 North Market Street

Carmichaels, Pennsylvania 15320

If any matters not described in this document are properly presented at the special meeting, the persons named in the proxy card will use their own judgment to determine how to vote your shares. CB does not know of any other matters to be presented at the meeting.

Solicitation of Proxies

This proxy solicitation is made by the board of directors of CB. Proxies will be solicited through the mail. Additionally, officers and directors of CB may solicit proxies personally or by telephone or other means of communication, without additional compensation. CB has also engaged Alliance Advisors LLC, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of $7,000, plus per item fees and reimbursement of reasonableout-of-pocket expenses. CB will reimburse banks, brokers and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding the proxy materials to beneficial owners of CB common stock.

CB Proposals

CB PROPOSAL NO. 1 – CB MERGER AGREEMENT PROPOSAL

CB is asking its stockholders to approve the merger agreement and the transactions contemplated thereby, including the issuance of CB common stock to First West Virginia stockholders. Holders of CB common stock should read this joint proxy statement/prospectus carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus asAppendix A.

After careful consideration, the CB board of directors, by a unanimous vote of all directors, approved the merger agreement and the transactions contemplated thereby, including the issuance of CB common stock to First West Virginia stockholders, and determined the merger, including the issuance of CB common stock, to be advisable and in the best interests of CB and the stockholders of CB. See “Description of the Merger—CB’s Reasons for the Merger; Recommendation of CB’s Board of Directors” included elsewhere in this joint proxy statement/prospectus for a more detailed discussion of the CB board of director’s recommendation.

CB’s board of directors unanimously recommends a vote “FOR” the CB merger agreement proposal.

CB PROPOSAL NO. 2 – CB ADJOURNMENT PROPOSAL

If, at the CB special meeting, the number of shares of CB common stock present or represented and voting in favor of the CB merger proposal is insufficient to approve the CB merger proposal, CB intends to move to adjourn the CB special meeting in order to enable CB’s board of directors to solicit additional proxies for approval of the merger proposal. In that event, CB will ask its stockholders to vote upon the CB adjournment proposal, but not the CB merger proposal. If it is deemed necessary to adjourn the special meeting, no notice of the adjourned meeting is required to be given to stockholders, other than an announcement at the special meeting of the time and place to which the meeting is adjourned, unless a new record date is fixed for the adjourned meeting, in which case notice of the place, date and time of adjourned meeting shall be given to persons who are stockholders as of the new record date.

CB is asking its stockholders to authorize the holder of any proxy solicited by the CB board of directors on a discretionary basis to vote in favor of adjourning the CB special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from CB stockholders who have previously voted.

CB’s board of directors unanimously recommends a vote “FOR” the CB adjournment proposal.

SPECIAL MEETING OF FIRST WEST VIRGINIA STOCKHOLDERS

This joint proxy statement/prospectus is being provided to holders of First West Virginia common stock as First West Virginia’s proxy statement in connection with the solicitation of proxies by and on behalf of its board of directors to be voted at the special meeting of First West Virginia stockholders to be held on April 11, 2018, and at any adjournment or postponement of the special meeting. This joint proxy statement/prospectus is also being provided to First West Virginia stockholders as CB’s prospectus in connection with the offer and sale by CB of its shares of common stock to be issued as consideration in the merger.

Date, Place and Time of the Meeting

First West Virginia’s board of directors is sending you this document for the purpose of requesting that you allow your shares of First West Virginia common stock to be represented at the special meeting by the persons named in the enclosed proxy card. The special meeting will be held at First West Virginia’s corporate office at 590 National Road, Wheeling, West Virginia at 11:00 a.m., local time, on April 11, 2018.

Matters to be Considered

At the special meeting, the First West Virginia board of directors will ask you to vote on a proposal to approve the merger agreement. You also may be asked to vote on a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the meeting to approve the merger agreement.

Who Can Vote at the Meeting

You are entitled to vote if the records of First West Virginia showed that you held shares of First West Virginia common stock as of the close of business on February 28, 2018. As of the close of business on that date, a total of 1,718,730 shares of First West Virginia common stock were issued and outstanding. Each share of First West Virginia common stock has one vote. If you are a beneficial owner of shares of First West Virginia common stock held by a broker, bank or other nominee (i.e., in “street name”) and you want to vote your shares in person at the meeting, you will have to get a written proxy in your name from the broker, bank or other nominee who holds your shares.

Quorum; Vote Required

The special meeting will conduct business only if a majority of the outstanding shares of First West Virginia common stock entitled to vote (a “quorum”) is represented in person or by proxy at the meeting. If you return valid proxy instructions or attend the meeting in person, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting. Brokernon-votes also will be counted for purposes of determining the existence of a quorum. A brokernon-vote occurs when a broker, bank or other nominee holding shares of First West Virginia common stock for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

Approval of the merger agreement will require the affirmative vote of the holders of a majority of the outstanding shares of FedFirst common stock entitled to vote at the meeting. Failure to return a properly executed proxy card or to vote in person will have the same effect as a vote against the merger agreement. Broker non-votes and abstentions from voting will have the same effect as a vote against the merger agreement.

Approval of the Merger-Related Executive Compensation proposal is determined by a majority of the votes cast. Broker non-votes and abstentions from voting will have no effect on this matter.

cast at a meeting of First West Virginia stockholders at which a quorum is present. The affirmative vote of the majority of votes cast by holders of FedFirst common stockat a meeting at which a quorum is present is also required to approve the proposal to adjourn the meeting, if necessary, to permit further solicitation of proxies on the proposal to approve the merger agreement. Brokernon-votes and abstentions from voting will have no effect on this matter.these matters.

Shares Held by FedFirst’sFirst West Virginia’s Officers and Directors

As of , 2014,February 16, 2018, directors and executive officers of FedFirstFirst West Virginia beneficially owned 270,444 shares of FedFirstFirst West Virginia common stock, excluding shares that may be acquired upon the exercise of stock options. This equals     %representing 15.74% of the issued and outstanding shares of FedFirstFirst West Virginia common stock. FedFirst’sFirst West Virginia’s directors who collectively own     % of FedFirst’s issued and outstanding common stock, have entered into voting agreements with CB to vote allan aggregate of 256,669 shares of FedFirstFirst West Virginia common stock owned by themover which they have sole voting power, representing 14.93% of the issued and outstanding shares of First West Virginia common stock, in favor of the proposal to approvemerger agreement at the merger agreement.special meeting.

Voting and Revocability of Proxies

You may vote in person at the special meeting or by proxy. To ensure your representation at the special meeting, FedFirstFirst West Virginia recommends that you vote by proxy even if you plan to attend the special meeting. You can always change your vote at the special meeting.

FedFirstFirst West Virginia stockholders whose shares are held in “street name” by their broker, bank or other nominee must follow the instructions provided by their broker, bank or other nominee to vote their shares. Your broker or bank may allow you to deliver your voting instructions via the telephone or the Internet.

Voting instructions are included on your proxy form. If you properly complete and timely submit your proxy, your shares will be voted as you have directed. You may vote for, against, or abstain with respect to the approval of the merger agreement the Merger-Related Executive Compensation proposal and the adjournment proposal. If you are the record holder of your shares of FedFirstFirst West Virginia common stock and submit your proxy without specifying a voting instruction, your shares will be voted “FOR” the proposal to approve the merger agreement “FOR” the proposal to approve the Merger-Related Executive Compensation and “FOR” the proposal to adjourn the meeting, if necessary, to permit further solicitation of proxies on the proposal to approve the merger agreement. FedFirst’sFirst West Virginia’s board of directors unanimously recommends a voteFOR approval of the merger agreement “FOR” the Merger-Related Executive Compensation, and “FOR” approval of the proposal to adjourn the meeting if necessary to permit further solicitation of proxies on the proposal to approve the merger agreement.

You may revoke your proxy before it is voted by:

 

filing with FedFirst’sFirst West Virginia’s Corporate Secretary a duly executed revocation of proxy;

 

submitting a new proxy withat a later date; or

 

voting in person at the special meeting.

Attendance at the special meeting will not, in and of itself, constitute a revocation of a proxy. AllAddress written notices of revocation and other communication with respect to the revocation of proxies should be addressed to:

Jennifer L. George,Deborah A. Kloeppner, Corporate Secretary

FedFirst Financial CorporationFirst West Virginia Bancorp, Inc.

565 Donner1701 Warwood Avenue

Monessen, Pennsylvania 15062Wheeling, West Virginia 26003

If any matters not described in this document are properly presented at the special meeting, the persons named in the proxy card will use their own judgment to determine how to vote your shares. FedFirstFirst West Virginia does not know of any other matters to be presented at the meeting.

Participants in the ESOP or 401(k) Plan

If you participate in the First Federal Savings Bank Employee Stock Ownership Plan (the “ESOP”) or if you hold shares through the First Federal Savings Bank Retirement Plan (the “401(k) Plan”), you will receive a voting instruction form for each plan that reflects all shares you may direct the trustees to vote on your behalf under the plans. Under the terms of the ESOP, the ESOP trustee votes all shares held by the ESOP, but each ESOP participant may direct the trustee how to vote the shares of common stock allocated to his or her account. The ESOP trustee, subject to the exercise of its fiduciary duties, will vote all unallocated shares of FedFirst common stock held by the ESOP and allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions. Under the terms of the 401(k) Plan, a participant is entitled to direct the trustee as to the shares in the FedFirst Financial Corporation Stock Fund credited to his or her account. The trustee will vote all shares for which no directions are given or for which instructions were not timely received in the same proportion as shares for which the trustee received voting instructions. The deadline for returning your voting instructions to each plan’s trustee is                      , 2014.

Solicitation of Proxies

This proxy solicitation is made by the board of directors of FedFirst. FedFirst has paid the cost and expenses incurred in the production of this proxy statement. Proxies will be solicited through the mail.First West Virginia. Additionally, officers and directors of FedFirstFirst West Virginia may solicit proxies personally or by telephone or other means of communication, without additional

compensation. FedFirstFirst West Virginia has also engaged Alliance Advisors, LLC, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of $7,500,$6,000, plus per item fees and reimbursement of reasonableout-of-pocket expenses. FedFirstFirst West Virginia will reimburse banks, brokers and other custodians, nominees and fiduciaries for their reasonable expenses in forwarding the proxy materials to beneficial owners of FedFirstFirst West Virginia common stock.

First WestVirginia Proposals

FIRST WEST VIRGINIA PROPOSAL NO. 1 – FIRST WEST VIRGINIA MERGER PROPOSAL

First West Virginia is asking its stockholders to approve the merger agreement. Holders of First West Virginia common stock should read this joint proxy statement/prospectus carefully and in its entirety, including the appendices, for more detailed information concerning the merger agreement and the merger. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Appendix A.

After careful consideration, the First West Virginia board of directors, by a unanimous vote of all directors, approved the merger agreement and declared the merger agreement and the transactions contemplated thereby, including the merger, to be advisable and in the best interests of First West Virginia and the stockholders of First West Virginia. See “Description of the Merger—First West Virginia’s Reasons for the Merger; Recommendation of First West Virginia’s Board of Directors” included elsewhere in this joint proxy statement/prospectus for a more detailed discussion of the First West Virginia board of director’s recommendation.

First West Virginia’s board of directors unanimously recommends a vote “FOR” the First West Virginia merger proposal.

FIRST WEST VIRGINIA PROPOSAL NO. 2 – FIRST WEST VIRGINIA ADJOURNMENT PROPOSAL

If, at the First West Virginia special meeting, the number of shares of First West Virginia common stock present or represented and voting in favor of the First West Virginia merger proposal is insufficient to approve the First West Virginia merger proposal, First West Virginia intends to move to adjourn the First West Virginia special meeting in order to enable First West Virginia’s board of directors to solicit additional proxies for approval of the merger proposal. In that event, First West Virginia will ask its stockholders to vote upon the First West Virginia adjournment proposal, but not the First West Virginia merger proposal. If it is deemed necessary to adjourn the special meeting, no notice of the adjourned meeting is required to be given to stockholders, other

than an announcement at the special meeting of the time and place to which the meeting is adjourned, unless the date of the adjourned meeting is more than 120 days after the date of the original meeting, in which case the board of directors must fix a new record date for the adjourned meeting and notice of the place, date and time of the adjourned meeting will be given to persons who are stockholders as of the new record date.

First West Virginia is asking its stockholders to authorize the holder of any proxy solicited by the First West Virginia board of directors on a discretionary basis to vote in favor of adjourning the First West Virginia special meeting to another time and place for the purpose of soliciting additional proxies, including the solicitation of proxies from First West Virginia stockholders who have previously voted.

First West Virginia’s board of directors unanimously recommends a vote “FOR” the First West Virginia adjournment proposal.

APPRAISAL RIGHTS OF FIRST WEST VIRGINIA STOCKHOLDERS

If you hold one or more shares of First West Virginia common stock, First West Virginia has concluded that you are entitled to appraisal rights under West Virginia law, meaning you have the right to demand that the fair value of your shares of First West Virginia common stock be appraised and paid to you in cash. The appraised fair value of your First West Virginia common stock may be more or less than the value of the consideration you would receive under the merger agreement. If you are contemplating exercising your appraisal rights, we urge you to read carefully the provisions of Sections31D-13-1301 through31D-13-1331 of the WVBCA, which are attached to this joint proxy statement/prospectus asAppendix D, and to consult with your legal counsel before electing or attempting to exercise these rights. The following discussion describes the steps you must take if you want to exercise your appraisal rights, but is qualified in its entirety by reference to the full text of the law. You should read this summary and the full text of the law carefully.

How to Exercise and Perfect Your Appraisal Rights

To be eligible to exercise your appraisal rights:

you must deliver to First West Virginia, before the First West Virginia special meeting, written notice of your intent to exercise your appraisal rights and demand payment for the fair value of your shares if the merger is completed; and

you must not vote, or cause or permit to be voted, any of your shares of First West Virginia common stock in favor of the merger agreement at the First West Virginia special meeting.

If you intend to exercise your appraisal rights, send your written notice, before the First West Virginia special meeting, to First West Virginia at the following address:

First West Virginia Bancorp, Inc.

1701 Warwood Avenue

Wheeling, West Virginia 26003

Attention: Deborah A. Kloeppner, Corporate Secretary

If you fail to deliver written notice of your intent to exercise your appraisal rights, or if you vote in favor of the merger agreement at the First West Virginia special meeting, you will lose your appraisal rights and you will instead receive shares of CB common stock and/or cash as described in the merger agreement.

Appraisal Notice and Form

If you comply with the requirements described above under “—How to Exercise and Perfect Your Appraisal Rights” and the merger is completed, CB will send you a written appraisal notice and form advising you that the merger has been completed. CB must deliver this notice to you within ten days after the merger is completed.

If you wish to pursue your appraisal rights and receive the fair value of your shares of First West Virginia common stock in cash, you must complete the form, which will require you to certify (i) whether you acquired such shares of First West Virginia common stock before the date upon which the principal terms of the merger were first announced to First West Virginia stockholders, and (ii) that you did not vote in favor of the merger agreement. The appraisal notice and form will specify the date that you must return the completed form to CB, which date will not be fewer than 40 or more than 60 days after the date the appraisal notice and form are sent. If you fail to return the executed form to CB by the deadline specified, you will be deemed to have waived the right to demand appraisal with respect to your shares of First West Virginia common stock.

The appraisal notice and form will also include information such as CB’s estimate of the fair value of your shares of First West Virginia common stock, instructions for submitting the certificates representing your shares of First West Virginia common stock for appraisal and payment, instructions on how to withdraw from the appraisal process should you change your mind and a copy of Sections31D-13-1301 through31D-13-1331 of the WVBCA.

Payment of CB’s Estimate of the Fair Value of Your Shares

Within 30 days after the deadline for returning your executed appraisal form to CB, if you have properly completed and returned the form to CB and deposited any certificates representing your shares of First West Virginia common stock with CB, CB must pay to you in cash the amount that it estimates to be the fair value of your shares of First West Virginia common stock, plus interest. The payment must be accompanied by financial statements of First West Virginia, a statement of CB’s estimate of the fair value of your shares, and information regarding your right to demand further payment.

If you are dissatisfied with the amount of CB’s estimated fair value of your shares, you must notify CB in writing of your own estimate of the fair value of your shares and demand payment of that amount within 30 days of receiving CB’s payment. If you do not make a demand for further payment within the time period specified, you will be deemed to have accepted the payment in full satisfaction of your appraisal rights.

After-Acquired Shares

If you fail to certify in the appraisal form that you did not acquire your shares of First West Virginia common stock before the date on which the principal terms of the merger were first announced to First West Virginia stockholders, CB may elect to withhold payment of the estimated fair value of your “after-acquired” shares. If CB elects to withhold payment from you, it must, within 30 days after the deadline for returning the appraisal form to CB, provide you with financial statements of First West Virginia and offer to pay you its estimate of the fair value of your shares. You will have the opportunity to either:

(1)accept CB’s offer to pay you its estimate of the fair value of your shares, plus interest, in full satisfaction of your appraisal rights, in which case you must notify CB of your acceptance within 30 days after receiving CB’s offer and CB must pay you its estimate of the fair value of your shares within 10 days after receiving your acceptance; or

(2)reject CB’s offer and demand payment of your own stated estimate of the fair value of your shares, in writing, within 30 days after receiving CB’s offer.

If you fail to either accept CB’s offer or to reject its offer and notify it in writing of your demand to be paid your own estimate of the fair value of your shares within 30 days after receiving the offer, you will be deemed to have accepted CB’s offer and CB must pay you its estimate of the fair value of your shares within 40 days after the date it sent you its offer.

Appraisal of the Fair Value of Your Shares

If you have made a timely, written demand to CB for payment of your own estimate of the fair value of your shares of First West Virginia common stock, within 60 days of receiving your demand, CB must either (i) pay to you in cash the amount of your estimate of the fair value of your shares, plus interest, or (ii) commence a proceeding and petition the court to determine the fair value of your shares and accrued interest. CB will make all stockholders whose demands remain unsettled parties to the proceeding.

The court may appoint one or more appraisers to receive evidence and recommend a decision on the question of fair value. Stockholders demanding appraisal rights will be entitled to the same discovery rights as parties in a civil proceeding, but there is no right to a jury trial.

Each holder of First West Virginia common stock made a party to the proceeding that has already received a payment from CB will be entitled to the amount, if any, by which the court finds the fair value of a share of First West Virginia common stock exceeds the amount paid by CB. Each holder of “after-acquired” shares of First West Virginia common stock, who have not yet received any payment from CB, will be entitled to the fair value of their shares, plus interest, as determined by the court.

CB will be responsible for the costs of the proceeding, including the compensation and expenses of appraisers appointed by the court, except that the court may assess costs against some or all of the stockholders demanding appraisal if the court finds that they acted arbitrarily, vexatiously or not in good faith with respect to the exercise of their appraisal rights. The court may also assess fees and expenses of counsel and experts for the respective parties if, for example, it finds that First West Virginia or CB did not satisfy the requirements of Sections31D-13-1301 through31D-13-1331 of the WVBCA, or that one of the parties acted other than in good faith.

Rights as a Stockholder

Once you deposit the certificates representing your shares of First West Virginia common stock with CB or, in the case of uncertificated shares, return the executed appraisal form to CB (described above under “—Appraisal Notice and Form), you will lose all rights as a stockholder, unless you subsequently and timely withdraw from the appraisal process by following the instructions contained in the appraisal notice and form.

Once you lose all rights as a stockholder, you will not be entitled to vote, receive dividends or distributions, or exercise any other rights as a First West Virginia stockholder, except for the right to receive payment for your shares and to bring appropriate legal action to obtain relief on the grounds that (i) the merger was not completed pursuant to the requirements of the WVBCA or the requirements of First West Virginia’s articles of incorporation or bylaws, or (ii) the merger was procured as a result of fraud or material misrepresentation. Unless the merger fails to adhere to the requirements of the WVBCA or First West Virginia’s articles of incorporation bylaws, or there is fraud or material misrepresentation, your appraisal rights constitute the exclusive remedy for the recovery of the value of your shares or money damages with respect to the merger.

However, if CB fails to make a payment required pursuant to your appraisal rights under Sections31D-13-1301 through31D-13-1331 of the WVBCA, you may sue CB directly for the amount owed and, to the extent you are successful, will be entitled to recover all costs and expenses of bringing the suit, including fees and expenses of counsel.

Withdrawal from the Appraisal Process

Once you have deposited the certificates representing your shares of First West Virginia common stock with CB or, in the case of uncertificated shares, returned the executed appraisal forms to CB (described above under “—Appraisal Notice and Form), you may withdraw from the appraisal process until the deadline specified in the appraisal notice and form, which will be a date within 20 days of the deadline to return the executed forms to CB. If you fail to withdraw from the appraisal process by such date, you may not withdraw without CB’s consent.

Termination of Appraisal Rights

If you do not perfect your appraisal rights, if you withdraw from the appraisal process, or if you are otherwise unsuccessful in asserting your appraisal rights, your right to have the fair value of your shares of First West Virginia common stock appraised and paid to you in cash will cease, and you will be entitled to receive the same consideration received by other First West Virginia stockholders in the merger. Your status as a stockholder will be restored and you will be entitled to receive any dividends or distributions made after the date of your payment demand.

DESCRIPTION OF THE MERGER

The following is a summary of the material terms of the merger agreement. A copy of the merger agreement is attached asAnnexAppendix A to this document and is incorporated by reference into this document.joint proxy statement/prospectus. We urge you to read carefully this entire document, including the merger agreement and the other appendices, as this summary may not contain all of the information that you consider important.

General

The merger agreement provides for the merger of FedFirstFirst West Virginia with and into CB, with CB as the surviving entity. FollowingImmediately following the merger, Progressive Bank, the wholly-owned subsidiary of First West Virginia, will merge with and into Community Bank, the wholly-owned subsidiary of CB, with Community Bank as the surviving entity. CB will remain the bank holding company for Community Bank.

Background of the Merger

Since completing its conversion from the mutual holding company form of organization to the stock holding company form of organization in 2010, FedFirst’sFirst West Virginia’s board of directors and seniorexecutive management haveperiodically review and assess First West Virginia’s business strategies and objectives, including strategic opportunities and challenges, and consider various strategic options potentially available to First West Virginia. The goal of these discussions is to explore avenues to maintain First West Virginia’s competitiveness, increase profitability and enhance long-term value for First West Virginia stockholders. Additionally, from time to time, engaged in reviews and discussions of long-term strategies and objectives and have considered ways to enhance FedFirst’s performance and prospects in light of competitive and other relevant developments, all with the goal of enhancing shareholder value. These reviews have included periodic discussions with respect to potential transactions that would further FedFirst’s strategic objectives, including the possible acquisition of other banks by FedFirst, and the potential benefits and risks of any such transactions, as well as comparisons of potential transactions with the execution of long-term strategies as an independent company.

In January 2013, Patrick G. O’Brien, President andChairman, Chief Executive Officer and President of FedFirst,First West Virginia, William G. Petroplus, has been contacted by representatives of other financial institutions, including CB, to inquire about First West Virginia’s interest in a merger transaction. Mr. Petroplus informed the First West Virginia board of directors of these preliminary inquiries, but such discussions did not result in proposals that the board could recommend to First West Virginia’s stockholders.

On April 1, 2016, members of the board of directors of First West Virginia and members of the board of directors of CB met withinformally at a third party location to discuss the two companies, community banking in their respective markets, each company’s strategic goals and each company’s commitment to its respective communities and employees. Barron P. McCune, Jr., PresidentVice Chairman and Chief Executive Officer of CB, atand Patrick G. O’Brien, Senior Executive Vice President and Chief Operating Officer of CB, made a presentation about CB, its financial performance and its recent transaction with FedFirst Financial Corporation. CB and First West Virginia management agreed to keep in touch regarding opportunities for the companies to work together in the future.

On April 5, 2017, Mr. McCune’s invitation.Petroplus received a letter from Messrs. McCune and O’Brien indicating that CB was interested in pursuing discussions with First West Virginia. The April 5, 2017 letter enclosed a copy of a CB investor presentation from February 2017 that included information about CB’s financial performance, stock performance, markets and strategic vision. Mr. Petroplus delivered copies of the April 5, 2017 letter and the enclosed presentation to all members of the First West Virginia board of directors.

On May 9, 2017, the First West Virginia board of directors appointed Mr. Petroplus and directors Nada E. Beneke, Rosalie J. Dlesk and Thomas L. Sable to serve on the board’s mergers and acquisitions committee.

Throughout the second quarter of 2017, Mr. Petroplus and Messrs. McCune and O’Brien continued a dialogue regarding the two companies’ business and Mr. McCune, who knew each other asstrategic goals. On June 1, 2017, First West Virginia entered into a resultnondisclosure agreement with CB.

On April 20, 2017, a representative of Mr. O’Brien having workedD.A. Davidson, a financial advisor, met with Mr. McCune at Community Bank from 1987 through 1993Petroplus to discuss D.A. Davidson’s services and qualifications, as well as at several non-profit, community-based organizations from 1987 through the present, discussed their respective institutionsrecent merger and market areas. Mr. McCune suggested that they consideracquisition activity. The parties engaged in a high-level conversation about a possible business combination involving First West Virginia. At its regularly scheduled board meeting on August 8, 2017, the board of their two institutions, but no price or other terms were offered or discussed at this meeting.directors of First West Virginia approved the engagement of D.A. Davidson as its financial advisor with respect to a potential business combination involving First West Virginia. On August 10, 2017, First West Virginia and D.A. Davidson executed an engagement letter.

In February 2013, Mr. O’Brien and John LaCarte, chairman ofOn August 21, 2017, the FedFirst board of directors met with representatives of Mufson Howe Hunter, acting as FedFirst’s financialD.A. Davidson and with First West Virginia’s legal counsel, Bowles Rice LLP (“Bowles Rice”), to gain a better understanding of the board’s role and the role that each advisor to examine the current M&A marketcould play in the bank and thrift industry and review the financial characteristicsprocess of a possible business combination between CB and FedFirst. On March 26, 2013, representatives of Mufson Howe Hunter reviewed similar information with the FedFirst board of directors. The FedFirst board of directors observed that there were many compelling strategic business reasons for a combination with CB, including their complementary market areas and similar corporate cultures. However, because FedFirst was precluded by regulation from taking any action in furtherance of a business combination, as it was still within three years of its second step conversion transaction, FedFirst did not pursue a transaction with CB or any other company at that time.

On August 8, 2013, the FedFirst board of directors met to discuss itsevaluating First West Virginia’s strategic alternatives. Representatives of Mufson Howe Hunter were present atBowles Rice advised the meeting, as was a representative of Kilpatrick Townsend & Stockton LLP, outside legal counsel to FedFirst. Representatives of Mufson Howe Hunter reviewed withboard about the directors bank and thrift stock market trends; compared key balance sheet and profitability metrics of FedFirst to those of comparable companies in Pennsylvania; examined FedFirst’s historical and projected financial performance; provided an update on the M&A market in the bank and thrift industry; reviewed with the directors the financial characteristics of a possible business combination between CB and FedFirst; and identified potential acquirors of FedFirst, evaluated their likely interest, and analyzed their capacity to pay based on certain transaction assumptions. Legal counsel reviewed with the directors theirdirectors’ fiduciary duties in the context of a business combination with another company.

On September 24, 2013, after the third anniversary of FedFirst’s second step conversion, the FedFirst board of directors again met to consider strategic alternatives. As part of its evaluation, the FedFirst board of directors, together with Mufson Howe Hunter, analyzed the institutions in or near FedFirst’s market area and identified those institutions, in addition to CB, as likely to have the greatest interest in a business combination with FedFirst. In identifying these institutions, the FedFirst board of directors considered the institutions that had previously expressed a possible interest in a transaction with FedFirst. Representatives of Mufson Howe Hunter reviewed with the directors financial information about potential merger partners, examined valuation metrics in comparable M&A transactions, and analyzed potential M&A values for FedFirst. At the conclusion of the meeting, the FedFirst board of directors authorized Mufson Howe Hunter to contact three selected parties

regarding their interest in a possible business combination with FedFirst. In opting to contact the three selected companies, the FedFirst board of directors determined that the business risks resulting from awareness in the local banking community of FedFirst’s interest in a business combination outweighed the benefit of contacting additional companies that were unlikely to have the interest or ability to complete a transaction with FedFirst.

The FedFirst board of directors authorized management to prepare a confidential information memorandum to share with the three selected banks. The confidential information memorandum contained financial and other information that was intended to permit the selected companies to evaluate FedFirst and formulate a preliminary proposal.

In late September and into early October 2013, management of FedFirst worked with Mufson Howe Hunter to prepare and circulate the confidential information memorandum, subject to obtaining a non-disclosure agreement from each of the recipients.

By mid-October 2013, FedFirst had received responses from each of the three companies. One company (Bank A) indicated that it had a strategic interest in acquiring FedFirst, given the location of FedFirst in relation to its markets. Of the other two companies, the first did not have a strong interest in FedFirst’s market area and indicated that it would rather focus on other transactions that might be more meaningful to it. The second of the other two companies also did not have a strong interest in FedFirst’s market area, but indicated that it might be willing to proceed with a transaction that would value FedFirst at or around book value, although its preference was to focus on finding a transaction that would be more meaningful to it.

The FedFirst board of directors met on October 22, 2013. Representatives of Mufson Howe Hunter were at the meeting and updated the directors on the response from the three banks that had been contacted by Mufson Howe Hunter. Mufson Howe Hunter reviewed with the directors the financial characteristics of a transaction with Bank A based on the value and type of merger consideration and assumptions about the extent of expense reductions, provided an overview of Bank A, and examined projected returns for FedFirst on a standalone basis and as combined with Bank A. After evaluating the information presented by Mufson Howe Hunter, the FedFirst board of directors determined to move forwardconnection with a potential transaction with Bank A.

In early November 2013, Bank A provided a due diligence document request to FedFirst. In mid-November 2013, following a review of FedFirst’s branch locations and the surrounding communities, Bank A informed FedFirst that it was no longer interested in pursuing a business combination. Because neither of the other two parties contacted by FedFirst had exhibited a strong interest in a business combination with FedFirst and because FedFirst believed that nonetransaction. Representatives of the other parties considered by FedFirst were likely to be more interested in a business combination with FedFirst than CB, FedFirst decided to restart discussions with CB.

In early December 2013, a representative of Mufson Howe Hunter communicated with a representative of Keefe, Bruyette & Woods, Inc., acting as financial advisor to CB, about commencing discussions regarding a possible business combination between the two companies.

On December 16, 2013, Mr. O’Brien and Mr. LaCarte, together with a representative of Mufson Howe Hunter, met with senior officers of CB, two directors of CB and a representative of Keefe, Bruyette & Woods, Inc. The meeting lasted for several hours and the parties discussed a wide range of topics relating to their respective companies, their operations, their strategic visions and the benefits of a combination of the two companies.

At the regular meeting of the FedFirst board of directors held on December 17, 2013, Mr. O’Brien and Mr. LaCarte reported to the other directors on the meeting with CB. The directors approved continuing discussions with CB and on December 27, 2013, the parties entered into a non-disclosure agreement so that they could exchange confidential information.

The parties resumed discussions in early 2014. In January 2014, the representatives of CB and FedFirst spoke frequently and met to jointly tour their respective branch networks and market areas. On January 22, 2014, officers of FedFirst met with officers of CB to discuss cost structures and evaluate opportunities for expense reductions.

On February 14, 2014, CB provided FedFirst with a non-binding letter of interest for a business combination between the two companies. CB proposed the merger of FedFirst into CB valued at $21.80 per share of FedFirst common stock, with the exchange of 65% of the outstanding shares of FedFirst common stock for shares of CB common stock and the remaining 35% exchanged for cash. CB conditioned the transaction on FedFirst purchasing from Mr. Boyer his 20% minority interest in Exchange Underwriters prior to closing.

On February 18, 2014, the FedFirst board of directors held a conference call with representatives of Mufson Howe Hunter and Kilpatrick Townsend to review the letter of interest.

At the regular meeting of the FedFirst board of directors on February 25, 2014, representatives of Mufson Howe Hunter reviewed with the directors an overview of the operations and financial performance of CB, summarized the key terms of the indication of interest, reviewed the assumptions used to analyze the transaction, evaluated the impact of the transaction on CB based on the amount and value of the merger consideration, and analyzed projected returns of FedFirst on a standalone basis and combined with CB Financial. The FedFirst board of directors discussed the proposed revisions to the letter of interest that it would require, the most significant of which was an increase in the value of the merger consideration.

On February 27, 2014, FedFirst delivered its mark-up of the letter of interest and communicated its view on the value of the merger consideration, which was that the merger consideration should be increased to a value of $23.00 per share. On March 6, 2014, CB agreed to increase the value of the merger consideration to $23.00 per share, and on March 7, 2014 delivered a revised letter of interest. During the course of negotiations, the parties discussed the number and identity of the FedFirst directors that would be appointed to CB’s board of directors. In its revised letter of interest, CB invited Messrs. LaCarte, Swiatek, O’Brien and Boyer to join CB’s board of directors based on their long-standing tenure with FedFirst, their experience and the active roles they have played in the management and affairs of FedFirst over the years. During the course of negotiations, the parties also discussed the method of calculating the exchange ratio and agreed that the exchange ratio would be determined at the time of signing the definitive merger agreement by dividing $23.00 by the volume-weighted average price of CB common stock over the prior 20 trading-day period. CB did not agree to FedFirst’s request to reduce the termination fee from 5% of the transaction value to 4% of the transaction value, but did agree to make the termination fee reciprocal.

At a meeting held on March 10, 2014, representatives of Mufson Howe HunterD.A. Davidson provided an overview of recent discussions with CB’sacquisition activity in the financial advisorservices industry and reviewed withassessed First West Virginia’s performance compared to its peers in the FedFirstregion, including a detailed analysis of First West Virginia’s loan composition, deposit composition, net charge-offs and reserves and credit quality migration. Finally, representatives of D.A. Davidson advised the board that, based upon D.A. Davidson’s assessment of the recent acquisition activity and First West Virginia’s profile, the board could reasonably expect that shares of First West Virginia common stock could be valued by a potential acquirer in the $24.00 to $26.00 per share range. This assessment was prepared prior to the market-wide increase in financial institution stock prices during late 2017, driven in part by anticipated passage of federal tax relief legislation. The board of directors authorized executive management and D.A. Davidson to proceed with the revised letternegotiations concerning a business combination with CB.

Throughout September, D.A. Davidson coordinated with First West Virginia’s senior management in establishing an electronic data room containing extensive information about First West Virginia.

On September 24, 2017, D.A. Davidson received a verbal, unsolicited expression of interest.

interest concerning a potential acquisition of First West Virginia from another financial institution, Company A. The FedFirstinformal expression of interest, which was subject to the completion of applicable due diligence, indicated that Company A could pay $28.00 to $30.00 per share of First West Virginia common stock in an all stock or mostly stock transaction. Company A was willing to consider offering board of directors met again on March 11, 2014 via teleconference. Representatives of Mufson Howe Hunter discussedseats to First West Virginia’s directors. On September 25, 2017, D.A. Davidson’s representative relayed the timing and method of calculating the exchange ratio that would be contained in the definitive agreement and confirmed that CB would not increase the nominal valuesubstance of the merger consideration above $23.00 per share. Following discussioncommunication from Company A to representatives of Bowles Rice and consultationto Mr. Petroplus. After discussions with legal counsel, the FedFirst board of directors voted to accept the letter of interest.

Over the next weeks the parties conducted their respective due diligence investigations, including diligence meetings on March 22Mr. Petroplus and 23, 2014. As part of its diligence efforts, both parties conducted a detailed review of loan files and CB engaged an independent third party specializing in the review of financialBowles Rice, D.A. Davidson informed Company A’s investment banker that First West Virginia was already pursuing discussions with another institution, asset quality to assist CB in its review of FedFirst’s loan portfolio.

On March 28, 2014, Luse Gorman Pomerenk & Schick, PC, special counsel for CB delivered an initial draft of the merger agreement. Over the ensuing days, the parties negotiatedbut the terms of the merger agreement and ancillary documents. In particular, the parties negotiated the various representations and warranties toCompany A’s informal expression of interest would be made by each of them, the terms of the covenants that restrict the activities of the parties pending completion of the merger, including the “no-shop” provision that restricts the ability of FedFirst to seek alternative transaction proposals, the treatment of various employee benefit plans and agreements, and the expense limitation on director and officer liability insurance. The parties also discussed the details with respectsubmitted to the composition of CB’sFirst West Virginia board of directors following the merger, agreed thatfor its consideration.

On September 29, 2017, CB would take action to amend its articles of incorporation to eliminate pre-emptive rights in connection with future share issuances, worked out the details with respectreceived access to the purchase ofelectronic data room. On October 9, 2017, the minority interest in Exchange Underwriters, and agreed that the listing of CB common stock on the Nasdaq Stock Market would be a condition to closing.

On April 7, 2014, the FedFirst board of directors met to receive an update on the due diligence process and the status of negotiations of the merger agreement. Management reviewed with the directors the results of its due diligence investigation, including its review of CB’s loan portfolio. On April 13, 2014, the FedFirst board of directors held a special meeting at which members of management and representatives of CB’s financial advisor, KBW, and its legal counsel, Luse Gorman, PC (“Luse Gorman”), were present. Messrs. McCune and O’Brien provided the board with an overview of the potential strategic transaction with First West Virginia, preliminary transaction considerations and an update on the discussions with First West Virginia to date. After discussion, the CB board of directors authorized management to submit anon-binding letter of interest to First West Virginia. On October 10, 2017, CB submitted anon-binding letter of interest to acquire all shares of First West Virginia common stock for $27.75 per share, with fixed merger consideration consisting of 80% CB stock and 20% cash.

On October 11, 2017, First West Virginia’s board held a special meeting to discuss CB’s letter of interest. Representatives from D.A. Davidson presented information about the CB indication of interest as well as information regarding the unsolicited, verbal expression of interest communicated by Company A. The board reviewed the financial performance, stock performance, dividend history, recent transaction history, market position and growth prospects of Company A and CB. Based upon its assessment of how Company A and CB compared with respect to these factors, and the terms offered by CB and conditionsinformally communicated by Company A, the First West Virginia board of directors determined that CB presented the most attractive proposal for First West Virginia’s stockholders. The board of directors unanimously authorized D.A. Davidson to offer a counterproposal to CB’snon-binding letter of interest, requesting $29.00 per share of First West Virginia common stock in merger consideration, the right for First West Virginia stockholders to elect cash and/or stock consideration and an increase in the number of CB director positions for current First West Virginia directors from two to three.

On October 13, 2017, the CB board of directors held a special telephonic meeting at which members of management and representatives of KBW and Luse Gorman participated. Messrs. McCune and O’Brien summarized the terms of First West Virginia’s counter proposal for the board of directors. Representatives of KBW also discussed with the CB board of directors the financial aspects of the proposed mergertransaction. After discussion, the CB board of directors authorized management to submit a revisednon-binding letter of interest to First West Virginia.

On October 13, 2017, CB submitted a revisednon-binding letter of interest in which it increased its offer to $28.50 per share of First West Virginia common stock, agreed to permit First West Virginia’s stockholders to make an election for cash and/or stock consideration and increased the number of CB director positions for current First West Virginia directors from two to three.

On October 13, 2017, the First West Virginia board held a special meeting to consider CB’s revised proposal. Following a discussion involving representatives of D.A. Davidson and Bowles Rice, the First West Virginia board approved the revised proposal from CB and authorized Mr. Petroplus to execute the revisednon-binding letter of interest. Following the meeting, First West Virginia and CB executed a revised letter of interest and agreed to negotiate the definitive agreement and complete due diligence.

During the next several weeks, CB’s team pursued its due diligence investigation and requested additional documentation that was supplied by First West Virginia. On October 28, 2017, representatives of CB met with executive management of First West Virginia at the offices of First West Virginia to conduct their management interviews andon-site document review.

On October 30, 2017, Luse Gorman provided an initial draft of the merger agreement. A representativeagreement and form of Kilpatrick Townsendvoting agreement to Bowles Rice. The voting agreement provided, among other things, that each director and executive officer of First West Virginia vote the shares of First West Virginia common stock over which they have sole voting power in favor of the merger at any meeting of the First West Virginia stockholders held to consider and vote on the merger.

Bowles Rice reviewed in detailthe draft merger agreement with both First West Virginia management and representatives of D.A. Davidson and, following feedback from First West Virginia’s mergers and acquisitions committee, on November 3, 2017, provided comments on the draft merger agreement to Luse Gorman. Mr. Petroplus attended mergers and acquisition committee meetings as a member of First West Virginia management and did not vote on committee actions.

From November 3 through November 16, 2017, First West Virginia and CB, with the assistance of their respective financial and legal advisors, continued to negotiate the terms of the definitive merger agreement and related documentsdocuments. The First West Virginia mergers and acquisitions committee continued to work actively with management and representatives of D.A. Davidson and Bowles Rice to review and analyze the board.various revised drafts of the definitive merger agreement. During this time, First West Virginia

executive management and Bowles Rice also conducted reverse due diligence on CB. In addition, First West Virginia and CB and their respective financial and legal advisors continued to discuss various matters related to the proposed combination of CB and First West Virginia.

On April 11, 2014,November 4, 2017, First West Virginia, through its financial advisor, provided CB with a document request list for its reverse due diligence and was provided with access to an electronic data room containing detailed due diligence information regarding CB. On November 10, 2017, First West Virginia executive management and representatives of D.A. Davidson conducted telephonic management interviews with senior management of CB. Representatives of Bowles Rice participated during portions of these discussions.

On November 14, 2017, First West Virginia’s mergers and acquisitions committee participated in a teleconference with representatives of D.A. Davidson and Bowles Rice to review the CB board of directors met to discuss thefinal terms and conditions of the proposed merger and the most recent version of the merger agreement. RepresentativesFollowing these discussions, the mergers and acquisitions committee voted (with Mr. Petroplus abstaining) to recommend the merger and the merger agreement to the board of Luse Gorman,directors, subject to final negotiation of the exchange ratio for converting shares of First West Virginia common stock into shares of CB common stock. On November 15, 2017, the parties agreed to the final exchange ratio whereby each share of First West Virginia common stock could be exchanged for either $28.50 in cash or 0.9583 shares of CB common stock. Each of CB and First West Virginia and their legal advisors worked to finalize the merger agreement and the related disclosure schedules and transaction documents.

On November 16, 2017, the First West Virginia board of directors held a special counselmeeting to CB, reviewed in detailreview the material terms of the definitivefinal merger agreement and related documents with the board.

On April 14, 2014, the FedFirsttransactions. The First West Virginia board of directors metreceived presentations regarding the proposed merger from representatives of D.A. Davidson and Bowles Rice. Executive management and representatives of D.A. Davidson briefed the First West Virginia board of directors on the results of the due diligence review conducted on CB. Representatives of Bowles Rice updated the First West Virginia board of directors on the negotiations with CB regarding the merger agreement, further advised the First West Virginia board of directors with respect to consider approvalits legal duties and reviewed the material terms of the merger agreement. A representative of Kilpatrick Townsend was present.agreement and related transaction documents. Representatives of Mufson Howe Hunter presented aD.A. Davidson reviewed the financial analysisaspects of the transaction. At the conclusion of its presentation, Mufson Howe Hunter deliveredproposed merger and rendered its oral opinion subsequently(subsequently confirmed in writing,writing) to the First West Virginia board of directors to the effect that, as of the date of its opinion and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by D.A. Davidson as set forth in such opinion, the merger consideration to be received bypaid to the stockholdersholders of FedFirst underFirst West Virginia common stock in the merger agreement iswas fair, from a financial point of view, to the holders of FedFirstFirst West Virginia common stock. The board of directors reviewed the presentation carefully and considered the experience and qualifications of Mufson Howe Hunter. After discussionSee “Description of the transaction,Merger—Opinion of First West Virginia’s Financial Advisor in Connection with the FedFirst board of directors unanimously approved the definitive merger agreement.

Also, on April 14, 2014, the CB board of directors met to consider approval of the merger agreement.Merger” for more information. Representatives of Keefe, Bruyette & Woods, Inc., CB’s financial advisor,D.A. Davidson and CB’s special counsel were present. RepresentativesBowles Rice responded to questions from the directors.

After reviewing D.A. Davidson’s opinion and following further discussion of Keefe, Bruyette & Woods, Inc. presented a financial analysis of the transaction. Representatives of Luse Gorman, special legal counsel to CB, reviewed the changes made to the definitive agreement since the CB board of directors met on April 11, 2014. After discussing the transaction, the CB board of directors unanimously approved the definitive merger agreement.

Thereafter, on Monday afternoon, April 14, 2014, the merger agreement was executed by officers of FedFirst and CB, and FedFirst and CB issued a joint press release announcing the execution of the merger agreement and the terms of the merger, afterand taking into consideration the closematters discussed at the meeting, including the factors described under “Description of the trading markets.

FedFirst’sMerger—First West Virginia’s Reasons for the Merger; Recommendation of FedFirst’sthe First West Virginia Board of Directors,

After careful consideration, at a meeting held on April 14, 2014, the FedFirstFirst West Virginia board of directors unanimously determined that the proposed merger with CB and the related transactions as reflected in the merger agreement includingpresented at the merger and the other transactions contemplated thereby, ismeeting were in the best interests of FedFirstFirst West Virginia and its shareholders andstockholders. The board of directors unanimously (i) approved the merger agreement.

In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement and recommendthe related documents, (ii) approved the submission of the merger agreement to First West Virginia’s stockholders, and (iii) recommended that its shareholders vote “FOR”First West Virginia’s stockholders approve the FedFirst merger proposal,agreement.

On November 16, 2017, the FedFirstCB board of directors consulted with FedFirstalso held a special meeting to review the material terms of the merger agreement and related transactions contemplated thereby. The CB board of directors received presentations from representatives of KBW and Luse Gorman. Executive management as well as its independent financial and legal advisors, and considered a numberbriefed the CB board of factors, includingdirectors on the following material factors:

its knowledgeresults of FedFirst’s business, operations, financial condition, asset quality, earnings, loan portfolio, capital and prospects both as an independent organization, and as a part of a combined company with CB;

its understanding of CB’s business, operations, regulatory and financial condition, asset quality, earnings, capital and prospects taking into account presentations by senior management of itsthe due diligence review conducted on First West Virginia. Representatives of Luse Gorman updated the CB and information furnished by Mufson Howe Hunter;

its belief thatboard of directors on the negotiations with First West Virginia regarding the merger will result in a stronger commercial banking franchise with a diversified revenue stream, strong capital ratios, a well-balanced loan portfolioagreement and an attractive funding base that hasreviewed the potential to deliver a higher value to FedFirst’s shareholders as compared to continuing to operate as a stand-alone entity;

the belief that the two companies share a common vision of the importance of customer service and local decision-making and that management and employees of FedFirst and CB possess complementary skills and expertise, which management believes should facilitate integration and implementation of the transaction;

the expanded possibilities, including organic growth and future acquisitions, that would be available to the combined company, given its larger size, asset base, capital, market capitalization and footprint;

the anticipated pro forma impactmaterial terms of the merger on CB, including potential synergies,agreement and related transaction documents. At this meeting, KBW reviewed the expected impact on financial metrics such as earnings and tangible equity per share, as well as on regulatory capital levels;

the fact that the valueaspects of the proposed merger consideration for holders of FedFirst common stock at $23.00 per share, represents a premium of 15% over the $20.06 closing price of FedFirst common stock on NASDAQ on April 10, 2014, which is the most recent date on which FedFirst common stock traded prior to April 14, 2014;

the financial analyses of Mufson Howe Hunter, FedFirst’s independent financial advisor, and its writtenrendered an opinion dated as of April 14, 2014, delivered to the FedFirstCB board of directors to the effect that, as of thatsuch date and subject to and based on the variousprocedures followed, assumptions considerations,made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in thesuch opinion, the aggregate merger consideration in the proposed merger was fair, from a financial point of view, to FedFirst’s shareholders;CB. See “Description of the Merger—Opinion of CB’s Financial Advisor in Connection with the Merger” for more information. Representatives of KBW and Luse Gorman responded to questions from the directors.

After further discussion of the terms of the merger, and taking into consideration the matters discussed at the meeting, including the factors described under “Description of the Merger—CB’s Reasons for the Merger; Recommendation of the CB Board of Directors,” the CB board determined that the proposed merger with First West Virginia and the related transactions as reflected in the merger agreement presented at the meeting were in the best interests of CB and its stockholders. The board of directors unanimously (i) approved the merger agreement and the related documents, including the issuance of CB common stock to First West Virginia stockholders, (ii) approved the submission of the merger agreement to CB’s stockholders, and (iii) recommended that CB’s stockholders approve the merger.

In the late afternoon on November 16, 2017, CB and First West Virginia executed the definitive merger agreement. Following the closing of the financial markets on November 16, 2017, CB and First West Virginia issued a joint press release publicly announcing the execution of the merger agreement.

CB’s Reasons for the Merger; Recommendation of CB’s Board of Directors

CB’s board of directors believes that the merger is in the best interests of CB and its stockholders. In deciding to approve the merger, CB’s board of directors considered a number of factors, including:

First West Virginia’s compatibility with CB in their community banking orientation, in their reputational standing in the respective communities served, and culturally at the board and executive management levels;

CB executive management’s review of the business, operations, earnings, and financial condition, including capital levels and asset quality, of First West Virginia;

 

the continued participationscale, scope, strength and diversity of FedFirst’s directorsoperations, product lines and management indelivery systems that could be achieved by combining CB and First West Virginia;

the geographic footprint of the combined company throughorganization, which would allow CB’s expansion into new, contiguous markets in West Virginia;

CB’s historic performance in similar markets and management’s familiarity with First West Virginia’s market area;

CB’s record of creating stockholder value in a prior acquisition transaction, its proven experience in successfully integrating an acquired business, and management’s belief that CB will be able to successfully integrate First West Virginia and Progressive Bank;

that the appointmenttransaction is expected to be accretive to CB’s earnings per share;

the pro forma financial effects of four of FedFirst’s directorsthe proposed transaction, including the expected dilution to tangible book value per share;

the anticipated cost savings and enhancement to the CBfuture revenue and earnings growth potential of CB;

the financial presentation, dated November 16, 2017, of KBW to CB’s board of directors and the appointmentopinion, dated November 16, 2017, of Mr. O’BrienKBW to CB’s board of directors to the positioneffect that, as of Executive Vice PresidentNovember 16, 2017, and Chief Operating Officer;

based upon and subject to the fact thatprocedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW, as set forth in the opinion, the aggregate merger consideration consists of a combination of CB common stock and cash and that FedFirst shareholders will be given the opportunity to elect the form of consideration that they wish to receive, giving FedFirst shareholders the opportunity to participate as stockholders of CB in the benefitsproposed merger was fair, from a financial point of view, to CB, as more fully described in the combination andsection of this joint proxy statement/prospectus entitled “—Opinion of CB’s Financial Advisor in Connection with the future performance of the combined company generally;Merger”;

 

CB’s board of directors’ review with management and its legal advisors of the fact that upon completionstructure and other terms of the merger FedFirst shareholders will own approximately 42% of the outstanding shares of the combined company;

the benefits to FedFirst and its customers of operating as a larger organization, including enhancements in products and services, higher lending limits, and greater financial resources;

the increasing importance of operational scale and financial resources in maintaining efficiency and remaining competitive over the long term and in being able to capitalize on technological developments that significantly impact industry competitive conditions;

the expected social and economic impact of the merger on the constituencies served by FedFirst, including its borrowers, customers, depositors, employees, suppliers and communities;

the effects of the merger on other FedFirst employees, including the prospects for continued employment in a larger organization and various benefits agreed to be provided to FedFirst employees;

the board’s understanding of the current and prospective environment in which FedFirst and CB operate, including national and local economic conditions, the interest rate environment, increasing operating costs resulting from regulatory initiatives and compliance mandates, the continued rapid consolidation in the financial services industry and the competitive effectsexpectation of the increased consolidation on smaller financial institutions such as FedFirst;

the perceived limited opportunities for a strategic partnership with another financial institution, at a similar or higher price, having characteristics that would achieve the benefits for FedFirst stockholders that the board believes will be achieved through the merger with CB;

the ability of CB to complete the merger from a financial and regulatory perspective;

the equity interest in the combined company that FedFirst’s existing shareholders will receive in the merger, which allows such shareholders to continue to participate in the future success of the combined company;

the board’s understandingCB’s legal advisors that the merger will qualify as a “reorganization” under Section 368(a)tax-free transaction to First West Virginia’s stockholders for U.S. federal income tax purposes (except with respect to cash received in exchange for whole or fractional shares of the Internal Revenue Code, providing favorable tax consequences to FedFirst’s shareholders in the merger on the stock portion of the merger consideration;First West Virginia common stock); and

 

the board’s review with its independent legal advisor, Kilpatrick Townsend,likelihood of the material terms ofregulators approving the merger agreement, including the board’s ability, under certain circumstances, to withhold, withdraw, qualifywithout burdensome conditions or modify its recommendation to FedFirst’s shareholders and to consider and pursue a better unsolicited acquisition proposal, subject to the potential payment by FedFirst of a termination fee to CB, which the board of directors concluded was reasonable in the context of termination fees in comparable transactions and in light of the overall terms of the merger agreement, as well as the nature of the covenants, representations and warranties and termination provisions in the merger agreement.delays.

The FedFirstCB’s board of directors also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberation of the proposed transaction,merger, including, without limitation, the following:

 

the potential risk of diverting management attention and resources from the operation of FedFirst’sCB’s business and towards the completion of the merger;

the restrictions on the conduct of FedFirst’s business prior to the completion of the merger, which are customary for public company merger agreements involving financial institutions, but which, subject to specific exceptions, could delay or prevent FedFirst from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of FedFirst absent the pending merger;

 

the potential risks associated with achieving anticipated cost synergies and savings, and successfully integrating FedFirst’sFirst West Virginia’s business, operations and workforce with those of CB;

 

the transaction-related restructuring charges and other merger-related costs;costs, including the payments and other benefits to be received by First West Virginia management;

 

the factrisk that the interests of certain of FedFirst’s directors and executive officers may be different from, or in addition to, the interests of FedFirst’s other shareholders as described under the heading “—Interests of FedFirst’s Directors and Executive Officers in the Merger”;

that while CB has agreed to list its common stock on the Nasdaq Stock Market, an active and liquid trading market in CB common stock may not develop;

the fact that CB is not currently subject to the public reporting requirements of the Exchange Act and that CB will incur significant time and expense complying with federal securities laws as a public company;

that, while FedFirst expects that the merger will be consummated, there can be no assurance that all conditions to the parties’ obligations to complete the merger agreement willmay not be satisfied, including the risk that necessary regulatory approvals or the FedFirst shareholder approvalapprovals might not be obtained and, as a result, the merger may not be consummated;

the risk of potential employee attrition and/or adverse effects on business and customer relationships as a result of the pending merger;

the fact that: (i) FedFirst would be prohibited from affirmatively soliciting acquisition proposals after execution of the merger agreement; and (ii) FedFirst would be obligated to pay to CB a termination fee if the merger agreement is terminated under certain circumstances, which may discourage other parties potentially interested in a strategic transaction with FedFirst from pursuing such a transaction; and

 

the other risks described in this joint proxy statement/prospectus under the heading “Risk Factors.”

The foregoing discussion of the information and factors considered by the FedFirstWhile CB’s board of directors is not intended to be exhaustive, but includes the materialconsidered these and other factors, considered by the FedFirst board of directors. In reaching its decision to approveincluding risks and uncertainties in connection with the merger, agreement, the merger and the other transactions contemplated by the merger agreement, the FedFirst board of directors did not quantify or assign any specific or relative weights to the factors considered and did not make any determination with respect to any individual directors may have given different weights to different factors. The FedFirstfactor. CB’s board of directors considered all these factors as a whole, including discussionscollectively made its determination with and questioning of FedFirst’s management and FedFirst’s independent financial and legal advisors, and overall consideredrespect to the merger based on the conclusion reached by its members, based on the factors to be favorable to,that each of them considered appropriate, that the merger is in the best interests of CB and to support, its determination.

FedFirst’s board of directors unanimously recommends that FedFirst’s shareholders vote “FOR” the approvalstockholders. The terms of the merger proposal, “FOR”were the compensation proposalresult ofarm’s-length negotiations between representatives of CB and “FOR” the adjournment proposal. FedFirst shareholders should be aware that FedFirst’s directors and executive officers have interests in the merger that are different from, or in addition to, thoserepresentatives of other FedFirst shareholders. The FedFirst board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, and in recommending that the merger proposal be approved by the shareholders of FedFirst. See “—Interests of FedFirst’s Directors and Executive Officers in the Merger.”First West Virginia.

This summary of the reasoning of FedFirst’s board of directors and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under the heading “Cautionary Note Regarding Forward-Looking Statements.”

Opinion of FedFirst’sCB’s Financial Advisor in Connection with the Merger

In January 2014, FedFirstCB engaged Mufson Howe HunterKBW to render financial advisory and investment banking services to FedFirst. Mufson Howe Hunter agreedCB, including an opinion to assist FedFirst in assessingthe CB board of directors as to the fairness, from a financial point of view, to CB of the exchange ratio and cashaggregate merger consideration (collectivelyin the “Merger Consideration”) to be received by the common shareholders of FedFirst pursuantproposed merger. CB selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the terms of the merger agreement with CB. FedFirst selected Mufson Howe Hunter on the basis of Mufson Howe Hunter’s experience and expertise in representing community banks in similar transactions, particularly in Western Pennsylvania. In the ordinary coursemerger. As part of its investment banking business, Mufson Howe HunterKBW is continually engaged in the valuation of financial institutionsservices businesses and their securities in connection with mergers and acquisitions and other corporate transactions.acquisitions.

As part of its engagement, representatives of Mufson Howe Hunter attendedKBW participated telephonically in the meeting of the FedFirst Board of DirectorsCB board held on April 14, 2014,November 16, 2017 at which the FedFirst Board of DirectorsCB board evaluated the proposed merger with CB.merger. At this meeting, Mufson Howe HunterKBW reviewed the financial aspects of the proposed merger and rendered an opinion to the CB board of directors to the effect that, as of such date the Merger Consideration offeredand subject to FedFirst common shareholders in the merger was fair, from a financial point of view. The FedFirst Board approved the merger agreement at this meeting.

The full text of Mufson Howe Hunter’s written opinion is attached asAnnex B to this document and is incorporated herein by reference. Mufson Howe Hunter has consented to the inclusion of its opinion in this document. FedFirst shareholders are

urged to read the opinion in its entirety for a description of the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Mufson Howe Hunter. KBW as set forth in such opinion, the aggregate merger consideration in the proposed merger was fair, from a financial point of view, to CB. The CB board approved the merger agreement at this meeting.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of suchthe opinion, which is attached asAppendix B to this document and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.

Mufson Howe Hunter’sKBW’s opinion speaks only as of the date of the opinion. The opinion iswas for the information of, and was directed to, the FedFirst Board and addressesCB board (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, to the FedFirst common shareholders of the Merger Considerationaggregate merger consideration in the proposed merger.merger to CB. It doesdid not address the underlying business decision of CB to proceedengage in the merger or enter into the merger agreement or constitute a recommendation to the CB board in connection with the merger, and it does not constitute a recommendation to any FedFirst shareholderholder of CB common stock or any stockholder of any other entity as to how the shareholder shouldto vote at the FedFirst special meeting onin connection with the merger or any related matter.other matter (including, with respect to holders of First West Virginia common stock, what election any such stockholder should make with respect to the stock consideration or the cash consideration), nor does it constitute a recommendation as to whether or not any such stockholder should enter into a voting, stockholders’, affiliates’ or other agreement with respect to the merger or exercise any dissenters’ or appraisal rights that may be available to such stockholder.

KBW’s opinion was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

In rendering itsconnection with the opinion, Mufson Howe HunterKBW reviewed, analyzed and relied upon information bearing upon the financial and operating condition of CB and First West Virginia and information bearing upon the merger, including, among other things:

 

a draft of the merger agreement;agreement, dated November 15, 2017 (the most recent draft then made available to KBW);

 

certain publicly availablethe audited financial statements and other historical financial information of FedFirst that was deemed relevant;

certain publicly available financial statements and other historical financial information of CB that was deemed relevant;

internal financial projectionsthe Annual Reports on Form10-K for FedFirst prepared by and reviewed with management of FedFirst;

internal financial projections for CB prepared by and reviewed with managementthe three fiscal years ended December 31, 2016, of CB;

 

the pro formaunaudited quarterly financial impact ofstatements and Quarterly Reports on Form10-Q for the merger on CB, based on assumptions related to transaction expenses, accounting adjustments,fiscal quarters ended March 31, 2017, June 30, 2017 and cost savings determined by and discussed with senior managementSeptember 30, 2017 of CB;

 

publicly reportedthe audited financial statements and the Annual Report on Form10-K for the fiscal year ended December 31, 2014 and the audited financial statements for the two fiscal years ended December 31, 2016 of First West Virginia;

the unaudited quarterly financial statements for the fiscal quarters ended March 31, 2017, June 30, 2017 and September 30, 2017 of First West Virginia;

certain regulatory filings of the respective subsidiaries of CB and First West Virginia, including the quarterly call reports filed with respect to each quarter during the three years ended December 31, 2016 and the quarters ended March 31, 2017, June 30, 2017 and September 30, 2017;

certain other interim reports and other communications of CB and First West Virginia to their respective stockholders; and

other financial information concerning the businesses and operations of CB and First West Virginia that was furnished to KBW by CB and First West Virginia or that KBW was otherwise directed to use for purposes of its analysis.

KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:

the historical price and trading activity for FedFirstcurrent financial position and results of operations of CB common stock, including and First West Virginia;

the assets and liabilities of CB and First West Virginia;

the nature and terms of certain other merger transactions and business combinations in the banking industry;

a comparison of certain financial and stock market information for FedFirstof CB and CBcertain financial information of First West Virginia with similar information for certain other companies, the securities of which were publicly traded companies;traded;

 

financial and operating forecasts and projections of First West Virginia with respect to fiscal years 2017 and 2018 that were prepared by, and provided to KBW and discussed with KBW by, First West Virginia management, and assumed First West Virginia growth rates with respect to periods thereafter that were provided to and discussed with KBW by CB management, all of which information was used and relied upon by KBW, based on such discussions, at the direction of CB management and with the consent of the CB board;

publicly available consensus “street estimates” of CB, as well as assumed CB long-term growth rates provided to KBW by CB management, all of which information was discussed with KBW by such management and used and relied upon by KBW at the direction of such management and with the consent of the CB board; and

estimates regarding certain pro forma financial termseffects of certain recent business combinationsthe merger on CB (including without limitation the potential cost savings and related expenses expected to result or be derived from the merger) that were prepared by CB management, provided to and discussed with KBW by such management, and used and relied upon by KBW at the direction of such management and with the consent of the CB board.

KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the banking industry togenerally. KBW also participated in discussions that were held with the extent publicly available;managements of CB and

such other information, financial studies, analyses and investigations and financial, economic and market criteria as we considered relevant.

Mufson Howe Hunter also held discussions with members of senior management of FedFirst and CB First West Virginia regarding theirthe past and current business operations, regulatory relations, financial conditions,condition and future prospects of their respective companies.companies and such other matters as KBW deemed relevant to its inquiry.

In conducting its review and arriving at its opinion, Mufson Howe HunterKBW relied upon and assumed the accuracy and completeness of all of the financial and other information that was provided to themit or otherwise publicly available. Mufson Howe Hunteravailable and KBW did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or accuracy. Mufson Howe Huntercompleteness. KBW relied upon the management of FedFirst andFirst West Virginia, with the consent of CB, as to the reasonableness and achievability of the financial and operating forecasts and projections of First West Virginia with respect to fiscal years 2017 and 2018 (and the assumptions and bases therefore) providedtherefor) referred to Mufson Howe Hunter,above, and Mufson Howe HunterKBW assumed that such forecasts and projections reflectedwere reasonably prepared and represented the best currently available estimates and judgments of such management, and that such forecasts and projections willwould be realized in the amounts and in the time periods estimated by such managements.

Mufson Howe Huntermanagement. KBW further relied upon CB management as to the reasonableness and achievability of the assumed long-term growth rates of First West Virginia, the publicly available consensus “street estimates” of CB, the assumed long-term growth rates of CB, and the estimates regarding certain pro forma financial effects of the merger on CB, all as referred to above (and the assumptions and bases for all such information, including, without independent verification,limitation, the cost savings and related expenses expected to result or be derived from the merger), and KBW assumed that all such information was reasonably prepared and represented, or in the case of the publicly available consensus “street estimates” of CB referred to above that such estimates were consistent with, the best currently available estimates and judgments of CB management and that the aggregate allowance for loanforecasts, projections and lease losses for FedFirstestimates reflected in such information would be realized in the amounts and CB are adequate to cover those losses. Mufson Howe Hunter did not make or obtain any evaluation or appraisalsin the time periods estimated.

It is understood that the portion of the property, assetsforegoing financial information of CB and liabilities of FedFirst and CB, nor did it examine any individual credit files.

The projections furnished to Mufson Howe Hunter and used by it in certain of its analyses were prepared by FedFirst and CB’s senior management teams. FedFirst and CB do not publicly disclose internal management projections of the typeFirst West Virginia that was provided to Mufson Howe Hunter in connectionand discussed with its review of the merger. As a result, such projections wereKBW was not prepared with a view towardsthe expectation of public disclosure. The projections weredisclosure, that all of the foregoing financial information, including the publicly available consensus “street estimates” of CB referred to above, was based on numerous variables and assumptions whichthat are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions. Accordingly,conditions and that, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with the projections.

respective managements of CB and First West Virginia, that all such information provided a reasonable basis upon which KBW could form its opinion and KBW expressed no view as to any such information or the assumptions or bases therefor. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

For purposesKBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either CB or First West Virginia since the date of the last financial statements of each such entity that were made available to KBW. KBW is not an expert in the independent verification of the adequacy of allowances for loan losses and KBW assumed, without independent verification and with CB’s consent, that the aggregate allowances for loan losses for CB and First West Virginia are adequate to cover such losses. In rendering its opinion, Mufson Howe HunterKBW did not make or obtain any evaluations or appraisals or physical inspection of the properties, assets or liabilities (contingent or otherwise) of CB or First West Virginia, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of CB or First West Virginia under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, KBW assumed that,no responsibility or liability for their accuracy.

KBW assumed, in all respects material to its analyses:analyses, that:

 

the merger willand any related transactions (including the subsidiary bank merger) would be completed substantially in accordance with the terms set forth in the merger agreement;agreement (the final terms of which KBW assumed would not differ in any respect material to its analyses from the draft version of the merger agreement that had been reviewed) with no adjustments to the aggregate merger consideration and with no other consideration or payments in respect of First West Virginia common stock;

 

the representations and warranties of each party in the merger agreement and in all related documents and instruments relatedreferred to in the merger agreement arewere true and correct;

 

each party to the merger agreement and allor any of the related documents willwould perform all of the covenants and agreements required to be performed by such party under such documents;

 

there are no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the merger or any related transaction (including the subsidiary bank merger) and all conditions to the completion of the merger willand any related transaction would be satisfied without any waivers and modifications;or modifications to the merger agreement or any related documents; and

 

in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger and any related transactions (including the subsidiary bank merger), no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, willwould be imposed that willwould have a material adverse effect on the future results of operations or financial condition of CB, First West Virginia or the combinedpro forma entity, or the contemplated benefits of the merger, including without limitation the cost savings revenue enhancements and related expenses expected to result or be derived from the merger.

Mufson Howe Hunter furtherKBW assumed that the merger willwould be accounted for usingconsummated in a manner that complied with the acquisition method under generally acceptedapplicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of CB that CB relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting principles, and thatregulatory matters with respect to CB, First West Virginia, the merger will qualifyand any related transaction (including the subsidiary bank merger), and the merger agreement. KBW did not provide advice with respect to any such matters.

KBW’s opinion addressed only the fairness, from a financial point of view, as a tax-free reorganization for United States federal income tax purposes. Mufson Howe Hunter’sof the date of such opinion, is not an expression of anthe aggregate merger consideration in the merger to CB. KBW expressed no view or opinion as to any other terms or aspects of the prices at which sharesmerger or any terms or aspects of FedFirst common stockany related transaction (including the subsidiary bank merger), including without limitation, the form or sharesstructure of the merger (including the form of aggregate merger consideration or the allocation thereof between cash and stock) or any such related transaction, any consequences of the merger or any such related transaction to CB, its stockholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, retention, consulting, voting, support, cooperation, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger, any such related transaction, or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. Developments subsequent to the date of KBW’s opinion may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. For purposes of its analyses, KBW did not incorporate previously publicly-announced proposed changes to U.S. tax laws regarding corporate tax rates. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

the underlying business decision of CB to engage in the merger or enter into the merger agreement;

the relative merits of the merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by CB or the CB board;

any business, operational or other plans with respect to First West Virginia or the pro forma entity that might be contemplated by CB or the CB board or that might be implemented by CB or the CB board subsequent to the closing of the merger;

the fairness of the amount or nature of any compensation to any of CB’s officers, directors or employees, or any class of such persons, relative to any compensation to the holders of CB common stock willor relative to the aggregate merger consideration;

the effect of the merger or any related transaction (including the subsidiary bank merger) on, or the fairness of the consideration to be received by, holders of any class of securities of CB, First West Virginia or any other party to any transaction contemplated by the merger agreement;

any election by holders of First West Virginia common stock to receive the cash consideration or the stock consideration or any combination thereof, or the actual allocation among such holders between cash and stock (including, without limitation, any reallocation thereof as a result of proration or otherwise pursuant to the merger agreement) or the relative fairness of the cash consideration and the stock consideration;

whether CB has sufficient cash, available lines of credit or other sources of funds to enable it to pay the aggregate cash consideration to the holders of First West Virginia common stock at the closing of the merger;

the actual value of CB common stock to be issued in the merger;

the prices, trading range or volume at which CB common stock would trade following the public announcement of the merger or actual valuefollowing the consummation of the shares of common stockmerger;

any advice or opinions provided by any other advisor to any of the combined company when issued pursuantparties to the merger or any other transaction contemplated by the prices at which the sharesmerger agreement; or

any legal, regulatory, accounting, tax or similar matters relating to CB, First West Virginia, any of common stocktheir respective stockholders, or relating to or arising out of or as a consequence of the combined company will trade followingmerger or any related transaction (including the completion ofsubsidiary bank merger), including whether or not the merger.

merger would qualify as atax-free reorganization for U.S. federal income tax purposes.

In performing its analyses, Mufson Howe HunterKBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditionconditions and other matters, which are beyond the control of Mufson Howe Hunter, FedFirstKBW, CB and CB.First West Virginia. Any estimates contained in the analyses performed by Mufson Howe HunterKBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the Mufson Howe HunterKBW opinion was among several factors taken into consideration by the FedFirstCB board in making its determination to approve the merger agreement and the merger.transactions contemplated thereby, including the merger and the issuance of CB common stock. Consequently, the analyses described below should not be viewed as determinative of the decision of the FedFirstCB board with respect to the fairness of the aggregate merger consideration. The type and amount of consideration payable in the merger were determined through negotiation between CB and First West Virginia and the decision of CB to enter into the merger agreement was solely that of the CB board.

The following is a summary of the material financial analyses presented by Mufson Howe HunterKBW to the FedFirstCB board on April 14, 2014, in connection with its fairness opinion. The summary is not a complete description of the financial analyses underlying the Mufson Howe Hunter opinion or the presentation made by Mufson Howe HunterKBW to the FedFirstCB board, but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Mufson Howe HunterKBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. The financial analyses summarized below include information presented in tabular format. Accordingly, Mufson Howe HunterKBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion. The tables alone do not constitute a complete description

For purposes of the financial analyses described below, KBW utilized an implied transaction value for the proposed merger of $49.7 million, or $29.04 per outstanding share of First West Virginia common stock, consisting of the sum of (i) the implied value of the stock consideration of 0.9583 of a share of CB common stock, based on the closing price of CB common stock on November 15, 2017 multiplied by 80%, and must be read together(ii) the cash consideration of $28.50 per share multiplied by 20%. In addition to the financial analyses described below, KBW reviewed with the accompanying text.CB board of directors for informational purposes, among other things, the implied transaction value for the proposed merger of $29.04 per outstanding share of First West Virginia common stock as multiples of First West Virginia’s latest 12 months (“LTM”) ended September 30, 2017 earnings per share (“EPS”) and First West Virginia’s estimated 2017 and 2018 EPS using financial forecasts and projections of First West Virginia provided by First West Virginia. These implied transaction multiples for the proposed merger were greater than 30.0x.

CB Selected Companies Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of CB to ten selected banks and thrifts that were listed on NASDAQ, the New York Stock Exchange or NYSE MKT and headquartered in Pennsylvania with total assets between $250 million and $1.5 billion. Merger targets were excluded from the selected companies.

The selected companies were as follows:

Citizens & Northern Corporation

Mid Penn Bancorp, Inc.

DNB Financial Corporation

Norwood Financial Corp.

Emclaire Financial Corp

Penns Woods Bancorp, Inc.

Fidelity D & D Bancorp, Inc.

Prudential Bancorp, Inc.

Malvern Bancorp, Inc.

WVS Financial Corp.

To perform this analysis, KBW used profitability data and other financial information as of, or for the period ended, September 30, 2017 and market price information as of November 15, 2017. KBW also used 2017 and 2018 EPS estimates taken from consensus “street estimates” of CB and the three selected companies for which consensus “street estimates” were publicly available. Certain financial data prepared by Mufson Howe Hunter, andKBW, as referenced in the following tables presented below, may not correspond to the data presented in FedFirst’s and CB’s historical financial statements, or the data prepared by First West Virginia’s financial advisor presented under the section entitled “Description of the Merger—Opinion of First West Virginia’s Financial Advisor in Connection with the Merger,” as a result of the different periods, assumptions and methods used by Mufson Howe HunterKBW to compute the financial data presented.

Summary In the case of Proposal. Pursuant toMid Penn Bancorp, Inc., the terms of the Agreement, each outstanding share of common stock, par value $0.01 per share, of FedFirst will be converted into the right to receive 1.1590 shares of common stock, par value $0.416 per

share, of CB or $23.00 in cash. Based on CB’s 20 trading day volume weighted average price at the close on April 11, 2014, one trading day before the announcement of the transaction, of $19.8449, the Merger Consideration represented a price of $23.00 per share to FedFirst’s common shareholders.

Selected Comparable Companies Analyses.Using publicly available information, Mufson Howe Hunter compared the financial conditionassets, capital ratios, loan/deposit ratio, market capitalization and market performance of FedFirstprice to selected publicly traded thrifts headquartered in Ohio, Pennsylvania and West Virginia with assets between $250 million and $750 million. The table below sets forth the data for FedFirst and for the companies included in the comparable company analysis as well as the high, low, mean and median for the comparable group. The financial data is as of and for the twelve months ended December 31, 2013 and the market data is as of April 11, 2014.

 Institution Location Total
Assets
($000)
  TCE/
TA
(%)
  NPAs/
Assets
(%)
  Reserves/
NPAs
(%)
  ROAA
(%)
  ROAE
(%)
  NIM
(%)
  Eff.
Ratio
(%)
  Price/
LTM
EPS
(x)
  Price/
Tang.
Book
(%)
  Payout
Ratio
(%)
  Yield
(%)
 

 Malvern Bancorp Inc (MLVF)

 Paoli, PA  594,041    12.56    1.18    68.96    (2.99  (21.51  2.49    102.2    NM    90.2    NM    NA  

 Cheviot Financial (CHEV)

 Cheviot, OH  587,110    13.90    2.58    11.22    0.24    1.43    2.86    75.8    49.3    88.3    171.4    3.5  

 Prudential Bancorp Inc. (PBIP)

 Philadelphia, PA  525,187    24.84    1.30    34.51    0.36    2.40    2.58    82.0    53.6    78.0    NM    NA  

 Standard Financial Corp (STND)

 Monroeville, PA  432,101    15.09    0.55    176.62    0.67    3.81    2.94    71.6    18.5    87.4    17.8    1.0  

 Alliance Bancorp of Penn (ALLB)

 Broomall, PA  425,502    16.49    2.24    44.62    0.32    1.80    3.36    79.4    53.4    98.7    69.0    1.3  

 Wayne Savings Bancshares (WAYN)

 Wooster, OH  410,293    9.01    1.63    42.11    0.51    5.24    3.18    77.9    15.7    87.3    44.4    2.8  

 Perpetual Federal Savings Bank (PFOH)

 Urbana, OH  346,785    17.57    4.65    28.86    1.16    6.92    3.21    38.2    11.4    77.1    41.9    3.8  

 WVS Financial Corp. (WVFC)

 Pittsburgh, PA  314,033    10.28    0.20    35.14    0.29    2.55    1.52    74.8    31.0    75.0    42.1    1.4  

 Polonia Bncp, Inc. (PBCP)

 Huntingdon Valley, PA  305,583    13.19    1.50    30.06    (0.09  (0.60  3.13    98.5    NM    87.0    NM    NA  

 Central Federal Corp. (CFBK)

 Fairlawn, OH  255,748    8.94    4.26    52.60    (0.39  (4.04  2.46    123.4    NM    104.5    NM    NA  

 ASB Financial Corp. (ASBN)

 Portsmouth, OH  253,993    9.24    2.51    29.83    0.64    7.72    3.30    75.0    12.0    107.3    68.6    5.7  
             

 FedFirst Financial Corp. (FFCO)

 Monessen, PA  319,027    15.92    1.54    67.39    0.73    4.28    3.42    70.8    22.0    93.4    53.8    1.2  

Ranking (12) Institutions

    4    6    3    2    4    1    2    5    4    4    7  
             
   High    24.84    4.65    176.62    1.16    7.72    3.42    123.4    53.6    107.3    171.4    5.7  
   Median    13.54    1.59    38.62    0.34    2.47    3.03    76.9    22.0    87.9    49.1    2.1  
   Average    13.92    2.01    51.83    0.12    0.83    2.87    80.8    29.7    89.5    63.6    2.6  
   Low    8.94    0.20    11.22    (2.99  (21.51  1.52    38.2    11.4    75.0    17.8    1.0  

Additionally, using publicly available information, Mufson Howe Hunter compared the financial condition and market performance of CB to selected publicly traded banks headquartered west of Harrisburg, Pennsylvania and east of Cleveland, Ohio with assets between $400 million and $900 million. The following table sets forth the data for CB and for the companies included in the comparable company analysis as well as the high, low, mean and median for the comparable group. The financial data is as of and for the twelve months ended December 31, 2013 and the market data is as of April 11, 2014.

 Institution Location Total
Assets
($000)
  TCE/
TA
(%)
  NPAs/
Assets
(%)
  Reserves/
NPAs
(%)
  ROAA
(%)
  ROAE
(%)
  NIM
(%)
  Eff.
Ratio
(%)
  Price/
LTM
EPS
(x)
  Price/
Tang.
Book
(%)
  Payout
Ratio
(%)
  Yield
(%)
 

 1st Summit Bncp Johnstown Inc. (FSMK)

 Johnstown, PA  869,045    7.20    0.24    260.77    1.07    13.95    3.20    54.7    10.7    150.9    11.5    2.1  

 Somerset Trust Holding Company (SOME)

 Somerset, PA  831,562    7.84    0.60    147.61    1.25    14.55    4.31    68.0    9.7    149.9    22.8    2.6  

 Middlefield Banc Corp. (MBCN)

 Middlefield, OH  647,090    7.59    2.29    47.59    1.06    13.17    3.85    59.4    7.8    112.7    30.0    3.8  

 Kish Bancorp Inc. (KISB)

 Reedsville, PA  630,081    6.21    1.34    70.30    0.69    9.81    3.04    84.2    11.2    117.1    NA    4.4  

 Cortland Bancorp (CLDB)

 Cortland, OH  556,918    8.89    1.32    51.17    0.33    3.61    3.41    77.2    27.1    96.4    30.8    1.1  

 Emclaire Financial Corp. (EMCF)

 Emlenton, PA  525,842    6.80    1.24    74.95    0.73    7.73    3.40    70.0    13.4    127.2    42.9    3.5  

 Northumberland Bancorp (NUBC)

 Northumberland, PA  488,663    8.62    0.31    165.53    0.87    9.82    2.65    67.9    10.0    97.5    22.7    2.3  

 Juniata Valley Financial Corp. (JUVF)

 Mifflintown, PA  448,782    10.71    1.55    32.92    0.89    8.07    3.53    70.4    19.5    162.3    92.6    4.8  

 CBT Financial Corp. (CBTC)

 Clearfield, PA  439,049    5.38    0.50    146.33    0.61    6.01    3.53    79.4    12.0    125.0    50.8    4.1  

 Hamlin B&TC (HMLN)

 Smethport, PA  434,006    16.71    0.14    434.58    1.44    8.74    3.52    49.5    NA    133.7    NA    3.8  

 First Community Finl Corp. (FMFP)

 Mifflintown, PA  420,705    8.27    1.97    33.74    1.10    13.60    3.59    58.8    12.4    162.3    31.4    2.4  
             

 CB Financial Services Inc. (CBFV)

 Carmichaels, PA  546,486    7.87    0.78    126.96    0.79    9.48    3.12    68.1    11.5    113.8    48.8    4.3  

Ranking (12) Institutions

    6    6    6    8    7    10    7    6    9    3    3  
             
   High    16.71    2.29    434.58    1.44    14.55    4.31    84.2    27.1    162.3    92.6    4.8  
   Median    7.86    1.01    100.96    0.88    9.65    3.47    68.0    11.5    126.1    31.1    3.6  
   Average    8.51    1.02    132.70    0.90    9.88    3.43    67.3    13.2    129.1    38.4    3.3  
   Low    5.38    0.14    32.92    0.33    3.61    2.65    49.5    7.8    96.4    11.5    1.1  

Recent Transactions Analysis. Mufson Howe Hunter reviewed publicly available information related to 1) 18 selected Nationwide thrift transactions involving institutions with assets between $250 million and $750 million announced since January 1, 2011; 2) 6 selected Pennsylvania, Maryland, Ohio and West Virginia based thrift transactions involving institutions with assets between $250 million and $750 million announced since January 1, 2011; 3) 5 selected Nationwide bank and thrift transactions where the seller had an Equity/Assets ratio greater than 12.00% and a NPAs/Assets ratio less than 1.50% (“Performance-based Group”) announced since January 1, 2011; and 4) 37 Nationwide bank and thrift merger transactions where the acquiror and seller were within $250 million in total assets of each other and each had assets greater than $100 million (“Merger Transactions”) announced since January 1, 2011.

1)Nationwide thrift transactions since 1/1/2011; Assets between $250 million and $750 million:

             SELLER’S FINANCIALS  AT ANNOUNCEMENT: 

 Ann.

 Date

 Comp.
Date
 Buyer ST Seller ST  Total
Assets
($000)
  Equity/
Assets
(%)
  ROAA
(%)
  ROAE
(%)
  NPAs/
Assets
(%)
  Deal
Value
($M)
  Premium/
Market
Value
(%)
  Price/
Tang.
Book
(%)
  Price/
LTM
EPS
(x)
  Price/
Assets
(%)
  Tng
Bk
Prem/
Core
Deps
(%)
 

 04/08/2014

 NA F.N.B. Corp. PA OBA Financial Services Inc  MD    385,555    18.76    0.32    1.7    1.30    98.8    29.5    133.2    NM    25.6    NA  

 01/23/2014

 NA HomeTrust Bancshares Inc. NC Jefferson Bancshares Inc.  TN    498,565    10.69    0.40    3.7    3.46    51.2    22.5    101.0    28.6    12.3    -0.3  

 12/18/2013

 04/01/2014 BNC Bancorp NC South Street Financial Corp.  NC    273,828    8.57    0.16    1.9    NA    25.4    67.7    106.3    41.8    9.3    1.1  

 12/18/2013

 NA First Financial Bancorp. OH First Bexley Bank  OH    295,404    7.69    1.46    18.1    0.71    44.5    NA    185.4    12.1    15.1    9.2  

 05/14/2013

 11/15/2013 Independent Bank Corp. MA Mayflower Bancorp Inc.  MA    261,344    8.66    0.58    6.6    0.36    37.4    67.9    163.5    25.2    14.3    7.2  

 03/05/2013

 09/06/2013 SI Financial Group Inc. CT Newport Bancorp Inc.  RI    449,413    11.83    0.34    3.0    1.17    63.9    6.5    115.8    38.2    14.2    4.1  

 02/06/2013

 05/31/2013 First Financial Bankshares TX OSB Financial Services Inc.  TX    442,832    10.24    1.60    15.5    0.97    57.4    NA    130.0    13.2    13.0    3.8  

 09/10/2012

 05/10/2013 Old Line Bancshares Inc MD WSB Holdings Inc.  MD    373,647    14.76    0.24    1.7    10.04    49.0    NM    88.7    43.7    13.1    -2.8  

 08/02/2012

 01/10/2013 City Holding Co. WV Community Financial Corp.  VA    503,907    10.00    0.35    3.6    7.27    25.0    46.8    65.8    23.9    5.2    -4.1  

 07/19/2012

 11/30/2012 WesBanco Inc. WV Fidelity Bancorp Inc.  PA    665,822    7.83    0.20    2.6    2.96    72.9    82.9    166.7    56.4    11.0    7.1  

 05/01/2012

 11/09/2012 Independent Bank Corp. MA Central Bancorp Inc.  MA    521,350    8.59    0.21    2.3    2.75    54.8    77.3    165.0    NM    10.5    8.4  

 12/22/2011

 07/31/2012 ESSA Bancorp Inc. PA First Star Bancorp Inc.  PA    423,335    6.48    -0.13    -2.0    1.63    24.7    90.2    50.0    NM    7.8    -0.9  

 12/05/2011

 04/03/2012 Beneficial Mutual Bncp (MHC) PA SE Financial Corp.  PA    306,871    8.26    0.16    2.0    3.67    31.8    NM    110.5    NM    10.6    NA  

 08/17/2011

 01/06/2012 Investors Bancorp Inc. (MHC) NJ BFS Bancorp MHC  NY    469,929    8.67    -1.58    -17.7    24.93    10.3    NA    25.3    NM    2.2    -9.5  

 06/06/2011

 10/31/2011 Opus Bank CA RMG Capital Corporation  CA    684,373    6.23    0.05    0.9    3.58    49.2    NM    130.6    47.2    9.8    3.0  

 04/07/2011

 07/12/2011 BancFirst Corp. OK Investor group  NA    264,786    9.53    1.25    12.5    1.40    25.8    NA    102.3    8.3    9.8    0.4  

 03/30/2011

 07/15/2011 Home Bancorp Inc. LA GS Financial Corp.  LA    263,811    10.50    0.15    1.4    4.82    26.4    21.7    95.4    63.6    10.0    -0.8  

 02/11/2011

 05/31/2011 CBM Florida Holding Co. FL First Community Bank Corp.  FL    470,613    5.74    -3.48    -50.2    9.75    10.0    NA    37.0    NM    2.1    -5.5  
                
  MEDIANS   Total Transactions - 18      433,084    8.66    0.23    2.1    2.96    40.9    57.3    108.4    33.4    10.6    0.7  
                
  FedFirst - Implied Transaction Value at $23.00/share     319,027    16.25    0.73    4.3    1.54    54.5    14.7    107.1    25.3    17.1    1.9  

2)PA, MD, OH & WV thrift transactions since 1/1/2011; Assets between $250 million and $750 million:

             SELLER’S FINANCIALS  AT ANNOUNCEMENT: 

 Ann.

 Date

 Comp.
Date
 Buyer ST Seller ST  Total
Assets
($000)
  Equity/
Assets
(%)
  ROAA
(%)
  ROAE
(%)
  NPAs/
Assets
(%)
  Deal
Value
($M)
  Premium/
Market
Value
(%)
  Price/
Tang.
Book
(%)
  Price/
LTM
EPS
(x)
  Price/
Assets
(%)
  Tng
Bk
Prem/
Core
Deps
(%)
 

 04/08/2014

 NA F.N.B. Corp. PA OBA Financial Services Inc  MD    385,555    18.76    0.32    1.7    1.30    98.8    29.5    133.2    NM    25.6    NA  

 12/18/2013

 NA First Financial Bancorp. OH First Bexley Bank  OH    295,404    7.69    1.46    18.1    0.71    44.5    NA    185.4    12.1    15.1    9.2  

 09/10/2012

 05/10/2013 Old Line Bancshares Inc MD WSB Holdings Inc.  MD    373,647    14.76    0.24    1.7    10.04    49.0    NM    88.7    43.7    13.1    -2.8  

 07/19/2012

 11/30/2012 WesBanco Inc. WV Fidelity Bancorp Inc.  PA    665,822    7.83    0.20    2.6    2.96    72.9    82.9    166.7    56.4    11.0    7.1  

 12/22/2011

 07/31/2012 ESSA Bancorp Inc. PA First Star Bancorp Inc.  PA    423,335    6.48    (0.13  (2.0  1.63    24.7    90.2    50.0    NM    7.8    -0.9  

 12/05/2011

 04/03/2012 Beneficial Mutual Bncp (MHC) PA SE Financial Corp.  PA    306,871    8.26    0.16    2.0    3.67    31.8    NM    110.5    NM    10.6    NA  
                
  MEDIANS   Total Transactions - 6      379,601    8.04    0.22    1.9    2.30    46.7    82.9    121.8    43.7    12.0    3.1  
                
  FedFirst - Implied Transaction Value at $23.00/share     319,027    16.25    0.73    4.3    1.54    54.5    14.7    107.1    25.3    17.1    1.9  

3)Nationwide bank & thrift transactions since 1/1/2011; Seller’s Equity/Assets ratio greater than 12.00% and NPAs/Assets ratio less than 1.50% (“Performance-based Group”):

             SELLER’S FINANCIALS  AT ANNOUNCEMENT: 

 Ann.

 Date

 Comp.
Date
 Buyer ST Seller ST  Total
Assets
($000)
  Equity/
Assets
(%)
  ROAA
(%)
  ROAE
(%)
  NPAs/
Assets
(%)
  Deal
Value
($M)
  Premium/
Market
Value
(%)
  Price/
Tang.
Book
(%)
  Price/
LTM
EPS
(x)
  Price/
Assets
(%)
  Tng
Bk
Prem/
Core
Deps
(%)
 

 04/08/2014

 NA F.N.B. Corp. PA OBA Financial Services Inc  MD    385,555    18.76    0.32    1.7    1.30    98.8    29.5    133.2    NM    25.6    NA  

 03/28/2013

 07/22/2013 CBFH Inc. TX VB Texas Inc.  TX    605,611    13.92    0.76    5.5    0.35    76.8    NA    100.0    17.1    NA    NM  

 10/15/2012

 03/15/2013 Pacific Premier Bancorp CA First Associations Bank  TX    356,176    12.87    1.40    11.7    0.00    54.2    NA    118.1    17.7    15.2    2.7  

 04/30/2012

 08/01/2012 PacWest Bancorp CA American Perspective Bank  CA    259,163    16.67    1.14    6.8    1.01    58.1    31.7    131.6    20.3    22.4    9.3  

 12/08/2011

 04/02/2012 ViewPoint Financial Group Inc TX Highlands Bancshares Inc.  TX    507,589    14.01    0.34    2.3    1.11    71.0    NA    119.6    64.3    14.0    3.2  
                
  MEDIANS   Total Transactions - 5      385,555    14.01    0.76    5.5    1.01    71.0    30.6    119.6    19.0    18.8    3.2  
                
  FedFirst - Implied Transaction Value at $23.00/share     319,027    16.25    0.73    4.3    1.54    54.5    14.7    107.1    25.3    17.1    1.9  

4)Nationwide bank and thrift merger transactions since 1/1/2011; Acquiror and seller within $250 million in total assets of each other and each had assets greater than $100 million (“Merger transactions”)

               SELLER’S FINANCIALS  AT ANNOUNCEMENT: 

 Ann.

 Date

 Comp.
Date
 Buyer ST Buyer
Total
Assets
($000)
 Seller ST  Total
Assets
($000)
  Equity/
Assets
(%)
  ROAA
(%)
  ROAE
(%)
  NPAs/
Assets
(%)
  Deal
Value
($M)
  Premium/
Market
Value
(%)
  Price/
Tang.
Book
(%)
  Price/
LTM
EPS
(x)
  Price/
Assets
(%)
  Tng
Bk
Prem/
Core
Deps
(%)
 

 01/27/2014

 NA Yadkin Financial Corporation NC 1,813,517 Piedmont Cmnty Bk Hldgs Inc.  NC    2,046,151    11.29    0.31    2.4    1.23    298.8    5.2    147.3    49.6    14.6    7.4  

 01/16/2014

 NA Bay Commercial Bank CA 327,181 Bank On It Inc.  CA    118,480    3.73    (0.42  (10.8  NA    4.3    NA    96.7    NM    7.9    (0.2

 01/14/2014

 NA TriSummit Bank TN 261,756 Community National Bank  TN    107,108    10.24    0.18    1.7    1.93    9.4    NM    86.7    NM    8.8    (2.1

 11/08/2013

 02/01/2014 South Georgia Bank Holding Co. GA 342,197 Dooly Bancshares Inc.  GA    100,848    14.92    1.12    8.3    7.29    15.0    NA    100.0    20.6    14.9    0.4  

 11/04/2013

 01/31/2014 Independence Bank CA 311,772 Premier Service Bank  CA    128,987    8.57    0.50    5.8    5.25    8.6    52.2    125.5    10.9    6.7    1.7  

 10/23/2013

 NA Heritage Financial Corp. WA 1,674,417 Washington Banking Co.  WA    1,648,154    11.03    0.97    8.8    2.40    264.6    18.0    148.7    15.6    17.6    7.0  

 10/21/2013

 03/18/2014 Poage Bankshares Inc. KY 299,786 Town Square Financial Corp.  KY    154,908    11.31    1.61    15.0    5.07    14.2    NA    104.5    12.6    9.2    0.5  

 08/15/2013

 NA Mercantile Bank Corp. MI 1,343,750 Firstbank Corp.  MI    1,457,046    9.09    0.83    8.4    2.48    154.5    14.2    159.6    13.9    10.6    NA  

 07/12/2013

 03/07/2014 First Bank NJ 372,945 Heritage Community Bk  NJ    146,259    6.63    0.02    0.3    4.71    4.8    NA    49.7    NM    3.3    (3.7

 06/28/2013

 11/30/2013 Peoples Financial Services PA 677,782 Penseco Financial Services  PA    929,788    14.33    1.10    7.5    0.43    155.9    26.1    147.0    15.1    16.8    7.6  

 06/06/2013

 11/15/2013 Texas State Bankshares Inc. TX 165,412 Border Capital Group Inc.  TX    162,051    14.16    1.08    7.5    5.93    16.5    NA    102.2    35.0    10.2    0.3  

 04/26/2013

 08/28/2013 HCBF Holding Co. FL 419,058 BSA Financial Services Inc.  FL    167,712    8.50    0.11    1.5    9.61    8.0    NA    86.1    67.2    4.8    (1.0

 03/07/2013

 11/01/2013 Riverview Financial Corp. PA 319,275 Union Bancorp Inc.  PA    123,779    8.66    (0.02  (0.2  NA    10.1    50.0    94.3    NM    8.2    (0.6

 01/28/2013

 05/01/2013 Investar Bank LA 341,519 First Community Bank  LA    106,282    6.28    (0.15  (1.3  5.33    4.6    NA    68.9    NM    4.3    (2.5

 11/28/2012

 04/26/2013 Nicolet Bankshares Inc. WI 681,969 Mid-Wisconsin Financial  WI    464,062    7.96    (0.62  (7.7  5.64    10.2    53.8    38.3    NM    2.2    NA  

 11/27/2012

 04/02/2013 Coronado First Bank CA 166,000 San Diego Private Bank  CA    129,198    10.15    0.43    4.1    0.28    13.6    NA    104.6    NM    10.5    0.5  

 11/06/2012

 11/01/2013 Old Florida Bancshares Inc. FL 649,094 New Traditions National Bank  FL    455,169    9.82    1.05    11.1    0.46    45.0    NA    100.7    11.4    9.9    0.1  

 09/25/2012

 04/01/2013 Crescent Financial Bancshares NC 819,505 ECB Bancorp Inc.  NC    944,266    8.82    0.21    2.4    4.00    54.4    59.5    81.3    NM    5.8    (1.6

 09/24/2012

 12/07/2012 People First Bancshares Inc. IL 281,067 Lima Bancshares Inc.  IL    119,354    9.33    NA    NA    NA    14.3    NA    128.0    8.3    11.9    3.1  

 09/21/2012

 01/31/2013 CapStone Bank NC 236,928 Patriot State Bk  NC    138,740    11.51    0.59    5.0    3.30    10.6    NA    66.4    NM    7.6    NA  

 07/24/2012

 01/24/2013 Mission Bancorp CA 262,242 Mojave Desert Bank NA  CA    103,834    8.34    0.09    1.1    0.92    7.1    41.8    79.6    NM    6.9    (1.7

 07/05/2012

 12/10/2012 HaleCo Bancshares Inc. TX 387,916 LubCo Bancshares Inc.  TX    289,918    8.14    1.57    20.7    0.24    19.6    NA    122.2    10.8    NA    NM  

 06/14/2012

 01/18/2013 Drummond Banking Co. FL 196,404 Williston Holding Co.  FL    188,234    7.46    (2.55  (33.1  7.21    15.6    NA    88.9    NM    8.3    (1.2

 06/05/2012

 10/25/2012 Equity Bancshares Inc. KS 600,206 First Community Bancshares Inc  KS    643,033    5.29    0.33    6.2    4.98    17.9    NA    95.8    14.4    2.8    (0.2

 05/23/2012

 02/28/2013 First Priority Financial Corp. PA 279,684 Affinity Bancorp Inc.  PA    176,284    6.91    (0.29  (4.3  1.54    12.7    NA    104.7    NM    NA    NM  

 05/17/2012

 12/28/2012 Carlile Bancshares Inc. TX 292,999 Washington Investment Co.  CO    532,090    11.00    (0.07  (0.6  10.73    65.0    NA    112.3    NM    12.2    2.3  

 05/14/2012

 10/01/2012 Park Sterling Corporation NC 1,130,751 Citizens South Banking Corp.  NC    1,073,815    8.38    (0.80  (9.4  3.62    77.8    35.2    114.0    NM    7.3    1.4  

 05/03/2012

 12/21/2012 WashingtonFirst Bankshares Inc VA 607,907 Alliance Bankshares Corp.  VA    506,483    5.55    (1.20  (17.1  3.55    24.2    15.4    86.0    NM    6.8    (1.2

 11/03/2011

 12/31/2012 Kentucky First Federal (MHC) KY 226,135 CKF Bancorp Inc.  KY    131,148    10.73    0.20    1.8    3.63    10.5    16.4    80.8    50.3    8.0    (3.7

 10/27/2011

 01/01/2012 Bitterroot Holding Co. MT 242,466 Ravalli County Bankshares Inc.  MT    186,970    10.92    0.10    0.9    8.66    18.1    NA    88.8    NM    9.7    (1.7

 09/15/2011

 12/15/2011 Goering Mgmt Co. KS 254,064 Home State Bancshares Inc.  KS    131,122    8.79    0.89    10.6    1.51    18.5    NA    153.4    25.6    14.1    7.4  

 08/16/2011

 11/08/2011 American State Bancshares Inc KS 375,973 Rose Hill Bancorp. Inc.  KS    248,514    9.96    1.01    10.3    0.88    29.0    NA    146.0    11.8    11.7    5.8  

 06/28/2011

 01/04/2012 Strategic Growth Banking LLC TX 112,457 Las Cruces B.R.G. Inc.  NM    104,133    11.97    1.18    10.6    2.95    24.6    NA    207.4    36.1    23.7    15.6  

 06/06/2011

 10/31/2011 Opus Bank CA 707,985 RMG Capital Corporation  CA    684,373    6.23    0.05    0.9    3.58    49.2    NM    130.6    47.2    9.8    3.0  

 05/26/2011

 08/23/2011 First General Bank CA 339,019 Golden Security Bancorp  CA    139,749    6.68    (1.19  (19.3  10.15    4.4    NA    47.0    NM    3.1    (4.6

 03/31/2011

 11/01/2011 Park Sterling Corporation NC 616,108 Community Capital Corp.  SC    655,934    7.23    (0.75  (9.9  6.62    32.3    16.8    69.7    NM    6.5    (3.2

 02/11/2011

 05/31/2011 CBM Florida Holding Co. FL 276,101 First Community Bank Corp.  FL    470,613    5.74    (3.48  (50.2  9.75    10.0    NA    37.0    NM    2.1    (5.5
                 
  MEDIANS     Total Transactions - 37    176,284    8.79    0.19    1.8    3.63    15.6    26.1    100.0    15.3    8.3    (0.1
                 
  FedFirst - Implied Transaction Value at $23.00/share    319,027    16.25    0.73    4.28    1.54    54.5    14.7    107.1    25.3    17.1    1.9  

For each transaction referred to above, Mufson Howe Hunter derived and compared, among other things, the implied ratio of price per common share paid for the acquired company to:

the latest closing price one day prior to the announcement of the acquisition ( “Premium to Market Value”)

tangible book value per share multiple were calculated pro forma for a pending acquisition.

KBW’s analysis showed the following concerning the financial performance of CB and the selected companies:

       Selected Companies 
   CB   25th
Percentile
   Median   Average   75th
Percentile
 

LTM Core Return on Average Assets (%)(1)

   0.86    0.71    0.86    0.87    1.01 

LTM Core Return on Average Equity (%)(1)

   8.16    8.18    8.79    8.69    10.16 

LTM Core Return on Average Tangible Common Equity (%)(1)

   9.01    8.92    10.35    9.51    11.59 

LTM Net Interest Margin (%)

   3.61    2.91    3.49    3.24    3.70 

LTM Fee Income / Revenue (%) (2)

   20.5    9.0    14.1    15.0    18.4 

LTM Efficiency Ratio (%)

   65.2    65.1    62.5    62.9    60.3 

(1)Core Income excluded extraordinary items,non-recurring items and gains / (losses) on sale of securities and amortization of intangibles as calculated by SNL Financial.
(2)Excluded gains/losses on sale of securities.

KBW’s analysis also showed the following concerning the financial condition of CB and the selected companies:

       Selected Companies 
   CB   25th
Percentile
   Median   Average   75th
Percentile
 

Tangible Common Equity / Tangible Assets (%)

   9.42    8.28    9.43    9.86    9.81 

Total Risk Based Capital Ratio (%)

   14.76    13.52    14.46    16.41    17.59 

Loans / Deposits (%)

   92.3    79.3    86.4    85.4    92.9 

Loan Loss Reserve / Gross Loans (%)

   1.16    0.77    1.00    0.95    1.07 

Nonperforming Assets / Assets (%)

   0.79    1.23    1.04    1.04    0.74 

LTM NetCharge-Offs / Average Loans (%)

   0.11    0.12    0.06    0.10    0.04 

In addition, KBW’s analysis showed the following concerning the market performance of CB and, to the extent available, the selected companies (excluding the impact of the acquired company based on the latest publicly available financial statementsLTM EPS multiple for one of the company available priorselected companies, which multiple was considered to the announcement of the acquisition.

last-twelve-months earnings per share of the acquired company based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition.

assets of the acquired company based on the latest publicly available financial statements of the company available prior to the announcement of the acquisition.

Deal premium, as measured against tangible book value, as a percent of core deposits.

The results of the analysis are set forth in the following table:be not meaningful because it was greater than 30.0x):

 

 Transaction Price to:  CB / FedFirst 
Merger:
 

Nationwide thrift
transactions

since 1/1/11,
assets between
$250mm &
$750mm median:

 PA, MD, OH & WV
thrift transactions
since 1/1/11, assets
between $250mm &
$750mm median:
 

Nationwide

performance-
based bank
& thrift
transactions
since 1/1/11
median:

 Nationwide bank
& thrift merger
transactions
since 1/1/11
median:

 Prior Market Price (“Premium”)

 14.70% 57.30% 82.90% 30.60% 26.10%

 Tangible Book Value

 107.10% 108.40% 121.80% 119.60% 100.00%

 LTM EPS

 25.3x 33.4x 43.7x 19.0x 15.3x

 Assets

 17.1% 10.6% 12.00% 18.80% 8.30%

 Tangible Book Premium / Core Deposits

 1.9x 0.7x 3.1x 3.2x -0.1x
       Selected Companies 
   CB   25th
Percentile
   Median   Average   75th
Percentile
 

One – Year Stock Price Change (%)

   30.9    19.0    25.6    28.8    42.2 

One – Year Total Return (%)

   35.3    20.3    28.4    32.0    44.8 

Year to Date Stock Price Change (%)

   17.8    6.0    12.3    15.5    24.7 

Stock Price / Tangible Book Value per Share (x)

   1.47    1.48    1.64    1.54    1.67 

Stock Price / LTM EPS (x)

   16.5    14.8    17.0    16.1    17.2 

Stock Price / 2017 Estimated EPS (x)

   17.4    16.8    18.6    19.9    22.3 

Stock Price / 2018 Estimated EPS (x)

   16.5    15.1    15.4    15.4    15.7 

Dividend Yield (%)(1)

   2.9    1.0    1.9    2.2    3.4 

LTM Dividend Payout Ratio (%)(1)

   47.6    25.5    42.3    41.1    54.2 

(1)Dividend yield and LTM dividend payout ratio reflected the most recent quarterly dividend on an annualized basis as a percentage of stock price and LTM EPS, respectively. One of the selected companies did not pay dividends.

No company or transaction used as a comparison in the above selected companies analysis is identical to FedFirst, CB or the merger.CB. Accordingly, an analysis of these results is not mathematical. Instead,Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

First West Virginia Selected Companies Analysis. Using publicly available information, KBW compared the financial performance, financial condition and market performance of First West Virginia to 12 selected banks and thrifts that were listed on NASDAQ, the New York Stock Exchange or NYSE MKT and headquartered in Maryland, Ohio, Pennsylvania, Virginia, or West Virginia with total assets between $100 million and $750 million. Merger targets were excluded from the selected companies.

The selected companies were as follows:

Bank of the James Financial Group, Inc.

HomeTown Bankshares Corporation

Central Federal Corporation

HV Bancorp, Inc.

Eagle Financial Bancorp, Inc.

United Bancorp, Inc.

Fauquier Bankshares, Inc.

Village Bank and Trust Financial Corp.

Glen Burnie Bancorp

Wayne Savings Bancshares, Inc.

Hamilton Bancorp, Inc.

WVS Financial Corp.

To perform this analysis, KBW used profitability data and other financial information as of, or for the period ended, September 30, 2017 and market price information as of November 15, 2017. Certain financial data prepared by KBW, as referenced in the tables presented below, may not correspond to the data presented in First West Virginia’s historical financial statements, or the data prepared by First West Virginia’s financial advisor presented under the section “Description of the Merger—Opinion of First West Virginia’s Financial Advisor in Connection with the Merger,” as a result of the different periods, assumptions and methods used by KBW to compute the financial data presented.

KBW’s analysis showed the following concerning the financial performance of First West Virginia and the selected companies:

       Selected Companies 
   First
West
Virginia
   25th
Percentile
   Median   Average   75th
Percentile
 

LTM Core Return on Average Assets (%)(1)

   0.16    0.38    0.49    0.47    0.57 

LTM Core Return on Average Equity (%)(1)

   1.67    3.80    5.23    4.86    5.73 

LTM Core Return on Average Tangible Common Equity (%)(1)

   1.76    3.80    5.17    4.79    5.80 

LTM Net Interest Margin (%)

   2.65    3.09    3.31    3.19    3.52 

LTM Fee Income / Revenue (%) (2)

   9.6    10.0    16.5    19.8    23.7 

LTM Efficiency Ratio (%)

   85.8    81.1    76.9    77.8    75.2 

(1)Core Income excluded extraordinary items,non-recurring items and gains / (losses) on sale of securities and amortization of intangibles as calculated by SNL Financial.
(2)Excluded gains/losses on sale of securities

KBW’s analysis also showed the following concerning the financial condition of First West Virginia and the selected companies:

       Selected Companies 
   First
West
Virginia
   25th
Percentile
   Median   Average   75th
Percentile
 

Tangible Common Equity / Tangible Assets (%)

   9.37    8.75    9.15    9.89    9.85 

Total Risk Based Capital Ratio (%)

   22.11    12.21    13.47    14.45    15.48 

Loans / Deposits (%)

   35.5    85.0    90.0    86.4    93.9 

Loan Loss Reserve / Gross Loans (%)

   1.75    0.66    0.91    0.91    1.01 

Nonperforming Assets / Assets (%)

   0.99    1.34    1.06    1.14    0.85 

LTM NetCharge-Offs / Average Loans (%)

   1.12    0.13    0.08    0.14    0.04 

In addition, KBW’s analysis showed the following concerning the market performance of First West Virginia and the selected companies (excluding the impact of the LTM EPS multiples for four of the selected companies, which multiples were considered to be not meaningful because they were either greater than 30.0x or negative):

      Selected Companies 
   First West
Virginia
  25th
Percentile
  Median   Average   75th
Percentile
 

One – Year Stock Price Change (%)

   16.9   13.1   21.5    25.3    27.3 

One – Year Total Return (%)

   21.5   16.8   22.8    27.2    28.8 

Year to Date Stock Price Change (%)(1)

   12.3   (0.2  10.4    19.1    27.6 

Stock Price / Tangible Book Value per Share (x)

   1.18   1.02   1.24    1.20    1.36 

Stock Price / LTM EPS (x)

   NM   19.1   20.6    20.9    22.8 

Dividend Yield (%)(2)

   3.7   0.0   0.8    1.2    2.1 

LTM Dividend Payout Ratio (%)(2)

   NM(3)   0.0   12.8    24.2    41.4 

(1)Year to date stock price change for HV Bancorp, Inc. and Eagle Financial Bancorp, Inc. was calculated from the date of the selected company’s initial public offering.
(2)Dividend yield and LTM dividend payout ratio reflected the most recent quarterly dividend on an annualized basis as a percentage of stock price and annualized LTM EPS, respectively. Six of the selected companies did not pay dividends.
(3)Considered to be not meaningful because it was greater than 100%.

No company used as a comparison in the above selected companies analysis is identical to First West Virginia. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Selected Transactions Analysis. KBW reviewed publicly available information related to 18 selected U.S. whole bank transactions announced since November 8, 2016 with target assets between $300 million and $400 million. Terminated transactions were excluded from the selected transactions.

The selected transactions were as follows:

Acquiror

Acquired Company

First Bancshares, Inc.

Southwest Banc Shares, Inc.

First Financial Bankshares, Inc.

Commercial Bancshares, Inc.

Business First Bancshares, Inc.

Minden Bancorp, Inc.

MutualFirst Financial, Inc.

Universal Bancorp

Brookline Bancorp, Inc.

First Commons Bank, NA

Triumph Bancorp, Inc.

Valley Bancorp, Inc.

Equity Bancshares, Inc.

Cache Holdings, Inc.

First Foundation Inc.

Community 1st Bancorp

Horizon Bancorp

Wolverine Bancorp, Inc.

Seacoast Banking Corporation of Florida

Palm Beach Community Bank

Seacoast Commerce Banc Holdings

Capital Bank

United Community Banks, Inc.

HCSB Financial Corporation

Sussex Bancorp

Community Bank of Bergen County, NJ

Old Line Bancshares, Inc.

DCB Bancshares, Inc.

First Merchants Corporation

Arlington Bank

ACNB Corporation

New Windsor Bancorp, Inc.

Glacier Bancorp, Inc.

TFB Bancorp, Inc.

Carolina Financial Corporation

Greer Bancshares Incorporated

For each selected transaction, KBW derived the following implied transaction statistics, in each case based on the transaction value paid for the acquired company and using financial data based on the acquired company’s then latest publicly available financial statements prior to the announcement of the acquisition:

Price per common share to tangible book value per share of the acquired company (in the case of selected transactions involving a private acquired company, this transaction statistic was calculated as total transaction consideration divided by total tangible common equity);

Price per common share to LTM EPS of the acquired company (in the case of selected transactions involving a private acquired company, this transaction statistic was calculated as total transaction consideration divided by LTM net income); and

Tangible equity premium to core deposits (total deposits less time deposits greater than $100,000) of the acquired company, referred to as core deposit premium.

The above transaction statistics for the selected transactions were compared with the corresponding transaction statistics for the proposed merger based on the implied transaction value for the proposed merger of $49.7 million and using historical financial information for First West Virginia as of or for the LTM period ended September 30, 2017.

The results of the analysis are set forth in the following table (excluding the impact of the LTM EPS multiples for five of the selected transactions, which multiples were considered to be not meaningful because they were greater than 30.0x):

       Selected Transactions 

Transaction Price to

  CB/
First West
Virginia
Merger
   25th
Percentile
   Median   Average   75th
Percentile
 

Tangible Book Value (%)

   155.9    160.2    168.3    175.0    196.0 

LTM Earnings (x)(1)

   NM    17.5    18.3    19.9    22.6 

Core Deposit Premium (%)

   6.7    7.3    10.4    12.4    14.8 

(1)LTM EPS multiples weretax-effected at 35% in the case of four selected transactions involving an acquired company that was aS-corporation.

No company or transaction used as a comparison in the above selected transaction analysis is identical to First West Virginia or the proposed merger. Accordingly, an analysis of these results is not mathematical. Rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies involved.

Relative Contribution Analysis. KBW analyzed the relative standalone contribution of CB and First West Virginia to various pro forma balance sheet and income statement items and the pro forma market capitalization of the combined entity. This analysis did not include purchase accounting adjustments. To perform this analysis, KBW used (i) historical balance sheet data for CB and First West Virginia as of September 30, 2017, (ii) publicly available consensus “street estimates” of CB for 2017, 2018 and 2019, (iii) earnings estimates for First West Virginia provided by First West Virginia management for 2017 and 2018, (iv) assumptions provided by CB management regarding First West Virginia’s earnings growth rate for 2019 and the potential cost savings expected to result from the merger, and (v) market price data as of November 15, 2017. The results of KBW’s analysis are set forth in the following table, which also compares the results of KBW’s analysis with the implied pro forma ownership percentages of CB and First West Virginia stockholders in the combined company based on the 0.9583 exchange ratio in the proposed merger and also based on a hypothetical exchange ratio assuming 100% stock consideration in the proposed merger for illustrative purposes:

   CB
as a % of
Total
  First West Virginia
as a % of
Total
 

Ownership

   

Pro Forma Ownership at 0.9583x exchange ratio

   76  24

Pro Forma Ownership assuming 100% stock consideration

   71  29

Balance Sheet

   

Assets

   73  27

Gross Loans Held for Investment

   87  13

Deposits

   73  27

Tangible Common Equity

   73  27

Income Statement

   

2017 Estimated Net Income

   90  10

2018 Estimated Net Income

   83  17

2019 Estimated Net Income

   83  17

2019 Estimated Net Income + Cost Savings

   69  31%(1) 

Market Capitalization

   

Market Capitalization

   77  23

(1)Adjusted for assumed cost savings provided by CB management.

Pro Forma Financial Impact Analysis. Mufson Howe Hunter KBW performed a pro forma mergerfinancial impact analysis on thethat combined projected income statement and balance sheet information of FedFirstCB and CB. Assumptions regardingFirst West Virginia. Using closing balance sheet estimates as of May 31, 2018 for CB and First West Virginia based on data extrapolated from “street estimates” in the case of CB and data provided by First West Virginia management in the case of First West Virginia, EPS estimates for First West Virginia provided by First West Virginia management for 2017 and 2018, an assumed First West Virginia long-term earnings growth rate provided by CB management, publicly available EPS consensus “street estimates” of CB for 2017, 2018 and 2019, and pro forma assumptions (including, without limitation, the cost savings and related expenses expected to result from the merger and certain accounting treatment, acquisition adjustments and cost savings were used to calculaterestructuring charges assumed with respect thereto) provided by CB management, KBW analyzed the estimated financial impact of

the merger would have on certain projected financial results of CB. In the course of this analysis, Mufson Howe Hunter used management’s earnings estimates for CB for 2014 and applied an earnings growth rate of 4.0% thereafter and used management’s earnings estimates for FedFirst for 2014 and applied an earnings growth rate of 4.0% thereafter.results. This analysis indicated that the merger is expected tocould be accretive to CB’s 2018 and 2019 estimated earnings per share in 2015 through 2019. The analysis also indicated that the merger is expected to beEPS and dilutive to book value per share andCB’s estimated tangible book value per share at closing. Furthermore, the analysis indicated that, pro forma for CBthe merger, each of CB’s tangible common equity to tangible assets ratio, leverage ratio, Common Equity Tier 1 Ratio, Tier 1Risk-Based Capital Ratio, and that CB is expected to maintain well capitalized capital ratios.Total Risk-Based Capital Ratio at closing could be lower. For all of the above analyses,analysis, the actual results achieved by CB following the merger may vary from the projected results, and the variations may be material.

CB Discounted DividendsCash Flow Analysis. Mufson Howe Hunter KBW performed a discounted dividendscash flow analysis to estimate a range for the implied equity value of the present values of after-tax cash flows that FedFirst could theoretically produce for dividends to equity holders through 2019 on a standalone basis.CB. In performing this analysis, Mufson Howe HunterKBW used management’s earnings estimatespublicly available consensus “street estimates” of CB and assumed long-term growth rates for FedFirst for 2014CB provided by CB management, and applied an earnings growth rate of 4.0% thereafter, andKBW assumed discount rates ranging from 10.0%11.0% to 16.0%15.0%. The rangeranges of values was determinedwere derived by adding the present value of projected cash flows to FedFirst shareholders from 2014 through 2019 and(i) the present value of the estimated excess cash flows that CB could generate over the period from the assumed closing date of May 31, 2018 through 2022 and (ii) the present value of CB’s implied terminal value at the end of FedFirst’s common stock. In determining the cash flows available to shareholders, Mufson Howe Huntersuch period. KBW assumed that FedFirstCB would maintain a tangible common equity to tangible assetassets ratio of 8.0%8.00% and would retain sufficient earnings to maintain that level. Any earnings in excess of what would need to be retained represented dividendable cash flows for FedFirst. In calculating the terminal value of FedFirst, Mufson Howe HunterCB, KBW applied multiples ranging from 10.0a range of 14.0x to 16.0 times 2019 projected16.0x CB’s estimated 2023 earnings. This discounted cash flow analysis resulted in a range of implied values for FedFirst from $16.24per share of CB common stock of $25.57 per share to $22.60$32.18 per share. In addition, Mufson Howe Hunter applied premiums ranging from 80% to 140% of 2019 projected tangible book value. This resulted in a range of values for FedFirst from $15.86 to $22.84 per share.

The discounted dividends present valuecash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that relies on numerous assumptions,must be made, including asset and earnings growth rates, terminal values, dividend payout rates and discount rates. The analysis did not purport to be indicative of the actual values or expected values of FedFirst.

CB or the pro forma combined company.

First West Virginia Discounted Cash Flow Analysis. KBW performed a discounted cash flow analysis to estimate a range for the implied equity value of First West Virginia, taking into account the cost savings and related expenses expected to result from the merger as well as certain accounting adjustments and restructuring charges assumed with respect thereto. In this analysis, KBW used financial forecasts and projections relating to the earnings and assets of First West Virginia in 2017 and 2018 provided by First West Virginia management, assumed First West Virginia long-term growth rates provided by CB management and estimated cost savings and related expenses and accounting adjustments and restructuring charges provided by CB management, and KBW assumed discount rates ranging from 14.0% to 18.0%. The ranges of values were derived by adding (i) the present value of the estimated excess cash flows that First West Virginia could generate over the period from the assumed closing date of May 31, 2018 to 2022 and (ii) the present value of First West Virginia’s implied terminal value at the end of such period, in each case applying estimated cost savings and related expenses and accounting adjustments and restructuring charges. KBW assumed that First West Virginia would maintain a tangible common equity to tangible assets ratio of 8.00% and First West Virginia would retain sufficient earnings to maintain that level. In calculating the terminal value of First West Virginia, KBW applied a range of 14.0x to 16.0x First West Virginia’s estimated 2023 earnings. This discounted cash flow analysis resulted in a range of implied values per share of First West Virginia common stock, taking into account the cost savings and related expenses expected to result from the merger as well as certain accounting adjustments and restructuring charges assumed with respect thereto, of $29.14 per share to $38.66 per share.

Mufson Howe Hunter,For comparison purposes, KBW also performed the discounted cash flow analysis for First West Virginia excluding assumed incremental loan growth over the period between the assumed closing of the transaction and December 31, 2020. Under this scenario, the discounted cash flow analysis resulted in a range of implied values per share of First West Virginia common stock, taking into account the cost savings and related expenses expected to result from the merger as well as certain accounting adjustments and restructuring charges assumed with respect thereto, of $24.16 per share to $30.74 per share.

The discounted cash flow analysis is a widely used valuation methodology, but the results of such methodology are highly dependent on the assumptions that must be made, including asset and earnings growth rates, terminal values, dividend payout rates, and discount rates. The above analyses did not purport to be indicative of the actual values or expected values of First West Virginia.

Miscellaneous. KBW acted as financial advisor to CB in connection with the proposed merger and did not act as an advisor to or agent of any other person. As part of its investment banking services,business, KBW is regularlycontinually engaged in the independent valuation of businessesbank and bank holding company securities in connection with mergers, acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate andvarious other purposes. FedFirstAs specialists in the securities of banking companies, KBW has experience in, and Mufson Howe Hunter have entered into an agreement whereby Mufson Howe Hunter has acted as financial advisorknowledge of, the valuation of banking enterprises. KBW and its affiliates, in the ordinary course of its and theirbroker-dealer businesses (and in the case of CB, further to FedFirst in connection with the merger. FedFirst has paid Mufson Howe Huntercertain existing sales and trading relationships between a fee of $25,000 upon execution of a letter of intent between FedFirstKBW broker-dealer affiliate and CB), may from time to time purchase securities from, and sell securities to, CB and a feeFirst West Virginia. In addition, as market makers in securities, KBW and its affiliates may from time to time have long or short positions in, and buy or sell, debt or equity securities of approximately $348,150 uponCB or First West Virginia for its and their own respective accounts and for the executionaccounts of its and their respective customers and clients.

Pursuant to the definitiveKBW engagement agreement, and plan of merger. Additionally, FedFirstCB has agreed to pay Mufson Howe HunterKBW a Contingent Fee attotal cash fee equal to 0.90% of the timeaggregate merger consideration, $100,000 of closingwhich became payable with the rendering of KBW’s opinion and the balance of which is estimated at approximately $696,300, against which both fees previously paid will be credited. In addition, FedFirst hascontingent upon the consummation of the merger. CB also agreed to reimburse Mufson Howe HunterKBW for reasonableout-of-pocket expenses and disbursements incurred in connection with its retentionengagement and to indemnify Mufson Howe HunterKBW against certain liabilities relating to or arising out of KBW’s engagement or KBW’s role in connection therewith. Other than its present engagement, in the two years preceding the date of

KBW’s opinion, KBW has not provided investment banking and financial advisory services to CB for which compensation was received. KBW provided investment banking assistance to CB in the past two years in regard to a potential transaction that was considered but not consummated by CB, in connection with which KBW did not enter into an engagement agreement or receive compensation. In the two years preceding the date of KBW’s opinion, KBW has not provided investment banking and financial advisory services to First West Virginia. KBW may in the future provide investment banking and financial advisory services to CB or First West Virginia and receive compensation for such services.

First West Virginia’s Reasons for the Merger; Recommendation of First West Virginia’s Board of Directors

In reaching its decision to approve the merger agreement and the merger and to unanimously recommend that First West Virginia stockholders vote for the approval of the merger agreement, the First West Virginia board of directors consulted with executive management, D.A. Davidson, its financial advisor, and Bowles Rice, its legal counsel. The First West Virginia board of directors carefully considered the terms of the merger agreement and the value of the merger consideration to be received by First West Virginia stockholders and ultimately determined that it was in the best interest of First West Virginia and its stockholders for First West Virginia to enter into the merger agreement with CB. The First West Virginia board of directors believes that partnering with CB will maximize the long-term value of stockholders’ investment in First West Virginia, and that the merger will provide the combined company with additional resources necessary to compete more effectively in northern West Virginia, southwestern Pennsylvania and southeastern Ohio. In addition, the First West Virginia board of directors believes that the customers and communities served by First West Virginia will benefit from the combined company’s enhanced abilities to meet their banking needs.

In reaching its unanimous decision to approve and declare advisable the merger agreement and the merger and to unanimously recommend that First West Virginia stockholders vote for the approval of the merger agreement, the First West Virginia board of directors considered many factors, including, without limitation, the following:

The value of the CB common stock consideration being offered to First West Virginia stockholders in relation to the market value, book value per share, tangible book value per share, earnings per share and projected earnings per share of First West Virginia and CB;

The fact that the merger consideration represented 1.53 times First West Virginia’s tangible book value per share at September 30, 2017;

The expected future receipt by First West Virginia stockholders of significant dividends after completion of the merger as CB stockholders, based on CB’s current and forecasted dividends and its history of dividend increases;

Comparative pro forma analyses of First West Virginia, CB and the combined company, and the earnings per share, dividends and capital levels of each entity;

CB’s asset size, capital position and financial performance in recent periods, which make CB an attractive merger partner and would give the combined company approximately $1.25 billion in assets;

The current and prospective environment in which First West Virginia operates, including national, regional and local economic conditions, the competitive environment for financial institutions, the significant regulatory burdens on financial institutions, and the uncertainties regarding future regulations;

The feasibility of, and the results that could be expected to be obtained if, First West Virginia continued to operate independently, including First West Virginia’s ability to compete with much larger regionally-based banks;

The anticipated future earnings growth of First West Virginia compared to the potential future earnings growth of CB and the combined company;

The anticipated future trading value of First West Virginia common stock compared to the value of the common stock consideration offered by CB and the potential future trading value of CB common stock;

The common stock consideration offered by CB, including the opportunity for First West Virginia stockholders to receive shares of CB common stock on atax-free basis for their shares of First West Virginia common stock;

The cash/stock election provisions in the merger agreement providing First West Virginia stockholders with an ability to choose the form of consideration that they wish to receive, subject to the overall 80% stock and 20% cash allotment;

The fact that 80% of the merger consideration would be in the form of CB common stock based upon a fixed exchange ratio, which will permit First West Virginia stockholders who receive CB common stock in the merger with the ability to participate in the future performance of the combined company or, for First West Virginia stockholders who receive cash, to liquidate their investment;

The greater market capitalization and trading liquidity of CB common stock in the event First West Virginia stockholders desired to sell the shares of CB common stock they will receive upon completion of the merger;

The process conducted by D.A. Davidson, First West Virginia’s financial advisor, to assist the First West Virginia board of directors in structuring the proposed merger with CB;

The presentation of analyses by D.A. Davidson, First West Virginia’s financial advisor, as to the fairness, from a financial point of view, of the merger consideration to the holders of First West Virginia common stock. In this regard, the First West Virginia board of directors received from D.A. Davidson a written opinion dated November 16, 2017 that, as of such date, the merger consideration was fair to First West Virginia common stockholders from a financial point of view;

The analyses presented by Bowles Rice, First West Virginia’s outside legal counsel, as to the structure of the merger, the merger agreement, duties of the First West Virginia board of directors under applicable law, and the process that First West Virginia (including its board of directors) employed in evaluating its strategic alternatives;

The scale, scope, strength and diversity of operations, product lines and delivery systems that could be achieved by combining First West Virginia with CB;

The additional products offered by CB to its customers, the ability of the combined company to provide comprehensive financial services to its customers, and the potential for operating synergies and cross-marketing of products and services across the combined company;

The potential value of an expansion of the CB branch network adding First West Virginia branch locations in northern West Virginia and southeastern Ohio to CB’s existing branch network in southwestern Pennsylvania;

The shared community banking philosophies of First West Virginia and CB, and each company’s commitment to community service and support of community-basednon-profit organizations and causes;

The fact that First West Virginia directors and executive officers have interests in the merger that are different from, or in addition to, those of other First West Virginia stockholders;

The likelihood of successful integration and operation of the combined company;

The likelihood of obtaining the governmental approvals needed to complete the transaction;

The potential cost-saving opportunities resulting from the merger;

The effects of the merger on First West Virginia employees, including the prospects for continued employment and the severance and other benefits agreed to be provided to First West Virginia employees; and

The review by the First West Virginia board of directors with its legal and financial advisors of the structure of the merger and the financial and other terms of the merger, including the merger consideration and the condition that the merger must qualify as a transaction that will permit First West Virginia stockholders to receive CB shares in exchange for their First West Virginia shares on atax-free basis for federal income tax purposes.

The First West Virginia board of directors also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberation of the proposed transaction, including, without limitation, the following:

The challenges of integrating First West Virginia’s businesses, operations and employees with those of CB;

The need to obtain approval by stockholders of First West Virginia and of CB, as well as governmental approvals, in order to complete the transaction;

The risks associated with the operations of the combined company including the ability to achieve the anticipated cost savings;

The risks associated with entry into the merger agreement and conduct of First West Virginia’s business before the merger is completed, and the impact that provisions of the merger agreement relating to payment of a termination fee by First West Virginia may have on First West Virginia receiving superior acquisition offers; and

That the fixed exchange ratio for the stock consideration, by its nature, would not adjust upwards to compensate for declines in CB’s stock price prior to the completion of the merger, meaning that First West Virginia stockholders would not be protected against decreases in CB’s stock price before the completion of the merger.

The First West Virginia board of directors also considered the structural protections included in the merger agreement, such as the ability of First West Virginia to terminate the merger agreement if, without limitation:

CB materially breaches any of its representations, warranties, covenants or agreements under the merger agreement, which material breach cannot be or has not been cured within 30 days after written notice of the breach to CB; or

Any required approval of any government authority is denied by final nonappealable action of such government authority, or the stockholders of First West Virginia or CB do not approve the merger at the applicable special meeting of the stockholders.

The First West Virginia board of directors also noted that it could terminate the merger agreement in order to concurrently enter into an agreement with respect to an unsolicited acquisition proposal that was received from a buyer other than CB and considered by First West Virginia in compliance with thenon-solicitation provisions of the merger agreement and that would, if consummated, result in a transaction that is more favorable to First West Virginia stockholders than the merger. This termination right is conditioned on First West Virginia providing notice of the unsolicited acquisition proposal to CB, CB not making a revised offer to First West Virginia that is at least as favorable as the unsolicited acquisition proposal and First West Virginia paying a $2.5 million termination fee to CB. The amount of this potential fee was negotiated atarm’s-length and was deemed by the First West Virginia board of directors to be reasonable based upon the termination fees paid in comparable transactions.

The First West Virginia board of directors also discussed its right to require CB to reimburse First West Virginia for actual and documentedout-of-pocket expenses not to exceed $500,000 if the merger agreement is terminated because CB’s board of directors breaches its obligation to recommend the merger to its stockholders or if CB’s stockholders fail to approve the merger agreement as a result of a breach of CB’s obligations with respect to its stockholder meeting.

The foregoing discussion of the information and factors considered by the First West Virginia board of directors is not intended to be exhaustive, but includes the material factors considered by the board of directors. In view of the wide variety and complexity of factors considered in connection with its evaluation of the merger, the First West Virginia board of directors did not find it practicable to, and did not attempt to, quantify, rank or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The First West Virginia board of directors did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The First West Virginia board of directors based its recommendation on the totality of the information presented. The First West Virginia board of directors evaluated the factors described above, including asking questions of First West Virginia’s legal and financial advisors. The First West Virginia board of directors relied on the experience and expertise of its legal advisors regarding the structure of the merger and the terms of the merger agreement and on the experience and expertise of its financial advisor for quantitative analysis of the financial terms of the merger.

For the reasons set forth above, the First West Virginia board of directors unanimously determined that the merger agreement and the related transactions, are advisable and in the best interests of First West Virginia and its stockholders, and unanimously adopted and approved the merger agreement and the related transactions. The First West Virginia board of directors unanimously recommends that the First West Virginia stockholders vote “FOR” the approval of merger agreement.

Opinion of First West Virginia’s Financial Advisor in Connection with the Merger

On August 10, 2017, First West Virginia entered into an engagement agreement with D.A. Davidson & Co. to render financial advisory and investment banking services to First West Virginia. As part of its engagement, D.A. Davidson agreed to assist First West Virginia in analyzing, structuring, negotiating and, if appropriate, effecting a transaction between First West Virginia and another corporation or business entity. D.A. Davidson also agreed to provide First West Virginia’s board of directors with an opinion as to the fairness, from a financial point of view, of the consideration to be paid to the holders of First West Virginia common stock in the proposed merger. First West Virginia engaged D.A. Davidson because D.A. Davidson is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger and is familiar with First West Virginia and its business. As part of its investment banking business, D.A. Davidson is continually engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.

On November 16, 2017, the First West Virginia board of directors held a meeting to evaluate the proposed merger. At this meeting, D.A. Davidson reviewed the financial aspects of the proposed merger and rendered an opinion to the First West Virginia board that, as of such date and based upon and subject to assumptions made, procedures followed, matters considered and limitations on the review undertaken, the consideration to be paid to the holders of First West Virginia common stock was fair, from a financial point of view, to such holders in the proposed merger.

The full text of D.A. Davidson’s written opinion, dated November 16, 2017, is attached asAppendix C to this joint proxy statement/prospectus and is incorporated herein by reference. The description of the opinion set forth herein is qualified in its entirety by reference to the full text of such opinion. First West Virginia’s stockholders are urged to read the opinion in its entirety.

D.A. Davidson’s opinion speaks only as of the date of the opinion and D.A. Davidson undertakes no obligation to revise or update its opinion. The opinion is directed to the First West Virginia board of directors and addresses only the fairness, from a financial point of view, of the consideration to be paid to the holders of First West Virginia common stock in the proposed merger. The opinion does not address, and D.A. Davidson expresses no view or opinion with respect to, (i) the underlying business decision of First West Virginia to engage in or proceed with the merger, (ii) the relative merits or effect of the merger as compared to any strategic alternatives or business strategies or combinations that may be or may have been available to or contemplated by First West

Virginia or First West Virginia’s board of directors, or (iii) any legal, regulatory, accounting, tax or similar matters relating to First West Virginia, its stockholders or relating to or arising out of the merger. The opinion expresses no view or opinion as to any terms or other aspects of the merger. First West Virginia and CB determined the consideration through the negotiation process. The opinion does not constitute a recommendation to any First West Virginia stockholder as to how such stockholder should vote at the First West Virginia meeting on the merger or any related matter. The opinion does not express any view as to the fairness of the amount or nature of the compensation to any of First West Virginia’s or CB’s officers, directors or employees, or any class of such persons, relative to the merger consideration. The opinion has been reviewed and approved by D.A. Davidson’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

D.A. Davidson has reviewed the registration statement on FormS-4 of which this joint proxy statement/prospectus is a part and consented to the inclusion of its opinion to the First West Virginia board of directors asAppendix C to this joint proxy statement/prospectus and to the references to D.A. Davidson and its opinion contained herein. A copy of the consent of D.A. Davidson is an exhibit to CB’s registration statement on FormS-4.

In connection with rendering its opinion, D.A. Davidson reviewed, analyzed and relied upon material bearing upon the merger and the financial and operating condition of First West Virginia and CB and the merger, including among other things, the following:

a draft of the Agreement, dated November 15, 2017;

certain financial statements and other historical financial and business information about First West Virginia and CB made available to D.A. Davidson from published sources and/or from the internal records of First West Virginia and CB that D.A. Davidson deemed relevant;

internal financial projections for First West Virginia for the years ending December 31, 2017 and December 31, 2018, as discussed with, and confirmed by, senior management of First West Virginia, and estimated long-term growth rate for the years thereafter, as discussed with senior management of First West Virginia;

certain publicly available analyst earnings estimates for CB for the years ending December 31, 2017, December 31, 2018 and December 31, 2019, and estimated long-term growth rate for the years thereafter, in each case as discussed with senior management of CB;

the current market environment generally and the banking environment in particular;

the financial terms of certain other transactions in the financial institutions industry, to the extent publicly available;

the market and trading characteristics of public companies and public bank holding companies in particular;

the pro forma financial impact of the merger, taking into consideration the amounts and timing of the transaction costs and cost savings;

the net present value of First West Virginia with consideration of projected financial results;

the net present value of CB with consideration of projected financial results;

the net present value of CB, on a pro forma basis with the pro forma financial impact of the merger, with consideration of projected financial results; and

such other financial studies, analyses and investigations and financial, economic and market criteria and other information as D.A. Davidson considered relevant including discussions with management and other representatives and advisors of First West Virginia and CB concerning the business, financial condition, results of operations and prospects of First West Virginia and CB.

In arriving at its opinion, D.A. Davidson has assumed and relied upon the accuracy and completeness of all information supplied or otherwise made available to D.A. Davidson, discussed with or reviewed by or for D.A. Davidson, or publicly available, and D.A. Davidson has not assumed responsibility for independently verifying such information or undertaken an independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of First West Virginia or CB, nor did D.A. Davidson make an independent appraisal or analysis of First West Virginia or CB with respect to the merger. In addition, D.A. Davidson has not assumed any obligation to conduct, nor has D.A. Davidson conducted any physical inspection of the properties or facilities of First West Virginia or CB. D.A. Davidson has further relied on the assurances of management of First West Virginia and CB that they are not aware of any facts or circumstances that would make any of such information inaccurate or misleading. D.A. Davidson did not make an independent evaluation or appraisal of the specific assets or liabilities including the amount of any fair value adjustments per FASB 141(R). D.A. Davidson did not make an independent evaluation of the adequacy of the allowance for loan losses of First West Virginia or CB nor has D.A. Davidson reviewed any individual credit files relating to First West Virginia or CB. D.A. Davidson has assumed that the respective allowances for loan losses for both First West Virginia and CB are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. D.A. Davidson has assumed that there has been no material change in First

West Virginia’s or CB’s assets, financial condition, results of operations, business or prospects since the date of the most recent financial statements provided to D.A. Davidson. D.A. Davidson has assumed in all respects material to its analysis that First West Virginia and CB will remain as going concerns for all periods relevant to its analysis. D.A. Davidson has also assumed in all respects material to its analysis that all of the representations and warranties contained in the merger agreement and all related agreements are true and correct, that each party to such agreements will perform all of the covenants required to be performed by such party under such agreements and that the conditions precedent in the merger agreement are not waived. D.A. Davidson has assumed that in the course of obtaining the necessary regulatory or other consents or approvals (contractual or otherwise) for the merger, no restrictions, including any divestiture requirements or amendment or modifications, will be imposed that will have a material adverse effect on the contemplated benefits of the merger. D.A. Davidson’s opinion is necessarily based upon information available to D.A. Davidson and economic, market, financial and other conditions as they exist and can be evaluated on the date the fairness opinion letter was delivered to First West Virginia’s board of directors.

Set forth below is a summary of the material financial analyses performed by D.A. Davidson in connection with rendering its opinion. The summary of the analyses of D.A. Davidson set forth below is not a complete description of the analyses underlying its opinion, and the order in which these analyses are described below is not indicative of any relative weight or importance given to those analyses by D.A. Davidson. The following summaries of financial analyses include information presented in tabular format. You should read these tables together with the full text of the summary financial analyses, as the tables alone are not a complete description of the analyses.

Unless otherwise indicated, the following quantitative information, to the extent it is based on market data, is based on market data as of November 14, 2017, two trading days prior to the date on which D.A. Davidson delivered the fairness opinion letter to First West Virginia’s board of directors, and is not necessarily indicative of market conditions after such date.

Summary of Proposal

D.A. Davidson reviewed the financial terms of the proposed transaction. As described in the merger agreement, First West Virginia’s stockholders may elect to receive either 0.9583 shares of CB common stock or $28.50 in cash for each share of First West Virginia common stock they own. The terms and conditions of the merger are more fully described in the merger agreement. For purposes of the financial analyses described below, based on the 10-day average closing price of CB common stock on November 13, 2017, of $29.74, the consideration represented a value of $28.50 per share of First West Virginia common stock. Based upon financial information as of or for the 12-month period ended September 30, 2017, D.A. Davidson calculated the following transaction ratios:

Transaction Ratios

 
   Aggregate  Per Share 

Transaction Price / Last Twelve Months Net Income

   88.9x   88.9x 

Transaction Price / Net Income (2017E)

   62.8x   62.8x 

Transaction Price / Net Income (2018E)

   32.3x   32.3x 

Transaction Price / Book Value

   145.6  145.6

Transaction Price / Tangible Book Value

   153.1  153.1

Tangible Book Premium / Core Deposits(1)

   6.4  —   

(1)Tangible book premium / core deposits calculated by dividing the excess or deficit of the aggregate transaction value compared to tangible book value by core deposits

Stock Trading History of CB

D.A. Davidson reviewed the history of the reported trading prices and volume of CB common stock and the relationship between the movements in the prices of CB common stock to movements in certain stock indices, including the Standard & Poor’s 500 Index, the SNL Bank Index and the Russell 2000 Index.

One Year Stock Performance
   Beginning Index Value
on 11/11/2016
 Ending Index Value on
11/14/2017

Standard & Poor’s 500 Index

  100.0% 119.1%

SNL Bank Index

  100.0% 118.9%

Russell 2000

  100.0% 115.0%

CBFV

  100.0% 124.6%

Three Year Stock Performance

   Beginning Index Value
on 11/13/2014
 Ending Index Value on
11/14/2017

Standard & Poor’s 500 Index

  100.0% 126.5%

SNL Bank Index

  100.0% 134.8%

Russell 2000

  100.0% 125.5%

CBFV

  100.0% 148.8%

First West Virginia Comparable Companies Analysis

D.A. Davidson used publicly available information to compare selected financial and market trading information for First West Virginia and a group of 12 financial institutions selected by D.A. Davidson that: (i) were banks with common stock listed on the NASDAQ, over-the-counter, grey market and pink sheet exchanges; (ii) were headquartered in Ohio and West Virginia; and (iii) had total assets between $250 million and $500 million. The 12 financial institutions were as follows:

Andover Bancorp, Inc.First Citizens National Bank of Upper Sandusky
Central Federal CorporationHocking Valley Bancshares, Inc.
CNB Financial Services, Inc.Jefferson Security Bank
Comunibanc CorporationMCNB Banks, Inc.
Consumers Bancorp, Inc.Potomac Bancshares, Inc.
FFD Financial CorporationUnited Bancorp, Inc.

The analysis compared publicly available financial and market trading information for First West Virginia and the data for the 12 financial institutions identified above as of and for the three-month period ended September 30, 2017. The table below compares the data for First West Virginia and the data for the 12 financial institutions identified above, with pricing data as of November 14, 2017.

Financial Condition and Performance 
      Comparable Companies 
   FWVB  Median  Average  Minimum  Maximum 

Total Assets (in millions)

  $343.1  $352.7  $357.9  $253.0  $471.6 

Non-Performing Assets / Total Assets

   0.99  0.74  1.88  0.05  6.64

Tangible Common Equity Ratio

   9.37  9.37  9.65  6.50  16.23

Efficiency Ratio (Most Recent Quarter)

   82.3  71.8  71.4  52.0  79.5

Return on Average Tangible Common Equity (Most Recent Quarter)

   4.48  7.63  8.14  3.91  15.97

Return on Average Assets (Most Recent Quarter)

   0.41  0.72  0.78  0.44  1.41

Market Performance Multiples

 
      Comparable Companies 
   FWVB  Median  Average  Minimum  Maximum 

Market Capitalization (in millions)

  $37.5  $37.4  $39.1  $16.6  $68.1 

Price / LTM Earnings Per Share

   NM   11.7x   14.3x   8.8x   22.7x 

Price / MRQ Annualized Earnings Per Share

   27.3x   12.6x   13.6x   8.9x   20.1x 

Price / Tangible Book Value Per Share

   117.1  121.5  107.2  53.0  154.5

CB Comparable Companies Analysis

D.A. Davidson used publicly available information to compare selected financial and market trading information for CB and a group of 18 financial institutions selected by D.A. Davidson which: (i) were banks with common stock listed on the NASDAQ, over-the-counter, and pink sheet exchanges; (ii) were headquartered in Pennsylvania; and (iii) had total assets between $500 million and $1 billion. These 18 financial institutions were as follows:

American Bank Incorporated

Harleysville Financial Corporation

CCFNB Bancorp, Inc.Honat Bancorp, Inc.
Centric Financial CorporationJonestown Bank and Trust Co.
Dimeco, Inc.

Juniata Valley Financial Corp.

Embassy Bancorp, Inc.

Kish Bancorp, Inc.

Emclaire Financial Corp

Northumberland Bancorp

Fidelity D & D Bancorp, Inc.

Prudential Bancorp, Inc.

First Priority Financial Corp.Riverview Financial Corporation
FNB Bancorp, Inc.Standard AVB Financial Corp.

The analysis compared publicly available financial and market trading information for CB and the data for the 18 financial institutions identified above as of and for the three-month period ended September 30, 2017. The table below compares the data for CB and the data for the comparable companies, with pricing data as of November 14, 2017.

Financial Condition and Performance

 
      Comparable Companies 
   CBFV  Median  Average  Minimum  Maximum 

Total Assets (in millions)

  $908.3  $701.3  $727.0  $504.9  $987.4 

Non-Performing Assets / Total Assets

   0.86  0.80  0.91  0.40  2.01

Tangible Common Equity Ratio

   9.42  8.50  9.42  6.43  15.42

Efficiency Ratio (Most Recent Quarter)

   65.8  66.1  67.1  49.8  84.7

Return on Average Tangible Common Equity (Most Recent Quarter)

   10.18  8.90  8.70  3.49  14.69

Return on Average Assets (Most Recent Quarter)

   0.92  0.87  0.83  0.24  1.32

Market Performance Multiples

 
      Comparable Companies 
   CBFV  Median  Average  Minimum  Maximum 

Market Capitalization (in millions)

  $118.9  $97.9  $98.1  $42.2  $163.7 

Price / LTM Earnings Per Share

   15.7  14.5  15.5  12.7  20.8

Price / MRQ Annualized Earnings Per Share

   14.5  14.2  15.8  9.9  23.1

Price / Tangible Book Value Per Share

   140.2  128.8  135.1  85.8  191.4

Precedent Transactions Analysis

D.A. Davidson reviewed four sets of comparable merger and acquisition transactions. The sets of mergers and acquisitions included: (1) “Nationwide Transactions,” (2) “PA, OH and WV Transactions,” (3) “Nationwide (ROAA) Transactions,” and (4) Nationwide (Loan / Deposit Ratio) Transactions”.

“Nationwide Transactions,” included 45 transactions where:

the transaction was announced in the last twelve months;

the transaction involved banks and thrifts headquartered nationwide; and

the selling company’s total assets were between $250.0 million and $500.0 million.

“PA, OH and WV Transactions” included 14 transactions where:

the transaction was announced between January 1, 2014 and November 14, 2017;

the transaction involved banks and thrifts headquartered in Pennsylvania, Ohio and West Virginia; and

the selling company’s total assets were between $250.0 million and $500.0 million.

“Nationwide (ROAA) Transactions” included 38 transactions where:

the transaction was announced between January 1, 2014 and November 14, 2017;

the transaction involved banks and thrifts headquartered nationwide;

the selling company’s total assets were between $250.0 million and $500.0 million; and

the return on average assets of the selling company was less than 0.50% over the preceding twelve months.

“Nationwide (Loan / Deposit Ratio) Transactions” included 8 transactions where:

the transaction was announced between January 1, 2014 and November 14, 2017;

the transaction involved banks and thrifts headquartered nationwide;

the selling company’s total assets were between $250.0 million and $500.0 million; and

the loan / deposit ratio of the selling company was less than 50.0%.

The following tables sets forth the transactions included in (1) “Nationwide Transactions,” (2) “PA, OH and WV Transactions,” (3) “Nationwide (ROAA) Transactions,” and (4) Nationwide (Loan / Deposit Ratio) Transactions” and are sorted by announcement date:

Nationwide Transactions

Announcement Date

Acquirer

Target

11/13/2017*

11/07/2017*

10/24/2017*

10/24/2017*

10/24/2017*

10/12/2017*

Heartland Financial USA Inc.

Suncrest Bank

Bangor Bancorp MHC

First Bancshares Inc.

Peoples Bancorp Inc.

First Financial Bankshares

Signature Bancshares Inc.

CBBC Bancorp

First Colebrook Bancorp Inc.

Southwest Banc Shares Inc.

ASB Financial Corp.

Commercial Bancshares Inc.

10/06/2017*

10/04/2017*

09/21/2017*

09/18/2017*

08/23/2017*

08/16/2017*

08/01/2017*

07/26/2017*

07/21/2017*

07/17/2017

07/17/2017

06/15/2017

06/14/2017

06/08/2017

06/06/2017*

05/12/2017

05/04/2017

05/02/2017

04/24/2017

04/20/2017

04/20/2017

04/11/2017*

04/11/2017*

03/29/2017*

03/17/2017

03/15/2017

02/14/2017

02/01/2017

01/25/2017

01/20/2017

12/15/2016

11/22/2016

11/17/2016

11/15/2016

11/15/2016

11/08/2016

11/04/2016

11/04/2016

11/03/2016

Business First Bancshares Inc.

MutualFirst Financial Inc.

Brookline Bancorp Inc.

First American Bank Corp.

Commerce Union Bancshares Inc.

National Commerce Corp.

Veritex Holdings Inc.

Triumph Bancorp Inc.

Select Bancorp Inc.

Equity Bancshares Inc.

Equity Bancshares Inc.

First Foundation Inc.

Horizon Bancorp

QCR Holdings Inc.

Glacier Bancorp Inc.

Bank First National Corp.

Seacoast Banking Corp. of FL

Seacoast Commerce Banc

Sierra Bancorp

Riverview Financial Corp.

United Community Banks Inc.

Sussex Bancorp

Washington Federal Inc.

Mid Penn Bancorp Inc.

Citizens Community Bncp

Topeka Bancorp Inc.

Progress Financial Corp.

Old Line Bancshares Inc

First Merchants Corp.

HCBF Holding Co.

BayCom Corp.

ACNB Corp.

Simmons First National Corp.

Glacier Bancorp Inc.

Little Bank Inc

Carolina Financial Corp.

Nicolet Bankshares Inc.

Seacoast Banking Corp. of FL

Bay Banks of Virginia Inc.

Minden Bancorp Inc

Universal Bancorp

First Commons Bank NA

Southport Financial Corp.

Community First Inc.

FirstAtlantic Finl Hldgs Inc

Liberty Bancshares Inc.

Valley Bancorp Inc.

Premara Financial Inc.

Cache Holdings Inc.

Eastman National Bcshs Inc.

Community 1st Bancorp

Wolverine Bancorp Inc.

Guaranty B&TC & certain assets

Columbine Capital Corp.

Waupaca Bancorp. Inc.

Palm Beach Community Bank

Capital Bank

OCB Bancorp

CBT Financial Corp.

HCSB Financial Corp.

Community Bk of Bergen County

Anchor Bancorp

Scottdale Bank & Trust Company

Wells Financial Corp.

Kaw Valley Bancorp Inc.

First Partners Financial Inc.

DCB Bancshares Inc.

Arlington Bank

Jefferson Bankshares Inc.

First ULB Corp.

New Windsor Bancorp Inc.

Hardeman County Investment Co.

TFB Bancorp Inc.

Union Banc Corp.

Greer Bancshares Inc.

First Menasha Bancshares Inc.

GulfShore Bancshares Inc.

Virginia BanCorp Inc.

*Indicates the transaction was pending as of November 14, 2017.

PA, OH and WV Transactions

Announcement Date

Acquirer

Target

10/24/2017*

04/20/2017

03/29/2017*

01/25/2017

09/08/2016

08/29/2016

08/23/2016

06/02/2016

06/01/2016

04/04/2016

03/03/2015

06/18/2014

04/14/2014

04/04/2014

Peoples Bancorp Inc.

Riverview Financial Corp.

Mid Penn Bancorp Inc.

First Merchants Corp.

United Community Finl Corp.

Standard Financial Corp

First Defiance Financial

Prudential Bancorp Inc.

Summit Financial Group Inc.

DNB Financial Corp.

WSFS Financial Corp.

Univest Corp. of Pennsylvania

CB Financial Services Inc.

Peoples Bancorp Inc.

ASB Financial Corp.

CBT Financial Corp.

Scottdale Bank & Trust Company

Arlington Bank

Ohio Legacy Corp

Allegheny Valley Bancorp Inc.

Commercial Bancshares Inc.

Polonia Bncp, Inc.

First Century Bankshares Inc.

East River Bk

Alliance Bancorp of Penn

Valley Green Bank

FedFirst Financial Corp.

Ohio Heritage Bancorp Inc.

*Indicates the transaction was pending as of November 14, 2017.

Nationwide (ROAA) Transactions

Announcement Date

Acquirer

Target

10/24/2017*

07/21/2017*

06/15/2017

05/12/2017

04/11/2017*

04/11/2017*

03/29/2017*

02/01/2017

11/04/2016

10/14/2016

10/06/2016

09/30/2016

09/21/2016

09/08/2016

06/08/2016

06/02/2016

05/20/2016

04/26/2016

04/04/2016

03/17/2016

03/10/2016

11/20/2015

08/26/2015

06/29/2015

06/22/2015

06/17/2015

05/01/2015

04/23/2015

04/02/2015

12/30/2014

10/14/2014

09/25/2014

05/05/2014

04/22/2014

04/08/2014

03/11/2014

03/05/2014

02/11/2014

Bangor Bancorp MHC

Select Bancorp Inc.

First Foundation Inc.

Bank First National Corp.

Washington Federal Inc.

Sussex Bancorp

Mid Penn Bancorp Inc.

Old Line Bancshares Inc

Seacoast Banking Corp. of FL

First Bancshares Inc.

Salem Five Bancorp

United Community Bancorp Inc.

HomeTrust Bancshares Inc.

United Community Finl Corp.

United Community Bancorp Inc.

Prudential Bancorp Inc.

First Citizens BancShares Inc.

Pacific Continental Corp.

United Community Banks Inc.

Independent Bank Corp.

Norwood Financial Corp.

County Bancorp Inc.

Northfield Bancorp Inc.

First Merchants Corp.

Bear State Financial Inc.

Pvt Invr- William P. Butler

First South Bancorp Inc.

Heritage Commerce Corp

Wintrust Financial Corp.

First NBC Bank Holding Co.

Prvt Invr - Jeff L. Demaske

Putnam County SB

Green Bancorp Inc.

Heritage Financial Group Inc.

F.N.B. Corp.

Ameris Bancorp

Park Sterling Corporation

IBERIABANK Corp.

First Colebrook Bancorp Inc.

Premara Financial Inc.

Community 1st Bancorp

Waupaca Bancorp. Inc.

Anchor Bancorp

Community Bk of Bergen County

Scottdale Bank & Trust Company

DCB Bancshares Inc.

GulfShore Bancshares Inc.

Iberville Bank

Georgetown Bancorp Inc.

Liberty Bancshares Inc.

TriSummit Bancorp Inc.

Ohio Legacy Corp

Illini Corp.

Polonia Bncp, Inc.

Cordia Bancorp Inc.

Foundation Bancorp Inc.

Tidelands Bancshares Inc

New England Bancorp Inc.

Delaware Bancshares Inc.

Fox River Valley Bancorp Inc.

Hopewell Valley Cmnty Bank

Ameriana Bancorp

Metropolitan National Bank

American Founders Bank Inc.

Northwest Georgia Bank

Focus Business Bank

Suburban Illinois Bancorp Inc

State Investors Bancorp Inc.

Advantage Bank

CMS Bancorp Inc.

SP Bancorp Inc.

Alarion Financial Services

OBA Financial Services Inc

Coastal Bankshares Inc.

Provident Community Bancshares

First Private Holdings Inc.

*Indicates the transaction was pending as of November 14, 2017.

Nationwide (Loan / Deposit Ratio)

Announcement Date

Acquirer

Target

03/29/2017*

03/10/2016

05/01/2015

04/23/2015

12/11/2014

09/26/2014

05/08/2014

03/05/2014

Mid Penn Bancorp Inc.

Norwood Financial Corp.

First South Bancorp Inc.

Heritage Commerce Corp

ESB Bancorp MHC

First Busey Corp.

Glacier Bancorp Inc.

Park Sterling Corporation

Scottdale Bank & Trust Company

Delaware Bancshares Inc.

Northwest Georgia Bank

Focus Business Bank

Citizens National Bancorp Inc.

Herget Financial Corp.

FNBR Holding Corp.

Provident Community Bancshares

*Indicates the transaction was pending as of November 14, 2017.

For each transaction referred to above, D.A. Davidson compared, among other things, the following implied ratios:

transaction price compared to earnings for the last twelve months, based on the latest publicly available financial statements of the target company before the announcement of the transaction;

transaction price compared to tangible book value per share, based on the latest publicly available financial statements of the target company before the announcement of the transaction;

transaction price per share compared to the closing stock price of the target company for the day before the announcement of the transaction;

transaction price compared to assets, based on the latest publicly available financial statements of the target company before the announcement of the transaction; and

tangible book premium to core deposits based on the latest publicly available financial statements of the target company before the announcement of the transaction.

As illustrated in the following tables, D.A. Davidson compared the proposed merger multiples to the multiples of the comparable transaction groups and other operating financial data where relevant. The table below sets forth the data for the comparable transaction groups as of the last twelve months ended prior to the transaction announcement and First West Virginia data for the last twelve months ended September 30, 2017.

Financial Condition and Performance

 
      Nationwide  PA, OH, WV  ROAA  Loan / Deposit 
   FWVB  Median  Median  Median  Median 

Return on Average Assets (Last Twelve Months)

   0.16  0.84  0.65  0.30  0.28

Return on Average Equity (Last Twelve Months)

   1.63  7.70  6.25  2.98  3.80

Tangible Common Equity Ratio

   9.37  9.98  10.03  8.71  8.56

Non-Performing Assets / Total Assets

   0.99  1.03  1.16  1.54  2.40

Transaction Multiples

 
      Nationwide  PA, OH, WV  ROAA  Loan / Deposit 
   FWVB  Median  Median  Median  Median 

Transaction Price / Last Twelve Months Earnings

   88.9x   18.3x   17.2x   37.3x   25.7x 

Transaction Price / Tangible Book Value

   153.1  164.7  138.0  134.7  114.5

One-Day Market Premium(1)

   30.7  37.8  22.6  43.8  77.6

Transaction Price / Assets

   14.3  15.4  15.3  12.8  11.3

Tangible Book Premium / Core Deposits(2)

   6.4  8.8  7.6  5.6  2.5

(1)Based on FWVB’s Closing Price as of 11/14/2017 of $21.80
(2)Core deposits exclude time deposits with account balances greater than $100,000. Tangible book premium / core deposits calculated by dividing the excess or deficit of the aggregate transaction value over tangible book value by core deposits

Net Present Value Analysis for First West Virginia

D.A. Davidson performed an analysis that estimated the net present value per share of First West Virginia common stock under various circumstances. The analysis assumed: (i) First West Virginia performed in accordance with First West Virginia management’s financial forecasts for the years ending December 31, 2017 and December 31, 2018; and (ii) an estimated long-term growth rate for the years thereafter, as discussed with and confirmed by First West Virginia management. To approximate the terminal value of First West Virginia common stock at December 31, 2022, D.A. Davidson applied price to earnings multiples of 13.0x to 20.0x and multiples of tangible book value ranging from 100.0% to 170.0%. The income streams and terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of First West Virginia’s common stock. In evaluating the discount rate, D.A. Davidson used industry standard methods of adding the current risk-free rate, which is based on the 20-year Treasury yield, plus the published Duff & Phelps Industry Equity Risk Premium and plus the published Duff & Phelps Size Premium.

At the November 16, 2017 First West Virginia board of directors meeting, D.A. Davidson noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

As illustrated in the following tables, the analysis indicates an imputed range of values per share of First West Virginia common stock of $10.85 to $19.68 when applying the price to earnings multiples to the financial forecasts and $11.51 to $22.90 when applying the multiples of tangible book value to the financial forecasts.

Earnings Per Share Multiples

   Earnings Per Share Multiple 

Discount Rate

  13.0x   14.0x   15.0x   16.0x   17.0x   18.0x   19.0x   20.0x 

9.00%

  $13.93   $14.75   $15.57   $16.39   $17.22   $18.04   $18.86   $19.68 

10.00%

  $13.34   $14.13   $14.91   $15.69   $16.48   $17.26   $18.04   $18.83 

11.00%

  $12.79   $13.53   $14.28   $15.03   $15.78   $16.52   $17.27   $18.02 

12.00%

  $12.26   $12.98   $13.69   $14.40   $15.11   $15.83   $16.54   $17.25 

13.00%

  $11.76   $12.45   $13.13   $13.81   $14.49   $15.17   $15.85   $16.53 

14.00%

  $11.29   $11.94   $12.59   $13.24   $13.89   $14.54   $15.19   $15.84 

15.00%

  $10.85   $11.47   $12.09   $12.71   $13.33   $13.95   $14.57   $15.19 

Tangible Book Value Multiples

   Tangible Book Value Per Share Multiple 

Discount Rate

  100.0%   110.0%   120.0%   130.0%   140.0%   150.0%   160.0%   170.0% 

9.00%

  $14.80   $15.96   $17.11   $18.27   $19.43   $20.58   $21.74   $22.90 

10.00%

  $14.18   $15.28   $16.38   $17.48   $18.58   $19.69   $20.79   $21.89 

11.00%

  $13.58   $14.63   $15.68   $16.74   $17.79   $18.84   $19.89   $20.94 

12.00%

  $13.02   $14.02   $15.03   $16.03   $17.03   $18.03   $19.04   $20.04 

13.00%

  $12.49   $13.45   $14.40   $15.36   $16.32   $17.27   $18.23   $19.19 

14.00%

  $11.98   $12.90   $13.81   $14.72   $15.64   $16.55   $17.47   $18.38 

15.00%

  $11.51   $12.38   $13.25   $14.12   $15.00   $15.87   $16.74   $17.61 

D.A. Davidson also considered and discussed with the First West Virginia board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, D.A. Davidson performed a similar analysis assuming First West Virginia estimated earnings per share in 2022 varied from 20% above projections to 20% below projections. This analysis resulted in the following range of per share values for First West Virginia common stock, using the same price to earnings multiples of 13.0x to 20.0x and a discount rate of 12.00%.

Variance to

2022 EPS

  Earnings Per Share Multiple 
  13.0x   14.0x   15.0x   16.0x   17.0x   18.0x   19.0x   20.0x 

20.00%

  $14.12   $14.97   $15.83   $16.68   $17.54   $18.39   $19.25   $20.10 

15.00%

  $13.65   $14.47   $15.29   $16.11   $16.93   $17.75   $18.57   $19.39 

10.00%

  $13.19   $13.97   $14.76   $15.54   $16.33   $17.11   $17.89   $18.68 

5.00%

  $12.73   $13.47   $14.22   $14.97   $15.72   $16.47   $17.22   $17.96 

0.00%

  $12.26   $12.98   $13.69   $14.40   $15.11   $15.83   $16.54   $17.25 

-5.00%

  $11.80   $12.48   $13.15   $13.83   $14.51   $15.18   $15.86   $16.54 

-10.00%

  $11.34   $11.98   $12.62   $13.26   $13.90   $14.54   $15.18   $15.83 

-15.00%

  $10.87   $11.48   $12.08   $12.69   $13.30   $13.90   $14.51   $15.11 

-20.00%

  $10.41   $10.98   $11.55   $12.12   $12.69   $13.26   $13.83   $14.40 

Net Present Value Analysis for CB

D.A. Davidson performed an analysis that estimated the net present value per share of CB common stock under various circumstances. The analysis assumed: (i) CB performed in accordance with the average S&P Global Market Intelligence consensus earnings estimates for the years ending December 31, 2017, December 31, 2018 and December 31, 2019, and (ii) an estimated long-term growth rate for the years thereafter, as discussed with and confirmed by CB and First West Virginia management. To approximate the terminal value of CB common stock at December 31, 2022, D.A. Davidson applied price to earnings multiples of 13.0x to 20.0x and multiples of tangible book value ranging from 130.0% to 200.0%. The income streams and terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0%, chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of CB’s common stock. In evaluating the discount rate, D.A. Davidson used industry standard methods of adding the current risk-free rate, which is based on the 20-year Treasury yield, plus the published Duff & Phelps Industry Equity Risk Premium and plus the published Duff & Phelps Size Premium.

At the November 16, 2017 First West Virginia board of directors meeting, D.A. Davidson noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

As illustrated in the following tables, the analysis indicates an imputed range of values per share of CB common stock of $18.10 to $34.12 when applying the price to earnings multiples to the financial forecasts and $20.37 to $38.75 when applying the multiples of tangible book value to the financial forecasts.

Earnings Per Share Multiples

   Earnings Per Share Multiple 

Discount Rate

  13.0x   14.0x   15.0x   16.0x   17.0x   18.0x   19.0x   20.0x 

9.00%

  $23.47   $24.99   $26.52   $28.04   $29.56   $31.08   $32.60   $34.12 

10.00%

  $22.45   $23.90   $25.35   $26.80   $28.25   $29.70   $31.15   $32.60 

11.00%

  $21.48   $22.87   $24.25   $25.63   $27.01   $28.39   $29.78   $31.16 

12.00%

  $20.57   $21.89   $23.20   $24.52   $25.84   $27.16   $28.48   $29.80 

13.00%

  $19.70   $20.96   $22.22   $23.47   $24.73   $25.99   $27.25   $28.51 

14.00%

  $18.88   $20.08   $21.28   $22.48   $23.68   $24.88   $26.09   $27.29 

15.00%

  $18.10   $19.25   $20.39   $21.54   $22.69   $23.84   $24.98   $26.13 

Tangible Book Value Multiples

   Tangible Book Value Per Share Multiple 

Discount Rate

  130.0%   140.0%   150.0%   160.0%   170.0%   180.0%   190.0%   200.0% 

9.00%

  $26.48   $28.23   $29.99   $31.74   $33.49   $35.24   $36.99   $38.75 

10.00%

  $25.32   $26.99   $28.66   $30.33   $32.00   $33.67   $35.34   $37.01 

11.00%

  $24.22   $25.81   $27.40   $28.99   $30.59   $32.18   $33.77   $35.36 

12.00%

  $23.18   $24.69   $26.21   $27.73   $29.25   $30.77   $32.29   $33.81 

13.00%

  $22.19   $23.64   $25.09   $26.54   $27.99   $29.44   $30.89   $32.34 

14.00%

  $21.25   $22.64   $24.02   $25.41   $26.79   $28.18   $29.56   $30.94 

15.00%

  $20.37   $21.69   $23.01   $24.34   $25.66   $26.98   $28.30   $29.62 

D.A. Davidson also considered and discussed with the First West Virginia board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, D.A. Davidson performed a similar analysis assuming CB estimated earnings per share in 2022 varied from 20% above projections to 20% below projections. This analysis resulted in the following range of per share values for CB common stock, using the same price to earnings multiples of 13.0x to 20.0x and a discount rate of 12.0%.

Variance to

2022 EPS

  Earnings Per Share Multiple 
  13.0x   14.0x   15.0x   16.0x   17.0x   18.0x   19.0x   20.0x 

20.00%

  $24.00   $25.58   $27.16   $28.74   $30.32   $31.91   $33.49   $35.07 

15.00%

  $23.14   $24.65   $26.17   $27.69   $29.20   $30.72   $32.24   $33.75 

10.00%

  $22.28   $23.73   $25.18   $26.63   $28.08   $29.53   $30.98   $32.43 

5.00%

  $21.42   $22.81   $24.19   $25.58   $26.96   $28.35   $29.73   $31.12 

0.00%

  $20.57   $21.89   $23.20   $24.52   $25.84   $27.16   $28.48   $29.80 

-5.00%

  $19.71   $20.96   $22.22   $23.47   $24.72   $25.97   $27.23   $28.48 

-10.00%

  $18.85   $20.04   $21.23   $22.41   $23.60   $24.79   $25.97   $27.16 

-15.00%

  $18.00   $19.12   $20.24   $21.36   $22.48   $23.60   $24.72   $25.84 

-20.00%

  $17.14   $18.19   $19.25   $20.30   $21.36   $22.41   $23.47   $24.52 

Net Present Value Analysis for Pro Forma CB

D.A. Davidson performed an analysis that estimated the net present value per share of CB common stock under various circumstances, including the impact of the merger with First West Virginia. The analysis assumed (i) CB performed in accordance with the average S&P Global Market Intelligence consensus earnings estimates for the years ending December 31, 2017, December 31, 2018 and December 31, 2019, (ii) an estimated long-term growth rate for the years thereafter; and (iii) the pro forma financial impact of the merger with CB including the cost savings estimates, purchase accounting adjustments and transaction expenses, as discussed with and confirmed by CB management. The analysis assumed (i) First West Virginia performed in accordance with First West Virginia management’s financial forecasts for the years ending December 31, 2017 and December 31, 2018, and (ii) an estimated long-term growth rate for the years thereafter, as discussed with and confirmed by First West Virginia management. To approximate the terminal value of CB common stock at December 31, 2022, D.A. Davidson applied price to earnings multiples of 13.0x to 20.0x and multiples of tangible book value ranging from 130.0% to 200.0%. The income streams and terminal values were then discounted to present values using different discount rates ranging from 9.0% to 15.0% chosen to reflect different assumptions regarding required rates of return of holders or prospective buyers of CB’s common stock. In evaluating the discount rate, D.A. Davidson used industry standard methods of adding the current risk-free rate, which is based on the 20-year Treasury yield, plus the published Duff & Phelps Industry Equity Risk Premium and plus the published Duff & Phelps Size Premium.

At the November 16, 2017 First West Virginia board of directors meeting, D.A. Davidson noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.

As illustrated in the following tables, the analysis indicates an imputed range of values per share of CB common stock of $21.84 to $41.73 when applying the price to earnings multiples to the financial forecasts and $20.33 to $38.63 when applying the multiples of tangible book value to the financial forecasts.

Earnings Per Share Multiples

   Earnings Per Share Multiple 

Discount Rate

  13.0x   14.0x   15.0x   16.0x   17.0x   18.0x   19.0x   20.0x 

9.00%

  $28.43   $30.33   $32.23   $34.13   $36.03   $37.93   $39.83   $41.73 

10.00%

  $27.18   $28.99   $30.80   $32.61   $34.42   $36.23   $38.04   $39.85 

11.00%

  $25.99   $27.72   $29.44   $31.17   $32.90   $34.62   $36.35   $38.07 

12.00%

  $24.87   $26.52   $28.16   $29.81   $31.46   $33.10   $34.75   $36.40 

13.00%

  $23.81   $25.38   $26.95   $28.52   $30.09   $31.66   $33.23   $34.81 

14.00%

  $22.80   $24.30   $25.80   $27.30   $28.80   $30.30   $31.80   $33.30 

15.00%

  $21.84   $23.28   $24.71   $26.14   $27.58   $29.01   $30.44   $31.88 

Tangible Book Value Multiples

   Tangible Book Value Per Share Multiple 

Discount Rate

  130.0%   140.0%   150.0%   160.0%   170.0%   180.0%   190.0%   200.0% 

9.00%

  $ 26.42   $ 28.17   $ 29.91   $ 31.66   $33.40   $ 35.14   $ 36.89   $ 38.63 

10.00%

  $25.26   $26.92   $28.59   $30.25   $31.91   $33.58   $35.24   $36.90 

11.00%

  $24.16   $25.75   $27.34   $28.92   $30.51   $32.09   $33.68   $35.26 

12.00%

  $23.13   $24.64   $26.15   $27.66   $29.17   $30.69   $32.20   $33.71 

13.00%

  $22.14   $23.58   $25.03   $26.47   $27.92   $29.36   $30.80   $32.25 

14.00%

  $21.21   $22.59   $23.97   $25.34   $26.72   $28.10   $29.48   $30.86 

15.00%

  $20.33   $21.64   $22.96   $24.27   $25.59   $26.91   $28.22   $29.54 

D.A. Davidson also considered and discussed with the First West Virginia board of directors how this analysis would be affected by changes in the underlying assumptions, including variations with respect to net income. To illustrate this impact, D.A. Davidson performed a similar analysis assuming CB’s pro forma estimated earnings per share in 2022 varied from 20% above projections to 20% below projections. This analysis resulted in the following range of per share values for CB common stock using the same price to earnings multiples of 13.0x to 20.0x, and using a discount rate of 12.0%.

Variance to

2022 EPS

  Earnings Per Share Multiple 
  13.0x   14.0x   15.0x   16.0x   17.0x   18.0x   19.0x   20.0x 

20.00%

  $29.15   $31.13   $33.10   $35.08   $37.05   $39.03   $41.01   $42.98 

15.00%

  $28.08   $29.97   $31.87   $33.76   $35.65   $37.55   $39.44   $41.34 

10.00%

  $27.01   $28.82   $30.63   $32.44   $34.25   $36.07   $37.88   $39.69 

5.00%

  $25.94   $27.67   $29.40   $31.13   $32.86   $34.58   $36.31   $38.04 

0.00%

  $24.87   $26.52   $28.16   $29.81   $31.46   $33.10   $34.75   $36.40 

-5.00%

  $23.80   $25.36   $26.93   $28.49   $30.06   $31.62   $33.18   $34.75 

-10.00%

  $22.73   $24.21   $25.69   $27.17   $28.66   $30.14   $31.62   $33.10 

-15.00%

  $21.66   $23.06   $24.46   $25.86   $27.26   $28.66   $30.06   $31.46 

-20.00%

  $20.59   $21.91   $23.22   $24.54   $25.86   $27.17   $28.49   $29.81 

Financial Impact Analysis

D.A. Davidson performed pro forma merger analyses that combined projected income statement and balance sheet information of First West Virginia and CB. Assumptions regarding the accounting treatment, acquisition adjustments and cost savings were used to calculate the financial impact that the merger would have on certain projected financial results of CB. In the course of this analysis, D.A. Davidson used the average S&P Global Market Intelligence consensus earnings estimates for CB for the years ending December 31, 2017, December 31, 2018 and December 31, 2019, and used management’s financial forecast for First West Virginia for the years ending December 31, 2017 and December 31, 2018 provided by First West Virginia management. This analysis indicated that the merger is expected to be accretive to CB’s estimated earnings per share in 2018, after excluding non-recurring transaction-related expenses. The analysis also indicated that the merger is expected to be dilutive to tangible book value per share for CB and that CB would maintain capital ratios in excess of those required for CB to be considered well-capitalized under existing regulations. For all of the above analyses, the actual results achieved by First West Virginia and CB prior to and following the merger will vary from the projected results, and the variations may be material.

D.A. Davidson prepared its analyses for purposes of providing its opinion to First West Virginia’s board of directors as to the fairness, from a financial point of view, of the consideration to be paid to the holders of First West Virginia common stock in the proposed merger and to assist First West Virginia’s board of directors in analyzing the proposed merger. The analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties and their respective advisors, none of First West Virginia, CB or D.A. Davidson or any other person assumes responsibility if future results are materially different from those forecasted.

D.A. Davidson’s opinion was one of many factors considered by First West Virginia’s board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the board of directors of First West Virginia or management with respect to the merger or the merger consideration.

D.A. Davidson and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions. D.A. Davidson acted as financial advisor to First West Virginia in connection with, and participated in certain of the negotiations leading to the merger. D.A. Davidson is a full service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, D.A. Davidson and its affiliates may provide such services to First West Virginia, CB and their respective affiliates, may actively trade the debt and equity securities (or related derivative securities) of First West Virginia and CB for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities. First West Virginia selected D.A. Davidson as its financial advisor because it is a nationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement dated August 10, 2017, First West Virginia engaged D.A. Davidson as its financial advisor in connection with the contemplated transaction. Pursuant to the terms of the engagement letter, First West Virginia agreed to pay D.A. Davidson a cash fee of $100,000 concurrently with the rendering of its opinion. First West Virginia will pay to D.A. Davidson at the time of closing of the merger a contingent cash fee equal to 1.25% of the aggregate merger consideration less $62,500 to credit a portion of fees received. First West Virginia has also agreed to reimburse D.A. Davidson for all reasonable out-of-pocket expenses, including fees of counsel, and to indemnify D.A. Davidson and certain related persons against specified liabilities, including liabilities under the federal securities laws, relating to or arising out of its engagement.

During the two years preceding the date of itsthe opinion, to FedFirst Mufson Howe HunterD.A. Davidson has not received $35,000any compensation from First West Virginia other than a retainer fee in financial advisory fees forconnection with the execution of the engagement letter dated August 10, 2017. Additionally, D.A. Davidson may provide investment banking services from FedFirstto the combined company in 2013the future and has not received compensation for investment banking services from CB.may receive future compensation.

Unaudited Prospective Financial Information

CB and FedFirstFirst West Virginia do not as a matter of course publicly disclose forecasts or internal projections as to future performance, revenues, earnings, financial condition or other results because of, among other reasons, the inherent uncertainty of the underlying assumptions and estimates. However, CB and First West Virginia are including in connection with the negotiation and review of the merger agreement, FedFirst’s management reviewedthis joint proxy statement/prospectus certain budget metrics for FedFirst’s 2014 operations and for CB’s 2014 operations and discussed with CB’s management its expectations for future growth from 2015 through 2017 (which we refer to as the FedFirstlimited unaudited prospective financial information for CB and the CB prospective financial information, respectively).First West Virginia. Such information contains unaudited prospective financial information for FedFirstFirst West Virginia and CB on a standalone, pre-merger basis, respectively, that was made available to, discussed with and reviewed by FedFirst’sFirst West Virginia’s financial advisor, Mufson Howe Hunter & Company LLC,D.A. Davidson, and CB’s financial advisor, KBW, in connection with the preparation of itstheir respective fairness opinion.opinions. Such information may differ in certain respects from what FedFirstFirst West Virginia and CB use for their respective internal purposes.

The FedFirstFirst West Virginia prospective financial information and the CB prospective financial information were not prepared with a view toward public disclosure and the inclusion of such information in this document should not be regarded as an indication that FedFirst,First West Virginia, CB or any other recipient of such information considered, or now considers, them to be necessarily predictive of actual future results. The FedFirstFirst West Virginia prospective financial information and the CB prospective financial information were not prepared with a view toward complying with the guidelines of the SECSecurities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of financial information. Neither ParenteBeard LLC,Baker Tilly Virchow Krause, LLP, the independent registered public accounting firm for both FedFirst and CB, nor BKD, LLP, the independent registered public accounting firm for First West Virginia, nor any other independent accountants have compiled, examined or performed any procedures with respect to such information, or expressed any opinion or any other form of assurance on such information or their achievability.

The FedFirstFirst West Virginia prospective financial information and the CB prospective financial information reflect numerous estimates and assumptions made by FedFirstFirst West Virginia and CB, respectively, with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to FedFirst’sFirst West Virginia’s and CB’s respective businesses, all of which are difficult to predict and many of which are beyond FedFirst’sFirst West Virginia’s and CB’s respective control. Such information also reflects assumptions as to certain business decisions that are subject to change. The FedFirstFirst West Virginia prospective financial information and the CB prospective financial information reflect subjective judgment in many respects and are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Accordingly, such information constitutes forward-looking information and are subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted in such prospective information, including, but not limited to, FedFirst’sFirst West Virginia’s and CB’s performance, industry performance, general business and economic conditions, customer requirements, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in this document. Such information does not take into account any circumstances or events occurring after the date they were prepared, including the transactions contemplated by the merger agreement, and do not take into account the effect of any possible failure of the merger to

occur. None of FedFirst,First West Virginia, CB nor any of their financial advisors nor any of their affiliates intends to, and each of them disclaims any obligation to, update, revise or correct the FedFirstFirst West Virginia prospective financial information or the CB prospective financial information if they are or become inaccurate, even in the short-term. The inclusion of such information in this document is not and should not be deemed an admission or representation by FedFirstFirst West Virginia or CB that such information is viewed by FedFirstFirst West Virginia or CB as material information of FedFirstFirst West Virginia or CB, respectively, particularly in light of the inherent risks and uncertainties associated with such information.

The FedFirstfollowing First West Virginia prospective financial information was utilized by Mufson Howe Hunter & Company LLCD.A. Davidson and KBW in performing financial analyses in connection with the preparation of itstheir respective fairness opinion assumes the following:opinions:

 

Total loans are $284.7 million at December 31, 2014, and increase by 5.0% per year through December 31, 2017;

Total deposits are $233.2 million at December 31, 2014, and increase by 2.5% per year through December 31, 2017; and

2014 net income is $2.3 million and increases by 4.0% per year through 2017.
      2017   2018 

Net Income

   $779,800   $1.5 million 

Total Assets

     

KBW

   $336.0 million   $343.0 million 

D.A. Davidson

   $337.0 million   $342.8 million 

Long-Term Earnings Growth Rate

   10.0   

The following CB prospective financial information was utilized by Mufson Howe Hunter & Company LLCD.A. Davidson and KBW in performing financial analyses in connection with the preparation of itstheir respective fairness opinion assumes the following:opinions:

 

Total loans are $410.9 million at December 31, 2014, and increase by 5.0% per year through December 31, 2017;

Total deposits are $487.2 at December 31, 2014, and increase by 1.5% per year through December 31, 2017; and

2014 net income is $4.4 million and increases by 4.0% per year through 2017.

CB’s Reasons for the Merger

CB’s board of directors believes that the merger is in the best interests of CB and its shareholders. In deciding to approve the merger, CB’s board of directors considered a number of factors, including:

FedFirst’s compatibility with CB in their community banking orientation, in their reputational standing in the respective communities served, and culturally at the Board and executive management levels;

executive management’s review of the business, operations, earnings, and financial condition, including capital levels and asset quality of FedFirst;

the opportunity to expand its menu of financial services and diversify its sources of income through the acquisition of Exchange Underwriters, Inc.; and

the anticipated enhancement to the future revenue and earnings growth potential of CB.

While CB’s board of directors considered these and other factors, the board of directors did not assign any specific or relative weights to the factors considered and did not make any determination with respect to any individual factor. CB’s board of directors collectively made its determination with respect to the merger based on the conclusion reached by its members, based on the factors that each of them considered appropriate, that the merger is in the best interests of CB and its shareholders. The terms of the merger were the result of arm’s-length negotiations between representatives of CB and representatives of FedFirst.

      2017   2018   2019 

Earnings Per Share

   $1.75   $1.85   $1.98 

Total Assets

       

KBW

   $923.0 million   $964.0 million   $1.01 billion 

D.A. Davidson

   $925.2 million   $979.1 million   $1.03 billion 

Long-Term Earnings Growth Rate

   6.5     

Consideration to be Received in the Merger

WhenIf and when the merger becomes effective, each share of FedFirstFirst West Virginia common stock issued and outstanding immediately before completion of the merger will automatically be converted into the right to receive, at the holder’s election, either $23.00$28.50 in cash or 1.15900.9583 shares of CB common stock, plus cash in lieu of any fractional share. Although shareholdersstockholders of FedFirst are being given the choice of whetherFirst West Virginia can choose to receive cash, CB common stock or a combination of cash and CB common stock in exchange for their shares of FedFirstFirst West Virginia common stock, all elections will be subject to the allocation and proration procedures as well as other provisionsdescribed in the agreement and plan of merger.merger agreement.

If CB declares a stock dividend or distribution on shares of its common stock or subdivides, splits, reclassifies or combines the shares of CB common stock before the effective time of the merger, then the exchange ratio will be adjusted to provide FedFirstFirst West Virginia stockholders with the same economic effect as contemplated by the merger agreement and plan of merger before any of these events.

FedFirst’sFirst West Virginia’s stockholders will not receive fractional shares of CB common stock. Instead, FedFirst’s shareholdersFirst West Virginia’s stockholders will receive a cash payment for any fractional shares in an amount equal to the product of (1) the fraction of a share of CB common stock to which he, she or itthe stockholder is entitled, multiplied by (2) the volume weighted average price of CB common stock over the twenty (20)15 trading days immediately precedingending on the third business day before the closing date of the merger.

Cash, Stock or Mixed Election

Under the terms of the merger agreement, FedFirstFirst West Virginia stockholders may elect to convert their shares into cash, CB common stock or a mixture of cash and CB common stock. All elections are further subject to the allocation and proration procedures

described in the merger agreement, which provideprovides that the number of shares of FedFirstFirst West Virginia common stock to be converted into CB common stock must equal 65%80% of the total number of shares of FedFirstFirst West Virginia common stock outstanding at the effective time of the merger and that the number of shares of FedFirstFirst West Virginia common stock to be converted into cash in the merger must equal 35%20% of the total number of shares of FedFirstFirst West Virginia common stock outstanding at the effective time of the merger. Neither CB nor FedFirstFirst West Virginia makes any recommendation as to whether FedFirstFirst West Virginia stockholders should elect to receive cash, CB common stock or a mixture of cash and CB common stock in the merger. Each holder of FedFirst common stockFirst West Virginia stockholder must make his or hertheir own decision with respect to such election.

It is unlikely that elections will be made in the exact proportions provided for in the merger agreement. As a result, the merger agreement describes procedures to be followed if FedFirstFirst West Virginia stockholders in the aggregate elect to receive more or less of the CB common stock than CB has agreed to issue. These procedures are summarized below.

 

  If Stock Is Oversubscribed:If FedFirstFirst West Virginia stockholders elect to receive more CB common stock than CB has agreed to issue in the merger, then all FedFirstFirst West Virginia stockholders who have elected to receive cash or who have made no election will receive cash for their FedFirstFirst West Virginia shares and all stockholders who elected to receive CB common stock will receive a pro rata portion of the available CB shares plus cash for those shares not converted into CB common stock.

 

  If Stock Is Undersubscribed: If FedFirstFirst West Virginia stockholders elect to receive fewer shares of CB common stock than CB has agreed to issue in the merger, then all FedFirstFirst West Virginia stockholders who have elected to receive CB common stock will receive CB common stock and those stockholders who elected to receive cash or who have made no election will be treated in the following manner:

 

If the number of shares held by FedFirstFirst West Virginia stockholders who have made no election is sufficient to make up the shortfall in the number of CB shares that CB is required to issue, then all FedFirstFirst West Virginia stockholders who elected cash will receive cash, and those stockholders who made no election will receive both cash and CB common stock in such proportion as is necessary to make up the shortfall.

 

If the number of shares held by FedFirstFirst West Virginia stockholders who have made no election is insufficient to make up the shortfall, then all FedFirstFirst West Virginia stockholders who made no election will receive CB common stock and those FedFirstFirst West Virginia stockholders who elected to receive cash will receive cash and CB common stock in such proportion as is necessary to make up the shortfall.

Notwithstanding these rules, as described under “Material U.S. Federal Income Tax Consequences of the Merger,” it may be necessary for CB to reduce the number of shares of FedFirstFirst West Virginia common stock that will be converted into the right to receive cash and correspondingly increase the number of shares of FedFirstFirst West Virginia common stock that will be converted into CB common stock. If this adjustment is necessary, shareholdersstockholders who elect to receive cash or a mixture of cash and stock may be required on a pro rata basis to receive a greater amount of CB common stock than they otherwise would have received.

No guarantee can be made that you will receive the amounts of cash and/or stock you elect. As a result of the allocation procedures and other limitations outlined in this documentjoint proxy statement/prospectus and the merger agreement, and plan of merger, you may receive CB common stock or cash in amounts that vary from the amounts you elect to receive.

Allocation Procedures

The aggregate amount of cash and CB common stock that will be paid is subject to the allocation procedures described in detail below. Pursuant to such allocation procedures, if the number of cash election shares is higher than 35%20% of the outstanding shares of FedFirstFirst West Virginia common stock, a pro rata portion of those shares will be converted into the right to receive CB common stock in order to provide for an aggregate 65%80% stock and 35%20% cash allocation among all outstanding FedFirstFirst West Virginia shares. Similarly, if the number of stock election shares is higher than 65%80% of the outstanding shares of FedFirstFirst West Virginia common stock, a pro rata portion of those shares will be converted into the right to receive the cash consideration in order to provide for an aggregate 65%80% stock and 35%20% cash allocation among all outstanding FedFirstFirst West Virginia shares.

Stock Consideration Allocation. If the aggregate number of stock election shares which(which we refer to as the “stock election number,”number”) exceeds the stock conversion number, then all cash election shares and all non-election shares of each holder thereof will be converted into the right to receive the cash consideration, and stock election shares of each holder thereof will be converted into the right to receive the stock consideration inwith respect ofto that number of stock election shares (rounded down to the nearest whole number) equal to the product obtained by multiplying (x) the number of stock election

shares held by such holder by (y) thea fraction, the numerator of which is the stock conversion number and the denominator of which is the stock election number, with the remaining number of such holder’s stock election shares being converted into the right to receive the cash consideration.

The “stock conversion number” is equal to the product obtained by multiplying (x) 2,315,8101,718,730 (subject to certain adjustments provided for in the merger agreement) by (y) 0.65.0.80. As of June 30, 2014,February 16, 2018, the stock conversion number was 1,505,276.1,374,984.

Cash Consideration Allocation.Allocation. If the stock election number is less than the stock conversion number (the amount by which the stock conversion number exceeds the stock election number being referred to in this document as the “shortfall number”), then all stock election shares will be converted into the right to receive the stock consideration, and the non-election shares and cash election shares will be treated in the following manner:

 

If the shortfall number is less than or equal to the number of non-election shares, then all cash election shares will be converted into the right to receive the cash consideration, and the non-election shares of each holder thereof will convert into the right to receive the stock consideration inwith respect ofto that number of non-election shares (rounded down to the nearest whole number) equal to the product obtained by multiplying (A) the number of non-election shares held by such holder by (B) a fraction, the numerator of which is the shortfall number and the denominator of which is the total number of non-election shares, with the remaining number of such holder’s non-election shares being converted into the right to receive the cash consideration; or

holder by (B) a fraction, the numerator of which is the shortfall number and the denominator of which is the total number of non-election shares, with the remaining number of such holder’s non-election shares being converted into the right to receive the cash consideration; or

 

If the shortfall number exceeds the number of non-election shares, then all non-election shares will be converted into the right to receive the stock consideration, and the cash election shares of each holder thereof will convert into the right to receive the stock consideration inwith respect ofto that number of cash election shares (rounded down to the nearest whole number) equal to the product obtained by multiplying (A) the number of cash election shares held by such holder by (B) a fraction, the numerator of which is the amount by which (x) the shortfall number exceeds (y) the total number of non-election shares and the denominator of which is the total number of cash election shares, with the remaining number of such holder’s cash election shares being converted into the right to receive the cash consideration.

Illustrative Examples of Allocation Procedures. For illustration only, the following examples describe the application of the allocation provisions of the merger agreement in the case of an oversubscription of cashstock election shares and in the case of an oversubscription of stockcash election shares. Solely for the purposes of these examples, it is assumed that (i) there are 2,400,0001,800,000 shares of common stock of FedFirstFirst West Virginia outstanding, (ii) the exchange ratio is 1.1590,0.9583, and (iii) the stock conversion number is 1,560,000.1,440,000.

Example 1 (Oversubscription of Stock Election Shares)

Assume that valid stock elections are received with respect to 1,530,000 shares (85% of the outstanding shares) of First West Virginia common stock; valid cash elections are received with respect to 180,000 shares (10% of the outstanding shares) of First West Virginia common stock; and no elections are received with respect to 90,000 shares (5% of the outstanding shares). The allocation provisions would generally apply as follows:

Cash election shares. All 180,000 cash election shares are converted into the right to receive the cash consideration.

Non-election shares. All 90,000 non-election mix shares are converted into the right to receive the cash consideration.

Stock election shares. Of the 1,530,000 stock election shares, 1,440,000 stock election shares are converted into the right to receive the stock consideration. The remaining 90,000 stock election shares are converted into the right to receive the cash consideration. Since the stock election shares are oversubscribed, this means that the First West Virginia stockholders who make a stock election receive a mix of cash and stock merger consideration.

This can be further illustrated as follows:

Stockholder Aholds 1,000 shares of First West Virginia common stock and makes a valid stock election with respect to all 1,000 shares. 941 of such shares (1,000 x (1,440,000/1,530,000), rounded down to the nearest whole number) are converted into the right to receive the stock consideration, and the remaining 59 of such shares are converted into the right to receive the cash consideration. Stockholder A would receive:

901 shares of CB common stock (941 x 0.9583) and cash instead of a fractional 0.7603 share of CB common stock; and

$1,681.50 in cash (59 x $28.50).

Stockholder Bholds 1,000 shares of First West Virginia common stock and makes a valid cash election with respect to all 1,000 shares. Stockholder B would receive $28,500.00 in cash (1,000 x $28.50).

Stockholder Cholds 1,000 shares of First West Virginia common stock and makes a valid cash election with respect to 500 shares and a valid stock election with respect to 500 shares. All 500 cash election shares are converted into the right to receive the cash consideration. Of the 500 stock election shares, 470 shares (500 x (1,440,000/1,530,000), rounded down to the nearest whole number) are converted into the right to receive the stock consideration, and the remaining 30 stock election shares are converted into the right to receive the cash consideration. Stockholder C would receive:

450 shares of CB common stock (470 x 0.9583) and cash instead of a fractional 0.401 share of CB common stock; and

$15,105.00 in cash ((500 + 30) x $28.50).

Example 2 (Oversubscription of Cash Election Shares)

Assume that valid cash elections are received with respect to 1,100,000810,000 shares (approximately 46%(45% of the outstanding shares) of FedFirstFirst West Virginia common stock; valid stock elections are received with respect to 900,000720,000 shares (approximately 38%(40% of the outstanding shares); and no elections are received with respect to 400,000270,000 shares (approximately 17%(15% of the outstanding shares). This means that the shortfall number is 660,000 (1,560,000-900,000)720,000 (1,440,000-720,000), and the allocation provisions would generally apply as follows:

 

  Stock election shares. All 900,000720,000 stock election shares are converted into the right to receive the stock consideration.

  Non-election shares. Because the shortfall number (660,000)(720,000) exceeds the number of non-election shares (400,000)(270,000), all 400,000270,000 non-election shares are converted into the right to receive the stock consideration.

 

  Cash election shares. Of the 1,100,000810,000 cash election shares, 260,000450,000 cash election shares are converted into the right to receive the stock consideration. The remaining 840,000360,000 cash election shares are converted into the right to receive the cash consideration. Since the cash election shares are oversubscribed, the FedFirstFirst West Virginia stockholders who make cash elections will receive a mix of cash and stock merger consideration.

This can be further illustrated as follows:

 

  Stockholder Aholds 1,000 shares of FedFirstFirst West Virginia common stock and makes a valid stock election with respect to all 1,000 shares. Stockholder A would receive 1,159958 shares of CB common stock (1,000 x 1.1590) shares0.9583) and cash instead of a fractional 0.3 share of CB common stock.

  Stockholder Bholds 1,000 shares of FedFirstFirst West Virginia common stock and makes a valid cash election with respect to all 1,000 shares. 236555 of such shares (1,000 x (260,000/1,100,000))(450,000/810,000), rounded down to the nearest whole number) would be converted into the right to receive the stock consideration, and the remaining 764445 of such shares would be converted into the right to receive the cash consideration. Stockholder B would receive:

 

273531 shares of CB common stock (236(555 x 1.1590)0.9583) and cash instead of a fractional 0.5240.8565 share of CB common stock; and

 

$17,572.0012,682.50 in cash (764(445 x $23.00)$28.50).

 

  Stockholder Cholds 1,000 shares of FedFirstFirst West Virginia common stock and makes a valid cash election with respect to 500 shares and a valid stock election with respect to 500 shares. All 500 stock election shares are converted into the right to receive the stock consideration. Of the 500 cash election shares, 118277 shares (500 x (260,000/1,100,000))(450,000/810,000), rounded down to the nearest whole number) would be converted into the right to receive the stock consideration, and the remaining 382223 of such cash election shares would be converted into the right to receive the cash consideration. Stockholder C would receive:

 

716744 shares of CB common stock ((500 + 118)277) x 1.1590)0.9583) and cash instead of a fractional 0.2620.5991 share of CB common stock; and

 

$8,786.006,355.50 in cash (382(223 x $23.00)$28.50).

Example 2 (Oversubscription of Stock Election Shares)

Assume that valid stock elections are received with respect to 1,800,000 shares (75% of the outstanding shares) of FedFirst common stock; valid cash elections are received with respect to 400,000 shares (approximately 17% of the outstanding shares) of FedFirst common stock; and no elections are received with respect to 200,000 shares (approximately 0.8% of the outstanding shares). The allocation provisions would generally apply as follows:

Cash election shares. All 400,000 cash election shares are converted into the right to receive the cash consideration.

Non-election shares. All 200,000 non-election shares are converted into the right to receive the cash consideration.

Stock election shares. Of the 1,800,000 stock election shares, 1,560,000 stock election shares are converted into the right to receive the stock consideration. The remaining 240,000 stock election shares are converted into the right to receive the cash consideration. Since the stock election shares are oversubscribed, this means that the FedFirst stockholders who make a stock election receive a mix of cash and stock merger consideration.

This can be further illustrated as follows:

Stockholder Aholds 1,000 shares of FedFirst common stock and makes a valid stock election with respect to all 1,000 shares. 866 of such shares (1,000 x (1,560,000/1,800,000)) are converted into the right to receive the stock consideration, and the remaining 134 of such shares are converted into the right to receive the cash consideration. Stockholder A would receive:

1,003 shares of CB common stock (866 x 1.1590) and cash instead of a fractional 0.694 share of CB common stock; and

$3,082.00 in cash (134 x $23.00).

Stockholder Bholds 1,000 shares of FedFirst common stock and makes a valid cash election with respect to all 1,000 shares. Stockholder B would receive $23,000.00 in cash (1,000 x $23.00).

Stockholder Cholds 1,000 shares of FedFirst common stock and makes a valid cash election with respect to 500 shares and a valid stock election with respect to 500 shares. All 500 cash election shares are converted into the right to receive the cash consideration. Of the 500 stock election shares, 433 shares (500 x (1,560,000/1,800,000)) are converted into the right to receive the stock consideration, and the remaining 67 stock election shares are converted into the right to receive the cash consideration. Stockholder C would receive:

501 shares of CB common stock (433 x 1.1590) and cash instead of a fractional 0.847 share of CB common stock; and

$13,041.00 in cash ((500 + 67) x $23.00).

Treatment of FedFirst Stock Options and Restricted Stock Awards

At the effective time of the merger, each option to purchase shares of FedFirst common stock outstanding at the effective time of the merger, whether or not vested, will be cancelled in exchange for a cash payment equal to the product of (1) $23.00 minus the exercise price of such option, multiplied by (2) the number of shares subject to such option, less required tax withholding.

At the effective time of the merger, each outstanding share of FedFirst restricted stock will vest and will be exchanged for 1.1590 shares of CB common stock.

Election Procedures; Surrender of Stock Certificates

An election form is being mailed separately from this joint proxy statement/prospectus to holders of shares of FedFirstFirst West Virginia common stock on or about the date this joint proxy statement/prospectus is being mailed. Each election form entitles each holder of FedFirstFirst West Virginia common stock to elect to receive cash, CB common stock, or a combination of cash and stock, or make no election with respect to the form of merger consideration they wish to receive.

To make an effective election, you must submit a properly completed election form, along with your FedFirstFirst West Virginia stock certificates representing all shares of FedFirstFirst West Virginia common stock covered by the election form (or an appropriate guarantee of delivery), to the exchange agent, Computershare Limited,Trust Company, N.A., on or before 5:00 p.m., Easternlocal time, on , 2014.April 23, 2018. Computershare LimitedTrust Company, N.A., will act as exchange agent in the merger and in that role will process the exchange of FedFirstFirst West Virginia common stock for cash and/or CB common stock. Shortly after the merger, the exchange agent will allocate cash and stock among FedFirstFirst West Virginia stockholders, consistent with their elections and the allocation and proration procedures. If you do not submit an election form, you will receive instructions from the exchange agent on where to surrender your FedFirstFirst West Virginia stock certificates after the merger is completed. In any event, do not forward your FedFirstFirst West Virginia stock certificates with your proxy cards.

You may change your election at any time before the election deadline by written notice accompanied by a properly completed and signed later-dated election form which is received by the exchange agent before the election deadline or by withdrawal of your stock certificates by written notice before the election deadline. All elections will be revoked automatically if the merger agreement and plan of merger is terminated. If you have a preference for receiving either CB common stock and/or cash for your FedFirstFirst West Virginia common stock, you should complete and return the election form. If you do not make an election, you will be allocated CB common stock and/or cash depending solely on the elections made by other stockholders.

Neither CB nor FedFirstFirst West Virginia makes any recommendation as to whether you should elect to receive cash, stock or a combination of cash and stock in the merger. You must make your own decision with respect to your election. Generally, the merger will be a tax-free transaction for FedFirstFirst West Virginia stockholders to the extent they receive CB common stock. See “—Material U.S. Federal Income Tax Consequences of the Merger.”

If your certificates for FedFirstFirst West Virginia common stock are not immediately available or you are unable to send the election form and other required documents to the exchange agent before the election deadline, FedFirstFirst West Virginia shares may be properly exchanged, and an election will be effective, if:

 

such exchanges are made by or through a member firm of a registered national securities exchange or of the Financial Industry Regulatory Authority, or by a commercial bank or trust company having an office, branch or agency in the United States;

 

the exchange agent receives, before the election deadline, a properly completed and duly executed notice of guaranteed delivery substantially in the form provided with the election form (delivered by hand, mail, telegram, telex or facsimile transmission); and

 

the exchange agent receives, within three (3) business days after the election deadline, the certificates for all exchanged FedFirstFirst West Virginia shares, or confirmation of the delivery of all such certificates into the exchange agent’s account with The Depository Trust Company in accordance with the proper procedures for such transfer, together with a properly completed and duly executed election form and any other documents required by the election form.

FedFirstFirst West Virginia stockholders who do not submit a properly completed election form or revoke their election form before the election deadline will have their shares of FedFirstFirst West Virginia common stock designated as non-election shares. FedFirstFirst West Virginia stock certificates represented by elections that have been revoked will be promptly returned without charge to the FedFirstFirst West Virginia stockholder revoking the election upon written request.

If you own shares of FedFirstFirst West Virginia common stock in “street name” through a broker or other financial institution, you should receive or seek instructions from the institution holding your shares concerning how to make your election. “Street name” holders may be subject to an election deadline earlier than the deadline applicable to holders of shares in registered form. Therefore, you should carefully read any materials you receive from your broker. If you instruct a broker to submit an election for your shares, you must follow such broker’s directions for revoking or changing those instructions.

After the completion of the merger, the exchange agent will mail to FedFirstFirst West Virginia stockholders who do not submit election forms, or who have revoked their election, a letter of transmittal, together with instructions for the exchange of their FedFirstFirst West Virginia stock certificates for the merger consideration. Until you surrender your FedFirstFirst West Virginia stock certificates for exchange after completion of the merger, you will not be paid dividends or other distributions declared after the merger with respect to any CB common stock in which your FedFirstFirst West Virginia shares have been converted. When you surrender your FedFirstFirst West Virginia stock certificates, CB will pay any unpaid dividends or other distributions, without interest. After the completion of the merger, there will be no further transfers of FedFirstFirst West Virginia common stock. FedFirstFirst West Virginia stock certificates presented for transfer after the completion of the merger will be canceled and exchanged for the merger consideration.

If your FedFirstFirst West Virginia stock certificates have been lost, stolen or destroyed, you will have to prove your ownership of these certificates, that they were lost, stolen or destroyed, and post a bond in such amount as the exchange agent may direct before you receive any consideration for your shares. The letter of transmittal includes instructions on how to provide evidence of ownership.

Accounting Treatment

CB will account for the merger under the “acquisition” method of accounting in accordance with GAAP. Using the acquisition method of accounting, CB will record FedFirst’sFirst West Virginia’s assets and liabilities at their respective fair values at the time of the completion of the merger. The difference between the CB’s purchase price and the net fair value of the assets acquired and liabilities assumed will be recorded as either goodwill (if the purchase price exceeds the fair value of net assets acquired) or bargain purchase gain (if the purchase price is less than the fair value of net assets acquired).

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion and legal conclusions contained herein constitute and represent the opinion of Luse Gorman, PC, counsel to CB, and the opinion of Bowles Rice LLP, counsel to First West Virginia, as to the material U.S. federal income tax consequences of the merger to U.S. residents and citizens that exchange their shares of First West Virginia common stock for the merger consideration in the merger.

General.General. The following summary discusses the material anticipated U.S. federal income tax consequences of the merger applicable to a holder of shares of FedFirstFirst West Virginia common stock who surrenders all of his or her FedFirstFirst West Virginia common stock for CB common stock and/or cash in the merger. This discussion is based upon the Internal Revenue Code, Treasury Regulations, judicial authorities, published positions of the Internal Revenue Service (“IRS”),IRS, and other applicable authorities, all as in effect on the date of this document and all of which are subject to change or differing interpretations (possibly with retroactive effect).

This discussion is limited to U.S. residents and citizens“U.S. holders” (as defined below) who hold their shares as capital assets for U.S. federal income tax purposes within the meaning of Section 1221 of the Code (generally, assets held for investment). No attempt has been made to comment on all U.S. federal income tax consequences of the merger and related transactions that may be relevant to holders of shares of FedFirstFirst West Virginia common stock.

This discussion also does not address all of the tax consequences that may be relevant to a particular person or the tax consequences that may be relevant to persons subject to special treatment under U.S. federal income tax laws (including, among

others, tax-exempt organizations, dealers in securities, commodities or foreign currencies, traders in securities that elect to apply a mark-to-market method of accounting, banks, insurance companies, mutual funds, regulated investment companies, real estate investment trusts, controlled foreign corporations, or passive foreign investment companies, former citizens or residents of the United States, financial institutions or persons who hold their shares of FedFirstFirst West Virginia common stock as part of a hedge, straddle, constructive sale or conversion transaction or other integrated investment, persons whose functional currency is not the U.S. dollar, holders that exercise appraisal rights, persons that are, or hold their shares of FedFirstFirst West Virginia common stock through, partnerships, S corporations or other pass-through entities, holders subject to the alternative minimum tax provisions of the Code, holders who actually or constructively own more than 5% of First West Virginia common stock or persons who acquired their shares of FedFirstFirst West Virginia common stock through the exercise of an employee stock option or otherwise as compensation). In addition, this discussion does not address any aspects of state, local, non-U.S. taxation or U.S. federal taxation other than income taxation. No ruling has been requested from the IRS regarding the U.S. federal income tax consequences of the merger. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.

FedFirstFor purposes of this discussion, the term “U.S. holder” means a beneficial owner of First West Virginia common stock that is for U.S. federal income tax purposes (1) an individual citizen or resident of the United States, (2) a corporation (or entity or an arrangement treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof or the District of Columbia, (3) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons (as defined in Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust, or (b) such trust has made a valid election to be treated as a U.S. person for U.S. federal income tax purposes, or (4) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source.

If an entity or an arrangement treated as a partnership for U.S. federal income tax purposes holds First West Virginia common stock, the tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. Any entity treated as a partnership for U.S. federal income tax purposes that holds First West Virginia common stock, and any partners in such partnership, should consult their own tax advisors.

First West Virginia stockholders are urged toshould consult their tax advisors as to the U.S. federal income tax consequences of the merger, as well as the effects of state, local, non-U.S. tax laws and U.S. tax laws other than income tax laws.

Opinion Conditions. It is a condition to the obligations of each of CB and FedFirstFirst West Virginia that CB and FedFirstFirst West Virginia receive an opinion of their respective legal counsel to the effect that the merger will constitute a “reorganization” for U.S. federal income tax purposes within the meaning of Section 368(a) of the Internal Revenue Code and that each of CB and FedFirstFirst West Virginia will be a party to the reorganization within the meaning of Section 368(b) of the Internal Revenue Code. CB and FedFirstFirst West Virginia expect to be able to obtain the tax opinion from their respective legal counsel if, as expected:

 

CB and FedFirstFirst West Virginia are able to deliver customary representations to their respective legal counsel; and

there is no adverse change in U.S. federal income tax law.

In addition, in connection with the filing of the registration statement of which this document forms a part, Kilpatrick Townsend & Stockton LLPeach of Bowles Rice and Luse Gorman, Pomerenk & Schick, P.C.PC has each delivered its opinion to FedFirstFirst West Virginia and CB, respectively, that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code and that each of CB and FedFirst will be a party to the reorganization within the meaning of Section 368(b) of the Internal Revenue Code. A copy of each opinion has been filed as an exhibit to CB’s registration statement, which has been filed with the Securities and Exchange Commission. Each such opinion speakspeaks only as of the date of the opinion, and has been rendered on the basis of facts, representations and assumptions set forth or referred to in such opinion and factual representations contained in certificates of officers of CB and FedFirst,First West Virginia, all of which must continue to be true and accurate in all material respects as of the effective time of the merger.

If any of the representations or assumptions upon which the opinions are based are inconsistent with the actual facts, the tax consequences of the merger could be adversely affected. The determination as to whether the proposed merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code will depend upon the facts and law existing at the effective time of the proposed merger.

Based on the opinionopinions of Kilpatrick Townsend & Stockton LLP, counsel to FedFirst, thatBowles Rice and Luse Gorman, PC, the tax consequences of the merger are set forth below.

Tax Consequences of the Merger Generally. The merger will qualify as a reorganization within“reorganization” under Section 368(a) of the meaning of Section 368(a), theCode for U.S. federal income tax consequences to stock of FedFirst are set forth below.purposes.

Exchange Solely for CB Common Stock.No gain or loss will be recognized by a FedFirstFirst West Virginia stockholder who receives solely shares of CB common stock (except for cash received in lieu of fractional shares, as discussed below) in exchange for his or her shares of FedFirstFirst West Virginia common stock. The tax basis of the shares of CB common stock received by a FedFirstFirst West Virginia stockholder in such exchange will be equal (except for the basis attributable to any fractional shares of CB common stock, as discussed below) to the tax basis of the FedFirstFirst West Virginia common stock surrendered in exchange for the CB common stock. The holding period of the CB common stock received will include the holding period of shares of FedFirstFirst West Virginia common stock surrendered in exchange for the CB common stock, provided that such shares were held as capital assets of the FedFirstFirst West Virginia stockholder at the effective time of the merger.

Exchange Solely for Cash. A FedFirstFirst West Virginia stockholder who receives solely cash in exchange for all of his or her shares of FedFirstFirst West Virginia common stock (and is not treated as constructively owning CB common stock after the merger under the circumstances referred to below under “—Possible Dividend Treatment”) will recognize gain or loss for federal income tax purposes equal to the difference between the cash received and such stockholder’s tax basis in the FedFirstFirst West Virginia common stock surrendered in exchange for the cash. Such gain or loss will be a capital gain or loss, provided that such shares were held as capital assets of the FedFirstFirst West Virginia stockholder at the effective time of the merger. Such gain or loss will be long-term capital gain or loss if the FedFirstFirst West Virginia stockholder’s holding period is more than one year at the effective time of the merger. The Internal Revenue Code contains limitations on the extent to which a taxpayer may deduct capital losses from ordinary income.

Exchange for CB Common Stock and Cash. A FedFirstFirst West Virginia stockholder who receives a combination of CB common stock and cash in exchange for his or her FedFirstFirst West Virginia common stock will not be permitted to recognize any loss for federal income tax purposes. Such a shareholderstockholder will recognize gain, if any, equal to the lesser of (1) the amount of cash received or (2) the amount of gain “realized” in the transaction. The amount of gain a FedFirstFirst West Virginia stockholder “realizes” will equal the amount by which (a) the cash plus the fair market value at the effective time of the merger of CB common stock received exceeds (b) the stockholder’s tax basis in the FedFirstFirst West Virginia common stock to be surrendered in the exchange for the cash and CB common stock. Any recognized gain could be taxed as a capital gain or a dividend, as described below.below under “—Possible Dividend Treatment.” The tax basis of the shares of CB common stock received by such FedFirstFirst West Virginia stockholder will be the same as the tax basis of the shares of FedFirstFirst West Virginia common stock surrendered in exchange for the shares of CB common stock, adjusted as provided in Section 358(a) of the Internal Revenue Code for the gain recognized and/or cash received in exchange for such shares of FedFirstFirst West Virginia common stock. The holding period for shares of CB common stock received by such FedFirstFirst West Virginia stockholder will include such shareholder’sstockholder’s holding period for the FedFirstFirst West Virginia common stock surrendered in exchange for the CB common stock, provided that such shares were held as capital assets of the shareholderstockholder at the effective time of the merger.

A FedFirstFirst West Virginia stockholder’s federal income tax consequences will also depend on whether his or her shares of FedFirstFirst West Virginia common stock were purchased at different times at different prices. If they were, the FedFirstFirst West Virginia stockholder could realize gain with respect to some of the shares of FedFirstFirst West Virginia common stock and loss with respect to other shares. Such FedFirstFirst West Virginia stockholder would have to recognize such gain to the extent such shareholderstockholder receives cash with respect to those shares in which the

shareholder’s stockholder’s adjusted tax basis is less than the amount of cash plus the fair market value at the effective time of the merger of the CB common stock received, but could not recognize loss with respect to those shares in which the FedFirstFirst West Virginia stockholder’s adjusted tax basis is greater than the amount of cash plus the fair market value at the effective time of the merger of the CB common stock received. Any disallowed loss would be included in the adjusted basis of the CB common stock. Such a FedFirstFirst West Virginia stockholder is urged toshould consult his or her own tax advisor respectingwith respect to the tax consequences of the merger to that stockholder.

Possible Dividend Treatment. In certain circumstances, a FedFirstFirst West Virginia stockholder who receives solely cash or a combination of cash and CB common stock in the merger may receive dividend income, rather than capital gain, treatment on all or a portion of the gain recognized by that stockholder if the receipt of cash “has the effect of the distribution of a dividend.” The determination of whether a cash payment has such effect is based on a comparison of the FedFirsta First West Virginia stockholder’s proportionate interest in CB after the merger with the proportionate interest the stockholder would have had if the stockholder had received solely CB common stock in the merger. This could happen because the stockholdersstockholder’s purchase (or the purchase by a family member or certain entities described below) of additional CB stock or a repurchase of shares by CB. For purposes of this comparison, the FedFirsta First West Virginia stockholder may be deemed to constructively own shares of CB common stock held by certain members of the stockholder’s family or certain entities in which the stockholder has an ownership or beneficial interest, and certain stock options may be aggregated with the stockholder’s shares of CB common stock. The amount of the cash payment that may be treated as a dividend is limited to the stockholder’s ratable share of the accumulated earnings and profits of FedFirstFirst West Virginia at the effective time of the merger. Any gain that is not treated as a dividend will be taxed as a capital gain, provided that the stockholder’s shares were held as capital assets at the effective time of the merger. Because the determination of whether a cash payment will be treated as having the effect of a dividend depends primarily upon the facts and circumstances of each FedFirstFirst West Virginia stockholder, stockholders are urged toshould consult their own tax advisors regarding the tax treatment of any cash received in the merger.

Cash in Lieu of Fractional Shares. A FedFirstFirst West Virginia stockholder who holds FedFirstFirst West Virginia common stock as a capital asset and who receives in the merger, in exchange for such stock, solely CB common stock and cash in lieu of a fractional share interest in CB common stock will be treated as having received such cash in full payment for such fractional share of stock and aswill realize capital gain or loss equal to the difference between the amount of cash received instead of a fractional share and the stockholder’s tax basis in the shares of First West Virginia common stock allocable to that fractional share of CB common stock, notwithstanding the dividend rules discussed above.

Net Investment Income Tax. A Medicare contribution tax of 3.8% is imposed on the “net investment income” of individuals, estates and certain trusts with income exceeding certain threshold amounts. A First West Virginia stockholder that is an individual is subject to a 3.8% tax on the lesser of: (1) his or her net investment income for the relevant taxable year, or (2) the excess of his or her

modified adjusted gross income for the taxable year over a certain threshold (between $125,000 and $250,000 depending on the individual’s U.S. federal income tax filing status). Estates and trusts are subject to similar rules. Net investment income generally would include any capital gain recognized in connection with the merger (including any gain treated as a dividend), as well as, among other items, other interest, dividends, capital gains and rental or royalty income received by such individual. First West Virginia stockholders should consult their tax advisors as to the application of this additional tax to their circumstances.

Backup Withholding.Unless an exemption applies under the backup withholding rules of Section 3406 of the Internal Revenue Code, the exchange agent shall be required to, and will, withhold 28% of any cash payments to which a FedFirstFirst West Virginia stockholder is entitled pursuant to the merger, unless the FedFirstFirst West Virginia stockholder completes, signs and returns the substitute IRS Form W-9 enclosed with the letter of transmittal sent by the exchange agent. Unless an applicable exemption exists and is proved in a manner satisfactory to the exchange agent, this completed form provides the information, including the FedFirstFirst West Virginia stockholder’s taxpayer identification number, and certification necessary to avoid backup withholding. Any amounts withheld under the backup withholding rules may be allowed as a credit against your U.S. Federal income tax liability, provided you timely furnish the required information to the IRS.

Tax Treatment of the Entities. No gain or loss will be recognized by CB or FedFirstFirst West Virginia as a result of the merger.

Reporting Requirements. A holder of FedFirstFirst West Virginia common stock that receives CB common stock as a result of the merger may beis required to retain permanent records related to such shareholder’s FedFirststockholder’s First West Virginia common stock and make such records available to any authorized IRS officers and employees. The records should include the number of shares of First West Virginia common stock exchanged, the number of shares of CB common stock received, the fair market value of the First West Virginia common stock exchanged, and the holder’s adjusted basis in the CB common stock received.

If a U.S. holder that receives CB common stock in the merger is considered a “significant holder,” such U.S. holder will be required (1) to file a statement with its U.S. Federalfederal income tax return a statement setting forthin accordance with Treasury Regulation Section 1.368-3 providing certain facts pertinent to the merger, including such U.S. holder’s tax basis in, and the fair market value of, the First West Virginia common stock surrendered by such U.S. holder in the merger, and (2) to retain permanent records of these facts relating to the merger. A “significant holder” is any First West Virginia stockholder that, immediately before the merger, (a) owned at least 5% (by vote or value) of the outstanding stock of First West Virginia, or (b) owned First West Virginia securities with a tax basis of $1.0 million or more.

Regulatory Matters Relating to the Merger

CB expectsCB’s acquisition of First West Virginia is subject to file a waiver request withthe approval of the Federal Reserve requesting confirmation that it may acquire FedFirst without the filing of a formal application. PursuantReserve. However, pursuant to applicable regulations, a formal application to the Federal Reserve is not required if: (1) the bank merger occurs simultaneously with the acquisition of the shares of the acquired holding company and the acquired bank is not operated as a separate entity; (2) the bank merger requires the prior approval of a federal supervisory agency under the Bank Merger Act; (3) the transaction does not involve the acquisition of any non-bank company requiring approval under the Bank Holding Company Act; (4) both before and after the transaction, the acquired savings and loanbank holding company meets the Federal Reserve’s capital adequacy guidelines; and (5) the acquiring bank holding company provides the Federal Reserve at least ten days prior written notice of the transaction, including a description of the transaction and a copy of the application made to the appropriate federal regulatory agency. While CB expects that thefiled a waiver would be granted, it will file any necessary applicationrequest with the Federal Reserve ifrequesting confirmation that it may acquire First West Virginia without the filing of a formal application. The waiver is not forthcoming.was granted on January 25, 2018.

Immediately following the merger of FedFirstFirst West Virginia with and into CB, CB expects to merge First Federal SavingsProgressive Bank with and into Community Bank, with Community Bank as the resulting entity. The bank merger is subject to the approval by the Federal Deposit Insurance CorporationFDIC under the Bank Merger Act and by the Pennsylvania Department of Banking under applicable Pennsylvania law. In granting its approval under the Bank Merger Act, the Federal Deposit Insurance CorporationFDIC must consider the financial and managerial resources and future prospects of the existing and proposed institutions and the convenience and needs of the communities to be served. Community Bank filed the requisite applications for the bank merger with the Federal Deposit Insurance CorporationFDIC and the Pennsylvania Department of Banking in July 2014.January 2018. As of the date of this joint proxy statement/prospectus, action on these applications is pending.

The non-objection of the West Virginia Division of Financial Institutions to each of the merger and the bank merger is also required. CB filed the requisite notices for the merger and bank merger with the West Virginia Division of Financial Institutions in January 2018.

In addition, a period of fifteen (15)15 to thirty (30)30 days must expire following approval by the Federal Deposit Insurance CorporationFDIC before completion of the merger is allowed, within which period the United StatesU.S. Department of Justice may file objections to the merger under the federal antitrust laws. While CB and FedFirstFirst West Virginia believe that the likelihood of objection by the Department of Justice is remote in this case, there can be no assurance that the Department of Justice will not initiate proceedings to block the merger.

The merger cannot proceed in the absence of the requisite regulatory approvals or waivers. See “Description of the Merger—Conditions to Completing the Merger” and “—Termination.Terminating the Merger Agreement.” There can be no assurance that the requisite

regulatory approvals will be obtained, and if obtained, there can be no assurance as to the date of any approval. There can also be no assurance that any regulatory approvals will not contain a condition or requirement that causes the approvals to fail to satisfy the condition set forth in the merger agreement and described under “Description of the Merger—Conditions to Completing the Merger.”

The approval of any application merely implies the satisfaction of regulatory criteria for approval, which does not include review of the merger from the standpoint of the adequacy of the exchange ratio for converting FedFirstFirst West Virginia common stock into CB common stock. Furthermore, regulatory approvals do not constitute an endorsement or recommendation of the merger.

Interests of Certain Persons in the Merger that are Different from Yours

Share Ownership.On the record date for the special meeting, FedFirst’sFirst West Virginia’s directors and officers beneficially owned in the aggregate,270,444 shares of FedFirst’sFirst West Virginia common stock, (excludingrepresenting 15.74% shares that may be acquired upon the exercise of stock options), representing approximately     % of the outstanding shares of FedFirstFirst West Virginia’s common stock.

As described below, certain of FedFirst’sFirst West Virginia’s officers and directors have interests in the merger that are in addition to, or different from, the interests of FedFirst’sFirst West Virginia’s stockholders generally. FedFirst’sFirst West Virginia’s board of directors was aware of these interests and took them into account in approving the merger.

Cash Payment for Outstanding Options.Under the terms of the merger agreement, all outstanding FedFirst stock options, whether or not vested, will be terminated and the holder of the option will receive a cash payment equal to the product of (1) the number of shares of FedFirst common stock subject to the stock option, multiplied by (2) the amount by which $23.00 exceeds the exercise price of such stock option, less any required tax withholding. Based upon the equity holdings of FedFirst as of the record date, the cash payments with respect to stock options to be made to the executive officers and directors of FedFirst upon the completion of the merger are as follows:

Executives/Directors of FedFirst

  FedFirst
Stock Options(#)
   Cash Payment($) 

Patrick G. O’Brien,

President and Chief Executive Officer

   67,909     446,314  

Richard B. Boyer

Vice President

   31,602     193,958  

Jamie L. Prah

Senior Vice President and Chief Financial Officer

   31,129     199,996  

Henry B. Brown III

Senior Vice President and Chief Lending Officer

   21,394     161,862  

All non-employee directors as a group (5 persons)

   80,254     538,708  

Acceleration of Vesting of Restricted Stock Awards.Under the terms of the merger agreement, restricted stock awards that have not yet vested will become fully vested upon the occurrence of a change in control and each share of restricted stock will be converted into 1.1590 shares of CB common stock. The number of unvested restricted stock awards held by FedFirst’s executive officers and directors as of August 1, 2014 is as follows:

Executive/Director of FedFirst

FedFirst
Unvested Restricted
Stock Awards(#)

Patrick G. O’Brien

9,673

Richard B. Boyer

3,600

Jamie L. Prah

3,600

Henry B. Brown III

2,700

All non-employee directors as a group (5 persons)

14,000

Appointment of FourThree Directors to the CB and Community Bank Boards of Directors. Following the completion of the merger, CB will appoint John J. LaCarte, John M. Swiatek, PatrickWilliam G. O’BrienPetroplus, Roberta Robinson Olejasz, and Richard B. Boyer,Jonathan A. Bedway, each of whom currently is a director of FedFirstFirst West Virginia and First Federal SavingsProgressive Bank, to the boards of directors of CB board of directors. Mr. LaCarte will be appointed to a term expiring at the 2017 annual meeting of shareholders, Mr. Swiatek will be appointed to a term expiring at the 2015 annual meeting of shareholders, and Messrs. O’Brien and Boyer will be appointed to a term expiring at the 2016 annual meeting of shareholders. Following the completion of the merger, Community Bank also will appoint these individuals to the Community Bank board of directors.Bank. These appointees will receive the same board fees and be otherwise entitled to the same privileges as the directors of CB and Community Bank immediately before the effective time of the merger. Directors of CB and Community Bank currently receive fees and other benefits as described in “Management“Information About CB—Director Compensation.” Mr. Petroplus will be appointed to a term expiring at the 2019 annual meeting of stockholders, Ms. Olejasz will be appointed to a term expiring at the 2018 annual meeting of stockholders, and Operations AfterMr. Bedway will be appointed to a term expiring at the Merger—Directors’ Compensation.”2020 annual meeting of stockholders.

Continued Employment for Certain FedFirst Executive OfficersAdvisory Board..Following the completion of the merger, Mr. O’Brien has agreed to remain employed as Executive Vice President and Chief Operating OfficerCB will form an advisory board comprised of Community Bank, Mr. Boyer has agreed to remain employed as Vice President of Insurance Operations of Community Bank and President and Chief Executive Officer of Exchange Underwriters, Inc. and Ms. George has agreed to remain employed as Senior Vice President of Retail Operations, Human Resources and Compliance of Community Bank. On April 14, 2014, Mr. O’Brien entered into an employment agreement with Community Bank, Mr. Boyer entered into an employment agreement with Community Bank and Exchange Underwriters, Inc. and Ms. George entered into a change in control agreement with Community Bank, each of which will supersede and replace their current agreements with FedFirst, First Federal Savings Bank and Exchange Underwriters, Inc. (as applicable) ascertain members of the effective timeFirst West Virginia board of directors who do not become members of the merger.

The new employment agreementsCB board of directors and representatives from the communities currently served by First West Virginia, in each case to be selected by CB. CB will maintain this advisory board for Messrs. O’Brien and Boyer have a term that will begin asperiod of the effective time of the merger and will continue 36at least 12 months after May 1 of the calendar year of, or immediately following, the effective timeclosing date of the merger. On each anniversaryThe advisory board will meet on a quarterly basis and will receive compensation for such service in an amount to be determined by CB prior to the closing date (which is defined as May 1 of each calendar year), each employment agreement will extend for one year such that the remaining term will be for 36 months thereafter, provided that disinterested members of the merger. CB has not made any determination as to the advisory board of directors of Community Bank conduct a comprehensive performance evaluation of the executive and affirmatively approve the extension.

The employment agreements provide for an annual base salary rate of $238,350 and $190,000 for Messrs. O’Brien and Boyer, respectively. In addition to base salary, each executive is entitled to participate in benefit plans that are made available to management employees, and will be reimbursed for all reasonable business expenses incurred. With respect to bonuses, Mr. O’Brien will receive a signing bonus of $20,000, payable in a lump sum at the effective time of the merger, and will be entitled to participate in any bonus plan or arrangement of Community Bank that is offered to executive officers. Mr. Boyer is entitled to receive: (i) 25% of all first year commissions generated by any salesperson of Exchange Underwriters, Inc. (including himself) from the sales of new insurance policies, which the commissions earned will be paid on a monthly basis; and (ii) an annual bonus equal to 20% of the year-over-year growth in Exchange Underwriters, Inc.’s annual audited net income, excluding any net income effect from the completion of any agency acquisition. However, Mr. Boyer will not be entitled to participate in any bonus plan or arrangement of Community Bank. Mr. O’Brien will also be entitled to use of a company-purchased or leased automobile and will be reimbursed for all operating expenses of the automobile.

In the event of the executive’s involuntary termination of employment for reasons other than cause, disability or death, or in the event the executive resigns during the term of the employment agreement for “good reason,” Community Bank (or Exchange Underwriters, Inc., in the case of Mr. Boyer) will provide the executive with the following severance benefits:

continued base salary payments (at the rate in effectfees as of the date of termination) for the greater of: (i) 12 months; or (ii) the remaining term of the employment agreement, payable in accordance with regular payroll practices; and

continued life insurance and non-taxable medical and dental coverage, which will cease upon the earlier of: (i) the completion of the remaining term of the employment agreement; or (ii) the date on which the executive receives substantially similar benefits from another employer.

Upon the occurrence of the executive’s termination for any reason (other than for cause) on or after the effective time of a change in control of CB or Community Bank, then in lieu of the severance benefits immediately above, Community Bank (or Exchange Underwriters, Inc., in the case of Mr. Boyer) or any successor will provide the executive with the following severance benefits:

a benefit equal to three times the executive’s highest annual rate of base salary earned during the calendar year of the executive’s date of termination or either of the three calendar years immediately preceding the his date of termination, payable in equal installments for the greater of (i) 12 months, or (ii) the remaining term of the employment agreement in accordance with regular payroll practices; and

continued life insurance and non-taxable medical and dental coverage until the earlier of: (i) three years after the executive’s date of termination; or (ii) the date on which the executive receives substantially similar benefits from another employer.

Upon any termination of employment (except following a change in control), Messrs. O’Brien and Boyer are each required to adhere to non-competition and non-solicitation covenants for one year and two years, respectively.

The new change in control agreement for Ms. George has a term that will begin as of the effective time of the merger and will continue for 24 months after May 1 of the calendar year of, or immediately following, the effective time of the merger. On each anniversary date (which is defined as May 1 of each calendar year), the agreement will be extended for one year such that the remaining term will be for 24 months thereafter, provided that disinterested members of the board of directors of Community Bank conduct a comprehensive performance evaluation of Ms. George and affirmatively approve the extension.

In the event that Ms. George’s involuntary termination of employment other than for cause, disability or death, or voluntary resignation for “good reason” occurs on or after the effective date of a change in control of CB or Community Bank, Ms. George would be entitled to a severance payment equal to two times her highest annual rate of base salary payable during the calendar year of her date of termination or either of the two calendar years immediately preceding her date of termination. Such payment will be payable in a lump sum within 30 days following her date of termination. In addition, Ms. George would be entitled to the continuation of substantially comparable life insurance and non-taxable medical and dental insurance coverage until the earlier of: (i) the date which is two years after her date of termination or (ii) the date on which she receives substantially similar benefits from another employer.

The change in control agreement also provides that the severance benefits thereunder when aggregated with other benefits and payments to which Ms. George would be entitled as a result of a change in control will be reduced, to the extent necessary, to avoid a penalty tax under Section 280G of the Internal Revenue Code.

For purposes of the employment agreements and change in control agreement, “good reason” is defined as: (i) a material reduction in the executive’s base salary or benefits (other than a reduction that is part of a good faith, overall reduction applicable to all employees); (ii) a material reduction in the executive’s authorities, duties or responsibilities; or (iii) a material breach of the employment agreement by Community Bank (or Exchange Underwriters, Inc., in the case of Mr. Boyer). In addition, the merger will not be considered a change in control for purposes of the employment agreements and change in control agreement.

FedFirst and First Federal Savings Bank Change in Control Agreement.FedFirst and First Federal Savings Bank are parties to change in control agreements with each of Messrs. Prah and Brown providing for severance benefits that would be triggered in the event of their termination of employment in connection with the merger. Specifically, in the event of the executive’s involuntary termination without “cause” or voluntary resignation for “good reason” (as defined in the change in control agreements) within 12 months following a change in control, First Federal Savings Bank (or any successor) will provide each executive with the following severance benefits:

a lump sum cash payment equal to three times, for Mr. Prah, and two times, for Mr. Brown, the executive’s base salary at the rate in effect immediately before the change in control or, if higher, the rate in effect when the executive terminates employment; and

continued life and health coverage substantially identical to the coverage maintained before termination for 36 months for Mr. Prah and 24 months for Mr. Brown.

Each change in control agreement also provides that the severance benefits thereunder when aggregated with other benefits and payments to which each executive would be entitled as a result of a change in control will be reduced, to the extent necessary, to avoid a penalty tax under Section 280G of the Internal Revenue Code.

For an estimate of the amounts payable in connection with a qualifying termination of employment following the merger to Messrs. Prah and Brown under their change in control agreements, see “Description of the Merger—Merger-Related Compensation for FedFirst’s Named Executive Officers” below.

Director Fee Continuation Agreement.First Federal Savings Bank is a party to a Director Fee Continuation Agreement with Mr. LaCarte. Under this agreement, Mr. LaCarte is entitled to an annual retirement benefit equal to $100 multiplied by the number of full years of service, payable to him, or his beneficiary, for a period of 10 years.

In accordance with the merger agreement, CB intends to terminate the Director Fee Continuation Agreement and distribute the accrued benefits thereunder immediately following the effective time of the merger in accordance with Section 409A of the Internal Revenue Code. All the benefits payable under the Director Fee Continuation Agreement have been fully vested and accrued, without regard to the merger.

Exchange Underwriters, Inc. Buyout with Richard Boyer. FedFirst Exchange Corporation, a subsidiary of First Federal Savings Bank that currently owns 80% of Exchange Underwriters, Inc., has agreed to purchase Mr. Boyer’s 20% minority interest for $1.2 million immediately before the closing of the merger.joint proxy statement/prospectus.

Indemnification and Continued Director and Officer Liability Coverage. From and after the effective time of the merger, CB has agreed to indemnify and hold harmless the current and former officers and directors of FedFirstFirst West Virginia and its subsidiaries against any costs or expenses incurred in connection with any claim, action, suit, proceeding or investigation that is a result of matters that existed or occurred at or before the effective time of the merger to the same extent as FedFirstFirst West Virginia currently provides for indemnification of its officers and directors. In addition, CB has agreed to provide, to the officers and directors of First West Virginia serving immediately before the effective time of the merger, directors’ and offices’officers’ liability insurance coverage for a period of six (6) years following the effective time of the merger to the officers and directors of FedFirst immediately before the effective time of the merger under the directors’ and officers’ liability insurance policy currently maintained by FedFirst or under a policy with comparable or better coverage,First West Virginia, except that, to obtain such insurance coverage, CB is not obligated to expend an annual amount exceedingin the aggregate more than 200% of the amount of the annual premiumspremium currently paid by FedFirstFirst West Virginia for such insurance. In lieu of the foregoing coverage, CB may request that First West Virginia obtain an extended reporting period endorsement under First West Virginia’s existing directors’ and officers’ liability insurance policy, or FedFirst may obtain a prepaidsubstitute therefor “tail” policy providing single limitpolicies the material terms of which, including coverage equivalentand amount, are no less favorable in any material respect to the foregoing coverage for a premium cost not to exceed 450%such person than First West Virginia’s existing insurance policies as of the annual premiums currently paid by FedFirst.date hereof.

Merger-Related Executive Compensation for FedFirst’s Named Executive Officers

The following tableRetention and related footnotes provide information about the compensation to be paid to FedFirst’s named executive officers that is based on or otherwise relates to the Merger (the “Merger-Related Executive Compensation”)Consulting Agreement; Retention Agreements. The Merger-Related Executive Compensation shown in the table and As described in more detail below, concurrently with the footnotes below is subject to an advisory (non-binding) vote of FedFirst stockholders as more fully described in the section of this document captioned “Merger-Related Executive Compensation Arrangements.”

The table below sets forth the aggregate dollar valueexecution of the various elementsmerger agreement, CB and its subsidiary Community Bank entered into (i) a consulting and retention agreement with William G. Petroplus, President and Chief Executive Officer of Merger-RelatedFirst West Virginia and its wholly-owned subsidiary Progressive Bank, and (ii) a retention agreement with each of Frances P. Reppy, Executive Compensation that each named executive officerVice President, Chief Administrative Officer and Chief Financial Officer of FedFirst would receive that is based on or otherwise relatesFirst West Virginia and Progressive Bank, and Brad D. Winwood, Executive Vice President, Chief Operating Officer and Investment Officer of First West Virginia and Progressive Bank. Mr. Petroplus, Ms. Reppy and Mr. Winwood have invaluable knowledge and expertise regarding the business and market area of First West Virginia and Progressive Bank. CB and Community Bank entered into these agreements to incentivize Mr. Petroplus, Ms. Reppy and Mr. Winwood to remain employed until the merger, assuming the following:

the estimated effective time of the merger is October 31, 2014;
and for period of time thereafter to provide to merger-related transition services.

Retention and Consulting Agreement for William G. Petroplus. Under the employmentretention and consulting agreement with Mr. Petroplus, if he remains an employee of Messrs. Prah and Brown is terminated by Community Bank without cause atFirst West Virginia through the effective time of the merger;merger, Community Bank will pay Mr. Petroplus a retention bonus of $100,000 at the effective time. Community Bank will also pay Mr. Petroplus $100,000 at the effective time in exchange for his commitment not to compete with CB or Community Bank, and

as required by Securities to comply with certain non-solicitation covenants for a period of 24 months after the effective time. To be eligible for those payments at the closing of the merger, Mr. Petroplus must also release CB and Exchange Commission rules,Community Bank, and their predecessors, from all amounts below have been calculated based onclaims related to his employment.

Mr. Petroplus will also provide consulting services to Community Bank for a per share priceperiod of FedFirst common stock of $21.87 (the average closing market price of FedFirst common stock12 months following the merger. As consideration for those consulting services, Mr. Petroplus will receive $50,000 paid in equal monthly installments in arrears over the first five (5)

12 months following the merger and a lump sum payment of $106,000 payable within 10 business days following the public announcementcompletion of the Merger on April 14, 2014).

As a result12 month consulting period. Mr. Petroplus will receive reimbursement of reasonable business expenses incurred in connection with the consulting services provided during the consulting period, but will not be entitled to participate in any benefit plans of CB or Community Bank during the consulting period. If Community Bank terminates Mr. Petroplus’ consulting services before the end of the foregoing assumptions,12 month consulting period without cause, or due to Mr. Petroplus’ disability or death, Mr. Petroplus (or his beneficiary) will receive a lump sum cash payment equal to the actual amounts received byunpaid consulting fees that Mr. Petroplus would have earned had he continued to provide consulting services to Community Bank for the remainder of the 12 month consulting period. If Mr. Petroplus’ consulting services cease for any other reason before the conclusion of the 12 month consulting period, Mr. Petroplus will receive only any earned consulting fees that are unpaid as of the date of termination. All payments under Mr. Petroplus’ retention and consulting agreement are subject to reduction in the event that such payments would otherwise result in an excess “parachute payment” and excise tax pursuant to the provisions of Section 280G of the Code. In addition, payments are subject to a named executive officer may materially differsix-month delay if such delay is required to comply with the provisions of Section 409A of the Code.

Retention Agreements for Frances P. Reppy and Brad D. Winwood.Under the retention agreements for Ms. Reppy and Mr. Winwood, if they remain employees of First West Virginia and Progressive Bank through the effective time of the merger, Community Bank will pay each of them a retention bonus of $110,925 and $109,013, respectively. Following the effective time, Ms. Reppy and Mr. Winwood will become employees of Community Bank. If they remain employed thereafter until their designated work-through dates (which is June 30, 2018 for Ms. Reppy and September 30, 2018 for Mr. Winwood), Community Bank will pay them an additional retention bonus of $110,925 and $109,013, respectively. To be eligible for their retention bonus payments, Ms. Reppy and Mr. Winwood must also release CB and Community Bank, and their predecessors, from all claims related to their employment.

If Community Bank terminates the amounts set forth below.employment of Ms. Reppy or Mr. Winwood prior to their designated work-through dates without cause or due to their disability or death, they will receive a cash lump sum payment equal to their unpaid retention bonuses that would had been earned had they remained employed through their designated work-through dates. If the employment of Ms. Reppy or Ms. Winwood ceases for any other reason, they will receive any base salary that is earned, but unpaid, at the time of the termination for their employment only. All payments under Ms. Reppy’s and Mr. Winwood’s retention agreements are subject to reduction in the event that such payments would otherwise result in an excess “parachute payment” and excise tax pursuant to the provisions of Section 280G of the Code. In addition, payments are subject to a six-month delay if such delay is required to comply with the provisions of Section 409A of the Code.

In addition, the termination of the First West Virginia Non-qualified Deferred Compensation Plan will result in a lump sum distribution of the vested amount thereunder to Ms. Reppy on January 2, 2019, as a participant therein, in accordance with Section  409A of the Code.

Merger-Related Executive Compensation

 

Executive

  Cash
($)(1)
   Equity
($)(2)
   Pension/
NQDC

($)
   Perquisites/
Benefits
($)(3)
   Tax
Reimbursement

($)
   Other
($)
   Total
($)
 

Patrick G. O’Brien

   —       559,846     —       —       —       —       559,846  

Richard B. Boyer

   —       230,419     —       —       —       —       230,419  

Jamie L. Prah

   283,585     236,991     —       3,024     —       —       523,600  

Henry B. Brown III

   278,000     192,362     —       30,468     —       —       500,830  

(1)The amounts in this column represent the cash severance payable to Messrs. Prah and Brown under their change in control agreements upon qualifying terminations of employment (as described above), which includes terminations for cause or resignations for good reason occurring within 12 months after a change in control. The amounts in this column to reflect any reductions in benefits to avoid any penalty tax under Section 280G of the Internal Revenue Code.
(2)The amounts in this column represent the aggregate value of: (i) the FedFirst restricted stock awards for which vesting would be accelerated based on a per share price of $21.87; and (ii) cash payment in cancellation of the FedFirst stock options, based on a per share value of $23.00, less the applicable per share exercise price. Such vesting and payment triggered upon the consummation of the merger and is not conditioned upon termination of the named executive officer’s employment. For Mr. O’Brien, his equity amount represents $190,269 attributable to the value of 8,700 FedFirst restricted stock awards for which vesting is accelerated and $369,577 attributable to the payment in cancellation of 67,909 FedFirst stock options. For Mr. Boyer, his equity amount represents $72,171 attributable to the value of 3,300 FedFirst restricted stock awards for which vesting is accelerated and $158,248 attributable to the payment in cancellation of 31,602 FedFirst stock options. For Mr. Prah, his equity amount represents $72,171 attributable to the value of 3,300 FedFirst restricted stock awards for which vesting is accelerated and $164,820 attributable to the payment in cancellation of 31,129 FedFirst stock options. For Mr. Brown, his equity amount represents $54,675 attributable to the value of 2,500 FedFirst restricted stock awards for which vesting is accelerated and $137,687 attributable to the payment in cancellation of 21,394 FedFirst stock options.
(3)The amount in this column represents the present value of Messrs. Prah’s and Brown’s continued life and health insurance coverage for 36 months and 24 months, respectively, which would be provided pursuant to their change in control agreements upon their qualifying terminations of employment (as described above).

Employee Matters

Employee Benefit Plans.401(k) Plan CB will review all FedFirst compensation and benefit plans to determine whether to maintain, terminate or continue such plans. In the event employee compensation and/or benefits as currently provided by FedFirst or one of its subsidiaries are changed or terminated by CB, in whole or in part, CB will use best efforts so that continuing employees will become eligible to participate in any CB benefit plan of similar character to the extent that one exists, other than any CB or CB subsidiary non-qualified deferred compensation plan, employment agreement, change in control agreement, equity incentive plan or other similar-type of arrangement. Employees of FedFirst or any of its subsidiaries who become participants in any CB or CB subsidiary compensation and benefit plan shall, for purposes of determining eligibility for, and for any applicable vesting periods of, such employee benefits only (and not for benefit accrual purposes) be given credit for service as an employee of FedFirst or any of its subsidiaries or any predecessor thereto before the effective time of the merger.

Tax-Qualified Retirement Plans.. Pursuant to the terms of the merger agreement, FedFirst is requiredCB will require First West Virginia to terminate the FedFirstits 401(k) Plan as well as the ESOP beforeplan immediately prior to or at the effective time of the merger. AsUntil the First West Virginia 401(k) plan is terminated, First West Virginia will continue to make contributions to the 401(k) plan in accordance with applicable accruals and in the ordinary course of business. After termination of the First West Virginia 401(k) plan, then as soon as administratively practicable following the effective time of the merger and receipt of a favorable determination letter from the IRS regarding the qualified status of the plans,First West Virginia 401(k) plan upon their termination, CB will, at each employee’s option, either distribute the account balances of allto participants and beneficiaries inor transfer the plans will either be distributed or transferredbalances to an eligible tax-qualified retirement plan or individual retirement account as directed by thea participant or beneficiary.beneficiary may direct. CB’s 401(k) plan permits employees who become CB or Community Bank employees following completion of the merger to rollover their account balances to CB’s 401(k) plan.

Nonqualified Employee Benefit Agreements. As of the effective time, First West Virginia shall, in cooperation with and pursuant to the irrevocable action of CB, terminate each nonqualified employee benefit agreement, and the amounts due thereunder shall be paid in a lump sum on January 2, 2019, to the participants therein, in accordance with Section 409A of the Code.

Supplemental Life Insurance Plan and Multiple Employee Welfare Arrangement. If requested by CB in writing at least 30 days prior to the effective time, First West Virginia shall cause the Progressive Bank Executive Supplemental Life Insurance Plan to be terminated in accordance with its terms, effective immediately prior to the effective time; and send a notice of its withdrawal from participation in a multiple employee welfare arrangement in accordance with its terms.

Severance Benefits.and Benefits for Terminated First West Virginia Employees.Full-time First West Virginia employees who are involuntarily terminated by CB or its subsidiaries (other than for “cause,” as determined by CB) at or within one year of the effective time of the merger and who are not covered by a separate severance, change in control or employment agreement or arrangement that specifically provides for severance payment on termination of employment, shall, upon executing an appropriate release in the form reasonably determined by CB, be entitled to receive:

a severance payment equal to two weeks of base pay (at the rate in effect on the termination date) for each year of service at First West Virginia, with a minimum of four weeks of base pay and a maximum equal to 26 weeks of base pay; and

any rights to continuation of medical coverage to the extent such rights are required under applicable federal or state law and subject to the employee’s compliance with all applicable requirements for such continuation coverage, including payment of all premiums or other expenses related to such coverage.

Retention Bonus Pool.CB will honorprovide a retention bonus pool for the termspurposes of retaining the services of employees of First Federal Savings Bank Employee Severance Compensation Plan,West Virginia and its subsidiaries who are key employees. The First West Virginia employees eligible to receive retention awards from the retention bonus pool and any criteria for payment, as amended. Underwell as the plan, any employeefinal allocation of FedFirstpayments from the retention bonus pool, will be determined by CB in consultation with First West Virginia.

Other Benefit Arrangements with CB for Continuing Employees.CB intends to use best efforts so that the former employees of First West Virginia or any FedFirstFirst West Virginia subsidiary who become employees of CB or Community Bank after the effective time (“continuing employees”) will become eligible to participate in any CB benefit plan of similar character (to extent that one exists, other than an employee who is a party to anany CB or subsidiary non-qualified deferred compensation plan, employment agreement, change in control agreement or equity incentive plan or other separation agreementsimilar type of arrangement for “top hat” or key employees), to the extent such participation would not result in the duplication of benefits for the same period of service. Continuing employees who become participants in a CB benefits plan shall be given credit for meeting eligibility and vesting requirements (but not for benefit accrual purposes) in such plans for service as an employee of First West Virginia or any First West Virginia subsidiary prior to the effective time.

The unused vacation time of each continuing employee that provides a benefit on a termination of employment, whose employment is terminated involuntarily (other than for cause) within one year followinghas been accrued or earned under First West Virginia’s vacation policy in the completionnormal course from January 1 of the merger, shall receive a lump sum severance payment equal to two weeks’ of base salary or weekly

wage rate thenyear in effect, for each completed year of service, subject to a minimum of four weeks and a maximum of 26 weeks, and further subject to a minimum of 12 weeks if the employee has a job title of Assistant Vice President or higher with FedFirst or any FedFirst subsidiary beforewhich the effective time of the merger.merger occurs through the effective time will be credited as vacation time earned under CB’s vacation policy for the remaining calendar year. Additional vacation time credited for services rendered by the continuing employees after the effective time, the payment of any accrued but unused vacation time in the event of termination and the carryover of any accrued but unused vacation time shall be determined in accordance with CB’s vacation policy.

Operations of First Federal SavingsProgressive Bank Afterafter the Merger

After the merger of First Federal SavingsProgressive Bank with and into Community Bank, the former banking offices of First Federal SavingsProgressive Bank will operate as branch offices of Community Bank.

Restrictions on Resale of Shares of CB Common Stock

The shares of CB common stock to be issued to FedFirst’sFirst West Virginia’s stockholders under the merger agreement have been registered under the Securities Act of 1933 and may be freely traded by such stockholders without restriction (unless they are affiliates of CB, in which case certain restrictions under the securities laws may apply). Certain stockholders who are deemed to be affiliates of CB must abide by certain transfer restrictions under the Securities Act of 1933.Act.

Time of Completion of the Merger

Unless the parties agree otherwise, andor unless the merger agreement has otherwise been terminated, the closing of the merger will take place on a date designated by CB that is no later than the fifth business day following the date on which all of the conditions to the merger contained in the merger agreement are satisfied or waived. See “—Conditions to Completing the Merger.” On the closing date, CB will file articles of merger with the Secretary of State of the Commonwealth of Pennsylvania and with the Secretary of State of West Virginia merging FedFirstFirst West Virginia into CB. The merger will become effective at the time stated in the articles of merger.

CB and FedFirstFirst West Virginia are working diligently to complete the merger as quickly as possible. It is currently expected that the merger will be completed late in the third quarter or early in the fourthsecond quarter of 2014.2018. However, because completion of the merger is subject to regulatory approvals and other conditions, the parties cannot be certain of the actual timing.

Conditions to Completing the Merger

CB’s and FedFirst’sFirst West Virginia’s obligations to consummate the merger are conditioned on the following:

 

approval of the merger agreement, by FedFirst stockholders;

receipt of all required regulatory approvals and the expirationtransactions contemplated thereby, including the issuance of all statutory waiting periods,CB common stock, by CB’s stockholders and none of such approvals shall include any condition or requirement that would result in a material adverse effect on CB or FedFirst;by First West Virginia’s stockholders;

 

no party to the merger beingis subject to any legal order, decree or injunction that prohibits consummating any part of the transaction, no governmental entity havinghas instituted any proceeding for the purpose of blocking the transaction, and the absence of anythere is no statute, rule or regulation that prohibits completion of any part of the transaction;

the parties have obtained all required regulatory approvals, waivers or non-objections and all statutory waiting periods have expired, and no approval, waiver or non-objection includes any condition or requirement that would result in a material adverse effect on CB or First West Virginia;

 

the registration statement, of which this documentjoint proxy statement/prospectus forms a part, beinghas been declared effective by the Securities and Exchange Commission, the absence of anythere is no stop order or pending or threatened proceeding by the Securities and Exchange Commission to suspend the effectiveness of the registration statement, and, the receipt of all requiredif applicable, no stop order has been issued by any state securities laws approvals;commissioner; and

 

the shares of CB common stock shallto be approvedissued pursuant to the merger agreement are authorized for listing on the Nasdaq Stock Market upon notice of issuance.

In addition, CB’s obligations to consummate the merger are conditioned on the following:

 

the representations and warranties of FedFirstFirst West Virginia contained in the merger agreement shall beare true and correct as of the closing date of the merger, and CB shall havehas received a written certificate from FedFirst’sFirst West Virginia’s Chief Executive Officer and its Chief Financial Officer to that effect;

 

FedFirst shall haveFirst West Virginia has performed in all materials respects all obligations and complied in all material respects with all agreementagreements and covenants to be performed or complied with at or before the effective time of the merger, and CB shall havehas received a written certificate from FedFirst’sFirst West Virginia’s Chief Executive Officer and its Chief Financial Officer to that effect;

there shall not have occurred anyno event or circumstance has occurred that has had a material adverse effect on FedFirst;First West Virginia;

 

CB shall havehas received an opinion from its counsel, dated as of the closing date of the merger, to the effect that the merger constitutes a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended;Code; and

 

FedFirst Exchange Corporation shall have become the owner of record of allnot more than 10% of the outstanding capitalshares of common stock of Exchange Underwriters, Inc.First West Virginia have perfected their right to dissent under the WVBCA.

In addition, FedFirst’sFirst West Virginia’s obligations to consummate the merger are conditioned on the following:

 

the representations and warranties of CB contained in the merger agreement shall beare true and correct as of the closing date of the merger, and FedFirst shall haveFirst West Virginia has received a written certificate from CB’s Chief Executive Officer and its Chief Financial Officer to that effect;

 

CB shall havehas performed in all materials respects all obligations and complied in all material respects with all agreementagreements and covenants to be performed or complied with at or before the effective time of the merger, and FedFirst shall haveFirst West Virginia has received a written certificate from CB’s Chief Executive Officer and its Chief Financial Officer to that effect;

 

there shall not have occurred anyno event or circumstance has occurred that has had a material adverse effect on CB; and

 

FedFirst shall haveFirst West Virginia has received an opinion from its counsel, dated as of the closing date of the merger, to the effect that the merger constitutes a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as amended.Code.

CB and FedFirstFirst West Virginia cannot guarantee whether all of the conditions to the merger will be satisfied or waived by the party permitted to do so.

Conduct of Business Before the Merger

FedFirstFirst West Virginia has agreed that, until completion of the merger and unless permitted by CB, neither it nor its subsidiaries will:

General Business

 

conduct its business other than in the usual, regular, and ordinary course consistent with past practice;

 

fail to preserve intact its business organization and assets and to preserve its rights and franchises;

Merger Agreement

 

take any action that would materially adversely affect the ability of CB and FedFirstFirst West Virginia to obtain the regulatory approvals or materially increase the period of time necessary to obtain such approvals or consummate the merger;

 

take any action that would materially adversely affect its ability to perform its covenants and agreements under the merger agreement;

 

take any action that would result in its representations and warranties not being true and correct at any future date on or before the closing date of the merger or in any of the conditions set forth in the merger agreement not being satisfied;

take any action that would prevent or impede, or be reasonably likely to prevent or impede, the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal revenue Code of 1986, as amended;Code;

Governing Documents

 

change or waive any provision of its articles of incorporation or bylaws, except as required by law;

Capital Stock

 

adjust, split, combine or reclassify its capital stock;

make, declare or pay any dividends or make any other distribution on its capital stock except for its regular quarterly cash dividend of not more than $0.08 per share and except for Exchange Underwriters, Inc. paying a dividend immediately before the effective time of the merger equal to its year-to-date net income (after tax), subject to the consent of CB as to the dividend amount;

grant any option, warrant or other right to acquire any of its shares of capital stock;

issue any additional shares of capital stock or any securities convertible or exercisable for any shares of its capital stock, except pursuant to the exercise of outstanding stock options and warrants;stock;

 

redeem, purchasesplit, combine or otherwise acquirereclassify its capital stock;

declare or pay any shares ofdividends or other distribution on its capital stock except for (i) its regular quarterly cash dividend of not more than $0.20 per share, consistent with past practice (provided that the issuance of shares upon the exercise of stock options outstanding asdeclaration of the datelast quarterly dividend by First West Virginia prior to the effective time and the payment thereof shall be coordinated with CB so that holders of First West Virginia common stock do not receive dividends on both First West Virginia common stock and CB common stock received in the merger agreement andin the issuance of 18,768 shares of FedFirstsame quarter or fail to receive any dividend on First West Virginia common stock or CB common stock received in the form of awards of restricted stock;merger in such quarter); and (ii) any First West Virginia subsidiary may pay dividends to its parent company (as permitted under applicable law or regulations);

Material Contracts

 

enter into, amend in any material respect or terminate any material contract or agreement (including without limitation any settlement agreement with respect to litigation) in excess of $50,000, except as contemplated by the merger agreement;

Branch Offices and Related Facilities

 

make application for the opening or closing of any, or open or close any, branch or automated banking facility;

Employees

 

increase salary or wages, grant or agree to pay any bonus (discretionary or otherwise) or severance or termination pay to, or enter into, renew or amend any employment agreement, severance agreement and/or supplemental executive agreement with, or increase in any manner the compensation or fringe benefits of, any of its directors, officers, employees or consultants, except: (i) as may be required pursuant to commitments existing on the date of the merger agreement or as required by the merger agreement; (ii) for bonuses, incentive payments and salary adjustments in the ordinary course of business consistent with past practice, provided that any increases to such amounts shall not exceed four percent (4%) (except3% except to the extent such increase in excess of 4% is mandatedpreviously disclosed by the terms of a relevant written plan currently in existence);First West Virginia to CB; or (iii)(ii) as otherwise contemplated by the merger agreement;

 

  hire or promote any employee to a rank having a title of vice president or other more senior rank or hire any new employee at an annual rate of compensation in excess of $75,000;$50,000; provided, however, that it may hire at-will, non-officer employees at an annual compensation rate not to exceed $75,000$50,000 to fill vacancies that may from time to time arise in the ordinary course of business;

 

hire any new employee without first seeking to fill any position internally;

Employee Benefits

 

enter into or modify any pension, retirement, stock purchase, stock appreciation right, stock grant, savings, profit sharing, deferred compensation, supplemental retirement, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any related trust agreement, in respect of any of its directors, officers or employees, or make any contributions to any defined contribution or defined benefit plan not in the ordinary course of business and consistent with past practice, except as may be required by law or regulatory guidance, by the terms of any such plan or agreement or by the terms of the merger agreement;

 

take any action that would give rise to an acceleration of the right to payment to any individual under any FedFirstFirst West Virginia benefit plan, except for the transactions contemplated by the merger agreement;

take any action that would give rise to a right of payment to any individual under any employment or change in control agreement;

Extraordinary Transactions

 

merge or consolidate with any other person;

 

sell or lease all or any substantial portion of its assets or business;

 

make any acquisition of all or any substantial portion of the business or assets of any other person other than in connection with foreclosures, settlements in lieu of foreclosure, troubled loan or debt restructuring, or the collection of any loan or credit arrangement between it and any other person;

enter into a purchase and assumption transaction with respect to deposits and liabilities;

incur deposit liabilities or increase the rate paid on deposits, other than liabilities incurred and rate increases in the ordinary course of business consistent with past practice and in keeping with prevailing competitive rates;practice;

 

permit the revocation or surrender by First Federal SavingsProgressive Bank of its certificate of authority to maintain, or file an application for the relocation of, any existing branch office;

Indebtedness

 

subject any asset of FedFirstits assets to a lien, pledge, security interest or other encumbrance (other than in connection with deposits, repurchase agreements, bankers acceptances, pledges in connection with acceptance of governmental deposits, and transactions in “federal funds” and the satisfaction of legal requirements in the exercise of trust powers) other than in the ordinary course of business consistent with past practice and except for transactions with the Federal Home Loan Bank (“FHLB”) of Pittsburgh;

incur any indebtedness for borrowed money (or guarantee any indebtedness for borrowed money), except in the ordinary course of business consistent with past practice;

 

waive, release, grant or transfer any rights of value or modify or change any existing indebtedness to which it is a party other than in the ordinary course of business consistent with past practice;

incur any indebtedness for borrowed money (or guarantee any indebtedness for borrowed money), except in the ordinary course of business consistent with past practice;

Accounting Practices

 

change its method, practice or principleprinciples of accounting, except as may be required from time to time by GAAP (without regard to any optional early adoption date) or regulatory accounting principles or by any bank regulator responsible for regulating FedFirst;it;

Investments

 

purchase any securities except securities: (i) rated “A” or higher by either Standard & Poor’s Ratings Services or Moody’s Investors Service; (ii) having a face amount in the aggregate of not more than $1,000,000; (iii) with a duration of not more than five (5) years; and (iv) otherwise in the ordinary course of business consistent with past practice;

Loans

 

make or acquire any new loan or other credit facility commitment (including without limitation, loan participations, lines of credit and letters of credit) in excess of $2.0$1.5 million or make or acquire any new loan or other credit facility commitment (including without limitation, loan participations, lines of credit and letters of credit) in any amount that would result in a lending relationship to a borrower or an affiliated group of borrowers in excess of $2.0$1.5 million, except for commitments issued before the date of the merger agreement which have not yet expired and except for the renewal of existing lines of credit;

Affiliates

 

enter into, renew, extend or modify any other transaction (other than a deposit transaction) with any affiliate;affiliate of First West Virginia;

Futures Contracts and Related Contracts

 

enter into any futures contracts, options, interest rate caps, interest rate floors, interest rate exchange agreements or other agreements or take any other action for purposes of hedging the exposure of its interest-earning assets and interest-bearing liabilities to changes in market rates of interest;

Policies and Procedures

 

make any change in its policies regarding the extension of credit, the establishment of reserves with respect to the possible loan losses or the charge off of loan losses, investments, asset/liability management or other banking policies, except as may be required by changes in applicable law or regulations, GAAP or regulatory accounting principles or by a bank regulator;

Capital Expenditures

 

make any capital expenditures in excess of $25,000 individually or $50,000 in the aggregate, other than pursuant to binding commitments existing on the date of the merger agreement;agreement or as previously disclosed by First West Virginia to CB;

Dispositions

sell, transfer, mortgage, encumber or otherwise dispose of any of its real property (including any real estate owned acquired through foreclosure) with a book value in excess of $500,000 to any person, except to the extent previously disclosed by First West Virginia to CB;

 

purchase or otherwise acquire, or sell or otherwise dispose of, any assets or incur any liabilities other than in the ordinary course of business consistent with past practices and policies;

Loan Participations

 

except for existing commitments to sell any participation interest in any loan, sell any participation interest in any loan (other than sales of loans secured by one- to four-family real estate that are consistent with past practice) unless CB has been given the first opportunity and a reasonable time to purchase any loan participation being sold, or purchase any participation interest in any loan other than purchases of participation interests from CB;

Commitments

 

undertake or enter into any lease, contract or other commitment for its account, other than in the ordinary course of providing credit to customers as part of its banking business, involving a payment of more than $25,000 annually, or containing any financial commitment extending beyond twelve (12)12 months from the date of the merger agreement;

Litigation

 

pay, discharge, settle or compromise any claim, action, litigation, arbitration or proceeding, other than any such payment, discharge, settlement or compromise in the ordinary course of business consistent with past practice that involves solely money damages in the amount not in excess of $25,000 individually or $50,000 in the aggregate, and that does not create negative precedent for other pending or potential claims, actions, litigation, arbitration or proceedings;

Foreclosures

 

foreclose upon or take a deed or title to any commercial real estate without having a Phase I environmental assessment of the property conducted as of a reasonably current date and, if such Phase I environmental assessment of the property indicates the presence of materials of environmental concern, providing notice to CB thereof before final sale;

Mortgage Servicing Rights

 

purchase or sell any mortgage loan servicing rights other than in the ordinary course of business consistent with past practice;

Communications

 

issue any broadly distributed communication of a general nature to employees (including general communications relating to benefits and compensation) without prior consultation with CB and, to the extent relating to post-closing employment, benefit or compensation information, without the prior consent of CB (which shall not be unreasonably withheld, conditioned or delayed), or issue any broadly distributed communication of a general nature to customers without the prior approval of CB (which shall not be unreasonably withheld, conditioned or delayed), except as required by law or for communications in the ordinary course of business consistent with past practice that do not relate to the merger;merger or other transactions contemplated by the merger agreement;

Tax Matters

 

make, change or rescind any material election concerning taxes or tax returns, file any amended tax return, enter into any closing agreement with respect to taxes, settle or compromise any material tax claim or assessment or surrender any right to claim a refund of taxes or obtain any tax ruling; or

Other Agreements

 

enter into any contract with respect to, or otherwise agree to take,or commit to take any or adopt any resolutions in support ofdo, any of the foregoing actions.foregoing.

CB has agreed that, until the completion of the merger and unless permitted by FedFirst,First West Virginia, it will not:

General Business

conduct its business other than in the usual, regular, and ordinary course consistent with past practice;

 

fail to preserve intact its business organization and assets and to maintain its rights and franchises;

GovernanceGoverning Documents

 

change or waive any provision of its certificatearticles of incorporation or articles of organization in the case of Community Bank, or bylaws in any way adverse to the rights of FedFirstFirst West Virginia stockholders, except as required by law;

Merger Agreement

 

take any action that would materially adversely affect the ability of CB and FedFirstFirst West Virginia to obtain the regulatory approvals or materially increase the period of time necessary to obtain such approvals or consummate the merger;

 

take any action that would materially adversely affect its ability to perform its covenants and agreements under the merger agreement;

 

take any action that would result in its representations and warranties not being true and correct at any future date on or before the closing date of the merger or in any of the conditions set forth in the merger agreement not being satisfied; or

 

take any action that would prevent or impede, or be reasonably likely to prevent or impede, the merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal revenue Code of 1986, as amended; or

Capital Stock

issue any shares of CB common stock, or issue or grant any right or agreement of any character relating to its authorized or issued capital stock or any securities convertible into shares of such stock, or split, combine or reclassify any shares of capital stock, except that it may issue shares of its common stock upon the valid exercise of options to acquire CB common stock outstanding as of the date of the merger agreement.Code.

Covenants of FedFirstFirst West Virginia and CB in the Merger Agreement

Agreement Not to Solicit Other Proposals. FedFirstFirst West Virginia has agreed not to, directly or indirectly, initiate, solicit or knowingly encourage (including by way of furnishing non-public information or assistance) any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any acquisition proposal, or enter into or maintain or continue discussions or negotiate with any person in furtherance of such inquiries or agree to or endorse any acquisition proposal. An acquisition proposal includes a proposal or offer with respect to any of the following:

 

any merger, consolidation, share exchange, business combination, or other similar transaction involving FedFirst;First West Virginia;

 

any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of the assets of FedFirstFirst West Virginia in a single transaction or series of transactions;

 

any tender offer or exchange offer for 25% or more of the outstanding shares of capital stock of FedFirstFirst West Virginia or the filing of a registration statement under the Securities Act of 1933 in connection with any such offer; or

 

any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

Despite the agreement of FedFirstFirst West Virginia not to solicit other acquisition proposals, the board of directors of FedFirstFirst West Virginia may generally negotiate or have discussions with, or provide information to, a third party who makes an unsolicited, written, bona fide acquisition proposal before the time of the FedFirstFirst West Virginia special meeting, provided that:

 

the proposed transaction is or could reasonably result in a “superior proposal,” which is defined as an unsolicited, bona fide written offer made by a third party to consummate an acquisition proposal which (i) First West Virginia’s board of directors determines in good faith, after consolationconsultation with its outside

legal counsel and its financial advisor, would, if consummated, result in a more favorable transaction to First West Virginia’s stockholders from a financial point of view than the transaction contemplated by the merger agreement with CB, (ii) is for 100% of the outstanding shares of First West Virginia common stock or substantially all of the assets of First West Virginia, and (iii) is reasonably likely to be completed on the terms proposed;

legal counsel and its financial advisor, the board of directors determines, in good faith, after consulting with its outside legal counsel and its financial advisor and taking into account all legal, financial, regulatory and other aspects of the proposal and the entity making the proposal, that such proposal, if consummated, is reasonably likely to result in a more favorable transaction to FedFirst’s stockholders than the transaction contemplated by the merger agreement with CB;

 

FedFirstFirst West Virginia has not violated the restrictions set forth in the merger agreement with respect to third-party proposals;

 

after consultation with and based uponhaving received the advice fromof outside legal counsel, the FedFirstFirst West Virginia board of directors in good faith determines such action to be necessary to comply with its fiduciary duties to FedFirst’sFirst West Virginia’s stockholders under applicable law; and

 

FedFirst shall promptly, but in no event later thanat least two (2) calendarbusiness days notify CB ofprior to furnishing any inquiries, proposalsnon-public information to, or offers received by, any information requested from, or anyentering into discussions or negotiations sought to be initiated or continued with FedFirst or any of its representatives indicating, in connection with, such third party, First West Virginia gives CB written notice the name of the identity of such third party and of First West Virginia’s intention to furnish non-public information to, or enter into discussions with, such third party and First West Virginia receives from such person an executed confidentiality agreement on terms no more favorable to such third party than the material termsconfidentiality agreement between CB and conditions of any inquiries, proposals or offers.First West Virginia is to CB.

Certain Other Covenants. The merger agreement also contains other agreements relating to the conduct of CB and FedFirstFirst West Virginia before the consummation of the merger, including the following:

 

FedFirstFirst West Virginia will cause FedFirst Exchange Corporation to become the owner of record of all of the outstanding capital stock of Exchange Underwriters, Inc. for total consideration not to exceed $1.2 million;

FedFirst will cause one or more of its representatives to confer with representatives of CB to inform CB regarding FedFirst’sFirst West Virginia’s operations at such times as CB may reasonably request, and FedFirstFirst West Virginia will promptly notify CB of any material change in the ordinary course of its business or in the operation of its properties and, to the extent permitted by applicable law, of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving FedFirst;First West Virginia;

FedFirstFirst West Virginia and CB will cooperate regarding a plan for the conversion of data processing and related electronic informational systems of FedFirstFirst West Virginia to those used by CB, which planning shall include, but not be limited to, discussion of the possible termination by FedFirstFirst West Virginia of third-party service provider arrangements effective at the closing of the merger or on a date thereafter, non-renewal of personal property leases and software licenses used by FedFirstFirst West Virginia in connection with its systems operations, retention of outside consultants and additional employees to assist with the conversion, and outsourcing, as appropriate, of proprietary or self-provided system services;

 

FedFirstFirst West Virginia will provide CB, within fifteen (15)15 business days of the end of each calendar month, a written list of nonperforming assets and, on a monthly basis, FedFirstFirst West Virginia will provide CB with a schedule of all (x) loan grading changes and (y)all loan approvals, which schedule shall indicate the loan amount, loan type and other material features of the loan;

 

FedFirstFirst West Virginia will promptly inform CB, to the extent permitted by applicable law, upon receiving notice of any legal, administrative, arbitration or other proceedings, demands, notices, audits or investigations (by any federal, state or local commission, agency or board) relating to the alleged liability of FedFirstFirst West Virginia under all applicable laws;

First West Virginia will permit CB access upon reasonable notice and at reasonable times to its properties and will make available during normal business hours its books and records relating to its assets, properties, operations, obligations and liabilities;

First West Virginia will permit CB, at CB’s expense, to perform a Phase I or Phase II environmental assessment at any labor or employment law;First West Virginia property;

 

each of CB and FedFirst will grant the other party reasonable access during normal business hours to its property, books, records and personnel and furnish all information that the other party may reasonably request, subject to exceptions for: (a) matters involving the merger agreement; (b) information or material that either party must keep confidential under applicable laws or regulations; or (c) pending or threatened litigation or investigations where the granting of access would adversely affect the confidentiality of or a privilege relating to the matters being discussed;

each of CB and FedFirstFirst West Virginia will provide the other party with a copy of (a) all financial statement audits and internal control reports, (b) regulatory reports and monthly consolidating financial statements, (c)and (d) in the case of FedFirst, substantially final drafts of its quarterly and annual reports before filing with the SEC and (d)First West Virginia, such other financial information that the other partyas CB may reasonably request;

 

First West Virginia will use commercially reasonable efforts to maintain insurance in amounts reasonable to cover customary risks, and will promptly disclose to CB if it receives a notice from any insurance carrier that a policy will be canceled or that coverage will be reduced, or that premium costs will be substantially increased;

CB and FedFirstFirst West Virginia will use commercially reasonable efforts to obtain as soon as practicable all consents and approvals of any persons or entities necessary to consummate the transactions contemplated by the merger agreement;

CB and First West Virginia will use their reasonable best efforts to submit all necessary applications, notices, and other filings with any governmental entity, the approval of which is required to complete the merger and related transactions, and will to the extent practicable consult with the other on all information relating to the other party that appears in any applications, notice or other filings;

CB and FedFirst will use their reasonable best efforts to obtain all third party consents necessary to consummate the merger;

CB and FedFirst will use all reasonable efforts to take all actions necessary to consummate the merger and the transactions contemplated by the merger agreement;

 

CB and FedFirst will consult with each other regarding any public announcementuse best efforts so that all former First West Virginia employees who become employees of CB or communication aboutCommunity Bank after the merger become eligible to participate in comparable CB employee benefit plans, and any filings with any governmental entity;will make available to former First West Virginia employees who become employees of CB or Community Bank employer-provided health coverage on the same basis as it provides such coverage to CB and Community Bank employees;

 

FedFirstCB will take all necessary actionestablish a retention bonus pool for employees of First West Virginia to terminate itshelp retain key First West Virginia employees, and will provide severance payments for any First West Virginia employee stock ownership plan and its 401(k) plan beforewho is involuntarily terminated by CB, other than for cause, at or within one year following the closing of the merger;

 

FedFirstCB will take all actions necessaryform an advisory board, to convene a meetingbe comprised of its stockholders to vote on the merger agreement. The FedFirstcertain members of First West Virginia’s board of directors will recommend atwho do not join the stockholder meeting that the stockholders vote to approveCB board of directors following the merger and will use its reasonable best efforts to solicit stockholder approval, and will not withdraw, modify or change its recommendation unless it determines that failure to do so would cause it to violate its fiduciary obligations to FedFirst’s stockholders and, inrepresentatives from the event such determination relates to an acquisition proposal, has provided CB the opportunity to propose revisions to the terms of the merger agreement;

CB will file a registration statement, of which this proxy statement/prospectus forms a part, with the Securities and Exchange Commission registering the shares of CB common stockcommunities served by First West Virginia, to be issued in the merger to FedFirst’s stockholders;

CB will cause Community Bank shall take all appropriate action so that, immediately following the completion of the merger, Patrick G. O’Brien will serve as Executive Vice President and Chief Operating Officer of Community Bank and Richard B. Boyer will serve as Vice President of Insurance of Community Bank.

CB shall cause Community Bank to take all appropriate action so that, effective immediately after the closing of the merger, Patrick G. O’Brien, Richard B. Boyer, John J. LaCarte and John M. Swiatek shall be appointed to the board of directors of Community Bank, and the board of directors of CB will appoint John L. LaCarte and John M. Swiatek to one or more of the Executive Committee, Nominating Committee, Audit Committee and Governance Committee.selected by CB;

 

CB will, for six (6) years following the closing of the merger, maintain directors’ and officers’ liability insurance covering the persons who are presently covered by FedFirst’sFirst West Virginia’s current directors’ and officers’ liability insurance policy with respect to actions, omissions,facts or events or matters occurring before the merger, on terms which are at least substantially equivalent to the terms of said current policy, subject to certain limits on the annual premium payments;

 

CB will, from and after the closing of the merger, to the fullest extent permitted under applicable law and the current provisions of the articles of incorporation and bylaws of FedFirstFirst West Virginia (to the extent not prohibited by federal law), indemnify, defend and hold harmless each person who is now, or who has been at any time before the date of the merger agreement or who becomes before the closing of the merger, an officer or director of FedFirst;First West Virginia; and

 

CB will file an applicationwith the Nasdaq Stock Market a notification for the listing onof the NASDAQ Stock Market (or such other national securities exchange on which theadditional shares of CB Common Stockcommon stock to be issued in connection with the merger;

each of CB and First West Virginia will be listed astake all actions necessary to convene a meeting of its stockholders to vote on the closing datemerger agreement, and will have its board of directors recommend at the merger)stockholders meeting that its stockholders vote to approve the merger agreement and will use commercially reasonable efforts to solicit stockholder approval (in First West Virginia’s case, subject to the board’s fiduciary obligations to First West Virginia stockholders);

CB and First West Virginia will cooperate in the preparation of this joint proxy statement/prospectus and CB will file a registration statement, of which this joint proxy statement/prospectus forms a part, with the Securities and Exchange Commission registering the shares of CB common stock to be issued in the merger;merger to First West Virginia’s stockholders;

CB and First West Virginia will use their reasonable efforts to prepare and file all necessary documentation to obtain all necessary permits, consents, waivers, approvals and authorizations from any governmental entity; and

 

CB will call, give notice of, convene and hold a special meeting of its shareholders for the purpose of amending its articles of incorporation to remove the provision regarding preemptive rights and, iftake all appropriate action so that, approval is not obtained at a shareholder meeting held beforeeffective immediately after the closing of the merger, CBits board of directors will include similar proposalbe increased by three persons, and three directors of First West Virginia (William G. Petroplus, Roberta Robinson Olejasz and Jonathan A. Bedway), will be appointed to approve such amendment at CB’s first annual meetingboard of shareholders after the merger.directors.

Representations and Warranties Made by CB and FedFirstFirst West Virginia in the Merger Agreement

CB and FedFirstFirst West Virginia have made certain customary representations and warranties to each other in the merger agreement relating to their businesses. For information on these representations and warranties, refer to the merger agreement attached asAnnex A. Appendix A. The representations and warranties must be true in all material respects (except where qualified by reference to materiality or a material adverse effect, in which case they must be true in all respects) through the completion of the merger. See “—Conditions to Completing the Merger.”

Terminating the Merger Agreement

The merger agreement may be terminated at any time before the completion of the merger, either before or after approval of the merger agreement by FedFirst’sFirst West Virginia’s stockholders, as follows:

 

by the mutual written consent of CB and FedFirst;First West Virginia;

 

by either party, if the FedFirst’sother party breaches a warranty or fails to fulfill a covenant that has not been cured within 30 days following written notice to the party in default, provided that the terminating party is not in material breach of any of its representations, warranties or covenants contained in the merger agreement;

by either party if its stockholders fail to approve the merger agreement, (providedprovided that FedFirsta party will only be entitled to terminate for this reason if it has complied with its obligations under the merger agreement with respect to its shareholder meeting);stockholders meeting;

by either party, if the merger is not consummated by September 30, 2018, unless failure to complete the merger by that time is due to a breach of a warranty or failure to fulfill a covenant or other agreement by the party seeking to terminate the merger agreement;

 

by either party, if a required regulatory approval, consent or waiver is denied or any court or other governmental entity prohibits the consummation of the merger or the transactions contemplated by the merger agreement;

 

by either party, if the merger is not consummated by March 31, 2015, unless failure to complete the merger by that time is due to a misrepresentation, breach of a warranty or failure to fulfill a covenant or other agreement by the party seeking to terminate the merger agreement;

by either party, if the other party makes a misrepresentation, breaches a warranty or fails to fulfill a covenant that has not been cured within thirty (30) days following written notice to the party in default, provided that the terminating party is not in material breach of any of its representations, warranties or covenants contained in the merger agreement;

by CB, if FedFirstFirst West Virginia has breached its covenant not to solicit another acquisition proposal, or if First West Virginia has received a superior proposal for a transaction with a party other than CB and FedFirst has entered into an acquisition agreement with respect to such superior proposal, or if the board of directors of FedFirst withdraws or fails toFirst West Virginia does not publicly recommend that FedFirst’sFirst West Virginia’s stockholders vote in favor of the merger with CB or has modified or qualified such recommendation in a manner adverse to CB;agreement; or

 

by FedFirst,First West Virginia, if it has received a superior proposal for a transaction with a party other than CB and FedFirst’sFirst West Virginia’s board of directors has determined to accept the superior proposal, after determining in good faith, based on advice of its outsideafter consulting with legal counsel, that failingthe failure to terminatetake such action would cause the merger agreement would constitute a breachboard of directors to violate its fiduciary duties (provided that FedFirst will only be permitted to terminate for this reason if at least five (5) business days before such termination, FedFirst gives written notice to CB of its intent, specifying the terms and conditions of the superior proposal, identifying the person making such proposal and stating whether FedFirst intends to enter into a definitive agreement with respect to such superior proposal, and provides a reasonable opportunity to CB during the five-day period to make such adjustments in the term and conditions of the merger agreement, so as to enable FedFirst to proceed with the merger with CB on adjusted terms consistent with FedFirst’s board of directors’ determination in good faith that proceeding based upon such adjusted terms would not constitute a breach of its fiduciary duties).under applicable law.

Termination Fee

The merger agreement requires FedFirstFirst West Virginia to pay CB a cash termination fee of $2.75$2.5 million if the merger agreement is terminated in any of the following circumstances:

 

by CB, if FedFirst has receivedFirst West Virginia terminates the merger agreement after it receives a superior proposal for a transaction with a party other than CB and FedFirst has entereddetermines to enter into an acquisition agreement with respect to such superior proposal;

if CB terminates the merger agreement after First West Virginia breaches its covenant not to solicit another acquisition proposal, or if the board of directors of FedFirst withdraws orafter First West Virginia receives a superior proposal for a transaction with a party other than CB and fails to publicly recommend that FedFirst’sits stockholders vote in favor of the merger with CBCB; or has modified or qualified such recommendation in a manner adverse to CB;

by either CB or FedFirst, if, the shareholders of FedFirst fail to approve the merger agreement (provided that FedFirst will only be entitled to terminate for this reason if it has complied with its obligations under the merger agreement with respect to its stockholder meeting), and (1)after an acquisition proposal with respect to FedFirstby a party other than CB has been publicly announced or otherwise communicated or made known to theFirst West Virginia’s senior management or board of directors, of FedFirst at any time after the date ofCB terminates the merger agreement and (2) if within one (1) year after such termination FedFirst enters into a definitive agreement with respect to, or consummates, an acquisition proposal; or

by CB, if FedFirstbecause (i) First West Virginia breaches a representation and warranty or fails to fulfill a covenant, or(ii) the merger is not consummated by the termination date, and (1) an acquisition proposal with respector (iii) First West Virginia’s stockholders have failed to FedFirst has been publicly announced or otherwise communicated or made known to the senior management or board of directors of FedFirst at any time after the date ofapprove the merger agreement, on or before the termination date and (2) if within one (1) year after such termination FedFirstFirst West Virginia enters into a definitive agreement with respect to, or consummates, an acquisition proposal.

The merger agreement requires CB to pay FedFirst a cash termination fee of $2.75 million if the merger agreement is terminated by FedFirst because CB breaches a representation and warranty or fails to fulfill a covenant and (1) an acquisition proposal with respect to CB has been publicly announced or otherwise communicated or made known to the senior management or board of directors of CB at any time after the date of the merger agreement on or before the termination date and (2) if within one (1) year after such termination CB enters into a definitive agreement with respect to, or consummates, an acquisition proposal.

Expenses

CB and FedFirstFirst West Virginia will each pay its own costs and expenses incurred in connection with the merger. However, First West Virginia may require CB to reimburse First West Virginia for its actual and documented out-of-pocked expenses, not to exceed $500,000, if the merger agreement is terminated because CB’s board of directors breaches its obligation to recommend the merger to its stockholders or if CB’s stockholders fail to approve the merger agreement as a result of a breach of CB’s obligations with respect to holding its stockholder meeting.

Changing the Terms of the Merger Agreement

Before the completion of the merger, CB and FedFirstFirst West Virginia may agree to waive, amend or modify any provision of the merger agreement. However, after the vote by FedFirstof the CB or First West Virginia stockholders, CB and FedFirstFirst West Virginia cannot make any amendment or modification that would reduce the amount or alter the kind of consideration to be received by FedFirst’sFirst West Virginia’s stockholders in connection with the merger.

Pending Litigation Regardingmerger, without the Merger

On April 21, 2014, a class action complaint, captioned Sutton v. FedFirst Financial Corp., et al., was filed under Case No. 24C14002331, in the Circuit Court in Baltimore City, Maryland against FedFirst, each of FedFirst’s directors, and CB. The complaint alleges, among other things, that the FedFirst directors breached their fiduciary duties to FedFirst and its stockholders by agreeing to sell to CB without first taking steps to ensure that FedFirst stockholders would obtain adequate, fair and maximum consideration under the circumstances, by agreeing to terms with CB that benefit themselves and/or CB without regard for the FedFirst stockholders and by agreeing to terms with CB that discourage other bidders. The plaintiff also alleges that CB aided and abetted the FedFirst directors’ breaches of fiduciary duties. The complaint seeks, among other things, an order declaring the merger agreement unenforceable and rescinding and invalidating the merger agreement, an order enjoining the defendants from consummating the merger, as well as attorneys’ and experts’ fees and certain other damages. FedFirst and CB believe the factual allegations in the complaint are without merit and intend to defend vigorously against the allegations in the complaint.further stockholder approval.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL DATA

The unaudited pro forma combined condensed consolidated financial information has been prepared using the acquisition method of accounting, giving effect to the merger. The unaudited pro forma combined condensed consolidated statement of financial condition combines the historical information of CB and of FedFirstFirst West Virginia as of March 31, 2014September 30, 2017 and assumes that the merger was completed on that date. The unaudited pro forma combined condensed consolidated statement of operations combinecombines the historical financial information of CB and of FedFirstFirst West Virginia and givegives effect to the merger as if it had been completed as of the beginning of the fiscal year presented and carried forward through the interim periodperiods presented. The unaudited pro forma combined condensed consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial condition had the merger been completed on the date described above, nor is it necessarily indicative of the results of operations in future periods or the future financial condition and results of operations of the combined entities. The financial information should be read in conjunction with the accompanying Notes to the Unaudited Pro Forma Combined Condensed Consolidated Financial Information. Certain reclassifications have been made to FedFirstFirst West Virginia historical financial information in order to conform to CB’s presentation of financial information.

The actual value of CB’s common stock to be recorded as consideration in the merger will be based on the closing price of CB’s common stock as of the merger completion date. The proposed merger is targeted for completion in late third quarter or early fourththe second quarter of 2014.2018. There can be no assurance that the merger will be completed as anticipated. For purposes of the pro forma financial information, the fair value of CB’s common stock to be issued in connection with the merger was based on CB’supon the closing stock price of $20.30 as$30.41 on November 16, 2017, the closing price immediately prior to the announcement of June 13, 2014.the merger.

The pro forma financial information includes estimated adjustments, including adjustments to record FedFirst’sFirst West Virginia’s assets and liabilities at their respective fair values, and represents CB’s pro forma estimates based on available fair value information as of the date of the merger agreement. In some cases, where noted, more recent information has been used to support estimated adjustments in the pro forma financial information.

The pro forma adjustments are subject to change depending on changes in interest rates and the components of assets and liabilities and as additional information becomes available and additional analyses are performed. The final allocation of the purchase price for the merger will be determined after it is completed and after completion of thorough analyses to determine the fair value of FedFirst’sFirst West Virginia’s tangible and identifiable intangible assets and liabilities as of the date the merger is completed. Increases or decreases in the estimated fair values of the net assets as compared with the information shown in the unaudited pro forma combined condensed consolidated financial information may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact CB’s statement of operations due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to FedFirst’sFirst West Virginia’s stockholders’ equity, including results of operations from March 31, 2014September 30, 2017 through the date the merger is completed, will also change the purchase price allocation, which may include the recording of a lower or higher amount of goodwill. If CB’s stock price as of the merger date differs from the June 13, 2014 stock price, estimated goodwill would change as follows: (i) a stock price of $19.50 would generate estimated goodwill of $1.8 million; (ii) a stock price of $20.00 would generate estimated goodwill of $2.7 million; (iii) a stock price of $20.50 would generate estimated goodwill of $3.6 million; and (iv) a stock price of $21.00 would generate estimated goodwill of $4.4 million. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein.

We anticipate that the merger will provide the combined company with financial benefits that include reduced operating expenses. We estimate an additional $2.8 million of CB merger-related costs to be incurred in connection with the merger. These costs are related to professional fees, lease and contract termination fees, change in control payments, and other expenses that will be incurred by CB, which will reduce CB’s earnings in the 2014 fiscal year. The unaudited pro forma combined condensed consolidated financial data, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had our companies been combined during these periods.

The unaudited pro forma combined condensed consolidated financial information has been derived from and should be read in conjunction with the historical consolidated financial statements and the related notes of CB and of FedFirst, which appear elsewhere in this document.First West Virginia.

Unaudited Combined Condensed Consolidated Pro Forma Statement of Financial Condition

 

  As of March 31, 2014*   As of September 30, 2017* 
  CB
Historical
 FedFirst
Historical
 Pro Forma
Adjustments
 Pro Forma
Combined
   CB
Historical
   First West
Virginia
Historical
   Pro Forma
Adjustments
 Pro Forma
Combined
 
  (In Thousands)   (In Thousands) 

ASSETS

            

Cash and cash equivalents

  $27,178   $5,993   $(23,563)(1)  $9,608    $43,745   $19,282   $(13,647)(1)  $49,380 

Investment securities

   121,402   25,477    —     146,879     115,889    205,244    (2,052 319,081 

Loans receivable

   385,350   277,642   (3,595)(2)  659,397     703,874    101,242    (2,520)(2)  802,596 

Allowance for loan losses

   (5,372 (3,387 3,387(2)  (5,372   (8,156   (1,771   1,771(2)  (8,156
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Loans, net

   379,978    274,255    (208  654,025     695,718    99,471    (749 794,440 

Other real estate owned

   255    126    —      381     410    1,033    —    1,443 

Accrued interest receivable

   1,867    1,004    —      2,871     2,517    1,028    —    3,545 

Deferred tax asset, net

   373    2,006    795(3)   3,174     —      —      —     —   

Federal Home Loan Bank stock

   1,860    2,310    —      4,170  

FHLB stock

   3,627    497    —    4,124 

Banking premises and equipment, net

   4,625    1,792    2,500(4)   8,917     16,558    7,260    —  (4)  23,818 

Bank-owned life insurance

   8,760    8,620    —      17,380     19,035    4,148    —    23,183 

Core deposit intangible

   —      —      1,700(5)   1,700  

Core deposit intangible assets

   3,418    —      6,641(5)  10,059 

Goodwill

   2,158    1,080    3,215(6)   6,453     4,953    1,644    15,323(6)  21,920 

Other assets

   1,717    620    —      2,337     2,459    1,040    (57)(11)  3,442 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Total assets

  $550,173   $323,283   $(15,561 $857,895    $908,329   $340,647   $5,459  $1,254,435 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

     

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Deposits

  $488,783   $233,636   $1,335(7)  $723,754    $762,374   $285,378   $92(7)  $1,047,844 

Federal Home Loan Bank advances

   3,000    36,524    320(8)   39,844  

FHLB advances

   24,500    2,213    179(8)  26,892 

Repurchase agreements

   13,550   —      —      13,550     24,662   21,058    —    45,720 

Deferred tax liability (asset)

   1,088   (2,479   1,229(3)  (162

Accrued expenses and other liabilities

   1,320    2,118    —      3,438     2,551    835    —    3,386 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Total liabilities

   506,653    272,278    1,655    780,586     815,175    307,005    1,500  1,123,680 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Shareholders’ equity:

     

Stockholders’ equity:

       

Common stock

   1,096    23    695(9)   1,814     1,818    8,644    (8,095)(9)  2,367 

Paid-in capital

   6,024    30,422    3,824(9)   40,270     42,128    6,966    30,086(9)  79,180 

Retained earnings

   41,395    21,359    (22,534  40,220     54,584    19,277    (19,277 54,584 

Treasury stock, at cost

   (4,999  —      —      (4,999   (4,722   (228   228  (4,722

Accumulated other comprehensive income, net of taxes

   4    149    (149  4     (654   (1,017   1,017  (654

Unearned Employee Stock Ownership Plan (ESOP)

   —      (994  994    —    

Noncontrolling interest in subsidiary

   —      46    (46  —    

Total shareholders’ equity

   43,520    51,005    (17,216  77,309  
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Total liabilities and shareholders’ equity

  $550,173   $323,283   $(15,561 $857,895  

Total stockholders’ equity

   93,154    33,642    3,959  130,755 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Total liabilities and stockholders’ equity

  $908,329   $340,647   $5,459  $1,254,435 
  

 

   

 

   

 

  

 

 

 

*Assumes that the merger was completed as of March 31, 2014September 30, 2017 utilizing the acquisition method of accounting. Estimated fair value adjustments for loans, investment securities, core deposit intangible, deposits, borrowed funds and repurchase agreement were determined by the management of CB and of FedFirst. Actual fair value adjustments, where appropriate, will be determined as of the merger completion date and will be amortized and accreted into income.
(1)The adjustment includes cash consideration of $9.8 million paid to First West Virginia stockholders. The adjustment also results from the assumption that cash and cash equivalents will be used to pay for after tax one-time merger and integration expenses of FedFirst. TheseFirst West Virginia. A portion of these expenses are actuallyhave been assumed to be charged against FedFirst’sFirst West Virginia’s income through September 30, 2017 and result in a chargean increase to CB’s goodwill. One time merger and integration costs include $900,000 in estimated professional fees, estimated change in control payments of $600,000 and other expenses of $100,000. The adjustment also includes cash consideration of $18.4 million paid to FedFirst stockholders and option holders of in-the-money FedFirst stock options and the purchase of the remaining minority interest in a subsidiary of FedFirst.
(2)The unaudited combined condensed consolidated pro forma statement of financial condition includes a fair value adjustment to total loans to reflect the credit condition and interest rate mark of FedFirst’s loan portfolio in the amount of $5.8$2.5 million, which represents a markan adjustment of 2.1%2.5% on FedFirst’sFirst West Virginia’s outstanding loan portfolio. In orderAnother factor to determinethis adjustment was the adjustment related to credit deterioration, CB employedelimination of First West Virginia’s allowance for loan losses. Purchased loans acquired in a detailed due diligence process. Members of CB’s senior management team, loan reviewbusiness combination are recorded at fair value and credit department functions, supported by its outside loan review firm, conducted a comprehensive review of FedFirst’s loan portfolio, underwriting methodology, loan-related policies and loan portfolio management processes. The individual loan file review included a representative sample of commercial loan relationships and adversely classified assets and watch list credits. In total, the individual loan file review covered approximately 70%recorded allowance of the total commercial loan balance and 45% of total loans outstanding. Future losses are considered to be equal to the credit mark and, accordingly, no adjustment has been recognized in future periods.acquired company is not carried over.

The pro forma adjustment also includes a fair value adjustment to total loans reflecting differences in interest rates in the amount of $2.2 million, which was based primarily on an analysis of current market interest rates, loan types, maturity dates and potential prepayments. The fair value adjustment will be amortized through loan interest income over the estimated lives of the affected loans. The weighted average remaining life of the loans was approximately 8.4 years.

Another factor to this adjustment was the elimination of FedFirst’s allowance for loan losses. Purchased loans acquired in a business combination are recorded at fair value and the recorded allowance of the acquired company is not carried over.

(3)Represents adjustments in the net deferred tax assetsliabilities resulting from the fair value adjustments related to the acquired assets and liabilities, identifiable intangibles and other deferred tax items. The actual deferred tax adjustment will depend on facts and circumstances existing at the completion of the merger. The fair value adjustment of the net deferred tax asset assumes an effective tax rate of 34%35%. See footnote 6 for additional details.
(4)BankingIt has been assumed that the net book value of banking premises and equipment have been adjusted to reflect appraised values of facilities to be acquired, less anticipated costs of required major renovations, less net book value.approximates fair market value and that any differences are immaterial.
(5)CB’s estimateRepresents the recognition of the fair value of the core deposit intangible asset, which is $1.7 million. Theassumed to be 2.5% of core deposit intangible asset was estimated by applying a 1.25% premium on FedFirst’s coreliabilities assumed. Core deposits which was based on current market data for similar transactions. The core deposit intangible asset will be amortized into noninterest expense over a ten year period using the sum-of-the-years digits methodology.are defined as total deposits less time deposits.
(6)Calculated to reflect the acquisition accounting adjustments related to the merger. The consideration paid to acquire FedFirstFirst West Virginia consists of cash of $18.4$9.8 million (2,286,286(assumes 343,746 shares of First West Virginia stock are exchanged for cash at a 35%the cash exchange ratioprice of $23.00$28.50 per share) and the issuance of 1,722,3601,317,647 shares of CB’s common stock based upon the fixed exchange rate of 1.1590 on 65% of 2,286,268 shares of FedFirst common stock outstanding, net of the retirement of unallocated shares used to terminate First Federal Savings Bank’s employee stock ownership plan. Outstanding options and warrants totaling 294,081 shares will be retired resulting in consideration of the difference between the cash price of $23.000.9583 per share and the weighted average strike price of $16.45, or $6.55 per share of $1.9 million. The associated tax benefit of $707,000 results from the aforementioned option payments plus ESOP debt of $150,000 in excess of the value of the ESOP shares at a 34% tax rate.share. The value of CB’s common stock to be issued iswas based upon the closing stock price of $20.30 as$30.41 on November 16, 2017, the closing price immediately before the announcement of June 13, 2014.the merger. Acquisition accounting adjustments assume that FedFirst’sFirst West Virginia’s stockholders’ equity is eliminated and the purchase price, goodwill and intangible assets are reflected on the CB’s financial statements pursuant to the application of acquisition accounting. FedFirst’s incremental transaction costs, net of tax, results from $1.5 million in FedFirst’s pre-close transactions costs being 70% deductible for tax purposes resulting in a tax benefit of $367,000 for a net transaction cost of $1.2 million.

  Note     Note     
    (In thousands)       (In thousands) 

Assumptions/Inputs:

       

Value of CB’s common stock to be issued

   $34,964      $40,070 

Cash paid to FedFirst’s stockholders and option holders

   18,404  
   

 

 

Consideration for options

    1,926  

Cash paid to First West Virginia’s stockholders

     9,797 
   

 

     

 

 

Total deal value at date merger agreement signed

    55,294       49,867 
   

 

     

 

 

FedFirst’s stockholders’ equity

    51,005  

Less: incremental FedFirst’s transaction costs (net of tax)

    (1,175

First West Virginia’s stockholders’ equity

     33,642 

Less: incremental First West Virginia’s transaction costs (net of tax)

     (1,381

Less: intangibles of First West Virginia

     (1,644
   

 

     

 

 

Less: intangibles of FedFirst

    (1,080
   

 

 

Tax Benefit of option cash out

    707  
   

 

 

FedFirst’s stockholders’ equity, net of transaction costs

    49,457  

First West Virginia’s stockholders’ equity, net of transaction costs

     30,617 
   

 

     

 

 

Fair value adjustments:

       

Loans

   (2  (208   (2   (749

Fixed assets

   (4  2,500  

Securities

   (10   (2,052

Core deposit intangible

   (5  1,700     (5   6,641 

Other assets

   (11   (57

Time deposits

   (7  (1,335   (7   (92

FHLB advances

   (8  (320   (8   (179
    

 

 

Fair value adjustments

    2,337       3,512 

Tax effect of fair value adjustments **

   (3  (795   (3   (1,229
   

 

     

 

 

Total adjustment of net assets acquired

    1,542       2,283 
   

 

     

 

 

Adjusted net assets acquired

    50,999       32,900 
   

 

     

 

 

Estimated goodwill

   (6 $4,295     (6  $16,967 
   

 

     

 

 

 

(**)*Assumed effective tax rate of 34%35%, as in effect as of September 30, 2017.

(7)The deposits include a fair valueYield adjustment to reflect the difference between portfolio yield and market rates for time deposits to reflect differences in interest ratesacquired in the amount of 1.3 million, whichmerger. Yield adjustments were calculated using present value analysis. Cash flow was based primarily on an analysis of currentdiscounted to present value using market interest rates and maturity dates. This fairfor similar deposits. The yield adjustment is the aggregate present value adjustment will be accreted into interest expense over the estimated lives of the affected time deposits. Estimated accretion was computed using the effective yield methodology utilizing a seven year period for full recognition of this adjustment based upon historical deposit lives.difference.
(8)The FHLB advances include a fairYield adjustments reflect the difference between portfolio yields and market rates for borrowings acquired in the merger. Yield adjustments were calculated using present value adjustment to FedFirst’s FHLB advances to reflect differences inanalysis. Cash flow for each month was calculated as the difference between projected interest ratescosts of $300,000. The fair value adjustment will be accreted into interest expense over the remaining lifeborrowings and hypothetical costs using current market rates based on advances from the FHLB of the affected FHLB advancePittsburgh. Cash flow was discounted to present value using the effective yield methodology utilizing a fair value adjustment period of less than one year based upon the outstanding balance and repayment history.market rates.
(9)Reflects elimination of FedFirst’sFirst West Virginia’s equity accounts, issuance of 1,722,3601,317,647 shares of CB’s common stock and additional merger-related transaction costs, net of tax. Through March 31, 2014, CB incurred merger-related transaction costs
(10)Yield adjustments reflect the difference between portfolio yields and market rates for investment securities. The adjustment represents an estimate in the change in market value ($2.1 million) of $71,000 ($47,000 netthe security portfolio from September 30, 2017 through the date of tax).the analysis based on changes in market interest rates.
(11)Reflects estimated loss on the sale of land owned by First West Virginia.

Unaudited Combined Condensed Consolidated Pro Forma Statement of Operations

For the ThreeNine Months Ended March 31, 2014September 30, 2017 (1)

(In Thousands, Except Share Data)

 

  CB Historical   FedFirst
Historical
 Pro Forma
Adjustments
 Pro Forma
Combined
   CB Historical   First West
Virginia
Historical
 Pro Forma
Adjustments
 Pro Forma
Combined
 

Interest and dividend income:

            

Loans

  $3,968    $3,002   $(82)(2)  $6,888    $21,830   $3,472  $112(2)  $25,414 

Investments

   581     203    —     784     1,798    3,707   324(2)  5,829 

Other interest-earning assets

   29     15    —     44     325    212   —    537 
  

 

   

 

  

 

  

 

   

 

   

 

  

 

  

 

 

Total interest and dividend income

   4,578     3,220    (82  7,716     23,953    7,391  436  31,780 

Interest expense:

            

Deposits

   429     316    (148)(2)   597     2,050    499   (46)(2)  2,503 

Short term borrowings

   10     —      —      10     59    112   —    171 

FHLB advances

   31    274    (97)(2)   208     361    92   (27)(2)  426 
  

 

   

 

  

 

  

 

   

 

   

 

  

 

  

 

 

Total interest expense

   470     590    (245  815     2,470    703  (73 3,100 
  

 

   

 

  

 

  

 

   

 

   

 

  

 

  

 

 

Net interest income before provision for loan losses

   4,108     2,630    163    6,901     21,483    6,688  509  28,680 

Provision for loan losses

   —       75    —      75     1,020    1,075   —    2,095 
  

 

   

 

  

 

  

 

   

 

   

 

  

 

  

 

 

Net interest income after provision for loan losses

   4,108     2,555    163    6,826     20,463    5,613  509  26,585 

Noninterest income:

            

Service fees

   455     138    —      593     1,839    220   —    2,059 

Insurance commissions

   —       790    —      790     2,686    —     —    2,686 

Increase in cash surrender value of bank-owned life insurance

   58     60    —      118     348    84   —    432 

Net gain on sales of loans

   86     —      —      86     389    —     —    389 

Net gain on sales of investments

   132    4   —    136 

Other income

   125     11    —      136     466    435   —    901 
  

 

   

 

  

 

  

 

   

 

   

 

  

 

  

 

 

Total noninterest income

   724     999    —      1,723     5,860    743   —    6,603 

Noninterest expenses:

            

Salaries and employee benefits

   1,874     1,563    —      3,437     10,425    3,191   —    13,616 

Occupancy and equipment

   591     325    16(2)   932     3,054    1,327   —    4,381 

Data processing

   —      —     —     —   

Outside professional services

   214     163    —      377     732    —     —    732 

Data processing

   —       172    —      172  

Marketing and advertising

   89     137    —      226     504    172   —    676 

FDIC deposit insurance and regulatory assessment

   193     49    —      242     267    87   —    354 

Acquisition-related expenses

   71     —      —      71  

Other

   425     270    77(2)   772     3,436    1,406   498(2)  5,340 
  

 

   

 

  

 

  

 

   

 

   

 

  

 

  

 

 

Total noninterest expenses

   3,457     2,679    93(3)   6,229     18,418    6,183   498(3)  25,099 

Income before noncontrolling interest in net income of consolidated subsidiary

   1,375     875    70(2)   2,320  

Income before income tax expense

   7,905    173  11  8,089 

Income tax expense

   296     323    24(2)   643     2,336    (228 4  2,112 
  

 

   

 

  

 

  

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   1,079     552    46    1,677  

Noncontrolling interest in net income of consolidated subsidiary

   —       (18  18    —    
  

 

   

 

  

 

  

 

   

 

   

 

  

 

  

 

 

Net (loss) income

  $1,079    $534   $64   $1,677    $5,569   $401  $7  $5,977 
  

 

   

 

  

 

  

 

   

 

   

 

  

 

  

 

 

Earnings (loss) per share:

            

Basic

  $0.46    $0.24    $0.41    $1.36   $0.23   $1.11 

Diluted

  $0.46    $0.23    $0.41     1.36    0.23   1.10 

Weighted average shares outstanding:

            

Basic

   2,344,477     2,235,132     4,066,837(4)    4,087,783    1,718,730    5,405,430(3) 

Diluted

   2,354,977     2,286,008     4,077,337(4)    4,104,157    1,718,730    5,421,804(3) 

Unaudited Combined Condensed Consolidated Pro Forma Statement of Operations

For the Year Ended December 31, 20132016 (1)

(In Thousands, Except Share Data)

 

  CB Historical FedFirst
Historical
 Pro Forma
Adjustments
 Pro Forma
Combined
   CB Historical   First West
Virginia
Historical
   Pro Forma
Adjustments
 Pro Forma
Combined
 

Interest and dividend income:

            

Loans

  $15,380   $11,867   $(329)(2)  $26,918    $29,576   $4,478   $150(2)  $34,204 

Investments

   2,317   1,026    —     3,343     2,252    4,564    432(2)  7,248 

Other interest-earning assets

   60   27    —     87     190    161    —    351 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Total interest and dividend income

   17,757    12,920    (329  30,348     32,018    9,203    582  41,803 

Interest expense:

            

Deposits

   1,968    1,419    (499)(2)   2,888     2,284    840    (61)(2)  3,063 

Federal funds purchased and repurchase agreements

   59    —      —      59     75    194    —    269 

FHLB advances

   209    1,275   (318)(2)   1,166     511    157   (36)(2)  632 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Total interest expense

   2,236    2,694    (817  4,113     2,870    1,191    (97 3,964 
  

 

  

 

  

 

  

 

 

Net interest income before provision for loan losses

   15,521    10,226    488    26,235     29,148    8,012    679  37,839 

Provision for loan losses

   100    740    —      840     2,040    —      —    2,040 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Net interest income after provision for loan losses

   15,421    9,486    488    25,395     27,108    8,012    679  35,799 

Noninterest income:

            

Service fees

   2,146    750    —      2,896     2,414    335    —    2,749 

Insurance commissions

   —      3,222    —      3,222     3,097    —      —    3,097 

Increase in cash surrender value of bank-owned life insurance

   243    243    —      486     926    122    —    1,048 

Net gain on sales of loans

   476    —      —      476     659    —      —    659 

Net gain on sales of investments

   168    1,103    —    1,271 

Other income (loss)

   309    102    —      411     98    592    —    690 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Total noninterest income

   3,174    4,317    —      7,491     7,362    2,152    —    9,514 

Noninterest expenses:

            

Salaries and employee benefits

   7,341    6,115    —      13,456     13,124    4,242    —    17,366 

Occupancy and equipment

   2,094    1,158    63(2)   3,315     3,733    1,748    —    5,481 

Outside professional services

   672    601    —      1,273     1,124    —      —    1,124 

Data processing

   —      575    —      575     476    409    —    885 

Marketing and advertising

   300    498    —      798     719    234    —    953 

FDIC deposit insurance and regulatory assessment

   786    180    —      966     388    158    —    546 

Net (Gain) loss on sale of real estate owned and repossessed assets

   (211  —      —      (211

Other

   2,197    1,178    309(2)   3,684     4,214    1,516    498(2)  5,835 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Total noninterest expenses

   13,179    10,305    372(3)   23,856     23,778    8,307    498(3)  32,583 

Income before income tax expense and noncontrolling interest in net income of consolidated subsidiary

   5,416    3,498    116(2)   9,030  

Income before income tax expense

   10,692    1,857    181  12,730 

Income tax expense

   1,160    1,186    40(2)   2,386     3,112    247    63  3,422 
  

 

  

 

  

 

  

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   4,256    2,312    76    6,644  

Noncontrolling interest in net income of consolidated subsidiary

   —      (77  77    —    
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Net income

  $4,256   $2,235   $153   $6,644    $7,580   $1,610   $118  $9,308 
  

 

  

 

  

 

  

 

   

 

   

 

   

 

  

 

 

Earnings per share:

            

Basic

  $1.73   $0.93    $1.59    $1.86   $0.94    $1.72 

Diluted

  $1.72   $0.91    $1.58     1.86    0.94    1.72 

Weighted average shares outstanding:

            

Basic

   2,463,571    2,405,295     4,185,931(5)    4,081,247    1,718,730     5,398,894(4) 

Diluted

   2,478,086    2,449,252     4,200,446(5)    4,086,190    1,718,730     5,403,837(4) 

 

(1)

Assumes that the merger was completed as of the beginning of the fiscal year presented and carried forward through the interim period presented utilizing the acquisition method of accounting. Estimated fair value adjustments for investment securities, loans, core deposit intangible, time deposits, borrowed funds and repurchase agreement were determined by the management of CB and of FedFirst.CB. The resulting premiums and discounts for purposes of the unaudited combined condensed consolidated pro forma financial data, where appropriate, are being amortized and accreted into income as more fully described in the notes below. Actual fair value adjustments where appropriate, will be determined as of the

merger completion datewere estimated based upon management estimates and from independent sources and will be amortized and accreted into income over the estimated remaining lives of the respective assets and liabilities.
(2)The following table summarizes the estimated full year impact of the amortization (accretion) of the non-credit related acquisition accounting adjustments on the pro forma statement of operations (in thousands) assuming the merger was completed as of the beginning of the fiscal year presented and carried through the interim period presented..

Category

  Premium/
(Discounts)
   Estimated
Life in
Years
   

Amortization
(Accretion)
Method

  Amortization
(Accretion)

Year Ended
December 31, 2016
 

Loans

  $(749   5.00   SL  $(150

Core deposit intangible

   6,641    10.00   SL   664 

Time deposits

   (90   1.50   SL   (61

FHLB advances

   (179   5.00   SL   (36

 

Category

  Premium/
(Discounts)
  Estimated
Life in
Years
   Amortization
(Accretion)
Method
   Amortization
(Accretion)

Year Ended
December 31,
2013
 

Loans

  $2,205    8.42     EY    $329  

Core deposit intangible

   1,700    10.00     SD     309  

Time deposits

   (1,335  7.00     EY     (499

FHLB advances

   (320  0.82     EY     (318

Banking premises

   2,500    40.00     SL     63  

EY - effective yield method.

SL - straight line method.

SD - sum-of-the years digit method.

The following table summarizes the estimated impact of the amortization (accretion) of the acquisition accounting adjustments on CB results of operations for the years following the merger assuming such transaction was effected on January 1, 20142017 (in thousands).

 

Amounts for the Years Ended December 31,

  Amortization
of
Intangibles
   Net
Amortization

(Accretion)
  Net Decrease
in Income
Before Taxes
 

2014

  $77    $147   $224  

2015

   301     281    582  

2016

   270     (132  138  

2017

   239     (351  (112

2018

   209     (438  (229

Thereafter

   604     (2,556  (1,952

Amounts

for the Years Ending December 31,

  Amortization
of Intangibles
   Net
Amortization
   Net Decrease
in Income
Before Taxes
 

2017 (through September 30, 2017)

  $(498  $509   $11 

2018

   (664   664    (1

2019

   (664   618    (47

2020

   (664   618    (47

2021

   (664   618    (47

Thereafter

   (3,487   46    (3,441

The income tax adjustment is based upon total pre-tax acquisition accounting adjustments and a 34%35% effective tax rate.

 

(3)Noninterest expenses also do not include one-time mergerBasic and integration expenses which will be expensed against incomediluted weighted average common shares outstanding were determined by adding the number of shares issuable to First West Virginia’s stockholders to CB’s historical weighted average basic and which are accounted for as balance sheet adjustments to cashdiluted outstanding common shares and equity in these pro forma financial statements. Those amounts, on an after-tax basis, total $3.1 million. In determining the fair valuereflect 1,317,647 incremental diluted shares of the assets acquired in this transaction, remaining costs of $1.5 million to be incurred by FedFirst are deducted from FedFirst’s total equity in determining the fair value of assets acquired and are not included in pro forma net income. In addition, CB will incur approximately $2.0 million, on an after-tax basis, in total transaction costs as a result of pro forma income for the proposed merger. Through March 31, 2014, pre-tax transaction costsnine months ended September 30, 2017. The stock consideration paid to First West Virginia’s stockholders consists of $71,000 and $ 0 have been recognized by CB and FedFirst, respectively. Allthe issuance of 1,317,647 shares of CB’s total transaction costs are expectedcommon stock based upon the fixed exchange rate of 0.9583 applied to be incurred during80% of the year ending December 31, 2014. A summary1,718,730 shares of CB’s transaction costs is as follows (in thousands):First West Virginia common stock outstanding.

Professional fees

  $845  

Other merger related expenses

   100  

Estimated pre-tax transaction costs

   945  

Less related tax benefit

   321  
  

 

 

 

Estimated transaction costs, net of taxes

  $624  
  

 

 

 

Professional fees include investment banking, legal, accounting and other professional fees and expenses associated with the merger. Merger related compensation and benefits include change in control payments. Other merger related expenses include marketing, printing, integration, contract termination costs and other expenses. The foregoing estimates may be refined after the completion of the merger.

(4)Basic and diluted weighted average common shares outstanding were determined by adding the number of shares issuable to FedFirst’s stockholders to CB’s historical weighted average basic and diluted outstanding common shares and reflect 1,722,360 incremental diluted shares of CB as a result of pro forma income for the quarter ended March 31, 2014. The stock consideration paid to FedFirst’s stockholders consists of the issuance of 1,722,360 shares of CB’s common stock based upon the fixed exchange rate of 1.1590 applied to 65% of the 2,286,268 shares of FedFirst common stock outstanding. The share amounts above reflect the impact related to the retirement of unallocated shares utilized to terminate First Federal Savings Bank’s employee stock ownership plan.
(5)Basic and diluted weighted average common shares outstanding were determined by adding the number of shares issuable to FedFirst’sWest Virginia’s stockholders to CB’s historical weighted average basic and diluted outstanding common shares. The stock consideration paid to FedFirst’sFirst West Virginia’s stockholders consists of the issuance of 1,722,3601,317,647 shares of CB’s common stock based upon the fixed exchange rate of 1.15900.9583 applied to 65%80% of the 2,286,2681,718,730 shares of FedFirstFirst West Virginia common stock outstanding. The share amounts above reflect the impact related to the retirement of unallocated shares utilized to terminate First Federal Savings Bank’s employee stock ownership plan.

DESCRIPTION OF CB CAPITAL STOCK

The following summary describes the material terms of CB’s capital stock and is subject to, and qualified by, CB’s articles of incorporation and bylaws and Pennsylvania law. See “Where You Can Find More Information” as to how to obtain a copy of CB’s articles of incorporation and bylaws.

General

CB is authorized to issue 35,000,000 shares of common stock, having a par value of $0.4167 per share, and 5,000,000 shares of preferred stock, having no stated par value. As of June 30, 2014, 2,338,775February 16, 2018, 4,096,452 shares of common stock were outstanding and no shares of preferred stock were outstanding.

Common Stock

Dividends. The holders of CB’s common stock are entitled to receive and share equally in dividends as may be declared by the board of directors out of funds legally available for dividends, after payment of all dividends on preferred stock, if any is outstanding. The payment of dividends is also subject to restrictions set forth in Pennsylvania law and the limitations imposed by the Federal Reserve Board. CB’s payment of dividends depends upon receipt of dividends from Community Bank, CB’s banking subsidiary. Payment of dividends by Community Bank is regulated by the FDIC and the Pennsylvania Department of Banking and generally, the prior approval of the FDIC is required if the total dividends declared by Community Bank, in any calendar year exceeds its net profits, as defined, for that year combined with its retained net profits for the preceding two years. Additionally, prior approval of the FDIC is required when a state non-member bank has deficit retained earnings but has sufficient current year’s net income, as defined, plus the retained net profits of the two preceding years. The FDIC may prohibit dividends if it deems the payment to be an unsafe or unsound banking practice. The FDIC has issued guidelines for dividend payments by state non-member banks emphasizing that proper dividend size depends on the bank’s earnings and capital.

Voting Rights. The holders of CB’s common stock possess exclusive voting rights in CB. They elect its board of directors and act on other matters that are required to be presented to them under Pennsylvania law or that are otherwise presented to them by the board of directors. Each holder of common stock is entitled to one vote per share on all matters presented to shareholders.stockholders. Holders of common stock are not entitled to cumulate their votes in the election of directors.

Liquidation. Upon a liquidation, dissolution or winding up of CB, holders of common stock are entitled to receive all of the assets of CB available for distribution after payment or provision for payment of all its debts and liabilities. If CB were ever to issuesissue preferred stock, the preferred shareholdersstockholders may have a priority over the holders of the common stock upon liquidation or dissolution.

Preemptive Rights; Redemption. Holders of CB’s common stock are not entitled to preemptive rights with respect to any shares that may be issued. The common stock cannot be redeemed.

Preferred Stock

CB’s articles of incorporation authorizes CB’s board of directors, without shareholderstockholder action, to issue preferred stock in one or more series and to establish the designations, powers, preferences, dividend rates and rights as the board of directors may from time to time determine. The issuance of preferred stock with voting, dividend, liquidation and conversion rights could dilute the voting strength of the holders of the common stock and may assist management in impeding an unfriendly takeover or attempted change in control.

Transfer Agent and Registrar

The transfer agent and registrar for CB’s common stock is Computershare Limited, New York, New York.Trust Company, N.A., Canton, Massachusetts.

COMPARISON OF RIGHTS OF SHAREHOLDERSSTOCKHOLDERS

The rights of stockholders of FedFirstFirst West Virginia are currently governed by FedFirst’sFirst West Virginia’s articles of incorporation and bylaws and by MarylandWest Virginia law. The rights of shareholdersstockholders of CB are currently governed by CB’s articles of incorporation and bylaws and by Pennsylvania law. If the merger is completed, FedFirstFirst West Virginia stockholders who receive CB common stock will become CB shareholdersstockholders and their rights will likewise be governed by CB’s articles of incorporation and bylaws and by Pennsylvania law.

The following is a summary of the material differences between the rights of a FedFirstFirst West Virginia stockholder and the rights of a CB shareholder.stockholder. This summary is not a complete statement of the differences between the rights of FedFirstFirst West Virginia stockholders and the rights of CB shareholders,stockholders, and is qualified in its entirety by reference to the governing law of each corporation and to the articles of incorporation and bylaws of each corporation. Copies of CB’s articles of incorporation and bylaws are filed as exhibits to CB’s registration statement on Form S-4 of which this documentsdocument is a part, and are incorporated herein by reference. Copies of FedFirst’sFirst West Virginia’s articles of incorporation and bylaws are available upon written request addressed to Jennifer L. George,Deborah A. Kloeppner, Corporate Secretary, FedFirst Financial Corporation, 565 DonnerFirst West Virginia Bancorp, Inc., 1701 Warwood Avenue, Monessen, Pennsylvania 15062.Wheeling, West Virginia 26003.

 

Authorized Stock

CB

  

FedFirstFirst West Virginia

•   The CB articles of incorporation authorize 40,000,000 shares of capital stock, consisting of 35,000,000 shares of common stock, $0.4167 par value per share, and 5,000,000 shares of preferred stock, no par value per share.

 

•   As of June 30, 2014,February 16, 2018, there were 2,338,7754,096,452 shares of CB common stock issued and outstanding.

 

•   No shares of preferred stock are issued or outstanding.

  

•   The FedFirstFirst West Virginia articles of incorporation authorize 30,000,000 shares of capital stock, consisting of 20,000,0002,000,000 shares of common stock, $0.01 par value per share, and 10,000,000 shares of preferred stock, $0.01$5.00 par value per share.

 

•   As of June 30, 2014,February 16, 2018, there were 2,315,8101,718,730 shares of FedFirstFirst West Virginia common stock issued and outstanding.

•   No shares of preferred stock are issued and outstanding.

Voting Rights

CB

  

FedFirstFirst West Virginia

•   The holders of the common stock exclusively possess all voting power, subject to the authority of the board of directors to offer voting rights to the holders of preferred stock.

 

•   Each share of common stock is entitled to one vote. Beneficial owners of more than 15% of CB’s outstanding shares of common stock are not entitled to vote the shares owned in excess of the 15% limit.

 

•   Holders of common stock may not cumulate their votes for the election of directors.

  

•   The holders of the common stock exclusively possess all voting power, subject to the authorization of the board of directors to offer voting rights to the holders of preferred stock.power.

 

•   Each share of common stock is entitled to one vote. Beneficial owners of more than 10% of FedFirst’s outstanding shares of common stock are not entitled to vote the shares owned in excess of the 10% limit.

 

•   Holders of common stock may not cumulate their votes for the election of directors.

Required Vote for Authorization of Certain Actions

CB

  

FedFirstFirst West Virginia

•   A majority of the votes cast at a meeting at which a majority of the outstanding capital stock is present shall decide every matter submitted to stockholders, except that directors are elected by a plurality of the votes cast at a meeting at which a majority of the outstanding capital stock is present.

•   The CB articles of incorporation require a supermajority shareholder voting requirement (66the affirmative vote of at least 66 2/3%) for of the approval ofoutstanding shares to approve certain actions, including certain business combinations involving the acquisition of CB and certain amendments to CB’s articles of incorporation and bylaws.

  

•   A majority of the votes cast at a meeting at which a majority of the outstanding capital stock is present shall decide every matter submitted to stockholders, except that directors are elected by a plurality of the votes cast at a meeting at which a majority of the outstanding capital stock is present.

•   Under West Virginia law, a consolidation, merger, share exchange or transfer must be approved by the affirmative vote of a majority of the votes cast on the matter assuming a quorum is present at the meeting. The FedFirst articles of incorporation requireof First West Virginia do not provide for a supermajority stockholderdifferent voting requirement (75%) for the approval of certain actions, including adopting certain amendments to the articles of incorporation and bylaws.requirement.

Dividends

CB

  

FedFirstFirst West Virginia

•   Holders of common stock are entitled, when declared by the CB board of directors, to receive dividends, subject to the rights of any holders of preferred stock.

  

•   Holders of common stock are entitled, when declared by the FedFirstFirst West Virginia board of directors, to receive dividends, subject to the rights of holders of preferred stock.dividends.

OtherDissenters’ or Appraisal Rights and Preferences

CB

  

FedFirstFirst West Virginia

•   TheUnder Pennsylvania law, CB common stock doesstockholders do not have any otherdissenters’ rights, or preferences.because CB’s stock is listed on a national exchange.

  

•   The FedFirst commonFirst West Virginia stockholders are entitled to appraisal rights. Under West Virginia law, appraisal rights are not available to stockholders of corporations if the stock does not have any other rightsis (i) listed on a national exchange, or preferences.(ii) held by 2,000 or more stockholders and outstanding stock, excluding shares held by affiliates or 10% stockholders, has an aggregate market value of $20.0 million or more.

Shareholders’Stockholders’ Meetings

CB

  

FedFirstFirst West Virginia

•   CB must deliver notice of the meeting at least ten (10) days before the meeting to each shareholderstockholder entitled to vote.

 

•   Only the CB board of directors may call a special meeting.

 

•   For purposes of determining shareholdersstockholders entitled to vote at a meeting, the board of directors may fix a record date that is not more than ninety (90)90 days before the meeting.

 

•   The board of directors or any shareholder entitled to vote may nominate directors for election or propose new business.

•   To nominate a director or propose new business, shareholders must give written notice to CB’s Secretary not less than sixty (60) days before the anniversary date of the immediately preceding annual meeting of stockholders.

•   FedFirst must deliver notice of the meeting and, in the case of a special meeting, a description of its purpose, no fewer than ten (10) days and no more than ninety (90) days before the meeting to each stockholder entitled to vote.

•   Special meetings may be called by chairman of the board, the president, two-thirds of the total number of directors or the holders of at least a majority of the outstanding capital stock entitled to vote at the special meeting.

•   For purposes of determining shareholders entitled to vote at a meeting, the board of directors may fix a record date that is not less than ten (10) days or more than ninety (90) days before the meeting.

•   The board of directors or any shareholder entitled to vote may nominate directors for election or propose new business.

 

•   To nominate a director or propose new business, stockholders must give written notice to theCB’s Secretary of FedFirst not less than ninety (90)60 days before the anniversary date of the immediately preceding annual meeting of stockholders.

•   First West Virginia must deliver notice of the regular annual meeting no fewer than 10 and no more than 60 days before the meeting to each stockholder entitled to vote at the meeting. First West Virginia must deliver notice and a description of the purpose of a special meeting no fewer than five and no more than 40 days before the special meeting to each stockholder entitled to vote at the meeting.

•   Special meetings may be called by the board of directors or by stockholders owning, in the aggregate, at least 10% of the stock of First West Virginia.

•   For purposes of determining stockholders entitled to vote at a meeting, the board of directors may fix a record date that is not less than 10 or more than 70 days before the meeting.

•   The board of directors or any stockholder entitled to vote may nominate directors for election. To nominate a director, stockholders must give written notice to the president of First West Virginia not less than 14 or more than 40 days before the meeting, unless FedFirstFirst West Virginia fails to give at least one hundred (100)21 days’ notice or prior public disclosure of the meeting, in which case notice by the stockholder to be timely must be received by FedFirstFirst West Virginia not later than the close of business on the 10thseventh day following the date of notice is mailed or prior public disclosure is made.in order to be considered timely. First West Virginia’s articles of incorporation and bylaws do not address shareholder proposals except with regard to the nomination of directors.

Action by ShareholdersStockholders Without a Meeting

CB

  

FedFirstFirst West Virginia

•   ShareholdersStockholders are prohibited from consenting in writing, without a meeting, to the taking of any action.

  

•   Under MarylandWest Virginia law, action may be taken by stockholders of FedFirstFirst West Virginia without a meeting if all stockholders entitled to vote on the action give written consent to taking such action without a meeting.

Board of Directors

CB

  

FedFirstFirst West Virginia

•   The CB articles of incorporation provide that the number of directors, to be fixed by board resolution, shall be between five (5) and twenty-five (25).25. The number of directors is currently fixed by resolution at eight (8).eight.

 

•   The board of directors is divided into three classes as equal in number as possible, and approximately one-third of the directors are elected at each annual meeting.

 

•   Vacancies on the board of directors may be filled by a vote of a majority of the remaining directors, and a director elected to fill a vacancy shall serve only until the term of the class to which the director was elected expires.

 

•   Directors may be removed only for cause by the vote of a majority of the outstanding shares entitled to vote for directors.

  

•   The articles of incorporation provide that the number of directors, to be fixed by resolution, shall be fixed as provided in the bylaws. The bylaws provide that the number of directors shall be as designated by the board of directors.between five and 25. The number of directors is currently fixed by resolution at seven (7).10.

 

•   First West Virginia only has one class of directors. The board of directors is divided into three classes as equal in number as possible, and approximately one-third of the directors are elected at each annual meeting.

 

•   Vacancies on the board of directors may be filled only by a majority vote of the remaining directors. A director appointed by the board of directors to fill a vacancy shall serve only until the term of the class to which the director was elected expires.next annual meeting.

 

•   DirectorsUnder West Virginia law, First West Virginia stockholders may remove a director with or without cause, but only at a meeting called for the purpose of removing the director and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director. The director may be removed at any time, only with cause, by the affirmative votestockholders only if the number of votes cast to remove the director exceeds the number of votes cast not to remove the director. However, a majoritydirector may not be removed if the number of votes sufficient to elect the shares of stock entitled to vote in the election of directors.director under cumulative voting is voted against his or her removal.

Amendment of Bylaws

CB

  

FedFirstFirst West Virginia

•   The bylaws may be amended or repealed upon the approval of at least a majority of the board of directors or upon the affirmative vote of two-thirds (66 2/3%) of votes cast by the shareholders at any legal meetingleast two-thirds of the shareholders.shares entitled to vote in an election of directors.

  

•   The bylaws may be amended or repealed withupon the approval of a majority of the board of directors at any meetingdirectors. Under West Virginia law, stockholders may amend or repeal the bylaws by the affirmative vote of the board of directors or with the approval of seventy five percent (75%)a majority of the votes cast byon the stockholdersmatter at a meeting of stockholders.at which a quorum is present.

Amendment of Articles of Incorporation

CB

  

FedFirstFirst West Virginia

•   The articles of incorporation may be amended or repealed upon approval by a majority of the board of directors and approval of at least a majority of the shares eligible to be castvote at a legal meeting of the shareholders.stockholders. Certain amendments that would affect provisions related to the board of directors, indemnification rights, meeting of stockholders and stockholder proposals, certain voting rights limitations, stockholder approval of certain business combinations, evaluations of offers of business combinations, and certain amendments to the articles of incorporation and bylaws, require supermajority (66 2/3%) shareholder approval.the affirmative vote of the holders of at least two-thirds of the shares entitled to vote.

  

•   ThePursuant to West Virginia Law, the articles of incorporation of First West Virginia may be amended uponby the approvalaffirmative vote of at least a majority of the shares outstanding. Certain amendments regarding limitations on voting rightsvotes cast by First West Virginia stockholders at any meeting at which a quorum is present called for the purpose of greater-than-10% stockholders, the classification of the board of directors, amendments to the bylaws, limitation of personal liability of directors, and amendments toamending the articles of incorporation require the approval of seventy five percent (75%) of the issued and outstanding shares of FedFirst common stock entitled to vote.incorporation.

MANAGEMENT AND OPERATIONS AFTER THE MERGER

Board of Directors

After the completion of the merger, CB’s boardthe boards of directors of CB and Community Bank will be increased by three members and will consist of all of the current directors of CB and Community Bank and three individuals who are current directors of First West Virginia, including William G. Petroplus, Roberta Robinson Olejasz and Jonathan A. Bedway. Mr. Petroplus will be appointed to a term expiring at the 2019 annual meeting of stockholders, Ms. Olejasz will be appointed to a term expiring at the 2018 annual meeting of stockholders, and Mr. Bedway will be appointed to a term expiring at the 2020 annual meeting of stockholders.

For information regarding the current directors of CB, executive compensation and relationships and related transactions, see “Information About CB” as well as FedFirst directors John J. LaCarte, John M. Swiatek, Patrick G. O’BrienCB’s proxy statement for its 2017 annual meeting of stockholders and Richard B. Boyer. Information regardingits Annual Report on Form 10-K, which are filed with the directors of CBSEC and the members of FedFirst’s board of directors who will be joining the board of directors of CB is provided below. Each individual has served in his current occupation for at least the last five (5) years, unless otherwise indicated. The age indicated for each individual is as of March 31, 2014.incorporated by reference into this document. See “Where You Can Find More Information.”

The following directors of CB have terms ending in 2015:Management

Barron P. McCune, Jr. Mr. McCune, age 60, has served as a director since 1992. He has served as President of Community Bank since 1999 and as President and Chief Executive of Community Bank since 2005 and Vice Chairman since 2006. Prior to joining Community Bank as its general counsel in 1992, Mr. McCune practiced law for 20 years. Mr. McCune holds a bachelors from Duke University and a law degree from the University of Denver School of Law. Mr. McCune’s long history of service to Community Bank and his legal knowledge are valuable assets to CB’s board of directors.

Ralph J. Sommers, Jr.Mr. Sommers, age 75, has served as a director since 1983 and as ChairmanAfter completion of the Board since 1999. He previously served as Chief Executive Officer of Community Bank from 1982 to 2005. Mr. Sommers’ long history with Community Bank and his knowledge of its market area are valuable assets to CB’s board of directors.

Karl G. Baily. Mr. Baily, age 62, has served as a director since 1996. He retired as President of Caldwell Banker Baily Real Estate and Vice President of Baily Insurance Agency, Inc. in 2012, but continues to work with Baily Insurance Agency, Inc. as a real estate broker and appraiser. Mr. Baily providesmerger, the board of directors with long-standing knowledge of the local real estate market and the local community.

The following directors of CB have terms ending in 2016:

Charles R. Guthrie. Mr. Guthrie, age 54, has served as a director since 2005. He is the President of Guthrie Belczyk and Associates, P.C., an accounting firm. Until 2012, Mr. Guthrie served as a registered representative of LPL, an investment company. Mr. Guthrie has been a Certified Public Accountant since 1982. Mr. Guthrie serves on committees of numerous community organizations in Community Bank’s local market area. His expertise in accounting, corporate management experience, and his community involvement are valuable assets to the CB board of directors.

Joseph N. Headlee. Mr. Headlee, age 65, has served as a director since 2002. He is a partner in Wayne Lumber Company and in Headlee Partnership. He has held these positions since 1982 and 1980, respectively. Mr. Headlee also has served as Treasurer of Franklin Township Sewage Authority. Mr. Headlee brings to CB’s board of directors experience in business management and marketing and familiarity with Community Bank’s market area.

The following directors of CB have terms ending in 2017:

Mark E. Fox. Mr. Fox, age 55, has served as a director since 1998. Mr. Fox has more than 32 years experience as the owner and manager of Fox Ford, Inc., a local car dealership. Since 2013, he has served as the President of Fox Ford, Inc. Before that time, he served as Vice President of Fox Ford, Inc. In addition, he holds a bachelors’ degree in accounting and a MBA degree. Mr. Fox’s experience in managing a local business provides CB’s board of directors with insight into economic and business trends in Community Bank’s market area.

William C. Groves. Mr. Groves, age 72, has served as a director since 1996. Since 1980 he has served as the President of Haulit Trucking, Inc. Mr. Groves is also a township supervisor of Cumberland Township, a position he has held since 2003. Mr. Groves’s experience in managing a local business and his long standing ties to the local community provide CB’s board of directors with valuable insight on Community Bank’s local market area.

David F. Pollock. Mr. Pollock, age 59, has served as a director since 2006. Mr. Pollock has been a practicing attorney for over 30 years. He is a Managing Partner in the law firm of Pollock Morris, LLC and since 2008 Mr. Pollock has been a Managing Partner of P&S Development, LLC, a real estate development company. Mr. Pollock’s legal knowledge and real estate development experience in Community Bank’s market area significantly contribute to the depth of CB’s board of directors.

Proposed appointees from FedFirst:

John J. LaCarte. Mr. LaCarte, age 47, has served as a director of FedFirst since 1998 and has served as FedFirst’s Chairman of the Board since 2004. He is the President of Model Cleaners, Uniforms & Apparel LLC. Mr. LaCarte will bring to CB’s board of directors entrepreneurial and business management experience from successfully managing a business with over 20 locations and 200 employees. In addition, Mr. LaCarte is a lifelong resident of Washington County with extensive knowledge of the local market area. As owner of a local business in the Washington County area, Mr. LaCarte will offer CB’s board of directors significant knowledge related to the local business and retail environment. Mr. LaCarte’s career as a small business owner also will provide organizational understanding and management expertise.

John M. Swiatek. Mr. Swiatek, age 56, has served as a director of FedFirst since 2010. He is currently a Managing Director of Innovation Sports & Entertainment, a division of The Innovation Group. Before joining The Innovation Group in 2011, he was the Director of the Sports, Entertainment and Marketing division of GSP Consulting Corporation. Mr. Swiatek also co-founded and served as the President and Managing Partner of the Washington Wild Things, a minor league professional baseball team in Washington, Pennsylvania, from 2001 until 2009. Mr. Swiatek will bring to CB’s board of directors extensive business background in finance, management and marketing. In addition, Mr. Swiatek will bring his familiarity with our market areas as well as the surrounding greater Pittsburgh metropolitan area.

Patrick G. O’Brien. Mr. O’Brien, age 53, has served as a director of FedFirst since 2009. He became FedFirst’s President and Chief Executive Officer in May 2009 and served as Executive Vice President and Chief Operating Officer of FedFirst from September 2005 to May 2009. Before joining FedFirst, Mr. O’Brien served as Regional President and Senior Lender—Commercial Lending with WesBanco Bank, Inc., Washington, Pennsylvania, from March 2002 to August 2005. Before serving with WesBanco Bank, Mr. O’Brien was Senior Vice President of Commercial Lending with Wheeling National Bank from August 1999 to March 2002, and Vice President and District Manager (Retail Banking) at PNC from 1993 to 1999. As FedFirst’s former President and Chief Executive Officer, Mr. O’Brien will bring to CB’s board of directors knowledge of FedFirst’s operations. Mr. O’Brien also will bring his extensive experience in community banking and his familiarity with our market area.

Richard B. Boyer. Mr. Boyer, age 56, has served as a director of FedFirst since 2002. He has been the President of Exchange Underwriters, Inc. since 1989. As President of Exchange Underwriters, Mr. Boyer will bring to CB’s board of directors knowledge of the insurance industry and the operations of Exchange Underwriters, which he has managed for over 20 years.

Executive Officers Who are Not Directors

The executive officers of CB will consist of the same individuals as existed before the merger. The executive officers ofand Community Bank will consist of the same individuals as existed before the merger plus Patrick G. O’Brien, who will serve as Executive Vice President and Chief Operating Officer, and Richard B. Boyer, who will serve as Vice President of Insurance Operations.

Information regarding the current executive officers of CB and Community Bank.

INFORMATION ABOUT CB

General

CB Financial Services, Inc., a Pennsylvania corporation incorporated in February 2005, is the bank holding company for Community Bank. CB’s common stock is quoted on the Nasdaq Global Market under the symbol “CBFV.” CB conducts its operations primarily through its wholly owned subsidiary, Community Bank, who are not also directors of CBa Pennsylvania-chartered commercial bank. Community Bank operates through its main office in Carmichaels, Pennsylvania, and fifteen branch offices in Greene, Allegheny, Washington and Fayette Counties in southwestern Pennsylvania. Community Bank is provided below. The age indicateda community-oriented institution offering residential and commercial real estate loans, commercial, industrial and agricultural loans, and consumer loans as well as a variety of deposit products for each individual is as of March 31, 2014.

Kevin D. Lemley, CPA. Mr. Lemley, age 59, has been employed by CB since December 2011individuals and serves as Senior Vice President and Chief Financial Officer. From 1999 to 2010, he served as Senior Vice President and Chief Financial Officer of Centra Bank, Inc. From 2010 to 2011, he served as Senior Vice President and Chief Credit Administration Officer of Centra Bank, Inc.

Ralph Burchianti.Mr. Burchianti, age 59, has been employed by CB since August 1985 and serves as Senior Vice President—Credit Administration.

Transactions With Certain Related Persons

Loans and Extensions of Credit. Federal law and regulations generally prohibits CB from making loans tobusinesses in its executive officers and directors. However, such laws and regulations contain a specific exemption from such prohibition for loans made bymarket area. Community Bank to itshas one subsidiary, Exchange Underwriters, Inc., which is a full-service, independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products. At September 30, 2017, CB, on a consolidated basis, had total assets of $908.3 million, total deposits of $762.4 million and stockholders’ equity of $93.2 million.

The principal executive officersoffice of CB is located at 100 North Market Street, Carmichaels, Pennsylvania 15320 and directors in compliance with federal banking regulations. Federal

banking regulations generally require that all loans or extensions of credit to executive officers and directors of insured institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of repayment or present other unfavorable features, although federal regulations allow Community Bank to make loans to executive officers and directors at reduced interest rates if the loantelephone number is made under a benefit program generally available to all other employees that does not give preference to any executive officer or director over any other employee.

In addition, loans made to a director or executive officer in an amount that, when aggregated with the amount of all other loans to the person and his or her related interests, are in excess of the greater of $25,000 or 5% of(724) 966-5041. Community Bank’s capitalwebsite address is www.communitybank.tv. Information on the website is not and surplus, up toshould not be considered a maximumpart of $500,000, must be approvedthis document.

Additional information about CB and its subsidiaries is included in advancedocuments incorporated by a majority of the disinterested members of Community Bank’s board of directors.

The outstanding balance of loans extended by Community Bank to its executive officers and directors and related parties was $3.3 million at March 31, 2014. Such loans were madereference in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to Community Bank, and did not involve more than the normal risk of collectability or present other unfavorable features when made.

At March 31, 2014, Community Bank did not have any loans outstanding to Messrs. LaCarte, Swiatek, O’Brien or Boyer, or to their respective related parties.

Other Transactions. Since the beginning of CB’s last fiscal year, there have been no transactions and there are no currently proposed transactions in which CB was or is to be a participant and the amount involved exceeds $120,000, and in which any of CB’s executive officers and directors or in which Messrs. LaCarte, Swiatek, O’Brien or Boyer had or will have a direct or indirect material interest.this joint proxy statement/prospectus. See “Where You Can Find More Information.”

Executive Compensation of CBStock Ownership

The following table sets forth information, as of February 16, 2018, regarding the shares of CB common stock beneficially owned by each director and executive officer of CB, and by all directors and executive officers as a group. As of February 16, 2018, CB knows of no person who beneficially owns more than 5% of CB’s outstanding common stock. A person may be considered to beneficially own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting or investment power. Unless otherwise indicated, each of the named individuals has sole voting and investment power with respect to the shares shown and none of the named individuals has pledged any of his shares.

   Number of Shares
Owned
  Percent of Common
Stock Outstanding (1)
 

Directors:

   

Karl G. Baily

   18,360(2)(5)   

Richard B. Boyer

   21,996(5)   

Mark E. Fox

   12,660(3)(5)   

William C. Groves

   20,179(4)   

Charles R. Guthrie, CPA

   12,895(3)(5)   

Joseph N. Headlee

   23,800(3)   

John J. LaCarte

   52,338(3)   1.3

Barron P. McCune, Jr.

   68,697(2)   1.7

Patrick G. O’Brien

   58,231(5)   1.4

David F. Pollock

   36,285   

Ralph J. Sommers, Jr.

   22,540   

John M. Swiatek

   13,848(5)   

Executive Officers Who Are Not Directors:

   

Kevin D. Lemley, CPA

   10,275(2)(5)   

Ralph Burchianti

   60,370(4)   1.5

All Directors and Executive Officers as a Group (14 persons)

   432,474   10.6

*Represents less than 1% of CB’s outstanding shares.
(1)Based on 4,096,452 shares of CB’s common stock outstanding and entitled to vote as of February 16, 2018.
(2)Includes shares owned indirectly through a spouse or child as follows: Mr. Baily – 400 shares, Mr. McCune – 5,330 shares and Mr. Lemley – 2,910 shares.
(3)Includes shares held by a corporation or limited partnership as follows: Mr. Fox – 725 shares, Mr. Guthrie – 48 shares, Mr. Headlee – 5,000 shares and Mr. LaCarte – 19,090 shares.
(4)Includes shares owned indirectly through an investment club as follows: Messrs. Groves and Burchianti – 220 shares each. The investment club, in which Messrs. Groves and Burchianti each has a 10% interest, owns a total of 2,200 shares.
(5)Includes shares owned through a retirement account as follows: Mr. Baily – 1,850 shares, Mr. Boyer – 11,989 shares, Mr. Fox –5,318 shares, Mr. Guthrie – 5,667 shares, Mr. O’Brien – 19,694 shares, Mr. Swiatek – 6,334 shares and Mr. Lemley – 725 shares.

Director Compensation

The following table sets forth the compensation received by individuals who served as directors, and who were not also named executive officers, of CB during the fiscal year ended December 31, 2017.

   Fees Earned or
Paid in Cash
   Stock
Awards (1)
   Option
Awards (2)
   Nonqualified
Deferred
Compensation
Earnings
   All Other
Compensation
  Total 

Karl G. Baily

  $26,400   $23,063   $6,924   $—     $2,640  $59,027 

Mark E. Fox

   38,400    23,063    6,924    —      2,640   71,027 

William C. Groves

   35,400    23,063    6,924    —      2,640   68,027 

Charles R. Guthrie, CPA

   29,400    23,063    6,924    —      2,640   62,027 

Joseph N. Headlee

   26,400    23,063    6,924    —      2,640   59,027 

John J. LaCarte

   26,400    23,063    6,924    —      2,640   59,027 

David F. Pollock

   29,400    23,063    6,924    —      2,640   62,027 

Ralph J. Sommers, Jr.

   38,400    23,063    6,924    —      60,236(3)   128,622 

John M. Swiatek

   26,400    23,063    6,924    —      2,640   59,027 

(1)Reflects the aggregate grant date fair value for restricted stock awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718 – Share Based Payment, based on the closing price of CB’s common stock on the grant date ($30.75 per share on December 15, 2017). Restricted stock awards vest on December 15, 2018. As of December 31, 2017, each listed director had an outstanding stock award for 750 shares. See“– Executive Compensation – 2015 Equity Incentive Plan.”
(2)Reflects the aggregate grant date fair value for stock options computed in accordance with FASB ASC Topic 718, using the binomial option pricing model to estimate the fair value of stock option awards. Stock option awards vest in five approximately equal installments, with the first vesting occurring on December 15, 2018. As of December 31, 2017, each listed director had an outstanding option award for 1,115 shares. See“– Executive Compensation – 2015 Equity Incentive Plan.”
(3)Includes salary ($50,000) and bonus ($2,200) paid in accordance with the employment agreement between Community Bank and Mr. Sommers. See“– Executive Compensation – Employment Agreements.”

The amounts reflected in the “Stock Awards” and “Option Awards” columns of the above table represent the grant date fair value of the awards issued to the listed directors under the CB Financial Services, Inc. 2015 Equity Incentive Plan (the “2015 Equity Incentive Plan”), as determined in accordance with applicable accounting standards. Although the full grant date fair value of the stock option awards is reflected in the above table, the actual value of the stock options, if any, realized by a director will depend on the extent to which the market value of CB common stock exceeds the exercise price of the stock option on the date of exercise. Accordingly, there is no assurance that the value realized by a director will be at or near the estimated value reflected in the above table.

Executive Compensation

Summary Compensation Table. The following information is furnished for the principal executive officer of CB or its subsidiaries and the two most highly-compensated executive officers (other than the principal executive officer) of CB and its subsidiaries whose total compensation for the fiscal year ended December 31, 2013, certain information2017, exceeded $100,000. These individuals are sometimes referred to in this document as to the total remuneration paid by CB to Mr. McCune, who serves as President and Chief Executive Officer, and the two most highly compensated“named executive officers of CB other than Mr. McCune (“Named Executive Officers”).

SUMMARY COMPENSATION TABLEofficers.”

 

Name and

principal position

  Year   Salary
($)
   Bonus
($)
   Non-Equity
incentive plan
compensation

($) (1)
   Nonqualified
deferred
compensation
earnings
($)
   All other
compensation
($) (2)
   Total
($)
 

Barron P. McCune, Jr.

Vice Chairman, President and Chief Executive Officer

   2013     250,109     —       18,008     —       78,326     346,443  

Kevin D. Lemley

Senior Vice President and Chief Financial Officer

   2013     141,750     —       10,206     —       7,459     159,415  

Ralph Burchianti

Senior Vice President—Credit Administration

   2013     158,165     —       11,388     —       29,080     198,633  

Name and Principal

Position

YearSalaryBonusStock
Awards (1)
Option
Awards (1)
All Other
Compensation (2)
Total

Barron P. McCune, Jr.

Vice Chairman & Chief Executive Officer


2017

2016

2015


$

363,960

353,760

333,760


$

42,024

23,800

32,000


$

23,063

10,210

15,998


$

—  

20,503

59,700


$

75,482

75,733

75,572


$

504,529

485,006

517,030


Patrick G. O’Brien

President


2017

2016

2015


$

257,861

250,350

238,500


$

30,943

17,525

23,835


$

—  

7,512

11,926


$

25,461

17,094

49,750


$

43,466

42,810

41,758


$

357,731

335,291

365,769


Richard B. Boyer

Vice President of Insurance Operations


2017

2016

2015


$

251,396

242,439

223,554


$

44,186

—  

47,531


$

23,063

13,225

16,688


$

10,495

10,276

29,850


$

66,063

66,416

61,871


$

395,203

332,356

379,494


 

(1)RepresentsThese amounts represent the bonus payments earned pursuantgrant date fair value of the awards issued to Community Bank’s non-equity bonus program,the named executive officers under the 2015 Equity Incentive Plan, as described below.determined in accordance with applicable accounting standards. Although the full grant date fair value of the stock option awards is reflected in the above table, the actual value of the stock options, if any, realized by the named executive officers will depend on the extent to which the market value of CB common stock exceeds the exercise price of the stock option on the date of exercise. Accordingly, there is no assurance that the value realized by a named executive officer will be at or near the estimated value reflected in the above table.

(2)The following table details the amounts reflect what CB has paid to, or reimbursed, the applicable Named Executive Officer for various benefits we provide. A break-down of the various elements of compensation in this column is set forthreported in the “All Other Compensation” column for 2017. The table immediately below.

   Other Compensation 

Name

  Year   Perquisites
($) (1)
   401(k) Plan
($) (2)
   Supplemental
Retirement
Program($) (3)
   BOLI
($) (4)
   Board Fees
($)
   Total
($)
 

Barron P. McCune, Jr.

   2013     —       46,910     9,547     269     21,600     78,326  

Kevin D. Lemley

   2013     —       7,459       —         7,459  

Ralph Burchianti

   2013     —       28,846       234       29,080  

(1)No Named Executive Officer receivedmay exclude perquisites or other personal benefits,which did not exceed $10,000 in the aggregate that was equal to or greater than $10,000.
(2)Represents the employer contributions made by Community Bank to the Named Executive Officer’s 401(k) plan account for the plan year.
(3)Represents the taxable contribution made by Community Bank to an account established for Mr. McCune pursuant to a supplemental retirement program for the benefit of Mr. McCune.
(4)Represents the Named Executive Officer’s imputed income related to split dollar life insurance provided by Community Bank. Such split dollar life insurance coverage is provided in accordance with the Named Executive Officer’s split dollar life insurance agreement with Community Bank, as described below.each named executive officer.

Employment Agreements

   Mr.
McCune
   Mr.
O’Brien
   Mr. Boyer 

Employer contributions to 401(k) plan

  $34,450   $13,250   $13,250 

Supplemental retirement plan contribution

   9,547    —      —   

Imputed income on split dollar life insurance

   366    —      1,234 

Director fees

   26,400    26,400    26,400 

Total

   70,763    39,650    40,884 

Current Employment Agreements.Community Bank is currently a party to individualhas entered into employment agreements with Ralph J.Messrs. Sommers, Jr., the Chairman of Board,McCune, O’Brien and also with Messrs. McCune, Lemley and BurchiantiBoyer (referred to below as the “executives” or “executive”). Exchange Underwriters, Inc. is also a party to the employment agreement with Mr. Boyer. The employment agreements have a term for three years that renew annually such that the remaining term is three years thereafter, subject to approval by the Board of Directors (in consultation with the Chief Executive Officer, with respect to Messrs. Lemleybegins October 31, 2014 and Burchianti).

The employment agreements currently provide for an annual base salary of $36,000, $250,109, $141,750 and $158,165 for Messrs. Sommers, McCune, Lemley and Burchianti, respectively. In addition to base salary, each executive is entitled to participate in bonus programs and benefit plans that are made available to management employees, and are reimbursed for all reasonable business expenses incurred. Moreover, Messrs. Sommers and McCune are entitled to use of a company-purchase automobile and are reimbursed for all operating expenses of the automobile. Community Bank also makes a taxable annual contribution of $9,547 to an account established for Mr. McCune pursuant to a supplemental retirement program for the benefit of Mr. McCune.

In the event of the executive’s termination of employment for “good reason,” Community Bank will provide the executive with the following severance benefits:

continued base salary payments (at the rate in effect as of the date of termination) for the greater of: (i) 12 months; or (ii) the remaining term of the employment agreement, payable in accordance with regular payroll practices; and

continued participation in the employee benefit plans of Community Bank for the remaining term of the employment agreement, if possible, except that if the executive’s participation in any health, medical, life insurance or disability plan is barred, Community Bank will obtain and pay for, on the executive’s behalf, individual insurance plans which provides equivalent coverage.

Notwithstanding the foregoing, in the event Community Bank does not elect to renew the term of the employment agreement, the executive will have right to receive his salary and benefits payable under the agreement for the remaining term or, if earlier, the date on which the executive is employed in a similar position pursuant an employment contract with materially similar terms by any successor to Community Bank or Community Bank as then controlled.

For purposes of the employment agreements, “good reason” is defined as: (i) any assignment of duties, without consent, other than the duties of the executive’s position specified in the agreement; (ii) removal of the executive from his executive position without cause; (iii) a reduction of the executive’s base salary or material reduction in benefits, except for a reduction in base salary in response to a material adverse change in the financial position of Community Bank; (iv) the failure to provide the executive with fringe benefits, vacation and perquisites specified in his agreement; and (v) a change in control of Community Bank.

New Employment Agreements. In connection with the merger, Community Bank intends to enter into new employment agreements with Messrs. Sommers, McCune, Lemley and Burchianti (referred to below as the “executives” or “executive”),

each of which will supersede and replace their current employment agreements with Community Bank described above as of the effective time of the merger. The new employment agreements have a term that will begin as of the effective time of the merger and will continuecontinues 36 months after May 1, of the calendar year of, or immediately following, the effective time of the merger.2015. On each anniversary date (which is defined as May 1 of each calendar year), each employment agreement will extend for one year such that the remaining term will be for 36 months thereafter, provided that disinterested members of the Bank’s board of directors of Community Bank conduct a comprehensive performance evaluation of the executive and affirmatively approve the extension.

Each employment agreement provides for an annual base salary rate of $36,000, $267,617, $148,838$50,000, $320,000, $238,350 and $166,073$190,000 for Messrs. Sommers, McCune, LemleyO’Brien and Burchianti,Boyer, respectively. In addition to base salary, each executive (except Mr. Boyer) is entitled to participate in bonus programs and benefit plans that are made available by the Bank to management employees,employees. In lieu of participating in the Bank’s bonus programs, Mr. Boyer is entitled to receive: (i) 25% of all first year commissions generated by any salesperson of Exchange Underwriters, Inc. (including himself) from the sales of new insurance policies, which the commissions earned will be paid on a monthly basis; and (ii) an annual bonus equal to 20% of the year-over-year growth in Exchange Underwriters, Inc.’s annual audited net income, excluding any net income effect from the completion of any agency acquisition.

Each executive will be reimbursed for all reasonable business expenses incurred. Moreover, Messrs. Sommers, McCune and McCune will beO’Brien are entitled to use of a company-purchased automobile and will be reimbursed for all operating expenses of the automobile. Community Bank will also make a taxable annual contribution of $9,547 to a non-qualified supplemental retirement program for the benefit of Mr. McCune.

In the event of the executive’s involuntary termination of employment for reasons other than cause, disability or death, or in the eventif the executive resigns during the term of the employment agreement for “good reason,” Community Bank will provide the executive with the following severance benefits:

 

continued base salary payments (at the rate in effect as of the date of termination)determination) for the greater of: (i)of 12 months;months or (ii) the remaining term of the employment agreement, payable in accordance with regular payroll practices; and

 

continued life insurance and non-taxable medical and dental coverage, which will ceaseend upon the earlier of: (i)of the completion of the remaining term of the employment agreement;agreement or (ii) the date on which the executive receives substantially similar benefits from another employer.

For purposes of the employment agreements, “good reason” is defined as: (i) a material reduction in the executive’s base salary or benefits (other than a reduction that is part of a good faith, overall reduction applicable to all employees); (ii) a material reduction in the executive’s authorities, duties or responsibilities; or (iii) a material breach of the employment agreement by Communitythe Bank.

Upon the occurrence of the executive’s termination for any reason (other than for cause) on or after the effective time of a change in control of CB or Community Bank, then in lieu of the severance benefits immediately above, Communitythe Bank or any successor will provide the executive with the following severance benefits:

 

a benefit equal to three times the executive’s highest annual rate of base salary earned during the calendar year of the executive’s date of termination or either of the three calendar years immediately preceding the his date of termination, payable in equal installments in accordance withaccording to regular payroll practices; and

continued life insurance and non-taxable medical and dental coverage until the earlier of: (i) three years after the executive’s date of termination; or (ii) the date on which the executive receives substantially similar benefits from another employer.

Upon any termination of employment (except following a change in control), each executive is required to adhere tonon-competition and non-solicitation covenants for one year.

Non-Equity Bonus ProgramProgram.

Community Bank maintains a bonus program designed to align the interests of employees of Community Bank with the overall performance of CB and Community Bank. Employees selected by the Boardboard of Directors, including the Named Executive Officers,directors are eligible to participate in the bonus program. Each employee’s bonus amount is designated as a percentage of base salary, and is determined based on the satisfaction of objective performance targets related to Community Bank’s net income and net loan growth (which is determined based on the percentage increase in net loans from the prior fiscal year). For the 20132017 plan year, the Board of DirectorsCompensation Committee established performance targets related to net income and net loan growth set forth in the following matrix, with the percentage amounts (based on the satisfaction of the applicable performance targets) representing the percentage of the employee’s base salary for purposes of determining his or her bonus:

 

(Dollars in thousands)  Net Loan Growth 

Net Income

  0%  3%  6%  9%  12% 

$3,770

   —      0.6  1.2  2.4  3.6

$3,920

   0.6  1.2  2.4  3.6  4.8

$4,070

   1.2  2.4  3.6  4.8  6.0

$4,220

   2.4  3.6  4.8  6.0  7.2

$4,368

   3.6  4.8  6.0  7.2  8.4
   Net Loan Growth 

Net Income (in thousands)

  0%  4%  8%  12%  16% 

$7,047

   —     0.6  1.2  2.4  3.6

$7,197

   0.6  1.2  2.4  3.6  4.8

$7,347

   1.2  2.4  3.6  4.8  6.0

$7,497

   2.4  3.6  4.8  6.0  7.2

$7,647

   3.6  4.8  6.0  7.2  8.4

For 2013,calculation purposes in 2017, net income exceeded $4,220,000was approximately $7.1 million (as adjusted for merger expenses and changes in the federal tax code) and net loan growth equaledloans increased approximately 12%. As a result, based on the matrix above, each employee including the Named Executive Officers, earned a bonus equal to 7.2%3% of base salary within the matrix. At their discretion, the Board of Directors approved an employee bonus equal to 5% of base salary, which was paid in January 2014.

Outstanding Equity Awards at Fiscal Year End

No Named Executive Officer had any outstanding equity awards as of December 31, 2013.

Benefit Plans2018.

Split Dollar AgreementsAgreements.. Community Bank has entered into split dollar life insurance agreements with each of Messrs. Sommers McCune and Burchianti.McCune. Under each agreement, the executive’s designated beneficiary will be entitled to share in the proceeds under a life insurance policy owned by Community Bank on the life of the executive in the event of his deathif he dies while employed with Community Bank. The death benefit payable to each executive is $200,000, provided, however that the death benefit must not exceed the executive’s net-at-risk portion of the proceeds (which is the difference between the cash surrender value of the policy and the total proceeds payable under the policy upon the death of the insured). If the executive’s termination occurs subsequent to a change in control of Community Bank, the executive will be 100% vested in his death benefit. Community Bank is the sole beneficiary of any death proceeds remaining after the executive’s death benefit has been paid to his designated beneficiary.

Community Bank also has assumed the split dollar life insurance agreement between First Federal Savings Bank and Mr. Boyer in connection with CB’s merger with FedFirst. This agreement provides Mr. Boyer with a cash payment if he dies while in service with Community Bank. Under the terms of the agreement, Community Bank is the owner of and pays all the premiums on the life insurance policy under which Mr. Boyer is insured. Under the agreement, upon Mr. Boyer’s death his designated beneficiary is entitled to $1,000,000 if he dies before age 65 and $500,000 if he dies after age 65. Community Bank is entitled to any remaining insurance proceeds. If Mr. Boyer terminates his employment before attaining his normal retirement age, his division of the insurance proceeds will be prorated based on his years of service with Community Bank.

401(k) PlanPlan.. Community Bank maintains the 401(k) Profit Sharing Plan, a tax-qualified defined contribution retirement plan (the “401(k) Plan”), for all employees who have satisfied the 401(k) Plan’s eligibility requirements. Each eligible employee can begin participating in the 401(k) Plan uponon the first day of the calendar quarter following the attainment of age 18 and completion of one yearsix months of service.

A participant may contribute up to 100% of his or her compensation to the 401(k) Plan on a pre-tax or post-tax (referred to as a “Roth” contribution) basis, subject to the limitations imposed by the Internal Revenue Code. For 2014,2017, the salary deferral contribution limit is $17,500$18,000 provided, however, that a participant over age 50 may contribute an additional $5,500$6,000 to the 401(k) Plan. Each plan year, Community Bank makes a matching contribution, based on each participant’s salary deferral contribution. The matching contribution formula is currently a 25% match of employee 401(k) Plan deferrals (if any) up to the first 4% of compensation deferred. In addition to salary deferral contributions, the 401(k) Plan provides

that Community Bank will make a safe harbor employer contribution to each eligible participant’s account equal to at least 3% of the participant’s compensation earned during the plan year (referred to as a “non-elective“safe harbor contribution”). A participant is always 100% vested in his or her salary deferral and non-electivesafe harbor contributions.

In addition, for the 20132017 plan year, Community Bank made a discretionary profit sharing contribution to each participant’s account based on his or her age in accordance with the following schedule:schedule (for all employees who were participants in the Community Bank Pension Plan as of December 31, 2007):

 

Age 66 or older

  1% of compensation

Age 51-65

  9% of compensation

Age 45-50

  7% of compensation

Age 40-44

  5% of compensation

Age 35-39

  3% of compensation

Under ageAge 34

and under  1% of compensation

New hiresAll employees who were not participants in the Community Bank Pension Plan as of December 31, 2007 and all employees hired on or later

after January 1, 2007  1% of compensation

Each participant vests in his or her profit sharing contribution at a rate 20% per year such that the participant will become 100% vested upon the completion of five years of credited service. However a participant will immediately become 100% vested in any profit sharing contributions upon the participant’s death, disability or attainment of age 65 while employed with Community Bank.

Generally, a participant (or participant’s beneficiary upon death) may receive a distribution from his or her vested account at retirement, age 59 1259½ (while employed with Community Bank), death, disability or termination of employment, which is payable in a lump sum. Each participant has an individual account under the 401(k) Plan and may direct the investment of his or her account balance among a variety of investment options available under the plan.

Director Compensation of CBOutstanding Equity Awards at December 31, 2017

. The following table sets forth information with respect to outstanding equity awards as of December 31, 2017, for the fiscal year ended December 31, 2013 certain information asnamed executive officers. All equity awards reflected in this table were granted pursuant to the total remuneration CB paid to its directors other than Mr. McCune. Mr. McCune’s compensation is set forth in the Summary Compensation Table above.

DIRECTOR COMPENSATION2015 Equity Incentive Plan, described below.

 

Name (1)

  Fees earned
or paid in cash

($)
   Option Awards
($) (1)
   Non-equity
incentive plan
compensation
($) (2)
   All other
compensation
($) (3)
   Total
($)
 

Karl G. Baily

   23,400     —       —       —       23,400  

Mark E. Fox

   29,900     —       —       —       29,900  

William C. Groves

   26,650     —       —       —       26,650  

Charles R. Gutherie

   23,400     —       —       —       23,400  

Joseph N. Headlee

   23,400     —       —       —       23,400  

David F. Pollock

   23,400     —       —       —       23,400  

Ralph J. Sommers, Jr.

   21,600     —       2,592     39,304     63,496  
Option AwardsStock Awards

Name

Number of
Securities
Underlying
Unexercised
Options
Exercisable
Number of
Securities
Underlying
Unexercised
Options
Unexercisable(1)
Option
Exercise
Price
Option
Expiration

Date
Number of
Shares of
Restricted
Stock That
Have Not
Vested(2)
Market Value
of Shares of

Restricted
Stock That

Have Not
Vested(3)

Barron P. McCune, Jr.


6,000

842

—  



9,000

3,368

3,280


$

22.25

26.45

30.75


12/16/25

12/16/26

12/15/27


—  

—  

750


$

—  

—  

22,500


Patrick G. O’Brien


5,000

702

—  



7,500

2,808

4,100


$

22.25

26.45

30.75


12/16/25

12/16/26

12/15/27


—  

—  

—  



—  

—  

—  


Richard B. Boyer


3,000

422

—  



4,500

1,688

1,690


$

22.25

26.45

30.75


12/16/25

12/16/26

12/15/27


—  

—  

750



—  

—  

22,500


 

(1)Mr. Sommers has 3,900 outstanding stock options granted under the CB Financial Services, Inc. Directors’ Stock Option Plan, all of which are fully exercisable at $14.25 per share.Options vest in five equal installments, commencing on December 15, 2018, December 16, 2017 and 2016, respectively.
(2)Represents the bonus payment earned by Mr. Sommers pursuant to Community Bank’s non-equity bonus program, as described above under “Executive Compensation—Non-Equity Bonus Program.”Restricted stock awards become 100% vested on December 15, 2018.
(3)For Mr. Sommers, this amount represents: (1) $36,000 in base salary; (2) $1,115 in imputed income related to split dollar life insurance provided by Community Bank in accordance with his split dollar life insurance agreement; and (3) $2,189 in employer contributions made by Community Bank to his 401(k) Plan account. For 2013, no director received any perquisites or other personal benefits, inBased on the aggregate, that was equal to or greater than $10,000.$30.00 closing price of CB’s common stock on December 31, 2017.

Board Fees

Each director of CB also serves as a director of Community Bank. Directors of CB do not receive separate fees for service on CB’s Board of Directors. Directors of Community Bank received a retainer of $1,800 per month. Directors do not receive any additional fee for committee meetings attended, except for members of the Loan Committee who receive an additional retainer of $250 per month and the Chairman of the Audit Committee who receives an additional retainer of $250 per month.

Director Plans

Mr. Sommers is a party to an employment agreement and a split dollar life insurance agreement with Community Bank. Mr. Sommers is also eligible to participate in the non-equity bonus program and the Community Bank 401(k) Plan. Such benefits are provided in connection with Mr. Sommers’ service as an employee-consultant to Community Bank, in addition to his duties as Chairman of the Board. See the descriptions of each agreement and plan set forth above under “Executive Compensation” for further details.

Directors’ Stock Option2015 Equity Incentive PlanOutsideAt the 2015 annual meeting, CB’s stockholders approved the 2015 Equity Incentive Plan to provide officers, employees and directors of CB orand Community Bank with additional incentives to promote the growth and performance of CB. Subject to permitted adjustments for certain corporate transactions, the 2015 Equity Incentive Plan authorizes the issuance or delivery to participants of up to 407,146 shares of CB common stock pursuant to grants of incentive and non-statutory stock options, restricted stock awards and restricted stock units. Of this amount, the maximum number of shares of CB common stock that may be issued under the plan pursuant to the exercise of stock options is 271,431 shares, and the maximum number of shares of CB common stock that may be issued as restricted stock awards or restricted stock units is 135,715 shares (the “Restricted Stock Threshold Amount”). The Compensation Committee may issue restricted stock awards or restricted stock units that exceed the Restricted Stock Threshold Amount, provided that the number of shares of CB common stock that are reserved for issuance under the 2015 Equity Incentive Plan as stock options will be reduced by three shares of common stock for each restricted stock award or restricted stock unit that is issued in excess of the Restricted Stock Threshold Amount.

Employees and directors of CB and its subsidiaries are eligible to participate and receive awards under the CB Financial Services, Inc. Directors’ Stock Option2015 Equity Incentive Plan, (the “Director Option Plan”). CB reserved 33,600except non-employee directors may not be granted incentive stock options. The 2015 Equity Incentive Plan will be administered by the members of the Compensation Committee. The Compensation Committee may grant any of these types of awards subject to performance based vesting conditions. Such awards shall be referred to herein as “performance awards.” As of December 31, 2017, 5,991 stock options and 111,824 shares of commonrestricted stock to be issued pursuant to grantsremain available for award from the 2015 Equity Incentive Plan.

The Compensation Committee shall specify the vesting schedule or conditions of stock optioneach award. Unless the Compensation Committee specifies a different vesting schedule at the time of grant, awards under the Director Option Plan. A stock option gives2015 Equity Incentive Plan, other than performance awards, shall be granted with a vesting rate not exceeding 20% per year, with the recipientfirst installment vesting no earlier than one year after the right to purchase sharesdate of common stockgrant of CB at a specified price duringthe award. If the vesting of an award under the 2015 Equity Incentive Plan is conditioned on the completion of a specified period of time. Awards to outside directors mayservice with CB or its subsidiaries, without the achievement of performance measures or objectives, then the required period of service for full vesting shall be granted only as non-statutory stock options. Shares of common stock purchased upon exercise of a stock option must be paid for in full at the time of exercise either in cash or with common stock owneddetermined by the recipient. AsCompensation Committee and evidenced in an award agreement. Notwithstanding anything to the contrary in the 2015 Equity Incentive Plan, except with respect to the deemed satisfaction of December 31, 2013, Mr. Sommers was the only director with outstanding stock option awards under the Director Option Plan. Mr. Sommers exercised all of his outstanding stock option awards after December 31, 2013. The Director Option Plan has expired andany performance conditions on a change in control, no further options may beaward granted under the Director Option Plan.

Executive Compensation for Certain Executive Officers of FedFirst

The following table provides information concerning total compensation earned or paid to Mr. O’Brien and Mr. Boyer.

SUMMARY COMPENSATION TABLE

Name and Principal Position

  Year  Salary  Bonus   Stock
Awards (1)
   Option
Awards (2)
   All Other
Compensation
  Total 

Patrick G. O’Brien

   2013   $225,250   $55,000    $100,450    $59,680    $32,074(4)(5)  $472,454  

President and CEO

   2012    213,750    54,000     41,760     48,840     27,966    386,316  

Richard B. Boyer

   2013    247,421(3)   48,501     54,975     37,300     43,790(4)(5)   431,987  

Vice President

   2012    261,571(3)   22,281     20,880     28,920     20,811    354,463  

(1)These amounts represent the aggregate grant date fair value for outstanding restricted stock awards granted during the year indicated, computed in accordance with FASB ASC Topic 718.
(2)These amounts represent the aggregate grant date fair value for outstanding stock option awards granted during the year indicated, computed in accordance with FASB ASC Topic 718. For information on the assumptions used to compute the fair value, see Note 13 to the Notes to the Consolidated Financial Statements. The actual value, if any, realized by an executive officer from any option will depend on the extent to which the market value of the common stock exceeds the exercise price of the option on the date the option is exercised. Accordingly, there is no assurance that the value realized by an executive officer will be at or near the value estimated above.
(3)Mr. Boyer’s salary, which includes commissions, was paid by Exchange Underwriters, Inc.
(4)Includes employer contributions to 401(k) Plan of $10,200 for Mr. O’Brien and $10,000 for Mr. Boyer, and value of shares allocated under the ESOP of $9,793 for Mr. O’Brien and $9,984 for Mr. Boyer.
(5)Includes perquisites which represent dividends paid on unvested restricted stock awards, cell phone and executive health and dental insurance benefits of $12,080 for Mr. O’Brien and $23,807 for Mr. Boyer. For Mr. Boyer amount also includes imputed income in connection with the Bank owned split dollar life insurance plan.

Employment Agreements.FedFirst and First Federal Savings Bank maintain an employment agreement with Patrick G. O’Brien (the “executive”). Exchange Underwriters, Inc. maintains an employment agreement with Richard B. Boyer. The employment agreements are intended to ensure that FedFirst, First Federal Savings Bank and Exchange Underwriters, Inc. will be able to maintain a stable and competent management base. In connection with the merger, Mr. O’Brien has entered into an employment agreement with Community Bank and Mr. Boyer has entered into an employment agreement with Community Bank and Exchange Underwriters, Inc., each of which will supersede and replace their current employment agreements described below.

Currently, the term of the employment agreement with Mr. O’Brien will expire on September 19, 2016, unless otherwise extended by the Board. The agreement provides that the Board may extend the term of the employment agreement on an annual basis for additional twelve months, unless the executive elects not to extend the term. Mr. O’Brien’s current base salary is $227,000. In addition to the base salary, the agreement provides for, among other things, discretionary bonuses, participation in stock benefit plans and other fringe benefits applicable to executive personnel. All reasonable costs and legal

fees paid or incurred by Mr. O’Brien in any dispute or question of interpretation relating to the employment agreement will be paid by FedFirst if the executive is successful on the merits in a legal judgment, arbitration or settlement. The employment agreement also provides that FedFirst and First Federal Savings Bank will indemnify Mr. O’Brien to the fullest extent legally allowable.

The employment agreement between Mr. Boyer and Exchange Underwriters, Inc. provides Mr. Boyer with a base salary of $176,000 per year, plus 25% of all first-year commissions generated by any salesperson of Exchange Underwriters, Inc. from sales of new insurance policies and an annual bonus equal to 20% of the year-over-year growth in Exchange Underwriters, Inc.’s annual audited net income. Mr. Boyer’s compensation may be reviewed by Exchange Underwriters, Inc. in the event of a material change in his business responsibilities during the term of the agreement. The current term of the agreement is set to expire on September 19, 2016, unless otherwise extended by the Board. In addition to cash compensation, Mr. Boyer’s agreement provides for health and welfare benefits, including disability and life insurance, on an equivalent basis to senior officers of First Federal Savings Bank and participation in the ESOP and 401(k) Plan.

See“Retirement Benefits”and“Other Potential Post-Termination Benefits”for a discussion of the benefits and payments Messrs. O’Brien and Boyer may receive under their employment agreements upon retirement or termination of employment.

Outstanding Equity Awards at Fiscal Year-End for Certain Executive Officers of FedFirst

The following table provides information concerning unexercised options and stock awards that have not vested for Mr. O’Brien and Mr. Boyer that were outstanding as of December 31, 2013.

       Option Awards   Stock Awards 

Name

  Grant
Date
   Number of
Securities
Underlying
Unexercised
Options
Exercisable
   Number of
Securities
Underlying
Unexercised
Options
Unexercisable (1)
   Option
Exercise
Price
   Option
Expiration

Date
   Number of
Shares or
Units of Stock
That Have
Not
Vested (1)
   Market Value
of Shares or
Units of Stock
That Have Not
Vested (2)
 

Patrick G. O’Brien

   8/8/06     21,307     —      $21.35     8/7/16     —       —    
   8/7/09     5,682     1,420     6.55     8/6/19     473    $9,214  
   9/27/11     3,000     4,500     13.10     9/26/21     —       —    
   4/2/12     1,200     4,800     13.92     4/1/22     2,400     46,752  
   9/25/12     2,000     8,000     15.00     9/26/22     —       —    
   4/2/13     —       16,000     17.65     4/1/23     3,000     58,440  
   10/1/13     —       —       —       —       2,500     48,700  

Richard B. Boyer

   8/8/06     7,102     —       21.35     8/7/16     —       —    
   9/27/11     2,000     3,000     13.10     9/26/21     —       —    
   4/2/12     600     2,400     13.92     4/1/22     1,200     23,376  
   9/25/12     1,300     5,200     15.00     9/24/22     —       —    
   4/2/13     —       10,000     17.65     4/1/23     1,500     29,220  
   10/1/13     —       —       —       —       1,500     29,220  

(1)Stock options and stock awards will vest in five equal annual installments commencing on the first anniversary of the grant date.
(2)Based upon FedFirst’s closing stock price of $19.48 on December  31, 2013.

Retirement Benefits for Certain Executive Officers of FedFirst

Split Dollar Arrangement.First Federal Savings Bank has entered into a split dollar life insurance agreement with Mr. Boyer. This agreement provides Mr. Boyer with a cash payment in the event he dies while in service with First Federal Savings Bank. Under the terms of the agreement, First Federal Savings Bank is the owner of and pays all the premiums on the life insurance policy under which Mr. Boyer is insured. Under the agreement, upon Mr. Boyer’s death his designated beneficiary is entitled to $1,000,000 if he dies prior to age 65 and $500,000 if he dies after age 65. First Federal Savings Bank will be entitled to any remaining insurance proceeds. If Mr. Boyer terminates his employment prior to attaining his normal retirement age, his division of the insurance proceeds will be prorated based on his years of service with First Federal Savings Bank.

Other Potential Post-Termination Benefits for Certain Executive Officers of FedFirst

Payments Made Upon Termination for Cause. In the event Mr. O’Brien or Mr. Boyer is terminated for cause (as defined in each executive’s employment agreement) the agreements provide that the executive will receive his base salary through the date of his termination and retain the rights to any vested benefits subject to the terms of the plan or agreement under which those benefits are provided.

Payments Made Upon Termination for Reasons Other Than Cause.In the event FedFirst or First Federal Savings Bank elects to terminate Mr. O’Brien for reasons other than for cause, or if he resigns after specified circumstances that would constitute constructive termination under the employment agreement, Mr. O’Brien (or, if he dies, his beneficiary) would be entitled to receive an amount equal to the remaining base salary payments due for the remaining term of his employment agreement. FedFirst would also continue and/or pay for his health and dental coverage for the remaining term of the employment agreement.

Mr. Boyer’s employment may be terminated without cause (as defined in his employment agreement) and voluntarily by Mr. Boyer with at least 60 days written notice to Exchange Underwriters, Inc. In the event of termination without cause, Mr. Boyer’s employment agreement provides he will be entitled to his base salary at the rate in effect upon his termination and average monthly commissions (as defined in the agreement) for the then-remaining term of the agreement. Mr. Boyer also shall be eligible for group-term life insurance, health and dental insurance, short- and long-term group disability insurance, and to participate in the ESOP and 401(k) Plan for the remainder of the term of the agreement. The agreement also restricts Mr. Boyer’s ability to compete in the marketplace for a period commencing on the effective date of the agreement and ending two years after the date in which Mr. Boyer ceases to be employed by Exchange Underwriters, Inc., unless Mr. Boyer is terminated without cause.

Payments Made Upon Disability.Under Mr. O’Brien’s employment agreement, if he is terminated as the result of disability, he would be entitled to monthly disability payments, each in amount equal to two-thirds (2/3) of his weekly rate of base salary in effect as of the date of his termination of employment due to disability. The disability payments will end on the earlier of: (A) the date he returns to full-time employment at First Federal Savings Bank in the same capacity as he was employed prior to his termination for disability; (B) his death; (C) his attainment of age 65; or (D) the date the then-current term of the agreement would have expired. All benefits received during active employment would continue to be provided during any period of disability.

Under Mr. Boyer’s employment agreement, if he is terminated for cause as a result of disability, Mr. Boyer would be entitled to monthly disability payments, each in an amount equal to sixty percent (60%) of his monthly rate of base salary in effect as of the date of his termination of employment due to disability and average monthly commissions (as defined in the agreement). Under the agreement the disability payments will end on the earlier of: (A) the date he returns to full-time employment with Exchange Underwriters, Inc. in the same capacity as he was employed prior to his termination for disability; (B) his death; (C) his attainment of age 65; or (D) the date the then-current term of the agreement would have expired. All benefits received during active employment would continue to be provided during any period of disability.

Payments Made Upon Death. Upon termination due to death, outstanding stock options granted pursuant to FedFirst’s 20062015 Equity Incentive Plan and 2011 Equity Incentive Plan automaticallywill vest and remain exercisable until the earlier ofin less than one year from the date of grant, unless due to death, disability or the expiration date of the stock options. Restricted stock awards granted to these officers under the 2006 Equity Incentive Plan and 2011 Equity Incentive Plan also vest in full upon death.

Payments Made Upon a Change in Control. The employment agreements with Messrs. O’Brien and Boyer provide that if involuntary termination followsfollowing a change in control. Vesting may be accelerated upon death, disability, or involuntary termination of employment or service following a change in control, of FedFirst or First Federal Savings Bank, the executive would be entitled to a severance payment equal to three times his annual base salary, and average yearly commission in the case of Mr. Boyer, in effect at the time of the change in control plus the continuation of health and dental benefits for a period not exceeding the earlier of: (A) three years from the termination date; (B) the executive’s employment with another employer; or (C) the executive’s death. Section 280G of the Internal Revenue Code provides that payments related to a change in control that equal or exceed three times the individual’s “base amount” (defined as average annual taxable compensation over the five preceding calendar years) constitute “excess parachute payments.” Individuals who receive excess parachute payments are subject to a 20% excise tax on the amount that exceeds the base amount, and the employer may not deduct such amounts. The employment agreements with Messrs. O’Brien and Boyer provide that if the total value of the benefits provided and payments made to him in connection with a change in control, either under their employment agreement alone or together with other payments and benefits that they have the right to receive from FedFirst, exceed three times their respective base amount (“280G Limit”), their severance payment will be reduced or revised so that the aggregate payments do not exceed his 280G Limit.

In the event of a change in control of FedFirst outstanding stock options granted pursuant to FedFirst’s 2006 Equity Incentive Plan and 2011 Equity Incentive Plan automatically vest and, if the option holder is terminated other than for cause within 12 months of the change in control, will remain exercisable until the expiration date of the stock options. Restricted stock awards granted to these officers under the plan also vest in full upon a change in control. The value of the accelerated options and restricted stock grants count towards the executive’s 280G Limit.

Director Compensation for Certain Directors of FedFirst

The following table provides the compensation received by John J. LaCarte and John M. Swiatek for their service as directors of FedFirst during the 2013 fiscal year.

Name

  Fees Earned or
Paid in Cash
   Stock
Awards (1)
   Option
Awards (2)
   All Other
Compensation (3)
   Total 

John J. LaCarte

   29,550     36,650     11,190     460     77,850  

John M. Swiatek

   23,550     36,650     11,190     774     72,164  

(1)These amounts represent the aggregate grant date fair value for outstanding restricted stock awards granted during 2013, computed in accordance with FASB ASC Topic 718. At December 31, 2013, the aggregate number of unvested shares of restricted stock held in trust for was as follows, Mr. LaCarte had 2,800 shares and Mr. Swiatek had 4,300 shares.
(2)These amounts represent the aggregate grant date fair value for outstanding stock option awards granted during 2013, computed in accordance with FASB ASC Topic 718. For information on the assumptions used to compute the fair value, see Note 13 to the Notes to the Consolidated Financial Statements. The actual value, if any, realized by a director from any option will depend on the extent to which the market value of the common stock exceeds the exercise price of the option on the date the option is exercised. Accordingly, there is no assurance that the value realized by a director will be at or near the value estimated above. At December 31, 2013, Mr. LaCarte had 7,918 vested stock options and 8,000 unvested stock options and Mr. Swiatek had 4,500 vested stock options and 11,750 unvested stock options.
(3)These amounts represent dividends paid on unvested restricted stock awards. For Mr. LaCarte, amount also includes imputed income received in connection with the Bank owned split dollar life insurance plan.

Director Fee Continuation Agreement. In consideration for continued service with First Federal Savings Bank, First Federal Savings Bank maintains an agreement with John J. LaCarte that provides for a benefit upon retirement, death or in the event Mr. LaCarte terminates his service with the First Federal Savings Bank voluntarily or is terminated by First Federal Savings Bank without cause. Under the terms of the agreement, Mr. LaCarte is entitled to an annual retirement benefit equal to $100 for each full year of service (including any partial year that he served in the year of retirement) payable to him, or his beneficiary, in equal annual installments over a period of ten years. Payments under this agreement commence on the first day of the month following the date Mr. LaCarte retires following his 65th birthday and completion of ten full years of service with First Federal Savings Bank. Mr. LaCarte has currently completed 13 years of service with First Federal Savings Bank. In the event Mr. LaCarte dies while serving on the Board, First Federal Savings Bank will pay his beneficiary a benefit equal to $100 for each full year of service from the date of first service to the date of death. The death benefit will be made either in a lump sum or in installments at the discretion of First Federal Savings Bank. If Mr. LaCarte voluntarily terminates service with First Federal Savings Bank prior to retirement or is terminated by First Federal Savings Bank without cause, he will receive a severance payment equal to the accrued balance in his liability reserve account multiplied by his vested percentage interest in his benefit underCompensation Committee at any time after the agreement. The severance payment will be made on an annual basis over a ten-year period. Mr. LaCarte is 100% vested in his benefits under the agreement.

Director Split Dollar Arrangements.First Federal Savings Bank maintain a split dollar life insurance agreement with John J. LaCarte that provides for a cash payment to his designated beneficiary in the event Mr. LaCarte dies while in service with First Federal Savings Bank. Under the termsfirst anniversary of the agreement, First Federal Savings Bank is the ownerdate of and pays all the premiums on the life insurance policy under which Mr. LaCarte is insured. This life insurance policy is a single premium policy, the premium for which was paid in full in 1999 when the split dollar arrangement was entered into with Mr. LaCarte. Under Mr. LaCarte’s split-dollar arrangement, if Mr. LaCarte is in service at the timegrant of his death, his designated beneficiary is entitled to an amount equal to the lesser of $25,000, or the total insurance proceeds less the cash value of the policy. If Mr. LaCarte is not in service at the time of his death, his designated beneficiary will receive 100% of his benefit under his split dollar life insurance agreement.award.

INFORMATION ABOUT CBFIRST WEST VIRGINIA

BusinessGeneral

First West Virginia Bancorp, Inc., a West Virginia corporation, was organized as a West Virginia business corporation in July 1973 to become the bank holding company for the Bank of CB Financial Services, Inc.Warwood, N.A. and Community Savings Bank, N.A. The Bank of Warwood, N.A. and Community Savings Bank, N.A. later merged in June 1984 under the name “First West Virginia Bank, N.A” and in November 1995 adopted the name “Progressive Bank, N.A.” First West Virginia’s common stock is listed on the OTCQX Marketplace under the symbol “FWVB.”

CB, a Pennsylvania corporation,First West Virginia has one wholly-owned banking subsidiary, Progressive Bank, which is headquartered in Wheeling, West Virginia. First West Virginia is dependent upon Progressive Bank for cash necessary to pay expenses, and dividends to its stockholders. First West Virginia functions primarily as the holder of the capital stock of Progressive Bank.

Progressive Bank is a community bank holding company. CB conducts its operations through its wholly owned subsidiary, Community Bank. CB’s federal banking regulator isserving all of Ohio, Brooke, Marshall, Upshur and Wetzel counties in the Federal Reserve. At March 31, 2014, CB,state of West Virginia, and a portion of the west bank of the Ohio River in Ohio. Progressive Bank operates three full-service offices in Ohio County, West Virginia, one full-service office in Brooke County, West Virginia, one full-service office in Marshall County, West Virginia, one full-service office in Wetzel County, West Virginia, one full-service office in Upshur County, West Virginia, and one full-service office in Bellaire, Ohio. As of September 30, 2017, First West Virginia had, on a consolidated basis, had total assets of $550.2$343.1 million, total deposits of $488.8$285.4 million, and shareholders’stockholders’ equity of $43.5$33.6 million.

Business of Community Bank

CommunityProgressive Bank is engaged in the business of banking and provides a Pennsylvania-charteredbroad range of consumer and commercial bank. Communitybanking products and services to individuals, businesses, professionals and governments. Its loan portfolio consists primarily of loans secured by real estate to consumers and businesses. Progressive Bank also engages in commercial loans and general consumer loans to individuals. The majority of Progressive Bank’s lending is regulated byconcentrated in the Pennsylvania Departmentupper Ohio Valley of Bankingnorthern West Virginia and Securitiesadjacent areas of Ohio and by the Federal Deposit Insurance Corporation. ThePennsylvania. Progressive Bank offers a wide range of both personal and commercial types of deposit accounts and services as a means of Community Bankgathering funds. Types of deposit accounts and services available include noninterest bearing demand checking, interest bearing checking (NOW accounts), savings, money market, certificates of deposit, individual retirement accounts, and Christmas Club accounts. The customer base for deposits is primarily retail in nature. Progressive Bank’s deposits are insured by the Federal Deposit Insurance Corporation up to applicable legal limits. Community Bank operates from eleven full-service offices in Greene, AlleghenyFDIC.

First West Virginia’s principal executive office is located at 1701 Warwood Avenue, Wheeling, West Virginia, and Washington Counties in southwest Pennsylvania. Community Bankits telephone number at that address is a community-oriented institution offering residential and commercial real estate loans, commercial, industrial and agricultural loans, and consumer loans as well as a variety of deposit products for individuals and businesses in its market area.

Community Bank’s(304) 277-1100. Its website address iswww.communitybank.tv. www.progbank.com. Information on thethis website is not and should not be considered to be a part of this document.joint proxy statement/prospectus.

Lending ActivitiesEmployees. CB’s loan portfolio consists primarily

As of residential real estate loans, commercial real estate loans, construction loans, commercial, industrialSeptember 30, 2017, Progressive Bank employed 91 employees, or 89 full-time equivalent employees. Progressive Bank provides a number of benefits for its full-time employees, including health and agricultural loans,life insurance, 401(k) plan, workers’ compensation and consumer loans. At March 31, 2014, $163.6 million,paid vacations. No employees are union participants or 42.4%, of the total loan portfolio consisted of residential real estate loans, $99.9 million, or 25.9%, of the total loan portfolio consisted of commercial real estate loans, $10.4 million, or 2.7%, of the total loan portfolio consisted of construction loans, $43.6 million, or 11.3%, of the total loan portfolio consisted of commercial, industrial and agricultural loans, and $67.8 million, or 17.7%, of the total loan portfolio consisted of consumer loans.

Deposit Activities. CB’s deposit accounts consist primarily of demand deposits, NOW accounts, money market accounts, savings accounts, and time deposits. At March 31, 2014, deposits totaled $488.8 million, of which $130.4 million consisted of demand deposits, $73.2 million consisted of NOW accounts, $109.1 million consisted of money market accounts, $91.1 million consisted of savings accounts, and $85.0 million consisted of time deposits.subject to a collective bargaining agreement.

Competition. CB faces

Progressive Bank encounters significant competition both in attracting deposits and in originating loans and attracting deposits. CB’s primary market area has a high concentration of financial institutions, many of which are significantly larger institutions that have greater financial resources than CB has, and many of which are competitors to varying degrees. CB’s competition for loans and leases comes principally from commercial banks, savings banks, mortgage banking companies, the U.S. Government, credit unions, leasing companies, insurance companies, real estate conduits and other companies that provide financial services to businesses and individuals. CB’sloans. Progressive Bank’s most direct competition for deposits historically has historically come from other commercial banks, savings banks, savings associations and credit unions. CBunions in its market area, and it expects continued strong competition from such financial institutions in the foreseeable future. Progressive Bank faces additional competition for deposits from online financial institutions and non-depository competitors, such as the mutual fund industry, securities and brokerage firms, and insurance companies.

Market Area.CB’s southwestern Pennsylvania market area consists Progressive Bank competes for deposits by offering depositors a high level of Greenepersonal service and Washington Counties and the southern portionexpertise together with a wide range of Allegheny County, and surrounding areas. Recently, natural gas drilling in the Marcellus Shale Area has been a regional economic driver. In addition to natural gas drillers and supporting companies, major area employers include University of Pittsburgh (Allegheny County), The Washington Hospital (Washington County), CONSOL Pennsylvania Coal Company (Greene and Washington Counties), Monongahela Valley Hospital (Washington County), GMS Mine Repair and Maintenance (Greene County), and The Waynesburg University (Greene County). Greene County is a significantly more rural county that both Allegheny and Washington Counties.

Based on data published by the Pennsylvania Department of Labor and Industry, the populations of Allegheny County is 1.2 million, Greene County is 38,000, and Washington County is 209,000. The March 2014 unemployment rate for Allegheny and Greene Counties was 5.6% for each county and was 6.0% for Washington County, compared to the state-wide rate of 6.0%. Per capital personal income is $52,000 in Allegheny County, $40,000 in Greene County and $49,000 in Washington County, compared to $45,000 state-wide.

Subsidiary Activities. Community Bank is the only subsidiary of CB. Community Bank has no subsidiaries.

Personnel.At March 31, 2014, CB had 122 full-time employees and 7 part-time employees, none of which are a party to a collective bargaining agreement. CB believes it has a good working relationship with its employees.

Properties. CB conducts its business through eleven offices. The following table sets forth certain information relating to CB’s offices at March 31, 2014.

   Year
Opened/
Acquired
   Owned or
Leased
  Net Book
Value at
March 31, 2014
   Approximate
Square
Footage
 
          (Dollars in thousands)     

Main Office (Greene County):

        

100 North Market Street

Carmichaels, PA 15320

   1901    Owned  $316     12,500  

Branch Offices (Greene County):

        

30 West Greene Street

Waynesburg, PA 15370

   1980    Owned   291     2,800  

3241 W. Roy Furman Highway

Rogersville, PA 15359

   1987    Owned   46     720  

100 Miller Lane

Waynesburg, PA 15370

   1983    Building owned

ground leased

   189     7,500  

1993 S. Eighty Eight Road

Greensboro, PA 15338

   1963    Owned   

 

Included with

Main Office

  

  

   500  

Branch Offices (Allegheny County):

        

714 Brookline Boulevard

Pittsburgh, PA 15226

   2004    Owned   244     3,000  

Branch Offices (Washington County):

        

65 West Chestnut Street

Washington, PA 15301

   2009    Building owned

ground leased

   770     1,494  

351 Oak Spring Road

Washington, PA 15301

   2000    Leased   45     610  

200 Main Street

Claysville, PA 15232

   1996    Owned   620     8,400  

Waterdam Centre

4139 Washington Road

McMurray, PA 15317

   1994    Leased   133     2,800  

Southpointe Commons

325 Southpointe Boulevard, Suite 100

Canonsburg, PA 15317

   2000    Leased   183     2,747  

Washington Business Center:

        

40 West Chestnut Street, Suite 100

Washington, PA 15301

   1987    Leased   378     6,815  

At March 31, 2014, the net book value of CB’s investment in premises and equipment was $4.6 million.

Legal Proceedings.Periodically, CB is involved in claims and lawsuits, such as claims to enforce liens, condemnation proceedings on properties in which it holds security interests, claims involving the making and servicing of real property loans and other issues incident to its business. CB is not a party to any pending legal proceedings that it believes would have a material adverse effect on its financial condition, results of operations or cash flows.services.

Supervision and Regulation

First West Virginia and Progressive Bank are subject to certain statutes and regulations. The following is a summary of certain statutes and regulations that affect First West Virginia and Progressive Bank. This summary is qualified in its entirety by such statutes and regulations.

GeneralFirst West Virginia. First West Virginia is subject to regulation by the Federal Reserve, the West Virginia Division of Financial Institutions and other federal and state regulators. As a registered bank holding company under the Bank Holding Company Act, First West Virginia is subject to regulation by the Federal Reserve. First West Virginia is required to file with the Federal Reserve reports and any other information regarding its business operations that is required pursuant to the Bank Holding Company Act. The Federal Reserve also makes examinations of First West Virginia.

The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before acquiring substantially all the assets of any bank or bank holding company or ownership or control of any voting shares of any

bank or bank holding company, if, after such acquisition, it would own or control, directly or indirectly, more than five percent (5%) of the voting shares of such bank or bank holding company. In approving acquisitions by bank holding companies of companies engaged in banking-related activities, the Federal Reserve considers whether the performance of any such activity by a subsidiary of the holding company reasonably can be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, which outweigh possible adverse effects, such as over concentration of resources, decrease of competition, conflicts of interest, or unsound banking practices.

First West Virginia is also deemed an “affiliate” of Progressive Bank under the Federal Reserve Act, which imposes certain restrictions on loans between First West Virginia and Progressive Bank, investments by Progressive Bank in the stock of First West Virginia, or the taking of stock of First West Virginia by Progressive Bank as collateral for loans to any borrower, or purchases by Progressive Bank of certain assets from First West Virginia, and the payment of dividends by Progressive Bank to First West Virginia.

Federal Reserve approval is required before First West Virginia may begin to engage in any permitted non-banking activity. The Federal Reserve is empowered to differentiate between activities which are initiated by First West Virginia or Progressive Bank and activities commenced by acquisition of a going concern.

The Federal Reserve has broad authority to prohibit activities of bank holding companies and their non-banking subsidiaries that represent unsafe and unsound banking practices or which constitute violations of laws or regulations. The Federal Reserve also can assess civil money penalties for certain activities conducted on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1 million for each day the activity continues.

The Dodd-Frank Act requires a bank holding company to serve as a source of financial strength for any subsidiary that is a depository institution. This support may be required at times when the bank holding company may not have the resources to provide support.

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act, a bank holding company may acquire banks in states other than its home state, subject to certain limitations. The Riegle-Neal Interstate Banking and Branching Efficiency Act also authorized banks to merge across state lines, thereby creating interstate branches. Banks are also permitted to establish new branches in other states.

As a bank holding company CB is subject to examination and supervision by, and is required to file certain reports with, the Federal Reserve. Effective as of the date of this document, CBdoing business in West Virginia, First West Virginia is also subject to the rules and regulationscorporate laws of the Securities and Exchange Commission underState of West Virginia as set forth in the federal securities laws.

As a Pennsylvania commercial bank, Community BankWVBCA, is subject to regulation and examination by the West Virginia Division of Financial Institutions, and must file annual reports with the West Virginia Division of Financial Institutions. The West Virginia Division of Financial Institutions has the power to examine First West Virginia and Progressive Bank and any acquisition application that First West Virginia submits to the Federal Reserve must also be submitted to the West Virginia Division of Financial Institutions.

Progressive Bank. The operations of Progressive Bank, as a national association, are subject to regulation by the Pennsylvania Department of Banking and Securities (the “PDBS”) and is also subject to examination by the Federal Deposit Insurance Corporation (the “FDIC”). The federal system of regulation and supervision establishes a comprehensive framework of activities in which Community Bank may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund. Community Bank is also regulated to a lesser extent by the Federal Reserve, which governs the reserves to be maintained against deposits and other matters. Community Bank’s relationship with its depositors and borrowers also is regulated to a great extent by federal law and, to a lesser extent, state law, including in matters concerning the ownership of deposit accounts and the form and content of its loan documents.

Set forth below are certain material regulatory requirements that are applicable to CB and Community Bank. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on CB and Community Bank. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on CB and Community Bank and their operations.

Dodd-Frank Act

The Dodd-Frank Act made significant changes to the regulatory structure for depository institutions and their holding companies. However, the Dodd-Frank Act’s changes go well beyond that and affect the lending, investments and other operations of all depository institutions. The Dodd-Frank Act required the Federal Reserve to set minimum capital levels for bank holding companies that are as stringent as those required for the insured depository subsidiaries, and the components of Tier 1 capital for holding companies were restricted to capital instruments that were then currently considered to be Tier 1 capital for insured depository institutions. The legislation also established a floor for capital of insured depository institutions that cannot be lower than the standards in effect upon passage, and directed the federal banking regulators to implement new leverage and capital requirements that take into account off-balance sheet activities and other risks, including risks relating to securitized products and derivatives.

The Dodd-Frank Act created a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, such as Community Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks with more than $10 billion in assets. Banks with $10 billion or less in assets are still examined for compliance by their applicable bank regulators. The new legislation also gave state attorneys general the ability to enforce applicable federal consumer protection laws.

The Dodd-Frank Act broadened the base for FDIC insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity capital of a financial institution. The legislation also increased the maximum amount of deposit insurance for banks to $250,000 per depositor, retroactive to January 1, 2008. The Dodd-Frank Act increased shareholder influence over boards of directors by requiring companies to give shareholders a non-binding vote on executive compensation and so-called “golden parachute” payments. The legislation also directs the Federal Reserve to promulgate rules prohibiting excessive compensation paid to bank holding company executives, regardless of whether the company is publicly traded or not. Further, the legislation requires that originators of securitized loans retain a percentageOffice of the risk for transferred loans, directs the Federal Reserve to regulate pricing of certain debit card interchange fees and contains a number of reforms related to mortgage origination.

Many provisionsComptroller of the Dodd-Frank Act involve delayed effective dates and/or require implementing regulations. Their impact on operations cannot yet fully be assessed. However, there is a significant possibility thatCurrency (the “OCC”). Representatives of the Dodd-Frank Act will result in an increased regulatory burdenOCC regulate and compliance, operating and interest expense for CB and Communityconduct examinations of Progressive Bank.

Progressive Bank Regulation

Business Activities.Community Bank derives its lending and investment powers from the applicable Pennsylvania law, federal law and applicable state and federal regulations. Under these laws and regulations, Community Bank may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits.

Capital Requirements. Federal regulations require state banks to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4% core capital to assets leverage ratio (3% for savings associations receiving the highest rating on the composite, or “CAMELS,” rating system for capital adequacy, asset quality, management, earnings, liquidity and sensitivity to market risk), and an 8% risk-based capital ratio.

The risk-based capital standard for state banks requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor of 0% to 200%, assigned by the regulations, based on the risks believed inherent in the type of asset. Core capital is defined as common shareholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible securities, subordinated debt and intermediate preferred stock, the allowance for loan losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. Additionally, an institution that retains credit risk in connection with an asset sale is required to maintain additional regulatory capital because offurnish regular reports to the purchaser’s recourse againstOCC and the institution. In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors, but qualitative factors as well andFDIC. The OCC has the authority to establish higher capital requirements for individual associations where necessary.

At March 31, 2014, Community Bank’s capital exceeded all applicable requirements.

New Capital Rule. On July 9, 2013, the FDIC and the other federal bank regulatory agencies issued a final rule that will revise their risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. The final rule applies to all depository institutions and top-tier bank holding companies with total consolidated assets of $500 million or more (such as CB). Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4.0% to 6.0% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital requirements unless aone-time opt-in or opt-out is exercised. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets in addition to the amount necessary to meet its minimum risk-based capital requirements. The final rule becomes effective for Community Bank on January 1, 2015. The capital conservation buffer requirement will be phased in at 0.625% per year beginning January 1, 2016 and ending January 1, 2019, when the full 2.5% capital conservation buffer requirement will be effective.

Loans-to-One Borrower. Generally, a Pennsylvania-chartered commercial bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of capital. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of March 31, 2014, Community Bank was in compliance with the loans-to-one borrower limitations.

Capital Distributions. The Pennsylvania Banking Code states, in part, that dividends may be declared and paid only out of accumulated net earnings and may not be declared or paid unless surplus is at least equal to capital. Dividends may not reduce surplus without the prior consent of the PDBS. In addition, the Federal Deposit Insurance Act provides that an insured depository institution may not make any capital distribution if, after making such distribution, the institution would fail to meet any applicable regulatory capital requirement.

Community Reinvestment Act and Fair Lending Laws. All insured institutions have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. The FDIC is required to assess the federal savings association’s record of compliance with the Community Reinvestment Act. Failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. In

addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lendersprevent national banks from discriminating in their lending practices on the basis of characteristics specified in those statutes. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the FDIC, as well as other federal regulatory agencies and the Department of Justice.

The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating. Community Bank received a “satisfactory” rating in its most recent federal examination.

Transactions with Related Parties. A state-chartered bank’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and federal regulation. An affiliate is generally a company that controls, or is under common control with an insured depository institution such as Community Bank. CB is an affiliate of Community Bank because of its control of Community Bank. In general, transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a state-chartered bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

Community Bank’s authority to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve. Among other things, these provisions generally require that extensions of credit to insiders:

be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and

not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Community Bank’s capital.

In addition, extensions of credit in excess of certain limits must be approved by Community Bank’s board of directors. Extensions of credit to executive officers are subject to additional limits based on the type of extension involved.

Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

Prompt Corrective Action Regulations. Under the Federal Prompt Corrective Action statute, the FDIC is required to take supervisory actions against undercapitalized state-chartered banks under its jurisdiction, the severity of which depends upon the institution’s level of capital. An institution that has total risk-based capital of less than 8% or a leverage ratio or a Tier 1 risk-based capital ratio that generally is less than 4% is considered to be undercapitalized. An institution that has total risk-based capital less than 6%, a Tier 1 core risk-based capital ratio of less than 3% or a leverage ratio that is less than 3% is considered to be “significantly undercapitalized.” An institution that has a tangible capital to assets ratio equal to or less than 2% is deemed to be “critically undercapitalized.”

Generally, the PDBS is required to appoint a receiver or conservator for a state-chartered bank that is “critically undercapitalized” within specific time frames. The regulations also provide that a capital restoration plan must be filed with the FDIC within 45 days of the date that an institution is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Any bank holding company of an institution that is required to submit a capital restoration plan must guarantee performance under the plan in an amount of up to the lesser of 5% of the

institution’s assets at the time it was deemed to be undercapitalized by the FDIC or the amount necessary to restore the institution to adequately capitalized status. This guarantee remains in place until the FDIC notifies the institution that it has maintained adequately capitalized status for each of four consecutive calendar quarters. Institutions that are undercapitalized become subject to certain mandatory measures such as a restrictions on capital distributions and asset growth. The PDBS may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive and the replacement of senior executive officers and directors.

At March 31, 2014, Community Bank met the criteria for being considered “well capitalized.”

In addition, the final capital rule adopted in July 2013 revises the prompt corrective action categories to incorporate the revised minimum capital requirements of that rule when it becomes effective. See “—New Capital Rule.”

Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC insured financial institutions such as Community Bank. Deposit accounts in Community Bank are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund.

Under the FDIC’s risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other risk factors. Rates are based on each institution’s risk category and certain specified risk adjustments. Stronger institutions pay lower rates while riskier institutions pay higher rates.

Assessments are based on an institution’s average consolidated total assets minus average tangible equity instead of total deposits, ranging from 2.5 to 45 basis points.

In addition to the FDIC assessments, the Financing Corporation (“FICO”) is authorized to impose and collect, with the approval of the FDIC, assessments for anticipated payments, issuance costs and custodial fees on bonds issued by the FICO in the 1980s to recapitalize the former Federal Savings and Loan Insurance Corporation. The bonds issued by the FICO are due to mature in 2017 through 2019. For the quarter ended December 31, 2013, the annualized FICO assessment was equal to 0.64 basis points of total assets less tangible capital.

The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of Community Bank. Management cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, isengaging in an unsafe or unsound condition to continue operationsbank practice and may remove officers or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. Community Bank does not currently knowdirectors. The subsidiary bank of any practice, condition or violation that may lead to termination of its deposit insurance.

Prohibitions Against Tying Arrangements. State-chartered banks are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Federal Home Loan Bank System. Community Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Pittsburgh, Community Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of March 31, 2014, Community Bank was in compliance with this requirement. Community Bank also is able to borrow from the Federal Home Loan Bank of Pittsburgh, which provides an additional source of liquidity for Community Bank.

Other Regulations

Interest and other charges collected or contracted for by Community Bank are subject to state usury laws and federal laws concerning interest rates. Community Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;

Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

Truth in Savings Act; and

rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of Community Bank also are subject to the:

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

The USA PATRIOT Act, which requires savings associations to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Regulation

General. CB is a bank holding company within the meaning of the Bank Holding Company Act of 1956, as amended. As such, CB is registered with the Federal Reserve and isalso subject to regulations, examinations, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve has enforcement authority over CB and its non-bank subsidiaries. Among other things, this authority permits the Federal Reserve to restrict or prohibit activities that are determined to be a serious risk to the subsidiary banking institution.

Capital. The Dodd-Frank Act requires the Federal Reserve to establish for all depository institution holding companies minimum consolidated capital requirements that are as stringent as those required for the insured depository subsidiaries. See “—Federal Banking Regulation—New Capital Rule.”

Source of Strength.The Dodd-Frank Act requires the federal bank regulatory agencies to issue regulations requiring that all bank holding companies serve as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in times of financial stress.

Dividends. The Federal Reserve has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retentioncertain restrictions imposed by the banking laws on extensions of credit to its holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a holding company to pay dividends may be restricted if a subsidiary depository institution becomes undercapitalized. The policy statement also states that a holding company should inform the Federal Reserve supervisory staff before redeeming or repurchasing common stock or perpetual preferred stock if the holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, as of the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect CB’s ability to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

Acquisition. Under the Federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a bank holding company. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve has found that the acquisition will not result in control of the company. A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock. Under the Change in Bank Control Act, the Federal Reserve generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.

Federal Securities Laws

CB’s common stock will be registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. As a result, CB will be subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

Emerging Growth Company Status

The Jumpstart Our Business Startups Act (the “JOBS Act”), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.0 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” CB qualifies as an emerging growth company under the JOBS Act.

An “emerging growth company” may choose not to hold shareholder votes to approve annual executive compensation (more frequently referred to as “say-on-pay” votes) or executive compensation payable in connection with a merger (more frequently referred to as “say-on-golden parachute” votes). An emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation. Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. CB has not elected to comply with new or amended accounting pronouncements in the same manner as a private company.

A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.0 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by non-affiliates).subsidiaries.

Federal and State TaxationLending Activities

General. CB reports its income on a fiscal year basis using the accrual method of accounting. CB’s federal and state income tax returns have not been audited during the past five years.

Federal Taxation. The federal income tax laws apply to CB in the same manner as to other corporations with some exceptions. CB may exclude from income 100% of dividends received from Community Bank as members of the same affiliated group of corporations. For federal income tax purposes, corporations may carry back net operating losses to the preceding two taxable years and forward to the succeeding twenty taxable years, subject to certain limitations. For its 2013 fiscal year, CB’s maximum federal income tax rate was 34%.

Pennsylvania Taxation. CB is subject to the Pennsylvania Bank and Trust Company Shares and Loan Tax. The tax rate for fiscal year 2013 was 0.89%. The tax is imposed on CB’s adjusted equity.

Management’s Discussion of Financial Condition and Results of Operations

This discussion and analysis reflects CB’s consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of its financial condition and results of operations. The information in this section as of March 31, 2014 and for the three months ended March 31, 2014 and 2013Historically, Progressive Bank’s principal lending activity has been derived from the unaudited consolidated financial statementsorigination of CB. The information in this section as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012 and 2011 has been derived from the audited consolidated financial statements of CB. The unaudited and audited consolidated financial statements appear elsewhere in this document. You should read the information in this section in conjunction with the business and financial information regarding CB and the financial statements provided in this document.

Critical Accounting Policies

Critical accounting policies are those that involve significant judgments and assumptions by management and that have, or could have, a material impact on CB’s income or the carrying value of its assets. CB’s critical accounting policies are those related to its allowance for loan losses, the evaluation of other-than-temporary impairment of investment securities, the valuation of and its ability to realize deferred tax assets and the measurement of fair values of financial instruments.

Allowance for Loan Losses.The allowance for loan losses is calculated with the objective of maintaining an allowance necessary to absorb credit losses inherent in the loan portfolio. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective, as it requires an estimate of the loss content for each risk rating and for each impaired loan, an estimate of the amounts and timing of expected future cash flows, and an estimate of the value of collateral.

CB has established a systematic method of periodically reviewing the credit quality of the loan portfolio in order to establish an allowance for loan losses. The allowance for loan losses is based on current judgments about the credit quality of individual loans and segments of the loan portfolio. The allowance for loan losses is established through a provision for loan losses based on CB’s evaluation of the probable losses inherent in the loan portfolio, and considers all known internal and external factors that affect loan collectability as of the reporting date. The evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, knowledge of inherent losses in the portfolio that are probable and reasonably estimable and other factors that warrant recognition in providing an appropriate loan loss allowance. Management believes this is a critical accounting policy because this evaluation involves a high degree of complexity and requires it to make subjective judgments that often require assumptions or estimates about various matters.

The allowance for loan losses consists primarily of specific allocations and general allocations. Specific allocations are made for loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral, including adjustments for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting and payment history. CB also analyzes delinquency trends, general economic conditions and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allowance. The principal assumption used in calculating the allowance for loan losses is the estimate of loss for each risk rating. Actual loan losses may be significantly more than the allowance CB has established, which could have a material negative effect on its financial results.

Other-Than-Temporary Impairment. In estimating other-than-temporary impairment of investment securities, securities are evaluated on at least a quarterly basis, to determine whether a decline in their value is other-than-temporary. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the

fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether or not CB intends to sell or expect that it is more likely than not that it will be required to sell the investment security before an anticipated recovery in fair value. Once a decline in value for a debt security is determined to be other than temporary, the other-than-temporary impairment is separated in (a) the amount of total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to credit loss is recognized in earnings. The amount of other-than-temporary impairment related to other factors is recognized in other comprehensive income (loss).

Valuation of Deferred Tax Assets. In evaluating the ability to realize deferred tax assets, management considers all positive and negative information, including CB’s past operating results and its forecast of future taxable income. In determining future taxable income, management utilizes a budget process that makes business assumptions and the implementation of feasible and prudent tax planning strategies. CB also utilize a monthly forecasting tool to incorporate activity throughout the calendar year. These assumptions require it to make judgments about its future taxable income that are consistent with the plans and estimates it uses to manage its business. The net deferred tax asset is offset by an equal valuation allowance. Any change in estimated future taxable income may result in a reduction of the valuation allowance against the deferred tax asset which would result in income tax benefit in the period.

Fair Value Measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A three-level of fair value hierarchy prioritizes the inputs used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities; includes certain U.S. Treasury and other U.S. Government agency debt that is highly liquid and actively traded in over-the-counter markets.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Average Balance Sheet

The following tables set forth average balances, average yields and costs, and certain other information at and for the periods indicated. Tax-equivalent yield adjustments have been made for tax-exempt loan income and tax-exempt securities income utilizing a marginal federal tax rate of 34%. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income.

   For the Three Months Ended March 31, 
   2014  2013 
   Average
Outstanding
Balance
  Interest   Average
Yield/
Rate (1)
  Average
Outstanding
Balance
  Interest   Average
Yield/
Rate (1)
 
   (Dollars in thousands) 

Interest-earning assets:

         

Loans

  $376,064   $4,027     4.34 $340,018   $3,807     4.54

Interest-earning deposits

   4,595    6     0.52    7,002    6     0.33  

Investment securities—taxable

   79,207    250     1.24    107,130    222     0.83  

Investment securities—tax exempt

   51,055    529     4.15    48,609    558     4.59  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total interest-earning assets

   510,921    4,812     3.82    502,759    4,593     3.71  

Non-interest-earning assets

   32,493       31,018     
  

 

 

     

 

 

    

Total assets

  $543,414      $533,777     
  

 

 

     

 

 

    

Interest-bearing liabilities:

         

Interest bearing demand deposits

  $75,328    37     0.20   $77,537    49     0.25  

Savings accounts

   87,562    40     0.18    75,069    47     0.25  

Money market accounts

   108,438    74     0.27    110,073    80     0.30  

Certificates of deposit

   85,530    278     1.32    88,691    350     1.61  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total interest-bearing deposits

   356,858    429     0.49    351,370    526     0.61  

Borrowings

   18,721    42     0.90    29,569    78     1.06  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Total interest-bearing liabilities

   375,579    471     0.51    380,939    604     0.64  

Noninterest-bearing demand deposits

   119,143       105,919     

Other liabilities

   5,150       1,972     
  

 

 

     

 

 

    

Total liabilities

   499,872       488,830     

Total stockholders’ equity

   43,542       44,947     
  

 

 

     

 

 

    

Total liabilities and total stockholders’ equity

  $543,414      $533,777     
  

 

 

     

 

 

    

Net interest income

   $4,341      $3,989    
   

 

 

     

 

 

   

Net interest rate spread (2)

      3.31     3.06

Net interest-earning assets (3)

  $135,342      $121,820     
  

 

 

     

 

 

    

Net interest margin (4)

      3.45     3.22

Average interest-earning assets to interest-bearing liabilities

   136.04     131.98   

(footnotes on following page)

  For the Years Ended December 31, 
  2013  2012  2011 
  Average
Outstanding
Balance
  Interest  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest  Average
Yield/
Rate
  Average
Outstanding
Balance
  Interest  Average
Yield/
Rate
 
  (Dollars in thousands) 

Interest-earning assets:

         

Loans

 $356,835   $15,807    4.43 $340,231   $16,122    4.74 $319,418   $16,795    5.26

Interest-earning deposits

  5,942    25    0.42    18,673    53    0.28    12,033    40    0.33  

Investment securities—taxable

  92,973    860    0.92    95,342    906    0.95    77,709    1,294    1.67  

Investment securities—tax exempt

  50,872    2,217    4.36    52,576    2,598    4.94    55,879    3,143    5.62  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-earning assets

  506,622    18,909    3.73    506,822    19,679    3.88    465,039    21,272    4.57  

Non-interest-earning assets

  33,845      31,713      32,088    
 

 

 

    

 

 

    

 

 

   

Total assets

 $540,467     $538,535     $497,127    
 

 

 

    

 

 

    

 

 

   

Interest-bearing liabilities:

         

Interest bearing demand deposits

 $76,573    170    0.22   $74,195    247    0.33   $62,865    376    0.60  

Savings accounts

  78,699    158    0.20    71,264    203    0.28    62,119    326    0.52  

Money market accounts

  107,571    302    0.28    116,224    401    0.35    99,116    733    0.74  

Certificates of deposit

  88,405    1,338    1.51    93,592    1,795    1.92    101,640    2,375    2.34  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-bearing deposits

  351,248    1,968    0.56    355,275    2,646    0.74    325,740    3,810    1.17  

Borrowings

  27,622    268    0.97    37,842    447    1.18    45,533    682    1.50  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-bearing liabilities

  378,870    2,236    0.59    393,117    3,093    0.79    371,273    4,492    1.21  

Noninterest-bearing demand deposits

  112,141      98,591      81,185    

Other liabilities

  4,555      2,901      3,926    
 

 

 

    

 

 

    

 

 

   

Total liabilities

  495,566      494,609      456,384    

Total stockholders’ equity

  44,901      43,926      40,743    
 

 

 

    

 

 

    

 

 

   

Total liabilities and total stockholders’ equity

 $540,467     $538,535     $497,127    
 

 

 

    

 

 

    

 

 

   

Net interest income

  $16,673     $16,586     $16,780   
  

 

 

    

 

 

    

 

 

  

Net interest rate spread (2)

    3.14      3.09      3.36  

Net interest-earning assets (3)

 $127,752     $113,705     $93,766    
 

 

 

    

 

 

    

 

 

   

Net interest margin (4)

    3.29    3.27    3.61

Average interest-earning assets to interest-bearing liabilities

  133.72    128.92    125.25  

(1)Annualized.
(2)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate 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. Tax exempt interest income is stated 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 CB’s net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. 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.

  Three Months Ended March 31,
2014 vs. 2013
  Year Ended December 31,
2013 vs. 2012
  Year Ended December 31,
2012 vs. 2011
 
  Increase (Decrease)
Due to
  Total
Increase
(Decrease)
  Increase (Decrease)
Due to
  Total
Increase
(Decrease)
  Increase (Decrease)
Due to
  Total
Increase
(Decrease)
 
        Volume              Rate         Volume  Rate   Volume  Rate  
  (In thousands) 

Interest-earning assets:

 

Loans

 $1,586   $(1,366 $220   $727   $(1,042 $(315 $1,056   $(1,729 $(673

Interest-earning deposits

  (10  10    —      (46  18    (28  20    (7  13  

Investment securities:

         

Taxable

  (275  303    28    (22  (24  (46  250    (638  (388

Tax exempt

  110    (139  (29  (82  (299  (381  (178  (367  (545
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-earning assets

  1,411    (1,192  219    577    (1,347  (770  1,148    (2,741  (1,593
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Interest-bearing liabilities:

         

NOW, money market and savings accounts

  17    (42  (25  (1  (220  (221  212    (796  (584

Certificates of deposit

  (49  (23  (72  (95  (362  (457  (178  (402  (580
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total deposits

  (32  (65  (97  (96  (582  (678  34    (1,198  (1,164

Borrowings

  (137  101    (36  (151  (28  (179  (156  (79  (235
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-bearing liabilities

  (169  36    (133  (247  (610  (857  (122  (1,277  (1,399
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Change in net interest income

 $1,580   $(1,228 $352   $824   $(737 $87   $1,270   $(1,464 $(194
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comparison of Financial Condition at March 31, 2014 and December 31, 2103

Total assets were $550.2 million at March 31, 2014, an increase of $3.7 million, or 0.7%, from $546.5 million at December 31, 2013. During the three months ended March 31, 2014, funds generated from calls, principal reductions and maturities of securities together with deposit growth were used to fund loan growth and reduce borrowings, offset by a decrease in securities available for sale.

Cash and due from banks increased $10.8 million, from $16.4 million at December 31, 2103 to $27.2 million at March 31, 2014 as excess funds generated from calls, principal reductions and maturities of securities and deposit growth were invested in cash.

Securities available-for-sale decreased $12.9 million, or 9.7%, to $120.9 million at March 31, 2014 compared to $133.8 million at December 31, 2013. The decrease was primarily the result of security calls.

Loans, net, increased $6.2 million, or 1.7%, to $379.9 million at March 31, 2014 compared to $373.8 million at December 31, 2013 primarily due to increases of $4.6 million in commercial real estate loans and $1.9 million in commercial loans. CB continues to generate growth in commercial loans while payoffs and principal reductions have reduced residential real estate, construction, commercial and industrial, and consumer loans from $164.2in its local market area. At September 30, 2017, Progressive Bank’s loans receivable totaled $101.2 million, compared to $97.1 million and $100.1 million at December 31, 2013 to $163.6 million at March 31, 2014.

Total deposits increased $8.4 million, or 1.8%, to $488.8 million at March 31, 2014 compared to $480.3 million at2016 and December 31, 2013. There were increases of $9.1 million in noninterest-bearing demand deposits and $6.1 million in savings, which were partially offset by decreases of $4.6 million in interest bearing demand accounts, $1.1 million in money market accounts, and $1.2 million in certificates of deposit. The decrease in certificates of deposits was primarily due to customer hesitancy to commit to long-term rates in the prevailing law interest rate environment.

Short-term borrowings decreased $1.8 million, or 11.9%, to $13.6 million at March 31, 2014 compared to $15.4 million at December 31, 2013. Other borrowed funds decreased $1.0 million, or 25%, to $3.0 million at March 31, 2014 compared to $4.0 million at December 31, 2013 primarily due to a $1.0 million repayment of Federal Home Loan Bank amortizing advances.

Stockholders’ equity decreased $1.5 million, or 3.3%, to $43.5 million at March 31, 2014 compared to $45.0 million at December 31, 2013 primarily due to the repurchase of 133,000 shares of common stock from a related party at $21.78 per share. This was partially offset by $1.1 million of net income for the three months ended March 31, 2014 and an $800,000 increase in the unrealized gain position of the security portfolio.

Comparison of Financial Condition at December 31, 2013 and 2012

Total assets at December 31, 2013 were $546.5 million, a decrease of $300,000, from total assets of $546.8 million at December 31, 2012. During 2013, funds generated from security calls, principal reductions and maturities in conjunction with deposit growth were used to fund loan growth and reduce borrowings.

Cash and due from banks decreased $8.9 million, from $125.3 million at December 31, 2102 to $16.4 million at December 31, 2013 as cash was used to fund loan growth and reduce borrowings.

Securities available-for-sale decreased $21.5 million, or 13.9%, to $133.8 million at December 31, 2013 compared to $155.3 million at December 31, 2012. The decrease was primarily the result of security calls.

Loans, net, increased $31.5 million, or 9.2%, to $373.8 million at December 31, 2013 compared to $342.2 million at December 31, 2012 primarily due to increases of $2.9 million in commercial loans, $18.8 million in residential real estate loans, and $5.1 million in consumer loans. CB continued to generate growth in commercial loans that more than offset payoffs and repayments during the year.

Total deposits increased $10.2 million, or 2.2%, to $480.3 million at December 31, 2013 compared to $470.1 million at December 31, 2012. There were increases of $14.3 million in noninterest-bearing demand deposits and $11.3 million in savings which were partially offset by decreases of $5.5 million in money market accounts, $8.1 million in interest bearing checking accounts, and $1.9 million in certificates of deposit. The decrease in certificates of deposits was primarily due to customer hesitancy to commit to long-term rates in the prevailing low interest rate environment. The decreases in money market accounts and in interest bearing checking accounts were primarily due to normal balance fluctuations.

Short-term borrowings decreased $8.0 million, or 34.2%, to $15.4 million at December 31, 2013 compared to $23.4 million at December 31, 2012. Other borrowed funds decreased $3.0 million, or 42.9%, to $4.0 million at December 31, 2013 compared to $7.0 million at December 31, 2012 primarily due to a $3.0 million repayment of Federal Home Loan Bank amortizing advances.

Stockholders’ equity increased $500,000, or 1.2%, to $45.0 million at December 31, 2013 compared to $44.5 million at December 31, 2012. Net income of $4.3 million offset $2.1 million of dividends paid and a $2.0 million decrease in the unrealized gain position of the security portfolio.

Comparison of Results of Operations for the Three Months Ended March 31, 2014 and 20132015, respectively.

Overview. Net income was $1.1 million for the three months ended March 31, 2014, compared to $863,000 for the same period in 2013, an increase of $216,000 or 25.0%. The increase was primarily due to an increase in net interest income.

Interest and Dividend Income. Interest and dividend income increased $233,000, or 5.4%, to $4.6 million for the three months ended March 31, 2014 compared to $4.3 million for the three months ended March 31, 2013. Interest income on loans increased $228,000 with an increase in average loans outstanding of $36.0 million, with commercial loans increasing $20.7 million, indirect automobile loans increasing $4.8 million and residential real estate loans increasing $10.1 million. These increases were partially offset by a 20 basis points decrease in average yield. All loan categories have been impacted by the low interest rate environment, with the average yield on commercial loans decreasing 6 basis points, the average yield on consumer loans decreasing 11 basis points, the average yield on indirect automobile loans decreasing 32 basis points and the average yield on residential real estate loans decreasing 18 basis points.

Interest Expense. Interest expense decreased $133,000, or 22.0%, to $471,000 for the three months ended March 31, 2014 compared to $604,000 for the three months ended March 31, 2013 due to a decrease of 13 basis points in the cost of funds and a decrease of $5.4 million in the average balance of interest-bearing liabilities. Interest expense on deposits decreased $97,000 due to a decrease in the average balance of higher-cost deposits and a decrease of 12 basis points in average cost, primarily related to the repricing of deposit products to lower rates with the majority of the benefit derived from money market accounts and maturing certificates of deposit. Interest expense on borrowings decreased $36,000 due to a decrease of $10.9 million in the average balance outstanding as funds generated from deposit growth and security reductions were used to pay-off higher cost borrowings.

Net Interest Income. Net interest income increased $366,000, or 9.8%, to $4.1 million for the three months ended March 31, 2014 compared to $3.7 million for the three months ended March 31, 2013. Net interest margin increased from 3.22% for the three months ended March 31, 2013 to 3.45% for the three months ended March 31, 2014.

Provision for Loan Losses. There was no provision for loan losses for the three months ended March 31, 2014 compared to $100,000 for the three months ended March 31, 2013. In the current period, the provision was eliminated based upon the analysis of the allowance for loan losses indicating that the reserve was deemed adequate for the existing credit quality of the loan portfolio at March 31, 2014.

Other Operating Income. Other operating income decreased $14,000, or 1.9%, to $724,000 for the three months ended March 31, 2014 compared to $738,000 for the three months ended March 31, 2013. Net gains on the sale of loans decreased $37,000, or 30.3%, to $86,000 for the three months ended March 31, 2014 compared to $123,000 for the three months ended March 31, 2013 as the prevailing low interest rate environment significantly reduced the profit margins on loan sales. Other income increased $28,000, or 170.7%, to $44,000 for the three months ending March 31, 2014 compared to $16,000 for the three months ended March 31, 2013 due to reduced amortization of mortgage servicing rights in the first quarter of 2014. Service fees on deposit accounts decreased $8,000, or 1.7%, to $455,000 for the three months ended March 31, 2014 compared to $463,000 for the three months ended March 31, 2013 primarily due to a decline in overdraft fees. Commissions increased $6,000, or 8.0%, to $81,000 for the three months ended March 31, 2014 compared to $75,000 for the three months ended March 31, 2013 primarily due to increased merchant service fees. Other income increased $27,000, or 158.8%, primarily due to reduced amortization of mortgage servicing rights in the first quarter of 2014.

Other Operating Expenses.The following table summarizes other operating expenses for the periods indicated (in thousands).

   Three Months Ended
March 31,
 
   2014   2013 

Salaries and employee benefits

  $1,874    $1,866  

Occupancy

   319     294  

Equipment

   272     222  

FDIC assessment

   96     93  

Pennsylvania shares tax

   97     96  

Contracted services

   96     86  

Legal fees

   118     67  

Advertising

   89     55  

Bankcard processing expense

   62     60  

Other real estate owned expense

   —       20  

All other

   434     470  
  

 

 

   

 

 

 

Total noninterest expense

  $3,457    $3,329  
  

 

 

   

 

 

 

Other operating expenses increased $128,000, or 3.8% to $3.5 million for the three months ended March 31, 2014 compared to $3.3 million for the three months ended March 31, 2013. Occupancy expense increased $25,000 primarily due to increased snow removal costs in the first quarter of 2014. Legal fees increased $51,000 primarily related to fees expended to resolve nonaccrual loans.

Income Tax Expense. Income tax expense for the three months ended March 31, 2014 increased $108,000 to $296,000 compared to $188,000 for the three months ended March 31, 2013 primarily due to increased net income before income tax expense. The effective tax rate was 21.5% for the three months ended March 31, 2014 compared to 17.9% for the three months ended March 31, 2013 due to the calls of tax free securities and the reinvestment of funds at reduced rates, which effectively reduced tax exempt income.

Results of Operations for the Year Ended December 31, 2013 and 2012

Overview. Net income was $4.3 million for the year ended December 31, 2013, compared to $4.2 million in 2012, an increase of 0.9%.

Interest and Dividend Income. Interest and dividend income decreased $554,000, or 3.0%, to $17.8 million for the year ended December 31, 2013 compared to $18.3 million for the year ended December 31, 2012. Interest income on loans decreased $217,000 on an increase in average loans outstanding of $16.6 million primarily due to a decrease of 31 basis points in the average yield. All loan categories were impacted by the prevailing low interest rate environment, with the average yield on commercial loans decreasing 16 basis points, the average yield on consumer loans decreasing 46 basis points and the average yield on residential real estate loans decreasing 36 basis points.

Interest Expense. Interest expense decreased $856,000, or 27.7%, to $2.2 million for the year ended December 31, 2013 compared to $3.1 million for the year ended December 31, 2012 due to decreases of 20 basis points in the average cost of funds, which offset a $14.2 million increase in the average balance of interest-bearing liabilities. Interest expense on deposits decreased $678,000 due to a decrease in the average balance of higher-cost deposits and a decrease of 18 basis points in average cost, primarily due to the repricing of deposits to lower rates with the majority of the benefit derived from money market accounts and maturing certificates of deposit. Interest expense on borrowings decreased $179,000 due to a decrease of $10.2 million in average balance as funds generated from deposit growth and reductions in investment securities were used to retire higher cost borrowings.

Net Interest Income. Net interest income for the year ended December 31, 2013 increased $302,000, or 2.0%, to $15.5 million compared to $15.2 million for the year ended December 31, 2012.

Provision for Loan Losses. The provision for loan losses was $100,000 for the year ended December 31, 2013 compared to $450,000 for the year ended December 31, 2012. The provision for loan losses decreased based upon the analysis of the allowance for loan loss indicating that the reserve was deemed adequate for the existing credit quality of the loan portfolio.

Other Operating Income. Other operating income decreased $341,000, or 9.7%, to $3.2 million for the year ended December 31, 2013 compared to $3.5 million for the year ended December 31, 2012. Net gains on the sale of loans decreased $340,000, or 41.7%, to $476,000 for the year ended December 31, 2013 compared to $817,000 for the year ended December 31, 2012 as the increase in mortgage loan rates had significantly reduced the profit margins on loan sales. Service fees on deposit accounts increased $20,000, or 0.9%, to $2.1 million in 2013 primarily due to an increase in debit card fees. Commissions increased $13,000, or 5.1%, to $269,000 in 2013 compared to $256,000 in 2012 primarily due to an increase in fees for merchant services. Income from bank owned life insurance decreased $17,000, or 6.5%, to $243,000 in 2013 compared to $260,000 in 2012 primarily due to a decline in market interest rates. Net gains on the sale of investments decreased $14,000 for the year ended December 31, 2013 compared to the year ended December 31, 2012 due to the absence of investment sales in 2013.

Other Operating Expenses. The following table summarizes other operating expenses for the periods indicated (in thousands).

   Years Ended
December 31,
 
   2013  2012 

Salaries and employee benefits

  $7,341   $7,294  

Occupancy

   1,119    991  

Equipment

   975    928  

FDIC assessment

   383    373  

Pennsylvania shares tax

   403    371  

Contracted services

   344    355  

Legal fees

   328    266  

Advertising

   300    299  

Bankcard processing expense

   253    256  

Other real estate owned expense

   126    176  

Net (gain) loss on sale of real estate owned/repossessed assets

   (211  26  

All other

   1,818    1,696  
  

 

 

  

 

 

 

Total noninterest expense

  $13,179   $13,031  
  

 

 

  

 

 

 

Noninterest expense increased $148,000, or 1.1% to $13.2 million for the year ended December 31, 2013 compared to $13.0 million for the year ended December 31, 2012. Occupancy expense increased $128,000 primarily due to a full year’s operation of the loan center and the associated occupancy costs. Legal fees increased $62,000 primarily related to fees expended to resolve nonaccrual loans and Other Real Estate Owned properties. All other expense increased $122,000, or 7.2% to $1.8 million for the year ended December 31, 2013 compared to $1.7 million for the year ended December 31, 2012. The primary component of the increase was other losses that exceeded prior year expense due to the losses associated with two retail branch robberies and the charge off of a $68,000 demand account in 2013. Salaries and employee benefits increased $47,000, or 0.6% for the year ended December 31, 2013 compared to December 31, 2012 due to inflationary increases. Equipment expenses increased $47,000, or 5.0% to $975,000 for the year ended December 31, 2013 compared to $928,000 for the year ended December 31, 2012 due to account volume increases. Pennsylvania share tax expenses increased $32,000, or 8.6% to $403,000 for the year ended December 31, 2013 compared to $371,000 for the year ended December 31, 2012 due to an increase in the average assets assessment base. FDIC assessments increased $10,000, or 2.7% to $383,000 for the year ended December 31, 2013 compared to $373,000 for the year ended December 31, 2012 due to an increase in deposits. Contracted services decreased $11,000, or 3.1% to $344,000 for the year ended December 31, 2013 compared to $355,000 for the year ended December 31, 2012 due to the reduced use of contracted services. Other real estate owned expense decreased $50,000 from $176,000 in 2012 to $126,000 in 2013 due to the disposition of properties in 2013. Net gain on the sale of real estate owned/repossessed assets of $211,000 for the year ended December 31, 2013 was due to the profitable disposal of an other real estate owned property during the year ended December 31, 2013, compared to a net loss on the sale of other real estate owned property of $26,000 in 2012.

Income Tax Expense. Income tax expense for the year ended December 31, 2013 increased $125,000 to $1.2 million compared to $1.0 million for the year ended December 31, 2012. The effective tax rate was 21.4% for the year ended December 31, 2013 compared to 19.7% for the year ended December 31, 2012. The increase in the effective tax rate was due to calls of tax free securities and the reinvestment of funds at reduced rates, which effectively reduced tax exempt income.

Comparison of Results of Operations for the Year Ended December 31, 2012 and 2011

Overview. Net income was $4.2 million for the year ended December 31, 2012, compared to $4.4 million for 2011, a decrease of 4.1%, primarily as a result of a decrease in net interest income and an increase in other operating expenses.

Interest and Dividend Income. Interest and dividend income decreased $1.7 million, or 8.3%, to $18.3 million for the year ended December 31, 2012 compared to $20.0 million for the year ended December 31, 2011. Interest income on loans decreased $900,000 on an increase in average loans outstanding of $20.8 million, primarily due to a decrease of 52 basis points in the average yield. Average balance of commercial loans increased by $9.9 million, the average balance of consumer loans increased by $5.3 million and the average balance of residential real estate loans increased by $6.0 million. The average yield on all loan categories decreased between 2011 and 2012 due to the prevailing low interest rate environment, with the average yield on commercial loans decreasing by 55 basis points, the average yield on consumer loans decreasing by 60 basis points and the average yield on residential real estate loans decreasing by 33 basis points.

Interest Expense. Interest expense decreased $1.4 million, or 31.1%, to $3.1 million for the year ended December 31, 2012 compared to $4.5 million for the year ended December 31, 2011 due to decreases of 42 basis points in the cost of funds, which more than offset an increase of $21.8 million in the average balance of interest-bearing liabilities. Interest expense on deposits decreased $1.2 million combining an increase in the average balance of interest bearing deposits of $29.5 million and a decrease of 43 basis points in the cost of funds, primarily related to the repricing of deposit products to lower rates with the majority of the benefit derived from money market accounts and maturing certificates of deposit. Interest expense on short term borrowings decreased $103,000 due to a decrease of $4.1 million in average balance and a 28 basis point decline in the cost of funds. Interest expense on other borrowed funds decreased $132,000 due to a decrease in average balances of $3.6 million.

Net Interest Income. Net interest income for the year ended December 31, 2012 decreased $254,000, or 1.6%, to $15.2 million compared to $15.5 million for the year ended December 31, 2011.

Provision for Loan Losses. The provision for loan losses was $450,000 for the year ended December 31, 2012 compared to $975,000 for the year ended December 31, 2011. The decrease in the provision for loan losses is primarily due to the evaluation of the loan loss reserve indicating that the reserve balance was sufficient for the risk characteristics of the loan portfolio.

Noninterest Income. Noninterest income increased $335,000, or 10.5%, to $3.5 million for the year ended December 31, 2012 compared to $3.2 million for the year ended December 31, 2011. Net gains on the sale of loans increased $491,000, or 150.6%, to $817,000 for the year ended December 31, 2012 compared to $326,000 for the year ended December 31, 2011. The interest rate environment was favorable for loan sales in 2012 and Community Bank generated a significant volume of loan originations qualifying for sale. Commissions increased $25,000, or 10.8% to $256,000 for the year ended December 31, 2012 compared to $231,000 for the year ended December 31, 2011 due to increased volume. Net gain on the sale of investments increased $14,000 for the year ended December 31, 2012 due to a sale in 2012 and the absence of any sales in 2011. Other noninterest income decreased $154,000, or 78.6% to $42,000 for the year ended December 31, 2012 compared to $196,000 for the year ended December 31, 2011 due to an acceleration in the write down of mortgage servicing rights related to the sale and servicing of residential mortgage loans attributable to a decline in market interest rates. Service fees on deposit accounts decreased $32,000 for the year ended December 31, 2012 primarily due to reduced overdraft fees.

Other Operating Expenses. The following table summarizes other operating expenses for the periods indicated (in thousands).

   Years Ended
December 31,
 
   2012   2011 

Salaries and employee benefits

  $7,294    $6,969  

Occupancy

   991     956  

Equipment

   928     873  

FDIC assessment

   373     393  

Pennsylvania shares tax

   371     342  

Contracted services

   355     273  

Legal fees

   266     192  

Advertising

   299     384  

Bankcard processing expense

   256     192  

Other real estate owned expense

   176     54  

(Gain) loss on sale of real estate owned/repossessed assets

   26     (118

All other

   1,696     1,876  
  

 

 

   

 

 

 

Total noninterest expense

  $13,031    $12,386  
  

 

 

   

 

 

 

Noninterest expense increased $645,000, or 5.2% to $13.0 million for the year ended December 31, 2012 compared to $12.4 million for the year ended December 31, 2011. Salaries and employee benefits increased $325,000, or 4.7% to $7.3 million for the year ended December 31, 2012 compared to $7.0 million for the year ended December 31, 2011 primarily due to additional staff positions and benefits. Occupancy expense increased $35,000 primarily due to a partial year’s operation of the loan center and the associated occupancy costs. Equipment expense increased $55,000 primarily due to the opening and

operation of the loan center in 2012. Contracted services increased $82,000 due to increased use of contracted services. Other real estate owned expenses increased $148,000, or 73.2% for the year ended December 31, 2012 compared to $54,000 for the year ended December 31, 2011. Legal fees increased $74,000, or 38.6% to $266,000 for the year ended December 31, 2012 compared to $192,000 for the year ended December 31, 2011. The increase in other real estate owned expenses and in legal fees were primarily related to the resolution of nonaccrual loans and other real estate owned properties. Bank card processing expense increased $64,000 due to an increase in card usage. Pennsylvania shares tax expense increased $29,000 due to an increase in the average assets assessment base. Advertising expense decreased $85,000, or 22.1%, to $299,000 for the year ended December 31, 2012 compared to $384,000 for the year ended December 31, 2011 due to a reduction in the advertising budget. FDIC assessments decreased $20,000 due to a reduced balance of average deposits.

Income Tax Expense. Income tax expense for the year ended December 31, 2012 increased $141,000 to $1.0 million compared to $900,000 for the year ended December 31, 2011. The effective tax rate was 19.7% for the year ended December 31, 2012 compared to 16.9% for the year ended December 31, 2011. The increase in the effective tax rate reflects calls of tax free securities and the reinvestment of funds at reduced rates, which effectively reduced tax exempt income.

Loan Portfolio Composition.

CBProgressive Bank primarily originates residential real estate, loans, commercial real estate, loans, including construction, loans, commercial and industrial, loans and consumer and other loans. The following table sets forth the composition of CB’sits loan portfolio by type of loan at the dates indicated, excluding loans held for sale.

        At December 31, 
  At March 31, 2014  2013  2012  2011  2010  2009 
  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent 
  (Dollars in thousands) 

Real estate loans:

            

Residential

 $163,579    42.45 $164,245    43.32 $145,455    41.78 $132,380    38.91 $120,458    38.31 $104,771    35.83

Commercial

  99,920    25.93    95,333    25.14    95,849    27.53    99,283    29.18    90,834    28.90    82,385    28.17  

Construction

  10,411    2.70    10,367    2.73    10,697    3.07    11,186    3.29    9,783    3.11    16,489    5.64  

Commercial, Industrial, and Agricultural loans

  43,621    11.32    41,719    11.01    38,800    11.15    39,955    11.74    32,985    10.49    31,722    10.85  

Consumer loans

  59,118    15.34    59,101    15.59    54,032    15.52    54,253    15.94    54,937    17.47    54,029    18.48  

Other loans

  8,701    2.26    8,381    2.21    3,297    0.95    3,200    0.94    5,416    1.72    3,022    1.03  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 $385,350    100.00 $379,146    100.00 $348,130    100.00 $340,257    100.00 $314,413    100.00 $292,418    100.00
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less:

            

Allowance for losses

  5,372     5,382     5,904     5,879     5,261     4,185   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

Total loans, net

 $379,978    $373,764    $342,226    $334,378    $309,152    $288,233   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

The following table sets forth the contractual maturities of CB’s total loan portfolio at March 31, 2014 and December 31, 2013. Demand loans, which are loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The table presents contractual maturities and does not reflect repricing or the effect of prepayments. Actual maturities may differ.

March 31, 2014

  Residential
Real Estate
   Commercial
Real Estate
   Construction 
  (In thousands) 

Amounts due in:

      

One year or less

  $6,473    $3,884    $1,368  

More than one through five years

   3,025     8,604     1,692  

More than five years

   154,081     87,432     7,351  
  

 

 

   

 

 

   

 

 

 

Total

  $163,579    $99,920    $10,411  
  

 

 

   

 

 

   

 

 

 
   (Dollars in thousands) 
   September 30,  December 31, 
   2017  2016  2015  2014  2013  2012 
   Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent 

Real Estate:

             

Residential

  $31,652   31.3 $29,721   30.6 $28,114   28.1 $28,902   29.1 $28,618   30.6 $27,548   27.7

Commercial

   45,960   45.4   44,044   45.4   44,557   44.5   46,910   47.3   44,116   47.3   50,276   50.6 

Construction

   298   0.3   595   0.6   761   0.8   3,519   3.5   487   0.5   729   0.7 

Commercial and Industrial

   13,501   13.3   12,280   12.6   13,191   13.2   5,738   5.8   5,525   5.9   5,650   5.7 

Consumer

   3,218   3.2   2,716   2.8   2,836   2.8   2,760   2.8   3,452   3.7   5,226   5.3 

Other

   6,613   6.5   7,736   8.0   10,639   10.6   11,388   11.5   11,204   12.0   9,958   10.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

   101,242   100.0  97,092   100.0  100,098   100.0  99,217   100.0  93,402   100.0  99,387   100.0
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allowance for losses

   (1,771   (1,797   (1,798   (1,813   (1,865   (2,181 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

Loans, net

  $99,471   $95,295   $98,300   $97,404   $91,537   $97,206  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

March 31, 2014

  Commercial,
Industrial,
and
Agricultural
   Consumer   Other   Total 
  (In thousands) 

Amounts due in:

        

One year or less

  $13,372    $7,154    $1,377    $33,628  

More than one through five years

   18,656     38,948     689     71,614  

More than five years

   11,593     13,016     6,635     280,108  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $43,621    $59,118    $8,701    $385,350  
  

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

  Residential
Real Estate
   Commercial
Real Estate
   Construction 
  (In thousands) 

Amounts due in:

      

One year or less

  $6,621    $3,003    $5,830  

More than one through five years

   3,094     8,438     2,658  

More than five years

   154,530     83,892     1,879  
  

 

 

   

 

 

   

 

 

 

Total

  $164,245    $95,333    $10,367  
  

 

 

   

 

 

   

 

 

 

December 31, 2013

  Commercial,
Industrial,
and
Agricultural
   Consumer   Other   Total 
  (In thousands) 

Amounts due in:

        

One year or less

  $13,012    $7,308    $890    $36,664  

More than one through five years

   19,585     40,245     776     74,796  

More than five years

   9,122     11,548     6,715     267,686  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $41,719    $59,101    $8,381    $379,146  
  

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2014, the total dollar amount of all loans that are due after March 31, 2015 and that have floating/adjustable interest rates and fixed interest rates is $238.1 million and $113.6 million, respectively. At December 31, 2013, the total dollar amount of all loans that are due after December 31, 2014 and that have floating/adjustable interest rates and fixed interest rates is $231.9 million and $110.6 million, respectively.

Loan Underwriting

General. CB underwrites its loans in accordance with written policies and procedures approved by its board of directors and with applicable laws and regulations. CB focuses its lending activities primarily in its market area.

Residential Real Estate Loans. Residential real estate loans typically have termsare comprised of 15loans secured by one- to 30 yearsfour-family residential and, to a lesser extent, multifamily properties. Included in residential real estate loans are originated with adjustable interest rates or fixed interest rates. Community Bank primarily originates fixed-rate residentialtraditional one- to four-family mortgage loans, but also offers adjustable-rate residentialmultifamily mortgage loans, home equity installment loans, and home equity loans. Community Bank’s residential mortgagelines of credit. Progressive Bank generates loans through its marketing efforts, existing customers and referrals, real estate loans are generally underwritten according to Fannie Maebrokers, builders and Freddie Mac guidelines, which are referred to as “conforminglocal businesses. At September 30, 2017, $31.7 million, or 31.3% of Progressive Bank’s total loan portfolio, was invested in residential loans.” Conforming loans can be sold in the secondary market if Community Bank chooses to do so. Community

Progressive Bank generally originates both fixed- and adjustable-rate, one- to four-family, residential mortgage loans in amountswith terms up to 30 years secured by property primarily located in its market area. At September 30, 2017, one-to four-family mortgage loans totaled $26.2 million. Progressive Bank’s mortgage loans amortize monthly with principal and interest due each month. These loans often remain outstanding for significantly shorter periods than their contractual terms because borrowers may refinance or prepay loans at their option without a prepayment penalty.

When underwriting one- to four-family mortgage loans, Progressive Bank reviews and verifies each loan applicant’s income and credit history. Management believes that stability of income and past credit history are integral parts in the maximum conforming loan limits as established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac. Community Bank also occasionally originates jumbo loans, whichunderwriting process. Written appraisals are loans that exceed the lending limit for conforming loans.

Communitygenerally required on real estate property offered to secure an applicant’s loan. Progressive Bank generally limits the loan-to-value ratios of one- to four-family residential mortgage loans to 80% (75% for non-owner occupied investment property) of the purchase price or appraised value of the property, whichever is less. For one- to four-family real estate loans with loan-to-value ratios of over 90%, Progressive Bank requires private mortgage insurance. Progressive Bank requires fire and casualty insurance on all properties securing real estate loans. Progressive Bank requires title insurance, or an attorney’s title opinion, as circumstances warrant.

Progressive Bank’s one- to four-family mortgage loans customarily include due-on-sale clauses, which gives Progressive Bank the right to declare a loan immediately due and payable in the event, among other things, that the borrower sells or otherwise disposes of the underlying real property serving as collateral for the loan.

Progressive Bank does not offer an “interest only” mortgage loan product on one- to four-family residential properties (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). Progressive Bank also does not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. Progressive Bank does not offer a “subprime loan” program (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation).

Home Equity Loans. At September 30, 2017, home equity loans totaled $5.4 million. Progressive Bank’s home equity loans and lines of credit are generally secured by the borrower’s principal residence. The maximum amount of a home equity loan or line of credit is generally 80% of the appraised value of a borrower’s real estate collateral less the amount of any prior mortgages or related liabilities. In some cases, Progressive Bank may lend up to 90% of the appraised value. Home equity loans are approved with fixed interest rates, which Progressive Bank determines based upon market conditions. Such loans are fully amortized over the life of the loan. Generally, the maximum term for home equity loans is 10 years. Home equity lines of credit are variable interest rate loans with a draw period of 15 years and a 10 year repayment period. The maximum term for home equity credit lines is 25 years.

Progressive Bank’s underwriting standards for home equity loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. Progressive Bank also considers the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.

Home equity loans entail greater risks than one- to four-family residential mortgage loans, which are secured by first lien mortgages. In such cases, collateral repossessed after a default may not provide an adequate source of repayment of the outstanding loan balance because of damage or depreciation in the value of the property or loss of equity to the first lien position. Further, home equity loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Finally, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans in the event of a default.

Commercial Real Estate Loans. Loans. CommunityProgressive Bank originates commercial real estate loans that are secured primarily by improved properties, such as retail facilities, office buildings and other non-residential buildings. At September 30, 2017, $46.0 million, or 45.4% of Progressive Bank’s total loan portfolio, consisted of commercial real estate loans. The maximum loan-to-value ratio for commercial real estate loans Progressive Bank originates is generally 80%, but may extend to 85% in some instances.

Progressive Bank’s commercial real estate loans generally have terms of up to 1520 years and have adjustable interest rates. The adjustable rate loans are typically fixed for the first five years and adjust annuallyevery year thereafter. The maximum loan-to-value ratio of itsProgressive Bank’s commercial real estate loans is generally 80% of the lower of cost or appraised value of the property securing the loan.

CommunityProgressive Bank considers a number of factors in originating commercial real estate loans. CommunityProgressive Bank evaluates the qualifications and financial condition of the borrower, including project-level and global cash flows, credit history and management expertise, as well as the value and condition of the property, securing the loan. When evaluating the qualifications of the borrower, CommunityProgressive Bank considers the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with CommunityProgressive Bank and other financial institutions. In evaluating the property securing the loan, the factors considered include the net operating income of the mortgaged property before debt service and depreciation, and the ratio of the loan amount to the appraised value of the property. All commercial real estate loans are appraised by outside independent appraisers.

Personal guarantees are generally obtained from the principals of commercial real estate loan borrowers, although this requirement may be waived in limited circumstances depending upon the loan-to-value ratio and the debt servicedebt-service ratio associated with the loan. CommunityProgressive Bank requires property and casualty insurance and flood insurance if the property is in a flood zone area.

Loans secured by commercial real estate generally involve a greater degree of credit risk than residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the effects of general economic conditions on income producing properties and the successful operation or management of the properties securing the loans. Furthermore, the repayment of loans secured by commercial real estate is typically dependent upon the successful operation of the related business and real estate property. If the cash flow from the project is reduced, the borrower’s ability to repay the loan may be impaired.

Construction LoansLoans.. CommunityProgressive Bank offers both fixedoriginates construction loans to individuals to finance the construction of residential dwellings and adjustable ratealso originates loans for the construction of commercial properties and owner-occupied properties used for businesses. At September 30, 2017, $298,000, or 0.3% of Progressive Bank’s total loan portfolio, consisted of construction loans. TheProgressive Bank’s construction loans generally provide for the payment of interest only during the construction phase, which is usually 12 to 18 months. At the end of the construction phase, the loan generally converts to a permanent residential or commercial mortgage loan. Loans generally can be made with a maximum loan-to-value ratio of these loans is generally 75%80% on both residential and commercial construction. Before making a commitment to fund a construction loan, Progressive Bank requires a pro forma appraisal of the lesserproperty, as completed by an independent licensed appraiser. Progressive Bank also requires an inspection of the appraised value orproperty before disbursement of funds during the purchase priceterm of the property. Personal guarantees of the borrower are generally required if the borrower is not an individual.construction loan.

Commercial and Industrial and Agricultural LoansLoans.. CommercialProgressive Bank originates commercial and industrial loans generally includeand lines of credit and loansto borrowers located in its market area that are generally secured by collateral other than real estate, such as equipment, inventory, and other business assets,assets. At September 30, 2017, $13.5 million, or 13.3% of Progressive Bank’s total loan portfolio, consisted of commercial and areindustrial loans. The loans generally short term loanhave terms of maturity from three to five years with adjustablefixed interest rates. CommunityProgressive Bank generally obtains personal guarantees with respectfrom the borrower or a third party as a condition to alloriginating the loan. On a limited basis, Progressive Bank will originate unsecured business loans in those instances where the applicant’s financial strength and creditworthiness has been established. Commercial business loans generally bear higher interest rates than residential loans, but they also may involve a higher risk of default because their repayment is generally dependent on the successful operation of the borrower’s business.

Progressive Bank’s underwriting standards for commercial business loans include a determination of the applicant’s ability to meet existing obligations and payments on the proposed loan from normal cash flows generated in the applicant’s business. Progressive Bank assesses the financial strength of each applicant through the review of financial statements and tax returns provided by the applicant. The creditworthiness of an applicant is derived from a review of credit reports as well as a search of public records. Progressive Bank periodically reviews business loans following origination. Progressive Bank requests financial statements at least annually and reviews them for substantial deviations or changes that might affect repayment of the loan. Progressive Bank’s loan officers may also visit the premises of borrowers to observe the business premises, facilities, and personnel and to inspect the pledged collateral. Underwriting standards for business loans are different for each type of loan depending on the financial strength of the applicant and the value of collateral offered as security.

Consumer Loans.Progressive Bank originates consumer loans that primarily consist of auto loans, secured and unsecured loans and lines of credit. AgriculturalAs of September 30, 2017, consumer loans totaled $3.2 million, or 3.2%, of Progressive Bank’s total loan portfolio. Consumer loans are generally offered on a fixed-rate basis. Progressive Bank’s underwriting standards for consumer loans include a determination of the applicant’s credit history and an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan. The stability of the applicant’s monthly income may be determined by verification of gross monthly income from primary employment, and additionally from any verifiable secondary income. Progressive Bank also considers the length of employment with the borrower’s present employer as well as the amount of time the borrower has lived in the local area. Creditworthiness of the applicant is of primary consideration; however, the underwriting process also includes a comparison of the value of the collateral in relation to the proposed loan amount.

Consumer loans entail greater risks than one- to four-family residential mortgage loans, particularly consumer loans secured by working farms. Community Bank doesrapidly depreciating assets, such as automobiles, or loans that are unsecured. In such cases, collateral repossessed after a default may not engageprovide an adequate source of repayment of the outstanding loan balance because of damage, loss or depreciation. Further,

consumer loan payments are dependent on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. Such events would increase Progressive Bank’s risk of loss on unsecured loans. Finally, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans in crop lending. Agriculturalthe event of a default

Loan Portfolio Maturities and Yields. The following table summarizes the maturities of Progressive Bank’s loan portfolio at September 30, 2017. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are generally made with loan to value ratios of 80%reported as being due in one year or less.

   (Dollars in thousands) 
   Real Estate  Commercial
and Industrial
 
   Residential  Commercial  Construction  

Due During the Years

Ending September 30,  

  Amount   Weighted
Average
Rate
  Amount   Weighted
Average
Rate
  Amount   Weighted
Average
Rate
  Amount   Weighted
Average
Rate
 

2018

  $492    4.85 $3,951    4.86 $—      0.00 $2,044    4.83

2019

   269    6.19   59    5.51   —      0.00   295    4.35 

2020

   371    5.82   598    5.39   —      0.00   670    4.93 

2021 to 2022

   644    4.39   4,373    4.63   50    4.91   2,441    4.91 

2023 to 2027

   3,106    5.59   4,372    5.16   116    4.47   7,108    4.23 

2028 to 2032

   4,754    4.46   24,042    4.65   93    4.80   943    4.08 

2033 and Beyond

   22,016    4.12   8,565    3.60   39    6.61   —      —   
  

 

 

    

 

 

    

 

 

    

 

 

   

Total

  $31,652    4.37 $45,960    4.53 $298    4.92 $13,501    4.47
  

 

 

    

 

 

    

 

 

    

 

 

   
   Consumer  Other  Total        

Due During the Years

Ending September 30,  

  Amount   Weighted
Average
Rate
  Amount   Weighted
Average
Rate
  Amount   Weighted
Average
Rate
        

2018

  $555    11.80 $1,322    4.62 $8,364    5.28   

2019

   379    5.97   96    4.35   1,098    5.42    

2020

   760    5.29   60    4.25   2,459    5.27    

2021 to 2022

   1,126    3.77   135    3.30   8,769    4.56    

2023 to 2027

   398    3.81   1,281    4.16   16,381    4.72    

2028 to 2032

   —      —     822    4.79   30,654    4.60    

2033 and Beyond

   —      —     2,897    4.50   33,517    4.02    
  

 

 

    

 

 

    

 

 

      

Total

  $3,218    5.78 $6,613    4.46 $101,242    4.51   
  

 

 

    

 

 

    

 

 

      

The following table sets forth at September 30, 2017, the dollar amount of all fixed-rate and adjustable-rate loans due after September 30, 2018.

   (In thousands) 
   Due After September 30, 2018 
   Fixed   Adjustable   Total 

Real Estate:

      

Residential

  $5,820   $25,340   $31,160 

Commercial

   6,648    35,361    42,009 

Construction

   38    260    298 

Commercial and Industrial

   6,134    5,323    11,457 

Consumer

   2,552    111    2,663 

Other

   1,864    3,427    5,291 
  

 

 

   

 

 

   

 

 

 

Total loans

  $23,056   $69,822   $92,878 
  

 

 

   

 

 

   

 

 

 

Loan Approval Procedures and Authority. Community

Progressive Bank’s lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by the board of directors. In the approval process for residential loans, CommunityProgressive Bank assesses the borrower’s ability to repay the loan and the value of the property securing the loan. To assess the borrower’s ability to repay, CommunityProgressive Bank reviews the borrower’s income and expenses and employment and credit history. In the case of commercial real estate loans, CommunityProgressive Bank also reviews projected income, expenses and the viability of the project being financed. CommunityProgressive Bank generally requires appraisals of all real property securing loans. Appraisals are performed by independent licensed appraisers. Community Bank’sThe loan approval policies and limits are also established by its board of directors. All loans originated by Community Bank are subject to its underwriting guidelines. Loan approval authorities vary based on loan size.size in the aggregate. Individual officer loan approval authority generally applies to loans of up to $500,000.$600,000 which are secured by real estate. Loans above that amount and up to $1 million may beare approved by the Loan Committee. Loans between $1 millionboard of directors.

Delinquencies and $2 millionClassified Assets

When a borrower fails to remit a required loan payment a late notice is mailed. In addition, telephone calls are made and additional letters may be approvedsent. For loans that are secured by real estate that become 30 days delinquent, a right to cure notice will be mailed stating to the borrower that they have 30 days to cure the default. Once the loan has become 90 or more days delinquent and Progressive Bank has exhausted all reasonable means of curing the delinquency, it is forwarded to Progressive Bank’s attorney to pursue other remedies or to file a mortgage foreclosure complaint. In the event that all collection efforts have not succeeded, then the property will proceed to a sheriff sale to be sold. Collection efforts continue on all loans until it is determined by the Discount Committee. Loans over $2 million must be approved bySenior Vice President – Chief Credit Officer and the Board of Directors.Senior Vice President – Senior Lender that the debt is uncollectable. For commercial loans, the borrower is contacted in an attempt to reestablish the loan to current status and ensure timely payments continue. Collection efforts continue until the loan is 60 days past due, at which time demand payment, default, and/or foreclosure procedures are initiated. Progressive Bank may consider loan workout arrangements with certain borrowers under certain circumstances.

Asset QualityNonperforming Assets and Delinquent Loans.

CBProgressive Bank reviews its loans on a regular basis and generally placeplaces loans on nonaccrual status when either principal or interest is 90 days or more past due. In addition, CBProgressive Bank places loans on nonaccrual status when we doProgressive Bank does not expect to receive full payment of interest or principal. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Loans that are 90 days or more past due may still accrue interest if they are well secured and in the process of collection. Once a loan is placed on nonaccrual status, the borrower must generally demonstrate at least six consecutive months of payment performance before the loan is eligible to return to accrual status.

Management monitors all past due loans and nonperforming assets. Such loans are placed under close supervision, with consideration given to the need for additions to the allowance for loan losses and (if appropriate) partial or full charge-off. At September 30, 2017 and December 31, 2016, Progressive Bank had $320,000 of loans 90 days or more past due that were still accruing interest. Nonperforming assets increased $300,000 million to $3.3 million at September 30, 2017, compared to $3.0 million at December 31, 2016. Management believes the volume of nonperforming assets can be partially attributed to unique borrower circumstances as well as the economy in general.

Real estate acquired through foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until such time as it is sold. When real estate owned is acquired, it is recorded at the lower of the unpaid principal balance of the related loan, or its fair market value, less estimated selling expenses. Any further write-down of real estate owned is charged against earnings. At September 30, 2017 and December 31, 2016, Progressive Bank owned $1.0 million of property classified as real estate owned.

Non-Performing Loans and Non-PerformingNonperforming Assets.The following table sets forth information regarding CB’s non-performing assets.the amounts and categories of Progressive Bank’s nonperforming assets at the dates indicated. Included in nonperforming loans and assets are troubled debt restructurings, which are loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.

 

  At March 31,
2014
  At December 31, 
   2013  2012  2011  2010  2009 
  (Dollars in thousands) 

Non-accrual loans:

      

Real estate loans:

      

Residential

 $334   $339   $1,509   $497   $367   $137  

Commercial

  2,768    2,665    2,669    3,526    180    155  

Construction

  365    365    365    407    412    365  

Commercial, Industrial, and Agricultural loans

  —      —      406    924    924    520  

Consumer loans

  3    17    36    71    49    77  

Other loans

  —      —      —      —      —      —    

Nonaccrual troubled debt restructurings

  —      —      503    —      —      —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total non-accrual loans

  3,470    3,386    5,488    5,425    1,932    1,254  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Accruing loans past due 90 days or more:

      

Real estate loans:

  —      —      —      —      —      —    

Residential

  —      —      —      —      —      —    

Commercial

  —      —      —      —      —      —    

Construction

  —      —      —      —      —      —    

Commercial, Industrial, and Agricultural loans

  —      —      —      —      —      —    

Consumer loans

  —      —      —      —      —      —    

Other loans

  —      —      —      —      —      —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total accruing loans past due 90 days or more

  —      —      —      70    —      —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total of nonaccrual loans and accruing loans 90 days or more past due

  3,470    3,386    5,488    5,495    1,932    1,254  

Troubled debt restructurings, accruing

  536    543    293    —      —      —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total nonperforming loans

  4,006    3,929    5,781    5,495    1,932    1,254  

Real estate owned:

      

Residential

  27    82    629    261    57    141  

Commercial

  54    54    75    —      254    —    

Other

  174    174    224    400    400    400  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate owned

  255    310    928    661    711    541  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Other non-performing assets

  —      —      —      —      —      —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total non-performing assets

  4,261    4,239    6,709    6,156    2,643    1,795  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total non-performing loans to total loans

  1.04  1.04  1.66  1.61  0.61  0.43

Total non-performing assets to total assets

  0.77  0.78  1.23  1.15  0.53  0.39
   (Dollars in Thousands) 
   September 30,  December 31, 
   2017  2016  2015  2014  2013  2012 

Non-accrual loans:

       

Real estate:

       

Residential

  $146  $206  $340  $290  $355  $388 

Commercial

   1,784   1,419   2,649   703   885   3,115 

Commercial and Industrial

   —     —     —     39   26   31 

Consumer

   1   —     —     —     4   17 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Non-accrual Loans

   1,931   1,625   2,989   1,032   1,270   3,551 

Accruing loans past due 90 days or more:

       

Real estate:

       

Residential

   —     —     83   —     —     —   

Commercial

   320   320   —     —     —     —   

Consumer

   —     —     —     14   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Accruing Loans 90 Days or More Past Due

   320   320   83   14   —     —   

Total non-accrual loans and accruing loans 90 days or more past due

   2,251   1,945   3,072   1,046   1,270   3,551 

Troubled debt restructurings, accruing

       

Real estate:

       

Commercial

   —     —     —     41   44   —   

Construction

   —     —     350   350   —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Troubled Debt Restructurings, Accruing

   —     —     350   391   44   —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total nonperforming loans

   2,251   1,945   3,422   1,437   1,314   3,551 

Real estate owned:

       

Real Estate – Commercial

   1,033   1,033   —     —     —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate owned

   1,033   1,033   —     —     —     —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total nonperforming assets

  $3,284  $2,978  $3,422  $1,437  $1,314  $3,551 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Nonperforming loans to total loans

   2.22  2.00  3.42  1.45  1.41  3.57

Nonperforming assets to total assets

   0.96   0.89   0.99   0.43   0.38   1.16 

Interest

The gross interest income that would have been recorded had Progressive Bank’s non-accruing loans been current in accordance with their original terms was $120,000 for the threenine months ended March 31, 2014September 30, 2017 and $135,000 for the year ended December 31, 2013, had nonaccrual2016. Interest income on these loans been current according to their original terms,included in net income amounted to $20,000 and $64,000, respectively. CB recognized $2,000 and $135,000 of interest income on nonaccrual loans$155,000 for the threenine months ended March 31, 2014September 30, 2017 and $13,000 for the year ended December 31, 2013, respectively.2016.

Interest incomeAt September 30, 2017, Progressive Bank had no loans that would have been recorded for the three months ended March 31, 2014 and the year ended December 31 2013, hadwere not currently classified as nonaccrual, 90 days past due or troubled debt restructurings, been current according to their original terms, amounted to $7,000 and $41,000, respectively. CB recognized $8,000 and $38,000but where known information about possible credit problems of interest income on troubled debt restructurings for the three months ended March 31, 2014 and the year ended December 31 2013, respectively.

At March 31, 2014 and December 31, 2013, and except as disclosed in this document, CB knew of no potential problem loans thatborrowers caused itmanagement to have serious doubtsconcerns as to the ability of the borrowers to comply with their existingpresent loan repayment terms.

Delinquent Loans. For information regarding CB’s delinquent loans at March 31, 2014, December 31, 2013terms and 2012, see Note 4 of the Notes to CB’s consolidated financial statements, which appear elsewherethat may result in this document.disclosure as nonaccrual, 90 days past due or troubled debt restructurings.

Classified AssetsAssets..Federal regulations provide that loans Loans and other assets of lesser quality should be classified as “substandard”,“substandard,” “doubtful” or “loss” assets. An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard”Substandard assets include those characterized by the “distinct possibility” that weProgressive Bank will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. CBProgressive Bank designates an asset as “special mention” if the asset has a potential weakness that warrants management’s close attention. For further information regarding CB’sProgressive Bank uses an internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are considered not criticized, and are aggregated as “pass” rated. The criticized rating categories used by management generally follow bank regulatory definitions. The special mention category includes assets that are currently protected but are below average quality, resulting in an undue credit risk, but not to the point of justifying a substandard classification. Loans in the substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. The following table shows the principal amount of special mention and classified assetsloans at March 31, 2014,September 30, 2017 and December 31, 2013 and 2012, see Note 42016.

   (In thousands) 
   September 30,   December 31, 
   2017   2016 

Special Mention

  $—     $—   

Substandard

   2,739    4,176 

Doubtful

   —      —   

Loss

   —      —   
  

 

 

   

 

 

 

Total

  $2,739   $4,176 
  

 

 

   

 

 

 

The total amount of the Notesclassified loans decreased $1.4 million, or 34.4%, to CB’s consolidated financial statements, which appear elsewhere in this document.$2.7 million at September 30, 2017, compared to $4.2 million at December 31, 2016.

Allowance for Loan Losses.

The allowance for loan losses is maintained at a level which, in management’s judgment, isconsidered adequate to absorb creditprovide for losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, and economic conditions. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on impaired loans, it isthat can be reasonably possible that management’s estimate of credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term. The allowance is increased byanticipated. Management performs a provision for loan losses, which is charged to expense and reduced by charge-offs, net of recoveries. Changes in the allowance relating to impaired loans are charged or credited to the provision for loan losses. Management’s periodicquarterly evaluation of the adequacy of the allowance based on losses in the current loan portfolio, which includes an assessment of economic conditions, changes in the nature and volume of the loan portfolio, loan loss experience, volume and severity of past due, classified and nonaccrual loans as well as other loan modifications, quality of Progressive Bank’s loan review system, the degree of oversight by Progressive Bank’s board of directors, existence and effect of any concentrations of credit and changes in the level of such concentrations, effect of external factors, such as competition and legal and regulatory requirements and other relevant factors. Progressive Bank also uses an independent third-party firm to enhance its loan review function. This process includes a thorough evaluation of Progressive Bank’s credit administration systems and personnel. The objective is to have an effective loan review system that provides Progressive Bank with information that will produce a more focused and effective approach in managing credit risk inherent in the loan portfolio. As a part of this process, Progressive Bank uses a system of loan grades to further support the adequacy of the loan loss allowance. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making evaluations. Additions are made to the allowance through periodic provisions charged to income and recovery of principal and interest on loans previously charged-off. Losses of principal are charged directly to the allowance when a loss actually occurs or when a determination is made that the specific loss is probable. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired. A loan is considered to be impaired when, based upon current information and events, it is probable that Progressive Bank will be unable to collect all amounts due for principal and interest according to the original contractual terms of the loan agreement. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration

all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured based on the present value of expected future cash flows discounted at a loan’s effective interest rate, or as a practical expedient, the observable market price, or, if the loan is collateral dependent, the fair value of the underlying collateral. When the measurement of an impaired loan is less than the recorded investment in the loan, the impairment is recorded in a specific valuation allowance through a charge to the provision for loan losses.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, Progressive Bank does not separately identify individual consumer and residential loans for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

The general component covers non-classified loans and is based on historical charge-off experience and expected loss given Progressive Bank’s internal risk rating process. The loan portfolio is stratified into homogeneous groups of loans that possess similar loss characteristics and an appropriate loss ratio adjusted for qualitative factors is applied to the current levelhomogeneous pools of net loanloans to estimate the incurred losses known and inherent risks in the portfolio, adverse situationsloan portfolio. A rolling three-year historical loss ratio is used and applied to homogeneous pools of loans. Management utilizes nine qualitative factors that may affectare adjusted based on changes in the borrower’s ability to repay,lending environment and economic conditions. The qualitative factors include the estimatedfollowing: levels of and trends in delinquencies, non-accruals, and charge-offs; trends within the loan portfolio; changes in lending policies and procedures; experience of lending personnel and management oversight; national and local economic trends; concentrations of credit; external factors such as legal and regulatory requirements; changes in the quality of loan review and Board oversight; and changes in the value of any underlying collateral, and current economic conditions.

Adjustable-rate mortgage loans decreasecollateral. The number of qualitative factors can change. Factors can be added for new risks or taken away if the risk associated with changes in market interest rates by periodically repricing, but involve other risks because, as interest rates increase, the underlying payments by the borrower increase, thus increasing the potentialno longer applies. Each loan type will have its own risk profile and management will evaluate and adjust each qualitative factor for default by the borrower. At the same time, the marketabilityeach loan type quarterly, if necessary. For example, if one area of the underlying collateral mayloan portfolio is experiencing sharp increases in growth, it is likely the qualitative factor for trends in the loan portfolio would be adversely affected by higher interest rates. Upward adjustmentincreased for that loan type. As levels of the contractual interest rate is also limited by the maximum periodicdelinquencies and lifetime interest rate adjustments permitted by our loan documents and, therefore, the effectiveness of adjustable-rate mortgagenon-accrual loans may be limited during periods of rapidly rising interest rates.

Loans secured bydecline for commercial real estate and multi-familycommercial loans it is likely that factor would be reduced.

In terms of Progressive Bank’s loan portfolio, the commercial and industrial loans and commercial real estate generallyloans are deemed to have more risk than the consumer real estate loans and other consumer loans in the portfolio. Commercial and industrial business loans involve larger principal amounts and a greater degreerisk of riskdefault than one- to four-residential mortgage loans of like duration because their repayment generally depends on the successful operation of the borrower’s business and the sufficiency of collateral, if any. Commercial real estate loans generally have higher credit risks compared to one- to four-family residential mortgage loans. Because paymentsloans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, payment experience on loans secured by commercialincome-producing properties typically depends on the successful operation of the related real estate project, and multi-family real estate are often dependent on successful operation or management of the properties, repayment of such loansthis may be affected bysubject to a greater extent to adverse conditions in the real estate market and in the general economy. The commercial loans and commercial real estate loans have historically been responsible for the majority of Progressive Bank’s delinquencies, non-accrual loans, and charge-offs so both of these categories carry higher qualitative factors than consumer real estate loans and other consumer loans. Progressive Bank has historically experienced very low levels of consumer real estate and consumer loan charge-offs so these qualitative factors are set lower than the commercial real estate and commercial and industrial loans.

Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or the economy.

Unlike residential mortgage loans, whichless, generally are madenot classified as impaired. Management determines the significance of payment delays on a case-by-case basis taking into consideration all circumstances concerning the basisloan, the credit worthiness and payment history of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans generally are made onborrower, the basislength of the borrower’s abilitypayment delay, and the amount of shortfall in relation to repay the loan fromprincipal and interest owed.

This specific valuation allowance is periodically adjusted for significant changes in the amount or timing of expected future cash flowflows, observable market price or fair value of the borrower’s business. As a result, the availability of fundscollateral. The specific valuation allowance, or allowance for the repayment of commercial businessimpaired loans, may depend substantially on the successis part of the business itself. Further, any collateral securingtotal allowance for loan losses. Cash payments received on impaired loans that are considered non-accrual are recorded as a direct reduction of the loans may depreciate over time, may be difficultrecorded investment in the loan. When the recorded investment has been fully collected, receipts are recorded as recoveries to appraise and may fluctuate in value.

The following table sets forth activity in CB’sthe allowance for loan losses until the previously charged-off principal is fully recovered. Subsequent amounts collected are recognized as interest income. If no charge-off exists, then once the recorded investment has been fully collected, any future amounts collected would be recognized as interest income. Impaired loans are not returned to accrual status until all amounts due, both principal and interest, are current and a sustained payment history has been demonstrated. Troubled debt restructuring (“TDR”) loans are generally considered impaired loans until such loans are performing in accordance with their modified terms. The general component covers pools of loans by loan class, including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate and consumer loans.

There can be no assurance the allowance for loan losses will be adequate to cover all losses, but management believes the allowance for loan losses in the amount of $1.8 million at September 30, 2017, was adequate to provide for probable losses from existing loans based on information currently available. While management uses available information to provide for loan losses, the ultimate collectability of a substantial portion of the loan portfolio, and the need for future additions to the allowance, will be based on changes in economic conditions and other relevant factors. As such, an adverse change in economic activity could reduce cash flows for both commercial and individual borrowers, which would likely cause Progressive Bank to experience increases in problem assets, delinquencies and losses on loans.

Generally, management considers all nonaccrual and TDR loans and certain renegotiated debt, when it exists, for impairment. The maximum period without payment that typically can occur before a loan is considered for impairment is 90 days. The past due status of loans receivable is determined based on contractual due dates for loan payments.

The allowance for loan losses remained constant at September 30, 2017 compared to December 31, 2016 at $1.8 million. Net charge-offs were $1.1 million for the periods indicated.nine months ended September 30, 2017. The allowance for loan losses to nonperforming loans ratio decreased to 78.68% at September 30, 2017, compared to 92.39% at December 31, 2016. The increase was due to an increase in nonperforming loans, mainly attributed to an increase in non-accrual loans.

Although Progressive Bank maintains its allowance for loan losses at a level that it considers to be adequate to provide for potential losses, there can be no assurance that such losses will not exceed the estimated amounts or that Progressive Bank will not be required to make additions to the allowance for loan losses in the future. Future additions to Progressive Bank’s allowance for loan losses and changes in the related ratio of the allowance for loan losses to nonperforming loans are dependent upon the economy, changes in real estate values and interest rates, the view of the regulatory authorities toward adequate loan loss reserve levels, and inflation. Management will continue to periodically review the entire loan portfolio to determine the extent, if any, to which further additional loan loss provisions may be deemed necessary.

Analysis of the Allowance for Loan Losses. The following table summarizes changes in the allowance for loan losses by loan categories for each period indicated and additions to the allowance for loan losses, which have been charged to operations.

 

   Three Months Ended
March 31,
  Year Ended December 31, 
   2014  2013  2013  2012  2011  2010  2009 
   (Dollars in thousands) 

Allowance at beginning of period

  $5,382   $5,904   $5,904   $5,879   $5,261   $4,185   $4,007  

Provision for loan losses

   —      100    100    450    975    1,650    1,725  

Charge offs:

        

Real estate loans:

        

Residential

   —      143    181    71    120    60    38  

Commercial

   —      436    555    103    4    22    —    

Construction

   —      —      —      —      —      —      1,297  

Commercial, Industrial, and Agricultural loans

   —      —      109    255    99    438    183  

Consumer loans

   36    26    96    167    172    193    275  

Other loans

   —      —      —      —      186    —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total charge-offs

   36    605    941    596    581    713    1,793  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Recoveries:

        

Real estate loans:

        

Residential

   1    —      86    49    7    17    24  

Commercial

   —      14    69    —      5    —      —    

Construction

   —      —      —      —      —      —      —    

Commercial, Industrial, and Agricultural loans

   1    —      68    50    146    40    134  

Consumer loans

   24    33    96    72    66    82    88  

Other loans

   —      —      —      —      —      —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total recoveries

   26    47    319    171    224    139    246  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (charge-offs) recoveries

   (10  (558  (622  (425  (357  (574  (1,547
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance at end of period

  $5,372   $5,446   $5,382   $5,904   $5,879   $5,261   $4,185  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance to non-performing loans outstanding at the end of the period

   134.10  132.93  136.98  102.13  106.99  272.31  333.73

Allowance to total gross loans outstanding at the end of the period

   1.39  1.58  1.42  1.70  1.73  1.67  1.43

Net (charge-offs) recoveries to average loans outstanding during the period

   —    0.16  0.17  0.12  0.11  0.19  0.55
   (Dollars in thousands) 
   Nine Months
Ended
September 30,
  Years Ended December 31, 
   2017  2016  2015  2014  2013  2012 

Balance at beginning of period

  $1,797  $1,798  $1,813  $1,865  $2,181  $2,504 

Provision for loan losses

   1,075   —     30   —     (400  (248

Charge-offs:

       

Real estate:

       

Residential

   —     (2  —     —     —     —   

Commercial

   (1,098  —     —     (36  —     (87

Commercial and Industrial

   —     (3  (57  (5  —     —   

Consumer

   (6  (1  (9  (16  (12  (9
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Charge-offs

   (1,104  (6  (66  (57  (12  (96

Recoveries:

       

Real estate:

       

Residential

   —     1   —     —     —     —   

Commercial

   —     —     2   —     84   15 

Commercial and Industrial

   —     2   5   —     —     —   

Consumer

   3   2   14   5   12   6 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Recoveries

   3   5   21   5   96   21 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net charge-offs

   (1,101  (1  (45  (52  84   (75
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at end of period

  $1,771  $1,797  $1,798  $1,813  $1,865  $2,181 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for loan losses to nonperforming loans

   78.68  92.39  52.54  126.17  141.93  61.42

Allowance for loan losses to total loans

   1.75   1.85   1.80   1.83   2.00   2.19 

Net charge-offs to average loans

   (1.12  (0.00  (0.04  (0.06  0.09   (0.07

Allocation of Allowance for Loan Losses.The following table sets forth the allocation of allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. Management believes that the allowance can be allocated by category only on an approximate basis. The allocation of the allowance for loan losses allocated to eachby category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.any category.

 

     At December 31, 
  At March 31, 2014  2013  2012 
  Allowance
for Loan
Losses
  Percent of
Allowance in
Each

Category to
Total
Allocated
Allowance
  Percent of
Loans in
Category

to Total
Loans
  Allowance
for Loan
Losses
  Percent of
Allowance in
Each

Category to
Total
Allocated
Allowance
  Percent of
Loans in
Category

to Total
Loans
  Allowance
for Loan
Losses
  Percent of
Allowance in
Each

Category to
Total
Allocated
Allowance
  Percent of
Loans in
Category

to Total
Loans
 
  (Dollars in thousands)    

Real estate loans:

         

Residential

 $1,481    28.85  42.45 $1,481    28.79  43.32 $2,215    37.20  41.78

Commercial

  1,703    33.18    29.93    1,703    33.11    25.14    2,051    34.45    27.53  

Construction

  355    6.92    2.70    355    6.90    2.73    326    5.48    3.07  

Commercial,
Industrial, and
Agricultural loans

  1,014    19.75    11.32    1,013    19.69    11.01    1,043    17.52    11.15  

Consumer loans

  580    11.30    15.34    592    11.51    15.59    320    5.35    15.52  

Other loans

  —      —      2.26    —      —      2.21    —      —      0.95  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total allocated
allowance

  5,133    100.00  100.00  5,144    100.00  100.00  5,955    100.00  100.00
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Unallocated

  239      238      (51  
 

 

 

    

 

 

    

 

 

   

Total

 $5,372     $5,382     $5,904    
 

 

 

    

 

 

    

 

 

   
  At December 31, 
  2011  2010  2009 
  Allowance
for Loan
Losses
  Percent of
Allowance in
Each

Category to
Total
Allocated
Allowance
  Percent of
Loans in
Category
to Total
Loans
  Allowance
for Loan
Losses
  Percent of
Allowance in
Each

Category to
Total
Allocated
Allowance
  Percent of
Loans in
Category
to Total
Loans
  Allowance
for Loan
Losses
  Percent of
Allowance in
Each

Category to
Total
Allocated
Allowance
  Percent of
Loans in
Category
to Total
Loans
 
  (Dollars in thousands)    

Real estate loans:

         

Residential

 $902    15.34  38.91 $822    15.70  38.31 $358    8.45  35.83

Commercial

  3,271    55.64    29.18    2,074    39.62    28.90    2,400    56.64    28.17  

Construction

  436    7.42    3.29    547    10.45    3.11    49    1.16    5.64  

Commercial,
Industrial, and
Agricultural loans

  983    16.72    11.74    1,369    26.15    10.49    985    23.25    10.85  

Consumer loans

  287    4.88    15.94    423    8.08    17.47    445    10.50    18.48  

Other loans

  —      —      0.94    —      —      1.72    —      —      1.03  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total allocated
allowance

  5,879    100.00  100.00  5,235    100.00  100.00  4,237    100.00  100.00
  

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

 

Unallocated

  —        27      (52  
 

 

 

    

 

 

    

 

 

   

Total

 $5,879     $5,262     $4,185    
 

 

 

    

 

 

    

 

 

   
       (Dollars in thousands) 
   September 30,  December 31, 
   2017  2016  2015  2014  2013  2012 
   Amount   Percent of
Total
Loans(1)
  Amount   Percent of
Total
Loans(1)
  Amount   Percent of
Total
Loans(1)
  Amount   Percent of
Total
Loans(1)
  Amount   Percent of
Total
Loans(1)
  Amount   Percent of
Total
Loans(1)
 

Real Estate:

 

        

Residential

  $209    31.3 $198    30.6 $237    28.1 $196    29.1 $247    30.6 $219    27.7

Commercial

   1,143    45.4   1,171    45.4   1,067    44.5   1,255    47.3   1,316    47.3   1,748    50.6 

Construction

   6    0.3   13    0.6   18    0.8   66    3.5   15    0.5   6    0.7 

Commercial and Industrial

   331    13.3   322    12.6   351    13.2   128    5.8   125    5.9   102    5.7 

Consumer

   12    3.2   12    2.8   14    2.8   15    2.8   28    3.7   31    5.3 

Other

   70    6.5  81    8.0  111    10.6  153    11.5  134    12.0   75    10.0
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total Allowance for Loan Losses

  $1,771    100.0 $1,797    100.0 $1,798    100.0 $1,813    100.0 $1,865    100.0 $2,181    100.0
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

(1)Represents percentage of loans in each category to total loans.

InvestmentsInvestment Activities

CB’sGeneral.First West Virginia’s current investment policy is established bypermits it to invest in U.S. treasuries, federal agency securities, mortgage-backed securities, investment grade corporate bonds, municipal bonds, short-term instruments, and other securities. The investment policy also permits investments in certificates of deposit, bankers’ acceptances, commercial paper and federal funds. First West Virginia’s current investment policy generally does not permit investment in stripped mortgage-backed securities, short sales, derivatives, or other high-risk securities. First West Virginia does not have any securities of issuers, other than U.S. government agencies and corporations, which exceed 10% of stockholders’ equity.

The accounting rules require that, at the time of purchase, First West Virginia designate a security as held to maturity, available-for-sale, or trading, depending on its Boardability and intent. Securities available for sale are reported at fair value, while securities held to maturity are reported at amortized cost. First West Virginia’s entire portfolio was designated as available-for-sale as of Directors. September 30, 2017.

The policy emphasizes safetyportfolio consists primarily of U.S. government and agency securities, municipal bonds, and mortgage-backed securities classified as available for sale. First West Virginia expects the composition of its investment portfolio to continue to change based on liquidity needs associated with loan origination activities. During the year ended December 31, 2016, First West Virginia had no investment securities that were deemed to be other than temporarily impaired.

Liquidity levels may be increased or decreased depending upon the yields on investment alternatives and upon management’s judgment as to the attractiveness of the yields then available in relation to other opportunities and its expectation of the level of yield that will be available in the future, as well as management’s projections as to the short-term demand for funds to be used in First West Virginia’s loan originations and other activities.

U.S. Government and Agency Securities. At September 30, 2017, First West Virginia held U.S. government and agency securities with a fair value of $56.6 million compared to $54.9 million at December 31, 2016. While these securities generally provide lower yields than other investments, such as mortgage-backed securities, First West Virginia’s current investment strategy is to maintain investments in such instruments to the extent appropriate for liquidity requirements, potential returns, cash flow targets,purposes, as collateral for borrowings, and consistencyfor prepayment protection.

Municipal Bonds. At September 30, 2017, First West Virginia held available-for-sale municipal bonds with oura fair value of $37.4 million compared to $34.4 million at December 31, 2016. Municipal bonds may be a general obligation of the issuer or secured by specific revenues. The majority of First West Virginia’s municipal bonds are general obligation bonds, which are backed by the full faith and credit of the municipality, paid off with funds from taxes and other fees, and have ratings (when available) of A or above. First West Virginia also invests in a limited amount of revenue municipal bonds, which are used to fund projects that will eventually create revenue directly, such as a water and sewer projects and public improvement projects.

Mortgage-Backed Securities.First West Virginia invests in mortgage-backed securities insured or guaranteed by the U.S. government or government-sponsored enterprises. These securities typically consist of mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac. The fair value of First West Virginia’s mortgage-backed securities portfolio was $110.4 million and $107.1 million at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, nearly all of the mortgage-backed securities in the investment portfolio had fixed rates of interest.

Mortgage-backed securities are created by pooling mortgages and issuing a security with an interest rate that is less than the interest rate on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multifamily mortgages, although First West Virginia invests primarily in mortgage-backed securities backed by one- to four-family mortgages. The issuers of such securities pool and resell the participation interests in the form of securities to investors. Some securities pools are guaranteed as to payment of principal and interest to investors. Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed securities are more liquid than individual mortgage loans because there is an active trading market for such securities. In addition, mortgage-backed securities may be used to collateralize First West Virginia’s specific liabilities and obligations. Finally, mortgage-backed securities are assigned lower risk-weightings for purposes of calculating risk-based capital.

Investments in mortgage-backed securities involve a risk management strategy.that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or acceleration of any discount relating to such interests, thereby affecting the net yield on First West Virginia’s securities. First West Virginia periodically reviews current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

Investment Securities Portfolio. The following table sets forth the amortized cost and estimated fair valuecomposition of CB’sFirst West Virginia’s investment securities portfolio at the dates indicated.

 

       At December 31, 
   At March 31, 2014   2013   2012   2011 
   Amortized
Cost
   Estimated
Fair Value
   Amortized
Cost
   Estimated
Fair Value
   Amortized
Cost
   Estimated
Fair Value
   Amortized
Cost
   Estimated
Fair Value
 
   (In thousands) 

Securities available-for-sale:

                

Debt securities:

                

U.S. Government and agency securities

  $64,595    $64,100    $77,559    $76,294    $106,034    $106,178    $78,507    $78,585  

Obligations of states and political subdivisions

   49,606     50,004     50,481     50,502     45,592     47,199     49,580     51,477  

U.S. government agency mortgage-backed securities

   5,665     5,703     5,916     5,926     1,342     1,419     1,762     1,871  

Equity securities:

                

Mutual fund

   500     505     500     535     500     535     500     532  

Other

   519     579     510     553     —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available-for-sale

  $120,885    $120,891    $134,966    $133,810    $153,468    $155,331    $130,349    $132,465  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

       At December 31, 
   At March 31, 2014   2013   2012   2011 
   Amortized
Cost
   Estimated
Fair Value
   Amortized
Cost
   Estimated
Fair Value
   Amortized
Cost
   Estimated
Fair Value
   Amortized
Cost
   Estimated
Fair Value
 
   (In thousands) 

Securities held-to-maturity:

                

Obligations of states and political subdivisions

  $511    $511    $1,006    $1,009    $2,032    $2,068    $3,286    $3,356  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total securities held-to-maturity

  $511    $511    $1,006    $1,009    $2,032    $2,068    $3,286    $3,356  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At March 31, 2014 and December 31, 2013, CB did not have any investment securities (other than securities of U.S. Government and U.S. Government agencies and corporations) that exceeded 10% of CB’s shareholders’ equity at such dates.

   (In thousands) 
   September 30   December 31, 
   2017   2016   2015   2014 
   Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
 

Securities available-for-sale

                

U.S. Government Agencies

  $57,745   $56,576   $56,743   $54,877   $57,250   $56,902   $44,595   $44,006 

Obligations of States and Political Subdivisions

   36,711    37,437    33,936    34,402    30,221    31,956    40,349    42,422 

Mortgage-Backed Securities

   111,649    110,392    109,336    107,119    115,432    114,519    110,626    110,443 

Equity Securities - Mutual Funds

   667    697    664    679    160    187    171    208 

Equity Securities - Other

   103    142    103    129    20    15    —      —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available-for-sale

  $206,875   $205,244   $200,782   $197,206   $203,083   $203,579   $195,741   $197,079 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Portfolio Maturities and Yields.The composition and maturities of theFirst West Virginia’s investment securities portfolio at March 31, 2014 and December 31, 2013,September 30, 2017, are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the effectimpact of scheduled principal repayments, prepayments or early redemptions that may occur. 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.

 

  One Year or Less  After One Year
Through Five Years
  After Five Years
Through Ten Years
  After Ten Years  Total 
  Amortized
Cost
  Weighted
Average
Yield
  Amortized
Cost
  Weighted
Average
Yield
  Amortized
Cost
  Weighted
Average
Yield
  Amortized
Cost
  Weighted
Average
Yield
  Amortized
Cost
  Fair
Value
  Weighted
Average
Yield
 
  (Dollars in thousands) 

Securities available-for-sale:

           

Debt securities:

           

U.S. Government and agency securities

 $—      —   $16,038    0.93 $40,725    1.32 $7,833    0.94 $64,596   $64,596    1.17

Obligations of states and political subdivisions

  4,897    3.08  5,503    2.00  17,049    2.37  21,882    3.23  49,331    49,725    2.78

Mortgage-backed securities

  —      —      233    5.55  4,873    1.77  558    2.33  5,664    5,703    1.98

Equity securities:

           

Mutual fund

  —      —      —      —      —      —      500    2.15  500    505    2.15

Other

  —      —      —      —      —      —      794    6.71  794    858    6.71
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Total securities available-for-sale

 $4,897    3.08 $21,774    1.25 $62,647    1.64 $31,567    2.72 $120,885   $120,891    1.91
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Securities held-to-maturity:

           

Obligations of states and political subdivisions

 $—      —     $511    1.15 $—      —     $—      —     $511   $511    1.15
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Total securities held-to-maturity

 $—      —     $511    1.15 $—      —     $—      —     $511   $511    1.15
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  
                (Dollars in thousands)             
              More Than Five Years             
  One Year or Less  Through Five Years  Through Ten Years  More Than Ten Years  Total 
     Weighted     Weighted     Weighted     Weighted     Weighted 
  Carrying  Average  Carrying  Average  Carrying  Average  Carrying  Average  Carrying  Average 
  Value  Yield  Value  Yield  Value  Yield  Value  Yield  Value  Yield 

U.S. Government Corporations and Agencies

 $2   0.66 $14,625   1.77 $41,949   2.06 $—     —   $56,576   1.98

Obligations of States and Political Subdivisions

  —     —     2,130   5.20   14,908   5.17   20,399   4.23   37,437   4.66 

Mortgage-Backed Securities

  —     —     14   4.82   68   2.87   110,310   2.15   110,392   2.15 

Equity Securities — Mutual Funds

  —     —     —     —     —     —     697   1.96   697   1.96 

Equity Securities — Other

  —      —     —     —     —     142   4.22   142   4.22 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total available-for- sale securities

 $2   0.66 $16,769   2.21 $56,925   2.88 $131,548   2.47 $205,244   2.56
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  One Year or Less  After One Year
Through Five Years
  After Five Years
Through Ten Years
  After Ten Years  Total 
  Amortized
Cost
  Weighted
Average
Yield
  Amortized
Cost
  Weighted
Average
Yield
  Amortized
Cost
  Weighted
Average
Yield
  Amortized
Cost
  Weighted
Average
Yield
  Amortized
Cost
  Fair
Value
  Weighted
Average
Yield
 
  (Dollars in thousands) 

Securities available-for-sale:

           

Debt securities:

           

U.S. Government and agency securities

 $—      —     $23,067    0.85 $44,575    1.19 $9,918    0.95 $77,560   $76,294    1.06

Obligations of states and political subdivisions

  3,125    4.40  5,859    1.96  17,176    2.24  24,320    3.18  50,480    50,502    2.79

Mortgage-backed securities

  —      —      293    5.55  5,059    1.75  564    2.39  5,916    5,926    2.00

Equity securities:

           

Mutual fund

  —      —      —      —      —      —      500    2.39  500    535    2.39

Other

  —      —      —      —      —      —      510    8.12  510    553    8.12
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Total securities available-for-sale

 $3,125    4.40 $29,219    1.12 $66,810    1.50 $35,812    2.61 $134,966   $133,810    1.78
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Securities held-to-maturity:

           

Obligations of states and political subdivisions

 $—      —     $513    1.15 $—      —     $493    5.05 $1,006   $1,009    3.06
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Total securities held-to-maturity

 $—      —     $513    1.15 $—      —     $493    5.05 $1,006   $1,009    3.06
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Sources of Funds

General.Deposits have traditionally been CB’sProgressive Bank’s primary source of funds for use in lending and investment activities. CBFirst West Virginia also uses borrowings, primarily Federal Home Loan BankFHLB of Pittsburgh advances, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds. In addition, funds are derived from scheduled loan payments, investment maturities, loan prepayments, loan sales, retained earnings and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

Deposits. Deposits are generated primarily from residentscustomers within CB’sProgressive Bank’s market area. CBProgressive Bank offers a selection of deposit accounts. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate.

Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals.

The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. The variety of deposit accounts offered allows CBProgressive Bank to be competitive in obtaining funds and responding to changes in consumer demand. Based on experience, CBmanagement believes that itsProgressive Bank’s deposits are relatively stable. However, the ability to attract and maintain deposits and the rates paid on these deposits has been and will continue to be significantly affected by market conditions.

The following tables set forth the distribution of Progressive Bank’s average deposit accounts, by account type, for the years indicated.

                 (Dollars in Thousands)                
  For the Nine Months
Ended September 30,
  For the Years Ended December 31, 
  2017  2016  2015  2014 
  Average
Balance
  Percent  Weighted
Average
Rate
  Average
Balance
  Percent  Weighted
Average
Rate
  Average
Balance
  Percent  Weighted
Average
Rate
  Average
Balance
  Percent  Weighted
Average
Rate
 

Non-Interest Bearing Demand Deposits

 $56,296   19.0  —   $41,969   15.1  —   $40,855   14.9  —   $47,037   16.9  —  

Interest Bearing Demand Deposits

  61,942   20.9   0.07   59,174   21.3   0.11   57,521   21.0   0.13   53,774   19.4   0.12 

Savings Accounts

  123,080   41.6   0.14   119,362   43.0   0.24   115,978   42.2   0.31   111,752   40.3   0.33 

Time Deposits

  54,549   18.5   0.83   57,173   20.6   0.85   60,239   21.9   0.93   64,914   23.4   1.04 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Deposits

 $295,867   100.0  0.23 $277,678   100.0  0.30 $274,593   100.0  0.36 $277,477   100.0  0.40
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The following table sets forth time deposits classified by interest rate as of the dates indicated.

       (Dollars in thousands)     
   September 30,   December 31, 
   2017   2016   2015   2014 

Interest Rate Range:

        

Less than 0.25%

  $9,736   $4,629   $1,921   $694 

0.25% to 0.50%

   14,342    20,645    23,077    26,296 

0.51% to 1.00%

   6,639    7,348    11,920    14,446 

1.01% to 2.00%

   21,835    21,873    17,520    10,129 

2.01% to 3.00%

   792    785    4,517    10,037 

3.01% to 4.00%

   —      —      —      556 

4.01% or greater

   207    214    214    214 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Time Deposits

  $53,551   $55,494   $59,169   $62,372 
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table sets forth, by interest rate ranges and scheduled maturity, information concerning First West Virginia’s time deposits at September 30, 2017.

   (Dollars in thousands) 
   September 30, 2017 
   Period to Maturity 
   Less Than   More Than   More Than   More Than   More Than           Percent 
   Or Equal to   One to   Two to   Three to   Four to   More Than       of 
   One Year   Two Years   Three Years   Four Years   Five Years   Five Years   Total   Total 

Interest Rate Range:

                

Less than 0.25%

  $9,704   $32   $—     $—     $—     $ —     $9,736    18.2

0.25% to 0.50%

   9,889    3,915    538    —      —      —      14,342    26.8 

0.51% to 1.00%

   3,905    1,992    558    184    —      —      6,639    12.4 

1.01% to 2.00%

   1,750    876    7,235    6,817    5,143    14    21,835    40.7 

2.01% to 3.00%

   700    —      —      —      —      92    792    1.5 

3.01% to 4.00%

   —      —      —      —      —      —      —      0.0 

4.01% or greater

   100    102    5    —      —      —      207    0.4 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $26,048   $6,917   $8,336   $7,001   $5,143   $106   $53,551    100.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of certificatesSeptember 30, 2017, the aggregate amount of depositoutstanding time deposits in amounts greater than or equal to $100,000 was approximately $19.4 million. The following table sets forth the maturity of those time deposits as of the dates indicated.September 30, 2017.

 

  At March 31,
2014
  At December 31,
2013
 
 (In thousands) 

Maturity Period:

  

Three months or less

 $4,999   $4,884  

Over three through six months

  1,223    1,919  

Over six through twelve months

  5,145    6,420  

Over twelve months

  23,207    22,080  
 

 

 

  

 

 

 

Total

 $34,574   $35,303  
 

 

 

  

 

 

 
   (In Thousands) 
   September 30, 2017 

Three Months or Less

  $2,961 

Over Three Months to Six Months

   3,471 

Over Six Months to One Year

   2,323 

Over One Year to Three Years

   5,820 

Over Three Years

   4,777 
  

 

 

 

Total

  $19,352 
  

 

 

 

Borrowings.First West Virginia’s borrowings consist of advances from the FHLB, funds borrowed under repurchase agreements and federal funds purchased.

The FHLB functions as a central reserve bank providing credit for Progressive Bank and other member savings associations and financial institutions. As a member, Progressive Bank is required to own capital stock in the FHLB and is authorized to apply for advances on the security of such stock and certain of its home mortgages, provided certain standards related to creditworthiness have been met. Progressive Bank’s FHLB borrowings are secured by a blanket lien by the FHLB on certain residential real estate loans or securities with a market value at least equal to the outstanding balances. At September 30, 2017, Progressive Bank had a maximum borrowing capacity with the FHLB of up to $52.0 million. Progressive Bank had FHLB borrowings of $2.2 million and $3.2 million at September 30, 2017 and December 31, 2016, respectively, which were all long-term borrowings.

Securities sold under agreements to repurchase represent business deposit customers whose funds, above designated target balances, are transferred into an overnight interest-earning investment account by purchasing securities from Progressive Bank’s investment portfolio under an agreement to repurchase. Progressive Bank may be required to provide additional collateral based on the fair value of the underlying securities. Short-term borrowings also consist of federal funds purchased. At September 30, 2017 and December 31, 2016, there were no federal funds purchased.

The following table sets forth information concerning balances and interest rates on borrowingsProgressive Bank’s FHLB advances at the dates and for the periods indicated.

 

   Three Months Ended
March 31,
  Year Ended December 31, 
   2014  2013  2013  2012  2011 
   (Dollars in thousands) 

Average amount outstanding during the period:

      

Federal funds purchased

  $1,246   $271   $672   $71   $297  

Securities sold under agreements to repurchase

   13,864    22,298    21,034    28,124    31,988  

FHLB advances

   3,611    7,000    5,915    9,647    13,248  

Weighted average interest rate during the period:

      

Federal funds purchased

   0.45  0.45  0.47  0.47  0.47

Securities sold under agreements to repurchase

   0.27    0.26    0.27    0.30    0.58  

FHLB advances

   3.46    3.64    3.53    3.75    3.73  

Balance outstanding at end of period:

      

Federal funds purchased

  $—     $—     $—     $—     $—    

Securities sold under agreements to repurchase

   13,550    19,464    15,384    23,374    28,018  

FHLB advances

   3,000    7,000    4,000    7,000    11,461  

Weighted average interest rate at end of period:

      

Federal funds purchased

   0.25  0.25  0.25  0.47  0.47

Securities sold under agreements to repurchase

   0.26    0.25    0.25    0.27    0.37  

FHLB advances

   3.65    3.62    3.29    3.63    2.59  

Maximum amount outstanding at any month-end:

      

Federal funds purchased

   1,850    871    4,100    1,500    3,600  

Securities sold under agreements to repurchase

   13,550    22,419    25,683    34,740    34,467  

FHLB advances

   3,000    7,000    7,000    11,461    11,461  
   (Dollars in thousands) 
   At or For the
Nine Months
Ended
September 30,
  At or For the Years Ended
December 31,
 
   2017  2016  2015  2014 

Balance at End of Period

  $2,213  $3,216  $3,320  $3,420 

Average Balance Outstanding During the Period

  $2,450  $3,274  $3,370  $3,467 

Maximum Amount Outstanding at any Month End

  $3,207  $3,312  $3,412  $3,508 

Weighted Average Interest Rate at End of Period

   4.84  4.80  4.80  4.78

Average Interest Rate During the Period

   5.02  4.80  4.78  4.79

The following table sets forth information concerning balances and interest rates on repurchase agreements at the dates and for the periods indicated.

   (Dollars in thousands) 
   At or For the
Nine Months
Ended
September 30,
  At or For the Years Ended
December 31,
 
   2017  2016  2015  2014 

Balance at End of Period

  $21,058  $22,531  $23,619  $21,051 

Average Balance Outstanding During the Period

  $18,855  $23,299  $24,602  $20,803 

Maximum Amount Outstanding at any Month End

  $21,962  $26,042  $28,048  $23,410 

Weighted Average Interest Rate at End of Period

   0.83  0.80  0.89  0.86

Average Interest Rate During the Period

   0.79  0.83  0.88  0.82

ManagementManagement’s Discussion and Analysis of Market RiskFinancial Condition and Results of Operations of First West Virginia

This discussion and analysis reflects First West Virginia’s consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of its financial condition and results of operations. The information in this section as of and for the three and nine months ended September 30, 2017 has been derived from the unaudited consolidated financial statements of First West Virginia. The information in this section as of and for the years ended December 31, 2016 and 2015 has been derived from the audited consolidated financial statements of First West Virginia. The unaudited and audited consolidated financial statements appear elsewhere in this joint proxy statement/prospectus. You should read the information in this section in conjunction with the business and financial information regarding First West Virginia and the financial statements provided in this joint proxy statement/prospectus.

GeneralForward-Looking Statements.

This discussion contains certain “forward-looking statements” within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on First West Virginia’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 majorityability of CB’sFirst West Virginia’s customers to make scheduled loan payments;

Loan delinquency rates;

First West Virginia’s ability to manage the risks involved in its business;

Inflation, market and monetary fluctuations;

First West Virginia’s ability to control costs and expenses; and

Changes in federal and state legislation and regulation applicable to First West Virginia’s business.

First West Virginia uses the current statutory federal tax rate of 34.0% and state tax rate of 6.5% to value its deferred tax assets and liabilitiesliabilities. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (P.L. 115-97), a tax reform law that includes a reduction in the U.S. corporate income tax rate. First West Virginia management expects that First West Virginia will 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.

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

Overview

First West Virginia’s results of operations depend primarily on its net interest income. Net interest income is the difference between the interest income First West Virginia earns on its interest-earning assets and the interest it pays on its interest-bearing liabilities. First West Virginia’s results of operations also are affected by its provisions for loan losses, noninterest income and noninterest expense. Noninterest income consists primarily of service charges and other fees on deposit accounts, net gains on available-for-sale securities, and other income. Noninterest expense consists primarily of expenses related to salaries and employee benefits, occupancy and expense of premises, and other expenses.

Financial institutions like First West Virginia, in general, are significantly affected by economic conditions, competition, and the monetary in nature. Consequently, CB’s most significant formand fiscal policies of market risk isthe federal government. Lending activities are influenced by the demand for and supply of housing, competition among lenders, interest rate risk. CB’s assets, consisting primarilyconditions, and funds availability. First West Virginia’s operations and lending are principally concentrated in the northern panhandle of mortgage loans,West Virginia market area.

Critical Accounting Policies

First West Virginia’s accounting policies are integral to understanding the results reported in its financial statements. First West Virginia’s accounting policies are described in detail in Note 1 of First West Virginia’s Consolidated Financial Statements, included elsewhere in this joint proxy statement/prospectus. Critical accounting policies are those that involve significant judgments and assumptions by management and that have, longer maturities than its liabilities, consisting primarily of deposits. Asor could have, a result, a principal partmaterial impact on First West Virginia’s income or the carrying value of its business strategy isassets. Detailed policies and control procedures have been established and are intended to manage interest rate riskensure valuation methods are well controlled and reduceapplied consistently from period to period. First West Virginia’s critical accounting policies are those related to its allowance for loan losses, the exposureevaluation of net interest incomeother-than-temporary impairment of investment securities, the valuation of and its ability to changes in market interest rates. Accordingly, CB’s board of directors has established an Asset/Liability Management Committee, which is responsible for evaluating the interest rate risk inherent in CB’srealize deferred tax assets, and liabilities, for determining the levelmeasurement of risk that is appropriate given CB’s business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the boardfair values of directors. Senior management monitors the level of interest rate risk on a regular basis and the Asset/Liability Management Committee meets of a monthly basis to review its asset/liability policies and position, interest rate risk position and to discuss and implement interest rate risk strategies.financial instruments.

Economic ValueAllowance for Loan Losses. The allowance for loan losses is calculated with the objective of Equity.CB monitors interest ratemaintaining an allowance necessary to absorb credit losses inherent in the loan portfolio. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective, as it requires an estimate of the loss content for each risk through the use of a simulation model that estimatesrating and for each impaired loan, an estimate of the amounts and timing of expected future cash flows, and an estimate of the value of collateral.

First West Virginia has established a systematic method of periodically reviewing the credit quality of the loan portfolio in order to establish an allowance for loan losses. The allowance for loan losses is based on current judgments about the credit quality of individual loans and segments of the loan portfolio. The allowance for loan losses is established through a provision for loan losses based on First West Virginia’s evaluation of the probable losses inherent in the loan portfolio, and considers all known internal and external factors that affect loan collectability as of the reporting date. The evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers, among other matters, the estimated net realizable value or the fair value of the underlying collateral, economic conditions, historical loan loss experience, knowledge of inherent losses in the portfolio that are probable and reasonably estimable and other factors that warrant recognition in providing an appropriate loan loss allowance. Management believes this is a critical accounting policy because this evaluation involves a high degree of complexity and requires it to make subjective judgments that often require assumptions or estimates about various matters.

The allowance for loan losses consists primarily of specific allocations and general allocations. Specific allocations are made for loans that are determined to be impaired. Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral, including adjustments for market conditions and selling expenses. The general allocation is determined by segregating the remaining loans by type of loan, risk weighting and payment history. First West Virginia also analyzes delinquency trends, general economic conditions, and geographic and industry concentrations. This analysis establishes factors that are applied to the loan groups to determine the amount of the general allowance. The principal assumption used in calculating the allowance for loan losses is the estimate of loss for each risk rating. Actual loan losses may be significantly more than the allowance First West Virginia has established, which could have a material negative effect on its financial results.

Goodwill.First West Virginia recorded goodwill in connection with its purchase of a branch from Wheeling National Bank in 2002. The goodwill value is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods.

Goodwill is periodically reviewed for impairment. No impairment losses were recognized in 2016, 2015 or 2014. Additionally, future events could cause management to conclude that impairment indicators exist and that the goodwill is impaired, which would result in First West Virginia recording an impairment loss. Any resulting impairment loss could have a material, adverse impact on First West Virginia’s financial condition and results of operations.

Other-Than-Temporary Impairment. In estimating other-than-temporary impairment of investment securities, securities are evaluated on at least a quarterly basis to determine whether a decline in their value is other-than-temporary. In estimating other-than temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether or not First West Virginia intends to sell or expect that it is more likely than not that it will be required to sell the investment security before an anticipated recovery in fair value. Once a decline in value for a debt security is determined to be other than temporary, the other-than-temporary impairment is separated in (a) the amount of total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to credit loss is recognized in earnings. The amount of other-than-temporary impairment related to other factors is recognized in other comprehensive income (loss).

Valuation of Deferred Tax Assets. In evaluating the ability to realize deferred tax assets, management uses an estimate of future earnings to support its position that the benefit of the deferred tax assets will be realized. These estimates require management to make judgments about its future taxable income that are consistent with the plans and estimates it uses to manage its business. If future income should prove non-existent or less than the amount of the deferred tax assets within the tax years to which they may be applied, the asset may not be realized and First West Virginia’s net income will be reduced.

Fair Value Measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A three-level of fair value hierarchy prioritizes the inputs used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities; includes certain U.S. Treasury and other U.S. Government agency debt that is highly liquid and actively traded in over-the-counter markets.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities (its economicinclude financial instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of equityfair value requires significant management judgment or “EVE”) would changeestimation.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Average Balances and Yields

The following tables present average balance sheets, interest earned on interest bearing assets, interest paid on interest bearing liabilities, average interest rates and interest differentials for the three and nine months ended September 30, 2017 and 2016. Average balance sheet information for the periods ended September 30, 2017 and 2016 was compiled using the daily average balance sheet. Total loans are gross of the allowance for loan losses, net of unearned income and include loans held for sale, if applicable. Loan fees and unearned discounts were included in income for average rate calculation purposes. Non-accrual loans were included in the event of a range of assumed changesaverage balance computations; however, no interest was included in market interest rates. The quarterly reports developed inincome after the simulation model assist CB in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance within CB’s policy guidelines.

The tables below set forth, as of March 31, 2014 and December 31, 2013, the estimated changes in EVE that would result from the designated instantaneous changes in market interest rates. Computations of prospective effects of hypothetical interest rate changes arenon-accrual status classification. Average yields on investment securities available for sale have been calculated based on numerous assumptions including relative levels of market interestamortized cost. Average rates loan prepaymentswere annualized for the three and deposit decay,nine month periods ended September 30, 2017 and should not be relied upon as indicative of actual results.2016.

At March 31, 2014

 

Change in Interest
Rates

(Basis Points) (1)

  Estimated EVE (2)   Estimated Increase (Decrease)
in EVE
 
        Amount          Percent     
(Dollars in thousands) 
+300  $37,627    $(14,984  (28.48)% 
+200   43,977     (8,634  (16.41)% 
+100   50,059     (2,552  (4.85)% 
   52,611     —      —    
(100)   51,015     (1,596  (3.03)% 

At December 31, 2013

 

Change in Interest
Rates

(Basis Points) (1)

  Estimated EVE (2)   Estimated Increase (Decrease)
in EVE
 
        Amount          Percent     
(Dollars in thousands) 
+300  $27,393    $(25,061  (47.78)% 
+200   36,587     (15,867  (30.25)% 
+100   46,374     (6,080  (11.59)% 
   52,454     —      —    
(100)   52,685     231    0.44
   (Dollars in thousands) (Unaudited) 
   Three Months Ended September 30, 
   2017  2016 
   Average
Volume
   Interest   Average
Rate(1)
  Average
Volume
   Interest   Average
Rate(1)
 

Assets:

           

Interest-Earning Assets:

           

Loans, Net

  $100,885   $1,137    4.47 $95,593   $1,115    4.64

Investment Securities

           

Taxable

   189,828    1,044    2.20   178,211    904    2.03 

Exempt From Federal Tax

   18,348    177    3.86   20,317    199    3.92 

Other Interest-Earning Assets

   20,235    78    1.53   22,928    44    0.76 
  

 

 

   

 

 

    

 

 

   

 

 

   

Total Interest-Earning Assets

   329,296    2,436    2.93   317,049    2,262    2.84 

Noninterest-Earning Assets

   21,206       19,951     
  

 

 

      

 

 

     

Total Assets

  $350,502      $337,000     
  

 

 

      

 

 

     

Liabilities and Stockholders’ equity:

           

Interest-Bearing Liabilities:

           

Interest-Bearing Demand Deposits

  $60,127    12    0.08 $57,829    18    0.12

Savings

   122,276    43    0.14   119,627    82    0.27 

Time Deposits

   54,024    112    0.82   56,715    119    0.83 
  

 

 

   

 

 

    

 

 

   

 

 

   

Total Interest-Bearing Deposits

   236,427    167    0.28   234,171    219    0.37 

Repurchase Agreements

   17,934    36    0.80   23,207    47    0.81 

FHLB Borrowings

   2,221    28    5.00   3,255    39    4.77 
  

 

 

   

 

 

    

 

 

   

 

 

   

Total Interest-Bearing Liabilities

   256,582    231    0.36   260,633    305    0.47 
    

 

 

      

 

 

   

Noninterest-Bearing Demand Deposits

   59,008       40,077     

Other Liabilities

   425       883     
  

 

 

      

 

 

     

Total Liabilities

   316,015       301,593     

Stockholders’ Equity

   34,487       35,407     
  

 

 

      

 

 

     

Total Liabilities and Stockholders’ Equity

  $350,502      $337,000     
  

 

 

      

 

 

     

Net Interest Income

    $2,205      $1,957   
    

 

 

      

 

 

   

Net Interest Rate Spread(2)

       2.57      2.37

Net Interest-Earning Assets(3)

  $72,714      $56,416     
  

 

 

      

 

 

     

Return on Average Assets

       0.40       0.59 

Return on Average Equity

       4.11       5.64 

Average Equity to Average Assets

       9.84       10.51 

Average Interest-Earning Assets to

           

Average Interest-Bearing Liabilities

       128.34       121.65 

 

The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the three months ended September 30, 2017 and for the years ended 2016 and 2015, respectively. The effect of this adjustment is presented below.

 

 

Investment Securities

  $208,176   $1,339    2.57 $198,528   $1,236    2.49

Loans

   100,885    1,190    4.68   95,593    1,190    4.95 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Earning Assets

  $329,296   $2,607    3.14  $317,049   $2,470    3.10 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Taxable Equivalent Net Yield on Earning Assets

    $2,376    2.86   $2,165    2.72
    

 

 

   

 

 

    

 

 

   

 

 

 

 

(1)Assumes an instantaneous uniform change in interest rates at all maturities.Annualized.
(2)EVE isNet interest rate spread represents the fair value of CB’sdifference 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.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EVE require making certain assumptions that may or may not reflect the manner in which actual

   (Dollars in thousands) (Unaudited) 
   Nine Months Ended September 30, 
   2017  2016 
   Average
Volume
   Interest   Average
Rate(1)
  Average
Volume
   Interest   Average
Rate(1)
 

Assets:

           

Interest-Earning Assets:

           

Loans, Net

  $98,677   $3,472    4.70 $96,515   $3,367    4.66

Investment Securities

           

Taxable

   191,064    3,163    2.21   176,322    2,737    2.07 

Exempt From Federal Tax

   18,691    544    3.88   23,204    688    3.95 

Other Interest-Earning Assets

   23,484    212    1.21   23,338    123    0.70 
  

 

 

   

 

 

    

 

 

   

 

 

   

Total Interest-Earning Assets

   331,916    7,391    2.98   319,379    6,915    2.89 

Noninterest-Earning Assets

   20,739       19,957     
  

 

 

      

 

 

     

Total Assets

  $352,655      $339,336     
  

 

 

      

 

 

     

Liabilities and Stockholders’ equity:

           

Interest-Bearing Liabilities:

           

Interest-Bearing Demand Deposits

  $61,942    34    0.07 $58,423    53    0.12

Savings

   123,080    128    0.14   119,082    243    0.27 

Time Deposits

   54,549    337    0.83   57,651    369    0.85 
  

 

 

   

 

 

    

 

 

   

 

 

   

Total Interest-Bearing Deposits

   239,571    499    0.28   235,156    665    0.38 

Repurchase Agreements

   18,855    112    0.79   23,107    147    0.85 

FHLB Borrowings

   2,450    92    5.02   3,281    117    4.76 
  

 

 

   

 

 

    

 

 

   

 

 

   

Total Interest-Bearing Liabilities

   260,876    703    0.36   261,544    929    0.47 
    

 

 

      

 

 

   

Noninterest-Bearing Demand Deposits

   56,296       41,824     

Other Liabilities

   625       807     
  

 

 

      

 

 

     

Total Liabilities

   317,797       304,175     

Stockholders’ Equity

   34,858       35,161     
  

 

 

      

 

 

     

Total Liabilities and Stockholders’ Equity

  $352,655      $339,336     
  

 

 

      

 

 

     

Net interest income

    $6,688      $5,986   
    

 

 

      

 

 

   

Net Interest Rate Spread(2)

       2.62      2.42

Net Interest-Earning Assets(3)

  $71,040      $57,835     
  

 

 

      

 

 

     

Return on Average Assets

       0.15       0.57 

Return on Average Equity

       1.54       5.55 

Average Equity to Average Assets

       9.88       10.36 

Average Interest-Earning Assets to

           

Average Interest-Bearing Liabilities

       127.23       122.11 

 

The fully taxable equivalent basis of interest income from obligations of states and political subdivisions has been determined using a combined Federal and State corporate income tax rate of 40% for the nine months ended September 30, 2017 and for the years ended 2016 and 2015, respectively. The effect of this adjustment is presented below.

 

 

Investment Securities

  $209,755   $4,070    2.59 $199,526   $3,884    2.60

Loans

   98,677    3,637    4.93   96,515    3,600    4.98 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Earning Assets

  $331,916   $7,919    3.19  $319,379   $7,607    3.18 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Taxable Equivalent Net Yield on Earning Assets

 

  $7,216    2.91   $6,678    2.79
    

 

 

   

 

 

    

 

 

   

 

 

 

(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.

The following table sets forth average balance sheets, average yields and costs, respondand certain other information for the years indicated. Tax-equivalent yield adjustments have been made for tax exempt loan and securities income utilizing a combined federal and state tax corporate income tax rate of 40%. All average balances are daily average balances. Non-accrual loans are included in the computation of average balances only. 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.

   (Dollars in thousands) 
   Years Ended December 31, 
   2016  2015  2014 
   Average
Balance
   Interest
and
Dividends
   Yield/
Cost
  Average
Balance
   Interest
and
Dividends
   Yield/
Cost
  Average
Balance
   Interest
and
Dividends
   Yield/
Cost
 

Assets:

                

Interest-Earning Assets:

                

Loans, Net

  $96,525   $4,777    4.95 $102,227   $6,259    6.12 $94,103   $5,135    5.46

Investment Securities

                

Taxable

   177,679    3,692    2.08  162,476    3,139    1.93  151,020    2,880    1.91

Tax Exempt

   22,235    1,458    6.56  30,940    2,012    6.50  48,551    3,023    6.23

Other Interest-Earning Assets

   23,003    153    0.67  21,076    116    0.55  21,313    104    0.49
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Interest-Earning Assets

   319,442    10,080    3.16  316,719    11,526    3.64  314,987    11,142    3.54

Noninterest-Earning Assets

   19,992       20,411       20,528     
  

 

 

      

 

 

      

 

 

     

Total Assets

  $339,434      $337,130      $335,515     
  

 

 

      

 

 

      

 

 

     

Liabilities and Stockholders’ equity:

                

Interest-Bearing Liabilities:

                

Interest-Bearing Demand Deposits

  $59,174    65    0.11 $57,521    72    0.13 $53,774    66    0.12

Savings

   119,362    288    0.24  115,978    364    0.31  111,752    368    0.33

Money Market

   —      —      0.00  —      —      0.00  —      —      0.00

Time Deposits

   57,173    487    0.85  60,239    563    0.93  64,914    677    1.04
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Interest-Bearing Deposits

   235,709    840    0.36  233,738    999    0.43  230,440    1,111    0.48

Repurchase Agreements

   23,300    194    0.83  24,602    217    0.88  20,804    172    0.83

Federal Home Loan Bank Borrowings

   3,274    157    4.80  3,370    161    4.78  3,467    166    4.79
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total Interest-Bearing Liabilities

   262,283    1,191    0.45  261,710    1,377    0.53  254,711    1,449    0.57

Noninterest-Bearing Liabilities

   41,969       40,855       47,037     
  

 

 

      

 

 

      

 

 

     

Total Liabilities

   304,252       302,565       301,748     

Stockholders’ Equity

   35,182       34,565       33,767     
  

 

 

      

 

 

      

 

 

     

Total Liabilities and Stockholders’ Equity

  $339,434      $337,130      $335,515     
  

 

 

      

 

 

      

 

 

     

Net Interest Income

    $8,889      $10,149      $9,693   
    

 

 

      

 

 

      

 

 

   

Net Interest Rate Spread(1)

       2.71      3.11      2.97

Net Interest-Earning Assets(2)

  $57,159      $55,009      $60,276     
  

 

 

      

 

 

      

 

 

     

Net Interest Margin(3)

       2.78      3.20      3.08

Average Interest-Earning Assets to

                

Average Interest-Bearing Liabilities

       121.79      121.02      123.66

(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. Interest income and yields are on a fully tax equivalent basis utilizing a combined federal and state corporate income tax rate of 40%.

Rate/Volume Analysis

The following tables present the effects of changing rates and volumes on First West Virginia’s 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% and a state tax rate of 6%. 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.

   (In thousands) (Unaudited) 
   Three Months Ended September 30, 2017
Compared To
Three Months Ended September 30, 2016
 
   Increase (Decrease) Due to 
   Volume   Rate   Total 

Interest and Dividend Income:

      

Loans, net

  $67   $(67  $—   

Investment Securities:

      

Taxable

   61    79    140 

Exempt From Federal Tax

   (31   (6   (37

Other Interest-Earning Assets

   (6   40    34 
  

 

 

   

 

 

   

 

 

 

Total Interest-Earning Assets

   91    46    137 
  

 

 

   

 

 

   

 

 

 

Interest Expense:

      

Deposits

   2    (54   (52

Repurchase Agreements

   (10   (1   (11

FHLB Borrowings

   (13   2    (11
  

 

 

   

 

 

   

 

 

 

Total Interest-Bearing Liabilities

   (21   (53   (74
  

 

 

   

 

 

   

 

 

 

Change in Net Interest Income

  $112   $99   $211 
  

 

 

   

 

 

   

 

 

 

   (In thousands) (Unaudited) 
   Nine Months Ended September 30, 2017
Compared To
Nine Months Ended September 30, 2016
 
   Increase (Decrease) Due to 
   Volume   Rate   Total 

Interest and Dividend Income:

      

Loans, net

  $73   $(36  $37 

Investment Securities:

      

Taxable

   234    192    426 

Exempt From Federal Tax

   (219   (21   (240

Other Interest-Earning Assets

   (1   90    89 
  

 

 

   

 

 

   

 

 

 

Total Interest-Earning Assets

   87    225    312 
  

 

 

   

 

 

   

 

 

 

Interest Expense:

      

Deposits

   13    (179   (166

Repurchase Agreements

   (26   (9   (35

FHLB Borrowings

   (31   6    (25
  

 

 

   

 

 

   

 

 

 

Total Interest-Bearing Liabilities

   (44   (182   (226
  

 

 

   

 

 

   

 

 

 

Change in Net Interest Income

  $131   $407   $538 
  

 

 

   

 

 

   

 

 

 

   (In thousands) (Unaudited) 
   Year Ended December 31, 2016
Compared To
Year Ended December 31, 2015
  Year Ended December 31, 2015
Compared To
Year Ended December 31, 2014
 
   Increase (Decrease) Due to  Increase (Decrease) Due to 
   Volume  Rate  Total  Volume  Rate  Total 

Interest and Dividend Income:

       

Loans, net

  $(349 $(1,133 $(1,482 $443  $681  $1,124 

Investment Securities:

       

Taxable

   452   101   553   251   8   259 

Tax-Exempt

   (279  (275  (554  (433  (578  (1,011

Other Interest-Earning Assets

   4   33   37   (16  28   12 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Interest-Earning Assets

   (172  (1,274  (1,446  245   139   384 

Interest Expense:

       

Deposits

   (16  (143  (159  (30  (82  (112

Repurchase Agreements

   (11  (12  (23  31   14   45 

Federal Home Loan Bank Borrowings

   (5  1   (4  (5  —     (5
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Interest-Bearing Liabilities

   (32  (154  (186  (4  (68  (72
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Change in Net Interest Income

  $(140 $(1,120 $(1,260 $249  $207  $456 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comparison of Financial Condition at September 30, 2017 and December 31, 2016

Assets. Total assets increased $7.9 million, or 2.3%, to $343.1 million at September 30, 2017 compared to $335.3 million at December 31, 2016.

Cash and cash equivalents decreased $3.6 million, or 15.7%, to $19.3 million at September 30, 2017 compared to $22.9 million at December 31, 2016.

Investment securities classified as available-for-sale increased $8.0 million, or 4.1%, to $205.2 million at September 30, 2017 compared to $197.2 million at December 31, 2016. This increase was primarily the result of new security purchases funded from principal collected on maturities, prepayments, and calls of securities as well as from deposit growth. In addition, the unrealized loss position improved from $3.6 million at December 31, 2016 to $1.6 million at September 30, 2017.

Loans, net, increased $4.2 million, or 4.4%, to $99.5 million at September 30, 2017 compared to $95.3 million at December 31, 2016. This was primarily due to net loan originations of $1.9 million on residential mortgage loans, $1.9 million on commercial real estate loans, $1.2 million on commercial and industrial loans, and $502,000 on consumer loans, partially offset by net loan payoffs of $297,000 on construction loans and $1.1 million on other loans.

Premises and equipment, net, decreased $369,000, or 4.8%, to $7.3 million at September 30, 2017 compared to $7.6 million at December 31, 2016. This is primarily due to depreciation expense, offset slightly by purchases of premises and equipment.

Liabilities. Total liabilities increased $7.3 million, or 2.4%, to $309.5 million at September 30, 2017 compared to $302.2 million at December 31, 2016.

Total deposits increased $9.7 million, or 3.5%, to $285.4 million at September 30, 2017 compared to $275.7 million at December 31, 2016. There were increases of $11.8 million in noninterest bearing demand deposits and $622,000 in interest bearing demand deposits, partially offset by decreases of $1.9 million in time deposits and $795,000 in savings accounts.

Repurchase agreements decreased $1.5 million, or 6.5%, to $21.1 million at September 30, 2017 compared to $22.5 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 Progressive Bank’s investment portfolio under an agreement to repurchase.

Federal Home Loan Bank borrowings decreased by $1.0 million due to the payoff of one borrowing in the current period.

Stockholders’ Equity.Stockholders’ equity increased $583,000, or 1.8%, to $33.6 million at September 30, 2017 compared to $33.1 million at December 31, 2016. During the period, net income was $401,000 and First West Virginia paid $1.0 million in dividends to stockholders.

Comparison of Financial Condition at December 31, 2016 and December 31, 2015

Assets. Total assets decreased $10.1 million, or 2.9%, to $335.3 million at December 31, 2016, compared to $345.4 million at December 31, 2015.

Investment securities classified as available-for-sale decreased $6.4 million, or 3.1%, to $197.2 million at December 31, 2016, compared to $203.6 million at December 31, 2015. This decrease was primarily the result of maturities, prepayments, and calls of available for sale securities being more than purchases combined in part by the change in value from an unrealized gain position to an unrealized loss position.

Loans, net, decreased $3.0 million, or 3.1%, to $95.3 million at December 31, 2016 compared to $98.3 million at December 31, 2015. This was primarily due to net payoffs and paydowns of $2.9 million on other loans, $900,000 in commercial and industrial loans, $500,000 on commercial real estate loans, $200,000 on construction loans, and $100,000 in consumer loans partially offset by an increase of $1.6 million on residential mortgage loans. The net loan payoffs were utilized to fund investment security purchases during the current period.

Premises and equipment, net, decreased $324,000, or 4.1%, to $7.6 million at December 31, 2016, compared to $8.0 million at December 31, 2015.

Liabilities. Total liabilities decreased $7.8 million, or 2.5%, to $302.2 million at December 31, 2016, compared to $310.0 million at December 31, 2015.

Total deposits decreased $6.6 million, or 2.3%, to $275.7 million at December 31, 2016, compared to $282.3 million at December 31, 2015. The decline in total deposits was primarily due to the decreases of $2.4 million in noninterest bearing demand deposits, $3.1 million in interest bearing demand deposits, and $3.7 million of time deposits, offset in part by the increase of $2.6 million in savings deposits.

Federal funds purchased and repurchase agreements decreased $1.1 million, or 4.6%, to $22.5 million at December 31, 2016, compared to $23.6 million at December 31, 2015. The decrease is primarily due to the decline in the balances maintained by existing business deposit customers. There were no federal funds purchased as of December 31, 2016 or 2015.

Stockholders’ Equity.Stockholders’ equity decreased $2.3 million, or 6.5%, to $33.1 million at December 31, 2016 compared to $35.4 million at December 31, 2015. During the period, net income was $1.6 million and First West Virginia paid $1.4 million in dividends to stockholders.

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

Overview. Net income decreased $145,000, to $357,000, for the three months ended September 30, 2017 compared to $502,000 for the three months ended September 30, 2016. The quarterly results were primarily impacted by the decrease in net gains on available-for-sale securities of $549,000, offset in part by the increase in interest and dividend income and decreases in interest and noninterest expenses.

Net Interest Income. Net interest income increased $248,000, or 12.7%, to $2.2 million for the three months ended September 30, 2017 compared to $2.0 million for the three months ended September 30, 2016.

Interest and dividend income increased $174,000, or 7.7%, to $2.4 million for the three months ended September 30, 2017 compared to $2.3 million for the three months ended September 30, 2016. Interest income on loans increased $22,000 for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. Average loan balances increased by $5.3 million during the current quarter compared to the same period of the prior year. The loan portfolio had a decrease of 17 basis points in yield. Interest income on taxable securities increased $140,000 mainly due to an increase of $11.6 million in the average balance for taxable securities in the current period compared to the same period of the prior year in addition to an increase of 16 basis points in yield. Other interest and dividend income increased $28,000 as a result of increased interest earned with correspondent deposit banks in the current period compared to the same period of the prior year. Interest income on securities exempt from federal tax decreased $22,000 as a result of a decrease of $2.0 million in the average balance and a decrease of 4 basis points in yield.

Interest expense decreased $74,000, or 24.3%, to $231,000 for the three months ended September 30, 2017 compared to $305,000 for the three months ended September 30, 2016. Interest expense on deposits decreased $52,000 due to a decrease in cost of 9 basis points offset in part by an increase in average interest-bearing deposits of $2.3 million. Interest-bearing demand deposits and savings accounts increased while there was a reduction in time deposits. Interest expense on short-term borrowings decreased $11,000 mainly due to an average balance decrease of $5.3 million on securities sold under agreements to repurchase. Interest expense on other borrowed funds decreased $11,000 primarily due to a FHLB long-term borrowing for $943,000 that paid off in the first quarter of 2017.

Provision for Loan Losses. There was no provision for loan losses for the three months ended September 30, 2017 and September 30, 2016. Net charge-offs for the three months ended September 30, 2017 were $4,000 compared to $2,000 of net charge-offs for the three months ended September 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 additional provisions for loan losses.

Noninterest Income. Noninterest income decreased $562,000, or 71.0%, primarily due to the decrease in the net gains on available-for-sale securities of $549,000. Sales of securities are based on a variety of factors including, but not limited to, liquidity, deferred tax asset strategy, and market conditions. Services charges and other fees decreased $17,000 due to a reduction in overdraft charges of deposit accounts. Other operating income increased slightly, by $4,000.

Noninterest Expense.Noninterest expense decreased $142,000, or 6.6%, to $2.0 million for the three months ended September 30, 2017 compared to $2.1 million for the three months ended September 30, 2016. Other operating expenses decreased $110,000 primarily due to decreases of $63,000 in other taxes and $51,000 in advertising expense combined with a decrease of $21,000 in the FDIC assessment as a result of an assessment factor reduction by the FDIC in the computation of the insurance assessment. Partially offsetting these favorable variances was an increase of $35,000 in investment service expense due to less concessions being received. Salaries and employee benefit expenses decreased $22,000 and net occupancy and expense of premises decreased $10,000 during the third quarter of 2017 compared to the same period of the prior year.

Income Tax Expense. Income taxes decreased $27,000 to $77,000 for the three months ended September 30, 2017 compared to $104,000 for the three months ended September 30, 2016. The decrease in income taxes was due to a decrease of $172,000 in pre-tax income.

Results of Operations for the Nine Months Ended September 30, 2017 and 2016

Overview. Net income decreased $1.1 million, to $401,000, for the nine months ended September 30, 2017 compared to $1.5 million for the nine months ended September 30, 2016. Earnings were primarily impacted by the $1.1 million increase in the provision for loan losses which was the result of a significant partial charge-off of one commercial real estate loan. First West Virginia does not believe that this charge-off is indicative of the risks and potential losses in the rest of the loan portfolio. In addition, net gains on available-for sale securities decreased $1.1 million. These variances were offset in part by the increase in interest rates. Inand dividend income and decreases in interest and noninterest expenses.

Net Interest Income. Net interest income increased $702,000, or 11.7%, to $6.7 million for the nine months ended September 30, 2017 compared to $6.0 million for the nine months ended September 30, 2016.

Interest and dividend income increased $476,000, or 6.9%, to $7.4 million for the nine months ended September 30, 2017 compared to $6.9 million for the nine months ended September 30, 2016. Interest income on taxable securities increased $426,000 due to an increase of $14.7 million in the average balance combined with an increase of 14 basis points in yield. Interest income on loans increased $105,000 primarily due to interest recognized on impaired loans. There was an increase in average loans outstanding of $2.2 million and an increase of 4 basis points in yield. Other interest and dividend income increased $74,000 primarily due to increased interest earned with correspondent deposit banks in the current period. Interest income on securities exempt from federal tax decreased $144,000 due a decrease of $4.5 million in the average balance combined with a decrease of 7 basis points in yield.

Interest expense decreased $226,000, or 24.3%, to $703,000 for the nine months ended September 30, 2017 compared to $929,000 for the nine months ended September 30, 2016. Interest expense on deposits decreased $166,000 due to rate decreases offset in part by an increase in average interest-bearing deposits of $4.4 million. Interest-bearing demand deposits and savings accounts increased while there was a reduction in time deposits. Interest expense on short-term borrowings decreased $35,000 mainly due to an average balance decrease of $4.3 million on securities sold under agreements to repurchase. Interest expense on other borrowed funds decreased $25,000 primarily due to a FHLB long-term borrowing for $943,000 that paid off in the first quarter of 2017.

Provision for Loan Losses. The provision for loan losses increased $1.1 for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Net charge-offs for the nine months ended September 30, 2017 were $1.1 million, which was the result of a significant partial charge-off of one commercial real estate loan. First West Virginia does not believe that this regard,charge-off is indicative of the EVE tables presented assume thatrisks and potential losses in the compositionrest of CB’s interest-sensitivethe loan portfolio. Net charge-offs for the nine months ended September 30, 2016 were $4,000. 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.

Noninterest Income. Noninterest income decreased $1.2 million, or 61.0%, to $743,000 for the nine months ended September 30, 2017 compared to $1.9 million at September 30, 2016. There was a $1.1 million decrease in the net gains on available-for-sale securities. Sales of securities are based on a variety of factors including, but not limited to, liquidity, deferred tax asset strategy, and market conditions. Services charges and other fees decreased $32,000 due to a reduction in overdraft charges of deposit accounts. Other operating income decreased by $34,000.

Noninterest Expense.Noninterest expense decreased $17,000, or 0.3%, to $6.2 million for the nine months ended September 30, 2017. Other operating expenses decreased $71,000 primarily due to a decrease of $68,000 in the FDIC assessment as a result of an assessment factor reduction by the FDIC in the computation of the insurance assessment combined with decreases of $60,000 in other taxes, $15,000 in service expense, and $15,000 in charge-offs of deposit accounts including debit card disputes of unauthorized transactions. Partially offsetting these favorable variances was an increase of $87,000 in investment service expense due to less concessions being received and an increase of $21,000 in advertising costs. Salaries and employee benefit expenses increased $31,000 and net occupancy and expense of premises increased $23,000 during the nine months ended September 30, 2017 compared to the same period of the prior year.

Income Tax Expense. Income tax expense decreased $460,000 to a benefit of $228,000 for the nine months ended September 30, 2017 compared to an expense of $232,000 for the nine months ended September 30, 2016. The decrease in income taxes was primarily due to a decrease of $1.5 million in pre-tax income.

Comparison of Operating Results for the Years Ended December 31, 2016 and 2015

Overview.Net income decreased $782,000, or 32.7%, to $1.6 million, for the year ended December 31, 2016, compared to $2.4 million for the year ended December 31, 2015. The decline in net income was primarily the result of a decrease in net interest income, offset in part by the increase in noninterest income combined with the decreases in noninterest expense, provision for loan losses and income tax expense.

Net Interest Income. Net interest income decreased $994,000 or 11.0% to $8.0 million for the year ended December 31, 2016 compared to $9.0 million for the year ended December 31, 2015. Net interest income declined primarily due to the decrease in the interest income on loans, offset in part by the increase in the interest income on investment securities combined with the decreases in the interest expense on deposits, repurchase agreements and FHLB borrowings. The changes in the volume and mix of earning assets and interest-bearing liabilities combined with the changes in the market rates of interest resulted in a taxable equivalent net interest margin of 2.78% for the year ended December 31, 2016, as compared to 3.20% earned for the same period in 2015.

Interest income on loans decreased $1.4 million or 24.4% to $4.5 million for the year ended December 31, 2016 compared to $5.9 million for the year ended December 31, 2015. The average balance of loans decreased $5.7 million which was primarily due to loan payoffs and paydowns. The taxable equivalent yield on loans declined 117 basis points in 2016, from 6.12% in 2015 to 4.95% in 2016. Interest income on investment securities increased $218,000 or 5.0% to $4.6 million for the year ended December 31, 2016 compared to $4.4 million for the year ended December 31, 2015. Interest income on taxable investment securities increased $546,000 primarily from the increase in the average balance. The average volume of taxable investment securities increased $15.2 million primarily from proceeds from the sales and maturities of securities exempt from federal tax, from loan payoffs and paydowns and excess funds. The yield on taxable investment securities increased 15 basis points, from 1.93% in 2015 to 2.08% in 2016 primarily from new investment securities purchases. Interest income on securities exempt from federal tax decreased $328,000 due to redeploying the proceeds from sales and maturities into taxable securities in the current year. There was a decrease of $8.7 million in the average balance on securities exempt from federal tax. The yield on tax exempt investment securities increased six basis points, from 6.50% in 2015 to 6.56% in 2016 primarily from higher yields on the existing securities in the portfolio. Other interest and dividend income increased $45,000 primarily due to an increase in other interest income which was partially offset by a decrease in FHLB stock dividends.

Interest expense decreased $186,000, or 13.5%, to $1.2 million for the year ended December 31, 2016, compared to $1.4 million for the year ended December 31, 2015. Interest expense on deposits decreased $159,000 primarily from a decrease in the average cost of interest-bearing deposits, partially offset by a slight increase in average interest-bearing deposits of $2.0 million. The average cost of interest-bearing deposits fell seven basis points. Interest expense on repurchase agreements decreased $23,000 primarily due to a decrease in average borrowings of $1.3 million and a decrease of five basis points. Interest expense on FHLB borrowings decreased $4,000 due to a decrease in average borrowings of $96,000 partially offset by an increase of two basis points.

Provision for Loan Losses. There was no provision for loan losses for the year ended December 31, 2016 compared to a $30,000 provision for loan losses for the year ended December 31, 2015. Net charge-offs for the year ended December 31, 2016, were $1,000, compared to net charge-offs of $45,000 for the year ended December 31, 2015. Management analyzes the loan portfolio on a quarterly basis to determine the adequacy of the allowance for loan losses, and the need for additional provisions for loan losses and determined no additional current provision was necessary for the year ended December 31, 2016 compared to the year ended December 31, 2015. Total loan volume declined $3.0 million as compared to the prior year. In addition, there was a decrease of $1.5 million in nonperforming loans at year-end as compared to the beginningprior year.

Noninterest Income. Noninterest income increased $39,000, or 1.8%, to $2.2 million for the year ended December 31, 2016, compared to $2.1 million for the year ended December 31, 2015. The increase in noninterest income was primarily due to the increase in service charges and fees earned on deposit accounts and other operating income, offset in part by the decreases in the net gains on sales of investment securities. Service charges and other fees increased $22,000 primarily due to an increase in overdraft fees offset in part by a period remains constant overdecrease in service charges on deposit accounts. Other operating income represents fees from safe deposit box rentals, sales of checkbooks, sales of cashiers’ checks and money orders, utility collections, ATM charges and card fees, credit life commissions, credit card fees and commissions and various other charges and fees related to normal customer banking relationships. Other operating income increased $68,000 or 10.6% for the period being measuredyear ended December 31, 2016 compared to 2015. The net gains on sales of available for sale investment securities decreased $51,000, to $1.1 million for the year ended December 31, 2016, compared to $1.2 million for the year ended December 31, 2015.

Noninterest Expense.Noninterest expenses are comprised of salaries and assumes thatemployee benefits, net occupancy expense and equipment expenses and other operating expenses. Noninterest expense decreased $8,000, or 0.1%, to $8.3 million for the year ended December 31, 2016, compared to $8.3 million for the year ended December 31, 2015. Salaries and employee benefits increased $57,000, primarily due to normal salary increases and an increase in employee benefit expense. Occupancy expense and equipment expenses increased $54,000 primarily due to increases in furniture and fixture expenses, which included repairs and small equipment purchases, other real estate owned expense and furniture and fixture depreciation expense, offset in part by decreases in occupancy expense and real estate taxes. Other operating expense decreased $121,000, primarily due to the decreases in regulatory assessment and deposit insurance, directors’ fees, service expenses, postage and transportation expenses and other expenses. This was partially offset by increases in other taxes, advertising expenses, stationery and supplies expenses.

Income Tax Expense. Income taxes decreased $136,000, to $247,000 for the year ended December 31, 2016, compared to $383,000 for the year ended December 31, 2015. The effective tax rate for the year ended December 31, 2016, was 13.3% compared to 13.8% for the year ended December 31, 2015. The decrease in income taxes was due to a particular changedecrease of $918,000 in net income before income tax expense, offset in part by the decrease in tax exempt income.

Comparison of Operating Results for the Years Ended December 31, 2015 and 2014

Overview.Net income increased $488,000, or 25.6%, to $2.4 million, for the year ended December 31, 2015, compared to $1.9 million for the year ended December 31, 2014.

Net Interest Income. Net interest income represents interest and dividend income less interest expenses. Net interest income increased $855,000, or 10.5%, to $9.0 million for the year ended December 31, 2015, compared to $8.1 million for the year ended December 31, 2014. The increase in net interest income was primarily due to the increase in the interest and dividend income combined with the decrease in interest rates is reflected uniformly acrossexpense.

Interest and dividend income increased $783,000 or 8.2%, to $10.4 million for the yield curve regardlessyear ended December 31, 2015 compared to $9.6 million for the year ended December 31, 2014. Interest income on loans increased $1.1 million due to an increase in average loans outstanding of $8.1 million and increased 66 basis points in yield. Interest income on taxable securities increased $259,000 due to an increase in the average balance of $11.4 million and increased two basis points from new purchases in the portfolio. Interest income on securities exempt from federal tax decreased $607,000 due to deploying proceeds from security sales and maturities into taxable securities. There was a decrease on securities exempt from federal tax of $17.6 million in average balances and an increase of 27 basis points resulting from higher yields on the remaining securities in the portfolio.

Interest expense decreased $72,000, or 5.0%, to $1.4 million for the year ended December 31, 2015, compared to $1.5 million for the year ended December 31, 2014. Interest expense on deposits decreased $112,000 primarily from a five basis point decrease in the average cost of interest-bearing deposits, offset in part by an increase in average interest-bearing deposits of $3.3 million. Interest expense on repurchase agreements increased $45,000 primarily due to an increase in average borrowings of $3.8 million and an increase of five basis points. Interest expense on FHLB borrowings decreased $5,000 due to the decrease in average borrowings of $97,000.

Provision for Loan Losses. The provision for loan losses was $30,000 for the year ended December 31, 2015. There was no provision for loan losses in the year ended December 31, 2014. Net charge-offs for the year ended December 31, 2015, were $45,000, compared to net charge-offs of $52,000 for the year ended December 31, 2014. Management analyzes the loan portfolio on a quarterly basis to determine the adequacy of the durationallowance for loan losses, and the need for any additional provisions for loan losses and determined the current provision was necessary due to the increased loan growth.

Noninterest Income. Noninterest income increased $237,000, or repricing12.6%, to $2.1 million for the year ended December 31, 2015, compared to $1.9 million for the year ended December 31, 2014. The increase in noninterest income was primarily due to the increase in the net gains on sales of specific assetsinvestment securities and liabilities. Accordingly, althoughno other-than-temporary losses on investments being recorded during the EVE tables provide an indication of CB’s interest rate risk exposure at a particular pointyear, offset in time, such measurements are not intended to and do not provide a precise forecast ofpart by the effect of changes in market interest rates on EVE and will differ from actual results.

EVE calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates canservice charges and fees earned on deposit accounts and other operating income. The net gains on sales of available for sale investment securities increased $285,000, to $1.2 million for the year ended December 31, 2015, compared to $900,000 for the year ended December 31, 2014. Service charges and other fees decreased $61,000 primarily due to a decline in overdraft charges which fluctuate based on customer activity. Other operating income represents fees from safe deposit box rentals, sales of checkbooks, sales of cashiers’ checks and money orders, utility collections, ATM charges and card fees, credit life commissions, credit card fees and commissions and various other charges and fees related to normal customer banking relationships. Other operating income decreased $37,000 or 5.5% for the year ended December 31, 2015 compared to 2014.

Noninterest Expense.Noninterest expenses are comprised of salaries and employee benefits, net occupancy expense and equipment expenses and other operating expenses. Noninterest expense increased $255,000 or 3.2%, to $8.3 million for the year ended December 31, 2015, compared to $8.1 million for the year ended December 31, 2014. This increase was primarily due to the fair valuesincrease in salary and employee benefit expenses of CB’s loans, deposits and borrowings.$259,000 due to normal salary increases as well as increases in employee benefit expenses.

Income Tax Expense. Income taxes increased $318,000 to $383,000 for the year ended December 31, 2015, compared to $65,000 for the year ended December 31, 2014. The effective tax rate for the year ended December 31, 2015, was 13.8% compared to 3.3% for the year ended December 31, 2014. The increase in income taxes and effective tax rate was due to an increase of $806,000 in net income before income tax expense and a decrease in tax-exempt income.

Liquidity and Capital Resources

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

CB

First West Virginia 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 banksshort- and short- and

intermediate-term securities. CBFirst West Virginia believes that it had sufficient liquidity at MarchDecember 31, 20142016, to satisfy its short- and long-term liquidity needs at that date.

CB’sFirst West Virginia’s most liquid assets are cash and due from banks, which totaled $27.2$22.9 million at MarchDecember 31, 2014. Securities classified as available-for-sale,2016. Unpledged securities, which provide an additional sourcessource of liquidity, totaled $120.9 million at March 31, 2014.$128.8 million. In addition, at MarchDecember 31, 2014, CB2016, First West Virginia had the ability to borrow up to $173.0$47.2 million from the Federal Home Loan BankFHLB of Pittsburgh, of which $3.0$3.2 million was outstanding, and up to $20.0 million from the Federal Reserve Bank of Cleveland, none of which was outstanding.

At MarchDecember 31, 2014, CB2016, First West Virginia had funding commitments totaling $69.9$17.2 million, consisting primarily of commitments to originate loans, unused lines of credit and letters of credit. See Note 12 to the noted to CB’s consolidated financial statements for further information.

At MarchDecember 31, 2014,2016, certificates of deposit due within one year of that date totaled $24.1$27.9 million, or 29.0%10.1% of total deposits. If these certificates of deposit do not remain with CB, CB will be required to seek other sources of funds. Depending on market conditions, CBFirst West Virginia may be required to pay higher rates on such deposits or other borrowings than it currently pays on these certificates of deposit. CBFirst West Virginia 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. CBFirst West Virginia has the ability to attract and retain deposits by adjusting the interest rates offered.

CB’s primary investing activities are the originationFirst West Virginia is committed to maintaining a strong liquidity position. First West Virginia monitors its liquidity position on a daily basis. First West Virginia anticipates that it will have sufficient funds to meet its current funding commitments. Based on its deposit retention experience and current pricing strategy, First West Virginia anticipates that a significant portion of loans and the purchasematuring time deposits will be retained.

As of securities. In the three months ended March 31, 2014 and the year ended December 31, 2013, CB originated $27.4 million and $144.0 million of loans, respectively.2016, the most recent notifications from the OCC categorized Progressive Bank as “well capitalized.” There are no conditions or events since that notification that management believes has changed the capital category.

CB is a separate legal entity from Community Bank, and CB must provideProgressive Bank’s actual capital ratios are presented in the following table. First West Virginia’s capital ratios are comparable to those shown for its own liquidity to pay dividends to shareholders and for other corporate purposes. At March 31, 2014, CB (on an unconsolidated basis) had liquid assets of $162,000.Progressive Bank.

CB and Community Bank are subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2014, CB and Community Bank exceeded all regulatory capital requirements and were considered “well-capitalized” under regulatory guidelines. See “Supervision and Regulation—Federal Banking Regulation—Capital Requirements” and Note 13 of the Notes to CB’s Consolidated Financial Statements.

   (Dollars in thousands) 
   September 30, 2017  December 31, 2016 
   Amount   Ratio  Amount   Ratio 

Common Equity Tier 1 (to risk weighted assets)

       

Actual

  $31,501    20.93 $32,141    22.02

For Capital Adequacy Purposes

   6,772    4.50   6,569    4.50 

To Be Well Capitalized

   9,782    6.50   9,489    6.50 

Tier 1 Capital (to risk weighted assets)

       

Actual

   31,501    20.93   32,141    22.02 

For Capital Adequacy Purposes

   9,029    6.00   8,759    6.00 

To Be Well Capitalized

   12,039    8.00   11,679    8.00 

Total Capital (to risk weighted assets)

       

Actual

   33,272    22.11   33,938    23.25 

For Capital Adequacy Purposes

   12,039    8.00   11,679    8.00 

To Be Well Capitalized

   15,049    10.00   14,599    10.00 

Tier 1 Leverage (to adjusted total assets)

       

Actual

   31,501    9.07   32,141    9.55 

For Capital Adequacy Purposes

   13,888    4.00   13,457    4.00 

To Be Well Capitalized

   17,360    5.00   16,821    5.00 

Off-Balance Sheet Arrangements and Contractual Obligations

Commitments. As a financial services provider, CBFirst West Virginia routinely is a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit, commitments under unused lines of credit, and commitments under letters of credit. While these contractual obligations represent potential future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans CBProgressive Bank makes. In addition, CBProgressive Bank enters into commitments to sell mortgage loans. For additional information, see Note 12 of the Notes to CB’s Consolidated Financial Statements.

Contractual Obligations. In the ordinary course of its operations, CBFirst West Virginia enters into certain contractual obligations. Such obligations include operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities and agreements with respect to investments.

The following tables set forth CB’spresent certain of First West Virginia’s contractual obligations at March 31, 2014 and December 31, 2013.2016.

 

   At March 31, 2014 
   Less than
One Year
   One to
Three Years
   Three to
Five Years
   More than
Five Years
   Total 
   (In thousands) 

Operating lease obligations

  $436    $397    $662    $1,113    $2,609  

Long-term debt obligations

   1,000     2,000     —       —       3,000  

  At December 31, 2013   (In thousands)
Payment Due by Period
 
  Less than
One Year
   One to
Three Years
   Three to
Five Years
   More than
Five Years
   Total   Total   Less Than
Or Equal to
One Year
   More Than
One to
Three Years
   More Than
Three to
Five Years
   More Than
Five Years
 

Certificates of deposit

  $55,494   $27,928   $12,409   $15,062   $95 

Borrowings

   3,216    110    1,803    92    1,211 

Operating lease obligations

   1,174    234    453    428    59 
  (In thousands)   

 

   

 

   

 

   

 

   

 

 

Operating lease obligations

  $433    $796    $559    $927    $2,715  

Long-term debt obligations

   1,000     3,000     —       —       4,000  

Total

  $59,884   $28,272   $14,665   $15,582   $1,365 
  

 

   

 

   

 

   

 

   

 

 

Recent Accounting Pronouncements

CB has implemented all new accounting pronouncements and does not believe there are any new pronouncements that have been issued that may have a material impact on the financial statements. See Note 1 to the notes to CB’s consolidated financial statements for further information.

Impact of Inflation and Changing PricesPrice

The consolidated financial statements and related notes of CBFirst West Virginia have been prepared in accordance with GAAP. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of CB’sFirst West Virginia’s operations. Unlike industrial companies, CB’sFirst West Virginia’s assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

Quantitative and Qualitative Disclosures about Market Risk

General. The majority of First West Virginia’s assets and liabilities are monetary in nature. Consequently, First West Virginia’s most significant form of market risk is interest rate risk. Progressive Bank’s assets, consisting primarily of mortgage loans, have longer maturities than its liabilities; consisting primarily of deposits. As a result, a principal part of its business strategy is to manage interest rate risk and reduce the exposure of net interest income to changes in market interest rates. Accordingly, Progressive Bank’s board of directors has established an Asset/Liability Management Committee, which is responsible for evaluating the interest rate risk inherent in Progressive Bank’s assets and liabilities, for determining the level of risk that is appropriate given Progressive Bank’s business strategy, operating environment, capital, liquidity and performance objectives; and for managing this risk consistent with the guidelines approved by the board of directors. Senior management monitors the level of interest rate risk on a quarterly basis and the Asset/Liability Management Committee meets on a quarterly basis to review its asset/liability policies and position and interest rate risk position, and to discuss and implement interest rate risk strategies.

Interest Rate Risk. Changes in interest rates can affect the level of income of a financial institution depending on the repricing characteristics of its assets and liabilities. This is termed interest rate risk. If a financial institution is asset sensitive, more of its assets will reprice in a given time frame than liabilities. This is a favorable position in a rising rate environment and would enhance income. If an institution is liability sensitive, more of its liabilities will reprice in a given time frame than assets. This is a favorable position in a falling rate environment. Financial institutions allocate significant time and resources to managing interest rate risk because of the impact that changes in interest rates can have to earnings.

The initial step in the process of maintaining Progressive Bank’s interest rate sensitivity involves the preparation of a basic “gap” analysis of earning assets and interest-bearing liabilities. Gap analysis places the maturing or repricing assets and liabilities into time buckets to measure the short and long-term pricing imbalances for a given time period. The analysis measures the difference or the “gap” between the amount of assets and liabilities repricing within a given time period. This form of analysis addresses repricing risk and the effect interest movements have on the cash flow characteristics of the balance sheet. Management uses this information as a factor in decisions made about maturities of investment of cash flows, classification of investment securities purchases as available-for-sale or held-to-maturity, emphasis of variable rate or fixed rate loans and short or longer-term deposit products in marketing campaigns, and deposit account pricing to alter asset and liability repricing characteristics. The overall objective is to minimize the impact to the margin of any significant change in interest rates. The gap analysis contains assumptions and estimates used by management in determining repricing characteristics and maturity distributions. Progressive Bank’s policy guideline provides that the cumulative gap at one year cannot exceed plus 10% or minus 10% of assets. As of December 31, 2016, the cumulative gap at one year is liability sensitive at approximately 1.88% of assets and is within the policy guideline. As this calculation is as of a point in time and conditions change on a daily basis, any conclusions made may not be indicative of future results.

(Dollars in thousands)                   
   Less than
Three
Months
  Four to
Twelve
Months
  One to
Three
Years
  Greater
than Three
Years
  Non-
Interest
Bearing
  Total 

ASSETS

       

Cash and cash equivalents

  $17,955  $—    $—    $—    $4,922  $22,877 

Investment securities

   4,218   12,777   58,386   125,401   (3,576  197,206 

Loans

   14,579   25,081   38,168   17,786   1,478   97,092 

Allowance for loan losses

   —     —     —     —     (1,797  (1,797

Bank owned life insurance

   4,063   —     —     —     —     4,063 

Other assets

   806   —     —     —     15,008   15,814 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total assets

  $41,621  $37,858  $96,554  $143,187  $16,035  $335,255 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LIABILITIES AND CAPITAL

       

Interest bearing demand deposits

  $6,147  $—    $10,954  $44,371  $—    $61,472 

Savings accounts

   28,337   —     43,590   49,103   —     121,030 

Certificates of deposit < $100,000

   6,767   12,433   7,793   8,482   —     35,475 

Certificates of deposit > $100,000

   3,986   4,742   4,616   6,675   —     20,019 

Noninterest bearing demand deposits

   —     —     —     —     37,710   37,710 

Repurchase agreements

   22,531   —     —     —     —     22,531 

FHLB borrowings

   209   641   1,505   861   —     3,216 

Other liabilities

   —     —     —     —     743   743 

Stockholders’ equity

   —     —     —     —     33,059   33,059 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total liabilities and capital

  $67,977  $17,816  $68,458  $109,492  $71,512  $335,255 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

GAP

   (26,356  20,042   28,096   33,695   (55,477 

GAP/ Total Assets

   -7.86  5.98  8.38  10.05  -16.55 

Cumulative GAP

   (26,356  (6,314  21,782   55,477   —    

Cumulative GAP/Total Assets

   -7.86  -1.88  6.50  16.55  0.00 

The above analysis contains repricing and maturity assumptions and estimates used by management.

Progressive Bank uses an asset/liability simulation model to measure the earnings at risk (EAR) and economic value of equity (EVE). The EAR analysis is considered management’s best source of managing short term interest rate risk. The strength of the EAR analysis is that it can capture all of the different forms of interest rate risk under many different interest rate scenarios. The EVE analysis is a valuation approach measuring long-term interest rate risk exposure. EVE considers all future time periods, which provides an advantage over earnings simulation. However, a negative attribute of EVE is that it assumes a sustained change in rates, which is never the case in the long-term. The EVE methodology seeks to compute the financial risk of having a duration mismatch between assets and funding. If asset duration is shorter than funding duration, Progressive Bank is asset sensitive and the EVE will move in the same direction as interest rates. If funding duration is shorter than asset duration, Progressive Bank is liability sensitive and the EVE will move in the opposite direction of interest rates.

The quarterly reports developed in the simulation model assist Progressive Bank in identifying, measuring, monitoring and controlling interest rate risk to ensure compliance with policy guidelines. The simulation model excludes the potential effect of interest rate changes on assets and liabilities of First West Virginia which are not deemed material.

Assumptions in the model are made to simulate the impact of future changes in interest rates and/or changes in balance sheet composition. The effect of changes in future interest rates on the mix of assets and liabilities may cause actual results to differ from simulated results. The projections provided by the model are not intended as an actual forecast of Progressive Bank’s performance in a particular rate environment, and should not be relied upon. Actual changes in the interest rate environment normally do not take place instantaneously, but over a period of time, and do not occur in a parallel fashion. Additionally, the balance sheet composition, spread relationships for new dollars invested, non-interest income and expenses, investment practices, and deposit practices all change as a result of changes in interest rates and would need to be considered by the Asset/Liability Management Committee.

The table below sets forth, as of December 31, 2016, the estimated changes in EVE and EAR that would result from the designated instantaneous changes in market interest rates. The results reported were within the policy guidelines established by Progressive Bank at December 31, 2016. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions, including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

   (Dollars in thousands) 
   Economic Value of Equity  Earnings at Risk 

Change in Interest Rates

in Basis Points (“bp”)

  Dollar
Amount
   Dollar
Change
  Percent
Change
  Dollar
Change
  Percent
Change
 

+400 bp

  $25,304   $(23,099  (47.7)%  $(908  (10.7)% 

+300 bp

   30,825    (17,578  (36.3  (659  (7.8

+200 bp

   36,653    (11,750  (24.3  (416  (4.9

+100 bp

   42,473    (5,930  (12.3  (195  (2.3

Flat

   48,403    —     —     —     —   

-100 bp

   48,748    345   0.7   (976  (11.6

-200 bp

   45,199    (3,204  (6.6  (2,088  (24.7

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurement. Modeling changes in EAR and EVE require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the tables presented above assume that the composition of Progressive Bank’s interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured, and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables presented above provide an indication of Progressive Bank’s interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EAR and EVE and will differ from actual results.

Stock Ownership

CB did not know of any person or entity that beneficially owned more than 5% of its outstanding common stock as of May 31, 2014. The following table sets forth information, as of February 16, 2018, regarding the shares of CBFirst West Virginia common stock beneficially owned asby persons known to First West Virginia to beneficially own more than 5% of May 31, 2014First West Virginia’s common stock, by each director and executive officer of CBFirst West Virginia, and by all directors and executive officers as a group. The table also sets forth the pro forma percentage ownership following the merger.

 

   Shares of Common
Stock Beneficially
Owned (1)
   Percent
(Existing) (2)
  Percent
Following Merger
 

Directors

     

Karl G. Baily

   19,580     0.74  0.48

Mark E. Fox

   7,308     0.28  0.18

William C. Groves

   13,699     0.52  0.34

Charles R. Guthrie

   7,515     0.28  0.18

Joseph N. Headlee

   14,180     0.54  0.35

Barron P. McCune, Jr.

   53,215     2.01  1.31

David F. Pollock

   31,005     1.17  0.76

Ralph J. Sommers, Jr.

   18,145     0.69  0.45

Executive Officers who are not Directors

     

Kevin D. Lemley, CPA

   3,230     0.12  0.08

Ralph Burchianti

   50,220     1.90  1.23

All directors and executive officers as a group (10 persons)

     

Persons Owning Greater than 5%

  Shares of Common Stock
Beneficially Owned (1)
  Percent (2) 

Rosalie J. Dlesk

   190,674 (3)   11.09 

James C. Inman and Laura G. Inman

   135,198 (4)   7.87 

Directors

   

Jonathan A. Bedway

   200   * 

Nada E. Beneke

   38,019   2.21 

Dr. Clyde D. Campbell

   11,259   * 

Rosalie J. Dlesk

   190,674 (3)   11.09 

Robert J. Fitzsimmons

   2,500   * 

Joseph M. Menendez

   2,700   * 

Roberta Robinson Olejasz

   2,894   * 

William G. Petroplus

   8,339 (5)   * 

Thomas L. Sable

   11,248 (6)   * 

Brian L. Schambach

   600   * 

Executive Officers who are not Directors

   

Francie P. Reppy

   1,870 (7)   * 

Brad D. Winwood

   131 (8)   * 

All directors and executive officers as a group (12 persons)

   270,444   15.74 

 

*Represents lessLess than 1% of the shares outstanding.
(1)

In accordance with applicable Securities and Exchange Commission rules,For purposes of this table, a person is deemed to be the beneficial owner for purposes of this table, of any shares of CBthe common stock or preferred stock if he or she has or shares voting or investment power with

respect to such common stock or has a right to acquire beneficial ownership at any time within 60 days from May 31, 2014.security. “Voting power” is the power to vote or direct the voting of shares and “investment power” is the power to dispose or direct the disposition of shares. Except as otherwise noted, ownership is direct and the named individuals and group exercise sole voting and investment power over the shares of CBFirst West Virginia common stock. In accordance with applicable SEC rules, outstanding options held by an individual that are vested or that will vest within 60 days of May 31, 2014 are included for purposes of calculating that individual’s percentage ownership, but not for purposes of calculating any other individual’s percentage ownership.
(2)Based on a total of 2,641,379a total of 1,718,730 shares of CBFirst West Virginia common stock outstanding as of May 31, 2014.February 16, 2018.
(3)107,335 shares are pledged as collateral.
(4)Includes 111,485 shares owned by Laura G. Inman and 22,713 shares owned by James C. Inman.

(5)Includes 907 shares owned jointly by William G. Petroplus and Sheree A. Petroplus and 452 shares owned by Sheree A. Petroplus, his wife. Mr. Petroplus disclaims beneficial ownership of 452 shares owned by Kristen G. Petroplus, his daughter, for which William G. Petroplus acts as custodian and 452 shares owned jointly by Alyssa R. Petroplus, his daughter, for which William G. Petroplus acts as custodian.
(6)Includes 11,248 shares owned jointly by Thomas L. Sable and Janice M. Sable.
(7)Includes 123 shares owned jointly by Francie P. Reppy and Michael H. Reppy.
(8)Includes 141 shares owned jointly by Brad D. Winwood and Douglas E. Winwood.

INFORMATION ABOUT FEDFIRST

Business of FedFirst

General

FedFirst Financial Corporation (“FedFirst”) is a stock holding company established in 2010, whose wholly owned subsidiary is First Federal Savings Bank (“First Federal”), a federally chartered stock savings bank (collectively “FedFirst”). Through its wholly-owned subsidiary FedFirst Exchange Corporation (“FFEC”), First Federal has an 80% controlling interest in Exchange Underwriters, Inc. (“Exchange Underwriters”). Exchange Underwriters is a full-service, independent insurance agency that offers propertyBiographical Information for Certain Executive Officers and casualty, commercial liability, surety and other insurance products.

First Federal operates as a community-oriented financial institution offering residential, multi-family and commercial mortgages, consumer loans and commercial business loans as well as a variety of deposit products for individuals and businesses from seven locations in southwestern Pennsylvania. First Federal conducts insurance brokerage activities through Exchange Underwriters. First Federal is subject to competition from other financial institutions and to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

FedFirst’s principal office is located at 565 Donner Avenue, Monessen, Pennsylvania 15062, and its telephone number is (724) 684-6800. FedFirst’s common stock is listed on the NASDAQ Capital Market under the trading symbol “FFCO.”

FedFirst’s website address ishttp://www.firstfederal-savings.com. FedFirst’s Internet website and the information contained therein or connected thereto are not intended to be incorporated into this proxy statement/prospectus or the reports it files with the Securities Exchange Commission.

Market Area

First Federal’s seven banking offices are located in Fayette, Washington and Westmoreland counties, which are located in the southern suburban area of metropolitan Pittsburgh. Generally, First Federal offices are located in small industrial communities that, in the past, relied extensively on the steel industry. Until the mid-1970s, these communities flourished. However, the economyDirectors of First Federal’s market area has diminished in direct correlation with the decline in the United States steel industry. With the decline of the steel industry, Fayette, Washington and Westmoreland counties now have smaller and more diversified economies, with employment in services constituting the primary source of employment in all three counties. The largest private-sector employers in First Federal’s market area are providers of health care services.

The area has been impacted by the energy industry through the extraction of untapped natural gas reserves in the Marcellus Shale. The Marcellus Shale extends throughout much of the Appalachian Basin and most of Pennsylvania and is located near high-demand markets along the east coast. The proximity to these markets makes it an attractive target for energy development and has resulted in significant job creation through the development of gas wells and transportation of gas.

In the past, the communities in which First Federal’s offices are located provided a stable customer base for traditional thrift products, such as savings, certificates of deposit and residential mortgages. Following the closing of the area’s steel mills, population and employment trends declined. The population in many of the smaller communities in First Federal’s market area continues to shrink as the younger population leaves to seek better and more reliable employment. As a result, the median age of First Federal’s customers has been increasing. With an aging customer base and little new real estate development, the lending opportunities in First Federal’s primary market area are limited. To counter these trends, First Federal expanded into communities that are experiencing population growth and economic expansion and consolidated two offices. In 2006, First Federal opened an office in Peters Township in Washington County. In 2007, First Federal opened an office in the downtown area of Washington, Pennsylvania. In 2011 and 2012, First Federal consolidated its Park Centre and Donora offices in the Middle Monongahela Valley area due to the close proximity of other branch locations.

Competition

First Federal faces significant competition for the attraction of deposits and origination of loans. First Federal’s most direct competition for deposits has historically come from the several financial institutions operating in its market area and from other financial service companies, such as brokerage firms, credit unions and insurance companies. First Federal also faces competition for investors’ funds from money market funds, mutual funds and other corporate and government securities. At June 30, 2013, which is the most recent date for which data is available from the FDIC, First Federal held approximately 0.24% of the deposits in the Pittsburgh metropolitan area. Banks owned by The PNC Financial Services

Group, Inc., Citizens Financial Group, Inc. and BNY Mellon also operate in First Federal’s market area. These institutions, as well as many other banking institutions operating in First Federal’s market area, are significantly larger and, therefore, have significantly greater resources.

First Federal’s competition for loans comes primarily from financial institutions in its market area and, to a lesser extent, from other financial service providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from the increasing number of non-depository financial service companies entering the mortgage market, such as insurance companies, securities companies and specialty finance companies.

First Federal expects competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. Competition for deposits and the origination of loans could limit First Federal’s growth in the future.

Lending ActivitiesWest Virginia

Residential Mortgage Loans.William G. Petroplus, age 70, has served as a member of the Board of Directors of First Federal originates mortgage loansWest Virginia since 1998. Mr. Petroplus was appointed to enable borrowersserve as Chairman of the Board of Directors in 2016. Mr. Petroplus also serves as a director of Progressive Bank, and has been a director of Progressive Bank since 1986. Prior to purchase or refinance existing homes located inhis appointment as President and Chief Executive Officer, he was appointed as the greater Pittsburgh metropolitan area.Interim President and Chief Executive Officer of First Federal offers fixedWest Virginia and adjustable rate mortgage loansProgressive Bank on December 21, 2013. Mr. Petroplus had previously served as Chairman of the Nominating Committee and as a member of the Corporate Governance/Human Resource Compensation Committee of First West Virginia prior to his appointment as Interim President and Chief Executive Officer.

Mr. Petroplus is a graduate of West Virginia University and the West Virginia University College of Law. Mr. Petroplus has 44 years’ experience as an attorney. He has been with terms upthe law firm Petroplus & Gaudino, PLLC since 1999. His legal background and training provide him with an excellent framework within which to 30 years. The relative amount of fixedoffer advice and adjustable rate mortgage loans that can be originated at any time is largely determined by the demand for eachcounsel in a competitive environment. Borrower demand for adjustable versus fixed rate loanshighly regulated banking industry. He also is the sole member of GWP Realty LLC, a real estate investment and rental limited liability company. Mr. Petroplus’s expertise in laws and regulations, that pertain to, but are not limited to real estate law, commercial lending, corporate law and fiduciary matters, contribute insight to the board on such matters.

Roberta Robinson Olejasz, age 46, has served as a member of the Board of Directors of First West Virginia since 2014 and currently serves as a director of Progressive Bank. Ms. Olejasz has been the dealer operator of Bob Robinson Chevrolet-Buick-GMC-Cadillac Inc. since 2005 and also serves as the finance manager of the dealership. Ms. Olejasz is a functiondirector and past Chairman of the levelWest Virginia Automobile and Truck Dealers Association, a member of interest rates, the expectationsvisiting committee of changesthe West Virginia University College of Business and Economics, and a board member of the Wheeling Chamber of Commerce. Ms. Olejasz received a Bachelor of Science degree in Management from Virginia Commonwealth University and a Masters of Business Administration from West Virginia University.

Ms. Olejasz brings a strong sense of executive management and leadership to the levelBoard of interest rates,Directors of First West Virginia. In addition, Ms. Olejasz’s experience as the dealer operator of Bob Robinson Chevrolet-Buick-GMC-Cadillac Inc. equips her to understand and guide management decisions and actions relating to planning, risk management, marketing and capital management.

Jonathan A. Bedway, age 52, has served as a member of the difference betweenBoard of Directors of First West Virginia since 2014 and currently serves as a director of Progressive Bank. Mr. Bedway is the interest ratesfounder and loan fees offered for fixed rate mortgage loansPresident of Bedway Development Corporation, a commercial construction contractor and a commercial real estate developer. Mr. Bedway is also the initial period interest ratesPresident of the following entities: Double J Real Estate, LLC; Bedway Group, Inc.; Broadway Realty; Bedway Land & Minerals; and loan fees for adjustable rate loans. The loan fees charged, interest rates and other provisions of mortgage loans are determined by First FederalGroway, LLC. Mr. Bedway serves on the basisBoard of its own pricing criteria and competitive market conditions.

First Federal currently has a low demand for its adjustable rate mortgage loans. Interest rates and payments on First Federal’s adjustable rate mortgage loans generally adjust annually after an initial fixed period that ranges from one to ten years. Interest rates and payments on First Federal’s adjustable rate loans generally are adjusted to a rate typically equal to 2.75% or 3.00% aboveWheeling Country Day School where he is the applicable index. The maximum amount by which the interest rate may be increased or decreased is generally 2% per adjustment period and the lifetime interest rate cap is generally 6% over the initial interest ratePresident of the loan.Board of Trustees. Mr. Bedway is a graduate of The Linsly School and West Virginia University with a Bachelor of Science degree.

Prior to 2006, First Federal purchased newly originated, single family, fixed rate mortgage loans to supplement its origination activities. The properties securingMr. Bedway’s 27 years of experience as the loans are located in 11 states around the country. First Federal underwrote allowner of a successful construction and development company and his experience and knowledge of the purchased loans to the same standards as loans originated by us. At December 31, 2013, First Federal had 64 purchased residential loans that totaled $6.9 million. Of these, 29 loans totaling $3.0 million were secured by homes in Michiganlocal and 12 loans totaling $1.7 million were secured by homes in Ohio.

While residential real estate loans are normally originated with up to 30 year terms, such loans may remain outstanding for shorter periods because borrowers often prepay their loans in full upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in theregional commercial real estate market prevailing interest ratesare beneficial in reviewing and the interest rates payable on outstandingattracting commercial loans.

Executive Compensation for Certain Executive Officers of First Federal generally does not make conventional loans with loan-to-value ratios exceeding 97%. Loans with loan-to-value ratios in excess of 80% typically require private mortgage insuranceWest Virginia

The following table shows all compensation awarded to, earned by or additional collateral.paid to First Federal requires all properties securing mortgage loans to be appraised by a board-approved, independent appraiserWest Virginia’s President and title insurance on all first mortgage loans. Borrowers must obtain hazard insurance, and flood insurance for loans on property located in a flood zone, before closing the loan.

In an effort to provide financing for low and moderate income and first-time buyers, First Federal offers a special home buyers program. First Federal offers residential mortgage loans through this program to qualified individuals and originates the loans using modified underwriting guidelines, including reduced fees and loan conditions. First Federal does not engage in subprime or Alt-A lending.

Commercial and Multi-Family Real Estate Loans.First Federal offers a variety of fixed and adjustable rate mortgage loans secured by commercial and multi-family real estate. These loans generally have terms of ten years with a 20 year

amortization and are typically secured by apartment buildings, office buildings, or manufacturing facilities. Loans are secured by first mortgages, and amounts generally do not exceed 80% of the property’s appraised value. In addition to originating these loans, First Federal also purchases participation loans originated by and sell participation loans to other financial institutions in the region.

A decision on whether to grant a commercial or multi-family real estate loan is based on the cash flow of the property, the borrower’s expertise, credit history and profitability, and the value of the underlying property. First Federal also evaluates the financial strength of any related entities in approving the request. First Federal generally requires a debt service coverage ratio (cash flow available to service debt/debt service) of at least 1.25x and a leverage ratio (debt-to-worth) of less than 3.0x. Environmental surveys are obtained for requests greater than $1.0 million or when circumstances suggest the possibility of the presence of hazardous materials. To monitor cash flow on income properties, First Federal requires borrowers and/or guarantors to provide annual financial statements regarding the commercial and multi-family real estate.

First Federal underwrites commercial loan participations to the same standards as loans originated by us. In addition, First Federal considers the financial strength and reputation of the lead lender. First Federal requires the lead lender to provide a full closing package as well as annual financial statements for the borrower and related entities so that First Federal can conduct an annual loan reviewChief Executive Officer, William G. Petroplus, for all loan participations.

Prior to 2006, First Federal purchased newly originated multi-family real estate loans as part of its efforts to increase its loan portfolio. The properties securing the loans are locatedservices rendered in four states throughout the country. First Federal sought geographic diversification among the purchased loans so that First Federal would not concentrate exposure to changes in any particular local or regional economy. First Federal underwrote the purchased loans to the same standards as loans originated by us. At December 31, 2013, purchased multi-family real estate loans totaled $3.8 million.

At December 31, 2013, First Federal’s largest multi-family real estate loan was $1.9 million and was secured by an assisted living facility. First Federal’s largest commercial real estate loan was $3.5 million purchased participation loan secured by commercial property. These loans were performing in accordance with their original terms at December 31, 2013, however the multi-family real estate loan was rated special mention due to a potential weakness identified during an annual review that may result in a further deterioration of its credit rating if uncorrected.

At December 31, 2013, commercial real estate and multi-family purchased loan participations totaled $17.9 million and sold loan participations totaled $5.3 million. All of the properties securing these loans are located in the Pittsburgh metropolitan area. First Federal’s largest purchased participation loan was $3.5 million and largest sold participation loan was $2.2 million.

Construction Loans.First Federal originates loans to individuals to finance the construction of residential dwellings. First Federal also makes loans for the construction of commercial properties, including apartment buildings and owner-occupied properties used for businesses. First Federal’s construction loans generally provide for the payment of interest only during the construction phase, which is usually 12 to 18 months. At the end of the construction phase, the loan generally converts to a permanent mortgage loan. Loans generally can be made with a maximum loan-to-value ratio of 97% on residential construction and 80% on commercial construction. Loans with loan-to-value ratios in excess of 80% on residential construction generally require private mortgage insurance or additional collateral. Before making a commitment to fund a construction loan, First Federal requires an appraisal of the property by an independent licensed appraiser. First Federal also will require an inspection of the property before disbursement of funds during the term of the construction loan.

At December 31, 2013, First Federal’s largest outstanding residential construction loan commitment was for $1.0 million, of which $500,000 was disbursed. At December 31, 2013, First Federal’s largest outstanding commercial construction commitment was a $3.2 million purchased participation loan of which there were no disbursements. These loans were performing in accordance with their original terms at December 31, 2013.

Commercial Business Loans.First Federal originates commercial business loans to professionals and small businesses in its market area. First Federal offers installment loans for a variety of business needs including capital improvements and equipment acquisition. Other commercial loans are secured by business assets such as accounts receivable, inventory, and equipment, and are typically backed by the personal guarantee of the borrower. First Federal originates working capital lines of credit to finance the short-term needs of businesses. These credit lines are repaid by seasonal cash flows from operations and are also typically backed by the personal guarantee of the borrower. When evaluating commercial business loans, First Federal performs a detailed financial analysis of the borrower and/or guarantor which includes but is not limited to: cash flow and balance sheet analysis, debt service capabilities, review of industry (geographic and economic conditions) and collateral analysis.

First Federal also provides financing to a Pittsburgh area machinery and equipment leasing company. These loans are secured with an assignment of machinery and equipment leases. At December 31, 2013, First Federal had 13 loans for equipment leases totaling $8.3 million.

At December 31, 2013, First Federal’s largest commercial business loan relationship was a $3.5 million warehouse line of credit, of which $555,000 was outstanding. This loan was performing in accordance with its original terms at December 31, 2013.

Consumer Loans.First Federal’s consumer loans include home equity installment loans, home equity lines of credit, loans on savings accounts, and personal lines of credit and installment loans.

The procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.

Home equity installment loans and home equity lines of credit are generally originated with a loan-to-value ratio of 80% or less. On occasion First Federal will originate home equity loans with a loan-to-value ratio greater than 80%. Home equity installment loans have fixed interest rates with terms that range up to 20 years. Home equity lines of credit have adjustable rates of interest that are indexed to the prime rate. First Federal discontinued offering home equity loans with a loan-to-value ratio greater than 100% in 2007 or with terms greater than 20 years in 2013, but there are loans currently in its portfolio with these characteristics. First Federal also offers secured and unsecured consumer loans that have fixed interest rates and terms that can range from one to 10 years.

Loan Underwriting Risks

Adjustable Rate Loans. While adjustable rate loans may better offset the adverse effects of an increase in interest rates as compared to fixed rate loans, the increased payments required of adjustable rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. In addition, although adjustable rate loans help make First Federal’s asset base more responsive to changes in interest rates, the extent of this interest sensitivity may be limited by the annual and lifetime interest rate adjustment limits.

Residential Loans. Residential loan collections depend on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. In the event of a default, if the collateral value declines below the outstanding balance on the loan; the sale of the collateral may not be sufficient to recoup the remaining principal owed and related foreclosure costs. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans. In recent years First Federal has been exposed to prepayment risk when borrowers refinance their loans at a lower rate due to the declining interest rate environment, which results in a lower rate of return.

Commercial and Multi-Family Real Estate Loans. Loans secured by commercial and multi-family real estate generally have larger balances and involve a greater degree of risk than residential mortgage loans. Of primary concern in commercial and multi-family real estate lending is the borrower’s creditworthiness and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to adverse conditions in the real estate market or the economy.

Construction Loans. Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost (including interest) of construction. During the construction phase, a number of factors could result in delays and cost overruns. If the estimate of construction costs proves to be inaccurate, First Federal may be required to advance funds beyond the amount originally committed to permit completion of the building. If the estimate of value proves to be inaccurate, First Federal may be confronted, at or before the maturity of the loan, with a building having a value which is insufficient to assure full repayment. If First Federal is forced to foreclose on a building before or at completion due to a default, there can be no assurance that First Federal will be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs.

Commercial Business Loans. Commercial business loans are higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the business. As a result, the availability of funds for the

repayment of commercial loans may depend substantially on the success of the business itself. A debt service coverage ratio of at least 1.25x and a leverage ratio of less than 3.0x are also applicable to commercial business loans. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value. First Federal also maintains allowable advance rates for each collateral type to ensure coverage.

Consumer Loans. Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are secured in a junior lien position, unsecured, or secured by assets that depreciate rapidly. In such cases, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and the remaining deficiency often does not warrant further substantial collection efforts against the borrower. In addition, consumer loan collections depend on the borrower’s continuing financial stability, and therefore are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy. In the event of a default, if the collateral value declines below the outstanding balance on the loan; the sale of the collateral may not be sufficient to recoup the remaining principal owed and related foreclosure costs. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

Loan Originations, Purchases and Sales

Loan originations come from a number of sources. The primary source of loan originations are telephone marketing efforts, existing customers, walk-in traffic, loan brokers, advertising and referrals from customers. First Federal has a relationship with a mortgage broker through which First Federal originates a substantial portion of its residential mortgage loans, and First Federal has a relationship with a commercial leasing company through which First Federal originates commercial equipment leases. First Federal also purchases and sells loan participations with other local community banks.

Loan Approval Procedures and Authority

First Federal’s lending activities follow written, nondiscriminatory, underwriting standards and loan origination procedures established by its board of directors and management. The board of directors has granted certain loan approval authority to a committee of officers. The loan committee approves all residential mortgages, construction loans and consumer loans and all commercial loans with CDHE up to $500,000. All commercial and multi-family loans with commercial direct hard exposure (“CDHE”) of $500,000 or more and loans or extensions of credit to insiders require the approval of the board of directors.

Loans to One Borrower

The maximum amount that First Federal may lend to one borrower and the borrower’s related entities is limited, by regulation, to generally 15% of its unimpaired capital and surplus. At December 31, 2013, First Federal’s regulatory limit on loans to one borrower was $6.7 million. At that date, First Federal’s largest lending relationship was a $4.9 million commercial real estate relationship. The loans were performing in accordance with their original terms at December 31, 2013.

Loan Commitments

First Federal issues commitments for fixed and adjustable rate mortgage and commercial loans conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lendhis capacity to First Federal’s customers. Generally, First Federal’s residential loan commitments expire after 45 days andWest Virginia and/or its commercial loan commitments expire after 90 days.

Investment Activities

First Federal has legal authority to invest in various types of liquid assets, including U.S. Treasury obligations, Government-sponsored enterprise securities and securities of various federal agencies and of state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions. Within certain regulatory limits, First Federal also may invest a portion of its assets in corporate securities and mutual funds. First Federal also is required to maintain an investment in Federal Home Loansubsidiary, Progressive Bank, (“FHLB”) of Pittsburgh stock. While First Federal has the authority under applicable law and its investment policies to invest in derivative securities, First Federal has never invested in such investments.

At December 31, 2013, First Federal’s investment portfolio consisted of municipal bonds, mortgage-backed securities issued primarily by Fannie Mae and Freddie Mac, guaranteed real estate mortgage investment conduits (“REMIC”), and corporate debt obligations (“CDO”) collateralized by trust preferred securities (“TruPS”).

Municipal bonds are a type of security issued by a state, municipality or county to finance its capital expenditures. Municipal bonds are typically exempt from federal taxes and from most state taxes in which they are issued. Municipal bonds may be general obligations of the issuer or secured by specific revenues. General obligation bonds are unsecured and backed by the full faith and credit of the municipality and are paid off with funds from taxes and other fees. Revenue bonds are used to fund projects that will eventually create revenue directly, such as a toll road or lease payments for a new building. Municipal bonds have traditionally had very low rates of default as they are backed either by government power to tax or revenue.

Mortgage-backed securities are asset-backed securities that represent a claim on the cash flows from mortgage loans through securitization. Mortgage-backed securities are typically pass-through in nature with repayment of principal and interest to the security holder occurring over the life of the security.

REMICs represent a participation interest in a pool of mortgages. REMICs are created by redirecting the cash flows from the pool of mortgages underlying those securities to create two or more classes (or tranches) with different maturity or risk characteristics designed to meet a variety of investor needs and preferences. REMICs may be sponsored by U.S. Government agencies and Government-sponsored enterprises.

A CDO is a type of structured asset-backed security that makes payments in a sequence based on the cash flow the CDO collects from the pool of bonds or other assets it owns. The CDO typically has tranches and the cash flow of interest and principal payments occurs based on seniority. If an asset defaults and the cash collected by the CDO is insufficient to pay all of its investors, those in the lowest, junior tranches suffer losses first. The last to lose payment from default are the safest, most senior tranches. Consequently payments and interest rates vary by tranche with the most senior tranches paying the lowest and the most junior tranches paying the highest rates to compensate for higher default risk. First Federal is subject to credit risk related to two pools of CDOs collateralized by TruPS of insurance companies. TruPS are generally longer-term, fixed maturity securities that allow early redemption by the issuer with fixed or variable payments typically occurring on a quarterly basis.

In December 2013, the OCC adopted final regulations, commonly known as the “Volcker Rule”, which contains certain prohibitions and restrictions on the ability of a banking entity to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund. The regulations prohibit a banking entity from having an ownership interest in, or certain relationships with, a hedge fund or private equity fund (referred to as a “covered fund”) unless an exception applies. A covered fund is defined to include any issuer that would be an investment company under the Investment Company Act of 1940, but relies on the exemption for funds sold to fewer than 100 investors or the exemption for funds sold only to qualified purchasers. An issuer that could rely on a different exemption from the definition of investment company under the Investment Company Act would not be considered a covered fund, and therefore would not be subject to the Volcker Rule. In particular, the federal banking regulators have noted that some issuers of CDOs may qualify for exemption under Investment Company Act Rule 3a-7, which exempts non-managed fixed income funds from the definition of investment company. Therefore, if the issuer meets the requirements of Rule 3a-7, the Notes will not be subject to the Volcker Rule. However, if a different exemption does not apply, then the CDOs would be considered a covered fund subject to the Volcker Rule and the banking entity would be required to divest its holdings by July 15, 2015. Based on First Federal’s review, the CDOs held by First Federal as of December 31, 2013 satisfy all conditions for relying on the exemption under Investment Company Act rule 3a-7,2017 and therefore are not considered a covered fund that require divesture by July 15, 2015.2016.

First Federal’s investment objectives are to provide and maintain liquidity, to provide collateral for pledging requirements, to establish an acceptable level of interest rate and credit risk, to provide an alternate source of investment when demand for loans is weak and to generate a favorable return. First Federal’s board of directors has the overall responsibility for the investment portfolio, including approval of the investment policy and appointment of the Investment Committee. The Investment Committee is responsible for implementation of the investment policy and monitoring First Federal’s investment performance. Individual investment transactions are reviewed and ratified by the board of directors on a monthly basis.

Name and Principal Position

  Year  Salary   Bonus   All Other
Compensation
  Total 

William G. Petroplus, President and Chief Executive Officer of First West Virginia and President and Chief Executive Officer of Progressive Bank

  2017  $122,400   $17,344   $5,227(1)  $144,971 
  2016  $120,277   $7,200   $7,078(1)  $134,555 

(1)Includes contributions to the Profit Sharing and 401(k) Plan.

Insurance Activities

FedFirst conducts insurance brokerage activities through its 80%-owned subsidiary, Exchange Underwriters. Exchange Underwriters is a full-service, independent insurance agency that offers property and casualty, commercial liability, surety and other insurance productsDirector Compensation for small businesses and individuals through over 25 insurance carriers. Exchange Underwriters is licensed in more than 35 states. In addition to serving businesses and individuals in the Pittsburgh metropolitan areas, Exchange Underwriters has developed specialty programs that are sold nationwide.

Exchange Underwriters generates revenues primarily from commissions paid by insurance companies with respect to the placement of insurance products. Commission revenue includes contingent commissions, which are commissions paid by an insurance carrier that are based on the overall profit and/or volume of the business placed with that insurance carrier during a particular calendar year.

Deposit Activities and Other Sources of Funds

General.Deposits, securities, borrowings and loan repayments are the major sourcesCertain Directors of First Federal’s funds for lending and other investment purposes. Loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and economic conditions.West Virginia

Deposits.Substantially allEach director of First Federal’s depositors are residentsWest Virginia was compensated at the rate of Pennsylvania. Deposits are attracted from within First Federal’s market area through$800 per regular meeting. Additionally, each director was compensated at the offeringrate of a broad selection of deposit products such as noninterest-bearing demand deposits, interest-bearing demand accounts, savings accounts, money market accounts and certificates of deposit (including individual retirement accounts). First Federal considers demand deposits, savings accounts and money market accounts to be core deposits. Deposit products are supported by services including online banking with bill pay, mobile banking, and telephone banking. Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. In determining the terms of First Federal’s deposit accounts, First Federal considers the rates offered by its competition, liquidity needs, profitability, matching deposit and loan products and customer preferences and concerns. First Federal generally reviews its deposit mix and pricing semi-monthly. First Federal’s current strategy is to offer competitive rates on all types of deposit products.

In addition to accounts$325 for individuals, First Federal also offers deposit accounts designed for the businesses operating in its market area. First Federal’s business banking deposit products include commercial checking accounts, money market accounts, sweep and insured money sweep services, remote electronic deposit, online banking with bill pay and automated clearinghouse.

At December 31, 2013, First Federal did not have any brokered deposits.

Borrowings.First Federal utilizes advances from the FHLB and, to a limited extent, repurchase agreements to supplement its supply of investable funds. First Federal also has the ability to borrow from the Federal Reserve based upon eligible collateral and has two unsecured discretionary lines of credit with other financial institutions. The FHLB functions as a central reserve bank providing credit for member financial institutions. As a member, First Federal are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain of its mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States or Government-sponsored enterprises), provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the FHLB’s assessment of the institution’s creditworthiness.

Personnel

At December 31, 2013, First Federal had 88 full-time equivalent employees, including 18 employees of its insurance agency subsidiary, none of whom is represented by a collective bargaining unit. First Federal believes that its relationship with its employees is good.

Subsidiaries

FedFirst’s only direct subsidiary is First Federal. First Federal’s only direct subsidiary is FedFirst Exchange Corporation. FedFirst Exchange Corporation owns an 80% interest in Exchange Underwriters.

Regulation and Supervision

Regulation and Supervision of First Federal

General

First Federal, as a federal savings association, is currently subject to extensive regulation, examination and supervision by the Office of the Comptroller of the Currency (“OCC”), as its primary federal regulator, and by the Federal Deposit

Insurance Corporation (“FDIC”) as the insurer of its deposits. First Federal is a member of the FHLB System and its deposit accounts are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. First Federal must file reports with the OCC concerning its activities and financial condition in addition to obtaining regulatory approvals before entering into certain transactions such as mergers with, or acquisitions of, other financial institutions. There are periodic examinations by the OCC to evaluate First Federal’s safety and soundness and compliance with various regulatory requirements. The regulatory structure gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of an adequate allowance for loan losses for regulatory purposes. Any change in such policies, whether by the OCC, the FDIC or Congress, could have a material adverse effect on FedFirst and First Federal and their operations.

The Consumer Financial Protection Bureau (“CFPB”) is an independent bureau of the Board of Governors of the Federal Reserve System (“FRB”) that has responsibility for the implementation of the federal financial consumer protection and fair lending laws and regulations and has authority to impose new requirements. Institutions of less than $10 billion in assets, such as First Federal, are subject to the regulations of the CFPB, but will continue to be examined for compliance with consumer protection and fair lending laws and regulations by, and be subject to the enforcement authority of, their prudential regulators.

Certain of the regulatory requirements that are applicable to First Federal and FedFirst are described below. This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on First Federal and FedFirst.

Capital Requirements

The applicable capital regulations require savings associations to meet three minimum capital standards: a 1.5% tangible capital to total assets ratio, a 4% Tier 1 capital to total assets leverage ratio (3% for institutions receiving the highest rating on the CAMELS examination rating system) and an 8% risk-based capital ratio. In addition, the prompt corrective action standards discussed below also establish, in effect, a minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions receiving the highest rating on the CAMELS system) and, together with the risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The regulations also require that, in meeting the tangible, leverage and risk-based capital standards, institutions must generally deduct investments in and loans to subsidiaries engaged in activities as principal that are not permissible for a national bank.

The risk-based capital standard for savings associations requires the maintenance of Tier 1 (core) and total capital (which is defined as core capital and supplementary capital less certain specified deductions from total capital such as reciprocal holdings of depository institution capital instruments and equity investments) to risk-weighted assets of at least 4% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet activities, recourse obligations, residual interests and direct credit substitutes, are multiplied by a risk-weight factor of 0% to 100%, assigned by the capital regulation based on the risks believed inherent in the type of asset. Tier 1 (core) capital is generally defined as common stockholders’ equity (including retained earnings), certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries, less intangibles other than certain mortgage servicing rights and credit card relationships. The components of supplementary capital (Tier 2 capital) include cumulative preferred stock, long-term perpetual preferred stock, mandatory convertible debt securities, subordinated debt and intermediate preferred stock, the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of unrealized gains on available-for-sale equity securities with readily determinable fair market values. Overall, the amount of supplementary capital included as part of total capital cannot exceed 100% of core capital.

The OCC also has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level is or may become inadequate in light of the particular risks or circumstances. At December 31, 2013, First Federal met each of its capital requirements.

Basel Committee on Banking Supervision

On July 9, 2013, the federal bank regulatory agencies issued a final rule that will revise their risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”) and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). The final rule applies to all depository institutions, top-tier bank holding companies with total consolidated assets of $500 million or more and top-tier savings and loan holding companies.

The rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4.0% to 6.0% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property.

The rule also includes changes in what constitutes regulatory capital, some of which are subject to a two-year transition period. These changes include the phasing-out of certain instruments as qualifying capital. In addition, Tier 2 capital is no longer limited to the amount of Tier 1 capital included in total capital. Mortgage servicing rights, certain deferred tax assets and investments in unconsolidated subsidiaries over designated percentages of common stock will be required to be deducted from capital, subject to a two-year transition period. Finally, Tier 1 capital will include accumulated other comprehensive income (which includes all unrealized gains and losses on available for sale debt and equity securities), subject to a two-year transition period.

The new capital requirements also include changes in the risk-weights of assets to better reflect credit risk and other risk exposures. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and non-residential mortgage loans that are 90 days past due or otherwise on nonaccrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital; and increased risk-weights (from 0% to up to 600%) for equity exposures.

Finally, the rule limits capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assetsmeetings held in addition to the amount necessary to meetregular meetings. Audit Committee members were compensated at the rate of $475 for regular meetings. The Chairman of the Audit Committee received additional compensation of $100 for each regular meeting for services in that capacity. The Corporate Governance/Human Resource and Compensation and Nominating Committee members were compensated at the rate of $325 for attendance at each committee meeting, unless a special meeting is held following a regular meeting in which event there is no additional compensation at the special meeting.

First West Virginia’s directors, who are also directors of its minimum risk-based capital requirements.subsidiary, Progressive Bank, were paid $325 for attendance at each regular bank board or committee meeting.

The final rule becomes effective on January 1, 2015. The capital conservation buffer requirement will be phased in beginning January 1, 2016, at 0.625% of risk-weighted assets, increasing eachfollowing table shows all compensation paid by First West Virginia to certain directors for the year until fully implemented at 2.5% on January 1, 2019.

It is management’s belief that, as ofended December 31, 2013, FedFirst2017.

Name

  Fees Earned
or Paid
in Cash ($)
   All
Other
Compensation ($)
   Total 

Jonathan A. Bedway(1)

  $12,625   $—     $12,625 

Roberta Robinson Olejasz(2)

  $15,550   $—     $15,550 

William G. Petroplus(3)

  $—     $—     $—   

(1)Jonathan A. Bedway was compensated $9,600 and $3,025 for serving as director of First West Virginia and Progressive Bank, respectively.

(2)Roberta Robinson Olejasz was compensated $9,600 and $5,950 for serving as director of First West Virginia and Progressive Bank, respectively.
(3)William G. Petroplus was not compensated for serving as director of First West Virginia and Progressive Bank, respectively in 2017.

Related Party Transactions

Directors and First Federal would have met all capital adequacy requirements under Basel III on a fully phased-in basis if such requirements were currently effective.

Federal Banking Regulation

Business Activities. The activities of federal savings banks, such as First Federal, are governed by federal laws and regulations. Those laws and regulations delineate the nature and extent of the business activities in which federal savings banks may engage. In particular, certain lending authority for federal savings banks, e.g., commercial, non-residential real property loans and consumer loans, is limited to a specified percentage of the institution’s capital or assets.

Prompt Corrective Regulatory Action. Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept broker deposits. The OCC is required to take certain supervisory actions against undercapitalized institutions, the severity of which depends upon the institution’s degree of undercapitalization. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution, including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. The OCC could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers of First West Virginia and directors. Significantly and critically undercapitalized institutions are subject to additional mandatory and discretionary measures.

Insurance of Deposit Accounts. First Federal’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Under the FDIC’s existing risk-based assessment system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors,Progressive Bank routinely enter into banking transactions with less risky institutions paying lower assessments. An institution’s assessment rate depends upon the category to which it is assigned. Assessment rates range from seven to 77.5 basis points on the institution’s assessment base, which is calculated as total assets minus tangible equity.

Deposit insurance per account owner is currently $250,000. The FDIC adopted an optional Temporary Liquidity Guarantee Program by which, for a fee, non-interest bearing transaction accounts would receive unlimited insurance coverage until December 31, 2010, which was later extended to December 31, 2012. First Federal opted to participateProgressive Bank in the unlimited coverage for noninterest bearing transaction accounts.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and resultsordinary course of operationsbusiness. Extensions of First Federal. Management cannot predict what insurance assessment rates will be in the future.

Loans to One Borrower. Federal law provides that savings associations are generally subject to the limits on loans to one borrower applicable to national banks. Generally, subject to certain exceptions, a savings association may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capitalsuch persons are made on substantially the same terms, including interest rates and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral.

Qualified Thrift Lender Test. Federal law requires savings associations to meet a qualified thrift lender test. Under the test, a savings association is required to either qualify as a “domestic building and loan association” under the Internal Revenue Code or maintain at least 65% of its “portfolio assets” (total assets less: (i) specified liquid assets up to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including certain mortgage-backed securities but also including education, credit card and small business loans) in at least nine months out of each 12-month period.

A savings association that fails the qualified thrift lender test is subject to certain operating restrictions, including dividend limitations. The Dodd-Frank Act made noncompliance with the qualified thrift lender test a violation of law that could result in an enforcement action. As of December 31, 2013, First Federal maintained 73.8% of its portfolio assets in qualified thrift investments and maintained at least 65% of its portfolio assets in qualified thrift investments in each of the previous 12 months, therefore, meeting the qualified thrift lender test.

Limitation on Capital Distributions. Federal regulations impose limitations upon all capital distributions by a savings association, including cash dividends, payments to repurchase its shares and payments to shareholders of another institution in a cash-out merger. Under the regulations, an application to and the prior approval of the OCC is required before any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under OCC regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OCC. If an application is not required, the institution must still provide 30 days prior written notice to the FRB of the capital distribution if, like First Federal, it is a subsidiary of a holding company, as well as an informational notice filing to the OCC. If First Federal’s capital ever fell below its regulatory requirements or the OCC notified it that it was in need of increased supervision, its ability to make capital distributions could be restricted. In addition, the OCC could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OCC determines that such distribution would constitute an unsafe or unsound practice.

Community Reinvestment Act. All federal savings associations have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income neighborhoods. An institution’s failure to satisfactorily comply with the provisions of the Community Reinvestment Act could result in denials of regulatory applications. Responsibility for administering the Community Reinvestment Act, unlike other fair lending laws, is not being transferred to the Consumer Financial Protection Bureau. First Federal received a “satisfactory” Community Reinvestment Act rating in its most recently completed examination.

Transactions with Related Parties. Federal law limits First Federal’s authority to engage in transactions with “affiliates” (e.g., any entity that controls or is under common control with First Federal, including FedFirst and their other subsidiaries). The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings association. The aggregate amount of covered transactions with all affiliates is limited to 20% of the savings association’s capital and surplus. Certain transactions with affiliates are required to be secured by collateral, in an amount and of a type specified by federal law. The purchase of low quality assets from affiliates is generally prohibited. Transactions with affiliates must generally be on terms and under circumstances that are at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. In addition, savings associations are prohibited from lending to any affiliateother persons. Management believes that is engaged in activities that are not permissible for bank holding companies and no savings association may purchase the securities of any affiliate other than a subsidiary.

The Sarbanes-Oxley Act of 2002 generally prohibits loans by FedFirst to its executive officers and directors. However, the law contains a specific exception for loans by a depository institution to its executive officers and directors in compliance with federal banking laws. Under such laws, First Federal’s authority to extend credit to executive officers, directors and

10% shareholders (“insiders”), as well as entities such persons control, is limited. The laws limit both the individual and aggregate amount of loans that First Federal may make to insiders based, in part, on First Federal’s capital level and requires that certain board approval procedures be followed. Such loans are required to be made on terms substantially the same as those offered to unaffiliated individuals andthese transactions do not involve more than thea normal risk of repayment. Therecollectability or present other unfavorable features.

First West Virginia and Progressive Bank have not entered into any transactions since January 1, 2016 in which the amount involved exceeded the lesser of $120,000 or one percent of First West Virginia’s average total assets for the years ended December 31, 2016 and 2017, and in which any related persons had or will have a direct or indirect material interest.

STOCKHOLDER NOMINATIONS AND PROPOSALS

First West Virginia will hold its 2018 annual meeting of stockholders only if the merger is an exceptionnot completed. First West Virginia’s bylaws provide that in order for loans made pursuanta stockholder to make nominations for the election of directors, a benefitstockholder must deliver notice of such nominations to the president or compensation program that is widely available to all employeeschairman of the institution and doesboard of directors of First West Virginia not give preferenceless than 14 days nor more than 40 days before any meeting of stockholders called for the election of directors, provided that, that if less than 21 days’ notice of the meeting is given to insiders over other employees. Loansstockholders, such nomination shall be mailed or delivered to executive officers are subject to additional limitations basedthe president of First West Virginia no later than the close of business on the typeseventh day following the day on which the notice of loan involved.the meeting was mailed.

CB’s articles of incorporation provide an advance notice procedure for certain business, or nominations to the board of directors, to be brought before an annual meeting of stockholders. Advance notice for certain business or nominations to the board of directors to be brought before next year’s annual meeting of stockholders of CB must be given to CB by not less than 60 days before the anniversary of the immediately preceding annual meeting of CB.

Enforcement.LEGAL MATTERS

The OCC currentlyvalidity of the shares of CB common stock to be issued in the merger has primary enforcement responsibility over savings associationsbeen passed upon for CB by Luse Gorman, PC, Washington, D.C. Certain federal income tax consequences of the merger have been passed upon for CB by Luse Gorman, PC, Washington, D.C, and for First West Virginia by Bowles Rice LLP, Charleston, West Virginia.

EXPERTS

The consolidated financial statements of CB as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016 incorporated by reference in this joint proxy statement/prospectus have been so incorporated in reliance on the reports of Baker Tilly Virchow Krause, LLP, an independent registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting.

The consolidated financial statements of First West Virginia as of December 31, 2016 and 2015 and for each of the three years in the period ended December 31, 2016 have been included in this joint proxy statement/prospectus in reliance upon the reports of BKD, LLP, an independent registered public accounting firm, as stated in its reports appearing herein, and upon on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

CB has authority to bring actions againstfiled with the institutionSecurities and all institution-affiliated parties, including shareholders, and any attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful actions likely to have an adverse effect on an insured institution. Formal enforcement action may range fromExchange Commission a registration statement under the Securities Act, as amended, that registers the issuance of the shares of CB common stock to be issued in connection with the merger. This joint proxy statement/prospectus is a capital directive or ceasepart of that registration statement and desist order to removalconstitutes the prospectus of officers and/or directors to institution of receivership, conservatorship or termination of deposit insurance. Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1.0 million per dayCB in especially egregious cases. The FDIC has the authority to recommendaddition to the OCCproxy statement for CB stockholders and First West Virginia stockholders. The registration statement, including this joint proxy statement/prospectus and the attached appendices, contains additional relevant information about CB and CB common stock.

CB also files reports, proxy statements and other information with the Securities and Exchange Commission under the Exchange Act. You may read and copy this information at the Public Reference Room of the Securities and Exchange Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may also obtain copies of this information by mail from the Public Reference Section of the Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates, or from commercial document retrieval services.

The Securities and Exchange Commission also maintains an Internet website that enforcement action be takencontains reports, proxy statements and other information about issuers, such as CB, who file electronically with respect to a particular savings association. If actionthe Securities and Exchange Commission. The address of the site is www.sec.gov. The reports and other information filed by CB with the Securities and Exchange Commission are also available at CB’s website at www.communitybank.tv under the tab “About Us—Investor Relations.” The web addresses of the Securities and Exchange Commission and CB are included as inactive textual references only. Except as specifically incorporated by reference into this joint proxy statement/prospectus, information on those websites is not takenpart of this joint proxy statement/prospectus.

The Securities and Exchange Commission allows CB to incorporate by the OCC, the FDIC has authorityreference information in this joint proxy statement/prospectus. This means that CB can disclose important information to take such action under certain circumstances. Federal law also establishes criminal penalties for certain violations.

FHLB System. First Federal is a member of the FHLB System, which consists of 12 regional FHLBs. The FHLB provides a central credit facility primarily for member institutions. First Federal, as a member of the FHLB of Pittsburgh, is requiredyou by referring you to acquire and hold shares of capital stock in that FHLB. First Federal was in compliance with this requirement with an investment in FHLB of Pittsburgh stock at December 31, 2013 of $2.6 million.

Federal Reserve System. The FRB regulations require savings associations to maintain non-interest earning reserves against their transaction accounts (primarily Negotiable Order of Withdrawal and regular checking accounts). The regulations generally provide that reserves be maintained against aggregate transaction accounts as follows for 2013: a 3% reserve ratio is assessed on net transaction accounts up to and including $79.5 million; a 10% reserve ratio is applied above $79.5 million. The first $12.4 million of otherwise reservable balances (subject to adjustments by the FRB) are exempted from the reserve requirements. The amounts are adjusted annually and, for 2014, will require a 3% ratio for up to $89.0 million and an exemption of $13.3 million. First Federal compliesanother document filed separately with the foregoing requirements.

Other Regulations

First Federal’s operations are subject to federal laws applicable to credit transactions, including the:

Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

Home Mortgage Disclosure Act of 1975, requiring financial institutions to provideSecurities and Exchange Commission. The information to enable the public and public officials to determine whether a financial institutionincorporated by reference is fulfilling its obligation to help meet the housing needs of the community it serves;

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; and

Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of First Federal are subject to laws such as the:

Currency and Foreign Transactions Reporting Act (commonly referred to as the “Bank Secrecy Act” or “BSA”), which requires U.S. financial institutions to assist U.S. government agencies to detect and prevent money laundering. Specifically, BSA requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities.

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and

Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check.

Regulation and Supervision of FedFirst

General. As a savings and loan holding company, FedFirst is subject to Federal Reserve regulations, examinations, supervision, reporting requirements and regulations regarding its activities. In addition, the Federal Reserve has enforcement authority over FedFirst and its non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve to restrict or prohibit activities that are determinedconsidered to be a serious riskpart of this joint proxy statement/prospectus, except for any information that is superseded by information that is included directly in this joint proxy statement/prospectus.

This joint proxy statement/prospectus incorporates by reference the documents listed below that CB previously filed with the Securities and Exchange Commission. They contain important information about the companies and their financial condition.

CB Filings with the Securities and Exchange Commission

(File No. 001-36706)

Period or Date Filed

Annual Report on Form 10-KYear ended December 31, 2016
Quarterly Reports on Form 10-QQuarters ended March 31, 2017; June 30, 2017 and September 30, 2017

Current Reports on Form 8-K or 8-K/A (in each case other than those portions furnished under Item 2.02 or Item 7.01 ofForm 8-K)

Filed on February 15, 2017; May 17, 2017; August 16, 2017; November 15, 2017; November 16, 2017 and January 18, 2018

The description of CB’s common stock set forth in the registration statement onForm 8-A12B and any amendment or report filed with the Securities and Exchange Commission for the purpose of updating this description

Filed on October 22, 2014

CB also incorporates by reference additional documents filed with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act between the date of this joint proxy statement/prospectus and the later of the date of CB special meeting and the date of the First West Virginia special meeting, provided that CB is not incorporating by reference any information furnished to, but not filed with, the Securities and Exchange Commission.

Documents incorporated by reference are available from CB without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference as an exhibit in this joint proxy statement/prospectus. You can obtain documents incorporated by reference in this joint proxy statement/prospectus by requesting them in writing or by telephone from CB at the following address and phone number:

CB Financial Services, Inc.

100 North Market Street

Carmichaels, Pennsylvania 15320

Attention: Deborah Sabocheck, Corporate Secretary

CB stockholders requesting documents must do so by April 4, 2018 to receive them before the CB special meeting. You will not be charged for any of these documents that you request.

Additional information about First Federal.West Virginia may be obtained by contacting Deborah A. Kloeppner, Corporate Secretary, First West Virginia Bancorp, Inc., 1701 Warwood Avenue, Wheeling, West Virginia 26003. To obtain additional information from First West Virginia before the First West Virginia special meeting, you must make your request no later than April 4, 2018. You will not be charged for any of these documents that you request.

FedFirst

Index to the Consolidated Financial Statements of First West Virginia Bancorp, Inc.

Condensed Consolidated Balance Sheets as of September  30, 2017 (unaudited) and December 31, 2016

F-2

Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016 (unaudited)

F-3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and 2016 (unaudited)

F-4

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2017 and 2016 (unaudited)

F-4

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 (unaudited)

F-5

Notes to the Unaudited Condensed Consolidated Financial Statements

F-6

Independent Auditor’s Report

F-33

Report of Independent Registered Public Accounting Firm

F-34

Consolidated Balance Sheets as of December 31, 2016 and 2015

F-35

Consolidated Statements of Income for the years ended December  31, 2016, 2015 and 2014

F-36

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014

F-37

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2016, 2015 and 2014

F-38

Consolidated Statements of Cash Flows for the years ended December  31, 2016, 2015 and 2014

F-39

Notes to Consolidated Financial Statements

F-40

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

   (Unaudited) 
(Dollars in thousands, except share data)  September 30,
2017
  December 31,
2016
 

ASSETS

   

Cash and Due From Banks

  $4,384  $4,922 

Due From Banks-Interest Bearing

   12,983   17,955 

Federal Funds Sold

   1,915   —   
  

 

 

  

 

 

 

Total Cash and Cash Equivalents

   19,282   22,877 

Investment Securities:

   

Available-for-Sale (at fair value)

   205,244   197,206 

Loans

   101,242   97,092 

Less Allowance for Loan Losses

   (1,771  (1,797
  

 

 

  

 

 

 

Net Loans

   99,471   95,295 

Premises and Equipment, Net

   7,260   7,629 

Accrued Income Receivable

   1,028   1,113 

Goodwill

   1,644   1,644 

Bank-Owned Life Insurance

   4,148   4,063 

Other Assets

   5,049   5,428 
  

 

 

  

 

 

 

TOTAL ASSETS

  $343,126  $335,255 
  

 

 

  

 

 

 

LIABILITIES

   

Noninterest Bearing Deposits:

   

Demand

  $49,498  $37,710 

Interest Bearing Deposits:

   

Demand

   62,094   61,472 

Savings

   120,235   121,030 

Time

   53,551   55,494 
  

 

 

  

 

 

 

Total Deposits

   285,378   275,706 

Securities Sold Under Agreements to Repurchase

   21,058   22,531 

Federal Home Loan Bank Borrowings

   2,213   3,216 

Accrued Interest Payable

   76   84 

Other Liabilities

   759   659 
  

 

 

  

 

 

 

TOTAL LIABILITIES

   309,484   302,196 

STOCKHOLDERS’ EQUITY

   

Common Stock - 2,000,000 Shares Authorized at $5 Par Value:

   

1,728,730 Shares Issued at September 30, 2017 and December 31, 2016

   8,644   8,644 

Treasury Stock - 10,000 Shares at Cost

   (228  (228

Surplus

   6,966   6,966 

Retained Earnings

   19,277   19,907 

Accumulated Other Comprehensive Loss

   (1,017  (2,230
  

 

 

  

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

   33,642   33,059 
  

 

 

  

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $343,126  $335,255 
  

 

 

  

 

 

 

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

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
(Dollars in thousands, except share and per share data)  2017   2016   2017  2016 

INTEREST AND DIVIDEND INCOME

       

Loans, Including Fees:

       

Taxable

  $1,058   $1,003   $3,225  $3,018 

Tax-exempt

   79    112    247   349 

Debt Securities:

       

Taxable

   1,044    904    3,163   2,737 

Tax-exempt

   177    199    544   688 

Federal Funds Sold

   6    —      15   —   

Other Interest and Dividend Income

   72    44    197   123 
  

 

 

   

 

 

   

 

 

  

 

 

 

TOTAL INTEREST AND DIVIDEND INCOME

   2,436    2,262    7,391   6,915 

INTEREST EXPENSE

       

Deposits

   167    219    499   665 

Federal Funds Purchased and Repurchase Agreements

   36    47    112   147 

Federal Home Loan Bank Borrowings

   28    39    92   117 
  

 

 

   

 

 

   

 

 

  

 

 

 

TOTAL INTEREST EXPENSE

   231    305    703   929 
  

 

 

   

 

 

   

 

 

  

 

 

 

NET INTEREST INCOME

   2,205    1,957    6,688   5,986 

Provision For Loan Losses

   —      —      1,075   —   
  

 

 

   

 

 

   

 

 

  

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

   2,205    1,957    5,613   5,986 

NONINTEREST INCOME

       

Service Charges and Other Fees

   73    90    220   252 

Net Gains onAvailable-for-Sale Securities

   4    553    4   1,101 

Other Operating Income

   152    148    519   553 
  

 

 

   

 

 

   

 

 

  

 

 

 

TOTAL NONINTEREST INCOME

   229    791    743   1,906 

NONINTEREST EXPENSE

       

Salaries and Employee Benefits

   1,043    1,065    3,191   3,160 

Net Occupancy and Expense of Premises

   407    417    1,327   1,304 

Other Operating Expenses

   550    660    1,665   1,736 
  

 

 

   

 

 

   

 

 

  

 

 

 

TOTAL NONINTEREST EXPENSE

   2,000    2,142    6,183   6,200 
  

 

 

   

 

 

   

 

 

  

 

 

 

Income Before Income Taxes

   434    606    173   1,692 

Income Tax Expense (Benefit)

   77    104    (228  232 
  

 

 

   

 

 

   

 

 

  

 

 

 

NET INCOME

  $357   $502   $401  $1,460 
  

 

 

   

 

 

   

 

 

  

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

   1,718,730    1,718,730    1,718,730   1,718,730 

EARNINGS PER SHARE (BASIC AND DILUTED)

  $0.20   $0.29   $0.23  $0.85 

DIVIDENDS PER SHARE

  $0.20   $0.20   $0.60  $0.60 

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

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
(Dollars in thousands)  2017   2016   2017   2016 

Net Income

  $357   $502   $401   $1,460 

Other Comprehensive Income (Loss):

        

Investment SecuritiesAvailable-for-Sale

        

Unrealized Holding Gains (Losses) Arising During the Period

   331    (515   1,949    3,453 

Income Tax Effect

   (125   194    (733   (1,300

Reclassification of Gains Recognized in Earnings

   (4   (553   (4   (1,101

Income Tax Effect

   2    208    1    414 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total Other Comprehensive Income (Loss)

   204    (666   1,213    1,466 
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive Income (Loss)

  $561   $(164  $1,614   $2,926 
  

 

 

   

 

 

   

 

 

   

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

   Common Stock             

Accumulated

Other

    
(Dollars in thousands, except share and per share data)  Shares   Amount   Treasury
Stock
  Surplus   Retained
Earnings
  Comprehensive
Income (Loss)
  Total
Stockholders’
Equity
 

December 31, 2016

   1,728,730   $8,644   $(228 $6,966   $19,907  $(2,230 $33,059 

Net Income

   —      —      —     —      401   —     401 

Other Comprehensive Income

   —      —      —     —      ��     1,213   1,213 

Cash Dividend ($0.60 Per Share)

   —      —      —     —      (1,031  —     (1,031
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

September 30, 2017

   1,728,730   $8,644   $(228 $6,966   $19,277  $(1,017 $33,642 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

   Common Stock             

Accumulated

Other

     
(Dollars in thousands, except share and per share data)  Shares   Amount   Treasury
Stock
  Surplus   Retained
Earnings
  Comprehensive
Income
   Total
Stockholders’
Equity
 

December 31, 2015

   1,728,730   $8,644   $(228 $6,966   $19,672  $310   $35,364 

Net Income

   —      —      —     —      1,460   —      1,460 

Other Comprehensive Income

   —      —      —     —      —     1,466    1,466 

Cash Dividend ($0.60 Per Share)

   —      —      —     —      (1,031  —      (1,031
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

September 30, 2016

   1,728,730   $8,644   $(228 $6,966   $20,101  $1,776   $37,259 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

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

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

   Nine Months Ended 
   September 30, 
(Dollars in thousands)  2017  2016 

OPERATING ACTIVITIES

   

Net Income

  $401  $1,460 

Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:

   

Provision for Loan Losses

   1,075   —   

Depreciation and Amortization

   429   468 

Amortization of Investment Securities, Net

   520   604 

Investment Security Gains

   (4  (1,101

Loss on Disposal of Premises and Equipment

   1   2 

Loss (Gain) on Sale of Other Real Estate Owned

   (51  12 

Increase in Cash Surrender Value of Bank-Owned Life Insurance

   (85  (85

Decrease (Increase) in Interest Receivable

   85   (8

Decrease in Interest Payable

   (8  (19

Increase in Deferred Taxes

   (12  (61

Other, Net

   (241  124 
  

 

 

  

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

   2,110   1,396 
  

 

 

  

 

 

 

INVESTING ACTIVITIES

   

Net Decrease (Increase) in Loans, Net of Charge-offs

   (5,333  2,617 

Recoveries on Loans PreviouslyCharged-off

   3   1 

Proceeds From Sales of SecuritiesAvailable-for-Sale

   308   44,672 

Proceeds From Maturities, Prepayments, and Calls of SecuritiesAvailable-for-Sale

   20,544   84,043 

Purchase of SecuritiesAvailable-for-Sale

   (27,461  (126,555

Purchase of Premises and Equipment

   (61  (210

Proceeds From the Sale of Foreclosed Assets

   130   60 
  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

   (11,870  4,628 
  

 

 

  

 

 

 

FINANCING ACTIVITIES

   

Net Increase (Decrease) in Deposits

   9,672   (7,155

Dividends Paid

   (1,031  (1,031

Increase (Decrease) in Short-term Borrowings

   (1,473  1,193 

Repayment of Federal Home Loan Bank Borrowings

   (1,003  (78
  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

   6,165   (7,071
  

 

 

  

 

 

 

DECREASE IN CASH AND CASH EQUIVALENTS

   (3,595  (1,047

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

   22,877   25,929 
  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $19,282  $24,882 
  

 

 

  

 

 

 

SUPPLEMENTAL DISCLOSURES:

   

Cash Paid for Interest

  $711  $948 

Cash Paid for Income Taxes

   55   50 

Loans Transferred to Other Real Estate Owned

   79   72 

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

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

A summary of the significant accounting and reporting policies applied in the presentation of the accompanying consolidated financial statements follows.

Nature of Operations and Basis of Presentation: First West Virginia Bancorp, Inc. (“First West Virginia”) is a unitaryWest Virginia corporation. First West Virginia provides a variety of banking services to individuals and businesses through the branch network of its affiliate bank (“Progressive Bank”). Progressive Bank operates eight full service branches located in Wheeling (3), Wellsburg, Moundsville, New Martinsville, and Buckhannon, West Virginia and Bellaire, Ohio. Primary deposit products consist of checking accounts, savings accounts, and loan holding company within the meaningcertificates of federal law. As a unitary savingsdeposit. Primary lending products consist of commercial and loan holding company that was in existence prior to May 4, 1999, FedFirst is generally not restricted as to the types ofresidential real estate loans, consumer loans, and business activities in which it may engage, provided that First Federal continues to be a qualified thrift lender.

Federal law prohibits a savings and loan holding company from, directly or indirectly or through one or more subsidiaries, acquiring more than 5% of the voting stock of another savings association, or savings and loan holding company thereof, without prior written approval of the Federal Reserve or from acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary holding company or savings association. A savings and loan holding company is also prohibited from acquiring more than 5% of a company engaged in activities other than those authorized by federal law or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating applications by holding companies to acquire savings associations, the Federal Reserve must consider the financial and managerial resources and future prospects of the company and institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.loans.

The Federal Reserve is prohibited from approving any acquisition that would resultaccompanying unaudited condensed consolidated financial statements were prepared in accordance with instructions for Form10-Q and, therefore, do not include information or footnotes necessary for a multiple savings and loan holding company controlling savings associations in more than one state, except: (i) the approval of interstate supervisory acquisitions by savings and loan holding companies; and (ii) the acquisition of a savings association in another state if the laws of the state of the target savings association specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Source of Strength. The Dodd-Frank Act also extends the “source of strength” doctrine to savings and loan holding companies. The regulatory agencies must promulgate regulations implementing the “source of strength” policy that holding companies act as a source of strength to their subsidiary depository institutions by providing capital, liquidity and other support in timescomplete presentation of financial stress.

Dividends. The Federal Reserve has the power to prohibit dividends by savings and loan holding companies if their actions constitute unsafe or unsound practices. The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which also applies to savings and loan holding companies and which expresses the Federal Reserve’s view that a holding company should pay cash dividends only to the extent that the company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the company’s capital needs, asset quality and overall financial condition. The Federal Reserve also indicated that it would be inappropriate for a holding company experiencing serious financial problems to borrow funds to pay dividends. Under the prompt corrective action regulations, the Federal Reserve may prohibit a bank holding company from paying any dividends if the holding company’s bank subsidiary is classified as “undercapitalized.”

Acquisition of FedFirst. Under the Federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company or savings association. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the outstanding voting stock of the company or institution, unless the Federal Reserve has found that the acquisition will not result in a change of control of FedFirst. Under the Change in Control Act, the Federal Reserve generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition. Any company that acquires control would then be subject to regulation as a savings and loan holding company.

Properties

First Federal currently conducts its banking business through seven full-service offices in Monessen, Monongahela, Belle Vernon, Uniontown, Perryopolis, McMurray and Washington, Pennsylvania. First Federal’s administrative offices are located in Monessen, Pennsylvania. First Federal owns all of its banking offices except for those in McMurray and Washington. The lease for First Federal’s McMurray office expires in 2016 and has an option for an additional three year period. The lease for First Federal’s Washington office expires in 2017 and has an option for two additional five year periods. The Uniontown office is subject to a ground lease and in January 2014 FedFirst exercised its option to extend the lease to 2019 with an option to extend for one additional five year period.

Exchange Underwriters’ office is located in two buildings in Canonsburg, Pennsylvania, one of which is leased and the other which is owned. The lease for First Federal’s Exchange Underwriters’ office expires in 2017 and has an option for an additional five year period.

The net book value of the land, buildings, furniture, fixtures and equipment owned by First Federal was $1.9 million at December 31, 2013.

Legal Proceedings

On April 21, 2014, a class action complaint, captioned Sutton v. FedFirst Financial Corp., et al., was filed in the Circuit Court in Baltimore, Maryland, against FedFirst, each of FedFirst’s directors, and CB. The complaint alleges, among other things, that the FedFirst directors breached their fiduciary duties to FedFirst and its stockholders by agreeing to sell to CB without first taking steps to ensure that FedFirst stockholders would obtain adequate, fair and maximum consideration under the circumstances, by agreeing to terms with CB that benefit themselves and/or CB without regard for the FedFirst stockholders and by agreeing to terms with CB that discourage other bidders. The plaintiff also alleges that CB aided and abetted the FedFirst directors’ breaches of fiduciary duties. The complaint seeks, among other things, an order declaring the merger agreement unenforceable and rescinding and invalidating the merger agreement, an order enjoining the defendants from consummating the merger, as well as attorneys’ and experts’ fees and certain other damages. FedFirst believes the factual allegations in the complaint are without merit and intends to defend vigorously against the allegations in the complaint.

Periodically, there have been various claims and lawsuits against First Federal, such as claims to enforce liens, condemnation proceedings on properties in which First Federal holds security interests, claims involving the making and servicing of real property loans and other issues incident to First Federal’s business. First Federal is not a party to any other pending legal proceedings that it believes would have a material adverse effect on First Federal’s financial condition, results of operations or cash flows.

FedFirst’s Management Discussion And Analysis Of Financial Condition And Results Of Operations

The objective of this section is to help shareholders and potential investors understand FedFirst’s views on itsposition, results of operations, and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial condition. Youstatements should be read this discussion in conjunction with the consolidated financial statements and notes tothereto of First West Virginia included in the Annual Report for the year ended December 31, 2016. However, in the opinion of management, all adjustments (consisting of only normal recurring adjustments) which are necessary for a fair presentation of the financial statements have been included. The results of operations for the three month and nine month periods ended September 30, 2017, are not necessarily indicative of the results which may be expected for the entire year or any other period. The consolidated balance sheet of First West Virginia as of December 31, 2016 has been derived from the audited consolidated balance sheet of First West Virginia as of that date.

Principles of Consolidation: The consolidated financial statements that appear elsewhereof First West Virginia include the financial statements of the parent and its wholly-owned subsidiary, Progressive Bank, N.A. (“Progressive Bank”). All significant intercompany transactions and accounts have been eliminated in this proxy statement/prospectus.

Overview

FedFirst conducts community banking activities by accepting deposits and originating loans in its market area. FedFirst’s lending products include residential mortgage loans, commercial real estate and business loans, and home equity and other consumer loans. FedFirst also maintains an investment portfolio consisting primarily of mortgage-backed securities, municipal bonds and REMICs. FedFirst’s loan and investment portfolios are funded with deposits as well as collateralized borrowings from the FHLB of Pittsburgh.consolidation.

Income. FedFirst’s primary sourceUse of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that FedFirst earns on its loans and investments, and interest expense, which is the interest that FedFirst pays on its deposits and borrowings. A secondary source of income is noninterest income, which is revenue that FedFirst receives from providing products and services. The majority of FedFirst’s noninterest income generally comes from commissions from the sale of insurance products, service charges (primarily from service charges on deposit accounts) and bank-owned life insurance.

Allowance for Loan Losses.Estimates: The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. FedFirst evaluates the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Expenses.The noninterest expenses FedFirst incurs in operating its business consists primarily of compensation and employee benefits expenses and occupancy expenses, which include depreciation. FedFirst also incurs expenses for FDIC insurance premiums, data processing, professional services, advertising, and other miscellaneous items.

Compensation and employee benefits consist primarily of salaries and wages paid to FedFirst’s employees, payroll taxes, and expenses for health insurance, retirement plans, equity compensation plans and other employee benefits. Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, lease expense, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Federal insurance premiums are payments to the FDIC for insurance of FedFirst’s deposit accounts. Data processing expenses are fees paid to third parties for processing customer information, deposits, loans and general ledger activity. Professional services are fees paid to third parties for audit and accounting, legal, consulting, and other specialist services. Other expenses include supplies, telephone, postage, correspondent bank fees, real estate owned expenses, amortization of intangibles and other miscellaneous operating expenses.

Critical Accounting Policies

In the preparation of FedFirst’s consolidated financial statements FedFirst has adopted various accounting policies that govern the application ofin conformity with accounting principles generally accepted in the United States. FedFirst’s significant accounting policies are described in FedFirst’s NotesStates of America requires management to Consolidated Financial Statements.

Certain accounting policies involve significant judgmentsmake estimates and assumptions by FedFirst that have a material impact onaffect the carrying valuereported amounts of certain assets and liabilities. FedFirst considers these accounting policies to be critical accounting policies. The judgmentsliabilities, disclosure of contingent assets and assumptions FedFirst uses are based on historical experienceliabilities at the date of the consolidated financial statements, and other factors, which FedFirst believes to be reasonable under the circumstances.reported amounts of revenues and expenses during the reporting period. Actual results could differ from these judgmentsthose estimates. Material estimates that are particularly susceptible to material change in the near term relate to the determination of the allowance for loan losses, valuation of deferred tax assets, other-than-temporary impairments (OTTI), and estimates under different conditions, resultingfair values of financial instruments.

Cash and Cash Equivalents: Cash and cash equivalents consist of cash on hand and amounts due from banks and federal funds sold with maturities of less than 90 days. At September 30, 2017, First West Virginia’s cash accounts exceeded federally insured limits by approximately $1,765,000. Additionally, First West Virginia had approximately $12,983,000 on deposit with the Federal Reserve Bank and the Federal Home Loan Bank of Pittsburgh as of September 30, 2017.

Investment Securities: Investment securities are classified at the time of purchase, based on management’s intention and ability, as securities available for sale or held to maturity. First West Virginia did not have any securities classified as held to maturity at September 30, 2017 or December 31, 2016. Certain debt and equity securities have been classified as available for sale to serve principally as a source of liquidity. Unrealized holding gains and losses foravailable-for-sale securities are reported as a separate component of stockholders’ equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Securities are periodically reviewed for other-than-temporary impairment based upon a number of factors, including, but not limited to, the length of time and extent to which the market value has been less than cost, the financial condition of the underlying issuer, the ability of the issuer to meet contractual obligations, the likelihood of the security’s ability to recover any decline in its market value, and management’s intent and ability to hold the security for a changeperiod of time sufficient to allow for a recovery in market value. Among the factors that are considered in determining management’s intent and ability is a review of First West Virginia’s capital adequacy, interest rate risk position and liquidity. The assessment of a security’s ability to recover any decline in market value, the ability of the issuer to meet contractual obligations and management’s intent and ability requires considerable judgment. Once a decline in value is determined to be other-than-temporary, if the investor does not intend to sell the security, and it ismore-likely-than-not that it will not be required to sell the security before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as thenon-credit portion) is recognized in other comprehensive income, net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. At September 30, 2017 and December 31, 2016, there were no investment securities identified by management to be other-than-temporarily impaired. If investments decline in fair value due to adverse changes in the financial markets, charges to income could haveoccur in future periods.

Federal Reserve and Federal Home Loan Bank stock are required investments for institutions that are members of the Federal Reserve and Federal Home Loan Bank systems. The required investment in the common stock is based on a material impactpredetermined formula, carried at cost and evaluated for impairment.

Loans and Loans Held for Sale: Loans are generally reported at the principal balance outstanding, net of unearned income. Interest income on loans is accrued based on the carrying valuesprincipal outstanding. It is First West Virginia’s policy to discontinue the accrual of FedFirst’s assetsinterest when either the principal or interest is past due 90 days or more, unless the loan is both well secured and liabilitiesin the process of collection. It is First West Virginia’s policy not to recognize interest income on specific impaired loans unless the likelihood of future loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. A nonaccrual loan may be returned to accrual status when none of its principal and its resultsinterest payments are due and there has been a sustained period of operations.repayment performance. Loans are considered past due when contractually required principal and interest payments have not been made on the due dates. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the contractual life of the related loans or commitments as an adjustment of the related loan’s yield using the level yield method. Loans held for sale are carried at the lower of cost or estimated fair value in the aggregate. First West Virginia had no loans held for sale as of September 30, 2017 and December 31, 2016.

Consumer loans are fully charged off or charged down to net realizable value when deemed uncollectible due to bankruptcy or other factors or no later than a defined number of days past due. Consumer loans not secured by real estate are charged off or charged down to net realizable value at 120 days past due forclosed-end loans and 180 days past due foropen-end loans. Residential real estate loans are charged down to net realizable value at 120 days past due forclosed-end loans and 180 days past due foropen-end loans. Commercial loans are fully charged off or charged down to net realizable value when management judges the loan to be uncollectible.

First West Virginia has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which Progressive Bank may sell conformingone-to-four family residential mortgage loans to the FHLB. The current agreement dated December 28, 2017 provides for a maximum commitment of $5,000,000. This commitment expires on December 28, 2018. Loans sold to the FHLB are sold with limited recourse or credit risk based upon utilization of the original commitment. Progressive Bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold and outstanding to the FHLB were $5,857,000 and $6,206,000 as of September 30, 2017 and December 31, 2016, respectively. These loans were also subject to recourse obligation or credit risk in the amount of $226,000 at September 30, 2017 and December 31, 2016. No liability has been recorded for the recourse obligation as the likelihood of incurring the liability is considered remote. The amount of income recognized as of a result of this agreement was $4,000 and $5,000 for the three months ended September 30, 2017 and 2016, respectively, and $13,000 and $16,000 for the nine months ended September 30, 2017 and 2016, respectively.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Allowance for Loan Losses.Losses: The allowance for loan losses represents management’s estimate ofthe amount which management estimates is adequate to provide for probable incurred losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the loan portfolio as of the balance sheet date.allowance, and all recoveries are credited to it. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses that is charged to earnings. Allocationsoperations. The provision is based on management’s evaluation of the allowance may be made for specific loans, butadequacy of the entire allowance is available for any loan that in management’s judgment should be charged-off. Loan losses are charged against the allowance when management confirms collectability of a loan balance is not likely. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses which encompasses the overall risk characteristics of the various portfolio segments, past experience with losses, the impact of economic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to significant changes in the near term.

Management tracks and assigns a historical loss percentage for each loan rating category within each loan type. A rolling three-year historical loss ratio is evaluatedused, calculated on a quarterly basis bybasis.

Management currently utilizes nine qualitative factors that are adjusted based on changes in the lending environment and economic conditions. The qualitative factors include the following: levels of and trends in delinquencies, nonaccruals, and charge-offs; trends within the loan portfolio; changes in lending policies and procedures; experience of lending personnel and management oversight; national and is based upon management’s periodiclocal economic trends; concentrations of credit; external factors such as legal and regulatory requirements; changes in the quality of loan review and Board oversight; and changes in the value of underlying collateral. The number of qualitative factors can change. Factors can be added for new risks or taken away if the collectability of the loans in light of historical experience, peer group information, the naturerisk no longer applies. Each loan type will have its own risk profile and volumemanagement will evaluate and adjust each qualitative factor for each loan type quarterly, if necessary. For example, if one area of the loan portfolio adverse situationsis experiencing sharp increases in growth, it is likely the qualitative factor for trends in the loan portfolio would be increased for that may affectloan type. As levels of delinquencies and nonaccrual loans decline for a loan type, it is likely that factor would be reduced.

In terms of First West Virginia’s loan portfolio, the borrower’s abilitycommercial and industrial loans and commercial real estate loans are deemed to repay, estimated value of any underlying collateral, prevailinghave more risk than the consumer real estate loans and other consumer loans in the portfolio. The commercial loans not secured by real estate are highly dependent on financial condition and are more dependent on economic conditions. The commercial loans secured by real estate are also dependent on economic conditions but generally have stronger forms of collateral. The commercial loans and commercial real estate loans have historically been responsible for the majority of First West Virginia’s delinquencies, nonaccrual loans, and charge-offs so both of these categories carry higher qualitative factors than consumer real estate loans and other factors relatedconsumer loans.

Mortgage loans secured byone-to-four family properties and all consumer loans are large groups of smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on acase-by-case basis taking into consideration all circumstances concerning the loan, the credit worthiness and payment history of the borrower, the length of the payment delay, and the amount of shortfall in relation to the collectability of the loan portfolio. This evaluation is inherently subjective as it involves a high degree of judgmentprincipal and requires estimates thatinterest owed.

Impaired loans are susceptible to significant revision as more information becomes available.

An allowance is establishedloans for loans that are individually evaluated and determined to be impaired. A loan is considered impaired when, based on current information and events,which it is probable that FedFirstFirst West Virginia will not be unableable to collect the scheduled payments of principal or interestall amounts due according to the contractual terms of the loan agreement. Loans that experience insignificant payment delaysFirst West Virginia individually evaluates such loans for impairment and payment shortfalls generally aredoes not classifiedaggregate loans by major risk classifications. The definition of “impaired loans” is not the same as impaired. Athe definition of “nonaccrual loans,” although the two categories overlap.

First West Virginia may choose to place a loan may be placed on nonaccrual status due to payment delinquency or uncertain collectability while not being classifiedclassifying the loan as impaired.impaired, provided the loan is not a commercial or commercial real estate classification. Payments received on nonaccrual loans are applied as a reduction of the loan principal balance. Factors considered by management in determining impairment include payment status risk rating, and loan amount. Generally, management performs individual impairment assessments of substandard loan relationships of $250,000 or greater to determine the amount that may be uncollectible.collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using currentthe original interest ratesrate, and its recorded value, or as a practical measure in the case of collateralizedcollateral dependent loans, the difference between the fair value of the collateral and the recorded amount of the loans less estimated selling costs. Impaired loans incur a charge-off when it is determinedloans. When foreclosure is probable, impairment is measured based on the fair value of the collateral less estimated liquidation expenses.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the ultimate collectability is not likely.

Loans excluded fromsize of the loan, loan quality ratings, value of collateral, repayment ability of borrowers, and historical experience factors. The historical experience factors utilized for individual impairment analysisloan reviews are collectivelybased upon past loss experience, known trends in losses and delinquencies, the growth of loans in particular markets and industries, and known changes in economic conditions in the particular lending markets. Allowances for homogeneous loans (such as residential mortgage loans, personal loans, etc.) are evaluated by management to estimate losses inherent in those loans. Management determinesbased upon historical loss experience, for each grouptrends in losses and delinquencies, growth of loans with similar risk characteristics within the portfolio based on loss experience for loans in each group. Loan categories represent groups of loans with similar risk characteristicsparticular markets, and may include types of loans by product, large credit exposures, concentrations, loan

grade, or any other characteristic that causes a loan’s risk profile to be similar to another. FedFirst also considers qualitative or environmental factors that are likely to cause estimated credit losses associated with First Federal’s existing portfolio to differ from historical loss experience, including changes in lending policies and procedures; changes in the nature and volume of the loan portfolio; changes in experience, ability and depth of loan management; changes in the volume and severity of past due loans, non-accrual loans and adversely graded or classified loans; changes in the quality of the loan review system; changes in the value of underlying collateral for collateral dependent loans; existence of or changes in concentrations of credit;known changes in economic or business conditions; and the effect of competition, legal and regulatory requirements on estimated credit losses.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized as special mention have potential weaknesses that may resultconditions in deterioration if uncorrected and not monitored. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass. To determine the appropriate risk rating category, the borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans.

Although FedFirst believes that it uses the best information available to establisheach lending market. There can be no assurance the allowance for loan losses will be adequate to cover all losses, but management believes the allowance for loan losses in the amount of $1,771,000 at September 30, 2017, was adequate to provide for probable losses from existing loans based on information currently available. While management uses available information to provide for loan losses, the ultimate collectability of a substantial portion of the loan portfolio, and the need for future adjustmentsadditions to the allowance, maywill be necessary ifbased on changes in economic conditions differ substantiallyand other relevant factors. As such, an adverse change in economic activity could reduce cash flows for both commercial and individual borrowers, which would likely cause First West Virginia to experience increases in problem assets, delinquencies and losses on loans.    

Goodwill: Goodwill resulted from First West Virginia’s purchase of a less-than-whole financial institution (the “branch”). The goodwill value of $1,644,000 is supported ultimately by revenue that is driven by the assumptions usedvolume of business transacted. A decline in makingearnings as a result of a lack of growth or the evaluation. In addition,inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods.

Goodwill is periodically reviewed for impairment. No impairment losses were recognized as of September 30, 2017 and December 31, 2016. Additionally, future events could cause management to conclude that impairment indicators exist and that the Officegoodwill is impaired, which would result in First West Virginia recording an impairment loss. Any resulting impairment loss could have a material, adverse impact on First West Virginia’s financial condition and results of operations.

Mortgage-Servicing Rights (“MSRs”):First West Virginia has agreements for the express purpose of selling loans in the secondary market. First West Virginia maintains all servicing rights for these loans. MSRs are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to the estimated servicing income over the estimated life of the Comptrollerservicing portfolio. Impairment is evaluated based on the fair value of the Currency (“OCC”),right, which is based on portfolio interest rates and prepayment characteristics.

Bank-Owned Life Insurance: Bank-owned life insurance consists of investments in life insurance policies on executive officers and other members of Progressive Bank’s management. The policies are carried at their net cash surrender value. Changes in the policy value are recorded as an integral part of its examination process, periodically reviews FedFirst’s allowance for loan losses. The OCC may require FedFirst to recognize adjustmentsadjustment to the allowancecarrying value with the corresponding amount recognized as noninterest income or expense. Earnings on these policies are based on its judgments about information availablethe net earnings on the cash surrender value of the policies. The net cash surrender value of bank-owned life insurance was $4,148,000 and $4,063,000 at September 30, 2017 and December 31, 2016, respectively. The death benefit value of the bank-owned life insurance at September 30, 2017 and December 31, 2016 was $8.7 million and $8.8 million, respectively. An agreement has been executed with all officers whereby a $40,000 death benefit is payable upon the participant’s death while employed by First West Virginia to their designated beneficiary.

Advertising Costs: Advertising costs are expensed as the costs are incurred. Advertising expenses amounted to $45,000 and $96,000 for the three months ended September 30, 2017 and 2016, respectively. For the nine month periods ended September 30, 2017 and 2016, advertising expenses amounted to $172,000 and $152,000, respectively.

Premises and Equipment: Land is carried at cost. Premises and equipment is stated at cost, less accumulated depreciation and amortization. Provisions for depreciation and amortization are computed generally using the straight-line method over the estimated useful lives of the assets. When units of property are disposed of, the premises and equipment accounts are relieved of the cost and the accumulated depreciation related to such units. Any resulting gains or losses are credited to or charged against income. Cost of repairs and maintenance is charged to expense as incurred. Additions and improvements are capitalized at cost.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from First West Virginia, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) First West Virginia does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Other Real Estate Owned: Assets acquired through, or in lieu of, loan foreclosures are initially recorded at fair value, less costs to sell when acquired, establishing a new cost basis. The assets are subsequently accounted for at the timelower of its examination. A large loss could depletecost or fair value, less estimated costs to sell. Any subsequent declines in fair value and gains or losses on the allowance and require increased provisionsdisposition of these assets are credited to replenish the allowance,or charged against income. Other real estate owned is included in other assets. There were no consumer mortgage loans secured by residential real estate properties for which would negatively affect earnings.formal foreclosure proceedings were in process at September 30, 2017.

Deferred Income Taxes.Taxes: FedFirst usesFirst West Virginia and its subsidiary file a consolidated federal income tax return. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. First West Virginia recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the asset and liability method of accountingprovision for income taxes. Under this method,taxes in the Condensed Consolidated Statements of Income. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are recognized for the futureexpected to be realized or settled. As changes in tax consequences attributable to differences between the financial statements’ carrying amounts of existing assets and liabilities and their respective tax bases. Deferredlaws or rates are enacted, deferred tax assets and liabilities are measured using enactedadjusted through the provision for income taxes. Deferred income tax rates expected to apply to taxable incomeexpenses or benefits are based on the changes in the deferred tax asset or liability from period to period. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Earnings Per Common Share: Earnings per common share are calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the year. First West Virginia has no securities which would be considered potential common stock.

Legal Proceedings: The nature of the business of First West Virginia’s subsidiary generates a certain amount of litigation involving matters arising in the ordinary course of business. First West Virginia is unaware of any litigation other than ordinary routine litigation incidental to the business of First West Virginia, to which it or its subsidiary is a party or of which any of their property is subject.

Recent Accounting Standards

In September 2017, the FASB issued Accounting Standards Update (“ASU”)2017-13,Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.ASU2017-13 amends the early adoption date option for certain companies related to the adoption of ASUNo. 2014-09, Revenue from Contracts with Customers (Topic 606) and ASUNo. 2016-02, Leases (Topic 842). The SEC staff stated the SEC would not object to a public business entity that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC adopting ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The SEC staff stated the SEC would not object to a public business entity that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC adopting ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. First West Virginia is evaluating the provisions of ASU2017-13 but believes that its adoption will not have a material impact on First West Virginia’s consolidated financial condition or results of operations.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Recent Accounting Standards (continued)

In March 2017, the FASB issued ASU2017-08,Receivables- Nonrefundable Fees and Other Costs (Subtopic310-20): Premium Amortization on Purchases of Callable Debt Securities. ASU2017-08 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. ASU2017-08 is effective for public business entities for annual periods beginning after December 15, 2018, and interim periods within those annual periods, and for all other entities for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020 with early adoption permitted. First West Virginia is evaluating the provisions of ASU2017-08 but believes that its adoption will not have a material impact on First West Virginia’s consolidated financial condition or results of operations.

In January 2017, the FASB issued ASU2017-04,Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU2017-04 simplifies the accounting for goodwill impairments by eliminating the second step of the goodwill impairment test. Instead, an entity will apply aone-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. ASU2017-04 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. First West Virginia is currently evaluating the provisions of ASU2017-04, but does not believe that its adoption will have a material impact on First West Virginia’s consolidated financial condition or results of operations.

In August 2016, the FASB issued ASU2016-15,Statement of Cash Flow (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU2016-15 addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement ofzero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in whichrelation 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. ASU2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those temporary differences arefiscal years. Early adoption is permitted and the amendments should be applied using a retrospective transition method to each period presented. First West Virginia is currently evaluating the provisions of ASU2016-15, but does not believe that its adoption will have a material impact on First West Virginia’s consolidated financial condition or results of operations.

In June 2016, the FASB issued ASU2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU2016-13 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, ASU2016-13 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 recoveredcollected. 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. ASU2016-13 affects companies holding financial assets and net investment in leases that are not accounted for at fair value through net income. The ASU2016-13 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. ASU2016-13 is effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. First West Virginia is currently evaluating the provisions of ASU2016-13 and is unable to estimate the impact on First West Virginia’s consolidated financial condition or settled. The realizationresults of deferred taxoperations at this time.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Recent Accounting Standards (continued)

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 is assessedand lease liabilities on the balance sheet, and disclosing key information about leasing arrangements. ASU2016-02 will require lessees to recognize aright-of-use (ROU) asset for its right to use the underlying asset and a valuation allowance provided, when necessary,lease liability for that portionthe 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 asset whichfuture 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. ASU2016-02 is not likelyeffective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted, and is to be realized.

FedFirst exercises significant judgment inapplied as of the beginning of the earliest period presented using a modified retrospective approach. First West Virginia is currently evaluating the amountprovisions of ASU2016-02, but expects to report increased assets and timingliabilities as a result of reporting additional leases on First West Virginia’s consolidated statement of financial condition or results of operations.

In January 2016, the FASB issued ASU2016-01,Financial Instruments – Overall (Subtopic825-10), which enhances the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. ASU2016-01 (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 resulting tax liabilitiesrequirement for an entity to disclose the methods and assets. These judgments require FedFirstsignificant assumptions used to make projections of future taxable income. The judgments and estimates FedFirst makes in determining its deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require FedFirst to record a valuation allowance against its deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period, which would negatively affect earnings.

Goodwill.FedFirst recorded goodwill in connection with its acquisition of Exchange Underwriters. Goodwill is not amortized but is tested for impairment annually or more frequently if impairment indicators arise. The goodwill impairment model is a two-step process. First, it requires a comparison of the book value of net assets toestimate the fair value of financial instruments measured at amortized cost; (iv) requires an entity to use the related operations that have goodwill assigned to them. Ifexit price notion when measuring the fair value of financial instruments for disclosure purposes; and (v) requires separate 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. ASU2016-01is determinedeffective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be less than book value,applied using a second step is performedcumulative-effect adjustment to compute the amountbalance sheet as of the impairment. FedFirst estimates the fair valuesbeginning of the related operations using discounted cash flows. The forecastsfiscal year of futureadoption. First West Virginia is currently evaluating the provisions of ASU2016-01, but does not believe that its adoption will have a material impact on First West Virginia’s consolidated financial condition or results of operations.

In May 2014, the FASB issued ASU2014-09,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. ASU2014-09 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 ASU2015-14, which defers the effective date of ASU2014-09. The guidance is effective for First West Virginia’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 basedaccounted for under other U.S. GAAP guidance. For that reason, First West Virginia does not expect it to have a material impact on FedFirst’s best estimateits consolidated results of future revenuesoperations for elements of the statement of income associated with financial instruments, including securities gains, interest income, and operating costs, based primarily on contractsinterest expense. However, First West Virginia does believe the new standard will result in effect, new accounts and cancellations and operating budgets. The impairment analysis requires management to make subjective judgments concerning how the acquired assets will performdisclosure requirements. First West Virginia is currently in the future. Eventsprocess of reviewing contracts to assess the impact of the new guidance on its service offerings that are in the scope of the guidance included innon-interest income, such as deposit related fees and factors that may significantlyservice charges and payment processing fees. First West Virginia 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 and will use modified retrospective method for transition in which the cumulative effect will be recognized at the date of adoption with no restatement of comparative periods presented.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Earnings Per Share

There are no convertible securities, which would affect the estimates include competitive forces, customer behaviorsnumerator in calculating basic and attrition, changes in revenue growth trends, cost structures and industry and market trends. Changes in these forecasts could cause a reporting unit to either pass or faildiluted earnings per share; therefore, net income as presented on the first stepCondensed 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 goodwill impairment model, which could significantly changebasic and diluted earnings per share computation.

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2017   2016   2017   2016 

Weighted-Average Common Shares Outstanding

   1,728,730    1,728,730    1,728,730    1,728,730 

Average Treasury Stock Shares

   (10,000   (10,000   (10,000   (10,000
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-Average Common Shares and Common Stock

        

Equivalents Used to Calculate Basic Earnings Per Share

   1,718,730    1,718,730    1,718,730    1,718,730 

Additional Common Stock Equivalents (Stock Options and

        

Restricted Stock) Used to Calculate Diluted Earnings Per Share

   —      —      —      —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-Average Common Shares and Common Stock

        

Equivalents Used to Calculate Diluted Earnings Per Share

   1,718,730    1,718,730    1,718,730    1,718,730 
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

  $0.20   $0.29   $0.23   $0.85 

Diluted

   0.20    0.29    0.23    0.85 

Note 3. Investment Securities

The following table presents the amountamortized cost and fair value of impairment recorded. FedFirst’s annual assessmentinvestment securitiesavailable-for-sale at the dates indicated:

   (Dollars in thousands)
September 30, 2017
 
   Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair Value 

U.S. Government Agencies

  $57,745   $—     $(1,169  $56,576 

Obligations of States and Political Subdivisions

   36,711    921    (195   37,437 

Mortgage-Backed Securities - Government-Sponsored Enterprises

   111,649    108    (1,365   110,392 

Equity Securities - Mutual Funds

   667    40    (10   697 

Equity Securities - Other

   103    39    —      142 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $206,875   $1,108   $(2,739  $205,244 
  

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Investment Securities (continued)

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

U.S. Government Agencies

  $56,743   $1   $(1,867  $54,877 

Obligations of States and Political Subdivisions

   33,936    864    (398   34,402 

Mortgage-Backed Securities - Government-Sponsored Enterprises

   109,336    49    (2,266   107,119 

Equity Securities - Mutual Funds

   664    29    (14   679 

Equity Securities - Other

   103    28    (2   129 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $200,782   $971   $(4,547  $197,206 
  

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Investment Securities (continued)

The following tables show First West Virginia’s gross unrealized losses and fair value, aggregated by investment category and length of potential goodwill impairment was completedtime that the individual securities have been in a continuous unrealized loss position at the fourth quarterdates indicated:

   (Dollars in thousands)
September 30, 2017
 
   Less than 12 months  12 Months or Greater  Total 
   Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
  Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
  Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
 

U.S. Government Agencies

   17   $36,320   $(598  9   $20,254   $(571  26   $56,574   $(1,169

Obligations of States and Political Subdivisions

   22    8,396    (149  2    668    (46  24    9,064    (195

Mortgage-Backed Securities - Government Sponsored Enterprises

   36    81,089    (1,040  7    11,100    (325  43    92,189    (1,365

Equity Securities - Mutual Fund

   2    541    (10  —      —      —     2    541    (10

Equity Securities - Other

   —      —      —     —      —      —     —      —      —   
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total

   77   $126,346   $(1,797  18   $32,022   $(942  95   $158,368   $(2,739
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

   December 31, 2016 
   Less than 12 months  12 Months or Greater  Total 
   Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
  Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
  Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
 

U.S. Government Agencies

   23   $53,875   $(1,867  —     $—     $—     23   $53,875   $(1,867

Obligations of States and Political Subdivisions

   36    13,036    (398  —      —      —     36    13,036    (398

Mortgage-Backed Securities - Government Sponsored Enterprises

   42    100,654    (2,190  2    3,361    (76  44    104,015    (2,266

Equity Securities - Mutual Fund

   2    535    (13  1    27    (1  3    562    (14

Equity Securities - Other

   —      —      —     1    22    (2  1    22    (2
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total

   103   $168,100   $(4,468  4   $3,410   $(79  107   $171,510   $(4,547
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Investment Securities (continued)

For debt securities, First West Virginia does not believe any individual unrealized loss as of 2013. Based on the results of this assessment, no impairment charge was deemed necessary for the years endedSeptember 30, 2017 and December 31, 2013 and 2012.

Other-Than-Temporary Impairment (“OTTI”).FedFirst reviews its investment2016 represents an other-than-temporary impairment. First West Virginia performs a review of the entire securities portfolio on a quarterly basis for indications ofto identify securities that may indicate an other-than-temporary impairment. This review includes analyzingFirst West Virginia’s management considers the length of time and the extent to which the fair value has been lowerless than the cost, and the financial condition and near-term prospects of the issuer, including any specific eventsissuer. The securities that may influence the operations of the issuer,are temporarily impaired at September 30, 2017 and FedFirst’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market.

FedFirst recognizes credit-related OTTI on debt securities in earnings while noncredit-related OTTI on debt securities not expected to be sold is recognized in accumulated OCI. FedFirst assesses whether the credit loss existed by considering whether (a) FedFirst has the intent to sell the security, (b) it is more likely than not that FedFirst will be required to sell the security before recovery, or (c) FedFirst does not expect to recover the entire amortized cost basis of the security. FedFirst can bifurcate the OTTI on securities not expected to be sold or where the entire amortized cost of the security is not expected to be recovered into the components representing credit loss and the component representing loss related to other factors. The portion of the fair value decline attributable to credit loss is recognized through earnings.

CDOs are evaluated for OTTI by determining whether it is probable that an adverse change in estimated cash flows has occurred. Determining whether there has been an adverse change in estimated cash flows involves the calculation of the present value of remaining cash flows compared to previously projected cash flows. FedFirst considers the discounted cash flow analysis to be its primary evidence when determining whether credit-related OTTI exists on CDOs.

Revenue Recognition of Insurance Commissions and Contingency Fees. Exchange Underwriters records insurance commission based on the method in which the policy is billed. For policies that Exchange Underwriters directly bills to policyholders, income is recorded when billed. For policies an insurance company directly bills to policyholders on behalf of Exchange Underwriters, income is recorded as payments are received. Commissions are recorded net of cancellations.

Exchange Underwriters also receives guaranteed supplemental payments and contingency fees that may be significant to its financial results. Guaranteed supplemental payments and contingency fees are dependent on several factors, which include, but are not limited to, eligible written premiums, earned premiums, incurred losses, and stop loss charges. Guaranteed supplemental payments are only accrued when insurance companies offer a lock-in provision and Exchange Underwriters agrees to a stipulated amount that typically includes a predetermined percentage adjusting the final payout calculations. Otherwise, contingency fees are recorded on a cash basis when received based on final calculations. Contingency fees are typically received in the first quarter of the year. Since insurance companies are not required to provide any estimates, FedFirst is not able to accrue contingency fees in the period earned as it does with guaranteed supplemental payments.

FedFirst Results of Operations for the Three Months Ended MarchDecember 31, 2014 and 2013

Overview. The Company had net income of $534,000 for the three months ended March 31, 2014, compared to $794,000 for the same period in 2013.

   

Three Months Ended

March 31,

 

(Dollars In thousands)

      2014          2013     

Net income of FedFirst Financial Corporation

  $534   $794  

Return on average assets

   0.67  1.01

Return on average equity

   4.16    5.85  

Average equity to average assets

   16.09    17.17  

Dividend payout ratio

   134.8  12.5

Net Interest Income. Net interest income for the three months ended March 31, 2014 increased $100,000, or 4.0%, to $2.6 million compared to $2.5 million for the three months ended March 31, 2013.

Interest income decreased $24,000, or 0.7%, and remained at $3.2 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. Interest income on securities decreased $112,000 due to a decrease of $14.7 million in average balance primarily due to paydowns of mortgage-backed and REMIC securities. Interest income on loans increased $77,000 due to a $20.5 million increase in the average balance of loans that included a change in loan composition with increases in commercial real estate, home equity installment and commercial business loans partially offset by a decrease in residential and multi-family real estate. The average yield on loans decreased 25 basis points primarily driven by originations of commercial and home equity loans at lower yields.

Interest expense decreased $124,000, or 17.4%, to $590,000 for the three months ended March 31, 2014 compared to $714,000 for the three months ended March 31, 2013. Interest expense on deposits decreased $68,000 due a decrease of 16 basis points in cost, primarily related to the repricing of maturing certificates of deposit to lower rates. Interest expense on borrowings decreased $56,000 due to a decrease of 47 basis points in cost from the payoff of higher cost borrowings that were replaced with lower cost, short-term borrowings.

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. 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.

  Three Months Ended March 31, 
  2014  2013 
(Dollars in thousands) Average
Balance
  Interest and
Dividends
  Yield/Cost  Average
Balance
  Interest and
Dividends
  Yield/Cost 

Assets:

      

Interest-earning assets:

      

Loans, net (1)(2)

 $269,652   $3,002    4.45 $249,189   $2,925    4.70

Securities (3)(4)

  25,968    222    3.42    40,646    335    3.29  

Other interest-earning assets

  6,510    15    0.92    7,599    4    0.21  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-earning assets

  302,130    3,239    4.29    297,434    3,264    4.39  

Noninterest-earning asset

  17,155      18,513    
 

 

 

    

 

 

   

Total assets

 $319,285     $315,947    
 

 

 

    

 

 

   

Liabilities and Stockholders’ equity:

      

Interest-bearing liabilities:

      

Interest-bearing demand deposits

 $32,958    7    0.08  18,745    4    0.09

Savings accounts

  24,643    3    0.05    24,487    3    0.05  

Money market accounts

  49,104    18    0.15    55,175    20    0.14  

Certificates of deposit

  87,542    288    1.32    92,059    357    1.55  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-bearing deposits

  194,247    316    0.65    190,466    384    0.81  

Borrowings

  42,624    274    2.57    43,351    330    3.04  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest-bearing liabilities

  236,871    590    1.00    233,817    714    1.22  

Noninterest-bearing liabilities

  31,029      27,870    
 

 

 

    

 

 

   

Total liabilities

  267,900      261,687    

Stockholders’ equity

  51,385      54,260    
 

 

 

    

 

 

   

Total liabilities and stockholders’ equity

 $319,285     $315,947    
 

 

 

    

 

 

   

Net interest income

  $2,649     $2,550   
  

 

 

    

 

 

  

Interest rate spread

    3.29    3.17

Net interest margin

    3.51      3.43  

Average interest-earning assets to average to average interest-bearing liabilities

    127.55    127.21

(1)Amount is net of deferred loan costs, loans in process and allowance for loan losses.
(2)Amount includes nonaccrual loans in average balances only.
(3)Amount does not include effect of unrealized gain (loss) on securities available-for-sale.
(4)Includes municipal bonds; yield and interest are stated on a taxable equivalent basis.

Rate/Volume Analysis.The following table sets forth the effects of changing rates and volumes on FedFirst’s net interest income. The volume column shows the effects attributable2016 relate principally 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). Changes related to volume/rate are prorated into volume and rate components. The total column represents the net change in volume and rate.

   Three Months Ended March 31, 2014
Compared to
Three Months Ended March 31, 2013
 
   Increase (decrease) due to 
(Dollars in thousands)      Volume          Rate          Total     

Interest and dividend income:

    

Loans, net

  $238   $(161 $77  

Securities

   (126  13    (113

Other interest-earning assets

   —      11    11  
  

 

 

  

 

 

  

 

 

 

Total interest-earning assets

   112    (137  (25
  

 

 

  

 

 

  

 

 

 

Interest expense:

    

Deposits

   10    (78  (68

Borrowings

   (6  (50  (56
  

 

 

  

 

 

  

 

 

 

Total interest-bearing liabilities

   4    (128  (124
  

 

 

  

 

 

  

 

 

 

Change in net interest income

  $108   $(9 $99  
  

 

 

  

 

 

  

 

 

 

Provision for Loan Losses. The provision for loan losses was $75,000 for the three months ended March 31, 2014. There was no provision for loan losses for the three months ended March 31, 2013. In the current period, the provision was impacted by commercial loan growth. Net recoveries for the three months ended March 31, 2014 were $4,000 compared to net charge-offs of $23,000 for the three months ended March 31, 2013.

Noninterest Income. Noninterest income decreased $270,000, or 21.3%, to $999,000 for the three months ended March 31, 2014 compared to $1.3 million for the three months ended March 31, 2013. Insurance commissions decreased $224,000 primarily due to a $243,000 decline in contingent commissions. In addition, fees and service charge income decreased $45,000 primarily due to prepayment fees received in the prior year from commercial loan payoffs.

Noninterest Expense. The following table summarizes noninterest expense for the periods indicated.

   Three Months Ended March 31, 
(Dollars in thousands)          2014                  2013         

Compensation and Employee Benefits

  $1,563   $1,520  

Occupancy

   325    300  

FDIC insurance premiums

   49    43  

Data processing

   172    165  

Professional services

   163    165  

Advertising

   137    139  

Supplies

   21    21  

Telephone

   12    12  

Postage

   30    34  

Correspondent bank fees

   11    10  

Real estate owned (income) expense

   (4  (6

Amortization of intangibles

   5    23  

All other

   195    186  
  

 

 

  

 

 

 

Total noninterest expense

  $2,679   $2,612  
  

 

 

  

 

 

 

Noninterest expense increased $67,000, or 2.6%, to $2.7 million for the three months ended March 31, 2014 compared to $2.6 million for the three months ended March 31, 2013. Compensation expense increased $43,000 primarily due to increases in stock-based compensation and employee benefit expenses. In addition, occupancy expenses increased $25,000 primarily from an increase in depreciation due to prior year office building improvements and increase in maintenance due to current year weather conditions.

Income Tax Expense.Income tax expense for the three months ended March 31, 2014 decreased $28,000 to $323,000 compared to $351,000 for the three months ended March 31, 2013 primarily due to a $312,000 decrease in net income before income tax expense. The effective tax rate was 36.9% for the three months ended March 31, 2014 compared to 29.6% for the three months ended March 31, 2013.

FedFirst Results of Operations for the Years Ended December 31, 2013 and 2012

Overview.

   December 31, 
(Dollars in thousands)  2013  2012 

Net income of FedFirst Financial Corporation

  $2,235   $2,255  

Return on average assets

   0.71  0.68

Return on average equity

   4.14    3.84  

Average equity to average assets

   17.08    17.71  

Dividend payout ratio

   29.2    50.0  

Net Interest Income. Net interest income decreased $91,000 to $10.2 million for the year ended December 31, 2013 compared to $10.3 million for the year ended December 31, 2012. Total interest income decreased $1.0 million, or 7.4%, to $12.9 million for the year ended December 31, 2013 compared to $13.9 million for the year ended December 31, 2012. Interest income on securities decreased $628,000 primarily due to paydowns which resulted in a $17.2 million decrease in the average balance.

Interest income on loans decreased $397,000 and included the effect of a one-time receipt in the current period of $115,000 upon payoff of an impaired, nonaccrual commercial real estate loan. Interest received while the loan was on nonaccrual was applied to principal and was not recognized to income until payoff. Despite this one-time event, the yield on loans decreased 39 basis points and was primarily driven by modifications and paydowns of higher yielding residential real estate duerates subsequent to the low interest rate environment that were replaced by originations of home equity and commercial loans at lower yields. The average balance of loans increased $12.0 million and included a change in loan composition with increases in commercial and home equity loans partially offset by a decrease in residential and multi-family loans.

Interest expense decreased $938,000, or 25.8%, to $2.7 million for the year ended December 31, 2013 compared to $3.6 million for the year ended December 31, 2012 due to decreases of 33 basis points in cost and $11.6 million in the average balance of interest-bearing liabilities. Interest expense on deposits decreased $589,000 due to a decrease of 28 basis points in cost, primarily related to interest rate reductions of all deposit products with the majorityacquisition of the benefit derived from maturing certificates of deposit and money market accounts, and a $5.1 million decrease in the average balance of higher-cost money market and certificates of deposits. Interest expense on borrowings decreased $349,000 due to a decrease of $6.6 million in the average balance coupled with a decrease of 29 basis points in cost, as higher-cost long-term borrowings were paid off and replaced at short-term, lower rates.

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. 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).

   Years Ended December 31, 
   2013  2012 
   Average
Balance
   Interest
and
Dividends
   Average
Yield/

Cost
  Average
Balance
   Interest
and
Dividends
   Average
Yield/

Cost
 

Assets:

           

Interest-earning assets:

           

Loans, net (1)(2)

  $256,010    $11,867     4.64 $244,012    $12,264     5.03

Securities (3)(4)

   33,376     1,104     3.31    50,574     1,731     3.42  

Other interest-earning assets

   8,666     27     0.31    18,412     31     0.17  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total interest-earning assets

   298,052    $12,998     4.36    312,998    $14,026     4.48  

Noninterest-earning assets

   18,314        18,786      
  

 

 

      

 

 

     

Total assets

  $316,366       $331,784      
  

 

 

      

 

 

     

Liabilities and Stockholders’ equity:

           

Interest-bearing liabilities:

           

Interest-bearing demand deposits

  $26,769    $23     0.09 $16,511    $20     0.12

Savings accounts

   24,569     12     0.05    24,048     39     0.16  

Money market accounts

   52,951     77     0.15    61,444     227     0.37  

Certificates of deposit

   90,394     1,307     1.45    97,757     1,722     1.76  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total interest-bearing deposits

   194,683     1,419     0.73    199,760     2,008     1.01  

Borrowings

   37,784     1,275     3.37    44,348     1,624     3.66  
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total interest-bearing liabilities

   232,467     2,694     1.16    244,108     3,632     1.49  

Noninterest-bearing liabilities

   29,852        28,931      
  

 

 

      

 

 

     

Total liabilities

   262,319        273,039      

Stockholders’ equity

   54,047        58,745      
  

 

 

      

 

 

     

Total liabilities and stockholders’ equity

  $316,366       $331,784      
  

 

 

      

 

 

     

Net interest income

    $10,304       $10,394    
    

 

 

      

 

 

   

Interest rate spread

       3.20      2.99

Net interest margin

       3.46        3.32  

Average interest-earning assets to average interest-bearing liabilities

       128.21      128.22  

(1)Amount is net of deferred loan costs, loans in process, and estimated allowance for loan losses.
(2)Amount includes nonaccrual loans in average balances only.
(3)Amount does not include effect of unrealized (loss) gain on securities available-for-sale.
(4)Includes municipal bonds; yield and interest are stated on a taxable equivalent basis.

Rate/Volume Analysis.The following table sets forth the effects of changing rates and volumes on FedFirst’s net interest income on a taxable equivalent basis (dollars in thousands). 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). The total column represents the sum of change. Changes related to volume/rate are prorated into volume and rate components.

   2013 Compared to 2012 
   Increase (decrease) due to 
(Dollars in thousands)  Volume  Rate  Total 

Interest and dividend income:

    

Loans, net

  $584   $(981 $(397

Securities

   (573  (54  (627

Other interest-earning assets

   (22  18    (4
  

 

 

  

 

 

  

 

 

 

Total interest-earning assets

   (11  (1,017  (1,028
  

 

 

  

 

 

  

 

 

 

Interest expense:

    

Deposits

   (43  (546  (589

Borrowings

   (227  (122  (349
  

 

 

  

 

 

  

 

 

 

Total interest-bearing liabilities

   (270  (668  (938
  

 

 

  

 

 

  

 

 

 

Change in net interest income

  $259   $(349 $(90
  

 

 

  

 

 

  

 

 

 

Provision for Loan Losses.The following table summarizes the activity in the allowance for loan losses for the years ended December 31, 2013 and 2012 (dollars in thousands).

   Years Ended December 31, 
       2013          2012     

Allowance at beginning of year

  $2,886   $3,098  

Provision for loan losses

   740    310  

Charge-offs

   (345  (543

Recoveries

   27    21  

Net charge-offs

   (318  (522
  

 

 

  

 

 

 

Allowance at end of year

  $3,308   $2,886  
  

 

 

  

 

 

 

The provision for loan losses was $740,000 for the year ended December 31, 2013 compared to $310,000 for the year ended December 31, 2012. In 2013, the provision was impacted by a change in the mix of the loan portfolio, including growth in commercial loans and an increase in special mention rated loans. Net charge-offs were $318,000 for the year ended December 31, 2013 compared to $522,000 for the year ended December 31, 2012.

An analysis of the changes in the allowance for loan losses is presented under “Risk Management—Analysis and Determination of the Allowance for Loan Losses.”

Noninterest Income.The following table summarizes noninterest income for the years ended December 31, 2013 and 2012 (dollars in thousands).

   Years Ended December 31, 
       2013           2012     

Fees and service charges

  $750    $624  

Insurance commissions

   3,222     2,460  

Income from bank-owned life insurance

   243     289  

Other

   102     102  
  

 

 

   

 

 

 
  $4,317    $3,475  
  

 

 

   

 

 

 

Noninterest income increased $842,000, or 24.2%, to $4.3 million for the year ended December 31, 2013 compared to $3.5 million for the year ended December 31, 2012. In 2013, there was a $762,000 increase in insurance commissions primarily due to an increase in commercial lines policies and a $228,000 increase in contingency fees. In addition, fees and service charge income increased $126,000 primarily due to prepayment fees received on payoffs of commercial loans. Income from bank-owned life insurance decreased $46,000 primarily due to the recognition of $33,000 in income from a policy of a former director who passed in the prior period.

Noninterest Expense. The following table summarizes noninterest expense for the years ended December 31, 2013 and 2012 (dollars in thousands).

   Years Ended December 31, 
(Dollars in thousands)      2013          2012     

Compensation and Employee Benefits

  $6,115   $5,700  

Occupancy

   1,158    1,191  

FDIC insurance premiums

   180    210  

Data processing

   575    555  

Professional services

   601    708  

Advertising

   498    221  

Supplies

   87    94  

Telephone

   46    54  

Postage

   120    127  

Correspondent bank fees

   123    131  

Real estate owned (income) expense

   (105  58  

Amortization of intangibles

   54    112  

All other

   853    783  
  

 

 

  

 

 

 

Total noninterest expense

  $10,305   $9,944  
  

 

 

  

 

 

 

Noninterest expense increased $361,000, or 3.6%, to $10.3 million for the year ended December 31, 2013 compared to $9.9 million for the year ended December 31, 2012. Compensation expense increased $415,000 primarily due to the hiring of additional staff, higher employee commissions from an increase in fee income on insurance policies, and an increase in stock-based compensation. In addition, advertising expense increased $277,000 primarily related to a cooperative marketing agreement signed to gain insurance commissions by binding coverage for workers’ compensation insurance policies. This was partially offset by the recognition of $105,000 of real estate owned income primarily due to gains on the sale of a properties in the current period compared to $58,000 of real estate owned expense in the prior period. Additionally, there was a $107,000 decrease in professional services primarily due to costs associated with strategic planning analysis and initiatives in the prior period and a $58,000 decrease in amortization of intangibles and $33,000 decrease in occupancy expense primarily due to fully depreciated and amortized assets.

Income Taxes. For the year ended December 31, 2013, income tax expense was $1.2 million compared to $1.3 million for the year ended December 31, 2012.

FedFirst determined that it was not required to establish a valuation allowance for deferred tax assets since it is more likely than not that the deferred tax assets will be realized through future taxable income and future reversals of existing taxable temporary differences. For more information, see Note 10 of the FedFirst Notes to Consolidated Financial Statements.

Balance Sheet Analysis

General. Total assets increased $267,000, or 0.1%, to $319.0 million at December 31, 2013 compared to $318.8 million at December 31, 2012.

Loans. Net loans increased $19.3 million, or 7.7%, to $268.8 million at December 31, 2013, compared to $249.5 million at December 31, 2012.

Commercial real estate and commercial business loans increased $21.4 million, or 35.3%, to $81.9 million at December 31, 2013, compared to $60.6 million at December 31, 2012. The increase was the result of efforts to continue to diversify the loan portfolio through development of commercial loan relationships with strong fundamentals and also included further expansion of relationships with other community banks through participation loans.

Construction loans, net of loans in process, increased $5.0 million to $8.7 million at December 31, 2013, compared to $3.7 million at December 31, 2012. Commercial construction loans, net of loans in process, increased $4.2 million to $6.7 million at December 31, 2013 compared to $2.5 million at December 31, 2012. Residential construction loans, net of loans in process, increased $789,000 to $2.0 million compared to $1.2 million at December 31, 2012. The increase in commercial construction loans is primarily driven by purchased participation loans with other community banks on large projects. Fluctuations in the construction loan segment are primarily driven by timing of funding compared to when construction is completed. Loans are transferred to the commercial or residential real estate category upon completion of construction.

Consumer loans increased $7.2 million, or 13.9%, to $58.5 million at December 31, 2013, compared to $51.3 million at December 31, 2012. The majority of the increase is due to home equity loans, which increased $7.4 million, or 15.0%, to $56.8 million, compared to $49.4 million at December 31, 2012. The increase in home equity loans is primarily due to customer refinance demand and preference for lower cost, shorter-term options compared to residential loans.

Residential loans decreased $9.2 million, or 7.6%, to $111.8 million at December 31, 2013, compared to $120.9 million at December 31, 2012. The decrease was the result of loan payoffs primarily driven by market conditions and the historically low interest rate environment. Payoffs and paydowns of residential real estate loans have been partially replaced by home equity loan originations at shorter terms and lower yields.

Multi-family loans decreased $4.5 million to $10.9 million compared to $15.3 million at December 31, 2012. The decrease in these categories was the result of loan payoffs primarily driven by market conditions and the historically low interest rate environment.

The following table sets forth the composition of the loan portfolio at the dates indicated (dollars in thousands).

  December 31, 
  2013  2012  2011  2010  2009 
  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent 

Real estate—mortgage:

          

One- to four-family residential

          

Originated

 $104,870    37.1 $110,754    43.4 $117,622    46.0 $121,376    51.3 $134,201    54.8

Purchased

  6,888    2.4    10,188    4.0    16,304    6.4    20,591    8.7    23,872    9.8  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total one-to four-family residential

  111,758    39.5    120,942    47.4    133,926    52.4    141,967    60.0    158,073    64.6  

Multi-family:

          

Originated

  7,083    2.5    11,101    4.3    13,122    5.1    4,082    1.7    3,970    1.6  

Purchased

  3,768    1.3    4,226    1.7    5,121    2.0    5,261    2.2    6,021    2.5  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total multi-family

  10,851    3.8    15,327    6.0    18,243    7.1    9,343    3.9    9,991    4.1  

Commercial

  61,889    21.9    45,504    17.8    35,307    13.8    33,732    14.2    31,405    12.8  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate—mortgage

  184,498    65.2    181,773    71.2    187,476    73.3    185,042    78.1    199,469    81.5  

Real estate—construction:

          

Residential

  3,337    1.2    1,931    0.8    3,874    1.5    6,787    2.9    3,028    1.2  

Commercial

  15,979    5.7    5,231    2.0    8,308    3.3    736    0.3    2,576    1.1  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate—construction

  19,316    6.9    7,162    2.8    12,182    4.8    7,523    3.2    5,604    2.3  

Consumer:

          

Home equity

          

Loan-to-value ratio of 80% or Less

  47,543    16.9    41,537    16.3    30,679    12.0    22,628    9.6    17,802    7.3  

Loan-to-value ratio of greater than 80%

  9,247    3.3    7,841    3.0    7,758    3.1    8,624    3.6    9,288    3.8  

Total home equity

  56,790    20.2    49,378    19.3    38,437    15.1    31,252    13.2    27,090    11.1  

Other

  1,666    0.6    1,923    0.8    1,892    0.7    2,090    0.9    2,243    0.9  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

  58,456    20.8    51,301    20.1    40,329    15.8    33,342    14.1    29,333    12.0  

Commercial business

  20,023    7.1    15,055    5.9    15,445    6.1    10,875    4.6    10,327    4.2  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

  282,293    100.0  255,291    100.0  255,432    100.0  236,782    100.0  244,733    100.0
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net premium on loans purchased

  93     106     127     116     108   

Net deferred loan costs

  351     450     606     697     829   

Loans in process

  (10,617   (3,431   (7,790   (4,716   (2,774 

Allowance for losses

  (3,308   (2,886   (3,098   (2,824   (2,509 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

Loans, net

 $268,812    $249,530    $245,277    $230,055    $240,387   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

The following table sets forth certain information at December 31, 2013 regarding the dollar amount of loans maturing during the periods indicated. The table does not include any estimate of prepayments, which significantly shorten the average life of loans and may cause FedFirst actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. Real estate—construction loans will be converted to a real estate—mortgage loan at the end of the construction period and are reported based on the maturity date of the real estate—mortgage loan (dollars in thousands).

   Amounts Due in 
   One Year
or Less
   One to
Five Years
   After Five
Years
   Total 

Real estate—mortgage:

        

One- to four-family residential

        

Originated

  $75    $646    $104,149    $104,870  

Purchased

   —       1,608     5,280     6,888  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total one-to four-family residential

   75     2,254     109,429     111,758  

Multi-family:

        

Originated

   —       40     7,043     7,083  

Purchased

   —       —       3,768     3,768  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total multi-family

   —       40     10,811     10,851  

Commercial

   743     9,528     51,618     61,889  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total real estate—mortgage

   818     11,822     171,858     184,498  

Real estate—construction:

        

Residential

   —       —       3,337     3,337  

Commercial

   2,000     10,196     3,783     15,979  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total real estate—construction

   2,000     10,196     7,120     19,316  

Consumer:

        

Home equity

        

Loan-to-value ratio of 80% or less

   1,812     1,208     44,523     47,543  

Loan-to-value ratio of greater than 80%

   140     358     8,749     9,247  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

   1,952     1,566     53,272     56,790  

Other

   227     70     1,369     1,666  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer

   2,179     1,636     54,641     58,456  

Commercial business

   2,972     13,441     3,610     20,023  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $7,969    $37,095    $237,229    $282,293  
  

 

 

   

 

 

   

 

 

   

 

 

 

The following table sets forth the dollar amount of all loans at December 31, 2013 that are due after December 31, 2014 and have either fixed or adjustable interest rates (dollars in thousands).

   Fixed   Adjustable   Total 

Real estate—mortgage:

      

One- to four-family residential

      

Originated

  $102,971    $1,824    $104,795  

Purchased

   1,502     5,386     6,888  
  

 

 

   

 

 

   

 

 

 

Total one-to four-family residential

   104,473     7,210     111,683  
  

 

 

   

 

 

   

 

 

 

Multi-family:

      

Originated

   1,727     5,356     7,083  

Purchased

   —       3,768     3,768  
  

 

 

   

 

 

   

 

 

 

Total multi-family

   1,727     9,124     10,851  

Commercial

   29,598     31,548     61,146  
  

 

 

   

 

 

   

 

 

 

Total real estate—mortgage

   135,798     47,882     183,680  

Real estate—construction:

      

Residential

   3,090     247     3,337  

Commercial

   —       13,979     13,979  
  

 

 

   

 

 

   

 

 

 

Total real estate—construction

   3,090     14,226     17,316  
  

 

 

   

 

 

   

 

 

 

Consumer:

      

Home equity

      

Loan-to-value ratio of 80% or less

   45,369     362     45,731  

Loan-to-value ratio of greater than 80%

   8,928     179     9,107  
  

 

 

   

 

 

   

 

 

 

Total home equity

   54,297     541     54,838  

Other

   1,439     —       1,439  
  

 

 

   

 

 

   

 

 

 

Total consumer

   55,736     541     56,277  

Commercial business

   15,051     2,000     17,051  
  

 

 

   

 

 

   

 

 

 

Total

  $209,675    $64,649    $274,324  
  

 

 

   

 

 

   

 

 

 

Securities. Securities available-for-sale decreased $15.8 million, or 37.1%, to $26.8 million at December 31, 2013 compared to $42.6 million at December 31, 2012 due to paydowns and a $700,000 maturity of a municipal bond. In addition, the securities portfolio reflects an unrealized gain of $102,000 at December 31, 2013 compared to an unrealized loss of $638,000 at December 31, 2012. The following table sets forth the amortized cost and fair value of the securities portfolio at the dates indicated (dollars in thousands).

       December 31,     
   2013   2012   2011 
   Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
   Amortized
Cost
   Fair
Value
 

Government-sponsored enterprises

  $—      $—      $—      $—      $2,000    $2,003  

Municipal bonds

   7,988     7,970     8,756     9,181     6,738     7,125  

Mortgage-backed—GSEs

   7,740     8,192     12,120     12,815     16,572     17,544  

REMICs

   6,946     7,019     18,345     18,700     23,413     24,318  

Corporate debt

   3,996     3,591     3,995     1,882     3,995     1,454  

Equities

   —       —       4     4     4     4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available-for-sale

  $26,670    $26,772    $43,220    $42,582    $52,722    $52,448  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2013, FedFirst had no investments in a single company or entity that had an aggregate book value in excess of 10% of its equity.

FedFirst reviews its investment portfolio on a quarterly basis for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer including any specific events that may influence the operations of the issuer, and the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market.

At December 31, 2013, FedFirst had two municipal bonds with an unrealized loss of $142,000 in an unrealized loss position of less than 12 months and one municipal bond with an unrealized loss of $83,000 in an unrealized loss position of 12 months or more. An evaluation was performed on each bond. For the two bonds in an unrealized loss position of less than 12 months, there were no events to indicate deterioration in credit with unchanged, investment grade credit ratings. FedFirst believes the unrealized loss on these two bonds is due to market conditions, specifically rising interest rates impacting the value of the bonds. For the bond in an unrealized loss position of 12 months or more, the credit rating was initially downgraded in 2012 primarily due to budgetary challenges and more recently in July 2013 primarily due to accreditation concerns; however the credit rating remains investment grade and the strong income indicators of the economic base and sound financial policies and practices of the municipality, and the municipality’s ability to levy a property tax that is sufficient to be used for bond payment are expected to allow it to repay debt and meet its contractual obligations. Therefore, FedFirst believes the unrealized loss of this bond is due to changes in market conditions. FedFirstsecurities. First West Virginia does not intend to sell the bonds and it is more likely than not that FedFirst will not be required to sell the bonds before recovery. FedFirst expects to recover the entire amortized cost basis and concluded that there was no OTTI on these bonds at December 31, 2013.

At December 31, 2013, FedFirst had three securities consisting of two pools of CDOs collateralized by the TruPS of insurance companies that were in an unrealized loss position for 12 months or greater at an amount of $405,000. These securities were downgraded from their original rating issuance to below investment grade in 2009 after purchase. The lack of liquidity in the market for this type of security, credit rating downgrades and market uncertainties are factors contributing to the unrealized losses on these securities.

These securities are evaluated for OTTI by determining whether it is probable that an adverse change in estimated cash flows has occurred. Determining whether there has been an adverse change in estimated cash flows involves the calculation of the present value of remaining cash flows compared to previously projected cash flows. FedFirst considers the discounted cash flow analysis to be its primary evidence when determining whether credit-related OTTI exists. Additionally, reports are reviewed that provide information for the amount of deferral/defaults that would have to occur to prevent the tranche from collecting contractual cash flows (principal and interest). None of these securities are projecting a cash flow disruption, nor have any of these securities experienced a cash flow disruption. FedFirst also reviewed each of the issues’ collateral participants, including their financial condition, ratings provided by A. M. Best (for insurance companies), and adverse conditions specifically related to industry or geographic area. This information did not suggest additional deferrals or defaults in the future that would result in the securities not receiving all of their contractual cash flows. Based on the analysis performed and the fact that FedFirst does not expect to sell these securities, and because it is not more likely than not that FedFirstit will be required to sell the securities before recovery of their amortized cost basis, FedFirst concluded that there was no OTTI on these securities at December 31, 2013.

In December 2013, the OCC adopted final regulations implementing section 619any of the Dodd-Frank Wall Street Reform and Protection Act, commonly known as the “Volcker Rule”, which restricts the ability of a banking entity to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund (referred to as a “covered fund”). A banking entity must divest its holding in covered funds by July 15, 2015. A covered fund is defined to include any issuer that would be an investment company under the Investment Company Act of 1940, but relies on the exemption for funds sold to fewer than 100 investors or the exemption for funds sold only to qualified purchasers. An issuer that could rely on a different exemption from the definition of investment company under the Investment Company Act would not be considered a covered fund, and therefore would not be subject to the Volcker Rule. In particular, the federal banking regulators have noted that some issuers of CDOs may qualify for exemption under Investment Company Act Rule 3a-7, which exempts non-managed fixed income funds from the definition of investment company. Therefore, if the issuer meets the requirements of Rule 3a-7, the CDOs will not be subject to the Volcker Rule. Based on First Federal’s review, the CDOs held by First Federal as of December 31, 2013 satisfy all conditions for relying on the exemption under Investment Company Act Rule 3a-7, and therefore are not considered a covered fund that require divesture by July 15, 2015. The CDOs weresecurities in an unrealized loss position before recovery of $405,000its 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) 
   September 30, 2017 
   Available-for-Sale 
   Amortized
Cost
   Fair
Value
 

Due in One Year or Less

  $2   $2 

Due after One Year through Five Years

   17,005    16,769 

Due after Five Years through Ten Years

   57,262    56,925 

Due after Ten Years

   132,606    131,548 
  

 

 

   

 

 

 

Total

  $206,875   $205,244 
  

 

 

   

 

 

 

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. Mortgage-Backed Securities have been allocated based on the final maturity date, although principal payments occur prior to that date.

Proceeds from sales of securitiesavailable-for-sale during the nine month periods ended September 30, 2017 and 2016, were $308,000 and $44,672,000, respectively. Gross gains of $4,000 were realized during the nine months ended September 30, 2017. Gross losses realized during the nine months ended September 30, 2017 were less than $500 and not considered material for financial reporting and disclosure purposes. Gross gains of $1,102,000 and gross losses of $1,000 were realized during the nine months ended September 30, 2016. Proceeds from sales of securitiesavailable-for-sale during the three month periods ended September 30, 2017 and 2016, were $304,000 and $17,509,000, respectively. Gross gains of $4,000 were realized during the three months ended September 30, 2017. There were no gross losses realized during the three months ended September 30, 2017. Gross gains of $553,000 were realized during the three months ended September 30, 2016. Gross losses realized during the three months ended September 30, 2017 were less than $500 and not considered material for financial reporting and disclosure purposes. Assets carried at approximately $70,226,000 and $68,395,000 at September 30, 2017 and December 31, 2013.2016, respectively, were pledged to secure United States Government and other public funds and for other purposes as required or permitted by law.

At

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss

First West Virginia’s loan portfolio is made up of four classifications: real estate loans, commercial and industrial loans, consumer loans and other loans. All loans are accounted for under the amortized cost method. The following table presents the classifications of loans as of the dates indicated.

   (Dollars in thousands) 
   September 30, 2017  December 31, 2016 
   Amount   Percent  Amount   Percent 

Loans

       

Real Estate:

       

Residential

  $31,652    31.3 $29,721    30.6

Commercial

   45,960    45.4   44,044    45.4 

Construction

   298    0.3   595    0.6 

Commercial and Industrial

   13,501    13.3   12,280    12.6 

Consumer

   3,218    3.2   2,716    2.8 

Other

   6,613    6.5   7,736    8.0 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total Loans

   101,242    100.00  97,092    100.0
    

 

 

    

 

 

 

Allowance for Loan Losses

   (1,771    (1,797  
  

 

 

    

 

 

   

Loans, Net

  $99,471    $95,295   
  

 

 

    

 

 

   

Total unamortized net deferred loan fees were $167,000 and $154,000 at September 30, 2017 and December 31, 2013, FedFirst had three REMIC securities2016, respectively.

Real estate loans serviced for others, which are not included in the Condensed Consolidated Balance Sheet, totaled $5.9 million and $6.2 million at September 30, 2017 and December 31, 2016, respectively.

First West Virginia has certain lending policies and procedures in place that were issuedare designed to maximize loan income within an acceptable level of risk. These policies and backedprocedures are reviewed by management and approved by the Board of Directors on a Government-Sponsored Enterprise (“FNMA”regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentration of credit, loan delinquencies and “FHLMC”)non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with an unrealized loss of $25,000. The securities werefluctuations in an unrealized loss position for less than 12 months. FedFirst believes the unrealized losseconomic conditions.

First West Virginia originates direct and indirect consumer loans including principally residential real estate, home equity lines and loans, credit cards, and indirect vehicle loans using a credit analysis as part of the securitiesunderwriting process. Each loan type has a separate underwriting criteria, which consists of several factors including debt to income, type of collateral, credit history and customer relationship with First West Virginia. Credit risk is driven by factors such as the creditworthiness of a borrower and general economic conditions in First West Virginia’s market area that might impact the borrower’s personal income, employment, or collateral value. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably. Underwriting standards are designed to promote relationship banking rather than transactional banking. First West Virginia’s management examines current and projected cash flows to determine the ability of the borrowers to repay their obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected and the collateral securing the loan may fluctuate in value. Credit risk in these loans is driven by the creditworthiness of the borrower and the economic conditions that impact the cash flow stability from business operations. Minimum standards and underwriting guidelines have been established for commercial loan types.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss (continued)

Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by the general economy or conditions specific to the real estate market such as geography and/or property type.

Construction and land development real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from First West Virginia until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of the borrower, property values and the economic conditions in First West Virginia’s market areas.

First West Virginia utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Risk ratings are assigned to individual credit exposures as an aspect of the credit approval and are adjusted thereafter to reflect changes in market interest ratesrisk exposure as the borrower’s condition changes. The most significant factor used to determine the risk rating is the borrower’s primary source of repayment, which includes a cash flow analysis. Other items considered in the loan review include secondary sources of repayment, financial trends, collateral value and characteristics, the size of the loan, and external factors impacting the borrower’s repayment ability.

Loans rated as “Pass” include those that have minimal, modest, acceptable, and higher risk. Minimal risk loans are fully secured by marketable securities or changescash collateral, or loans supported by the United States Treasury. Modest risk loans have borrowers with stable cash flows over an extended period of time and extensive access to credit from several sources. Acceptable risk loans include individual borrowers with substantial liquid assets and commercial borrowers with strong cash flow. Higher risk loans have adequate sources of repayment and no current identifiable risk for repayment and loans that are slightly below average due to any number of factors such as income, collateral, or the lack of sufficient financial information.

Problem and potential problem loans are classified as “Special Mention,” “Substandard,” and “Doubtful.” Substandard loans are inadequately protected by the current worth and paying capacity of the borrower or the collateral pledged, if any. These loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt and are characterized by the distinct possibility that First West Virginia will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in market conditions as there was no indicationthose classified Substandard with the added characteristic that the issuers were having financial difficulties. FedFirst does not intend to sellweaknesses present make collection or liquidation in full, on the securities and it is not more likely than not that FedFirst will be required to sell the securities before their recovery. FedFirst expects to recover the entire amortized cost basis of currently existing facts, conditions, and values, highly questionable. Loans that do not currently expose First West Virginia to sufficient risk to warrant classification in one of the securitiesaforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention.

For consumer and concluded that there was no OTTI atconsumer real estate loan classes, First West Virginia also evaluates credit quality based on the aging status of the loan and by payment activity.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss (continued)

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 September 30, 2017 and December 31, 2013.2016, there were no loans in the criticized category of Loss within the internal risk rating system.

   (Dollars in thousands) 
   September 30, 2017 
   Pass   Special
Mention
   Substandard   Doubtful   Total 

Loans

          

Real Estate:

          

Residential

  $31,326   $—     $326   $—     $31,652 

Commercial

   43,557    —      2,403    —      45,960 

Construction

   298    —      —      —      298 

Commercial and Industrial

   13,492    —      9    —      13,501 

Consumer

   3,217    —      1    —      3,218 

Other

   6,613    —      —      —      6,613 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Loans

  $98,503   $—     $2,739   $—     $101,242 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   December 31, 2016 
   Pass   Special
Mention
   Substandard   Doubtful   Total 

Loans

          

Real Estate:

          

Residential

  $29,329   $—     $392   $—     $29,721 

Commercial

   40,268    —      3,776    —      44,044 

Construction

   595    —      —      —      595 

Commercial and Industrial

   12,268    —      12    —      12,280 

Consumer

   2,716    —      —      —      2,716 

Other

   7,736    —      —      —      7,736 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Loans

  $92,912   $—     $4,180   $—     $97,092 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss (continued)

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) 
   September 30, 2017 
   Loans
Current
   30-59
Days
Past Due
   60-89
Days
Past Due
   90 Days
Or More
Past Due
   Total
Past Due
   Non-
Accrual
   Total
Loans
 

Loans

              

Real Estate:

              

Residential

  $31,122   $—     $384   $—     $384   $146   $31,652 

Commercial

   43,792    64    —      320    384    1,784    45,960 

Construction

   298    —      —      —      —      —      298 

Commercial and Industrial

   13,482    19    —      —      19    —      13,501 

Consumer

   3,210    7    —      —      7    1    3,218 

Other

   6,613    —      —      —      —      —      6,613 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Loans

  $98,517   $90   $384   $320   $794   $1,931   $101,242 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   December 31, 2016 
   Loans
Current
   30-59
Days
Past Due
   60-89
Days
Past Due
   90 Days
Or More
Past Due
   Total
Past Due
   Non-
Accrual
   Total
Loans
 

Loans

              

Real Estate:

              

Residential

  $29,097   $367   $51   $—     $418   $206   $29,721 

Commercial

   42,024    281    —      320    601    1,419    44,044 

Construction

   595    —      —      —      —      —      595 

Commercial and Industrial

   12,104    144    32    —      176    —      12,280 

Consumer

   2,712    4    —      —      4    —      2,716 

Other

   7,736    —      —      —      —      —      7,736 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Loans

  $94,268   $796   $83   $320   $1,199   $1,625   $97,092 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nonaccrual loans amounted to $1.9 million and $1.6 million at September 30, 2017 and December 31, 2016, respectively. The amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $47,000 and $38,000 for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016 and for the year ended December 31, 2016, the amount of interest income that would have been recognized had the loans performed in accordance with their original terms was $120,000, $127,000 and $135,000, respectively.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss (continued)

The following table sets forth the stated maturitiesamounts and weighted average yieldscategories of FedFirst’s securities at December 31, 2013. Certain mortgage-backed securities have adjustable interest rates and will reprice periodically within the various maturity ranges. These repricing schedules are not reflected in the table below. At December 31, 2013, mortgage-backed securities and REMICs with adjustable rates totaled $1.2 million (dollars in thousands).

              December 31,             
  One Year or Less  One Year to Five Years  Five to Ten Years  After Ten Years  Total 
  Carrying
Value
  Weighted
Average
Yield
  Carrying
Value
  Weighted
Average
Yield
  Carrying
Value
  Weighted
Average
Yield
  Carrying
Value
  Weighted
Average
Yield
  Carrying
Value
  Weighted
Average
Yield
 

Municipal bonds

 $—      —   $2,210    5.87 $2,677    3.69 $3,083    3.05 $7,970    3.98

Mortgage-backed GSEs

  1    6.29    104    3.25    3,548    2.88    4,539    4.92    8,192    4.00  

REMICs

  —      —      —      —      276    3.99    6,743    3.02    7,019    3.05  

Corporate debt

  —      —      —      —      —      —      3,591    2.28    3,591    2.28  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total available-for-sale debt securities

 $1    6.29 $2,314    5.74 $6,501    3.28 $17,956    3.30 $26,772    3.49
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

  

FHLB Stock. FHLB stock decreased $1.2 million, or 31.6%, to $2.6 million at December 31, 2013 compared to $3.8 million at December 31, 2012 due to the FHLB repurchasing excess capital stock.

Other assets.Othernonperforming assets decreased $1.5 million, or 72.7%, to $573,000 at December 31, 2013 compared to $2.1 million at December 31, 2012. The decrease was primarily the result of a $643,000 refund of the FDIC prepaid insurance assessment and a $503,000 federal income tax refund that was applied against 2013 estimated tax payments.

Deposits. Total deposits increased $5.2 million, or 2.4%, to $219.2 million at December 31, 2013 compared to $214.1 million at December 31, 2012. There were increases of $12.9 million in interest-bearing demand deposits and $3.3 million in noninterest-bearing demand deposits partially offset by decreases of $6.3 million in money market accounts and $4.8 million in certificates of deposit. The increase in interest-bearing demand deposits and corresponding decrease in money market accounts was primarily due to First Federal’s reclassification of sweep products in the current period. During the current period, municipal and business customers that use First Federal’s sweep products deposited significant amounts, some of which may be temporary. In addition, due to the low rate environment, First Federal has been selective on promotional rates and has concentrated its efforts on increasing noninterest-bearing accounts by building strong customer relationships. The decrease in certificates of deposits was primarily due to customer hesitancy to commit to long-term rates. The following table sets forth the balances of the deposit products at the dates indicated (dollarsindicated. Included in thousands).

   December 31, 
   2013  2012  2011 
   Amount   Percent  Amount   Percent  Amount   Percent 

Noninterest-bearing demand deposits

  $27,247     12.4 $23,987     11.2 $20,536     9.3

Interest-bearing demand deposits

   30,733     14.0    17,878     8.4    14,555     6.6  

Savings accounts

   24,415     11.1    24,271     11.3    22,827     10.3  

Money market accounts

   48,746     22.2    55,047     25.7    59,709     27.0  

Certificates of deposit

   88,091     40.3    92,874     43.4    103,913     46.8  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total deposits

  $219,232     100.0 $214,057     100.0 $221,540     100.0
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

The following table indicates the amount of jumbo certificates of deposit by time remaining until maturity at December 31, 2013. Jumbo certificates of deposit require minimum deposits of $100,000 (dollars in thousands).

Maturity Period

  Certificates
of Deposit
 

Three months or less

  $1,225  

Over three through six months

   3,092  

Over six through twelve months

   17,711  

Over twelve months

   12,168  
  

 

 

 

Total jumbo certificates

  $34,196  
  

 

 

 

The following table sets forth certificates of deposit classified by rates at the dates indicated (dollars in thousands).

   December 31, 
   2013   2012   2011 

0.50% or less

  $37,970    $15,771    $9,126  

0.51 – 1.00%

   11,708     28,589     8,333  

1.01 – 2.00%

   14,223     17,266     36,142  

2.01 – 3.00%

   15,564     30,350     32,923  

3.01 – 4.00%

   4,832     5,521     8,098  

4.01% or greater

   3,794     5,377     9,291  
  

 

 

   

 

 

   

 

 

 

Total certificates of deposit

  $88,091    $92,874    $103,913  
  

 

 

   

 

 

   

 

 

 

The following table sets forth the amountnonperforming loans and maturities of certificates of deposit at December 31, 2013 (dollars in thousands).

   Amounts Due in 
   One Year
or Less
   One to
Two
Years
   Two to
Three
Years
   Three
to Four
Years
   Four to
Five
Years
   Five Years
and
Thereafter
   Total   Percent
of Total
 

0.50% or less

  $32,322    $4,200    $1,448    $—      $—      $—      $37,970     43.1

0.51 – 1.00%

   7,273     1,172     513     600     795     1,355     11,708     13.3  

1.01 – 2.00%

   1,929     539     4,338     719     681     6,017     14,223     16.1  

2.01 – 3.00%

   1,441     2,714     989     1,787     4,866     3,767     15,564     17.7  

3.01 – 4.00%

   3,076     1,245     —       38     451     22     4,832     5.5  

4.01% or greater

   526     1,515     1,063     474     216     —       3,794     4.3  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total certificates of deposit

  $46,567    $11,385    $8,351    $3,618    $7,009    $11,161    $88,091     100.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table sets forth deposit activity for the periods indicated (dollars in thousands).

   December 31, 
   2013   2012  2011 

Beginning balance

  $214,057    $221,540   $203,562  

Increase (decrease before interest credited)

   3,719     (9,575  15,117  

Interested credited

   1,456     2,092    2,861  
  

 

 

   

 

 

  

 

 

 

Net increase (decrease) in deposits

   5,175     (7,483  17,978  
  

 

 

   

 

 

  

 

 

 

Deposits at end of year

  $219,232    $214,057   $221,540  
  

 

 

   

 

 

  

 

 

 

Borrowings. Borrowings decreased $3.1 million, or 6.3%assets are troubled debt restructurings (“TDRs”), to $45.6 million at December 31, 2013 compared to $48.7 million at December 31, 2012. The weighted average rate of borrowings decreased 43 basis points to 2.34% at December 31, 2013 compared to 2.77% at December 31, 2012 primarily due to the payoff of a $7.1 million matured advance at a rate of 3.68%. This was partially offset by a $3.9 million increase in short-term borrowings.

The following table sets forth information concerning FedFirst’s borrowings at the periods indicated (dollars in thousands).

   December 31, 
   2013  2012  2011 

Maximum amount outstanding at any month end during the year

  $46,338   $48,873   $72,864  

Average amounts outstanding during the year

   37,784    44,348    58,150  

Weighted average rate during the year

   3.37  3.66  3.69

Balance outstanding at end of year

  $45,591   $48,678   $49,289  

Weighted average rate at end of year

   2.34  2.77  3.69

Stockholders’ Equity. Stockholders’ equity decreased $1.4 million, or 2.7%, to $51.9 million at December 31, 2013 compared to $53.3 million at December 31, 2012. The decrease was primarily due to the purchase of 213,157 shares of FedFirst’s common stock for $4.1 million and $528,000 in dividend payments to stockholders partially offset by $2.2 million of net income and a $450,000 increase in accumulated other comprehensive income as a result of an increase in the unrealized gain position of the security portfolio.

Results of Operations of Exchange Underwriters

Exchange Underwriters’ net income increased $226,000 to $385,000 for the year ended December 31, 2013 compared to $159,000 for the year ended December 31, 2012.

Total income increased $757,000 to $3.2 million for the year ended December 31, 2013 compared to $2.5 million for the year ended December 31, 2012. Substantially all of the income of Exchange Underwriters is derived from commissions received on the sale of insurance. The increase in income is primarily due to an increase in commissions from commercial-lines policies and a $228,000 increase in contingency fees.

Total expenses, excluding income tax expense, increased $375,000 to $2.5 million for the year ended December 31, 2013 compared to $2.2 million for the year ended December 31, 2012 primarily due to an increase in advertising expense from a cooperative marketing agreement signed to gain insurance commissions by binding coverage for workers’ compensation insurance policies and an increase in compensation expense from higher commissions based on volume and increased employee benefit costs partially offset by a decrease in amortization of intangibles due to fully amortized assets.

Risk Management

Overview. Managing risk is an essential part of successfully managing a financial institution. FedFirst’s most prominent risk exposureswhich are credit risk, market and interest rate risk, operational risk, liquidity risk, regulatory and compliance risk, reputation risk, and strategic risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due. Market and interest rate risk is the sensitivity risk of FedFirst’s earnings and net portfolio value to changes in interest rates. Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events and may include fraud, processing errors, technology failures and disaster recovery. Liquidity risk is the risk that funds cannot be generated at reasonable prices, or in a reasonable time frame, to meet normal or unanticipated obligations. Regulatory and compliance risk is the risk that a change in laws or new regulations will materially impact FedFirst’s business through increased operational costs. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in FedFirst’s customer base or revenue. Strategic risk is the risk of loss arising from a poor strategic business decision.

Credit Risk Management. FedFirst’s strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans.

When a borrower fails to remit a required loan payment, FedFirst initiates a number of steps to cure the delinquency and restore the loan to current status. For all loans a past due notice is generated and sent to the borrower when the loan becomes 15 days past due. For residential and consumer loans, if the payment is not received within five days, a second past due notice is sent. If payment is not received by the 30th day of delinquency, additional letters and phone calls are made. Generally, a notice is sent of FedFirst’s intention to foreclose when residential loans become 60 days past due without establishing payment arrangements. If the borrower has not cured the default within the next 30 days, FedFirst will commence foreclosure proceedings. If a foreclosure action is instituted and the loan is not paid current, paid in full, or refinanced before the foreclosure sale, the property securing the loan generally is sold at foreclosure. For commercial loans, the borrower is contacted in an attempt to reestablish the loan to current status and ensure timely payments continue. Collection efforts continue until the loan is 90 days past due, at which time demand payment, default, and/or foreclosure procedures are initiated. FedFirst may consider loan workout arrangements with certain borrowers under certain circumstances.

On a monthly basis, management informs the board of directors of loans delinquent 30 days or more, loans in foreclosure, and repossessed property.

Analysis of Nonperforming and Classified Assets. FedFirst considers repossessed assets and loans that are 90 days or more past due to be nonperforming assets. Loans are generally placed on nonaccrual status when they become 90 days delinquent, at which time the accrual of interest ceases and all previously accrued and unpaid interest is reversed against earnings.

A loan whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties is considered a troubled debt restructuring (“TDR”). difficulties. Nonaccrual TDRs are included in their specific loan category in the nonaccrual loans section. There were no accruing TDRs at September 30, 2017 and December 31, 2016.

   (Dollars in Thousands) 
   September 30,
2017
  December 31,
2016
 

Nonaccrual Loans:

   

Real Estate:

   

Residential

  $146  $206 

Commercial

   1,784   1,419 

Consumer

   1   —   
  

 

 

  

 

 

 

Total Nonaccrual Loans

   1,931   1,625 
  

 

 

  

 

 

 

Accruing Loans Past Due 90 Days or More:

   

Real Estate:

   

Commercial

   320   320 
  

 

 

  

 

 

 

Total Accruing Loans 90 Days or More Past Due

   320   320 
  

 

 

  

 

 

 

Total Nonperforming Loans

   2,251   1,945 

Real Estate Owned:

   

Commercial

   1,033   1,033 
  

 

 

  

 

 

 

Total Real Estate Owned

   1,033   1,033 
  

 

 

  

 

 

 

Total Nonperforming Assets

  $3,284  $2,978 
  

 

 

  

 

 

 

Nonperforming Loans to Total Loans

   2.22  2.00

Nonperforming Assets to Total Assets

   0.96   0.89 

Total Noncurrent Loans

   2,251   1,945 

Noncurrent Loans to Total Loans

   2.22  2.00

TDRs typically are the result from FedFirst’sof our loss mitigation activities and could include rate reductions, principal forgiveness, forbearance and other actions intendedwhereby concessions are granted to minimize the economic loss and to avoid foreclosure or repossession of collateral. A restructuringThe 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. During the three and nine months ended September 30, 2017, one commercial real estate loan totaling $633,000 modified terms due to an amortization concession in a borrower that is experiencing financial difficulties, but resultsnew TDR transaction. No loans were modified in only a delay in payment that is insignificant is not considered a concession.

Once a loan is classified as a TDR during the determination of income recognition is based onthree and nine months ended September 30, 2016 or during the status ofyear ended December 31, 2016. No TDRs modified in the loan prior to classification. If a loan is in non-accrual status, then it will remain in that classificationprevious twelve months subsequently defaulted during the three or nine months ended September 30, 2017 and 2016, respectively.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for a minimum of six consecutive months until uncertainty with respect to collectability no longer exists. Loans that are currentLoan Loss (continued)

The following table presents information at the time of classificationmodification related to loans modified in a TDR during the three and nine months ended September 30, 2017.

   (Dollars in thousands)
Three Months Ended September 30, 2017
 
   Number
of
Contracts
   Pre-
Modification
Outstanding
Recorded
Investment
   Post-
Modification
Outstanding
Recorded
Investment
   Related
Allowance
 

Loans

        

Real Estate

        

Commercial

   1   $633   $633   $—   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1   $633   $633   $—   
  

 

 

   

 

 

   

 

 

   

 

 

 

   Nine Months Ended September 30, 2017 
   Number
of
Contracts
   Pre-
Modification
Outstanding
Recorded
Investment
   Post-
Modification
Outstanding
Recorded
Investment
   Related
Allowance
 

Loans

        

Real Estate

        

Commercial

   1   $633   $633    —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1   $633   $633   $—   
  

 

 

   

 

 

   

 

 

   

 

 

 

First West Virginia also evaluates problem loans for impairment. A loan is considered to be impaired if it is probable that First West Virginia will remain on an accrual basisnot be able to collect the payments for principal and are monitored. If restructuredinterest when due according to the contractual terms of a loan are not met, then the loan will be placed onagreement. Impaired loans generally include all nonaccrual status.

Real estate that FedFirst acquires asloans and troubled debt restructurings (TDRs). The following table presents a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired it is recorded at the lower of its cost, which is the unpaid balancesummary of the loan less estimated selling costs, or fair market value at the date of foreclosure. Holding costs and declines in fair value after acquisitionloans considered to be impaired as of the property result in charges against income.dates indicated. There were no loans with a related allowance recorded.

   (Dollars in thousands)
September 30, 2017
 
   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
 

Loans

          

Real Estate:

          

Residential

  $33   $33   $—     $33   $—   

Commercial

   1,784    1,784    —      1,784    —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $1,817   $1,817   $—     $1,817   $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss (continued)

   (Dollars in thousands)
December 31, 2016
 
   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
 

Loans

          

Real Estate:

          

Residential

  $47   $47   $—     $47   $—   

Commercial

   1,418    1,418    —      1,418    —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $1,465   $1,465   $—     $1,465   $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   September 30, 2017 
   Average
Recorded
Investment
   Interest
Income
Recognized
   Interest
Income
Recognized
Cash Basis
 

Loans

      

Real Estate:

      

Residential

  $41   $—     $4 

Commercial

   2,035    —      151 
  

 

 

   

 

 

   

 

 

 

Total

  $2,076   $—     $155 
  

 

 

   

 

 

   

 

 

 

   December 31, 2016 
   Average
Recorded
Investment
   Interest
Income
Recognized
   Interest
Income
Recognized
Cash Basis
 

Loans

      

Real Estate:

      

Residential

  $55   $—     $—   

Commercial

   2,442    —      13 

Commercial and Industrial

   2    —      —   
  

 

 

   

 

 

   

 

 

 

Total

  $2,499   $—     $13 
  

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss (continued)

The following table provides information with respect to FedFirst’s nonperforming assetspresents 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)
September 30, 2017
 
   Real
Estate
Residential
  Real
Estate
Commercial
  Real
Estate
Construction
  Commercial
and
Industrial
  Consumer  Other  Total 

June 30, 2017

  $211  $1,103  $11  $369  $14  $67  $1,775 

Charge-offs

   —     —     —     —     (4  —     (4

Recoveries

   —     —     —     —     —     —     —   

Provision

   (2  40   (5  (38  2   3   —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

September 30, 2017

  $209  $1,143  $6  $331  $12  $70  $1,771 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2016

  $198  $1,171  $13  $322  $12  $81  $1,797 

Charge-offs

   —     (1,098  —     —     (6  —     (1,104

Recoveries

   —     —     —     —     3   —     3 

Provision

   11   1,070   (7  9   3   (11  1,075 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

September 30, 2017

  $209  $1,143  $6  $331  $12  $70  $1,771 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

   September 30, 2017 
   Real
Estate
Residential
   Real
Estate
Commercial
   Real
Estate
Construction
   Commercial
and
Industrial
   Consumer   Other   Total 

Individually Evaluated for Impairment

  $—     $—     $—     $—     $—     $—     $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Collectively Evaluated for Potential Impairment

  $209   $1,143   $6   $331   $12   $70   $1,771 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss (continued)

   September 30, 2016 
   Real
Estate
Residential
  Real
Estate
Commercial
   Real
Estate
Construction
  Commercial
and
Industrial
  Consumer  Other  Total 

June 30, 2016

  $220  $1,119   $8  $336  $13  $100  $1,796 

Charge-offs

   (2  —      —     —     —     —     (2

Recoveries

   —     —      —     —     —     —     —   

Provision

   (36  39    2   (2  —     (3  —   
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

September 30, 2016

  $182  $1,158   $10  $334  $13  $97  $1,794 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2015

  $237  $1,067   $18  $351  $14  $111  $1,798 

Charge-offs

   (2  —      —     (3  —     —     (5

Recoveries

   —     —      —     —     1   —     1 

Provision

   (53  91    (8  (14  (2  (14  —   
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

September 30, 2016

  $182  $1,158   $10  $334  $13  $97  $1,794 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

   September 30, 2016 
   Real
Estate
Residential
   Real
Estate
Commercial
   Real
Estate
Construction
   Commercial
and
Industrial
   Consumer   Other   Total 

Individually Evaluated for Impairment

  $—     $—     $—     $—     $—     $—     $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Collectively Evaluated for Potential Impairment

  $182   $1,158   $10   $334   $13   $97   $1,794 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Loss (continued)

   December 31, 2016 
   Real
Estate
Residential
   Real
Estate
Commercial
   Real
Estate
Construction
   Commercial
and
Industrial
   Consumer   Other   Total 

Individually Evaluated for Impairment

  $—     $—     $—     $—     $—     $—     $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Collectively Evaluated for Potential Impairment

  $198   $1,171   $13   $322   $12   $81   $1,797 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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) 
   September 30, 2017 
   Real
Estate
Residential
   Real
Estate
Commercial
   Real
Estate
Construction
   Commercial
and
Industrial
   Consumer   Other   Total 

Individually Evaluated for Impairment

  $33   $1,784   $—     $—     $—     $—     $1,817 

Collectively Evaluated for Potential Impairment

   31,619    44,176    298    13,501    3,218    6,613    99,425 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $31,652   $45,960   $298   $13,501   $3,218   $6,613   $101,242 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   December 31, 2016 
   Real
Estate
Residential
   Real
Estate
Commercial
   Real
Estate
Construction
   Commercial
and
Industrial
   Consumer   Other   Total 

Individually Evaluated for Impairment

  $47   $1,418   $—     $—     $—     $—     $1,465 

Collectively Evaluated for Potential Impairment

   29,674    42,626    595    12,280    2,716    7,736    95,627 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $29,721   $44,044   $595   $12,280   $2,716   $7,736   $97,092 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5. Deposits

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

 

   December 31, 
   2013  2012  2011  2010  2009 

Nonaccrual loans:

      

Real estate—mortgage:

      

One-to four-family residential

      

Originated

  $1,595   $1,269   $128   $332   $137  

Purchased

   307    763    1,416    394    227  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total one-to four-family residential

   1,902    2,032    1,544    726    364  

Multi-family

      

Purchased

   —      —      —      —      634  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total multi-family

   —      —      —      —      634  

Commercial

   493    172    568    493    98  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate—mortgage

   2,395    2,204    2,112    1,219    1,096  

Consumer:

      

Home equity

      

Loan-to-value ratio of 80% or less

   —      —      —      —      79  

Loan-to-value ratio of greater than 80%

   30    —      33    —      45  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total home equity

   30    —      33    —      124  

Other

   —      —      —      —      11  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

   30    —      33    —      135  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total nonaccrual loans

   2,425    2,204    2,145    1,219    1,231  

Accruing loans past 90 days or more

   —      —      —      —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total nonaccrual loans and accruing loans past due 90 days or more

   2,425    2,204    2,145    1,219    1,231  

Real estate owned

   126    146    544    426    419  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total nonperforming assets

  $2,551   $2,350   $2,689   $1,645   $1,650  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Troubled debt restructurings:

      

In nonaccrual status

  $968   $1,254   $465   $493   $—    

Performing under modified terms

   2,358    1,501    1,565    672    —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total troubled debt restructurings

  $3,326   $2,755   $2,030   $1,165   $—    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total nonperforming loans to total loans

   0.86  0.86  0.84  0.51  0.50

Total nonperforming assets to total assets

   0.80    0.74    0.80    0.48    0.47  

Total nonperforming assets and troubled debt restructurings performing under modified terms to total assets (1)

   1.54    1.21    1.27    0.68    —    
Maturity Period:  September 30,
2017
 

One Year or Less

  $26,048 

Over One Through Two Years

   6,917 

Over Two Through Three Years

   8,336 

Over Three Through Four Years

   7,001 

Over Four Through Five Years

   5,143 

Over Five Years

   106 
  

 

 

 

Total

  $53,551 
  

 

 

 

(1)Troubled debt restructurings in nonaccrual status are included in nonperforming assets.

Interest incomeThe balance in time deposits that would have been recorded formeet or exceed the years ended December 31, 2013FDIC insurance limit of $250,000 totaled $4.4 million and $5.2 million as of September 30, 2017 and December 31, 2012 had nonaccruing loans been current according to their original terms amounted to $106,000 and $132,000,2016, respectively. No interest related to nonaccrual loans was included in interest income for the years ended December 31, 2013 and 2012.

Note 6. Repurchase Agreements

The following table showssets forth information related to repurchase agreements as of the aggregate amounts of FedFirst’s classified assetsdates indicated.

   (Dollars in thousands) 
   September 30, 2017   December 31, 2016 
   Amount   Weighted
Average
Rate
   Amount   Weighted
Average
Rate
 

Securities Sold Under Agreements to Repurchase:

        

Balance at Period End

   21,058    0.83    22,531    0.80 

Average Balance Outstanding During the Period

   18,855    0.79    23,299    0.83 

Maximum Amount Outstanding at any Month End

   21,962      26,042   

Securities Collateralizing the Agreements atPeriod-End:

 

      

Carrying Value

   29,566      32,338   

Fair Value

   29,550      32,138   

For repurchase agreements, First West Virginia transfers various securities to customers in exchange for cash at the dates indicated (dollars in thousands). Real estate owned properties are considered substandard based on internal policy.

   December 31, 
   2013   2012   2011 

Special mention assets

  $4,587    $508    $2,338  

Substandard assets

   5,569     5,399     4,477  
  

 

 

   

 

 

   

 

 

 

Total classified assets

  $10,156    $5,907    $6,815  
  

 

 

   

 

 

   

 

 

 

Delinquencies. The following table provides information about delinquencies in FedFirst’s loan portfolioend of each business day and agrees to reacquire the securities at the dates indicated (dollars in thousands).

   December 31, 
   2013   2012 
   30-59 Days
Past Due
   60-89 Days
Past Due
   90 Days or
Greater
Past Due
   30-59 Days
Past Due
   60-89 Days
Past Due
   90 Days or
Greater
Past Due
 

Real estate—mortgage:

            

One- to four-family residential

            

Originated

  $1,012    $427    $627    $1,052    $138    $281  

Purchased

   —       —       307     —       —       595  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total one-to four-family residential

   1,012     427     934     1,052     138     876  

Commercial

   30     —       493     456     —       74  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total real estate—mortgage

   1,042     427     1,427     1,508     138     950  

Real estate—construction:

            

Residential

   715     —       —       —       —       —    

Consumer:

            

Home equity

            

Loan-to-value ratio of 80% or less

   1     —       —       510     —       —    

Loan-to-value ratio of greater than 80%

   144     158     30     406     36     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

   145     158     30     916     36     —    

Other

   —       3     —       5     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer

   145     161     30     921     36     —    

Commercial business

   —       —       —       8     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total delinquencies

  $1,902    $588    $1,457    $2,437    $174    $950  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Analysis and Determinationend of the Allowancenext business day for Loan Losses. FedFirst’s methodology for assessing the appropriateness ofcash exchanged plus interest. The process is repeated at the allowance for loan losses consists of: (1) a valuation allowance on impaired loans; and (2) a valuation allowance on the remainder of the loan portfolio. Although FedFirst determines the amountend of each elementbusiness day until the agreement is terminated. The securities underlying the agreements remained under First West Virginia’s control. The risk involved in this type of the allowance separately, the entire allowance for loan lossestransaction is available for the entire portfolio.

Allowance on Impaired Loans. FedFirst establishes an allowance for loans that are individually evaluated and determined to be impaired. The amount of impairment is determined by the difference between the present value of the expected cash flows related to the loan, using current interest rates and its recorded value, or, as a practical measure in the case of collateralized loans, the difference between the fair value of the collateral andsecurities transferred may decline below the recorded amount of First West Virginia’s obligation which would require First West Virginia to pledge additional amounts. First West Virginia attempts to manage this risk by monitoring the fair value of securities pledged compared to the repurchase agreement amounts. Additional securities are pledged as necessary to secure First West Virginia’s obligation.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Federal Home Loan Bank Borrowings

The subsidiary bank is a member of the Federal Home Loan Bank of Pittsburgh (“FHLB”). The FHLB borrowings are secured by a blanket lien by the FHLB on certain residential real estate loans less estimated selling costs. Ator securities with a fair value at least equal to the outstanding balances. The remaining maximum borrowing capacity with the FHLB at September 30, 2017 was approximately $49.8 million subject to the purchase of additional FHLB stock. The subsidiary bank had FHLB borrowings of $2,213,000 and $3,216,000 at September 30, 2017 and December 31, 2013, there were seven loan relationships that were individually evaluated for impairment,2016, respectively. At September 30, 2017, the subsidiary bank had two fixed rate amortizing advances which totaled $2,213,000 with interest rates ranging from 4.81% to 4.89% of which fiveone advance for $816,000 will mature through 2018 and one advance for $1,397,000 will mature through 2023. The collateral securing these borrowings totaled $2,326,000 at September 30, 2017.

Progressive Bank also has a line of credit agreement with the Federal Home Loan Bank which renews annually. The maximum credit available is $23.7 million under the agreement. There were considered TDRs. Atno borrowings outstanding under this agreement at September 30, 2017 and December 31, 2012, there were seven loan relationships that were individually evaluated for impairment, of which four were considered TDRs. TDR and impaired loan information and any related specific allowances were previously summarized in the “—Troubled Debt Restructurings” and “—Impaired Loans” sections.

Allowance on the Remainder of the Loan Portfolio. FedFirst establishes an allowance for loans that are not determined to be impaired. Management determines historical loss experience for each group of loans with similar risk characteristics within the portfolio based on loss experience for loans in each group. Loan categories will represent groups of loans with similar risk characteristics and may include types of loans categorized by product, large credit exposures, concentrations,

loan grade, or any other characteristic that causes a loan’s risk profile to be similar to another. FedFirst utilizes previous years’ net charge-off experience by loan category as a basis in determining loss projections. In addition, there are two categories of loans considered to be higher risk concentrations that are evaluated separately when calculating the allowance for loan losses:

Loans purchased in the secondary market. Prior to 2006, pools of multi-family and one- to four-family residential mortgage loans located in areas outside of FedFirst’s primary geographic lending area in southwestern Pennsylvania were acquired in the secondary market. Although these loans were underwritten to FedFirst’s lending standards, they are considered higher risk given FedFirst’s unfamiliarity with the geographic areas where the properties are located and ability to timely identify problem loans through servicer correspondence.

Home equity loans with a loan-to-value ratio greater than 80%. These loans are considered higher risk given the pressure on property values and reduced credit alternatives available to leveraged borrowers.

FedFirst also considers qualitative or environmental factors that are likely to cause estimated credit losses associated with First Federal’s existing portfolio to differ from historical loss experience. FedFirst’s qualitative and environmental factors are reviewed on a quarterly basis to ensure they are reflective of current conditions in its loan portfolio and economy. In 2013, the qualitative factors were adjusted by applying factors to commercial construction loans to ensure potential losses are captured as disbursements are occurring. FedFirst’s historical loss experience is typically updated on an annual basis when another complete year of loss history is available. At December 31, 2013, FedFirst adjusted its historical loss data by utilizing the three most recent years of loss history and periods where FedFirst did not experience any losses were excluded from determining the historical average loss for each loan class. It was determined that the most recent three years of loss history represented the most relevant data. At December 31, 2012, FedFirst utilized six years of loss history and, generally, periods where FedFirst did not experience any losses were excluded from determining the historical average loss for each loan class.2016.    

The following table sets forth the allowance for loan losses by loan categoryscheduled maturities of Federal Home Loan Bank borrowings at the dates indicated (dollars in thousands).indicated.

 

  December 31, 
  2013  2012  2011  2010  2009 
  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent 

Real estate—mortgage:

          

One- to four-family residential

          

Originated

 $432    37.1 $466    43.4 $534    46.0 $558    51.3 $641    54.8

Purchased

  286    2.4    372    4.0    465    6.4    443    8.7    323    9.8  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  718    39.5    838    47.4    999    52.4    991    60.0    964    64.6  

Multi-family:

          

Originated

  114    2.5    33    4.3    39    5.1    12    1.7    12    1.6  

Purchased

  34    1.3    102    1.7    124    2.0    127    2.2    117    2.5  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total multi-family

  148    3.8    135    6.0    163    7.1    139    3.9    129    4.1  

Commercial

  1,025    21.9    802    17.8    858    13.8    804    14.2    647    12.8  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate—mortgage

  1,891    65.2    1,775    71.2    2,020    73.3    1,934    78.1    1,740    81.5  

Real estate—construction:

          

Residential

  6    1.2    3    0.8    6    1.5    10    2.9    4    1.2  

Commercial

  103    5.7    8    2.0    12    3.3    1    0.3    4    1.1  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate—construction

  109    6.9    11    2.8    18    4.8    11    3.2    8    2.3  

Consumer:

          

Home equity

          

Loan-to-value ratio of 80% or less

  475    16.9    434    16.3    379    12.0    294    9.6    168    7.3  

Loan-to-value ratio of greater than 80%

  268    3.3    246    3.0    267    3.1    292    3.6    321    3.8  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total home equity

  743    20.2    680    19.3    646    15.1    586    13.2    489    11.1  

Other

  11    0.6    19    0.8    24    0.7    26    0.9    31    0.9  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

  754    20.8    699    20.1    670    15.8    612    14.1    520    12.0  

Commercial business

  432    7.1    245    5.9    242    6.1    171    4.6    160    4.2  

Unallocated

  122    —      156    —      148    —      96    —      81    —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total allowance for loan losses

 $3,308    100.0 $2,886    100.0 $3,098    100.0 $2,824    100.0 $2,509    100.0
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   (Dollars in thousands) 
   September 30, 2017  December 31, 2016 
   Amount   Weighted
Average
Rate
  Amount   Weighted
Average
Rate
 

Due in One Year

  $74    4.84 $110    4.78

Due After One Year to Two Years

   825    4.84   1,760    4.76 

Due After Two Years to Three Years

   44    4.81   43    4.81 

Due After Three Years to Four Years

   46    4.81   45    4.81 

Due After Four Years to Five Years

   49    4.81   47    4.81 

Due After Five Years

   1,175    4.81   1,211    4.81 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $2,213    4.82 $3,216    4.78
  

 

 

   

 

 

  

 

 

   

 

 

 

(1)Represents percentage of loans in each category to total loans.
Note 8. Commitments and Contingent Liabilities

AnalysisThe subsidiary bank is a party to financial instruments withoff-balance-sheet risk in the normal course of Loan Loss Experience. The following table sets forth an analysisbusiness to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the allowance for loan losses for the periods indicated (dollars in thousands).

   Years Ended December 31, 
   2013  2012  2011  2010  2009 

Allowance at beginning of year

  $2,886   $3,098   $2,824   $2,509   $1,806  

Provision for loan losses

   740    310    850    850    1,090  

Charge-offs:

      

Real estate—mortgage:

      

One- to four-family residential

      

Originated

   (12  (136  —      (82  (32

Purchased

   (199  (309  (489  (181  (105
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total one- to four-family residential

   (211  (445  (489  (263  (137

Multi-family

      

Purchased

   —      —      —      (46  (130
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total multi-family

   —      —      —      (46  (130

Commercial

   —      (33  —      —      (63
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate—mortgage

   (211  (478  (489  (309  (330

Consumer:

      

Home equity

      

Loan-to-value ratio of 80% or less

   —      —      (14  (87  —    

Loan-to-value ratio of greater than 80%

   (121  (49  (64  (119  (46
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total home equity

   (121  (49  (78  (206  (46

Other

   (13  (1  (11  (18  (14
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

   (134  (50  (89  (224  (60

Commercial business

   —      (15  —      (2  —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total charge-offs

   (345  (543  (578  (535  (390

Recoveries

   27    21    2    —      3  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net charge-offs

   (318  (522  (576  (535  (387
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance at end of year

  $3,308   $2,886   $3,098   $2,824   $2,509  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance to nonperforming loans

   136.41  130.94  144.43  231.67  203.82

Allowance to total loans

   1.17    1.13    1.21    1.19    1.03  

Net charge-offs to average loans

   0.12    0.21    0.24    0.23    0.16  

Market Risk Management.The process by which FedFirst manages its interest rate risk is called asset/liability management. The goal of FedFirst’s asset/liability management is to increase net interest income without taking undue interest rate risk while maintaining adequate liquidity. The Asset Liability Committee is responsible for the identification and management of interest rate risk exposure and continuously evaluates strategies to manage FedFirst’s exposure to interest rate fluctuations.

Interest Rate Risk Management. FedFirst manages the interest rate sensitivity of its interest-bearing liabilities and interest-earning assets in an effort to minimize the adverse effects of changesamount recognized in the interest rate environment. As interest rates changeconsolidated balance sheets. The contract amounts of these instruments reflect the extent of involvement First West Virginia has in the market, rates earned on interest rate sensitive assets and rates paid on interest rate sensitive liabilities do not necessarily move concurrently. Deposit accounts typically react more quickly to changes in market interest rates than loans becauseparticular classes of the shorter maturities of deposits. As a result, sharp increases in interest rates may adversely affect FedFirst’s earnings while decreases in interest rates may beneficially affect its earnings. FedFirst currently does not participate in hedging programs, interest rate swaps or other activities involving the use of derivative financial instruments.

FedFirst has an Asset Liability Committee, which includes members of executive management,First West Virginia’s exposure to communicate, coordinate and control all aspects of its business involving asset/liability management. The committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

In an effort to assess interest rate risk, FedFirst uses a simulation model to determine the effect of immediate incremental increases and decreases in interest rates on net income and the net portfolio value. Net portfolio value represents

the market value of portfolio equity and is equal to the market value of assets minus the market value of liabilities, with adjustments for off-balance sheet items. This analysis assesses the risk ofcredit loss in market risk sensitive instruments in the event of an instantaneousnonperformance by the other party to the financial instrument for commitments to extend credit and sustained basis point increase or decreasestandby letters of credit is represented by the contractual amount of those instruments. First West Virginia uses the same credit policies in market interest rates with no effect given to any steps that FedFirst might take to counter the effect of that interest rate movement. Certain assumptions are made regarding loan prepaymentsmaking commitments and decay rates of non-maturity deposit accounts. Becauseconditional obligations as it is difficult to accurately project the market reaction of depositorsdoes foron-balance-sheet instruments.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8. Commitments and borrowers, the effect of actual changes in interest rates on these assumptions may differ from simulated results.Contingent Liabilities (continued)

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

   (Dollars in thousands) 
   

September

30,

   

December

31,

 
   2017   2016 

Standby Letters of Credit

  $399   $376 

Construction Mortgages

   4,132    2,363 

Personal Lines of Credit

   1,439    1,468 

Overdraft Protection Lines

   2,746    2,801 

Home Equity Lines of Credit

   3,783    3,877 

Commercial Lines of Credit

   4,191    6,307 
  

 

 

   

 

 

 
  $16,690   $17,192 
  

 

 

   

 

 

 

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in FedFirst’s net portfoliothe contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. First West Virginia evaluates each customer’s creditworthiness on acase-by-case basis. The amount of collateral obtained, if deemed necessary by First West Virginia 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.

Standby letters of credit are conditional commitments issued by First West Virginia to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The standby letters of credit in the amount of $80,000 expire in 2018 and $319,000 expire in 2021. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

First West Virginia and its subsidiary are parties to various legal and administrative proceedings and claims. Although any litigation contains an element of uncertainty, management believes that the outcome of these events will not have a material effect on the consolidated financial position and results of operations of First West Virginia.

Note 9. Fair Value Disclosure

FASB ASC 820 “Fair Value Measurement” defines fair value at December 31, 2013and provides the framework for measuring fair value and required disclosures about fair value measurements. Fair value is defined as the price that would occurbe received for an asset or paid to transfer a liability in an orderly transaction between market participants in the event of an immediate changeprincipal 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 interest rates with no effect givenvaluation methods to any steps that FedFirst might take to counteract that change (dollars in thousands).determine fair value.

December 31, 2013

  Net Portfolio Value (“NPV”)  NPV as a Percent
of Portfolio
Value of Assets
  Earnings at Risk 

Basis Point (“bp”)

Change in Rates

  Dollar
Amount
   Dollar
Change
  Percent
Change
  NPV
Ratio
  Change  Dollar
Change
  Percent
Change
 

300bp

  $30,688    $(19,341  (38.7)%   10.76  (498)bp  $(1,834  (17.1)% 

200

   37,466     (12,563  (25.1  12.65    (309  (1,199  (11.2

100

   44,721     (5,308  (10.6  14.54    (120  (503  (4.7

Static

   50,029     —      —      15.74    —      —      —    

(100)

   51,468     1,439    2.9    15.85    11    (350  (3.3

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features that restrict changes in interest rates on a short-term basis and over the life of the asset. Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could deviate significantly from those assumed in calculating the table.

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

FedFirst regularly adjusts its investments in liquid assets based upon its assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of its asset/liability management policy.

FedFirst’s most liquid assets are cash and cash equivalents and interest-bearing deposits. The three levels of these assets depend on FedFirst’s operating, financing, lending and investing activities during any given period. At December 31, 2013, cash and cash equivalents totaled $5.6 million. Securities classifiedfair value hierarchy are as available-for-sale that are not pledged as collateral, and which provide additional sources of liquidity, totaled $18.3 million at December 31, 2013. In addition, at December 31, 2013, FedFirst had a maximum remaining borrowing capacity at the FHLB of approximately $105.4 million. FedFirst also has two unsecured discretionary lines of credit totaling $13.0 million. At December 31, 2013 and 2012, there were no outstanding advances on the lines of credit.follows:

Certificates of deposit due within one year of December 31, 2013 totaled $46.6 million, or 52.9% of certificates of deposit. The large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods in the recent interest rate environment. If these maturing deposits do not remain with FedFirst, FedFirst will be required to seek other sources of funds, including other certificates of deposit and borrowings. FedFirst believes, however, based on past experience that a significant portion of its maturing certificates of deposit will remain with us. FedFirst has the ability to attract and retain deposits by adjusting the interest rates offered.

The following table presents certain of FedFirst’s contractual obligations as of December 31, 2013 (dollars in thousands).

   Amounts Due in 
   Total   One Year
or Less
   One to
Three
Years
   Three to
Five Years
   After Five
Years
 

Certificates of deposit

  $88,091    $46,567    $19,736    $10,627    $11,161  

Borrowings

   45,591     33,860     11,731     —       —    

Operating lease obligations (1)

   558     178     306     67     7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $134,240    $80,605    $31,773    $10,694    $11,168  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)Payments

Level I –

Fair value is based on unadjusted quoted prices in active markets that are accessible to First West Virginia for leaseidentical 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 real property.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.

FedFirst’s primary investing activities are

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Fair Value Disclosure (continued)

This hierarchy requires the originationuse of loans and the purchase of securities. FedFirst’s primary financing activities consist of activity in deposit accounts and FHLB advances. Deposit flows are affected by the overallobservable market data when available. The level of interest rates, the interest rates and products offered by FedFirst and its local competitors and other factors. FedFirst generally manages the pricing of its deposits to be competitive and to increase core deposit relationships. Occasionally, FedFirst offers promotional rates on certain deposit products to attract deposits. No further changes in FedFirst’s funding mix are currently planned or expected, other than changes in the ordinary course of business resulting from deposit flows. For information about FedFirst’s costs of funds, see “FedFirst Results of Operations forfair value hierarchy within which the Years Ended December 31, 2013 and 2012—Net Interest Income.”fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement.

The following table presents FedFirst’s primary investingthe financial assets measured at fair value on a recurring basis and financing activities duringreported on the periodsCondensed Consolidated Balance Sheet as of the dates indicated, (dollarsby level within the fair value hierarchy. The majority of First West Virginia’s securities are included in thousands).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-based or independently sourced market parameters.

 

   Years Ended December 31 
         2013              2012       

Investing activities:

   

Loans disbursed or closed

  $(85,301 $(66,788

Loan principal repayments

   64,660    62,001  

Proceeds from maturities and principal repayments of securities

   16,298    19,998  

Proceeds from sales of securities available-for-sale

   —      —    

Purchases of securities

   —      (10,940

Financing activities:

   

(Decrease) increase in deposits

   5,175    (7,483

Decrease in borrowings

   (3,087  (611
       (Dollars in thousands) 
   Fair
Value
Hierarchy
   September
30,
2017
   December
31,
2016
 

Available for Sales Securities:

      

U.S. Government Agencies

   Level II   $56,576   $54,877 

Obligations of States and Political Subdivisions

   Level II    37,437    34,402 

Mortgage-Backed Securities - Government-Sponsored Enterprises

   Level II    110,392    107,119 

Equity Securities - Mutual Funds

   Level I    697    679 

Equity Securities - Other

   Level I    142    129 
    

 

 

   

 

 

 

Total Available for Sale Securities

    $205,244   $197,206 
    

 

 

   

 

 

 

FedFirstFinancial 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 separate legal entityliability 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 First West Virginia.

The following methods and assumptions were used by First West Virginia in estimating the fair value disclosures for financial instruments:

Cash and Cash Equivalents, Accrued Interest Receivable, Repurchase Agreements, and Accrued Interest Payable

The fair value is equal to the current carrying value.

Investment SecuritiesAvailable-for-Sale

Where quoted market prices are available in an active market, securities are classified within Level I of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters. Such securities are classified in Level II of the valuation hierarchy.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Fair Value Disclosure (continued)

Loans

The fair value for net loans is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality.

Deposits

The fair values of noninterest-bearing and interest-bearing demand deposits and savings deposits are based on the discounted value of cash flows after estimating the weighted-average remaining term. The fair values for time deposits are based on the discounted value of cash flows. A wholesale cost of funds is used to discount the cash flows.

Federal Home Loan Bank Borrowings

The discounted cash flow method is used to estimate the fair value of Federal Home Loan Bank borrowings.

Off-Balance-Sheet Instruments

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and must provide for its own liquidity. FedFirst’s financial obligations consist primarilythe present creditworthiness of its operating expenses, repurchases of common stock, and payments of dividends to stockholders, when declared. FedFirst has no outstanding indebtedness. FedFirst’s available sources of income are interest and dividends on its investments and dividends from First Federal.the counterparties. The amount of dividends that First Federal can payfees currently charged on commitments is determined to FedFirst in any calendar year withoutbe insignificant and, therefore, the prior approvalcarrying value and fair value of the OCC cannot exceed retained net income for the year plus retained net income for the two prior calendar years. In 2013 and 2012, First Federal paid dividends to FedFirst totaling a $2.5 million and $3.5 million, respectively.

Stock Ownershipoff-balance-sheet instruments are not shown.

The following table sets forth information, aspresents the estimated fair values of June 30, 2014, regardingFirst West Virginia’s financial instruments at the shares of FedFirst common stock beneficially owned by persons known to FedFirst to beneficially own more than 5% of FedFirst’s common stock, by each director and executive officer of FedFirst and by all directors and executive officers as a group.dates indicated.

 

Persons Owning Greater than 5%

  Shares of Common Stock
Beneficially Owned
(1)(4)(5)(6)(8)
  Percent (9) 

Stilwell Value Partners I, L.P.,

   223,384(2)   9.6  

Stilwell Activist Fund, L.P.,

   

Stilwell Activist Investments, L.P.,

   

Stilwell Partners, L.P., Stilwell Value LLC, and

   

Joseph Stilwell

   

111 Broadway, 12th Floor

   

New York, New York 10006

   

Ryan Heslop, Ariel Warszawski,

   149,010(3)   6.4  

Firefly Value Partners, LP, FVP GP, LLC,

   

Firefly Management Company GP, LLC and

   

FVP Master Fund, L.P.

   

551 Fifth Avenue, 36th Floor

   

New York, New York 10176

   

Directors

       

R. Carlyn Belczyk

   16,916    *  

Richard B. Boyer

   28,142    1.2  

John M. Kish

   25,633    1.1  

John J. LaCarte

   35,941(7)   1.6  

Patrick G. O’Brien

   73,327    3.1  

John M. Swiatek

   15,350    *  

David L. Wohleber

   26,532    1.1  

Executive Officers who are not Directors

       

Jamie L. Prah

   23,356    1.0  

Henry B. Brown III

   15,866    *  

All directors and executive officers as a group (10 persons)

   276,184    11.3  
       (Dollars in thousands) 
       September 30, 2017   December 31, 2016 
   Fair Value
Hierarchy
   Carrying
Value
   Fair
Value
   Carrying
Value
   Fair
Value
 

Financial Assets:

          

Cash and Cash Equivalents

   Level I   $19,282   $19,282   $22,877   $22,877 

Investment SecuritiesAvailable-for-Sale

   See Above    205,244    205,244    197,206    197,206 

Loans, Net

   Level III    99,471    99,047    95,295    97,215 

Accrued Interest Receivable

   Level I    1,028    1,028    1,113    1,113 

Financial Liabilities:

          

Non-Maturing Deposits

   Level I    231,827    217,251    220,212    209,754 

Time Deposits

   Level II    53,551    52,897    55,494    54,803 

Repurchase Agreements

   Level I    21,058    21,058    22,531    22,531 

Federal Home Loan Bank Borrowings

   Level II    2,213    2,355    3,216    3,415 

Accrued Interest Payable

   Level I    76    76    84    84 

Note 10. Accumulated Other Comprehensive Income (Loss)

The activity in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2017 and 2016 is as follows:

   Unrealized Gains (Losses) on 

(dollars in thousands)

  Securities Available for Sale(1) 
   Three months ended
September 30,
   Nine months ended
September 30,
 
   2017   2016   2017   2016 

Beginning Balance

  $(1,221  $2,442   $(2,230  $310 

Other comprehensive income (loss) before reclassifications

   206    (321   1,216    2,153 

Amounts reclassified from accumulated other comprehensive loss

   (2   (345   (3   (687
  

 

 

   

 

 

   

 

 

   

 

 

 

Period Change

   204    (666   1,213    1,466 
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending Balance

  $(1,017  $1,776   $(1,017  $1,776 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

*(1)Less than 1%All amounts are net of tax. Related income tax expense or benefit is calculated using a combined federal and state income tax rate approximating 39.5%.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Accumulated Other Comprehensive Income (Loss) (continued)

   Amount Reclassified from    
   Accumulated Other    
   Comprehensive Income (Loss)    

Details About Accumulated Other

Comprehensive Income (Loss)

Components

  For the three months ended
September 30,
  For the nine months ended
September 30,
  Affected Line Item
in the Statement of
Income
 

(dollars in thousands)

  2017  2016  2017  2016    

Securities available for sale(1):

      

Net securities gains reclassified into earnings

  $(4 $(553 $(4 $(1,101  

Net gains on
available for sale
securities
 
 
 

Related income tax expense

   2   208   1   414   Income tax expense 
  

 

 

  

 

 

  

 

 

  

 

 

  

Net effect on accumulated other comprehensive income (loss) for the period

  $(2 $(345 $(3 $(687  Net of tax 
  

 

 

  

 

 

  

 

 

  

 

 

  

Total reclassifications for the period

  $(2 $(345 $(3 $(687  Net of tax 
  

 

 

  

 

 

  

 

 

  

 

 

  

(1)For purposes of this table, a person is deemedadditional detail related to be the beneficial owner of any shares of the common stock or preferred stock if he or she has or shares voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days after June 30, 2014. “Voting power” is the power to vote or direct the voting of sharesunrealized gains (losses) on securities and “investment power” is the power to dispose or direct the disposition of shares. Except as otherwise noted, ownership is direct and the named individuals and group exercise sole voting and investment power over the shares of FedFirst common stock. In accordance with applicable Securities and Exchange Commission rules, outstanding options held by an individual that are vested or that will vest within 60 days of June 30, 2014 are included for purposes of calculating that individual’s percentage ownership, but not for purposes of calculating anyrelated amounts reclassified from accumulated other individual’s percentage ownership.
(2)Based on information contained in a Schedule 13D/A filed with the Securities and Exchange Commission on July 2, 2014, which indicates that Stilwell Value Partners I, L.P., Stilwell Activist Fund, L.P., Stilwell Activist Investments, L.P., Stilwell Partners, L.P., Stilwell Value LLC, and Joseph Stilwell have shared voting and dispositive power over 223,384 shares as of June 30, 2014.
(3)Based on information contained in a Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2014, which indicates that FVP Master Fund, L.P., Firefly Value Partners, LP, FVP GP, LLC, Firefly Management Company GP, LLC, Ryan Heslop and Ariel Warszawski have shared voting and dispositive power over 149,010 shares.
(4)

This column includes unvested restricted stock held in trust as part of the 2006 Equity Incentive Plan and the 2011 Equity Incentive Plan with respect to which individuals have voting but not investment power as follows: Ms. Belczyk

and Mr. Swiatek—3,400 shares, Mr. Boyer and Mr. Prah—3,600 shares, Mr. Kish, Mr. LaCarte, and Mr. Wohleber—2,400 shares, Mr. O’Brien—7,173 shares, and Mr. Brown—2,700 shares. All restricted stock awards vest in five equal annual installments commencing one year from the date of grant, which is April 2, 2012, April 2, 2013 and October 1, 2013 for Mr. Boyer’s, Mr. Kish’s, Mr. LaCarte’s, Mr. Wohleber’s, Mr. Prah’s, and Mr. Brown’s awards, May 26, 2011, April 2, 2012, April 2, 2013 and October 1, 2013 for Ms. Belczyk’s and Mr. Swiatek’s awards, and August 7, 2009, April 2, 2012, April 2, 2013 and October 1, 2013 for Mr. O’Brien’s awards.
(5)This column includes vested stock options and stock options which are exercisable within 60 days of June 30, 2014 as follows: Ms. Belczyk and Mr. Swiatek—6,350 shares, Mr. Boyer—13,602 shares, Mr. Kish, Mr. LaCarte, and Mr. Wohleber—8,518 shares, Mr. O’Brien—39,009 shares, Mr. Prah—13,129 shares and Mr. Brown—7,094 shares. All stock options vest in five equal annual installments commencing one year from the date of grant.
(6)Includes shares allocated to the account of individuals under the ESOP with respect to which individuals have voting but not investment power as follows: Mr. Boyer—4,480 shares, Mr. O’Brien—3,609 shares, Mr. Prah—1,941 shares, and Mr. Brown—1,756 shares.
(7)Includes 14,469 shares held by a corporation controlled by Mr. LaCarte.
(8)Includes 21,264 shares held in trust in the Bank’s 401(k) Plan as follows: Mr. Boyer—5,761 shares, Mr. O’Brien—12,933 shares, and Mr. Brown—2,570 shares.
(9)Based on a total of a total of 2,315,810 shares of FedFirst common stock outstanding as of June 30, 2014.comprehensive income (loss) see Note 3 “Investment Securities.”

MERGER-RELATED EXECUTIVE COMPENSATIONNote 11. Subsequent Events

As requiredFirst West Virginia evaluated subsequent events through the date of January 11, 2018 which is the date the condensed consolidated financial statements were available to be issued, and incorporated into the condensed consolidated financial statements the effect of all material known events determined by ASC Topic 855,Subsequent Events, to be recognizable events.

On November 16, 2017, First West Virginia announced the federal securities laws, FedFirst is providing its stockholderssigning of a definitive merger agreement (the “Merger Agreement”) with CB Financial Services, Inc. (“CB”), a Pennsylvania corporation. Pursuant to the opportunityMerger Agreement, First West Virginia will merge with and into CB with CB as the surviving corporation (the “Merger”). Immediately following the Merger, Progressive Bank, N.A., the wholly-owned national bank subsidiary of First West Virginia, will merge with and into Community Bank, the wholly-owned Pennsylvania-chartered commercial bank subsidiary of CB, with Community Bank as the surviving bank.

Subject to cast a non-binding, advisory vote on the compensation that may become payable to its named executive officers in connection with the completionterms and conditions of the merger, as disclosed in the section of this document captioned “Description of the Merger—Merger-Related Executive Compensation for FedFirst’s Named Executive Officers,” and the related table and narratives.

Your vote is requested. FedFirst believes that the information regarding compensation that may become payable to its named executive officers in connection with the completion of the merger, as disclosed in the section of this Proxy Statement/Prospectus captioned “Description of the Merger—Merger-Related Executive Compensation for FedFirst’s Named Executive Officers” is reasonable and demonstrates that FedFirst’s executive compensation program was designed appropriately and structured to ensure the retention of talented executives and a strong alignment with the long-term interests of FedFirst’s stockholders. This vote is not intended to address any specific item of compensation, but rather the overall compensation that may become payable to FedFirst’s named executive officers in connection with the completion of the merger. In addition, this vote is separate and independent from the vote of stockholders to approve the merger agreement. However, the compensation will not be payable in the event the merger is not completed. FedFirst asks that its stockholders vote “FOR” the following resolution:

RESOLVED, that the compensation that may become payable to FedFirst’s named executive officers in connection withMerger Agreement, upon the completion of the Merger, as disclosed in the section captioned “Descriptionstockholders of the Merger—Merger-Related Executive Compensation for FedFirst’s Named Executive Officers,” and the related tables and narrative, is hereby approved.

This vote is advisory and therefore, itFirst West Virginia will not be binding on FedFirst, nor will it overrule any prior decision of FedFirst or require FedFirst’s board of directors (or any committee thereof) to take any action. However, FedFirst’s board of directors values the opinions of FedFirst’s stockholders, and to the extent that there is any significant vote against the named executive officer compensation as disclosed in this document, FedFirst’s board of directors will consider stockholders’ concerns and will evaluate whether any actions are necessary to address those concerns. FedFirst’s board of directors will consider the affirmative vote of the holders of a majority of the votes cast of FedFirst common stock entitled to vote on the matter “FOR” the foregoing resolution as advisory approval of the compensation that may become payable to FedFirst’s named executive officersreceive $28.50 in connection with the completion of the merger.FedFirst’s Board of Directors unanimously recommends that stockholders vote “FOR” the approval of the above resolution.

ADJOURNMENT OF SPECIAL MEETING

If there are not sufficient votes to constitute a quorumcash or to approve the merger agreement at the time of the special meeting, the merger agreement cannot be approved unless the special meeting is adjourned to a later date or dates to permit further solicitation of proxies. To allow proxies that have been received by FedFirst at the time of the special meeting to be voted for an adjournment, if deemed necessary, FedFirst has submitted the adjournment proposal to its stockholders as a separate matter for their consideration. FedFirst will vote properly submitted proxy cards “FOR” approval of the adjournment proposal, unless otherwise indicated on the proxy card. If it is deemed necessary to adjourn the special meeting, no notice of the adjourned meeting is required to be given to stockholder, other than an announcement at the special meeting of the time and place to which the meeting is adjourned, unless the date of the adjourned meeting is more than one hundred twenty (120) days after the record date for the original meeting, or if a new record date is fixed for the adjourned meeting, notice of the place, date and time of adjourned meeting shall be given to persons who are stockholders as of the new record date.FedFirst’s board of directors unanimously recommends that stockholders vote “FOR” the adjournment proposal.

SUBMISSION OF STOCKHOLDER NOMINATIONS AND PROPOSALS

If the merger is completed in the expected timeframe, FedFirst will not hold another annual meeting of stockholders. If the merger is not completed or if the merger is delayed and the 2015 annual meeting of stockholders becomes necessary, FedFirst must receive proposals that stockholders seek to include in the proxy statement for FedFirst’s next annual meeting no later than December 18, 2014. If next year’s annual meeting is held on a date more than 30 calendar days from May 22, 2015, a stockholder proposal must be received by a reasonable time before FedFirst begins to print and mail its proxy solicitation for such annual meeting. Any stockholder proposals will be subject to the requirements of the proxy rules adopted by the Securities and Exchange Commission.

FedFirst’s bylaws provide that in order for a stockholder to make nominations for the election of directors or proposals for business to be brought before the annual meeting, a stockholder must deliver notice of such nominations and/or proposals to the Corporate Secretary not less than 90 days prior to the date of the annual meeting; provided that if less than 100 days’ notice or prior public disclosure of the date of the annual meeting is given to stockholders, such notice must be received not later than the close of business on the 10th day following the day on which notice of the date of the annual meeting was mailed to stockholders or prior public disclosure of the meeting date was made. A copy of the bylaws may be obtained from FedFirst.

LEGAL MATTERS

The validity of the0.9583 shares of CB common stock for each share of First West Virginia’s common stock, subject to be issuedproration to ensure that at closing 80% of the outstanding shares of First West Virginia’s common stock are exchanged for shares of CB common stock and the remaining 20% are exchanged for cash. This cash and stock transaction is valued at approximately $49.0 million. First West Virginia and CB expect to complete the transaction in the proposed merger has been passed upon for CB by Luse Gorman Pomerenk & Schick, P.C.second quarter of 2018. The completion of the transaction is subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals and the approval of the stockholders of First West Virginia and CB.

First West Virginia uses the current statutory federal tax rate of 34.0% and state tax rate of 6.5% to value its deferred tax assets and liabilities. On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (P.L.115-97), Washington, DC. Certain federal a tax reform law that includes a reduction in the U.S. corporate income tax consequences of the proposed mergerrate. First West Virginia management expects that First West Virginia will be passed upon for CB by Luse Gorman Pomerenk & Schick, PC, Washington, DC,required to record an initial charge against earnings to lower the carrying amount of its net deferred tax asset, and for FedFirst by Kilpatrick Townsend & Stockton LLP, Washington, DC.then, going forward, would record lower tax provisions on an ongoing basis.

EXPERTSINDEPENDENT AUDITOR’S REPORT

TheAudit Committee, Board of Directors and Stockholders

First West Virginia Bancorp, Inc. and Subsidiary

Wheeling, West Virginia

We have audited the accompanying consolidated financial statements of financial condition of CB Financial Services,First West Virginia Bancorp, Inc. and Subsidiary, which comprise the consolidated balance sheets as of December 31, 20132016 and 20122015, and the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity and cash flows for the years then ended, December 31, 2013, 2012 and 2011 have been included in this proxy statement/prospectus in reliance upon the report of ParenteBeard LLC, independent registered public accounting firm, as stated in their report appearing herein, and upon the authority of said firm as experts in accounting and auditing.

The consolidated statements of financial condition of FedFirst Financial Corporation and its subsidiaries as of December 31, 2013 and 2012 and the related notes to the consolidated statements of operations, comprehensive income, changes in stockholders’ equity, and cash flowsfinancial statements.

Management’s Responsibility for the years ended December 31, 2013 and 2012 have been included in this proxy statement/prospectus in reliance upon the report of ParenteBeard LLC, independent registered public accounting firm, as stated in their report appearing herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATIONFinancial Statements

FedFirst files annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public over the Internet at the SEC’s website at www.sec.gov. You may also read and copy any document FedFirst files with the SEC at its public reference room located at 100 F Street, NE, Room 1580, Washington DC 20549. Copies of these documents also can be obtained at prescribed rates by writing to the Public Reference Section of the SEC, at 100 F Street, NE, Room 1580, Washington DC 20549 or by calling 1-800-SEC-0330 for additional information on the operation of the public reference facilities.

CB has filed with the SEC a registration statement on Form S-4 under the Securities Act to register the shares of CB common stock to be issued to FedFirst stockholders in the merger. This document is a part of that registration statement and constitutes both a prospectus of CB and a proxy statement of FedFirst for its special meeting. As permitted by the SEC rules, this proxy statement/prospectus does not contain all of the information that you can find in the registration statement or in the exhibits to the registration statement. The additional information may be inspected and copied as set forth above.

All information concerning CB and its subsidiaries included in this document has been furnished by CB and all information concerning FedFirst and its subsidiaries included in this document has been furnished by FedFirst.

You should rely only on the information contained in this document when evaluating the merger agreement and the proposed merger. We have not authorized anyone to provide you with information that is different from what is contained in this document. This document is dated                     , 2014. You should not assume that the information contained in this document is accurate as of any date other than such date, and neither the mailing of this document to stockholders of FedFirst nor the issuance of shares of CB common stock as contemplated by the merger agreement shall create any implication to the contrary.

LOGO

FINANCIAL STATEMENTS

Contents

Page

Report of Independent Registered Public Accounting Firm

F-2

Consolidated Statements of Financial Condition at March 31, 2014 (unaudited) and December  31, 2013 and 2012

F-3

Consolidated Statements of Income for the three months ended March  31, 2014 and 2013 (unaudited) and the years ended December 31, 2013, 2012 and 2011

F-4

Consolidated Statements of Comprehensive Income for the three months ended March  31, 2014 and 2013 (unaudited) and the years ended December 31, 2013, 2012 and 2011

F-5

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March  31, 2014 (unaudited) and the years ended December 31, 2011, 2012 and 2013

F-6

Consolidated Statements of Cash Flows for the three months ended March  31, 2014 and 2013 (unaudited) and the years ended December 31, 2013, 2012 and 2011

F-7

Notes to Consolidated Financial Statements

F-8

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

CB Financial Services, Inc. and Subsidiary

Carmichaels, Pennsylvania

We have audited the accompanying consolidated statement of condition of CB Financial Services, Inc. and Subsidiary (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2013. The Company’s managementManagement is responsible for the preparation and fair presentation of these consolidated financial statements. statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First West Virginia Bancorp, Inc. and Subsidiary as of December 31, 2016 and 2015, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ BKD, LLP

Indianapolis, Indiana

March 23, 2017, except for Note 4 as to which the date is January 11, 2018

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders

First West Virginia Bancorp, Inc. and Subsidiary

Wheeling, West Virginia

We have audited the accompanying consolidated statements of income, comprehensive income, stockholders’ equity and cash flows of First West Virginia Bancorp, Inc. and Subsidiary (Company) for the year ended December 31, 2014. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. AnThe Company is not required to have, nor were we engaged to perform, an audit includesof its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit also included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesstatements, assessing the accounting principles used and significant estimates made by management as well asand evaluating the overall financial statement presentation. We believe that our auditsaudit provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements of First West Virginia Bancorp, Inc. and Subsidiary referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year periodyear ended December 31, 20132014, in conformity with accounting principles generally accepted in the United States of America.

/s/ ParenteBeard LLCBKD, LLP

Pittsburgh, PennsylvaniaIndianapolis, Indiana

JuneMarch 27, 2015, except for Note 4 as to which the date is January 11, 20142018

LOGOFIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

Consolidated Statement of ConditionCONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share and share data)

 

   (Unaudited)       
   March 31,  December 31, 
   2014  2013  2012 

ASSETS

    

Cash and Due From Banks:

    

Interest Bearing

  $8,264   $7,094   $13,351  

Non-Interest Bearing

   18,914    9,323    11,944  

Investment Securities:

    

Available-for-Sale

   120,891    133,810    155,331  

Held to Maturity

   511    1,006    2,032  

Loans, Net

   379,978    373,764    342,226  

Premises and Equipment, Net

   4,625    4,612    4,853  

Goodwill

   2,158    2,158    2,158  

Core Deposit Intangible

   —      —      52  

Bank-Owned Life Insurance

   8,760    8,702    8,458  

Accrued Interest and Other Assets

   6,072    6,017    6,348  
  

 

 

  

 

 

  

 

 

 

TOTAL ASSETS

  $550,173   $546,486   $546,753  
  

 

 

  

 

 

  

 

 

 

LIABILITIES

    

Deposits:

    

Demand Deposits

  $130,331   $121,210   $106,913  

NOW Accounts

   73,235    77,797    85,897  

Money Market Accounts

   109,085    110,174    115,640  

Savings Accounts

   91,110    84,961    73,626  

Time Deposits

   83,499    84,670    86,553  

Brokered Deposits

   1,523    1,523    1,519  
  

 

 

  

 

 

  

 

 

 

Total Deposits

   488,783    480,335    470,148  

Short-Term Borrowings

   13,550    15,384    23,374  

Other Borrowed Funds

   3,000    4,000    7,000  

Accrued Interest and Other Liabilities

   1,320    1,762    1,761  
  

 

 

  

 

 

  

 

 

 

TOTAL LIABILITIES

   506,653    501,481    502,283  
  

 

 

  

 

 

  

 

 

 

STOCKHOLDERS’ EQUITY

    

Preferred Stock, No Par Value; 5,000,000 Shares Authorized

   —      —      —    

Common Stock, $.4167 Par Value; 35,000,000 Shares Authorized, 2,630,879 and 2,626,864 Shares Issued in 2014 and 2013, Respectively

   1,096    1,095    1,085  

Capital Surplus

   6,024    5,969    5,636  

Retained Earnings

   41,395    40,807    38,623  

Treasury Stock, at Cost (291,884 and 158,884 Shares in 2014 and 2013, Respectively)

   (4,999  (2,103  (2,103

Accumulated Other Comprehensive (Loss)Income

   4    (763  1,229  
  

 

 

  

 

 

  

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

   43,520    45,005    44,470  
  

 

 

  

 

 

  

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $550,173   $546,486   $546,753  
  

 

 

  

 

 

  

 

 

 
   December 31, 
   2016  2015 

ASSETS

   

Cash and Due From Banks

  $4,922  $4,561 

Due From Banks - Interest Bearing

   17,955   21,368 
  

 

 

  

 

 

 

Total Cash and Cash Equivalents

   22,877   25,929 

Investment Securities:

   

Available-for-Sale (at fair value)

   197,206   203,579 

Loans

   97,092   100,098 

Less Allowance for Loan Losses

   (1,797  (1,798
  

 

 

  

 

 

 

Net Loans

   95,295   98,300 

Premises and Equipment, Net

   7,629   7,953 

Accrued Income Receivable

   1,113   1,028 

Goodwill

   1,644   1,644 

Bank-Owned Life Insurance

   4,063   3,950 

Other Assets

   5,428   3,011 
  

 

 

  

 

 

 

TOTAL ASSETS

  $335,255  $345,394 
  

 

 

  

 

 

 

LIABILITIES

   

Noninterest Bearing Deposits:

   

Demand

  $37,710  $40,111 

Interest Bearing Deposits:

   

Demand

   61,472   64,573 

Savings

   121,030   118,434 

Time

   55,494   59,169 
  

 

 

  

 

 

 

Total Deposits

   275,706   282,287 

Securities Sold Under Agreements to Repurchase

   22,531   23,619 

Federal Home Loan Bank Borrowings

   3,216   3,320 

Accrued Interest Payable

   84   102 

Other Liabilities

   659   702 
  

 

 

  

 

 

 

TOTAL LIABILITIES

   302,196   310,030 
  

 

 

  

 

 

 

STOCKHOLDERS’ EQUITY

   

Common Stock, 2,000,000 Shares Authorized at $5 Par Value:

   

1,728,730 Shares Issued at December 31, 2016 and 2015

   8,644   8,644 

Treasury Stock - 10,000 Shares at Cost

   (228  (228

Surplus

   6,966   6,966 

Retained Earnings

   19,907   19,672 

Accumulated Other Comprehensive Income (Loss)

   (2,230  310 
  

 

 

  

 

 

 

TOTAL STOCKHOLDERS’ EQUITY

   33,059   35,364 
  

 

 

  

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $335,255  $345,394 
  

 

 

  

 

 

 

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

LOGOFIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

Consolidated Statement of IncomeCONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands)thousands, except per share and share data)

 

  (Unaudited)    
  Three months ended  Years Ended December 31, 
  March  March          
  2014  2013  2013  2012  2011 

INTEREST AND DIVIDEND INCOME

     

Loans, Including Fees

 $3,968   $3,740   $15,380   $15,597   $16,489  

Federal Funds Sold

  3    6    16    50    31  

Investment Securities:

     

Taxable

  226    221    825    902    1,294  

Exempt From Federal Income Tax

  355    376    1,492    1,755    2,141  

Other Interest and Dividend Income

  26    3    44    7    9  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

TOTAL INTEREST AND DIVIDEND INCOME

  4,578    4,346    17,757    18,311    19,964  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INTEREST EXPENSE

     

Deposits

  429    527    1,968    2,646    3,810  

Federal Funds Purchased

  9    14    3    1    2  

Short-Term Borrowings

  1    —      56    84    186  

Other Borrowed Funds

  31    63    209    362    494  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

TOTAL INTEREST EXPENSE

  470    604    2,236    3,093    4,492  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INTEREST INCOME

  4,108    3,742    15,521    15,218    15,471  

Provision For Loan Losses

  —      100    100    450    975  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

  4,108    3,642    15,421    14,768    14,496  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

OTHER OPERATING INCOME

     

Service Fees on Deposit Accounts

  455    463    2,146    2,126    2,158  

Commissions

  81    75    269    256    231  

Net Gain on Sale of Investments

  —      —      —      14    —    

Net Gains on Sale of Loans

  86    123    476    817    326  

Income from Bank-Owned Life Insurance

  58    60    243    260    269  

Other

  44    17    40    42    196  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

TOTAL OTHER OPERATING INCOME

  724    738    3,174    3,515    3,180  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

OTHER OPERATING EXPENSE

     

Salaries and Employee Benefits

  1,874    1,866    7,341    7,294    6,969  

Occupancy

  319    294    1,119    991    956  

Equipment

  272    222    975    928    873  

FDIC Assessment

  96    93    383    373    393  

PA Shares Tax

  97    96    403    371    342  

Contracted Services

  96    86    344    355    273  

Legal Fees

  118    67    328    266    192  

Advertising

  89    55    300    299    384  

Bankcard Processing Expense

  62    60    253    256    192  

Other Real Estate Owned Expense

  —      20    126    176    54  

Net (Gain) Loss on Sale of Real Estate Owned and Repossessed Assets

  —      —      (211  26    (118

Other

  434    470    1,818    1,696    1,876  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

TOTAL OTHER OPERATING EXPENSE

  3,457    3,329    13,179    13,031    12,386  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income Before Income Taxes

  1,375    1,051    5,416    5,252    5,289  

Income Taxes

  296    188    1,160    1,035    894  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET INCOME

 $1,079   $863   $4,256   $4,217   $4,396  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

EARNINGS PER SHARE

     

Basic

 $0.46   $0.35   $1.73   $1.73   $1.82  

Diluted

  0.46    0.35    1.72    1.70    1.78  

WEIGHTED AVERAGE SHARES OUTSTANDING:

     

Basic

  2,344,477    2,454,827    2,463,571    2,438,281    2,409,494  

Diluted

  2,354,977    2,474,112    2,478,086    2,476,601    2,474,729  
   Years Ended December 31, 
   2016   2015   2014 

INTEREST AND DIVIDEND INCOME

      

Loans, Including Fees:

      

Taxable

  $4,029   $5,416   $4,304 

Tax-exempt

   449    506    499 

Debt Securities:

      

Taxable

   3,685    3,139    2,880 

Tax-exempt

   879    1,207    1,814 

Other Interest and Dividend Income

   161    116    104 
  

 

 

   

 

 

   

 

 

 

TOTAL INTEREST AND DIVIDEND INCOME

   9,203    10,384    9,601 
  

 

 

   

 

 

   

 

 

 

INTEREST EXPENSE

      

Deposits

   840    999    1,111 

Federal Funds Purchased and Repurchase Agreements

   194    217    172 

Federal Home Loan Bank Borrowings

   157    161    166 
  

 

 

   

 

 

   

 

 

 

TOTAL INTEREST EXPENSE

   1,191    1,377    1,449 
  

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME

   8,012    9,007    8,152 

Provision For Loan Losses

   —      30    —   
  

 

 

   

 

 

   

 

 

 

NET INTEREST INCOME AFTER

      

PROVISION FOR LOAN LOSSES

   8,012    8,977    8,152 
  

 

 

   

 

 

   

 

 

 

NONINTEREST INCOME

      

Service Charges and Other Fees

   335    313    374 

Net Gains onAvailable-for-Sale Securities

   1,103    1,154    869 

Other-Than-Temporary Losses on Securities:

      

Total Other-Than-Temporary Losses

   —      —      (49

Portion of Loss Recognized in Other Comprehensive Income (Before Taxes)

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Net Impairment Losses Recognized in Earnings

   —      —      (49

Other Operating Income

   714    646    683 
  

 

 

   

 

 

   

 

 

 

TOTAL NONINTEREST INCOME

   2,152    2,113    1,877 
  

 

 

   

 

 

   

 

 

 

NONINTEREST EXPENSE

      

Salary and Employee Benefits

   4,242    4,185    3,925 

Net Occupancy Expense of Premises

   1,749    1,693    1,689 

Other Operating Expenses

   2,316    2,437    2,446 
  

 

 

   

 

 

   

 

 

 

TOTAL NONINTEREST EXPENSE

   8,307    8,315    8,060 
  

 

 

   

 

 

   

 

 

 

Income Before Income Taxes

   1,857    2,775    1,969 

INCOME TAX EXPENSE

   247    383    65 
  

 

 

   

 

 

   

 

 

 

NET INCOME

  $1,610   $2,392   $1,904 
  

 

 

   

 

 

   

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

   1,718,730    1,718,730    1,718,730 

EARNINGS PER SHARE

  $0.94   $1.39   $1.11 

DIVIDENDS PER COMMON SHARE

  $0.80   $0.80   $0.80 

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

LOGOFIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

Consolidated Statement of Comprehensive IncomeCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

 

   (Unaudited)           
   Three months ended   Years Ended December 31, 
     March      March             
   2013  2014   2013  2012  2011 

Net Income

       

Other Comprehensive Income (Loss):

  $863   $1,079    $4,256   $4,217   $4,397  

Unrealized Loss (Gain) on Available-for-Sale

       

Securities, Net of Tax

   (205  767     (1,993  (158  829  

Reclassification Adjustment, Net of Tax

       (9 
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

Total Comprehensive Income

  $658   $1,846    $2,263   $4,050   $5,226  
  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 
   Years Ended December 31, 
   2016  2015  2014 

Net Income

  $1,610  $2,392  $1,904 

Other Comprehensive Income (Loss):

    

Investment SecuritiesAvailable-for-Sale

    

Unrealized Holding Gains (Losses) Arising During the Period

   (2,969  312   6,516 

Income Tax Effect

   1,117   (117  (2,452

Reclassification of Gains Recognized in Earnings

   (1,103  (1,154  (819

Income Tax Effect

   415   434   308 
  

 

 

  

 

 

  

 

 

 

Total Other Comprehensive Income (Loss)

   (2,540  (525  3,553 
  

 

 

  

 

 

  

 

 

 

Comprehensive Income (Loss)

  $(930 $1,867  $5,457 
  

 

 

  

 

 

  

 

 

 

(1)The net amount of gains on securities of $1,103,000, $1,154,000 and $819,000 for the years ended December 31, 2016, 2015 and 2014, respectively, are reported as Net Gains on Sales of Investments on the Consolidated Statements of Income. The income tax effect of $415,000, $434,000 and $308,000 for the years ended December 31, 2016, 2015 and 2014, respectively, are included in Income Taxes on the Consolidated Statements of Income.

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

LOGOFIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

Consolidated Statement of Changes in Shareholders’ EquityCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2014 (Unaudited) and Years Ended December 31, 2011, 2012 and 2013

(Dollars in thousands)thousands, except per share and share data)

 

                 Accumulated    
                 Other    
   Common   Capital   Retained  Treasury  Comprehensive    
   Stock   Surplus   Earnings  Stock  Income (Loss)  Total 

Balance, December 31, 2010

   1,063     4,957     34,066    (2,103  568    38,551  

Net Income

       4,397      4,397  

Other Comprehensive Income

         829    829  

Exercise of Stock Options

   11     308        319  

Dividends Declared ($ .83 per share)

       (2,004    (2,004
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Balance, December 31, 2011

   1,074     5,265     36,459    (2,103  1,397    42,092  

Net Income

       4,217      4,217  

Other Comprehensive Income

         (168  (168

Exercise of Stock Options

   11     371        382  

Dividends Declared ($ .84 per share)

       (2,053    (2,053
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Balance, December 31, 2012

   1,085     5,636     38,623    (2,103  1,229    44,470  

Net Income

       4,256      4,256  

Other Comprehensive Income

         (1,992  (1,992

Exercise of Stock Options

   10     333        343  

Dividends Declared ($ .84 per share)

       (2,072    (2,072
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Balance, December 31, 2013

   1,095     5,969     40,807    (2,103  (763  45,005  

Net Income

       1,079      1,079  

Other Comprehensive Income

         767    767  

Exercise of Stock Options

   1     55        56  

Dividends Declared ($ .21 per share)

       (491    (491

Treasury Stock Purchased, at Cost

        (2,896   (2,896
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2014

  $1,096    $6,024    $41,395   $(4,999 $4   $43,520  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

  

 

 

 
   Common Stock             Accumulated
Other
Comprehensive
Income (Loss)
    
   Shares   Amount   Treasury
Stock
  Surplus   Retained
Earnings
   Total 

BALANCE, JANUARY 1, 2014

   1,728,730   $8,644   $(228 $6,966   $18,126  $(2,718  30,790 

Net Income

   —      —      —     —      1,904   —     1,904 

Other Comprehensive Income, Net

   —      —      —     —      —     3,553   3,553 

Cash Dividend ($0.80 per share)

   —      —      —     —      (1,375  —     (1,375
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

BALANCE, DECEMBER 31, 2014

   1,728,730    8,644    (228  6,966    18,655   835   34,872 

Net Income

   —      —      —     —      2,392   —     2,392 

Other Comprehensive Loss, Net

   —      —      —     —      —     (525  (525

Cash Dividend ($0.80 per share)

   —      —      —     —      (1,375  —     (1,375
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

BALANCE, DECEMBER 31, 2015

   1,728,730    8,644    (228  6,966    19,672   310   35,364 

Net Income

   —      —      —     —      1,610   —     1,610 

Other Comprehensive Loss, Net

   —      —      —     —      —     (2,540  (2,540

Cash Dividend ($0.80 per share)

   —      —      —     —      (1,375  —     (1,375
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

BALANCE, DECEMBER 31, 2016

   1,728,730   $8,644   $(228 $6,966   $19,907  $(2,230 $33,059 
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

  

 

 

  

 

 

 

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

LOGOFIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

Consolidated Statement of Cash FlowsCONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 

   (Unaudited)          
   Three months
ended
  Years Ended December 31, 
   March  March          
   2014  2013  2013  2012  2011 

OPERATING ACTIVITIES

      

Net Income

  $1,079   $863   $4,256   $4,217   $4,397  

Cash Provided by Operating Activities:

      

Net Amortization on Investments

   377    527    1,851    2,516    2,750  

Depreciation and Amortization

   118    164    629    484    522  

Gain on Sale of Investments

   —      —      —      (14  —    

Provision for Loan Losses

   —      100    100    450    975  

Income from Bank-Owned Life Insurance

   (58  (60  (244  (260  (269

Proceeds From Mortgage Loans Sold

   4,628    3,155    15,927    19,510    12,548  

Originations of Mortgage Loans for Sale

   (4,542  (3,033  (15,451  (18,693  (12,222

Gains on Sale of Loans

   (86  (123  (476  (817  (326

Decrease (Increase) in Taxes Payable

   (77  (104  52    (281  (234

(Increase) Decrease in Accrued Interest Receivable

   (11  2    69    160    339  

Decrease in Accrued Interest Payable

   —      14    (61  (174  (167

Decrease in Prepaid FDIC Assessment

   —      84    653    337    354  

Deferred Income Tax

   (1  203    192    14    45  

(Gain) on Sale of Other Real Estate Owned and Repossessed Assets

   —      —      (211  26    (119

Loss on Dispositions of Premises and Equipment

   —      —      —      —      16  

Impairment on Foreclosed Real Estate

   —      13    126    176    —    

Other, Net

   (730  (890  638    (934  (118
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

   697    915    8,050    6,717    8,491  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INVESTING ACTIVITIES

      

Investment Securities Available for Sale:

      

Proceeds From Principal Repayments and Maturities

   18,013    19,281    58,189    104,184    86,246  

Purchases of Securities

   (4,309  (7,082  (41,517  (130,283  (89,243

Investment Securities Held to Maturity:

      

Proceeds From Principal Repayments and Maturities

   495    —      1,005    1,745    1,490  

Purchases of Securities

   —      —      —      (527  (1,845

Proceeds From Sale of Securities

   —      —      —      514    —    

Net Increase in Loans

   (6,214  600    (32,670  (7,754  (25,970

Purchase of Premises and Equipment

   (131  (41  (237  (1,098  (606

Proceeds From Sale of Other Real Estate Owned and Repossessed Assets

   59    —      1,212    90    303  

Net Change in Restricted Equity Securities

   (130  (16  (380  15    191  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

   7,783    12,742    (14,398  (33,114  (29,434
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

FINANCING ACTIVITIES

      

Net Increase (Decrease) in Deposits

   8,448    (8,477  10,187    20,008    43,404  

Net Decrease in Short-Term Borrowings

   (1,834  (3,909  (7,989  (4,645  (6,171

Principal Payments on Other Borrowed Funds

   (1,000  —      (3,000  (4,461  (4,494

Cash Dividends Paid

   (491  (517  (2,072  (2,052  (2,004

Treasury Stock, purchases at cost

   (2,896  —      —      —      —    

Exercise of Stock Options

   56    273    343    381    319  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

   2,283    (12,630  (2,531  9,231    31,054  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

DECREASE IN CASH AND CASH EQUIVALENTS

   10,763    1,027    (8,879  (17,166  10,111  

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

   16,417    25,296    25,296    42,462    32,351  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

  $27,180   $26,323   $16,417   $25,296   $42,462  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   Years Ended December 31, 
   2016  2015  2014 

OPERATING ACTIVITIES

    

Net Income

  $1,610  $2,392  $1,904 

Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:

    

Provision for Loan Losses

   —     30   —   

Depreciation and Amortization

   625   629   606 

Amortization on Investment Securities, Net

   792   720   477 

Investment Security Gains

   (1,103  (1,154  (869

Other-Than-Temporary Losses on Securities

   —     —     49 

Net Gains on Sales of Mortgage Loans

   —     —     (2

Loss on Disposal of Premises and Equipment

   2   9   6 

Loss (Gain) on Sale of Other Real Estate Owned

   12   —     (42

Increase in Cash Surrender Value of Bank-Owned Life Insurance

   (114  (110  (108

Originations of Mortgage Loans Held for Sale

   —     —     (85

Proceeds from Sales of Mortgage Loans

   —     —     87 

(Increase) Decrease in Interest Receivable

   (85  (13  154 

Decrease in Interest Payable

   (18  (18  (14

(Decrease) Increase in Deferred Income Tax

   (68  (88  (44

Other, Net

   153   (89  595 
  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

   1,806   2,308   2,714 
  

 

 

  

 

 

  

 

 

 

INVESTING ACTIVITIES

    

Net Decrease (Increase) in Loans, Net of Charge-Offs

   1,900   (926  (6,074

Proceeds from Sales of Securities Available for Sale

   44,693   52,099   22,605 

Proceeds from Maturities, Prepayments, and Calls of Securities Available for Sale

   93,346   38,099   23,203 

Purchases of Securities Available for Sale

   (135,425  (97,106  (37,784

Purchases of Premises and Equipment

   (283  (178  (2,025

Proceeds From Sale of Foreclosed Assets

   60   —     250 
  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

   4,291   (8,012  175 
  

 

 

  

 

 

  

 

 

 

FINANCING ACTIVITIES

    

Net Increase (Decrease) in Deposits

   (6,581  10,144   (13,734

Dividends Paid

   (1,375  (1,375  (1,375

(Decrease) Increase in Short-Term Borrowings

   (1,088  2,568   836 

Repayment of Federal Home Loan Bank Borrowings

   (105  (100  (95
  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

   (9,149  11,237   (14,368
  

 

 

  

 

 

  

 

 

 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

   (3,052  5,533   (11,479

CASH AND DUE FROM BANKS AT BEGINNING OF YEAR

   25,929   20,396   31,875 
  

 

 

  

 

 

  

 

 

 

CASH AND DUE FROM BANKS AT END OF YEAR

  $22,877  $25,929  $20,396 
  

 

 

  

 

 

  

 

 

 

SUPPLEMENTAL DISCLOSURES:

    

Cash paid for Interest

   1,209   1,395   1,463 

Cash paid for Income Taxes

   110   526   138 

Loans Transferred To Other Real Estate Owned

   1,105   —     208 

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

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

CB FINANCIAL SERVICES, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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,First West Virginia Bancorp, Inc. and its wholly owned subsidiary, CommunityProgressive Bank, N.A. (the “Bank”). CB Financial Services,First West Virginia Bancorp, Inc. and CommunityProgressive Bank, areN.A. may be collectively referred to as the “Company”.“First West Virginia.” All intercompany transactions and balances have been eliminated in consolidation. The following unaudited interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

Nature of Operations

The Company derives substantially all its income fromFirst West Virginia provides a variety of banking services to individuals and bank-related services which include interest earnings onbusinesses through the branch network. Progressive Bank operates eight full service branches located in Wheeling (3), Wellsburg, Moundsville, New Martinsville, and Buckhannon, West Virginia and Bellaire, Ohio. Primary deposit products consist of checking accounts, savings accounts, and certificates of deposit. Primary lending products consist of commercial commercial mortgage,and residential real estate loans, consumer loans, 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, Washington and Allegheny Counties located in southwestern Pennsylvania.

The Company evaluated subsequent events for recognition or disclosure through February 26, 2014, the date the financial statements were available to be issued.business loans.

Use of Estimates

The preparation of financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with general practice within the banking industry. In preparing the financial statements,requires management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, asdisclosure of contingent assets and liabilities at the date of the consolidated statementfinancial statements, and the reported amounts of condition and revenues and expenses forduring the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significantmaterial change in the near term relate to fair value of investment securities available for sale,the determination of the allowance for loan losses, on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, other-than-temporary impairment evaluations of securities, the valuation of deferred tax assets, other-than-temporary impairments (OTTI), and the valuationfair values of goodwill impairment.

Revenue Recognition

Income on loans and investments is recognized as earned on the accrual method. Service charges and fees on deposit accounts are recognized at the time the customer account is charged. Gains and losses on sales of mortgages are based on the difference between the selling price and the carrying value of the related mortgage sold.

Operating Segments

An operating segment is defined as a component of an enterprise that engages in business activities which generate revenue and incur expense, and the operating results of which are reviewed by management. The Company’s business activities are currently confined to one operating segment which is community banking.financial instruments.

Cash and Due From BanksCash Equivalents

Included in Cash and Due From Banks are required federal reserves of $499,000, $388,000 and $505,000 at March 31, 2014, December 31, 2013 and December 31, 2012, for facilitating the implementation of monetary policy by the Federal Reserve System. The required reserves are computed by applying prescribed ratios to the classes of average deposit balances. These are held in the formcash equivalents consist of cash on hand and/or balances maintained directlyand amounts due from banks and federal funds sold with maturities of less than 90 days. At December 31, 2016, First West Virginia’s cash accounts exceeded federally insured limits by approximately $1,570,000. Additionally, First West Virginia had approximately $16,236,000 on deposit with the Federal Reserve Bank.

Bank and the Federal Home Loan Bank of Pittsburgh as of December 31, 2016.

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The subsidiary bank is required to maintain an average reserve balance with the Federal Reserve Bank or in cash on hand. The average required reserve balances for the years ended December 31, 2016 and 2015 were $2,313,000 and $2,358,000, respectively.

Investment Securities

Investment securities are classified at the time of purchase, based on management’s intentionsintention and ability, as securities available for sale or held to maturity. First West Virginia did not have any securities classified as held to maturity at December 31, 2016 or 2015. Certain debt and equity securities available-for-sale. Debt securities acquired with the intent and the abilityhave been classified as available for sale to hold to maturity are stated at cost adjusted for amortizationserve principally as a source of premium and accretion of discount which are computed using a level yield method and recognized as adjustments to interest income.liquidity. Unrealized holding gains and losses foravailable-for-sale securities are reported as a separate component of stockholders’ equity, net of tax, until realized. Realized securities gains and losses if any, are computed using the specific identification method. Declines in the fair value of individual securities below amortized cost that are other than temporary will result in write-downs of the individual securities to their fair value. Any related write-downs will be included in earnings as realized losses. Interest and dividends on investment securities are recognized as income when earned.

Common stock

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Securities are periodically reviewed for other-than-temporary impairment based upon a number of factors, including, but not limited to, the length of time and extent to which the market value has been less than cost, the financial condition of the underlying issuer, the ability of the issuer to meet contractual obligations, the likelihood of the security’s ability to recover any decline in its market value, and management’s intent and ability to hold the security for a period of time sufficient to allow for a recovery in market value. Among the factors that are considered in determining management’s intent and ability is a review of First West Virginia’s capital adequacy, interest rate risk position and liquidity. The assessment of a security’s ability to recover any decline in market value, the ability of the issuer to meet contractual obligations and management’s intent and ability requires considerable judgment. Once a decline in value is determined to be other-than-temporary, if the investor does not intend to sell the security, and it ismore-likely-than-not that it will not be required to sell the security before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as thenon-credit portion) is recognized in other comprehensive income (loss), net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. At December 31, 2016 and 2015, there were no investment securities identified by management to be other-than-temporarily impaired. If investments decline in fair value due to adverse changes in the financial markets, charges to income could occur in future periods.

Federal Reserve and Federal Home Loan Bank (“FHLB”)stock are required investments for institutions that are members of the Federal Reserve and Atlantic Central Bankers’Federal Home Loan Bank (“ACBB”) represents ownershipsystems. The required investment in organizations which are wholly owned by other financial institutions. These restricted equity securities are accounted forthe common stock is based on industry guidance in Accounting Standards Codification (“ASC”) Sub-Topic 325-20, which requires the investment to bea predetermined formula, carried at cost and evaluated for impairmentimpairment.

Loans and Loans Held for Sale

Loans are generally reported at the principal balance outstanding, net of unearned income. Interest income on loans is accrued based on the ultimate recoverabilityprincipal outstanding. It is First West Virginia’s policy to discontinue the accrual of interest when either the principal or interest is past due 90 days or more, unless the loan is both well secured and in the process of collection. It is First West Virginia’s policy not to recognize interest income on specific impaired loans unless the likelihood of future loss is remote. Interest payments received on such loans are applied as a reduction of the par value. Included in Accrued Interest and Other Assets are FHLB stock of $1,859,900, $1,729,600 and $1,349,700 at March 31, 2014, December 31, 2013 and 2012, respectively, and ACBB stock of $40,000 at March 31, 2014 , December 31, 2013 and 2012.

The Company periodically evaluates its FHLB investment for possible impairment based on, among other things, the capital adequacy of the FHLB and its overall financial condition. The Company believes its holdings in the stock are ultimately recoverable at par value at December 31, 2013 and, therefore, determined that FHLB stock was not impaired. In addition, the Company has ample liquidity and does not require redemption of its FHLB stock in the foreseeable future.

Loans Receivable and Allowance for Loan Losses

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at theloan principal amount outstanding net of deferred loan fees and the allowance for loan losses. The Company’s loan portfolio is segmented to enable management to monitor risk and performance. The real estate loans are further segregated into three classes. Residential mortgages include those secured by residential properties, while commercial mortgages consist of loans to commercial borrowers secured by commercial or residential real estate. Construction loans typically consist of loans to build commercial buildings and acquire and develop residential real estate. The commercial, industrial and agricultural segment consists of loans to finance the activities of commercial or agricultural customers. The consumer segment consists primarily of indirect auto loans, home equity loans, installment loans and overdraft lines of credit.

Residential mortgage and construction loans are typically longer-term loans and, therefore, generally, present greater interest rate risk than the consumer and commercial loans. Under certain economic conditions, housing values may decline, which may increase the risk that the collateral values are not sufficient. Commercial real estate loans generally present a higher level of risk than loans secured by residences. This greater risk is due to several factors, including the concentration of principal in a limited number of loans and borrowers, the effect of general economic conditions on income producing properties and the increased difficulty in evaluating and monitoring these types of loans. Furthermore, the repayment of commercial real estate loans is typically dependent upon the successful operation of the related real estate project. If the cash flow from the project is reduced (for example, if leases are not obtained or renewed, a bankruptcy court modifies a lease term, or a major tenant is unable to fulfill its lease obligations), the borrower’s ability to repay thebalance. A nonaccrual loan may be impaired. Commercial, industrial and agricultural loans are generally secured by business assets, inventories, accounts receivable, etc, which present collateral risk. Consumer loans generally have higher interest rates and shorter terms than residential mortgage loans; however, they have additional credit risk due to the type of collateral securing the loan.

Accrual of interest on loans is generally discontinued when it is determined that a reasonable doubt exists as to the collectibility of principal, interest, or both. Payments received on nonaccrual loans are recorded as income or applied against principal according to management’s judgment as to the collectibility of such principal. Loans are returned to accrual status when all thenone of its principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The Company uses an eight point internal risk rating system to monitor the credit qualitydue and there has been a sustained period of the overall loan portfolio. The first four categoriesrepayment performance. Loans are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories used by

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are below average quality, resulting in an undue credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Those loans that represent a specific allocation of the allowance for loan losses are placed in the Doubtful category. Any loan that has been charged off is placed in the Loss category.

In the normal course of business, the Company modifies loan terms for various reasons. These reasons may include as a retention strategy to compete in the current interest rate environment, and to re-amortize or extend a loan term to better match the loan’s payment stream with the borrower’s cash flows. A modified loan is considered to be a troubled debt restructuring (TDR) when the Company has determined that the borrower is experiencing financial difficulties. The Company evaluates the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. To make this determination a credit review is performed to assess the ability of the borrower to meet their obligations.

When the Company restructures a loan to a troubled borrower, the loan terms (i.e. interest rate, payment, amortization period and/or maturity date) are modified in such a way to enable the borrower to cover the modified debt service payments based on current financials and cash flow adequacy. If the hardship is thought to be temporary, then modified terms are offered only for that time period. Where possible, the Company obtains additional collateral and/or secondary payment sources at the time of the restructure. To date, the Company has not forgiven any principal as a restructuring concession. The Company will not offer modified terms if it believe that modifying the loan terms will only delay an inevitable permanent default.

All loans designated as TDRs are considered impaired loans and may be in either accruing or non-accruing status. The Company’s policy for recognizing interest income on TDRs does not differ from its overall policy for interest recognition. TDRs are considered to be in payment default if, subsequent to modification, the loans are transferred to non-accrual status. Loans may be removed from TDR status in the calendar year following the modification if the interest rate at the time of modification was consistent with the interest rate for a loan with comparable credit risk and the loan has performed according to to its modified terms for at least six months.

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The past due status of all classes of loans receivable is determined basedwhen contractually required principal and interest payments have not been made on contractualthe due dates for loan payments.

dates. Loan origination and commitment fees as well asand certain direct loan origination costs are being deferred and the net amount amortized over the contractual life of the related loans or commitments as an adjustment toof the related loan’s yield. These amountsyield using the level yield method. Loans held for sale are being amortized overcarried at the contractual liveslower of cost or estimated fair value in the aggregate. First West Virginia had no loans held for sale as of December 31, 2016 and 2015.

Consumer loans are fully charged off or charged down to net realizable value when deemed uncollectible due to bankruptcy or other factors or no later than a defined number of days past due. Consumer loans not secured by real estate are charged off or charged down to net realizable value at 120 days past due forclosed-end loans and 180 days past due foropen-end loans. Residential real estate loans are charged down to net realizable value at 120 days past due forclosed-end loans and 180 days past due foropen-end loans. Commercial loans are fully charged off or charged down to net realizable value when management judges the loan to be uncollectible.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

First West Virginia has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which Progressive Bank may sell conformingone-to-four family residential mortgage loans to the FHLB. The current agreement dated December 28, 2015 provides for a maximum commitment of $5,000,000. This commitment expires on December 28, 2017. Loans sold to the FHLB are sold with limited recourse or credit risk based upon utilization of the related loans.original commitment. Progressive Bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold and outstanding to the FHLB were $6,206,000 and $7,520,000 as of December 31, 2016 and 2015, respectively. These loans were also subject to recourse obligation or credit risk in the amount of $226,000 and $311,000 at December 31, 2016 and 2015, respectively. No liability has been recorded for the recourse obligation as the likelihood of incurring the liability is considered remote. The amount of income recognized as of a result of this agreement was $21,000 and $24,000 for the years ended December 31, 2016 and 2015, respectively.

Allowance for Loan Losses

The allowance for loan losses represents the amount which management estimates is maintained at a level considered adequate to provide for probable incurred losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses that can be reasonably anticipated. Management performs a quarterlyis charged to operations. The provision is based on management’s evaluation of the adequacy of the allowance based onfor loan losses inwhich encompasses the current loanoverall risk characteristics of the various portfolio which includes an assessmentsegments, past experience with losses, the impact of economic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to significant changes in the naturenear term.

Management tracks and volumeassigns a historical loss percentage for each loan rating category within each loan type. A rolling three-year historical loss ratio is used, calculated on a quarterly basis.

Management currently utilizes nine qualitative factors that are adjusted based on changes in the lending environment and economic conditions. The qualitative factors include the following: levels of and trends in delinquencies, nonaccruals, and charge-offs; trends within the loan portfolio; changes in lending policies and procedures; experience of lending personnel and management oversight; national and local economic trends; concentrations of credit; external factors such as legal and regulatory requirements; changes in the quality of loan review and Board oversight; and changes in the value of underlying collateral. The number of qualitative factors can change. Factors can be added for new risks or taken away if the risk no longer applies. Each loan type will have its own risk profile and management will evaluate and adjust each qualitative factor for each loan type quarterly, if necessary. For example, if one area of the loan portfolio is experiencing sharp increases in growth, it is likely the qualitative factor for trends in the loan loss experience, volume and severityportfolio would be increased for that loan type. As levels of past due, classifieddelinquencies and nonaccrual loans as well asdecline for a loan type, it is likely that factor would be reduced.

In terms of First West Virginia’s loan portfolio, the commercial and industrial loans and commercial real estate loans are deemed to have more risk than the consumer real estate loans and other loan modifications, quality of the Company’s loan review system, and the degree of oversight by the Company’s Board of Directors, existence and effect of any concentrations of credit and changesconsumer loans in the levelportfolio. The commercial loans not secured by real estate are highly dependent on financial condition and are more dependent on economic conditions. The commercial loans secured by real estate are also dependent on economic conditions but generally have stronger forms of such concentrations, effectcollateral. The commercial loans and commercial real estate loans have historically been responsible for the majority of externalFirst West Virginia’s delinquencies, nonaccrual loans, and charge-offs so both of these categories carry higher qualitative factors such as competition and legal and regulatory requirementsthan consumer real estate loans and other relevant factors. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making evaluations. Additionsconsumer loans.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Mortgage loans secured byone-to-four family properties and all consumer loans are made to the allowance through periodic provisions charged to incomelarge groups of smaller-balance homogeneous loans and recovery of principal and interest on loans previously charged-off. Losses of principal are charged directly to the allowance when a loss actually occursmeasured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or when a determination is made that the specific loss is probable. This evaluation is inherently subjective as it requires estimates thatless, generally are susceptible to significant revisions as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that arenot classified as impaired. A loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due for principal and interest according to the original contractual terms of the loan agreement. Management determines the significance of payment delays and payment shortfalls on a case-

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

by-casecase-by-case basis taking into consideration all circumstances concerning the loan, the credit worthiness and payment history of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment recorddelay, and the amount of the shortfall in relation to the principal and interest owed. Impairment

Impaired loans are loans for which it is probable First West Virginia will not be able to collect all amounts due according to the contractual terms of the loan agreement. First West Virginia individually evaluates such loans for impairment and does not aggregate loans by major risk classifications. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap.

First West Virginia may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability while not classifying the loan as impaired, provided the loan is not a commercial or commercial real estate classification. Payments received on nonaccrual loans are applied as a reduction of the loan principal balance. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or in the case of collateral dependent loans, the difference between the fair value of the collateral and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the present value of expected future cash flows discounted at a loan’s effective interest rate, or as a practical expedient, the observable market price, or, if the loan is collateral dependent, the fair value of the underlying collateral. Whencollateral less estimated liquidation expenses.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the measurementsize of an impairedthe loan, is less thanloan quality ratings, value of collateral, repayment ability of borrowers, and historical experience factors. The historical experience factors utilized for individual loan reviews are based upon past loss experience, known trends in losses and delinquencies, the recorded investmentgrowth of loans in particular markets and industries, and known changes in economic conditions in the loan, the impairment is recordedparticular lending markets. Allowances for homogeneous loans (such as residential mortgage loans, personal loans, etc.) are evaluated based upon historical loss experience, trends in a specific valuation allowance through a charge to the provision for loan losses. Any reserve for unfundedlosses and delinquencies, growth of loans in particular markets, and known changes in economic conditions in each lending commitments represents management’s estimate of losses inherent in its’ unfunded loan commitments and is recorded inmarket. There can be no assurance the allowance for loan losses on the consolidated Statement of Condition.

This specific valuation allowance is periodically adjusted for significant changes in the amount or timing of expected future cash flows, observable market price or fair value of the collateral. The specific valuation allowance, or allowance for impaired loans, is part of the total allowance for loan losses. Cash payments received on impaired loans are recorded as a direct reduction of the recorded investment in the loan. When the recorded investment has been fully collected, receipts are recorded as recoverieswill be adequate to cover all losses, but management believes the allowance for loan losses untilin the previously charged-off principal is fully recovered. Subsequent amounts collected are recognized as interest income. Impairedamount of $1,797,000 at December 31, 2016, was adequate to provide for probable losses from existing loans are not returned to accrual status until all amounts due, both principal and interest, are current and a sustained payment history has been demonstrated. The general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate and consumer loans. An unallocated component is maintained to cover uncertainties that could affect the Company’s estimate of probable losses.

Generally, management considers all nonaccrual loans and certain renegotiated debt, when it exists, for impairment. The maximum period without payment that typically can occur before a loan is considered for impairment is ninety days. The past due status of loans receivable is determined based on contractual due datesinformation currently available. While management uses available information to provide for loan payments.

The Company grants commercial, residential, and other consumer loans to customers throughout Greene, Washington, and Allegheny Counties in Pennsylvania. Althoughlosses, the Company has a diversified loan portfolio at March 31, 2014, December 31, 2013 and 2012,ultimate collectability of a substantial portion of its debtors’ abilitythe loan portfolio, and the need for future additions to honor their contracts is determined by the allowance, will be based on changes in economic environment of these counties.conditions and other relevant factors. As such, an adverse change in economic activity could reduce cash flows for both commercial and individual borrowers, which would likely cause First West Virginia to experience increases in problem assets, delinquencies and losses on loans.

PremisesInvestment Securities

Investment securities are classified at the time of purchase, based on management’s intention and Equipmentability, as securities available for sale or held to maturity. First West Virginia did not have any securities classified as held to maturity at December 31, 2016 or 2015. Certain debt and equity securities have been classified as available for sale to serve principally as a source of liquidity. Unrealized holding gains and losses foravailable-for-sale securities are reported as a separate component of stockholders’ equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

Premises

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Securities are periodically reviewed for other-than-temporary impairment based upon a number of factors, including, but not limited to, the length of time and equipmentextent to which the market value has been less than cost, the financial condition of the underlying issuer, the ability of the issuer to meet contractual obligations, the likelihood of the security’s ability to recover any decline in its market value, and management’s intent and ability to hold the security for a period of time sufficient to allow for a recovery in market value. Among the factors that are statedconsidered in determining management’s intent and ability is a review of First West Virginia’s capital adequacy, interest rate risk position and liquidity. The assessment of a security’s ability to recover any decline in market value, the ability of the issuer to meet contractual obligations and management’s intent and ability requires considerable judgment. Once a decline in value is determined to be other-than-temporary, if the investor does not intend to sell the security, and it ismore-likely-than-not that it will not be required to sell the security before recovery of the security’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as thenon-credit portion) is recognized in other comprehensive income (loss), net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. At December 31, 2016 and 2015, there were no investment securities identified by management to be other-than-temporarily impaired. If investments decline in fair value due to adverse changes in the financial markets, charges to income could occur in future periods.

Federal Reserve and Federal Home Loan Bank stock are required investments for institutions that are members of the Federal Reserve and Federal Home Loan Bank systems. The required investment in the common stock is based on a predetermined formula, carried at cost less accumulated depreciation. Depreciationand evaluated for impairment.

Loans and Loans Held for Sale

Loans are generally reported at the principal balance outstanding, net of unearned income. Interest income on loans is principally computedaccrued based on the straight-line methodprincipal outstanding. It is First West Virginia’s policy to discontinue the accrual of interest when either the principal or interest is past due 90 days or more, unless the loan is both well secured and in the process of collection. It is First West Virginia’s policy not to recognize interest income on specific impaired loans unless the likelihood of future loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. A nonaccrual loan may be returned to accrual status when none of its principal and interest payments are due and there has been a sustained period of repayment performance. Loans are considered past due when contractually required principal and interest payments have not been made on the due dates. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the estimated useful livescontractual life of the related assets, which range from three to seven yearsloans or commitments as an adjustment of the related loan’s yield using the level yield method. Loans held for furniture, fixtures, and equipment and 27.5 to 40 years for building premises. Leasehold improvementssale are amortized over the shorter of their estimated useful lives or their respective lease terms, which range from seven to fifteen years. Expenditures for maintenance and repairs are charged to expense when incurred while costs of major additions and improvements are capitalized.

Bank-Owned Life Insurance

The Company is the owner and beneficiary of bank owned life insurance (“BOLI”) policies on certain employees. The earnings from the BOLI policies are recognized as a component of other income. The BOLI policies are an asset that can be liquidated, if necessary, with tax costs associated. However, the Company intends to hold these policies and, accordingly, the Company has not provided for deferred income taxes on the earnings from the increase in cash surrender value.

Real Estate Owned

Real estate owned acquired in settlement of foreclosed loans is carried as a component of other assets at the lower of cost or estimated fair value minus estimated costin the aggregate. First West Virginia had no loans held for sale as of December 31, 2016 and 2015.

Consumer loans are fully charged off or charged down to sell. Priornet realizable value when deemed uncollectible due to foreclosure,bankruptcy or other factors or no later than a defined number of days past due. Consumer loans not secured by real estate are charged off or charged down to net realizable value at 120 days past due forclosed-end loans and 180 days past due foropen-end loans. Residential real estate loans are charged down to net realizable value at 120 days past due forclosed-end loans and 180 days past due foropen-end loans. Commercial loans are fully charged off or charged down to net realizable value when management judges the estimated collectibleloan to be uncollectible.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

First West Virginia has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which Progressive Bank may sell conformingone-to-four family residential mortgage loans to the FHLB. The current agreement dated December 28, 2015 provides for a maximum commitment of $5,000,000. This commitment expires on December 28, 2017. Loans sold to the FHLB are sold with limited recourse or credit risk based upon utilization of the original commitment. Progressive Bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold and outstanding to the FHLB were $6,206,000 and $7,520,000 as of December 31, 2016 and 2015, respectively. These loans were also subject to recourse obligation or credit risk in the amount of $226,000 and $311,000 at December 31, 2016 and 2015, respectively. No liability has been recorded for the recourse obligation as the likelihood of incurring the liability is considered remote. The amount of income recognized as of a result of this agreement was $21,000 and $24,000 for the years ended December 31, 2016 and 2015, respectively.

Allowance for Loan Losses

The allowance for loan losses represents the amount which management estimates is adequate to provide for probable incurred losses inherent in its loan portfolio. The allowance method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is established through a provision for loan losses that is charged to operations. The provision is based on management’s evaluation of the adequacy of the allowance for loan losses which encompasses the overall risk characteristics of the various portfolio segments, past experience with losses, the impact of economic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to significant changes in the near term.

Management tracks and assigns a historical loss percentage for each loan rating category within each loan type. A rolling three-year historical loss ratio is used, calculated on a quarterly basis.

Management currently utilizes nine qualitative factors that are adjusted based on changes in the lending environment and economic conditions. The qualitative factors include the following: levels of and trends in delinquencies, nonaccruals, and charge-offs; trends within the loan portfolio; changes in lending policies and procedures; experience of lending personnel and management oversight; national and local economic trends; concentrations of credit; external factors such as legal and regulatory requirements; changes in the quality of loan review and Board oversight; and changes in the value of underlying collateral. The number of qualitative factors can change. Factors can be added for new risks or taken away if the risk no longer applies. Each loan type will have its own risk profile and management will evaluate and adjust each qualitative factor for each loan type quarterly, if necessary. For example, if one area of the loan portfolio is experiencing sharp increases in growth, it is likely the qualitative factor for trends in the loan portfolio would be increased for that loan type. As levels of delinquencies and nonaccrual loans decline for a loan type, it is likely that factor would be reduced.

In terms of First West Virginia’s loan portfolio, the commercial and industrial loans and commercial real estate loans are deemed to have more risk than the consumer real estate loans and other consumer loans in the portfolio. The commercial loans not secured by real estate are highly dependent on financial condition and are more dependent on economic conditions. The commercial loans secured by real estate are also dependent on economic conditions but generally have stronger forms of collateral. The commercial loans and commercial real estate loans have historically been responsible for the majority of First West Virginia’s delinquencies, nonaccrual loans, and charge-offs so both of these categories carry higher qualitative factors than consumer real estate loans and other consumer loans.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Mortgage loans secured byone-to-four family properties and all consumer loans are large groups of smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on acase-by-case basis taking into consideration all circumstances concerning the loan, the credit worthiness and payment history of the borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and interest owed.

Impaired loans are loans for which it is probable First West Virginia will not be able to collect all amounts due according to the contractual terms of the loan agreement. First West Virginia individually evaluates such loans for impairment and does not aggregate loans by major risk classifications. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap.

First West Virginia may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability while not classifying the loan as impaired, provided the loan is not a commercial or commercial real estate classification. Payments received on nonaccrual loans are applied as a reduction of the loan principal balance. Factors considered by management in determining impairment include payment status and collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using the original interest rate, and its recorded value, or in the case of collateral dependent loans, the difference between the fair value of the collateral is evaluated to determine if a partial charge-offand the recorded amount of the loan balanceloans. When foreclosure is necessary. After transfer to real estate owned, any subsequent write-downs are charged against operating expenses. Direct costs incurred in the foreclosure process and subsequent holding costs incurred on such properties are recorded as expenses of current operations.

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance, FASB ASC 740 Topic, “Income Taxes”. The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liabilityprobable, impairment is based on the tax effects of the differences between book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination, the term more likely than not means a likelihood of more than fifty percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion of all of a deferred tax asset will not be realized.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

Core Deposit Intangible

Core Deposit Intangible was developed by specific core deposit life studies, and is amortized using the straight-line method over periods ranging from eight to ten years. The recoverability of the carrying value of intangible assets is evaluated on an ongoing basis, and permanent declines in value, if any are charges to expense.

Goodwill

The Company accounts for goodwill in accordance with FASB ASC Sub-Topic 350-20, “Intangibles—Goodwill and Other”. This statement, among other things, requires a two-step process for testing the impairment of goodwill for each reporting unit on at least an annual basis. The Company performs an annual impairment analysis of goodwill. Based on the fair value of each reporting unit that has goodwill,the collateral less estimated usingliquidation expenses.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the expected presentsize of the loan, loan quality ratings, value of future cash flows, no impairmentcollateral, repayment ability of goodwill was recognizedborrowers, and historical experience factors. The historical experience factors utilized for individual loan reviews are based upon past loss experience, known trends in losses and delinquencies, the growth of loans in particular markets and industries, and known changes in economic conditions in the first quarterparticular lending markets. Allowances for homogeneous loans (such as residential mortgage loans, personal loans, etc.) are evaluated based upon historical loss experience, trends in losses and delinquencies, growth of 2014 or during 2013 and 2012.

Mortgage Service Rights (“MSRs”)

The Company has agreements for the express purpose of selling loans in particular markets, and known changes in economic conditions in each lending market. There can be no assurance the secondary market. The Company maintains all servicing rightsallowance for these loans. Originated MSRs are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to other assets on the consolidated Statement of Condition. Servicing fee income is recorded for fees earned for servicing loans. The fees are based on contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. The carrying and fair values of the MSRs and related amortization is not significant for financial reporting purposes.

Treasury Stock

The purchase of the Company’s common stock is recorded at cost. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on the average cost basis, with any excess proceeds being credited to Capital Surplus.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other comprehensive income. Other comprehensive income (loss) is comprised of unrealized holding gains on the available-for-sale securities portfolio and urealized losses (losses) related to factors other than credit on debt securities.

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Earnings Per Share

The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated utilizing the reported net income as the numerator and weighted average shares outstanding as the denominator. The computation of diluted earnings per share differs in that the dilutive effects of any options, warrants, and convertible securities are adjusted for in the denominator. Treasury shares are not deemed outstanding for earnings per share calculations.

Stock Options

The Company maintains a stock option plan for key officers, employees, and nonemployee directors.

Stock compensation accounting guidance, FASB ASC Topic 718, “Compensation—Stock Compensation,” requires that the compensation cost relating to share based payment transactions be recognized in financial statements. The cost will be measured based onadequate to cover all losses, but management believes the grant date fair value of the equity or liability instruments issued. The stock compensation accounting guidance covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

The stock compensation accounting guidance requires that compensation costallowance for all stock awards be calculated and recognized over the employees’ service period, generally defined as the vesting period. For awards with graded-vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. A Black-Sholes model is used to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of the grant is used for restricted stock awards.

Cash Flow Information

The Company has defined cash equivalents as those amounts due from depository institutions, interest-bearing deposits with other banks with maturities of less than 90 days, and federal funds sold. Cash payments for interest on deposits, short-term borrowings, and other borrowed fundsloan losses in 2014, 2013 and 2012 were $470,980, $2,297,918 and $3,266,686, respectively. No cash payments for income taxes were made during the first quarter of 2014. Cash payments for income taxes made in 2013 and 2012 were $525,000 and $1,150,000, respectively. No Transfers from loans to real estate owned were made in the first quarter of 2014. Tranfers from loans to real estate owned and repossessed assets in 2013 and 2012 were $1,031,423 and $544,278, respectively.

Advertising Costs

Advertising costs are expensed as incurred.

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 December 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-12, “Definition of a Public Business Entity—an Addition to the Master Glossary.” The primary purposes of this update are to (1) amend the Master Glossary of theFASB Accounting Standards Codification®to include one definition of public business entity for future use in U.S. GAAP. The amendment does not affect existing requirements however, this definition will be used by the FASB, the Private Company Council (PCC), and the Emerging Issues Task Force (EITF) in specifying the scope of future financial accounting and reporting guidance; and (2) Identify the types of business entities that are excluded from the scope of thePrivate Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for PrivateCompanies (Guide). Other types of entities that are excluded from the scope of the Guide include not-for-profit entities within the scope of Topic 958 and employee benefit plans within the scope of Topics 960 through 965 on plan accounting. Business entities that are within the scope of the Guide are those for which the FASB and the PCC will consider potential financial accounting and reporting alternatives within U.S. GAAP.

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In January 2014, the FASB issued ASU 2014-04, “Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40)—Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure.” The amendments in this update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. For entities other than public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning after December 15, 2015 and are not expected to have a significant impact on the Company’s financial statements.

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income,” which will require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income, either on the face of the statement where net income is presented or in the notes to the financial statements. For entities other than public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2014 and are not expected to have a significant impact on the Company’s financial statements.

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 will be 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.

   (Unaudited)       
   March 31,  March 31,  December 31,  December 31, 
   2013  2014  2013  2012 

Weighted-Average Common Shares Outstanding

   2,613,711    2,633,405    2,622,455    2,597,165  

Average Treasury Stock Shares

   (158,884  (288,928  (158,884  (158,884
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted-Average Common Shares and Common Stock Equivalents Used to Calculate Basic Earnings Per Share

   2,454,827    2,344,477    2,463,571    2,438,281  

Additional Common Stock Equivalents (Stock Options) Used to Calculate Diluted Earnings Per Share

   15,285    10,500    14,515    38,320  
  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted-Average Common Shares and Common Stock Equivalents Used to Calculate Diluted Earnings Per Share

   2,470,112    2,354,977    2,478,086    2,476,601  
  

 

 

  

 

 

  

 

 

  

 

 

 

NOTE 3—INVESTMENT SECURITIES

The amortized cost and fair value of investment securities available-for-sale as of March 31, 2014, December 31, 2013 and 2012: are as follows:

   (Dollars in thousands) 
   2014 (Unaudited) 
       Gross   Gross    
   Amortized   Unrealized   Unrealized  Fair 
   Cost   Gains   Losses  Value 

U.S. Government Agencies

  $64,595    $71    $(566 $64,100  

Equity Securities—Mutual Funds

   500     5     —      505  

Equity Securities—Other

   519     63     (3  579  

Obligations of States and Political Subdivisions

   49,606     769     (371  50,004  

Mortgage-Backed Securities—Government Sponsored Enterprises

   5,665     38     —      5,703  
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $120,885    $946    $(940)  $120,891  
  

 

 

   

 

 

   

 

 

  

 

 

 
   2013 
       Gross   Gross    
   Amortized   Unrealized   Unrealized  Fair 
   Cost   Gains   Losses  Value 

U.S. Government Agencies

  $77,559    $8    $(1,273 $76,294  

Equity Securities—Mutual Funds

   500     35     —      535  

Equity Securities—Other

   510     47     (4  553  

Obligations of States and Political Subdivisions

   50,481     659     (637  50,503  

Mortgage-Backed Securities—Government Sponsored Enterprises

   5,916     41     (32  5,925  
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $134,966    $790    $(1,946)  $133,810  
  

 

 

   

 

 

   

 

 

  

 

 

 
   2012 
       Gross   Gross    
   Amortized   Unrealized   Unrealized  Fair 
   Cost   Gains   Losses  Value 

U.S. Government Agencies

  $106,034    $226    $(82 $106,178  

Equity Securities—Mutual Funds

   500     35     —      535  

Obligations of States and Political Subdivisions

   45,592     1,698     (91  47,199  

Mortgage-Backed Securities—Government Sponsored Enterprises

   1,342     77     —      1,419  
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

  $153,468    $2,036    $(173)  $155,331  
  

 

 

   

 

 

   

 

 

  

 

 

 

The amortized cost and fair value of investment securities held to maturity at March 31, 2014, December 31, 2013 and 2012 are as follows:

   (Dollars in thousands) 
   2014 (Unaudited) 
       Gross   Gross     
   Amortized   Unrealized   Unrealized   Fair 
   Cost   Gains   Losses   Value 

Obligations of States and Political Subdivisions

  $511    $—      $—      $511  
  

 

 

   

 

 

   

 

 

   

 

 

 

   2013 
       Gross   Gross    
   Amortized   Unrealized   Unrealized  Fair 
   Cost   Gains   Losses  Value 

Obligations of States and Political Subdivisions

  $1,006    $3    $—     $1,009  
  

 

 

   

 

 

   

 

 

  

 

 

 
   2012 
       Gross   Gross    
   Amortized   Unrealized   Unrealized  Fair 
   Cost   Gains   Losses  Value 

Obligations of States and Political Subdivisions

  $2,032    $40    $(4 $2,068  
  

 

 

   

 

 

   

 

 

  

 

 

 

NOTE 3—INVESTMENT SECURITIES (continued)

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 March 31, 2014, December 31, 2013 and 2012:

  (Dollars in thousands) 
  2014 (Unaudited) 
  Less than Twelve Months  Twelve Months or Greater  Total 
     Gross     Gross     Gross 
  Fair  Unrealized  Fair      Unrealized      Fair  Unrealized 
        Value              Losses            Value      Losses  Value  Losses 

U.S. Government Agencies

 $40,465   $(388 $7,140   $(178 $47,605   $(566

Equity Securities—Other

  138    (3  —      —      138    (3

Obligations of States and Political Subdivisions

  13,500    (190  —      —      13,500    (190

Mortgage-Backed Securities—Government-Sponsored Enterprises

  2,449    —      8,133    (181  10,582    (181
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $56,552   $(581 $15,273   $(359 $71,825   $(940
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  2013 
  Less than Twelve Months  Twelve Months or Greater  Total 
     Gross     Gross     Gross 
  Fair  Unrealized  Fair      Unrealized      Fair  Unrealized 
  Value  Losses      Value      Losses  Value  Losses 

U.S. Government Agencies

 $52,407   $(1,043 $7,834   $(230 $60,241   $(1,273

Equity Securities—Other

  85    (4  —      —      85    (4

Obligations of States and Political Subdivisions

  16,489    (409  8,052    (228  24,541    (637

Mortgage-Backed Securities—Government-Sponsored Enterprises

  5,028    (31  —      —      5,028    (31
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $74,009   $(1,487 $15,886   $(458 $89,895   $(1,945,112
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  2012 
  Less than Twelve Months  Twelve Months or Greater  Total 
     Gross     Gross     Gross 
  Fair  Unrealized  Fair  Unrealized  Fair  Unrealized 
      Value      Losses  Value  Losses  Value  Losses 

U.S. Government Agencies

  33,505    (82  —      —      33,505    (82

Obligations of States and Political Subdivisions

  10,478    (92  501    (3  10,979    (95
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  43,983    (174  501    (3  44,484    (177
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

For debt securities, the Company does not believe any individual unrealized loss as of March 31, 2014 represents an other-than-temporary impairment. The Company performs a review of the entire securities portfolio on a quarterly basis to identify securities that may indicate an other-than-temporary impairment. The Company’s management considers the length of time and the extent to which the fair value has been less than cost and the financial condition of the issuer. There are 60, 73 and 32 positions that are temporarily impaired at March 31, 2014, December 31, 2013 and 2012, respectively, relating 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.

Investment securities available-for-sale with a carrying value of $65,967,787, $81,785,465 and $119,218,973 at March 31, 2014, December 31, 2013 and 2012 respectively, are pledged to secure public deposits, short-term borrowings and for other purposes as required or permitted by law. No held-to maturity investment securities were pledged to secure public deposits, short-term borrowings and for other purposes at March 31, 2014 or December 31, 2013. Investment securities held to maturity with a carrying value of $2,032,396 and a market value of $2,068,361$1,797,000 at December 31, 2012, were pledged2016, was adequate to secure public deposits, short-term borrowings andprovide for other purposes as required or permitted by law.

NOTE 3—INVESTMENT SECURITIES (continued)

The scheduled maturitiesprobable losses from existing loans based on information currently available. While management uses available information to provide for loan losses, the ultimate collectability of investment securities available-for-sale and held to maturity at March 31, 2014, and December 31, 2013 are summarized as follows:

   (Dollars in Thousands) 
   2014 (Unaudited) 
   Available-for-Sale   Held to Maturity 
   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value 

Due in One Year or Less

  $4,897    $4,952    $—      $—    

Due after One Year through Five Years

   21,774     21,669     511     511  

Due after Five Years through Ten Years

   62,647     62,317     —       —    

Due after Ten Years

   31,567     31,953     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 120,885    $120,891    $511    $511  
  

 

 

   

 

 

   

 

 

   

 

 

 
   2013 
   Available -for-Sale   Held to Maturity 
   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value 

Due in One Year or Less

  $3,125    $3,198    $—      $—    

Due after One Year through Five Years

   29,219     29,057     513     514  

Due after Five Years through Ten Years

   66,810     65,783     —       —    

Due after Ten Years

   35,812     35,772     493     495  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $134,966    $133,810    $1,006    $1,009  
  

 

 

   

 

 

   

 

 

   

 

 

 

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. There were no sales of available-for sale investments during the first quarter of 2014 or during 2013. There were sales of available-for-sale investment securities with proceeds of $513,755 during 2012, resulting in a gross gain of $13,755.

The following tables show the Company’s Obligations of States, Municipalities and Political Subdivisions and their sources of repayment as of March 31, 2014:

   (Dollars in thousands) 
   Amortized
Cost
   Fair Value 

Pennsylvania Municipalities

  $47,571    $47,928  

Pennsylvania Political Subdivisions

   1,539     1,572  

All Other State Political Subdivisions

   496     504  
  

 

 

   

 

 

 
  $49,606    $50,004  
  

 

 

   

 

 

 

   (Dollars in thousands) 
   Amortized
Cost
   Fair Value 

General Obligation

  $46,853    $47,222  

Specific Revenue

    

Public Improvement

   250     250  

Water and Sewer

   246     254  

Other

   2,257     2,278  
  

 

 

   

 

 

 
  $49,606    $50,004  
  

 

 

   

 

 

 

The Company has a concentration of states, municipal and political subdivisions in the Commonwealth of Pennsylvania, primarily in school districts. These investments are not concentrated geographically within any region of Pennsylvania as they are disbursed over the entire Commonwealth. School district bonds are backed by the individual school districts and also

NOTE 3—INVESTMENT SECURITIES (continued)

by the Commonwealth via an enhanced rating under the State Aid Withholding Program, Intercept Program, or Act 50 in Pennsylvania. In addition, most investments in this area also have credit support from various insuring agencies.

The Company evaluates its investments in states, municipalities, and political subdivisions both on a pre-purchase and subsequently on a quarterly basis. The evaluation includes a review of fund balances, operating revenues and expenses for the most recent five years, if available, and the trends of those metrics. In addition to this financial review, other pertinent criteria are reviewed, such as population growth in the area, median family income, poverty rates, and debt service expenditures as a percent of expenditures. Based upon these criteria, the credit worthiness of the investments are determined. Upon completion of the review, the results are compared to the published credit ratings. As a result of the Company’s review, there were no investments in states, municipalities, and political subdivisions that differed significantly from the published credit ratings.

NOTE 4—LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES

Major classifications of loans as of March 31, 2014, December 31, 2013 and 2012:

   (Dollars in Thousands) 
   (Unaudited)       
   2014  2013  2012 

Real Estate:

    

Residential

  $163,579   $164,245   $145,455  

Commercial

   99,920    95,333    95,849  

Construction

   10,411    10,367    10,697  

Commercial, Industrial, and Agricultural

   43,621    41,719    38,800  

Consumer

   59,118    59,101    54,032  

Other

   8,701    8,381    3,297  
  

 

 

  

 

 

  

 

 

 
   385,350    379,146    348,130  

Less Allowance for Loan Losses

   (5,372  (5,382  (5,904
  

 

 

  

 

 

  

 

 

 

Net Loans

  $379,978   $373,764   $342,226  
  

 

 

  

 

 

  

 

 

 

Real estate loans serviced for others, which are not included in the Consolidated Statement of Condition, totaled $55,593,291, $53,000,655 and $44,809,833 at March 31, 2014, December 31, 2013 and 2012, respectively.

Loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of March 31, 2014, December 31, 2013 and 2012:

   (Dollars in thousands) 
   2014 (Unaudited) 
       Special             
   Pass   Mention   Substandard   Doubtful   Total 

Real Estate:

          

Residential

  $162,748    $200    $549    $82    $163,579  

Commercial

   80,166     14,357     —       5,397     99,920  

Construction

   8,949     —       —       1,462     10,411  

Commercial, Industrial and Agricultural

   39,551     3,756     —       314     43,621  

Consumer

   59,115     —       3     —       59,118  

Other

   8,701     —       —       —       8,701  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $359,230    $18,313    $552    $7,255    $385,350  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 4—LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES (continued)

   2013 
       Special             
   Pass   Mention   Substandard   Doubtful   Total 

Real Estate:

          

Residential

  $163,234    $397    $604    $10    $164,245  

Commercial

   78,324     11,859     335     4,815     95,333  

Construction

   6,712     2,178     —       1,477     10,367  

Commercial, Industrial and Agricultural

   37,924     3,480     —       315     41,719  

Consumer

   59,084     —       17     —       59,101  

Other

   8,381     —       —       —       8,381  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $353,659    $17,914    $956    $6,617    $379,146  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2012 
       Special             
   Pass   Mention   Substandard   Doubtful   Total 

Real Estate:

          

Residential

  $141,876    $503    $2,941    $135    $145,455  

Commercial

   79,733     9,740     3,368     3,008     95,849  

Construction

   8,281     2,051     —       365     10,697  

Commercial, Industrial and Agricultural

   34,421     3,239     892     248     38,800  

Consumer

   53,996     —       36     —       54,032  

Other

   3,297     —       —       —       3,297  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $321,604    $15,533    $7,237    $3,756    $348,130  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table presents the classessubstantial portion of the loan portfolio, summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2014, December 31, 2013 and 2012:

   (Dollars in thousands) 
   2014 (Unaudited) 
       30-59   60-89             
   Loans   Days   Days   Total   Non-   Total 
   Current   Past Due   Past Due   Past Due   Accrual   Loans 

Real Estate:

            

Residential

  $163,245    $—      $—      $—      $334    $163,579  

Commercial

   96,715     393     44     437     2,768     99,920  

Construction

   9,467     568     11     579     365     10,411  

Commercial, Industrial and Agricultural

   43,294     327     —       327     —       43,621  

Consumer

   58,998     104     13     117     3     59,118  

Other

   8,701     —       —       —       —       8,701  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $380,420    $1,392    $68    $1,460    $3,470    $385,350  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   2013 
       30-59   60-89             
   Loans   Days   Days   Total   Non-   Total 
   Current   Past Due   Past Due   Past Due   Accrual   Loans 

Real Estate:

            

Residential

  $163,626    $173    $107    $280    $339    $164,245  

Commercial

   91,686     592     390     982     2,665     95,333  

Construction

   10,002     —       —       —       365     10,367  

Commercial, Industrial and Agricultural

   41,711     8     —       8     —       41,719  

Consumer

   58,789     288     7     295     17     59,101  

Other

   8,381     —       —       —       —       8,381  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   374,195     1,061     504     1,565     3,386     379,146  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 4—LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES (continued)

   2012 
       30-59   60-89             
   Loans   Days   Days   Total   Non-   Total 
   Current   Past
Due
   Past
Due
   Past
Due
   Accrual   Loans 

Real Estate:

            

Residential

   142,870     954     —       954     1,632     145,456  

Commercial

   92,622     —       177     177     3,049     95,848  

Construction

   10,332     —       —       —       365     10,697  

Commercial, Industrial and Agricultural

   38,324     70     —       70     406     38,800  

Consumer

   53,784     180     32     212     36     54,032  

Other

   3,297     —       —       —       —       3,297  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   341,229     1,204     209     1,413     5,488     348,130  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total unrecorded interest income related to nonaccrual loans was $46,750 for the first quarter of 2014 and $64,101 and $126,785 for 2013 and 2012, respectively.

A summary of the loans considered to be impaired as of March 31, 2014, December 31, 2013 and 2013 are as follows:

   (Dollars in Thousands) 
   2014 (Unaudited) 
           Unpaid   Average   Interest 
   Recorded   Related   Principal   Recorded   Income 
   Investment   Allowance   Balance   Investment   Recognized 

Real Estate:

          

Residential

  $—      $—      $—      $—      $—    

Commercial

   4,680     785     4,680     4,695     23  

Construction

   1,462     249     1,097     1,104     11  

Commercial, Industrial and Agricultural

   314     252     314     314     4  

Consumer

   —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Impaired Loans

  $6,456    $1,286    $6,091    $6,113    $38  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   2013 
           Unpaid   Average   Interest 
   Recorded   Related   Principal   Recorded   Income 
   Investment   Allowance   Balance   Investment   Recognized 

Real Estate:

          

Residential

  $65    $—      $86    $94    $5  

Commercial

   5,407     640     5,693     5,960     245  

Construction

   1,477     265     1,477     1,692     54  

Commercial, Industrial and Agricultural

   315     253     315     316     13  

Consumer

   —       —       —       —      
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Impaired Loans

  $7,264    $1,158    $7,571    $8,062    $317  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2012 
           Unpaid   Average   Interest 
   Recorded   Related   Principal   Recorded   Income 
   Investment   Allowance   Balance   Investment   Recognized 

Real Estate:

          

Residential

  $1,632    $6    $1,680    $1,708    $54  

Commercial

   3,343     871     3,610     3,904     185  

Construction

   365     166     365     365     —    

Commercial, Industrial and Agricultural

   430     85     1,981     456     12  

Consumer

   36     —       54     63     4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Impaired Loans

  $5,806    $1,128    $7,690    $6,496     255  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 4—LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES (continued)

As of March 31, 2014, of the $6.5 million of loans individually evaluated for impairment, $1.5 million of commercial real estate loans had no related allowance. All other loans individually evaluated for impairment had a related allowance.

As of December 31, 2013, of the $7.3 million of loans individually evaluated for impairment, no related allowance existed for $700 thousand residential real estate loans and no related allowance existed for $2.2 million commercial real estate loans. All other remaining loans individually evaluated for impairment had related reserves.

As of December 31, 2012, of the $5.8 million of loans individually evaluated for impairment, $1.6 million residential real estate, $1.0 million commercial real estate, $200 thousand commercial, industrial and agricultural, and $400 thousand consumer loans had no related allowance. The remaining loans individually evaluated for impairment had related reserves.

Loans classified as TDRs consisted of two loans totaling $536,352, two loans totaling $542,565 and four loans totaling $796,462 as of March 31, 2014, December 31, 2013 and 2012, respectively. The following table presents the volume and recorded investment at the time of modification of the TDRs by class and type of modification that occurred during the periods ended March 31, 2014, December 31, 2013 and 2012:

   (Dollars in thousands) 
   2014 (Unaudited) 
   Temporary Rate           Modification of Payment 
   Modification   Extension of Maturity   and Other Terms 
   Number of   Recorded   Number of   Recorded   Number of   Recorded 
   Contracts   Investment   Contracts   Investment   Contracts   Investment 

Real Estate

            

Commercial

   1    $282     1    $254     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1    $282     1    $254     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2013 
   Temporary Rate           Modification of Payment 
   Modification   Extension of Maturity   and Other Terms 
   Number of   Recorded   Number of   Recorded   Number of   Recorded 
   Contracts   Investment   Contracts   Investment   Contracts   Investment 

Real Estate

            

Commercial

   1    $259     1    $259     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1    $259     1    $259     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

   2012 
   Temporary Rate           Modification of Payment 
   Modification   Extension of Maturity   and Other Terms 
   Number
of
   Recorded   Number
of
   Recorded   Number
of
   Recorded 
   Contracts   Investment   Contracts   Investment   Contracts   Investment 

Real Estate

            

Residential

       1    $140      

Commercial

   2    $379         1    $611  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   2    $379     1    $140     1    $611  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 4—LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES (continued)

The activity in the Allowance for Loan Loss summarized by primary segments and segregated into the amount required for loans Individually Evaluated for Impairment and the amount requiredneed for loans Collectively Evaluated for Potential Losses as of March 31, 2013, December 31, 2013 and 2012:

  2014 (Unaudited) 
           Commercial          
  Real
Estate
  Real Estate  Real Estate  Industrial
and
          
  Residential  Commercial  Construction  Agricultural  Consumer  Unallocated  Total 

Beginning Balance

 $1,481   $1,703   $355   $1,013   $592   $238   $5,382  

Charge-offs

  —      —      —      —      (36  —      (36

Recoveries

  1    —      —      1    24    —      26  

Provision

  (1  —      —      —      —      1    —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending Balance

 $1,481   $1,703   $355   $1,014   $580   $239   $5,372  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Individually Evaluated for Impairment

 $—     $785   $249   $252   $—     $—     $1,286  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively Evaluted for Potential Losses

 $1,481   $918   $106   $762   $580   $239   $4,086  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  2013 
           Commercial          
  Real
Estate
  Real Estate  Real Estate  Industrial
and
          
  Residential  Commercial  Construction  Agricultural  Consumer  Unallocated  Total 

Beginning Balance

 $2,215   $2,051   $326   $1,043   $320   $(51 $5,904  

Charge-offs

  (181  (555  —      (109  (95  —      (940

Recoveries

  86    69    —      68    96    —      319  

Provision

  (639  138    29    11    271    289    99  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending Balance

 $1,481   $1,703   $355   $1,013   $592   $238   $5,382  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Individually Evaluated for Impairment

 $—     $640   $265   $253   $—     $—     $1,158  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively Evaluted for Potential Losses

 $1,481   $1,063   $90   $760   $592   $238   $4,224  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  2012 
           Commercial          
  Real Estate  Real Estate  Real Estate  Industrial and          
  Residential  Commercial  Construction  Agricultural  Consumer  Unallocated  Total 

Beginning Balance

 $902   $3,271   $436   $983   $287   $—     $5,879  

Charge-offs

  (71  (103  —      (255  (168   (597

Recoveries

  49    —      —      49    73     171  

Provision

  1,335    (1,117  (110  266    128    (51  451  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending Balance

 $2,215   $2,051   $326   $1,043   $320   $(51 $5,904  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Individually Evaluated for Impairment

 $6   $871   $166   $85   $—     $—     $1,128  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively Evaluted for Potential Losses

 $2,209   $1,180   $160   $958   $320   $(51 $4,776  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NOTE 4—LOANS AND RELATED ALLOWANCE FOR LOAN LOSSES (continued)

Major classifications of loans summarized by Individually Evaluated for Impairment and Collectively Evaluated for Potential Losses as of March 31, 2014, December 31, 2013 and December 31, 2012:

  (Dollars in thousands) 
  2014 (Unaudited) 
           Commercial          
  Real Estate  Real Estate  Real Estate  Industrial and          
  Residential  Commercial  Construction  Agricultural  Consumer  Other  Total 

Individually Evaluated for Impairment

 $—     $4,680   $1,462   $314   $—     $—     $6,456  

Collectively Evaluated for Impairment

  163,579    95,240    8,949    43,307    59,118    8,701    378,894  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 $163,579   $99,920   $10,411   $43,621   $59,118   $8,701   $385,350  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  2013 
           Commercial          
  Real Estate  Real Estate  Real Estate  Industrial and          
  Residential  Commercial  Construction  Agricultural  Consumer  Other  Total 

Individually Evaluated for Impairment

 $65   $5,407   $1,477   $315   $—     $—     $7,264  

Collectively Evaluated for Impairment

  164,180    89,926    8,890    41,404    59,101    8,381    371,882  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 $164,245   $95,333   $10,367   $41,719   $59,101   $8,381   $379,146  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  2012 
           Commercial          
  Real Estate  Real Estate  Real Estate  Industrial and          
  Residential  Commercial  Construction  Agricultural  Consumer  Other  Total 

Individually Evaluated for Impairment

 $1,632   $3,343   $365   $430   $36   $—     $5,806  

Collectively Evaluated for Impairment

  143,823    92,506    10,332    38,370    53,996    3,297    342,324  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 $145,455   $95,849   $10,697   $38,800   $54,032   $3,297   $348,130  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Certain directors, executive officers, and principal stockholders of the Company, including companies in which they are principal owners, are loan customers of the Company. Such loans are made in the normal course of business, and summarized as follows:

   (Dollars in thousands)    
   (Unaudited)
March 31,
2014
  December 31, 
    2013  2012 

Balance, January 1

  $3,394   $3,511   $3,299  

Additions

   15    142    904  

Payments

   (112  (259  (691
  

 

 

  

 

 

  

 

 

 

Balance, December 31

  $3,297   $3,394   $3,512  
  

 

 

  

 

 

  

 

 

 

NOTE 5—PREMISES AND EQUIPMENT

Major classifications of premises and equipment are summarized as follows:

   (Dollars in thousands) 
   (Unaudited)       
   March 31,  December 31, 
   2014  2013  2012 

Land

  $1,112   $1,112   $1,092  

Building

   4,242    4,177    4,160  

Leasehold Improvements

   1,625    1,625    1,605  

Furniture, Fixtures, and Equipment

   7,911    7,808    7,664  

Property Held Under Capital Lease

   299    299    299  
  

 

 

  

 

 

  

 

 

 
   15,189    15,021    14,820  

Less Accumulated Depreciation

   (10,564  (10,409  (9,967
  

 

 

  

 

 

  

 

 

 

Total Premises and Equipment

  $4,625   $4,612   $4,853  
  

 

 

  

 

 

  

 

 

 

NOTE 5—PREMISES AND EQUIPMENT (continued)

Depreciation and amortization expense on premises and equipment was $118,306 in the first quarter of 2014, $478,295 in 2013 and $424,200 in 2012.

NOTE 6—CORE DEPOSIT INTANGIBLE

A summary of core deposit intangible assets is as follows:

   (Dollars in thousands)    
   Gross        
   Carrying   Accumulated  Net Carrying 
   Amount   Amortization  Amount 

Balance at December 31, 2011

  $2,193    ($2,080 $113  

Amortization Expense

   —       (60  (60
  

 

 

   

 

 

  

 

 

 

Balance at December 31, 2012

   2,193     (2,140  53  

Amortization Expense

   —       (53  (53
  

 

 

   

 

 

  

 

 

 

Balance at December 31, 2013

  $2,193    ($2,193 $—    
  

 

 

   

 

 

  

 

 

 

There was no amortization of core deposit intangible in the first quarter of 2014.

NOTE 7—DEPOSITS

The following table shows the maturities of time deposits for the next five years and beyond as of March 31, 2014 and December 31, 2013:

   (Dollars in thousands)     
   (Unaudited)     
   2014   2013 

2014

  $24,116    $33,642  

2015

   22,042     19,016  

2016

   14,200     11,126  

2017

   8,116     7,394  

2018

   7,285     7,128  

Beyond 2018

   7,740     6,364  
  

 

 

   

 

 

 

Total

  $83,499    $84,670  
  

 

 

   

 

 

 

The balance in time deposits of $100,000 or more totaled $34,573,881and $35,303,402 as of March 31, 2014 and December 31, 2013, respectively.

NOTE 8—FEDERAL FUNDS PURCHASED AND SHORT-TERM BORROWINGS

The components of federal funds purchased and short-term borrowings are summarized as follows:

   (Dollars in thousands)        
   (Unaudited)               
   March 31,  December 31, 
   2014  2013  2012 
   Amount   Rate  Amount   Rate  Amount   Rate 

Federal Funds Purchased

          

Balance at Period-End

  $—       —     $—       —     $—       —    

Average Balance Outstanding During the Year

   1,246     0.45  672     0.47  71     0.47

Maximum Amount Outstanding at any Month-End to Repurchase

   1,850      4,100      —      

Balance at Period-End

  $13,550     0.28 $15,384     0.28 $23,374     0.27

Average Balance Outstanding During the Year

   13,864     0.27  21,035     0.27  28,124     0.30

Maximum Amount Outstanding at any Month-End

   14,099      25,683      34,740    

Securities Collaterizing the Agreements at Period-End:

          

Carrying Value

   21,349      25,399      30,415    

Market Value

   21,151      24,921      30,513    

NOTE 9—OTHER BORROWED FUNDS

Other borrowed funds consist of fixed rate advances from the FHLB as follows:

   (Dollars in thousands)        
       Weighted        
       Average  (Unaudited)   At December 31, 

Description

  Maturity   Interest Rate  At March 31,   2013 

CLP—Fixed

   August 22, 2013     3.98 $—      $—    

CLP—Fixed

   February 25, 2014     2.26  —       1,000  

CLP—Fixed

   February 25, 2015     2.71  1,000     1,000  

CLP—Fixed

   September 5, 2015     4.05  2,000     2,000  
     

 

 

   

 

 

 
     $3,000    $4,000  
     

 

 

   

 

 

 

As of March 31, 2014 the Company maintains a credit arrangement with a maximum borrowing limit of approximately $175 million with the FHLB. This arrangement is subject to annual renewal, incurs no service charge, and is secured by a blanket security agreement on outstanding residential mortgage loans and the Company’s investment in FHLB stock. Under this arrangement the Company had available a variable rate Line of Credit in the amount of $20 million as of March 31, 2014, December 31, 2013 and 2012.

A Borrower-In-Custody of Collateral agreement was entered into with the Federal Reserve Bank for a $40 million Line of Credit in 2009. This credit agreement requires quarterly certification of collateral, is subject to annual renewal, incurs no service charge and is secured by Commercial and Consumer Indirect Loans. As of March 31, 2014 this facility had not been used.

The contractual maturities of these borrowings are as follows:

(Dollars in thousands)        
(Unaudited)  (Unaudited)     
   At March 31,   At December 31, 

Due in One Year

   1,000     1,000  

Due After One Year But Within Five Years

   2,000     3,000  

Due From Five Years to Ten Years

   —       —    
  

 

 

   

 

 

 

Total

   3,000     4,000  
  

 

 

   

 

 

 

NOTE 10—INCOME TAXES

The provision for income taxes is summarized as follows:

   Dollars in thousands) 
   (Unaudited)        
   March 31,  December 31, 
   2013  2014  2013   2012 

Current Payable

  $(15 $297   $968    $1,021  

Deferred

   203    (1  192     14  
  

 

 

  

 

 

  

 

 

   

 

 

 

Total Provision

  $188   $296   $1,160    $1,035  
  

 

 

  

 

 

  

 

 

   

 

 

 

NOTE 10—INCOME TAXES (continued)

The tax effects of deductible and taxable temporary differences that gave rise to significant portions of the net deferred tax assets and liabilities are as follows:

   (Unaudited)         
   March 31,   December 31, 
   2014   2013   2012 

Deferred Tax Assets:

      

Allowance for Loan Losses

  $1,612    $1,548    $1,749  

Core Deposit Intangible

   65     95     123  

Passthrough Entities

   3     3     33  

Net Unrealized Loss on Securities

   —       393     —    

Discount Accretion

   14     13     9  

Other

   132     129     114  
  

 

 

   

 

 

   

 

 

 

Gross Deferred Tax Assets

   1,826     2,181     2,028  
  

 

 

   

 

 

   

 

 

 

Deferred Tax Liabilities:

      

Deferred Origination Fees and Costs

   195     164     50  

Premises and Equipment

   587     604     552  

Net Unrealized Gain on Securities

   2     —       633  

Mortgage Servicing Rights

   171     157     93  

Goodwill

   482     473     751  
  

 

 

   

 

 

   

 

 

 

Gross Deferred Tax Liabilities

   1,437     1,398     2,079  
  

 

 

   

 

 

   

 

 

 

Net Deferred Tax Assets (Liabilities)

  $389    $783    $(51
  

 

 

   

 

 

   

 

 

 

No valuation allowance was established against the deferred tax assets in view of the Company’s ability to carryback taxes paid in previous years and certain tax strategies and anticipated future taxable income as evidenced by the Company’s earnings potential at March 31, 2014, December 31, 2013 and 2012.

A reconciliation of the federal income tax expense at statutory income tax rates and the actual income tax expense on income before taxes is shown below:

  (Dollars in thousands) 
  March 31,  December 31, 
  2013  2014  2013  2012 
     % of Pre-tax     % of Pre-tax     % of Pre-tax     % of Pre-tax 
  Amount  Income  Amount  Income  Amount  Income  Amount  Income 

Provision at Statutory Rate

 $357    34.0 $466    34.0 $1,841    34.0 $1,786    34.0

Effect of Tax-Free Income

  (132  (12.6  (126  (9.2  (527  (9.7  (658  (12.5

BOLI Income

  (20  (1.9  (19  (1.4  (80  (1.5  (88  (1.7

Other

  (17  (1.7  (25  (1.8  (74  (1.4  (5  (0.1
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Actual Tax Expense and Effective Rate

 $188    17.8 $296    21.6 $1,160    21.4 $1,035    19.7
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Deferred taxes at March 31, 2014, December 31, 2013 and 2012 are included in other assets in the accompanying Consolidated Statement of Condition.

The Company’s federal and Pennsylvania income tax returns are no longer subject to examination by federal or Commonwealth of Pennsylvania taxing authorities for years before 2010. As of March 31, 2014, December 31, 2013 and 2012 there were no unrecognized tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. There were no interest or penalties accrued at March 31, 2014, December 31, 2013 and 2012.

NOTE 11—EMPLOYEE BENEFITS

SAVINGS AND PROFIT SHARING PLAN

The Company maintains a Cash or Deferred Profit-sharing Section 401(k) Plan with contributions matching those by eligible employees for the first 4 percent of an employee’s contribution at the rate of $.25 on the dollar. All employees who work over 1,000 hours per year are eligible to participate in the plan. The Company made no contribution in the first quarter 2014, $42,253 in 2013 and $40,769 in 2012 to this plan. In 2009, the 401(k) Plan was enhanced to include a “safe harbor” provision and a discretionary retirement contribution. The Company made no contributions for the first quarter 2014, $422,176 and $406,434 for the enhanced portion of the 401(k) Plan in 2013 and 2012, respectively.

STOCK OPTION PLAN

The Company maintains an Incentive Stock Option Plan for executive management, a Supplemental Stock Option Plan for all full-time employees, and a Directors’ Stock Option Plan for all outside directors. All three plans provide for the granting of options at the discretion of the Board of Directors, and all options typically have expiration terms of ten years subject to certain extensions and early terminations. Under the Incentive Stock Option Plan, the first option grants were awarded on May 17, 2000. First option grants under the Supplemental Stock Option Plan and the Directors’ Stock Option Plan were awarded on May 16, 2001. The per share exercise price of an option granted cannot be less than the fair value of a share of common stock at the time the option is granted. The Company has a policy of issuing new shares to satisfy share option exercises. No tax benefits were realized for the tax deductions from non-qualifying stock options exercised for the periods ended, March 31, 2014, December 31, 2013 and 2012, respectively.

The following table presents shares data relatedadditions to the stock plans:

   (Unaudited) 
      Weighted 
      Average 
      Exercise 
   2014  Price 

Outstanding, January 1

   14,515   $14.25  

Granted

   —      —    

Exercised

   (4,015  14.25  

Forfeited

   —     

Outstanding, March 31

   10,500   $14.25  

Exercisable, March 31

   10,500   $14.25  

      Weighted      Weighted 
      Average      Average 
      Exercise      Exercise 
   2013  Price   2012  Price 

Outstanding, January 1

   38,320   $14.48     65,235   $14.36  

Granted

   —      —        —    

Exercised

   (23,405  14.62     (26,915 $14.19  

Forfeited

   (400  14.50     —     
  

 

 

    

 

 

  

Outstanding, December 31

   14,515   $14.25     38,320   $14.48  
  

 

 

    

 

 

  

Exercisable, December 31

   14,515   $14.25     38,320   $14.48  
  

 

 

    

 

 

  

The following table summarizes characteristics of stock options outstanding at March 31, 2014

  (Unaudited)       
  Outstanding  Exercisable 
  Average  Average  Average       
Exercise Contractual  Exercise  Exercise       

Price

 Shares  Life  Price  Shares  Price 
$14.25  10,500    0.125   $14.25    10,500   $14.25  
 

 

 

    

 

 

  
  10,500      10,500   
 

 

 

    

 

 

  

At March 31, 2014, December 31, 2013 and 2012, the Company did not have any unvested stock options outstanding.

NOTE 12—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 condition. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

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

The unused and available credit balances of financial instruments whose contracts represent credit risk at March 31, 2014 and December 31, 2013 and 2012 are as follows:

   (Dollars in thousands)     
   (Unaudited)         
   2014   2013   2012 

Standby Letters of Credit

  $663    $693    $427  

Performance Letters of Credit

   1,192     1,534     1,258  

Construction Mortgages

   9,307     9,939     11,468  

Personal Lines of Credit

   5,596     5,502     7,264  

Overdraft Protection Lines

   6,577     6,552     6,657  

Home Equity Lines of Credit

   8,138     8,155     8,328  

Commercial Lines of Credit

   38,384     42,393     29,894  
  

 

 

   

 

 

   

 

 

 
  $69,857    $74,768    $65,296  
  

 

 

   

 

 

   

 

 

 

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 isallowance, will be 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 13—REGULATORY CAPITAL

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 resultchanges 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 weightingseconomic conditions and other relevant factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company As such, an adverse change in economic activity could reduce cash flows for both commercial and the Bank to maintain minimum amounts and ratios of total and Tier I capital to risk-weighted assets and of Tier I capital to average assets. Management believes, as of December 31, 2013, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

NOTE 13—REGULATORY CAPITAL (continued)

As of March 31, 2014, the most recent notification from the Federal Deposit Insurance Corporation categorized the Company as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the institution’s category.

The Bank’s actual capital ratios are presented in the following table, which shows that it met all regulatory capital requirements at March 31, 2014, December 31, 2013 and 2012. The Company’s capital ratios are comparable to those shown for the Bank.

   (Unaudited)  (Dollars in thousands)    
    
   2014  2013  2012 
   Amount   Ratio  Amount   Ratio  Amount   Ratio 

Total Capital (to Risk-Weighted Assets)

          

Actual

   45,173     12.45  46,578     12.98  44,082     13.13

For Capital Adequacy Purposes

   29,020     8.00    28,709     8.00    26,860     8.00  

To Be Well Capitalized

   36,275     10.00    35,885     10.00    33,745     10.00  

Tier I Capital (to Risk-Weighted Assets)

          

Actual

   40,628     11.20  42,081     11.73  39,864     11.87

For Capital Adequacy Purposes

   14,510     4.00    14,354     4.00    13,430     4.00  

To Be Well Capitalized

   21,765     6.00    21,531     6.00    20,145     6.00  

Tier I Capital (to Average Assets)

          

Actual

   40,628     7.53  42,081     7.70  39,864     7.33

For Capital Adequacy Purposes

   21,577     4.00    21,863     4.00    21,759     4.00  

To Be Well Capitalized

   26,972     5.00    27,329     5.00    27,198     5.00  

Basel is a committee of central banks and bank regulators from major industrialized countries that develops broad policy guidelines for use by each country’s regulators with the purpose of ensuring that financial institutions have adequate capital given the risk levels of assets and off-balance sheet financial instruments. On July 2, 2013, the Federal Reserve approved final rules that substantially amend the regulatory risk-based capital rules. The FDIC and the OCC have subsequently approved these rules. The final rules were adopted following the issuance of proposed rules by the Federal Reserve in June 2012, and implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to two consultative documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank capital, leverage and liquidity requirements.

The rules include new risk-based capital and leverage ratios,individual borrowers, which would be phasedlikely cause First West Virginia to experience increases in from 2015 to 2019, and would refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to institutions under the final rules would be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions.

The final rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital. The capital conservation buffer will be phased-in over four years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weightedproblem assets, for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. This will result in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Basel III provided discretion for regulators to impose an additional buffer, the “countercyclical buffer,” of up to 2.5% of common equity Tier 1 capital to take into account the macro-financial environment and periods of excessive credit growth. However, the final rules permit the countercyclical buffer to be applied only to “advanced approach banks” ( i.e. , banks with $250 billion or more in total assets or $10 billion or more in total foreign exposures). The final rules also implement revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common

NOTE 13—REGULATORY CAPITAL (continued)

equity, unrealized gainsdelinquencies and losses as well as certain instruments that will no longer qualify as Tier 1 capital, some of which will be phased out over time. However, the final rules provide that small depository institution holding companies with less than $15 billion in total assets as of December 31, 2009 will be able to permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 in additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature.

The final rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels begin to show signs of weakness. These revisions take effect January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions will be required to meet the following increased capital level requirements in order to qualify as “well capitalized:” (i) a new common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5% (increased from 4%).loans.

The final rules set forth certain changes for the calculation of risk-weighted assets, which we will be required to utilize beginning January 1, 2015. The standardized approach final rule utilizes an increased number of credit risk exposure categories and risk weights, and also addresses: (i) an alternative standard of creditworthiness consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in total assets that are not subject to the “advance approach rules” that apply to banks with greater than $250 billion in consolidated assets.

NOTE 14—OPERATING LEASES

The Company leases several offices or the ground on which they are located under operating leases expiring by 2034.

Minimum future rental payments under noncancelable operating leases having remaining terms in excess of one year as are as follows:

   (Dollars in thousands) 
   (Unaudited)     
   March 31, 2013   March 31, 2013   December 31, 2013 

2013

  $311    $—      $—    

2014

   433     327     433  

2015

   411     411     411  

2016

   385     385     385  

2017

   331     311     311  

2018

   331     248     248  

2019 & thereafter

   560     927     927  
  

 

 

   

 

 

   

 

 

 
  $2,762    $2,609    $2,715  
  

 

 

   

 

 

   

 

 

 

Rental expense recorded in the first quarter of 2014, 2013 and 2012 was $118,144, $467,191 and $367,833, respectively.

NOTE 15—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 to sell an asset in an orderly transaction between market participants at the market date. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in valuation methods to determine fair value. The three levels of fair value hierarchy are as follows:

Level I –Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.
Level II –Fair value is based on significant inputs, other than Level I inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level II inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets, and other observable inputs.
Level III –Fair value would be based on significant unobservable inputs. Examples of valuation methodologies that would result in Level III classification include option pricing models, discounted cash flows, and other similar techniques.

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

The following table presents the assets and liabilities reported on the statement of financial condition at their fair value as of March 31, 2014, December 31, 2013 and 2012, by level within the fair value hierarchy. As required, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

     (Dollars in thousands)       
     2014 (Unaudited)       
  Level I  Level II  Level III  Total 

Available for Sales Securities:

    

U.S. Government Agencies

 $—     $64,100   $—     $64,100  

Equity Securities—Mutual Funds

  505    —      —      505  

Equity Securities—Other

  579     —      579  

Obligations of States and Political Subdivisions

  —      50,004    —      50,004  

Mortgage-Backed Securities—Government—Sponsored Enterprises

  —      5,703    —      5,703  
 

 

 

  

 

 

  

 

 

  

 

 

 

Total Available for Sale Securities

 $1,084   $119,807   $—     $120,891  
 

 

 

  

 

 

  

 

 

  

 

 

 
     2013       
  Level I  Level II  Level III  Total 

Available for Sales Securities:

    

U.S. Government Agencies

 $—     $76,294   $—     $76,294  

Equity Securities—Mutual Funds

  535    —      —      535  

Equity Securities—Other

  553     —      553  

Obligations of States and Political Subdivisions

  —      50,502    —      50,502  

Mortgage-Backed Securities—Government—Sponsored Enterprises

  —      5,926    —      5,926  
 

 

 

  

 

 

  

 

 

  

 

 

 

Total Available for Sale Securities

 $1,088   $132,722   $—     $133,810  
 

 

 

  

 

 

  

 

 

  

 

 

 
     2012       
  Level I  Level II  Level III  Total 

Available for Sale Securities:

    

U.S. Government Agencies

 $—     $106,178   $—     $106,178  

Equity Securities—Mutual Funds

  535    —      —      535  

Obligations of States and Political Subdivisions

  —      47,199    —      47,199  

Mortgage-Backed Securities—Government—Sponsored Enterprises

  —      1,419    —      1,419  
 

 

 

  

 

 

  

 

 

  

 

 

 

Total Available for Sale Securities

 $535   $154,796   $—     $155,331  
 

 

 

  

 

 

  

 

 

  

 

 

 

NOTE 15—FAIR VALUE DISCLOSURE (continued)

The following tables present the assets measured on a nonrecurring basis on the Consolidated Statement of Condition at their fair value as of March 31, 2014, December 31, 2012 and 2011 by level within the fair value hierarchy. 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 loan include: quoted market prices for identical assets classified as Level 1 inputs; observable inputs, employed by certified appraisers, for similar assets classified as Level II inputs. In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level III inputs:

   2014 (Unaudited)     
   Level I   Level II   Level III   Total 

Assets Measured on a Non-recurring Basis:

        

Impaired Loans

  $—      $—      $7,939    $7,939  

OREO

   —       —       —       —    
   2013     
   Level I   Level II   Level III   Total 

Assets Measured on a Non-recurring Basis:

        

Impaired Loans

  $—      $—      $3,833    $3,833  

OREO

   —       —       229     229  
   2012     
   Level I   Level II   Level III   Total 

Assets Measured on a Non-recurring Basis:

        

Impaired Loans

  $—      $—      $1,831    $1,831  

OREO

   —       —       244     244  

Impaired Loans and Other Real Estate Owned

Impaired loans are evaluated and valued at the time the loan is identified as impaired, at the lower of cost or fair value. Fair value is measured based on the value of the collateral securing these loans and is classified as Level III in the fair value hierarchy. At March 31, 2014, December 31, 2013 and 2012, the fair value of impaired loans consists of the loan balance of $6,455,732 $4,991,332 and 2,959,384 less their specific valuation allowances of $1,286,144, $1,158,128 and $1,128,285, respectively.

For Level III assets and liabilities measured at fair value on a recurring or non- recurring basis as of December 31, 2012, the significant unobservable inputs used in the fair value measurements were as follows:

(Dollars in thousands)

Level III

 (Unaudited)
Fair Value at

March 31, 2014
  

Valuation

Techniques

 

Significant

Unobservable Inputs

 Significant
Unobservable
Input Value

Impaired Loans

 $7,939   Market Comparable Properties Marketability Discount 10% to 30%(1)

OREO

  —     Market Comparable Properties Marketability Discount 10% to 50%(1)

(1)Range would include discounts taken since appraisal and estimated values

Level III

 Fair Value at
December 31,
2013
  

Valuation

Techniques

 

Significant

Unobservable Inputs

 Significant
Unobservable
Input Value

Impaired Loans

 $3,833   Market Comparable Properties Marketability Discount 10% to 30%(1)

OREO

  229   Market Comparable Properties Marketability Discount 10% to 50%(1)

(1)Range would include discounts taken since appraisal and estimated values

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.

NOTE 15—FAIR VALUE DISCLOSURE (continued)

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 employed simulation modeling in determining the estimated fair value of financial instruments for which quoted market prices were 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 valueInvestment securities are classified at the time 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 arepurchase, based on carrying values. Fair valuesmanagement’s intention and ability, as securities available for certain mortgage loans, credit card loans,sale or held to maturity. First West Virginia did not have any securities classified as held to maturity at December 31, 2016 or 2015. Certain debt 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 12.

NOTE 15—FAIR VALUE DISCLOSURE (continued)

The estimated fair values of the Company’s financial instruments are as follows:

(Dollars in thousands)

  Valuation
Method
Used
 (Unaudited)  December 31, 
   March 31, 2014  2013  2012 
   Carrying
Value
  Fair
Value
  Carrying
Value
  Fair
Value
  Carrying
Value
  Fair
Value
 

Financial Assets:

       

Interest Bearing

 Level I $8,264   $8,264   $7,094   $7,094   $13,351   $13,351  

Non-Interest Bearing

 Level I  18,914    18,914    9,323    9,323    11,944    11,944  

Investment Securities:

       

Available for Sale

 See Above  120,891    120,891    133,810    133,810    155,331    155,331  

Held to Maturity

 Level II  511    511    1,006    1,009    2,032    2,068  

Loans, Net

 Level III  379,978    390,856    373,764    384,664    342,226    359,881  

Restricted Stock

 Level II  1,900    1,900    1,770    1,770    1,390    1,390  

Bank-Owned Life Insurance

 Level II  8,760    8,760    8,702    8,702    8,458    8,458  

Accrued Interest Receivable

 Level I  1,856    1,856    1,866    1,866    1,934    1,934  

Financial Liabilities:

       

Deposits

 Level III  488,783    469,846    480,335    482,704    470,148    471,683  

Short-term Borrowings

 Level I  13,550    13,550    15,384    15,384    23,374    23,374  

Other Borrowed Funds

 Level III  3,000    3,124    4,000    4,148    7,000    7,315  

Accrued Interest Payable

 Level I  266    266    267    267    328    328  

Off-Balance Sheet Instruments,

       

Commitments to Extend Credit

 Level III $—     $—     $—     $—     $—     $—    

NOTE 16—CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

Financial information pertaining only to CB Financial Services, Inc (dollars in thousands).

Statement of Condition

   (Unaudited)         
   March 31,   December 31, 
   2014   2013   2013   2012 

ASSETS

        

Cash and Due From Banks:

  $162    $901    $973    $1,124  

Investment Securities, Available-for-Sale

   579     494     553     —    

Investment in Community Bank

   42,799     43,488     43,494     43,346  

Other Assets

   —       1     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL ASSETS

  $43,540    $44,884    $45,020    $44,470  
  

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Other Liabilities

   20     —       15     0  

Stockholders Equity

   43,520     44,884     45005     44,470  
  

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $43,540    $44,884    $45,020    $44,470  
  

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 16—CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY (continued)

Statement of Income

   (Unaudited)             
   Three months ended   Years Ended December 31, 
   March   March   
       2014           2013       2013   2012   2011 

Interest and Dividend Income

  $6    $2    $19    $—      $—    

Dividend from bank subsidiary

   1,074     862     4,240     4,217     4,397  

Noninterest Expense

   1     1     3     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income Before Income Taxes

  $1,079    $863    $4,256    $4,217    $4,397  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income Taxes

   —       —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

  $1,079    $863    $4,256    $4,217    $4,397  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Statement of Cash Flows

(Dollars in thousands)

   (Unaudited)          
   Three months ended  Years Ended December 31, 
   March
    2014    
  March
    2013    
  
    2013  2012  2011 

OPERATING ACTIVITIES

      

Net Income

  $1,079   $863   $4,256   $4,217   $4,397  

Cash Provided by Operating Activities:

      

Undistributed net loss (income) of subsidiary

   1,499    (345  (2,184  (2,164  (2,393

Increase in Other Assets

   (43  (3   —      —    

Increase (Decrease) in Other Liabilities

   (6  1     —      (3
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

   2,529    516    2,072    2,053    2,001  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

INVESTING ACTIVITIES

      

Purchases of Securities

   (9  (495  (513  —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

   (9  (495  (513  —      —    
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

FINANCING ACTIVITIES

      

Cash Dividends Paid

   (491  (517  (2,072  (2,053  (2,004

Treasury Stock Purchases, at cost

   (2,896  —      —      —      —    

Exercise of Stock Options

   56    273    343    381    319  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   (3,331  (244  (1,729  (1,672  (1,685
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

DECREASE IN CASH AND EQUIVALENTS

   (811  (223  (170  381    316  

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

   973    1,124    1,124    743    427  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

  $162   $901   $954   $1,124   $743  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

NOTE 17—SUBSEQUENT EVENTS

On January 2, 2014, the Company re-purchased 133,000 shares of Common Stock at $21.78 per share from a related party. The sharesequity securities have been classified as Treasury Stockavailable for sale to serve principally as a source of liquidity. Unrealized holding gains and will be held at cost.losses foravailable-for-sale securities are reported as a separate component of stockholders’ equity, net of tax, until realized. Realized securities gains and losses are computed using the specific identification method. Interest and dividends on investment securities are recognized as income when earned.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

 

NOTE 18—QUARTERLY FINANCIAL INFORMATION (Unaudited)

The following table summarizes selected information regarding the Company’s results of operations for the periods indicated (dollars in thousands, except per share date). Quarterly earnings per share data may vary from annual earnings per share due to rounding.

   Three Months Ended 

2013

  March 31   June 30   September 30   December 31 

Interest Income

  $ 4,346    $4,355    $4,570    $4,633  

Interest Expense

   604     566     548     518  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income

   3,742     3,789     4,022     4,115  

Provision for Loan Losses

   100     —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income after Provision for Loan Losses

   3,642     3,789     4,022     4,115  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non Interest Income

   738     884     781     903  

Non Interest Expense

   3,329     3,355     3,341     3,433  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before Income Tax Expense

   1,051     1,318     1,462     1,585  

Income Tax Expense

   188     280     324     368  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

  $863    $1,038    $1,138    $1,217  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Share—Basic

  $0.35    $0.42    $0.46    $0.50  

Earnings Per Share—Diluted

   0.35     0.42     0.46     0.49  

Dividends Per Share—Regular

   0.21     0.21     0.21     0.21  
   Three Months Ended 

2012

  March 31   June 30   September 30   December 31 

Interest Income

  $4,829    $4,700    $4,643    $4,558  

Interest Expense

   894     795     739     665  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income

   3,935     3,905     3,904     3,893  

Provision for Loan Losses

   150     150     150     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Interest Income after Provision for Loan Losses

   3,785     3,755     3,754     3,893  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non Interest Income

   809     897     935     866  

Non Interest Expense

   3,179     3,357     3,374     3,532  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before Income Tax Expense

   1,415     1,295     1,315     1,227  

Income Tax Expense

   265     234     246     290  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

  $1,150    $1,061    $1,069    $937  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings Per Share—Basic

  $0.47    $0.44    $0.44    $0.38  

Earnings Per Share—Diluted

   0.46     0.43     0.43     0.38  

Dividends Per Share—Regular

   —       0.42     —       0.42  

LOGO

FINANCIAL STATEMENTS

Contents

Page

Consolidated Statements of Financial Condition at March 31, 2014 (unaudited) and December 31, 2013

F-38

Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013 (unaudited)

F-39

Consolidated Statements of Comprehensive Income for the three months ended March  31, 2014 and 2013 (unaudited)

F-40

Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March  31, 2014 and 2013 (unaudited)

F-41

Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (unaudited)

F-42

Notes to Consolidated Financial Statements

F-43

Report of Independent Registered Public Accounting Firm

F-63

Consolidated Statements of Financial Condition at December 31, 2013 and 2012

F-64

Consolidated Statements of Operations for the years ended December 31, 2013 and 2012

F-65

Consolidated Statements of Comprehensive Income for the years ended December 31, 2013 and 2012

F-66

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December  31, 2013 and 2012

F-67

Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012

F-68

Notes to Consolidated Financial Statements

F-69

LOGO

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

AT MARCH 31, 2014 (UNAUDITED) AND DECEMBER 31, 2013

(Dollars in thousands, except share data)

  March 31,
2014
  December 31,
2013
 

Assets:

   

Cash and cash equivalents:

   

Cash and due from banks

  $2,029   $2,034  

Interest-earning deposits

   3,964    3,518  
  

 

 

  

 

 

 

Total cash and cash equivalents

   5,993    5,552  

Securities available-for-sale

   25,477    26,772  

Loans, net

   274,255    268,812  

Federal Home Loan Bank (“FHLB”) stock, at cost

   2,310    2,589  

Accrued interest receivable—loans

   861    858  

Accrued interest receivable—securities

   143    135  

Premises and equipment, net

   1,792    1,852  

Bank-owned life insurance

   8,620    8,560  

Goodwill

   1,080    1,080  

Real estate owned

   126    126  

Deferred tax assets

   2,006    2,118  

Other assets

   620    573  
  

 

 

  

 

 

 

Total assets

  $323,283   $319,027  
  

 

 

  

 

 

 

Liabilities and Stockholders’ Equity:

   

Deposits:

   

Noninterest-bearing

  $30,836   $27,247  

Interest-bearing

   202,800    191,985  
  

 

 

  

 

 

 

Total deposits

   233,636    219,232  

Borrowings

   36,524    45,591  

Advance payments by borrowers for taxes and insurance

   557    458  

Accrued interest payable—deposits

   91    107  

Accrued interest payable—borrowings

   140    144  

Other liabilities

   1,330    1,644  
  

 

 

  

 

 

 

Total liabilities

   272,278    267,176  

Stockholders’ equity

   

FedFirst Financial Corporation stockholders’ equity:

   

Preferred stock $0.01 par value; 10,000,000 shares authorized; none issued

   —      —    

Common stock $0.01 par value; 20,000,000 shares authorized; 2,316,093 and 2,357,293 shares issued and outstanding

   23    24  

Additional paid-in-capital

   30,422    31,169  

Retained earnings—substantially restricted

   21,359    21,528  

Accumulated other comprehensive income, net of deferred tax of $96 and $40

   149    62  

Unearned Employee Stock Ownership Plan (“ESOP”)

   (994  (1,037
  

 

 

  

 

 

 

Total FedFirst Financial Corporation stockholders’ equity

   50,959    51,746  

Noncontrolling interest in subsidiary

   46    105  
  

 

 

  

 

 

 

Total stockholders’ equity

   51,005    51,851  
  

 

 

  

 

 

 

Total liabilities and stockholders’ equity

  $323,283   $319,027  
  

 

 

  

 

 

 

See Notes to the Unaudited Consolidated Financial Statements.

LOGO

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE

MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)

   Three Months Ended
March 31,
 

(Dollars in thousands, except per share data)

  2014   2013 

Interest income:

    

Loans

  $3,002    $2,925  

Securities—taxable

   166     277  

Securities—tax exempt

   37     38  

Other interest-earning assets

   15     4  
  

 

 

   

 

 

 

Total interest income

   3,220     3,244  

Interest expense:

    

Deposits

   316     384  

Borrowings

   274     330  
  

 

 

   

 

 

 

Total interest expense

   590     714  
  

 

 

   

 

 

 

Net interest income

   2,630     2,530  

Provision for loan losses

   75     —    
  

 

 

   

 

 

 

Net interest income after provision for loan losses

   2,555     2,530  

Noninterest income:

    

Fees and service charges

   138     183  

Insurance commissions

   790     1,014  

Income from bank-owned life insurance

   60     61  

Other

   11     11  
  

 

 

   

 

 

 

Total noninterest income

   999     1,269  

Noninterest expense:

    

Compensation and employee benefits

   1,563     1,520  

Occupancy

   325     300  

FDIC insurance premiums

   49     43  

Data processing

   172     165  

Professional services

   163     165  

Advertising

   137     139  

Other

   270     280  
  

 

 

   

 

 

 

Total noninterest expense

   2,679     2,612  
  

 

 

   

 

 

 

Income before income tax expense and noncontrolling interest in net income of consolidated subsidiary

   875     1,187  

Income tax expense

   323     351  
  

 

 

   

 

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   552     836  

Noncontrolling interest in net income of consolidated subsidiary

   18     42  
  

 

 

   

 

 

 

Net income of FedFirst Financial Corporation

  $534    $794  
  

 

 

   

 

 

 

Earnings per share:

    

Basic

  $0.24    $0.32  

Diluted

   0.23     0.32  
  

 

 

   

 

 

 

Weighted-average shares outstanding:

    

Basic

   2,235,132     2,457,646  

Diluted

   2,286,008     2,472,403  
  

 

 

   

 

 

 

See Notes to the Unaudited Consolidated Financial Statements.

LOGO

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE

THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)

   Three Months Ended
March 31,
 

(Dollars in thousands)

  2014   2013 

Net income before noncontrolling interest in net income of consolidated subsidiary

  $552    $836  

Other comprehensive income:

    

Unrealized gain on securities available-for-sale, net of income tax expense

   87     116  
  

 

 

   

 

 

 

Other comprehensive income, net of income tax expense

   87     116  
  

 

 

   

 

 

 

Comprehensive income

   639     952  

Less: Comprehensive income attributable to the noncontrolling interest in subsidiary

   18     42  
  

 

 

   

 

 

 

Comprehensive income attributable to FedFirst Financial Corporation

  $621    $910  
  

 

 

   

 

 

 

LOGO

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)

(Dollars in thousands, except per share data)

 Common
Stock
  Additional
Paid-in-
Capital
  Retained
Earnings
  Accumulated
Other
Comprehensive
(Loss) Income
  Unearned
ESOP
  Noncontrolling
Interest in
Subsidiary
  Total
Stockholders’
Equity
 

December 31, 2012

 $25   $34,986   $19,821   $(388 $(1,210 $60   $53,294  

Comprehensive income:

       

Net income

  —      —      794    —      —      42    836  

Other comprehensive income, net of tax of $74

  —      —      —      116    —      —      116  

Purchase and retirement of common stock (15,000 shares)

  —      (260  —      —      —      —      (260

ESOP shares committed to be released

  —      (8  —      —      44    —      36  

Stock-based compensation expense

  —      48    —      —      —      —      48  

Distribution to noncontrolling shareholder

  —      —      —      —      —      (32  (32

Dividends paid ($0.04 per share)

  —      —      (99  —      —      —      (99
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

March 31, 2013

 $25   $34,766   $20,516   $(272 $(1,166 $70   $53,939  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(Dollars in thousands, except per share data)

 Common
Stock
  Additional
Paid-in-
Capital
  Retained
Earnings
  Accumulated
Other
Comprehensive
Income
  Unearned
ESOP
  Noncontrolling
Interest in
Subsidiary
  Total
Stockholders’
Equity
 

December 31, 2013

 $24   $31,169   $21,528   $62   $(1,037 $105   $51,851  

Comprehensive income:

       

Net income

  —      —      534    —      —      18    552  

Other comprehensive income, net of tax of $56

  —      —      —      87    —      —      87  

Purchase and retirement of common stock (41,200 shares)

  (1  (825  —      —      —      —      (826

ESOP shares committed to be released

  —      (2  —      —      43    —      41  

Stock-based compensation expense

  —      80    —      —      —      —      80  

Distribution to noncontrolling shareholder

  —      —      —      —      —      (77  (77

Dividends paid ($0.31 per share)

  —      —      (703  —      —      —      (703
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

March 31, 2014

 $23   $30,422   $21,359   $149   $(994 $46   $51,005  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See Notes to the Unaudited Consolidated Financial Statements.

LOGO

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE

MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)

   Three Months Ended
March 31,
 

(Dollars in thousands)

  2014  2013 

Cash flows from operating activities:

   

Net income of FedFirst Financial Corporation

  $534   $794  

Adjustments to reconcile net income to net cash provided by operating activities:

   

Noncontrolling interest in net income of consolidated subsidiary

   18    42  

Provision for loan losses

   75    —    

Depreciation

   88    79  

Amortization of intangibles

   5    23  

Net amortization of security premiums and loan costs

   83    129  

Noncash expense for ESOP

   41    36  

Noncash expense for stock-based compensation

   80    48  

Increase in bank-owned life insurance

   (60  (61

(Increase) decrease in other assets

   (7  376  

Decrease in other liabilities

   (334  (147
  

 

 

  

 

 

 

Net cash provided by operating activities

   523    1,319  

Cash flows from investing activities:

   

Net loan originations

   (5,563  (2,965

Proceeds from maturities and principal repayments of securities available-for-sale

   1,400    6,149  

Purchases of premises and equipment

   (28  (21

Decrease in FHLB stock, at cost

   279    557  
  

 

 

  

 

 

 

Net cash (used in) provided by investing activities

   (3,912  3,720  

Cash flows from financing activities:

   

Net decrease in short-term borrowings

   (9,067  (9,800

Repayments of long-term borrowings

   —      (986

Net increase in deposits

   14,404    5,136  

Increase (decrease) in advance payments by borrowers for taxes and insurance

   99    (46

Purchase and retirement of common stock

   (826  (260

Dividends paid

   (703  (99

Distribution to noncontrolling shareholder

   (77  (32
  

 

 

  

 

 

 

Net cash provided by (used in) financing activities

   3,830    (6,087
  

 

 

  

 

 

 

Net increase (decrease) in cash and cash equivalents

   441    (1,048

Cash and cash equivalents, beginning of period

   5,552    5,874  
  

 

 

  

 

 

 

Cash and cash equivalents, end of period

  $5,993   $4,826  
  

 

 

  

 

 

 

Supplemental cash flow information:

   

Cash paid for:

   

Interest on deposits and borrowings (including interest credited to deposit accounts of $332 and $411 respectively)

  $610   $789  

Income tax expense

   247    30  

Real estate acquired in settlement of loans

   —      105  
  

 

 

  

 

 

 

See Notes to the Unaudited Consolidated Financial Statements.

LOGO

Notes to the Unaudited Consolidated Financial Statements

Note 1.Basis of Presentation/Nature of Operations

The accompanying unaudited Consolidated Financial Statements include the accounts of FedFirst Financial Corporation (“FedFirst Financial” or the “Company”), a stock holding company established in 2010, whose wholly owned subsidiary is First Federal Savings Bank (“First Federal” or the “Bank”), a federally chartered stock savings bank, which owns FedFirst Exchange Corporation (“FFEC”). FFEC has an 80% controlling interest in Exchange Underwriters, Inc. (“Exchange Underwriters”). Exchange Underwriters is a full-service, independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products. All significant intercompany transactions have been eliminated.

First Federal operates as a community-oriented financial institution offering residential, multi-family and commercial mortgages, consumer loans and commercial business loans as well as a variety of deposit products for individuals and businesses from seven locations in southwestern Pennsylvania. First Federal conducts insurance brokerage activities through Exchange Underwriters. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

The unaudited consolidated financial statements were prepared in accordance with instructions to Form 10-Q and, therefore, do not include information or notes necessary for a complete presentation of financial position, results of operations, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, all normal recurring adjustments that, in the opinion of management,Securities are necessary to make the consolidated financial statements not misleading have been included. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the full year or any other interim period.

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

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 securitiesperiodically reviewed for other-than-temporary impairment based upon a number of factors, including, related cash flow projections, goodwill impairment, and the valuation of deferred tax assets.

Note 2.Recent Accounting Pronouncements

ASU 2013-11 Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11,Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. The ASU is intendedbut not limited to, eliminate diversity in practice resulting from a lack of guidance on this topic in current GAAP. Under the ASU, an entity generally must present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this ASU did not have a material impact on the Company’s financial condition and results of operation.

LOGO

ASU 2014-04 Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. In January 2014, the FASB issued ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure, to reduce diversity in practice by clarifying when an in substance repossession of foreclosure occurs, that is, when a creditor should be considered to have received physical possession of a residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operation.

ASU 2014-06 Technical Corrections and Improvements Related to Glossary Terms. In March 2014, the FASB issued ASU 2014-06, Technical Corrections and Improvements Related to Glossary Terms, to amend and clarify various master glossary terms that cover a wide range of topics in the Accounting Standards Codification. The amendments in this ASU were effective upon issuance and did not have a material impact on the Company’s financial condition and results of operations.

Note 3.Securities

The following table sets forth the amortized cost and fair value of securities available-for-sale at the dates indicated (dollars in thousands).

       Gross   Gross     
   Amortized   Unrealized   Unrealized   Fair 

March 31, 2014

  Cost   Gains   Losses   Value 

Municipal bonds

  $7,971    $217    $126    $8,062  

Mortgage-backed—GSEs

   7,245     464     —       7,709  

REMICs

   6,020     75     18     6,077  

Corporate debt

   3,996     —       367     3,629  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available-for-sale

  $25,232    $756    $511    $25,477  
  

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2013

                

Municipal bonds

  $7,988    $207    $225    $7,970  

Mortgage-backed—GSEs

   7,740     452     —       8,192  

REMICs

   6,946     98     25     7,019  

Corporate debt

   3,996     —       405     3,591  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available-for-sale

  $26,670    $757    $655    $26,772  
  

 

 

   

 

 

   

 

 

   

 

 

 

The amortized cost and fair value of securities at March 31, 2014 by contractual maturity were as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

   Amortized   Fair 

(Dollars in thousands)

  Cost   Value 

Due in one year or less

  $1    $1  

Due from one to five years

   2,074     2,277  

Due from five to ten years

   6,198     6,252  

Due after ten years

   16,959     16,947  
  

 

 

   

 

 

 

Total

  $25,232    $25,477  
  

 

 

   

 

 

 

LOGO

The following table presents gross unrealized losses and fair value of securities aggregated by category and length of time that individual securities have been in a continuous loss position at the dates indicated (dollars in thousands).

  Less than 12 months  12 months or more  Total 

March 31, 2014

 Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
  Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
  Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
 

Municipal bonds

  1   $2,715   $75    1   $1,084   $51    2   $3,799   $126  

REMICs

  1    1,633    18    —      —      —      1    1,633    18  

Corporate debt

  —      —      —      3    3,629    367    3    3,629    367  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total securities temporarily impaired

  2   $4,348   $93    4   $4,713   $418    6   $9,061   $511  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  Less than 12 months  12 months or more  Total 

December 31, 2013

 Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
  Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
  Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
 

Municipal bonds

  2   $4,147   $142    1   $1,058   $83    3   $5,205   $225  

REMICs

  3    2,532    25    —      —      —      3    2,532    25  

Corporate debt

  —      —      —      3    3,591    405    3    3,591    405  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total securities temporarily impaired

  5   $6,679   $167    4   $4,649   $488    9   $11,328   $655  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The Company reviews its investment portfolio on a quarterly basis for indications of other-than-temporary impairment (“OTTI”). This review includes analyzing the length of time and the extent to which the fairmarket value has been lowerless than the cost, the financial condition and near-term prospectsof the underlying issuer, the ability of the issuer including any specific events that may influenceto meet contractual obligations, the operationslikelihood of the issuer,security’s ability to recover any decline in its market value, and themanagement’s intent and ability to hold the investmentsecurity for a period of time sufficient to allow for any anticipateda recovery in market value. Among the market.

Municipal Bonds—At March 31, 2014, the Company had one municipal bond with an unrealized lossfactors that are considered in determining management’s intent and ability is a review of $75,000 in an unrealized lossFirst West Virginia’s capital adequacy, interest rate risk position and liquidity. The assessment of less than 12 months and one municipal bond with an unrealized loss of $51,000 in an unrealized loss position of 12 months or more. An evaluation was performed on each bond. For the bond in an unrealized loss position of less than 12 months, there were no events to indicate deterioration in credit with unchanged, investment grade credit ratings. The Company believes the unrealized loss on this bond is due to market conditions, specifically rising interest rates impacting the value of the bonds. For the bond in an unrealized loss position of 12 months or more, the credit rating was initially downgraded in 2012 primarily due to budgetary challenges and more recently in July 2013 primarily due to accreditation concerns; however the credit rating remains investment grade and the strong income indicators of the economic base and sound financial policies and practices of the municipality, and the municipality’sa security’s ability to levy a property tax that is sufficient to be used for bond payment are expected to allow it to repay debt and meet its contractual obligations. Therefore, the Company believes the unrealized loss of this bond is due to changesrecover any decline in market conditions. The Company does not intend to sell the bonds and it is more likely than not that the Company will not be required to sell the bonds before recovery. The Company expects to recover the entire amortized cost basis and concluded that there was no OTTI on these bonds at March 31, 2014.

Corporate Debt—At March 31, 2014, the Company had three securities that were in an unrealized loss position for 12 months or more at an amount of $367,000. These securities consist of two pools of trust preferred corporate debt obligations (“CDOs”) collateralized by the trust preferred securities of insurance companies in the United States. These securities were downgraded from their original rating issuance to below investment grade in 2009 after purchase. Credit rating downgrades and market uncertainties are factors contributing to the unrealized losses on these securities.

LOGO

The following table provides additional information related to the Company’s CDOs at March 31, 2014 (dollars in thousands).

Pool

 Class Tranche Amortized
Cost
  Fair
Value
  Unrealized
Loss
  S&P
Rating
 Current
Number of
Insurance
Companies
  Total
Collateral
  Current
Deferrals
and
Defaults
  Performing
Collateral
  Additional
Immediate
Deferrals /
Defaults
Before
Causing an
Interest
Shortfall (a)
  Additional
Immediate
Deferrals /
Defaults
Before
Causing a
Break in
Yield (b)
 

I-PreTSL I

 Mezzanine B-3 $1,500   $1,295   $(205 CCC-  16   $188,300   $32,500   $155,800   $103,169   $46,000  

I-PreTSL II

 Mezzanine B-3  2,496    2,334    (162 BB+  22    275,500    24,500    251,000    186,472    105,000  
 

 

 

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   $3,996   $3,629   $(367       
   

 

 

  

 

 

  

 

 

        

(a)A temporary interest shortfall is caused by an amount of deferrals/defaults high enough such that there is insufficient cash flow available to pay current interest on the given tranche or by breaching the principal coverage test of the tranche immediately senior to the given tranche. Amounts presented represent additional deferrals/defaults beyond those currently existing that must occur before the security would experience an interest shortfall.
(b)A break in yield for a given tranche means that deferrals/defaults have reached such a level that the tranche would not receive all of its contractual cash flows (principal and interest) by maturity (so not just a temporary interest shortfall, but an actual loss in yield on the investment). In other words, the magnitude of the defaults/deferrals has depleted the entire credit enhancement (excess interest and over-collateralization) beneath the given tranche. Amounts presented represent additional deferrals/defaults beyond those currently existing that must occur before the security would experience a break in yield.

These securities are evaluated for OTTI by determining whether it is probable that an adverse change in estimated cash flows has occurred. Determining whether there has been an adverse change in estimated cash flows involves the calculation of the present value, of remaining cash flows compared to previously projected cash flows. None of these securities are projecting a cash flow disruption, nor have any of these securities experienced a cash flow disruption. Additionally, reports are reviewed that provide information for the amount of deferral/defaults that would have to occur to prevent the tranche from collecting contractual cash flows (principal and interest). These securities have a strong credit profile based on the stress analysis which found I-PreTSL I and I-PreTSL II could withstand an immediate default of up to 30% and 42%, respectively, of the remaining performing collateral and still expect to receive all contractual cashflows. The Company also reviewed each of the issues’ collateral participants, including their financial condition, ratings provided by A. M. Best (for insurance companies), and adverse conditions specifically related to industry or geographic area. This information did not suggest additional deferrals or defaults in the future that would result in the securities not receiving all of their contractual cash flows. Based on the analysis performed and the fact that the Company does not expect to sell these securities, and because it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis, the Company concluded that there was no OTTI on these securities at March 31, 2014.

In December 2013, the OCC adopted final regulations implementing section 619 of the Dodd-Frank Wall Street Reform and Protection Act, commonly known as the “Volcker Rule”, which restricts the ability of the issuer to meet contractual obligations and management’s intent and ability requires considerable judgment. Once a banking entitydecline in value is determined to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund (referred to as a “covered fund”). A banking entity must divest its holding in covered funds by July 15, 2015. A covered fund is defined to include any issuer that would be an investment company under the Investment Company Act of 1940, but relies on the exemption for funds sold to fewer than 100 investors or the exemption for funds sold only to qualified purchasers. An issuer that could rely on a different exemption from the definition of investment company under the Investment Company Act would not be considered a covered fund, and therefore would not be subject to the Volcker Rule. In particular, the federal banking regulators have noted that some issuers of CDOs may qualify for exemption under Investment Company Act Rule 3a-7, which exempts non-managed fixed income funds from the definition of investment company. Therefore,other-than-temporary, if the issuer meets the requirements of Rule 3a-7, the CDOs will not be subject to the Volcker Rule. Based on our review, the CDOs held by the Bank as of March 31, 2014 satisfy all conditions for relying on the exemption under Investment Company Act Rule 3a-7, and therefore are not considered a covered fund that require divesture by July 15, 2015. The CDOs were in an unrealized loss position of $367,000 at March 31, 2014.

Other Securities—This category may include mortgage-backed securities and REMICS. At March 31, 2014, the Company had one REMIC security that was issued and backed by a Government-Sponsored Enterprise (“GSE”) with an unrealized loss

LOGO

of $18,000. The security was in an unrealized loss position for less than 12 months. The Company believes the unrealized loss of the security is due to changes in market interest rates or changes in market conditions as there was no indication that the issuers were having financial difficulties. The Companyinvestor does not intend to sell the security, and it ismore-likely-than-not that it will not more likely than not that the Company will be required to sell the security before its recovery. The Company expects to recoverrecovery of the entiresecurity’s amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as thenon-credit portion) is recognized in other comprehensive income (loss), net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. At December 31, 2016 and 2015, there were no investment securities identified by management to be other-than-temporarily impaired. If investments decline in fair value due to adverse changes in the financial markets, charges to income could occur in future periods.

Federal Reserve and Federal Home Loan Bank stock are required investments for institutions that are members of the securityFederal Reserve and concluded that there was no OTTIFederal Home Loan Bank systems. The required investment in the common stock is based on a predetermined formula, carried at March 31, 2014.cost and evaluated for impairment.

Loans and Loans Held for Sale

Note 4.Loans

The following table sets forth the composition of our loan portfolioLoans are generally reported at the dates indicated (dollarsprincipal balance outstanding, net of unearned income. Interest income on loans is accrued based on the principal outstanding. It is First West Virginia’s policy to discontinue the accrual of interest when either the principal or interest is past due 90 days or more, unless the loan is both well secured and in thousands).the process of collection. It is First West Virginia’s policy not to recognize interest income on specific impaired loans unless the likelihood of future loss is remote. Interest payments received on such loans are applied as a reduction of the loan principal balance. A nonaccrual loan may be returned to accrual status when none of its principal and interest payments are due and there has been a sustained period of repayment performance. Loans are considered past due when contractually required principal and interest payments have not been made on the due dates. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized over the contractual life of the related loans or commitments as an adjustment of the related loan’s yield using the level yield method. Loans held for sale are carried at the lower of cost or estimated fair value in the aggregate. First West Virginia had no loans held for sale as of December 31, 2016 and 2015.

   March 31, 2014  December 31, 2013 
   Amount  Percent  Amount  Percent 

Real estate-mortgage:

     

One- to four-family residential

     

Originated

  $103,569    35.9 $104,870    37.1

Purchased

   6,604    2.3    6,888    2.4  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total one- to four-family residential

   110,173    38.2    111,758    39.5  

Multi-family

     

Originated

   6,996    2.4    7,083    2.5  

Purchased

   3,736    1.3    3,768    1.3  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total multi-family

   10,732    3.7    10,851    3.8  

Commercial

   66,478    23.1    61,889    21.9  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate-mortgage

   187,383    65.0    184,498    65.2  
  

 

 

  

 

 

  

 

 

  

 

 

 

Real estate-construction:

     

Residential

   5,305    1.8    3,337    1.2  

Commercial

   16,082    5.6    15,979    5.7  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total real estate-construction

   21,387    7.4    19,316    6.9  
  

 

 

  

 

 

  

 

 

  

 

 

 

Consumer:

     

Home equity

     

Loan-to-value ratio of 80% or less

   46,896    16.3    47,543    16.9  

Loan-to-value ratio of greater than 80%

   9,091    3.1    9,247    3.3  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total home equity

   55,987    19.4    56,790    20.2  

Other

   1,609    0.6    1,666    0.6  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total consumer

   57,596    20.0    58,456    20.8  
  

 

 

  

 

 

  

 

 

  

 

 

 

Commercial business

   21,990    7.6    20,023    7.1  
  

 

 

  

 

 

  

 

 

  

 

 

 

Total loans

  $288,356    100.0 $282,293    100.0
  

 

 

  

 

 

  

 

 

  

 

 

 

Net premiums on loans purchased

   92     93   

Net deferred loan costs

   307     351   

Loans in process

   (11,113   (10,617 

Allowance for loan losses

   (3,387   (3,308 
  

 

 

   

 

 

  

Loans, net

  $274,255    $268,812   
  

 

 

   

 

 

  

Consumer loans are fully charged off or charged down to net realizable value when deemed uncollectible due to bankruptcy or other factors or no later than a defined number of days past due. Consumer loans not secured by real estate are charged off or charged down to net realizable value at 120 days past due forclosed-end loans and 180 days past due foropen-end loans. Residential real estate loans are charged down to net realizable value at 120 days past due forclosed-end loans and 180 days past due foropen-end loans. Commercial loans are fully charged off or charged down to net realizable value when management judges the loan to be uncollectible.

LOGOFIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

 

Delinquencies.First West Virginia has entered into an agreement with the Federal Home Loan Bank of Pittsburgh (“FHLB”) under which Progressive Bank may sell conformingone-to-four family residential mortgage loans to the FHLB. The following tablecurrent agreement dated December 28, 2015 provides information about delinquenciesfor a maximum commitment of $5,000,000. This commitment expires on December 28, 2017. Loans sold to the FHLB are sold with limited recourse or credit risk based upon utilization of the original commitment. Progressive Bank also maintains the servicing of these loans, for which it is paid a servicing fee. The total amount of loans sold and outstanding to the FHLB were $6,206,000 and $7,520,000 as of December 31, 2016 and 2015, respectively. These loans were also subject to recourse obligation or credit risk in our loan portfoliothe amount of $226,000 and $311,000 at December 31, 2016 and 2015, respectively. No liability has been recorded for the dates indicated (dollars in thousands).

   March 31, 2014   December 31, 2013 
   30-59
Days
Past
Due
   60-89
Days
Past
Due
   90 Days
or Greater
Past

Due
   30-59
Days
Past
Due
   60-89
Days
Past
Due
   90 Days
or Greater
Past

Due
 

Real estate—mortgage:

            

One- to four-family residential

            

Originated

  $1,428    $225    $536    $1,012    $427    $627  

Purchased

   65     —       307     —       —       307  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total one- to four-family residential

   1,493     225     843     1,012     427     934  

Commercial

   29     —       470     30     —       493  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total real estate—mortgage

   1,522     225     1,313     1,042     427     1,427  

Real estate—construction:

            

Residential

   —       —       —       715     —       —    

Consumer:

            

Home equity

            

Loan-to-value ratio of 80% or less

   —       81     —       1     —       —    

Loan-to-value ratio of greater than 80%

   168     —       30     144     158     30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

   168     81     30     145     158     30  

Other

   —       4     —       —       3     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer

   168     85     30     145     161     30  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total delinquencies

  $1,690    $310    $1,343    $1,902    $588    $1,457  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LOGO

Nonperforming Assets.The following table provides information with respect to our nonperforming assets atrecourse obligation as the dates indicated (dollars in thousands).

   March 31, 2014  December 31, 2013 
   Number of
Contracts
   Amount  Number of
Contracts
   Amount 

Nonaccrual loans:

       

Real estate—mortgage:

       

One- to four-family residential

       

Originated

   3    $1,498    4    $1,595  

Purchased

   4     307    4     307  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total one- to four-family residential

   7     1,805    8     1,902  

Commercial

   2     470    2     493  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total real estate—mortgage

   9     2,275    10     2,395  

Consumer:

       

Home equity (loan-to-value ratio of greater than 80%)

   1     30    1     30  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total nonaccrual loans

   10     2,305    11     2,425  
  

 

 

   

 

 

  

 

 

   

 

 

 

Accruing loans past due 90 days or more

   —       —      —       —    
  

 

 

   

 

 

  

 

 

   

 

 

 

Total nonaccrual loans and accruing loans past due 90 days or more

   10     2,305    11     2,425  

Real estate owned

   1     126    1     126  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total nonperforming assets

   11    $2,431    12    $2,551  
  

 

 

   

 

 

  

 

 

   

 

 

 

Troubled debt restructurings

       

In nonaccrual status

   1     963    1     968  

Performing under modified terms

   8     2,330    8     2,358  
  

 

 

   

 

 

  

 

 

   

 

 

 

Troubled debt restructurings

   9    $3,293    9    $3,326  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total nonperforming loans to total loans

     0.80    0.86

Total nonperforming assets to total assets

     0.75      0.80  

Total nonperforming assets and troubled debt restructurings performing under modified terms to total assets

     1.47      1.54  
    

 

 

    

 

 

 

Troubled Debt Restructurings. A loan whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficultieslikelihood of incurring the liability is considered remote. The amount of income recognized as of a troubled debt restructuring (“TDR”). TDRs typically are the result of our loss mitigation activities whereby concessions are granted to minimize lossthis agreement was $21,000 and avoid foreclosure or repossession of collateral. The concessions granted$24,000 for the TDRs in our portfolio primarily consist of, but are not limited to, capitalization of principalyears ended December 31, 2016 and interest due, reverting from payment of principal and interest to interest-only, or extending a maturity date through a signed forbearance agreement. Certain TDRs were placed in nonaccrual status at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance2015, respectively.

Allowance for a reasonable period which is generally six months. Loans that were current at the time of classification remained on an accrual basis and are monitored to ensure restructured contractual terms are met.Loan Losses

TDRs are typically evaluated for any possible impairment similar to other impaired loans based on the current fair value of the collateral, less selling costs, for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through a specificThe allowance for loan losses. In periods subsequentlosses represents the amount which management estimates is adequate to modification, we continue to evaluate all TDRsprovide for any additional impairment and will adjust any specific allowances accordingly.

There were no loans modified as a TDR during the three months ended March 31, 2014 and 2013.

LOGO

Impaired Loans.probable incurred losses inherent in its loan portfolio. The following tables summarize informationallowance method is used in regards to impaired loans by loan portfolio class at the dates indicated (dollars in thousands).

       Unpaid       Average   Interest 
   Recorded   Principal   Related   Recorded   Income 

March 31, 2014

  Investment   Balance   Allowance   Investment   Recognized 

Impaired loans with no related allowance recorded

          

One- to four-family originated residential

  $1,499    $1,499    $—      $1,502    $15  

Commercial real estate

   2,662     2,675     —       2,692     43  

Home equity (loan-to-value ratio of 80% or less)

   401     401     —       403     5  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $4,562    $4,575    $—      $4,597    $63  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

       Unpaid       Average   Interest 
   Recorded   Principal   Related   Recorded   Income 

December 31, 2013

  Investment   Balance   Allowance   Investment   Recognized 

Impaired loans with no related allowance recorded

          

One- to four-family originated residential

  $1,505    $1,505    $—      $1,515    $65  

Commercial real estate

   2,705     2,705     —       2,742     149  

Home equity (loan-to-value ratio of 80% or less)

   405     405     —       409     10  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $4,615    $4,615    $—      $4,666    $224  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allowanceproviding for loan losses. Accordingly, all loan losses are charged to the allowance, and all recoveries are credited to it. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary,established through a provision for loan losses that is charged to earnings.

Our methodology for assessingoperations. The provision is based on management’s evaluation of the appropriatenessadequacy of the allowance for loan losses consists of: (1) a valuation allowance on impaired loans; and (2) a valuation allowance onwhich encompasses the remainderoverall risk characteristics of the loan portfolio. Although we determinevarious portfolio segments, past experience with losses, the amountimpact of each elementeconomic conditions on borrowers, and other relevant factors. The estimates used in determining the adequacy of the allowance separately, the entire allowance for loan losses, including the amounts and timing of future cash flows expected on impaired loans, are particularly susceptible to significant changes in the near term.

Management tracks and assigns a historical loss percentage for each loan rating category within each loan type. A rolling three-year historical loss ratio is availableused, calculated on a quarterly basis.

Management currently utilizes nine qualitative factors that are adjusted based on changes in the lending environment and economic conditions. The qualitative factors include the following: levels of and trends in delinquencies, nonaccruals, and charge-offs; trends within the loan portfolio; changes in lending policies and procedures; experience of lending personnel and management oversight; national and local economic trends; concentrations of credit; external factors such as legal and regulatory requirements; changes in the quality of loan review and Board oversight; and changes in the value of underlying collateral. The number of qualitative factors can change. Factors can be added for new risks or taken away if the risk no longer applies. Each loan type will have its own risk profile and management will evaluate and adjust each qualitative factor for each loan type quarterly, if necessary. For example, if one area of the loan portfolio is experiencing sharp increases in growth, it is likely the qualitative factor for trends in the loan portfolio would be increased for that loan type. As levels of delinquencies and nonaccrual loans decline for a loan type, it is likely that factor would be reduced.

In terms of First West Virginia’s loan portfolio, the commercial and industrial loans and commercial real estate loans are deemed to have more risk than the consumer real estate loans and other consumer loans in the portfolio. The commercial loans not secured by real estate are highly dependent on financial condition and are more dependent on economic conditions. The commercial loans secured by real estate are also dependent on economic conditions but generally have stronger forms of collateral. The commercial loans and commercial real estate loans have historically been responsible for the entire portfolio.majority of First West Virginia’s delinquencies, nonaccrual loans, and charge-offs so both of these categories carry higher qualitative factors than consumer real estate loans and other consumer loans.

Allowance

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Mortgage loans secured byone-to-four family properties and all consumer loans are large groups of smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired. Management determines the significance of payment delays on acase-by-case basis taking into consideration all circumstances concerning the loan, the credit worthiness and payment history of the borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and interest owed.

Impaired Loans.We establish an allowanceloans are loans for which it is probable First West Virginia will not be able to collect all amounts due according to the contractual terms of the loan agreement. First West Virginia individually evaluates such loans thatfor impairment and does not aggregate loans by major risk classifications. The definition of “impaired loans” is not the same as the definition of “nonaccrual loans,” although the two categories overlap.

First West Virginia may choose to place a loan on nonaccrual status due to payment delinquency or uncertain collectability while not classifying the loan as impaired, provided the loan is not a commercial or commercial real estate classification. Payments received on nonaccrual loans are individually evaluatedapplied as a reduction of the loan principal balance. Factors considered by management in determining impairment include payment status and determined to be impaired.collateral value. The amount of impairment for these types of loans is determined by the difference between the present value of the expected cash flows related to the loan, using currentthe original interest ratesrate, and its recorded value, or as a practical measure in the case of collateralizedcollateral dependent loans, the difference between the fair value of the collateral and the recorded amount of the loans less estimated selling costs. At March 31, 2014, there were seven loan relationships that were individually evaluated for impairment, of which five were considered TDRs. TDR and impaired loan activity and any related specific allowances were previously discussed in the“Troubled Debt Restructurings” and“Impaired Loans” sections.

Allowance on the Remainder of the Loan Portfolio. We establish an allowance for loans that are not determined to be impaired. Management determines historical loss experience for each group of loans with similar risk characteristics within the portfolio based on loss experience for loans in each group. Loan categories will represent groups of loans with similar risk characteristics and may include types of loans categorized by product, large credit exposures, concentrations, loan grade, or any other characteristic that causes a loan’s risk profile to be similar to another. We utilize previous years’ net charge-off experience by loan category as a basis in determining loss projections. In addition, there are two categories of loans considered to be higher risk concentrations that are evaluated separately when calculating the allowance for loan losses:

Loans purchased in the secondary market. Prior to 2006, pools of multi-family and one- to four- family residential mortgage loans located in areas outside of our primary geographic lending area in southwestern Pennsylvania were acquired in the secondary market. Although these loans were underwritten to our lending standards, they are considered higher risk given our unfamiliarity with the geographic areas where the properties are located and ability to timely identify problem loans through servicer correspondence.

Home equity loans with a loan-to-value ratio greater than 80%. These loans are considered higher risk given the pressure on property values and reduced credit alternatives available to leveraged borrowers.

LOGO

We also consider qualitative or environmental factors that are likely to cause estimated credit losses associated with the bank’s existing portfolio to differ from historical loss experience. Our historical loss experience and qualitative and environmental factors are reviewed on a quarterly basis to ensure they are reflective of current conditions in our loan portfolio and economy. At March 31, 2014, we utilized the three most recent years of loss history and periods where we did not experience any losses were excluded from determining the historical average loss for each loan class. Certain historical loss factors are annually adjusted when another complete year of loss history is available in order to incorporate recent loss experience in the allowance calculation.

LOGO

The following table summarizes the activity in the allowance for loan losses for the three months ended March 31, 2014 (dollars in thousands).

  Real estate—mortgage  Real estate—construction  Consumer          
  One- to four-family                 

Home equity (loan-

to-value ratio of

             
  residential  Multi-family           80%  greater  Other  Commercial       
  (originated)  (purchased)  (originated)  (purchased)  Commercial  Residential  Commercial  or less)  than 80%)  Consumer  business  Unallocated  Total 

Loan Balance

 $103,569   $6,604   $6,996   $3,736   $66,478   $5,305   $16,082   $46,896   $9,091   $1,609   $21,990    $288,356  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for loan losses:

             

December 31, 2013

 $432   $286   $114   $34   $1,025   $6   $103   $475   $268   $11   $432   $122   $3,308  

Charge-offs

  —      —      —      —      —      —      —      —      —      —      —      —      —    

Recoveries

  3    —      —      —      —      —      —      —      1    —      —      —      4  

Provision

  (17  (11  (1  —      70    3    10    (6  (6  —      24    9    75  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

March 31, 2014

 $418   $275   $113   $34   $1,095   $9   $113   $469   $263   $11   $456   $131   $3,387  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively evaluated on historical loss experience

 $112   $137   $—     $—     $59   $—     $—     $30   $87   $6   $21   $—     $452  

Collectively evaluated on qualitative factors

  306    138    113    34    1,036    9    113    439    176    5    435    —      2,804  

Unallocated

  —      —      —      —      —      —      —      —      —      —      —      131    131  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total allowance for loan losses

 $418   $275   $113   $34   $1,095   $9   $113   $469   $263   $11   $456   $131   $3,387  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Percent of Allowance

  12.4  8.1  3.3  1.0  32.3  0.3  3.3  13.8  7.8  0.3  13.5  3.9  100.0

Percent of Loans (1)

  35.9  2.3  2.4  1.3  23.1  1.8  5.6  16.3  3.1  0.6  7.6   100.0

(1)Represents percentage of loans in each category to total loans.

LOGO

The following table summarizes the activity in the allowance for loan losses for the three months ended March 31, 2013 (dollars in thousands).

  Real estate—mortgage  Real estate—construction  Consumer          
  One- to four-family                 

Home equity (loan-

to-value ratio of

             
  residential  Multi-family           80%  greater  Other  Commercial       
  (originated)  (purchased)  (originated)  (purchased)  Commercial  Residential  Commercial  or less)  than 80%)  Consumer  business  Unallocated  Total 

Loan Balance

 $106,616   $9,316   $10,989   $4,193   $45,761   $1,763   $11,981   $44,564   $8,401   $1,778   $16,182    $261,544  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for loan losses:

             

December 31, 2012

 $466   $372   $33   $102   $802   $3   $8   $434   $246   $19   $245   $156   $2,886  

Charge-offs

  —      (29  —      —      —      —      —      —      —      —      —      —      (29

Recoveries

  3    —      —      —      —      —      —      —      —      3    —      —      6  

Provision

  (21  (3  —      —      5    —      10    30    18    (4  18    (53  —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

March 31, 2013

 $448   $340   $33   $102   $807   $3   $18   $464   $264   $18   $263   $103   $2,863  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively evaluated on historical loss experience

 $133   $152   $—     $64   $90   $—     $—     $64   $105   $13   $9   $—     $630  

Collectively evaluated on qualitative factors

  315    188    33    38    717    3    18    400    159    5    254    —      2,130  

Unallocated

  —      —      —      —      —      —      —      —      —      —      —      103    103  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total allowance for loan losses

 $448   $340   $33   $102   $807   $3   $18   $464   $264   $18   $263   $103   $2,863  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Percent of Allowance

  15.6  11.9  1.2  3.6  28.2  0.1  0.6  16.2  9.2  0.6  9.2  3.6  100.0

Percent of Loans (1)

  40.7  3.6  4.2  1.6  17.5  0.7  4.6  17.0  3.2  0.7  6.2   100.0

(1)Represents percentage of loans in each category to total loans.

LOGO

Credit Quality Information. Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office of the Comptroller of the Currency (“OCC”) has the authority to identify problem assets and, if appropriate, require them to be classified. There are four classifications for problem assets: special mention, substandard, doubtful and loss. The following table presents the classes of the loan portfolio and shows our credit risk profile by internally assigned risk rating at the dates indicated (dollars in thousands).

  Real estate—mortgage  Real estate—construction  Consumer       
                       Home equity (loan-          
  One- to four-family                 to-value ratio of          
  residential  Multi-family           80%  greater  Other  Commercial  Total 

March 31, 2014

 (originated)  (purchased)  (originated)  (purchased)  Commercial  Residential  Commercial  or less)  than 80%)  Consumer  business  loans 

Grade:

            

Pass

 $102,071   $6,297   $5,161   $3,736   $63,058   $5,305   $16,082   $46,293   $9,061   $1,609   $20,093   $278,766  

Special Mention

  —      —      1,835    —      574    —      —      —      —      —      1,897��   4,306  

Substandard

  1,498    307    —      —      2,846    —      —      603    30    —      —      5,284  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $103,569   $6,604   $6,996   $3,736   $66,478   $5,305   $16,082   $46,896   $9,091   $1,609   $21,990   $288,356  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Real estate—mortgage  Real estate—construction  Consumer       
                       Home equity (loan-          
  One- to four-family                 to-value ratio of          
  residential  Multi-family           80%  greater  Other  Commercial  Total 

December 31, 2013

 (originated)  (purchased)  (originated)  (purchased)  Commercial  Residential  Commercial  or less)  than 80%)  Consumer  business  loans 

Grade:

            

Pass

 $103,275   $6,581   $5,231   $3,768   $58,311   $3,337   $15,979   $46,934   $9,217   $1,666   $17,964   $272,263  

Special Mention

  —      —      1,852    —      676    —      —      —      —      —      2,059    4,587  

Substandard

  1,595    307    —      —      2,902    —      —      609    30    —      —      5,443  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $104,870   $6,888   $7,083   $3,768   $61,889   $3,337   $15,979   $47,543   $9,247   $1,666   $20,023   $282,293  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LOGO

Note 5.Deposits

Deposits are summarized as follows (dollars in thousands).

   March 31, 2014  December 31, 2013 
   Amount   Percent  Amount   Percent 

Noninterest-bearing demand deposits

  $30,836     13.2 $27,247     12.4

Interest-bearing demand deposits

   35,434     15.2    30,733     14.0  

Savings accounts

   24,923     10.7    24,415     11.1  

Money market accounts

   55,660     23.8    48,746     22.2  

Certificates of deposit

   86,783     37.1    88,091     40.3  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total deposits

  $233,636     100.0 $219,232     100.0
  

 

 

   

 

 

  

 

 

   

 

 

 

Note 6.Borrowings

We utilize borrowings as a supplemental source of funds for loans and securities. The primary sources of borrowings are FHLB advances and, to a limited extent, repurchase agreements. At March 31, 2014 and December 31, 2013, we had $36.8 million and $45.9 million of borrowings, respectively, of which $33.8 million and $42.9 million, respectively, were FHLB advances and $3.0 million were repurchase agreements. At March 31, 2014 and December 31, 2013, our FHLB advances were comprised of fixed rate advances.

The following table sets forth borrowings based on their stated maturities and weighted average rates at the dates indicated.

   March 31, 2014  December 31, 2013 

(Dollars in thousands)

  Balance  Weighted
Average
Rate
  Balance  Weighted
Average
Rate
 

Due in one year or less

  $24,750    2.56 $33,860    1.81

Due in one to two years

   12,000    3.82    12,000    3.82  
  

 

 

  

 

 

  

 

 

  

 

 

 

Advances

  $36,750    $45,860   

Less: deferred premium on modification

   (226   (269 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total advances

  $36,524    2.97 $45,591    2.34
  

 

 

  

 

 

  

 

 

  

 

 

 

The following table sets forth information concerning our borrowings for the periods indicated.

(Dollars in thousands)

  Three Months
Ended
March 31,
2014
  Year
Ended
December 31,
2013
 

Maximum amount outstanding at any month end during the period

  $43,260   $46,338  

Average amount outstanding during the period

   42,624    37,784  

Weighted average rate during the period

   2.57  3.37

Note 7.Earnings Per Share

Basic earnings per common share is calculated by dividing FedFirst Financial’s net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed in a manner similar to basic earnings per common share except that the weighted-average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Common stock equivalents include restricted stock awards and stock options. Anti-dilutive shares are common stock equivalents with weighted-average exercise prices in excess of the weighted-average market value for the periods presented. Unallocated common shares held by the Employee Stock Ownership Plan (“ESOP”) are not included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted earnings per common share until they are committed to be released.

LOGO

The following table sets forth basic and diluted earnings per common share at the dates indicated.

   Three Months Ended 
   March 31, 

(Dollars in thousands, except per share amounts)

  2014   2013 

Net income of FedFirst Financial Corporation

  $534    $794  

Weighted-average shares outstanding:

    

Basic

   2,235,132     2,457,646  

Effect of dilutive stock options and restrictive stock awards

   50,876     14,757  
  

 

 

   

 

 

 

Diluted

   2,286,008     2,472,403  

Earnings per share:

    

Basic

  $0.24    $0.32  

Diluted

   0.23     0.32  
  

 

 

   

 

 

 

The dilutive effect on average shares outstanding is the result of stock options outstanding and restricted stock. At March 31, 2014 and March 31, 2013, options to purchase 134,538 and 163,313 shares of common stock, respectively, at a weighted average exercise price of $19.31 and $17.40 per share, respectively, were outstanding but not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares.

Note 8.Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could realize in a sale transaction on the dates indicated. The estimated fair value amounts were measured as of March 31, 2014 and December 31, 2013 and were not re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to March 31, 2014 and December 31, 2013 may be different than the amounts reported at each period end.

The fair value hierarchy prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are as follows:

Level 1—Quoted prices for identical instruments in active markets.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are active, and model derived valuations in which significant inputs or significant drivers are observable in active markets.
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant drivers are unobservable.

The following is a discussion of assets and liabilities measured at fair value on a recurring basis and the valuation techniques used:

Securities available for sale. The majority of the Company’s securities are included in Level 2 of the fair value hierarchy. Fair values 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. In some cases, the fair value was determined from a broker who is able to quote a price based on observable inputs in a liquid market for similar securities.

LOGO

In some instances, the fair value of certain securities cannot be determined using these techniques due to the lack of relevant market data. As such, these securities are valued using an alternative technique and classified within Level 3 of the fair value hierarchy. At March 31, 2014, Level 3 includes three corporate debt securities with a fair value of $3.6 million.

The corporate debt securities are pooled trust preferred CDOs collateralized by the trust preferred securities of insurance companies in the United States. The CDOs, which were rated A at purchase and are currently rated below investment grade, could not be priced using quoted market prices, observable market activity or comparable trades, and the financial market was considered not active. The trust preferred market has been severely impacted by the lack of liquidity in the credit markets and concern over the financial services industry. There has been little or no active trading in these securities; therefore it was more appropriate to determine fair value using a discounted cash flow analysis.

The Company utilized a third party pricing service that performed a two-step process to determine the fair value of the CDOs. First, an asset analysis was performed to evaluate the credit quality of the collateral and the deal structure using probability of default values for each underlying issuer and loss given default values by asset type. Probability of default is the likelihood that the issuer of the CDOs will go into default and stop paying and was estimated using an expected default frequency approach, which considers the market value and volatility of a firm’s assets and the threshold for default. Probability of default was combined with correlation assumptions, which is the tendency of companies to default once other companies have defaulted. CDOs are more likely to experience stress at the same time since they are concentrated in the same sector, therefore a 50% asset correlation was assumed for issuers in the same industry. Loss given default is the amount of cash lost to the investor at the time of default and is related to the recovery rate. Loss and recovery estimates determine how much cash remains when an issuer goes into default. Deferrals are a common feature of CDOs and were treated as defaults in the analysis. Loss given default has been historically high for CDOs and therefore a 0% recovery rate was assumed on currently defaulted and deferring assets, which resulted in a 100% loss given default.

Second, a liability analysis was performed in which the expected cash flows produced based off the expected credit events of the asset analysis were allocated across the tranches to determine the tranches that would get paid or incur a loss. These expected cash flows were discounted at a risk free interest rate plus a premium for illiquidity (3 month LIBOR plus 300 basis points) to produce a discounted cash flow valuation and determine an estimated fair value.

For financial assets measured at fair value on a recurring basis, the following tables set forth the fair value measurements by fair value hierarchy at the dates indicated.

(Dollars in thousands)

  March 31, 2014   December 31, 2013 

Significant other observable inputs (Level 2)

    

Securities available-for-sale

    

Municipal bonds

  $8,062    $7,970  

Mortgage-backed—GSEs

   7,709     8,192  

REMICs

   6,077     7,019  
  

 

 

   

 

 

 

Total significant other observerable inputs (Level 2)

   21,848     23,181  

Significant unobservable inputs (Level 3)

    

Securities available-for-sale

    

Corporate debt

   3,629     3,591  
  

 

 

   

 

 

 

Total significant unobservable inputs (Level 3)

   3,629     3,591  
  

 

 

   

 

 

 

Total securities available-for-sale

  $25,477    $26,772  
  

 

 

   

 

 

 

Total assets measured at fair value on a recurring basis

  $25,477    $26,772  
  

 

 

   

 

 

 

LOGO

   Significant 
   Unobservable Inputs 

(Dollars in thousands)

  (Level 3) 

December 31, 2012

  $1,882  

Total unrealized gains included in other comprehensive income

   1,708  

Discount accretion

   1  
  

 

 

 

December 31, 2013

  $3,591  

Total unrealized gains included in other comprehensive income

   38  
  

 

 

 

March 31, 2014

  $3,629  
  

 

 

 

We may be required to measure certain assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or writedowns of individual assets.

The following is a discussion of assets and liabilities measured at fair value on a nonrecurring basis.

Impaired loans. Certain impaired loans over $250,000 are individually reviewed to determine the amount of each loan that may be at risk of noncollection. When repayment is expected solely from the collateral, the impaired loans are reported at the fair value of the underlying collateral using property appraisals less any projected selling costs.

Real estate owned. The fair value of real estate owned is estimated using property appraisals less any projected selling costs.

For financial assets measured at fair value on a nonrecurring basis, the following table sets forth the fair value measurements by fair value hierarchy at the dates indicated.

   December 31, 2013 

(Dollars in thousands)

  Carrying
Value
   Fair
Value
 

Level 3

    

Impaired loans

  $586    $586  

Real estate owned

   465     465  
  

 

 

   

 

 

 

Total assets measured at fair value on a nonrecurring basis

  $1,051    $1,051  
  

 

 

   

 

 

 

For Level 3 assets measured at fair value on a recurring basis as of March 31, 2014, the following table sets forth the significant unobservable inputs used in the fair value measurements.

(Dollars in thousands)

 Fair
Value
  Valuation Technique 

Significant

Unobservable Inputs

 Significant
Unobservable
Input Value
 

Recurring basis

    

Securities available-for-sale:

    

Corporate debt

 $3,629   Discounted cash flow 

Average probability of default

  0.98
   

Correlation for issuers in the same industry

  50
   

Deferral/default recovery rate on currently defaulted/deferring assets and projected defaults

  0
   

Prepayment

  0

The following presents the fair value of financial instruments. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value

LOGO

estimates cannot be sustained by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. In addition, the following information should not be interpreted as an estimate of the fair value of the Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at March 31, 2014 and December 31, 2013.

Cash and Cash Equivalents

The carrying amounts approximate the asset’s fair values.

Securities Available-for Sale

See previous discussion on securities available-for-sale measured at fair value on a recurring basis for further details on the valuation techniques used to determine the fair value of securities available-for-sale.

Loans

The fair values for residential real estate loans are estimated using discounted cash flow analyses using mortgage commitment rates from either FNMA or FHLMC. The fair values of consumer and commercial business loans are estimated using discounted cash flow analyses, using interest rates reported in various government releases. The fair values of multi-family and commercial real estate loans are estimated using discounted cash flow analysis, using interest rates based on national commitment rates on similar loans. The carrying value is net of the allowance for loan losses. Due to the significant judgment involved in evaluating credit quality and the allowance for loan losses, loans are classified as Level 3.

Federal Home Loan Bank Stock

The carrying amount approximates the asset’s fair value.

Accrued Interest Receivable and Accrued Interest Payable

The fair value of these instruments approximates the carrying value.

Deposits

The fair values disclosed for demand deposits (e.g., savings accounts) are, by definition, equal to the amount payable on demand at the repricing date (i.e., their carrying amounts). Fair values of certificates of deposits are estimated using a discounted cash flow calculation that applies the FHLB of Pittsburgh advance yield curve to the maturity schedule of the Bank’s certificates of deposit.

Borrowings

The fair value of FHLB advances and repurchase agreements are estimated using a discounted cash flow calculation using the current FHLB advance yield curve. This is the method that the FHLB of Pittsburgh used to determine the cost of terminating the borrowing contract.

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, 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 purposes.

LOGO

The following table sets forth the carrying amount and estimated fair value of financial instruments at the dates indicated (dollars in thousands).

   Carrying   Estimated   Fair Value Measurements 

March 31, 2014

  Amount   Fair Value   Level 1   Level 2   Level 3 

Financial assets:

          

Cash and cash equivalents

  $5,993    $5,993    $5,993    $—      $—    

Securities available-for-sale

   25,477     25,477     —       21,848     3,629  

Loans, net

   274,255     278,093     —       —       278,093  

FHLB stock

   2,310     2,310     —       2,310     —    

Accrued interest receivable

   1,004     1,004     —       1,004     —    

Financial liabilities:

          

Deposits

   233,636     233,979     —       233,979     —    

Borrowings

   36,524     37,156     —       37,156     —    

Accrued interest payable

   231     231     —       231     —    

   Carrying   Estimated   Fair Value Measurements 

December 31, 2013

  Amount   Fair Value   Level 1   Level 2   Level 3 

Financial assets:

          

Cash and cash equivalents

  $5,552    $5,552    $5,552    $—      $—    

Securities available-for-sale

   26,772     26,772     —       23,181     3,591  

Loans, net

   268,812     271,038     —       —       271,038  

FHLB stock

   2,589     2,589     —       2,589     —    

Accrued interest receivable

   993     993     —       993     —    

Financial liabilities:

          

Deposits

   219,232     219,538     —       219,538     —    

Borrowings

   45,591     46,446     —       46,446     —    

Accrued interest payable

   251     251     —       251     —    

Note 9.Other Comprehensive Income

The following table sets forth the tax effects allocated to each component of the Company’s other comprehensive income at the dates indicated (dollars in thousands).

   Before   Income   Net of 
   Income Tax   Tax   Income Tax 

Three Months Ended March 31, 2014

  Expense   Expense   Expense 

Other comprehensive income:

      

Unrealized gain on securities available-for-sale

  $143    $56    $87  

Three Months Ended March 31, 2013

            

Other comprehensive income:

      

Unrealized gain on securities available-for-sale

  $190    $74    $116  

Note 10.Segment Reporting

The consolidated operating results of FedFirst Financial are presented as a single financial services segment. FedFirst Financial is the parent company of the Bank, which owns FFEC. FFEC has an 80% controlling interest in Exchange Underwriters, Inc. Exchange Underwriters, Inc. is managed separately from the banking and related financial services that the Company offers. Exchange Underwriters, Inc. is an independent insurance agency that offers property and casualty, life, health, commercial general liability, surety and other insurance products.

LOGO

Following is a table of selected financial data for the Company’s subsidiaries and consolidated results for the dates indicated (dollars in thousands).

   First Federal
Savings Bank
   Exchange
Underwriters,
Inc.
   FedFirst
Financial
Corporation
  Net
Eliminations
  Consolidated 

March 31, 2014

                  

Assets

  $323,029    $763    $51,002   $(51,511 $323,283  

Liabilities

   276,434     200     43    (4,399  272,278  

Stockholders’ equity

   46,595     563     50,959    (47,112  51,005  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

December 31, 2013

                  

Assets

  $319,381    $1,438    $51,773   $(53,565 $319,027  

Liabilities

   273,457     578     27    (6,886  267,176  

Stockholders’ equity

   45,924     860     51,746    (46,679  51,851  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Three Months Ended March 31, 2014

                  

Total interest income

  $3,220    $—      $18   $(18 $3,220  

Total interest expense

   608     —       —      (18  590  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income

   2,612     —       18    —      2,630  

Provision for loan losses

   75     —       —      —      75  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income after provision for loan losses

   2,537     —       18    —      2,555  

Noninterest income

   209     790     —      —      999  

Noninterest expense

   1,945     634     100    —      2,679  

Undistributed net income of subsidiary

   88     —       588    (676  —    
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary

   889     156     506    (676  875  

Income tax expense (benefit)

   283     68     (28  —      323  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   606     88     534    (676  552  

Less: Noncontrolling interest in net income of consolidated subsidiary

   18     —       —      —      18  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income of FedFirst Financial Corporation

  $588    $88    $534   $(676 $534  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Three Months Ended March 31, 2013

                  

Total interest income

  $3,244    $—      $21   $(21 $3,244  

Total interest expense

   735     —       —      (21  714  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income

   2,509     —       21    —      2,530  

Provision for loan losses

   —       —       —      —      —    
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income after provision for loan losses

   2,509     —       21    —      2,530  

Noninterest income

   255     1,014     —      —      1,269  

Noninterest expense

   1,882     656     74    —      2,612  

Undistributed net income of subsidiary

   210     —       829    (1,039  —    
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary

   1,092     358     776    (1,039  1,187  

Income tax expense (benefit)

   221     148     (18  —      351  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   871     210     794    (1,039  836  

Less: Noncontrolling interest in net income of consolidated subsidiary

   42     —       —      —      42  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income of FedFirst Financial Corporation

  $829    $210    $794   $(1,039 $794  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Note 11.Proposed Merger Announcement

On April 14, 2014, CB Financial Services, Inc. (“CB Financial”), a Carmichaels, Pennsylvania based holding company for Community Bank, and FedFirst Financial announced the signing of an Agreement and Plan of Merger (“Merger Agreement”) under which FedFirst Financial will merge with and into CB Financial in a cash and stock transaction valued at approximately $54.5 million. Under the terms of the Merger Agreement, stockholders of FedFirst Financial will be entitled to elect to receive $23.00 in cash or shares of CB Financial common stock based on a fixed exchange ratio of 1.1590 shares of CB Financial common stock for each share of FedFirst Financial common stock, subject to proration to ensure that at closing 65% of the outstanding shares of FedFirst Financial common stock are exchanged for shares of CB Financial common stock and the remaining 35% are exchanged for cash. CB Financial and FedFirst Financial expect to complete the transaction late

LOGO

in the third or early fourth quarter of 2014. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the merger by shareholders of FedFirst Financial. The Merger Agreement contains certain provisions under which each party has agreed to pay the other a termination fee of $2.75 million if the Merger Agreement is terminated under certain circumstances.

Community Bank, a Pennsylvania-chartered commercial bank, operates eleven offices in Greene, Allegheny and Washington Counties in southwestern Pennsylvania. At December 31, 2013, CB Financial had total consolidated assets of approximately $546.5 million.

The Company expects to incur merger-related expenses prior to the completion of the transaction including, but not limited to, approximately $1.1 million in professional services related to investment banker and legal fees. Approximately $600,000 to $700,000 of these expenses are expected to be incurred in the second quarter of 2014.

Note 12.Related Parties

In 2002, the Company purchased an 80% controlling interest in Exchange Underwriters. The President of Exchange Underwriters is Richard B. Boyer, who owns the remaining 20% of Exchange Underwriters (“Shareholder”). Mr. Boyer is on the board of directors of the Company. The original stock purchase agreement between FFEC and the Shareholder includes an obligation for the Company to purchase the Shareholder’s 20% stake upon the earliest of (1) the termination of the Shareholder’s employment for any reason, (2) May 29, 2014 (the twelfth anniversary of the closing date of the stock purchase agreement), or (3) the transfer by the Shareholder of any of his shares. The Shareholder has a right of first refusal to purchase the FFEC’s interest in Exchange Underwriters prior to the FFEC selling or transferring such shares and has “tag-along” rights to participate in any sale to a buyer on the same terms and conditions as FFEC.

In connection with the execution of the Merger Agreement with CB Financial, FFEC entered into a new stock purchase agreement dated as of April 14, 2014 by and between FFEC and Richard B. Boyer, which provides for the purchase of Mr. Boyer’s interest in Exchange Underwriters for total consideration of $1.2 million immediately prior to the closing of the Company’s merger with CB Financial. FFEC also entered into an amendment to the original stock purchase agreement which extends from May 29, 2014 to June 1, 2017 the date on which FedFirst Financial is obligated to purchase Mr. Boyer’s interest in Exchange Underwriters in the event that the merger is not completed.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

FedFirst Financial Corporation

We have audited the accompanying consolidated statements of financial condition of FedFirst Financial Corporation and subsidiaries (“Company”) as of December 31, 2013 and 2012 and the related consolidated statements of operations, comprehensive income, and changes in stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FedFirst Financial Corporation and subsidiaries as of December 31, 2013 and 2012 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ ParenteBeard LLC

Pittsburgh, Pennsylvania

March 12, 2014

LOGO

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

December 31,

  2013  2012 
(Dollars in thousands except share data)       

Assets:

   

Cash and cash equivalents:

   

Cash and due from banks

  $2,034   $2,044  

Interest-earning deposits

   3,518    3,830  
  

 

 

  

 

 

 

Total cash and cash equivalents

   5,552    5,874  

Securities available-for-sale

   26,772    42,582  

Loans, net

   268,812    249,530  

Federal Home Loan Bank (“FHLB”) stock, at cost

   2,589    3,787  

Accrued interest receivable—loans

   858    829  

Accrued interest receivable—securities

   135    206  

Premises and equipment, net

   1,852    1,797  

Bank-owned life insurance

   8,560    8,317  

Goodwill

   1,080    1,080  

Real estate owned

   126    146  

Deferred tax assets and tax credit carryforwards

   2,118    2,511  

Other assets

   573    2,101  
  

 

 

  

 

 

 

Total assets

  $319,027   $318,760  
  

 

 

  

 

 

 

Liabilities and Stockholders’ Equity:

   

Deposits:

   

Noninterest-bearing

   27,247    23,987  

Interest-bearing

   191,985    190,070  
  

 

 

  

 

 

 

Total deposits

   219,232    214,057  

Borrowings

   45,591    48,678  

Advance payments by borrowers for taxes and insurance

   458    681  

Accrued interest payable—deposits

   107    144  

Accrued interest payable—borrowings

   144    158  

Other liabilities

   1,644    1,748  
  

 

 

  

 

 

 

Total liabilities

   267,176    265,466  

Stockholders’ equity:

   

FedFirst Financial Corporation stockholders’ equity:

   

Preferred stock $0.01 par value; 10,000,000 shares authorized; none issued

   —      —    

Common stock $0.01 par value; 20,000,000 shares authorized; 2,991,461 shares issued and 2,357,293 and 2,540,341 shares outstanding

   24    25  

Additional paid-in-capital

   31,169    34,986  

Retained earnings—substantially restricted

   21,528    19,821  

Accumulated other comprehensive income (loss), net of deferred tax (benefit) of $40 and $(250)

   62    (388

Unearned Employee Stock Ownership Plan (“ESOP”)

   (1,037  (1,210
  

 

 

  

 

 

 

Total FedFirst Financial Corporation stockholders’ equity

   51,746    53,234  

Noncontrolling interest in subsidiary

   105    60  
  

 

 

  

 

 

 

Total stockholders’ equity

   51,851    53,294  
  

 

 

  

 

 

 

Total liabilities and stockholders’ equity

  $319,027   $318,760  
  

 

 

  

 

 

 

See Notes to the Consolidated Financial Statements

LOGO

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,

  2013   2012 
(Dollars in thousands, except per share amounts)        

Interest income:

    

Loans

  $11,867    $12,264  

Securities—taxable

   875     1,505  

Securities—tax exempt

   151     149  

Other interest-earning assets

   27     31  
  

 

 

   

 

 

 

Total interest income

   12,920     13,949  

Interest expense:

    

Deposits

   1,419     2,008  

Borrowings

   1,275     1,624  
  

 

 

   

 

 

 

Total interest expense

   2,694     3,632  
  

 

 

   

 

 

 

Net interest income

   10,226     10,317  

Provision for loan losses

   740     310  
  

 

 

   

 

 

 

Net interest income after provision for loan losses

   9,486     10,007  

Noninterest income:

    

Fees and service charges

   750     624  

Insurance commissions

   3,222     2,460  

Income from bank-owned life insurance

   243     289  

Other

   102     102  
  

 

 

   

 

 

 

Total noninterest income

   4,317     3,475  

Noninterest expense:

    

Compensation and employee benefits

   6,115     5,700  

Occupancy

   1,158     1,191  

FDIC insurance premiums

   180     210  

Data processing

   575     555  

Professional services

   601     708  

Advertising

   498     221  

Other

   1,178     1,359  
  

 

 

   

 

 

 

Total noninterest expense

   10,305     9,944  

Income before income tax expense and noncontrolling interest in net income of consolidated subsidiary

   3,498     3,538  

Income tax expense

   1,186     1,251  
  

 

 

   

 

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   2,312     2,287  

Noncontrolling interest in net income of consolidated subsidiary

   77     32  
  

 

 

   

 

 

 

Net income of FedFirst Financial Corporation

  $2,235    $2,255  
  

 

 

   

 

 

 

Earnings per share:

    

Basic

  $0.93    $0.81  

Diluted

   0.91     0.80  
  

 

 

   

 

 

 

See Notes to the Consolidated Financial Statements

LOGO

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

December 31,

  2013   2012 
(Dollars in thousands)        

Net income before noncontrolling interest in net income of consolidated subsidiary

  $2,312    $2,287  

Other comprehensive income:

    

Unrealized gain (loss) on securities available-for-sale, net of income tax expense (benefit)

   450     (221
  

 

 

   

 

 

 

Other comprehensive income (loss), net of income tax expense (benefit)

   450     (221
  

 

 

   

 

 

 

Comprehensive income

   2,762     2,066  

Less: Comprehensive income attributable to the noncontrolling interest in subsidiary

   77     32  
  

 

 

   

 

 

 

Comprehensive income attributable to FedFirst Financial Corporation

  $2,685    $2,034  
  

 

 

   

 

 

 

See Notes to the Consolidated Financial Statements

LOGO

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

  Common
Stock
  Additional
Paid-in-
Capital
  Retained
Earnings
  Accumulated
Other
Comprehensive
Loss
  Unearned
ESOP
  Noncontrolling
Interest in
Subsidiary
  Total
Stockholders’
Equity
 
(Dollars in thousands, except per share data)                     

Balance at January 1, 2012

 $30   $41,630   $18,650   $(167 $(1,382 $40   $58,801  

Comprehensive income:

       

Net income

  —      —      2,255    —      —      32    2,287  

Other comprehensive loss, net of tax benefit of $(143)

  —      —      —      (221  —      —      (221

Issuance of common stock (16,240 shares)

  —      226    —      —      —      —      226  

Purchase and retirement of common stock (433,201 shares)

  (5  (6,746  —      —      —      —      (6,751

ESOP shares committed to be released (8,182 shares)

  —      (54  —      —      172    —      118  

Stock-based compensation expense

  —      156    —      —      —      —      156  

Stock awards granted (16,240 shares)

  —      (226  —      —      —       (226

Distribution to noncontrolling shareholder

  —      —      —      —      —      (12  (12

Dividends paid ($0.40 per share)

  —      —      (1,084  —      —      —      (1,084
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2012

 $25   $34,986   $19,821   $(388 $(1,210 $60   $53,294  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Common
Stock
  Additional
Paid-in-
Capital
  Retained
Earnings
  Accumulated
Other
Comprehensive
(Loss) Income
  Unearned
ESOP
  Noncontrolling
Interest in
Subsidiary
  Total
Stockholders’
Equity
 
(Dollars in thousands, except per share data)                     

Balance at January 1, 2013

 $25   $34,986   $19,821   $(388 $(1,210 $60   $53,294  

Comprehensive income:

       

Net income

  —      —      2,235    —      —      77    2,312  

Other comprehensive income, net of tax of $290

  —      —      —      450    —      —      450  

Issuance of common stock (30,250 shares)

  —      555    —      —      —      —      555  

Purchase of common stock for retirement (213,157 shares)

  (1  (4,060  —      —      —      —      (4,061

ESOP shares committed to be released (8,182 shares)

  —      (20  —      —      173    —      153  

Stock-based compensation expense

  —      270    —      —      —      —      270  

Stock awards granted (30,250 shares)

  —      (555  —      —      —      —      (555

Stock options exercised (1,326 shares)

  —      (7  —      —      —      —      (7

Distribution to noncontrolling shareholder

  —      —      —      —      —      (32  (32

Dividends paid ($0.22 per share)

  —      —      (528  —      —      —      (528
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2013

 $24   $31,169   $21,528   $62   $(1,037 $105   $51,851  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

See Notes to the Consolidated Financial Statements

LOGO

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

  2013  2012 
(Dollars in thousands)       

Cash flows from operating activities:

   

Net income

  $2,235   $2,255  

Adjustments to reconcile net income to net cash provided by operating activities

   

Noncontrolling interest in net income of consolidated subsidiary

   77    32  

Provision for loan losses

   740    310  

Depreciation

   306    372  

Amortization of intangibles

   54    112  

Impairment loss on real estate owned

   42    58  

Deferred income taxes

   103    727  

Net amortization of security premiums and loan costs

   364    621  

Benefit payment for supplemental executive retirement plan

   —      (2,955

Noncash expense for ESOP

   142    102  

Noncash expense for stock-based compensation

   270    156  

Increase in bank-owned life insurance

   (243  (256

Refund of FDIC prepaid insurance assessment

   643    —    

Decrease (increase) in other assets

   739    (554

Decrease in other liabilities

   (155  (125
  

 

 

  

 

 

 

Net cash provided by operating activities

   5,317    855  

Cash flows from investing activities:

   

Net loan originations

   (20,641  (4,787

Proceeds from maturities and principal repayments of securities available-for-sale

   16,298    19,998  

Purchases of securities available-for-sale

   —      (10,940

Purchases of premises and equipment

   (361  (195

Decrease in FHLB stock, at cost

   1,198    1,553  

Proceeds from sales of real estate owned

   623    387  

Cash surrender value of bank owned life insurance policy surrendered

   —      239  

Income for cash surrender value of bank owned life insurance policy surrendered

   —      (33
  

 

 

  

 

 

 

Net cash (used in) provided by investing activities

   (2,883  6,222  

Cash flows from financing activities:

   

Net increase in short-term borrowings

   3,860    12,000  

Repayments of long-term borrowings

   (6,947  (12,611

Net increase (decrease) in deposits

   5,175    (7,483

(Decrease) increase in advance payments by borrowers for taxes and insurance

   (223  167  

Purchase and retirement of common stock

   (4,061  (6,751

Dividends paid

   (528  (1,084

Distribution to noncontrolling shareholder

   (32  (12
  

 

 

  

 

 

 

Net cash used in financing activities

   (2,756  (15,774
  

 

 

  

 

 

 

Net decrease in cash and cash equivalents

   (322  (8,697

Cash and cash equivalents, beginning of year

   5,874    14,571  
  

 

 

  

 

 

 

Cash and cash equivalents, end of year

  $5,552   $5,874  
  

 

 

  

 

 

 

Supplemental cash flow information:

   

Cash paid for:

   

Interest on deposits and borrowings (including interest credited to deposit accounts of $1,456 and $2,092, respectively)

  $2,789   $3,760  

Income taxes

   643    846  

Noncash activities:

   

Real estate acquired in settlement of loans

  $507   $47  
  

 

 

  

 

 

 

See Notes to the Consolidated Financial Statements

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Summary of Significant Accounting Policies

Nature of Operations

The accompanying audited Consolidated Financial Statements include the accounts of FedFirst Financial Corporation (“FedFirst Financial” or the “Company”), a stock holding company established in 2010, whose wholly owned subsidiary is First Federal Savings Bank (“First Federal” or the “Bank”), a federally chartered stock savings bank, which owns FedFirst Exchange Corporation (“FFEC”). FFEC has an 80% controlling interest in Exchange Underwriters, Inc. (“Exchange Underwriters”). Exchange Underwriters is a full-service, independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products. All significant intercompany transactions have been eliminated.

First Federal operates as a community-oriented financial institution offering residential, multi-family and commercial mortgages, consumer loans and commercial business loans as well as a variety of deposit products for individuals and businesses from seven locations in southwestern Pennsylvania. First Federal conducts insurance brokerage activities through Exchange Underwriters. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.

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

Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America (“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 and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, evaluation of securities for other-than-temporary impairment (“OTTI”), goodwill impairment, amortization of intangible assets, and the valuation of deferred tax assets.

Securities

The Company classifies securities at the time of purchase as either trading, available-for-sale or held-to-maturity. Securities that the Company has the positive intent and ability to hold to maturity are classified as securities held-to-maturity and are reported at amortized cost. Securities bought and held principally for the purpose of selling them in the near term are classified as securities for trading and reported at fair value with gains and losses included in earnings. The Company had no held-to-maturity or trading securities at December 31, 2013 or 2012. Securities not classified as held-to-maturity or trading securities are classified as securities available-for-sale and are reported at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (“OCI”). Interest income includes amortization of purchase premium or discount. Premiums and discounts are amortized and accreted using the level yield method. Net gain or loss on the sale of securities is based on the amortized cost of the specific security sold.

Other-Than-Temporary Impairment

The Company reviews its investment portfolio on a quarterly basis for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer, including any specific events that may influence the operations of the issuer, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes credit-related OTTI on debt securities in earnings while noncredit-related OTTI on debt securities not expected to be sold is recognized in accumulated OCI. The Company assesses whether the credit loss existed by considering whether (a) the Company has the intent to sell the security, (b) it is more likely than not that the Company will be required to sell the security before recovery, or (c) the Company does not expect to recover the entire amortized cost basis of the security. The Company can bifurcate the OTTI on securities not expected to be sold or where the entire amortized cost of the security is not expected to be recovered into the components representing credit loss and the component representing loss related to other factors. The portion of the fair value decline attributable to credit loss is recognized through earnings.

Corporate debt securities are evaluated for OTTI by determining whether itforeclosure is probable, that an adverse change in estimated cash flows has occurred. Determining whether there has been an adverse change in estimated cash flows involves the calculation of the present value of remaining cash flows compared to previously projected cash flows. We consider the discounted cash flow analysis to be our primary evidence when determining whether credit-related OTTI exists on corporate debt securities.

Loans

The Company segments the loan portfolioimpairment is measured based on loan types with related risk characteristics. The segments consist of real estate-mortgage, real estate-construction, consumer and commercial business loans. Real estate-mortgage includes the following classes: one- to four-family residential, multi-family, and commercial. One- to four-family and multi-family are subdivided into loans originated within our geographic lending area and loans purchased out-of-state. Real estate-construction includes the following classes: residential and commercial. Consumer includes the following classes: home equity and other, which is primarily composed of secured and unsecured consumer loans. Home equity is subdivided into loans with a loan-to-value ratio of 80% or less or greater than 80%. Loans are stated at the outstanding principal amount of the loans, net of premiums and discounts on loans purchased, deferred loan costs, loans in process, and the allowance for loan losses. Loans are originated with the intent to hold until maturity. Interest income on loans is accrued and credited to interest income as earned. Loans are generally placed on nonaccrual status at the earlier of when they become delinquent 90 days or more as to principal or interest or when it appears that principal or interest is uncollectible. Interest accrued prior to a loan being placed on nonaccrual status is subsequently reversed. Interest income on nonaccrual loans is recognized only in the period in which it is ultimately collected. Loans are returned to an accrual status when factors indicating doubtful collectability no longer exist.

Loan fees and direct costs of originating loans are deferred, and the net fee or cost is accreted or amortized to interest income as a yield adjustment over the contractual lives of the related loans using the interest method. Amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status.

A loan whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties is considered a troubled debt restructuring (“TDR”). TDRs typically result from our loss mitigation activities and could include rate reductions, principal forgiveness, forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral. A restructuring for a borrower that is experiencing financial difficulties, but results in only a delay in payment that is insignificant is not considered a concession. Once a loan is classified as a TDR, the determination of income recognition is based on the status of the loan prior to classification. If a loan is in non-accrual status, then it will remain in that classification for a minimum of six consecutive months until uncertainty with respect to collectability no longer exists. Loans that are current at the time of classification will remain on an accrual basis and are monitored. If restructured contractual terms of a loan are not met, then the loan will be placed on nonaccrual status.

Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Allocations of the allowance may be made for specific loans, but the entire allowance is

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

available for any loan that in management’s judgment should be charged-off. Loan losses are charged against the allowance when management confirms collectability of a loan balance is not likely. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a quarterly basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, peer group information, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, prevailing economic conditions and other factors related to the collectability of the loan portfolio. This evaluation is inherently subjective as it involves a high degree of judgment and requires estimates that are susceptible to significant revision as more information becomes available.

An allowance is established for loans that are individually evaluated and determined to be impaired. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest according to the contractual terms of the loan agreement. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. A loan may be placed on nonaccrual status due to payment delinquency or uncertain collectability, while not being classified as impaired. Factors considered by management in determining impairment include payment status, risk rating, and loan amount. Generally, management performs individual impairment assessments of substandard loan relationships of $250,000 or greater to determine the amount that may be uncollectible. The amount of impairment is determined by the difference between the present value of the expected cash flows related to the loan, using current interest rates and its recorded value, or, as a practical measure in the case of collateralized loans, the difference between the fair value of the collateral less estimated liquidation expenses.

Individual loan reviews are based upon specific quantitative and qualitative criteria, including the recorded amountsize of the loan, loan quality ratings, value of collateral, repayment ability of borrowers, and historical experience factors. The historical experience factors utilized for individual loan reviews are based upon past loss experience, known trends in losses and delinquencies, the growth of loans less estimated selling costs. Impairedin particular markets and industries, and known changes in economic conditions in the particular lending markets. Allowances for homogeneous loans incur a charge-off when it is determined foreclosure is probable and the ultimate collectability is not likely.

Loans excluded from the individual impairment analysis(such as residential mortgage loans, personal loans, etc.) are collectively evaluated by management to estimate losses inherent in those loans. Management determinesbased upon historical loss experience, for each grouptrends in losses and delinquencies, growth of loans with similar risk characteristics within the portfolio based on loss experience for loans in each group. Loan categories represent groups of loans with similar risk characteristicsparticular markets, and may include types of loans by product, large credit exposures, concentrations, loan grade, or any other characteristic that causes a loan’s risk profile to be similar to another. We also consider qualitative or environmental factors that are likely to cause estimated credit losses associated with the bank’s existing portfolio to differ from historical loss experience, including changes in lending policies and procedures; changes in the nature and volume of the loan portfolio; changes in experience, ability and depth of loan management; changes in the volume and severity of past due loans, non-accrual loans and adversely graded or classified loans; changes in the quality of the loan review system; changes in the value of underlying collateral for collateral dependent loans; existence of or changes in concentrations of credit;known changes in economic or business conditions; and the effect of competition, legal and regulatory requirements on estimated credit losses.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized as special mention have potential weaknesses that may resultconditions in deterioration if uncorrected and not monitored. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as doubtful have all the weaknesses inherent in loans classified as substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass. To determine the appropriate risk rating category, the borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments, for commercial and consumer loans.

Although we believe that we use the best information available to establisheach lending market. There can be no assurance the allowance for loan losses will be adequate to cover all losses, but management believes the allowance for loan losses in the amount of $1,797,000 at December 31, 2016, was adequate to provide for probable losses from existing loans based on information currently available. While management uses available information to provide for loan losses, the ultimate collectability of a substantial portion of the loan portfolio, and the need for future adjustmentsadditions to the allowance, maywill be necessary ifbased on changes in economic conditions differ substantially from the assumptions usedand other relevant factors. As such, an adverse change in

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

making the evaluation. In addition, the Office of the Comptroller of the Currency (“OCC”), as an integral part of its examination process, periodically reviews our allowance economic activity could reduce cash flows for loan losses. The OCC may require us to recognize adjustments to the allowance based on its judgments about information available to it at the time of its examination. A large loss could deplete the allowanceboth commercial and require increased provisions to replenish the allowance,individual borrowers, which would negatively affect earnings.likely cause First West Virginia to experience increases in problem assets, delinquencies and losses on loans.

Federal Home Loan Bank System

The Company is a member of the Federal Home Loan Bank System. As a member, the Bank is required to maintain an investment in the capital stock of the Federal Home Loan Bank of Pittsburgh (“FHLB”). Deficiencies, if any, in the required investment at the end of any reporting period are purchased in the subsequent reporting period. The investment is carried at cost. No ready market exists for the stock, and it has no quoted market value. The Company may receive dividends on its FHLB capital stock, which are included in interest income and are recognized when declared.

Premises and Equipment

Land is carried at cost. Office propertiesPremises and equipment are carriedis stated at cost, less accumulated depreciation and amortization. BuildingsProvisions for depreciation and leasehold improvementsamortization are depreciatedcomputed generally using the straight-line method usingover the estimated useful lives generally ranging from 10 to 40 years. Furniture, fixtures,of the assets. When units of property are disposed of, the premises and equipment accounts are depreciated usingrelieved of the straight-line method with useful lives generally ranging from threecost and the accumulated depreciation related to 10 years. Charges forsuch units. Any resulting gains or losses are credited to or charged against income. Cost of repairs and maintenance and repairs are expensedis charged to expense as incurred. Additions and improvements are capitalized at cost.

Bank-Owned Life Insurance

The Company purchasedBank-owned life insurance on the livesconsists of certaininvestments in life insurance policies on executive officers and directors.other members of Progressive Bank’s management. The policies accumulate asset valuesare carried at their net cash surrender value. Changes in the policy value are recorded as an adjustment to meet future liabilities, including the payment of employee benefits. Increases incarrying value with the corresponding amount recognized as noninterest income or expense. Earnings on these policies are based on the net earnings on the cash surrender value and proceeds uponof the death of a key employee are recorded as noninterest income.policies. The net cash surrender value of bank-owned life insurance is recorded as an asset.

Goodwill

We recorded goodwill in connection with our acquisition of Exchange Underwriters. Goodwill is not amortized but is tested for impairment annually or more frequently if impairment indicators arise.was $4,064,000 and $3,950,000 at December 31, 2016 and 2015, respectively. The goodwill impairment model is a two-step process. First, it requires a comparison of the book value of net assets to the fairdeath benefit value of the related operations that have goodwill assigned to them. If the fair value is determined to be less than book value, a second step is performed to compute the amount of the impairment. We estimate the fair values of the related operations using discounted cash flows. The forecasts of future cash flows are based on our best estimate of future revenues and operating costs, based primarily on contracts in effect, new accounts and cancellations and operating budgets. The impairment analysis requires management to make subjective judgments concerning how the acquired assets will perform in the future. Events and factors that may significantly affect the estimates include competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and industry and market trends. Changes in these forecasts could cause a reporting unit to either pass or fail the first step in the goodwill impairment model, which could significantly change the amount of impairment recorded. Our annual assessment of potential goodwill impairment was completed in the fourth quarter of 2013. Based on the results of the annual assessments, no impairment charge was deemed necessary for the years endedbank-owned life insurance at December 31, 20132016 and 2012.

Intangible Assets

The Company determines2015 was $8.8 million. An agreement has been executed with all officers whereby a $40,000 death benefit is payable upon the accounting for intangible assets based onparticipant’s death while employed by First West Virginia to their useful life. An intangible asset with a finite useful life is amortized, whereas an intangible asset with an indefinite useful life is not amortized. The useful life of an

designated beneficiary.

LOGO

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

intangible asset is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the Company. The Company evaluates the remaining useful life of its intangible assets that are being amortized annually to determine whether events and circumstances warrant a revision to the remaining period of amortization.

Other Real Estate Owned

When properties areAssets acquired through, foreclosure, theyor in lieu of, loan foreclosures are transferredinitially recorded at estimated fair value, less estimated selling costs and any required write-downsto sell when acquired, establishing a new cost basis. The assets are charged to the allowancesubsequently accounted for loan losses. Subsequently, such properties are carried at the lower of the adjusted cost or fair value, less estimated selling costs. Estimatedcosts to sell. Any subsequent declines in fair value and gains or losses on the disposition of the propertythese assets are credited to or charged against income. Other real estate owned is generally based on an appraisal.included in other assets. There were no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process at December 31, 2016.

Income Taxes

First West Virginia accounts for income taxes in accordance with income tax accounting guidance in ASC Topic 740,Income Taxes. The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. First West Virginia determines deferred income taxes using the balance sheet method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination, the term more likely than not means a likelihood of more than 50%; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets themore-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met themore-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date, and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion of all of a deferred tax asset will not be realized.

Goodwill

Goodwill resulted from First West Virginia’s purchase of a less-than-whole financial institution (the “branch”). The goodwill value of $1,644,000 is supported ultimately by revenue that is driven by the volume of business transacted. A decline in earnings as a result of a lack of growth or the inability to deliver cost effective services over sustained periods can lead to impairment of goodwill that could adversely impact earnings in future periods.

Goodwill is periodically reviewed for impairment. No impairment losses were recognized in 2016, 2015 and 2014. Additionally, future events could cause management to conclude that impairment indicators exist and that the goodwill is impaired, which would result in First West Virginia recording an impairment loss. Any resulting impairment loss could have a material, adverse impact on First West Virginia’s financial condition and results of operations.

Mortgage-Servicing Rights (“MSRs”)

First West Virginia has agreements for the express purpose of selling loans in the secondary market. First West Virginia maintains all servicing rights for these loans. MSRs are recorded by allocating total costs incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in proportion to the estimated servicing income over the estimated life of the servicing portfolio. Impairment is evaluated based on the fair value of the right, which is based on portfolio interest rates and prepayment characteristics.

Treasury Stock

The purchase of First West Virginia’s common stock is recorded at cost.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) is comprised of unrealized holding gains (losses) on theavailable-for-sale securities portfolio, net of tax.

Earnings Per Share

Earnings per common share are calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the year. First West Virginia has no securities which would be considered potential common stock.

Cash Flow Information

First West Virginia has defined cash equivalents as those amounts due from depository institutions, interest-bearing deposits with other banks with maturities of less than 90 days, and federal funds sold.

Advertising Costs

Advertising costs are expensed as the costs are incurred. Advertising expenses amounted to $234,000, $205,000, and $187,000 for 2016, 2015 and 2014, respectively.

Legal Proceedings

The nature of the business of First West Virginia’s subsidiary generates a certain amount of litigation involving matters arising in the ordinary course of business. First West Virginia is unaware of any litigation other than ordinary routine litigation incidental to the business of First West Virginia, to which it or its subsidiary is a party or of which any of their property is subject.

Reclassifications

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

Recent Accounting Standards

In January 2017, the FASB issued ASU2017-04,Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU2017-04 simplifies the accounting for goodwill impairments by eliminating the second step of the goodwill impairment test. Instead, an entity will apply aone-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. ASU2017-04 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. First West Virginia is currently evaluating the provisions of ASU2017-04, but does not believe that its adoption will have a material impact on First West Virginia’s consolidated financial condition or results of operations.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Recent Accounting Standards (continued)

In August 2016, the FASB issued ASU2016-15,Statement of Cash Flow (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU2016-15 addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement ofzero-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. ASU2016-15 is effective for public business entities 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. First West Virginia is currently evaluating the provisions of ASU2016-15, but does not believe that its adoption will have a material impact on First West Virginia’s consolidated financial condition or results of operations.

In June 2016, the FASB issued ASU2016-13,Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU2016-13 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, ASU2016-13 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. ASU2016-13 affects companies holding financial assets and net investment in leases that are not accounted for at fair value through net income. The ASU2016-13 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. ASU2016-13 is effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. For all other public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. First West Virginia is currently evaluating the provisions of ASU2016-13 and is unable to estimate the impact on First West Virginia’s consolidated financial condition or results of operations at this time.

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. ASU2016-02 will require lessees to recognize aright-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. ASU2016-02 is effective for public business entities 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. First West Virginia is currently evaluating the provisions of ASU2016-02, but expects to report increased assets and liabilities as a result of reporting additional leases on First West Virginia’s consolidated statement of financial condition or results of operations.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies (continued)

Recent Accounting Standards (continued)

In January 2016, the FASB issued ASU2016-01,Financial Instruments – Overall (Subtopic825-10), which enhances the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. ASU2016-01 (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 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. ASU2016-01 is effective for public business entities 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. First West Virginia is currently evaluating the provisions of ASU2016-01, but does not believe that its adoption will have a material impact on First West Virginia’s consolidated financial condition or results of operations.

In May 2014, the FASB issued ASU2014-09,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. ASU2014-09 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 ASU2015-14, which defers the effective date of ASU2014-09. The guidance is effective for First West Virginia’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, First West Virginia does not expect it to have a material impact on its consolidated results of operations for elements of the statement of income associated with financial instruments, including securities gains, interest income, and interest expense. However, First West Virginia does believe the new standard will result in new disclosure requirements. First West Virginia is currently in the process of reviewing contracts to assess the impact of the new guidance on its service offerings that are in the scope of the guidance included innon-interest income, such as deposit related fees and service charges and payment processing fees. First West Virginia 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 and will use modified retrospective method for transition in which the cumulative effect will be recognized at the date of adoption with no restatement of comparative periods presented.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

   Years Ended December 31, 
   2016   2015   2014 

Weighted-Average Common Shares Outstanding

   1,728,730    1,728,730    1,728,730 

Average Treasury Stock Shares

   (10,000   (10,000   (10,000
  

 

 

   

 

 

   

 

 

 

Weighted-Average Common Shares and Common Stock Equivalents Used to Calculate Basic Earnings Per Share

   1,718,730    1,718,730    1,718,730 

Additional Common Stock Equivalents Used to Calculate Diluted Earnings Per Share

   —      —      —   
  

 

 

   

 

 

   

 

 

 

Weighted-Average Common Shares and Common Stock Equivalents Used to Calculate Diluted Earnings Per Share

   1,718,730    1,718,730    1,718,730 
  

 

 

   

 

 

   

 

 

 

Earnings per share:

      

Basic

  $0.94   $1.39   $1.11 

Diluted

   0.94    1.39    1.11 

Note 3. Investment Securities

The amortized cost and fair value of investment securitiesavailable-for-sale as of December 31, 2016 and 2015, are as follows:

   (Dollars in thousands) 
   2016 
   Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair
Value
 

Securities available for sale:

        

Obligations of U.S. Government Corporations and Agencies

  $56,743   $1   $(1,867  $54,877 

Obligations of States and Political Subdivisions

   33,936    864    (398   34,402 

Mortgage-Backed Securities

   109,336    49    (2,266   107,119 

Equity Securities - Mutual Funds

   664    29    (14   679 

Equity Securities - Other

   103    28    (2   129 
  

 

 

   

 

 

   

 

 

   

 

 

 

Totalavailable-for-sale

  $200,782   $971   $(4,547  $197,206 
  

 

 

   

 

 

   

 

 

   

 

 

 
   2015 
   Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair Value 

Securities available for sale:

        

Obligations of U.S. Government Corporations and Agencies

  $57,250   $18   $(366  $56,902 

Obligations of States and Political Subdivisions

   30,221    1,739    (4   31,956 

Mortgage-Backed Securities

   115,432    311    (1,224   114,519 

Equity Securities - Mutual Funds

   160    28    (1   187 

Equity Securities - Other

   20    —      (5   15 
  

 

 

   

 

 

   

 

 

   

 

 

 

Totalavailable-for-sale

  $203,083   $2,096   $(1,600  $203,579 
  

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Investment Securities (continued)

The following table presents the scheduled maturities of investment securities as of the date indicated:

   (Dollars in thousands)
2016
 
   Available-for-Sale 
   Amortized
Cost
   Fair
Value
 

Due in One Year or Less

  $1   $1 

Due after One Year through Five Years

   6,339    6,458 

Due after Five Years through Ten Years

   65,742    64,266 

Due after Ten Years

   128,700    126,481 
  

 

 

   

 

 

 
  $200,782   $197,206 
  

 

 

   

 

 

 

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. Mortgage-Backed Securities have been allocated based on the final maturity date, although principal payments occur prior to that date.

Proceeds from sales of securities available for sale during the years ended December 31, 2016, 2015 and 2014, were $44,693,000, $52,099,000 and $22,605,000, respectively. Gross gains of $1,104,000 and gross losses of $1,000 in 2016, gross gains of $1,156,000 and gross losses of $2,000 in 2015 and gross gains of $906,000 and gross losses of $37,000 in 2014 were realized on those sales. Assets carried at approximately $68,395,000 and $72,616,000 at December 31, 2016 and 2015, respectively, were pledged to secure United States Government and other public funds and for other purposes as required or permitted by law.

The unrealized losses on First West Virginia’s investments in direct obligations of U.S. Government corporations and agencies were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because First West Virginia does not intend to sell the investments and it is not more likely than not First West Virginia will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, First West Virginia does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

The unrealized losses on First West Virginia’s investments in residential mortgage-backed securities were caused by interest rate changes and illiquidity. First West Virginia expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because First West Virginia does not intend to sell the investments and it is not more likely than not First West Virginia will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, First West Virginia does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

The unrealized losses on First West Virginia’s investments in securities of state and political subdivisions were caused by interest rate changes and illiquidity. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Because First West Virginia does not intend to sell the investments and it is not more likely than not First West Virginia will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, First West Virginia does not consider those investments to be other-than-temporarily impaired at December 31, 2016.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Investment Securities (continued)

The following tables show First West Virginia’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 December 31, 2016 and 2015:

   (Dollars in thousands)
2016
 
   Less than 12 months  12 Months or Greater  Total 
   Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
  Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
  Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
 

U.S. Government Agencies

   23   $53,875   $(1,867  —     $—     $—     23   $53,875   $(1,867

Obligations of States and Political Subdivisions

   36    13,036    (398  —      —      —     36    13,036    (398

Mortgage-Backed Securities Government Sponsored Enterprises

   42    100,654    (2,190  2    3,361    (76  44    104,015    (2,266

Equity Securities - Mutual Fund

   2    535    (13  1    27    (1  3    562    (14

Equity Securities - Other

   —      —      —     1    22    (2  1    22    (2
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total

   103   $168,100   $(4,468  4   $3,410   $(79  107   $171,510   $(4,547
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 
   2015 
   Less than 12 months  12 Months or Greater  Total 
   Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
  Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
  Number
of
Securities
   Fair
Value
   Gross
Unrealized
Losses
 

U.S. Government Agencies

   10   $33,461   $(289  3   $4,925   $(77  13   $38,386   $(366

Obligations of States and Political Subdivisions

   3    886    (4  —      —      —     3    886    (4

Mortgage-Backed Securities Government Sponsored Enterprises

   23    61,201    (434  10    28,179    (790  33    89,380    (1,224

Equity Securities - Mutual Fund

   1    7    (1  1    22    (1  2    29    (2

Equity Securities - Other

   1    15    (4  —      —      —     1    15    (4
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

Total

   38   $95,570   $(732  14   $33,126   $(868  52   $128,696   $(1,600
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Investment Securities (continued)

For debt securities, First West Virginia does not believe any individual unrealized loss as of September 30, 2017 and December 31, 2016 represents an other-than-temporary impairment. First West Virginia performs a review of the entire securities portfolio on a quarterly basis to identify securities that may indicate an other-than-temporary impairment. First West Virginia’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 September 30, 2017 and December 31, 2016 relate principally to changes in interest rates subsequent to the acquisition of the specific securities. First West Virginia 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.

Note 4. Loans and Related Allowance for Loan Losses

This footnote has been modified as, subsequent to the original issuance of the consolidated financial statements, First West Virginia announced that it had entered into an Agreement and Plan of Merger pursuant to which First West Virginia would merge with and into CB Financial Services, Inc. (CB), with CB as the surviving entity.

The primary changes to this footnote include modification of previous loan and allowance for loan losses disclosure classifications to better align with CB’s financial statement presentation and to reclassify deferred loan fees into each applicable loan category. There were no changes to the ending loan or allowance for loan losses balances presented on the consolidated balance sheets.

First West Virginia’s loan portfolio is made up of four classifications: real estate loans, commercial and industrial loans, consumer loans and other loans. All loans are accounted for under the amortized cost method. The following table presents the classifications of loans as of December 31, 2016 and 2015:

   (Dollars in thousands) 
   2016   2015 

Loans

    

Real Estate:

    

Residential

  $29,721   $28,114 

Commercial

   44,044    44,557 

Construction

   595    761 

Commercial and Industrial

   12,280    13,191 

Consumer

   2,716    2,836 

Other

   7,736    10,639 
  

 

 

   

 

 

 

Total Loans

   97,092    100,098 

Allowance for Loan Losses

   (1,797   (1,798
  

 

 

   

 

 

 

Loans, Net

  $95,295   $98,300 
  

 

 

   

 

 

 

Real estate loans serviced for others, which are not included in the Consolidated Balance Sheets, totaled $6.2 and $7.5 million at December 31, 2016 and 2015, respectively.

Total unamortized net deferred loan fees were $154,000 and $149,000 at December 31, 2016 and 2015, respectively.

First West Virginia has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. These policies and procedures are reviewed by management and approved by the Board of Directors on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentration of credit, loan delinquencies andnon-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

First West Virginia originates direct and indirect consumer loans including principally residential real estate, home equity lines and loans, credit cards, and indirect vehicle loans using a credit analysis as part of the underwriting process. Each loan type has a separate underwriting criteria, which consists of several factors including debt to income, type of collateral, credit history and customer relationship with First West Virginia. Credit risk is driven by factors such as the creditworthiness of a borrower and general economic conditions in First West Virginia’s market area that might impact the borrower’s personal income, employment, or collateral value. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

Commercial and industrial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably. Underwriting standards are designed to promote relationship banking rather than transactional banking. First West Virginia’s management examines current and projected cash flows to determine the ability of the borrowers to repay their obligations as agreed. Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of the borrower, however, may not be as expected and the collateral securing the loan may fluctuate in value. Credit risk in these loans is driven by the creditworthiness of the borrower and the economic conditions that impact the cash flow stability from business operations. Minimum standards and underwriting guidelines have been established for commercial loan types.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by the general economy or conditions specific to the real estate market such as geography and/or property type.

Construction and land development real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from First West Virginia until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of the borrower, property values and the economic conditions in First West Virginia’s market areas.

First West Virginia utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Risk ratings are assigned to individual credit exposures as an aspect of the credit approval and are adjusted thereafter to reflect changes in risk exposure as the borrower’s condition changes. The most significant factor used to determine the risk rating is the borrower’s primary source of repayment, which includes a cash flow analysis. Other items considered in the loan review include secondary sources of repayment, financial trends, collateral value and characteristics, the size of the loan, and external factors impacting the borrower’s repayment ability.

Loans rated as “Pass” include those that have minimal, modest, acceptable, and higher risk. Minimal risk loans are fully secured by marketable securities or cash collateral, or loans supported by the United States Treasury. Modest risk loans have borrowers with stable cash flows over an extended period of time and extensive access to credit from several sources. Acceptable risk loans include individual borrowers with substantial liquid assets and commercial borrowers with strong cash flow. Higher risk loans have adequate sources of repayment and no current identifiable risk for repayment and loans that are slightly below average due to any number of factors such as income, collateral, or the lack of sufficient financial information.

Problem and potential problem loans are classified as “Special Mention,” “Substandard,” and “Doubtful.” Substandard loans are inadequately protected by the current worth and paying capacity of the borrower or the collateral pledged, if any. These loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt and are characterized by the distinct possibility that First West Virginia will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable. Loans that do not currently expose First West Virginia to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention.

For consumer and consumer real estate loan classes, First West Virginia also evaluates credit quality based on the aging status of the loan and by payment activity.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

Loans summarized by the aggregate pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of December 31, 2016 and 2015, are as follows:

   (Dollars in thousands) 
   2016 
   Pass   Special
Mention
   Substandard   Doubtful   Total 

Loans

          

Real Estate:

          

Residential

  $29,329   $—     $392   $—     $29,721 

Commercial

   40,272    —      3,772    —      44,044 

Construction

   595    —      —      —      595 

Commercial and Industrial

   12,268    —      12    —      12,280 

Consumer

   2,716    —      —      —      2,716 

Other

   7,736    —      —      —      7,736 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Loans

  $92,916   $—     $4,176   $—     $97,092 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2015 
   Pass   Special
Mention
   Substandard   Doubtful   Total 

Loans

          

Real Estate:

          

Residential

  $27,288   $—     $826   $—     $28,114 

Commercial

   41,864    —      2,693    —      44,557 

Construction

   411    —      350    —      761 

Commercial and Industrial

   13,191    —      —      —      13,191 

Consumer

   2,831    —      5    —      2,836 

Other

   10,639    —      —      —      10,639 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Loans

  $96,224   $—     $3,874   $—     $100,098 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

At December 31, 2016 and 2015, there were no loans in the criticized category of Loss.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of December 31, 2016 and 2015:

   (Dollars in thousands) 
   2016 
   Loans
Current
   30-59
Days
Past Due
   60-89
Days
Past Due
   90 Days
Or More
Past Due
   Total
Past Due
   Non-
Accrual
   Total
Loans
 

Loans

              

Real Estate:

              

Residential

  $29,097   $367   $51   $—     $418   $206   $29,721 

Commercial

   42,024    281    —      320    601    1,419    44,044 

Construction

   595    —      —      —      —      —      595 

Commercial and Industrial

   12,104    144    32    —      176    —      12,280 

Consumer

   2,712    4    —      —      4    —      2,716 

Other

   7,736    —      —      —      —      —      7,736 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Loans

  $94,268   $796   $83   $320   $1,199   $1,625   $97,092 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2015 
   Loans
Current
   30-59
Days
Past Due
   60-89
Days
Past Due
   90 Days
Or More
Past Due
   Total
Past Due
   Non-
Accrual
   Total
Loans
 

Loans

              

Real Estate:

              

Residential

  $27,400   $291   $—     $83   $374   $340   $28,114 

Commercial

   41,908    —      —      —      —      2,649    44,557 

Construction

   761    —      —      —      —      —      761 

Commercial and Industrial

   13,170    21    —      —      21    —      13,191 

Consumer

   2,829    7    —      —      7    —      2,836 

Other

   10,639    —      —      —      —      —      10,639 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Loans

  $96,707   $319   $—     $83   $402   $2,989   $100,098 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total unrecorded interest income related to nonaccrual loans was $135,000 and $89,000 for 2016 and 2015, respectively. There was $320,000 and $83,000 of loans 90 days or more past due that were still accruing interest as of December 31, 2016 and 2015, respectively.

First West Virginia also evaluates problem loans for impairment. A loan is considered to be impaired if it is probable that First West Virginia will not be able to collect the payments for principal and interest when due according to the contractual terms of the loan agreement. Impaired loans generally include all nonaccrual loans and troubled debt restructurings (TDRs).

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

The following table presents a summary of the loans considered impaired as of December 31, 2016 and 2015.

   (Dollars in thousands) 
   2016 
   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
 

Real Estate:

          

Residential

  $47   $47   $—     $47   $—   

Commercial

   1,418    1,418    —      1,418    —   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $1,465   $1,465   $—     $1,465   $—   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2015 
   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
 

Real Estate:

          

Residential

  $65   $65   $—     $65   $—   

Commercial

   2,649    2,649    —      2,649    —   

Construction

   350    —      350    350    9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $3,064   $2,714   $350   $3,064   $9 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2014 
   Unpaid
Contractual
Principal
Balance
   Recorded
Investment
With No
Allowance
   Recorded
Investment
With
Allowance
   Total
Recorded
Investment
   Related
Allowance
 

Real Estate:

          

Residential

  $143   $143   $—     $143   $—   

Commercial

   744    474    270    744    78 

Construction

   350    —      350    350    9 

Commercial and Industrial

   39    —      39    39    39 

Consumer

   18      11    11    1 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $1,294   $617   $670   $1,287   $127 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

   2016 
   Average
Recorded
Investment
   Interest
Income
Recognized
   Interest
Income
Recognized
Cash Basis
 

Real Estate:

      

Residential

  $55   $—     $—   

Commercial

   2,442    —      13 

Commercial and Industrial

   2    —      —   
  

 

 

   

 

 

   

 

 

 

Total

  $2,499   $—     $13 
  

 

 

   

 

 

   

 

 

 
   2015 
   Average
Recorded
Investment
   Interest
Income
Recognized
   Interest
Income
Recognized
Cash Basis
 

Real Estate:

      

Residential

  $88   $—     $—   

Commercial

   914    —      1,101 

Construction

   350    21    —   

Commercial and Industrial

   21    —      1 
  

 

 

   

 

 

   

 

 

 

Total

  $1,373   $21   $1,102 
  

 

 

   

 

 

   

 

 

 
   2014 
   Average
Recorded
Investment
   Interest
Income
Recognized
   Interest
Income
Recognized
Cash Basis
 

Real Estate:

      

Residential

  $158   $—     $—   

Commercial

   809    2    —   

Construction

   210    13    —   

Commercial and Industrial

   27    —      —   

Consumer

   3    1    —   
  

 

 

   

 

 

   

 

 

 

Total

  $1,207   $16   $—   
  

 

 

   

 

 

   

 

 

 

First West Virginia’s loan portfolio also includes certain loans that have been modified in a troubled debt restructuring (TDR), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from First West Virginia’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonaccrual at the time of restructure and may only be returned to accrual status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. TDRs on accrual status may remain in accrual status after they have been restructured as long as they continue to perform in accordance with their modified terms. There were no TDRs in accrual status at December 31, 2016, one TDR in accrual status at December 31, 2015, and two TDRs in accrual status at December 31, 2014. There were no funds committed to be advanced to customers whose loans were classified as TDRs at December 31, 2016 and December 31, 2015. At December 31, 2014, there were funds of $33,000 committed to be advanced to customers whose loans were classified as TDRs.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

When First West Virginia modifies a loan, management evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, instead of discounted cash flows. If management determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized by segment or class of loan, as applicable, through an allowance estimate or acharge-off to the allowance. Segment and class status is determined by the loan’s classification at origination.

The following table includes the recorded investment and number of modifications for new TDRs, as of December 31, 2015 and 2014. There were no new TDRs as of December 31, 2016. First West Virginia reports the recorded investment in the loans prior to a modification and also the recorded investment in the loans after the loans were restructured:

   (Dollars in thousands) 
   Year Ended December 31, 2015 
   Number
of
Contracts
   Pre-
Modification
Outstanding
Recorded
Investment
   Post-
Modification
Outstanding
Recorded
Investment
   Related
Allowance
 

Loans

        

Real Estate

        

Residential

   1   $62   $62   $—   

Commercial

   1    204    204    —   

Construction

   1    350    350    9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   3   $616   $616   $9 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Year Ended December 31, 2014 
   Number
of
Contracts
   Pre-
Modification
Outstanding
Recorded
Investment
   Post-
Modification
Outstanding
Recorded
Investment
   Related
Allowance
 

Loans

        

Real Estate

        

Construction

   1   $350   $350   $9 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1   $350   $350   $9 
  

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

The following table includes new troubled debt restructurings by type of modification:

   (Dollars in thousands) 
   Year Ended December 31, 2015 
   Interest
Only
   Term   Combination   Total
Modification
 

Loans

        

Real Estate

        

Residential

  $—     $62   $—     $62 

Commercial

   —      —      204    204 

Construction

   —      350    —      350 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $412   $204   $616 
  

 

 

   

 

 

   

 

 

   

 

 

 
   Year Ended December 31, 2014 
   Interest
Only
   Term   Combination   Total
Modification
 

Loans

        

Real Estate

        

Construction

  $—     $350   $—     $350 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $—     $350   $—     $350 
  

 

 

   

 

 

   

 

 

   

 

 

 

As of December 31, 2016 and December 31, 2015, there were no TDRs that subsequently defaulted within 12 months after restructuring.

Certain directors, executive officers and principal stockholders of First West Virginia, including companies in which they are principal owners, are loan customers of First West Virginia. Such loans are made in the normal course of business, and summarized as follows:

   (Dollars in thousands) 
   2016   2015 

Balance, January 1

  $3,292   $3,236 

Additions

   1,207    676 

Payments

   (257   (620
  

 

 

   

 

 

 

Balance, December 31

  $4,242   $3,292 
  

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

The activity in the allowance for loan loss summarized by primary segments and segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for potential impairment as of December 31, 2016, 2015 and 2014 follows:

   (Dollars in thousands) 
   2016 
   Real
Estate
Residential
  Real
Estate
Commercial
  Real
Estate
Construction
  Commercial
and
Industrial
  Consumer  Other  Total 

Beginning Balance

  $237  $1,067  $18  $351  $14  $111  $1,798 

Charge-offs

   (2  —     —     (3  (1  —     (6

Recoveries

   1   —     —     2   2   —     5 

Provision

   (38  104   (5  (28  (3  (30  —   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending Balance

  $198  $1,171  $13  $322  $12  $81  $1,797 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Individually Evaluated for Impairment

  $—    $—    $—    $—    $—    $—    $—   
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively Evaluated for Potential Impairment

  $198  $1,171  $13  $322  $12  $81  $1,797 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   2015 
   Real
Estate
Residential
  Real
Estate
Commercial
  Real
Estate
Construction
  Commercial
and
Industrial
  Consumer  Other  Total 

Beginning Balance

  $196  $1,255  $66  $128  $15  $153  $1,813 

Charge-offs

   —     —     —     (57  (9  —     (66

Recoveries

   —     2   —     5   14   —     21 

Provision

   41   (190  (48  275   (6  (42  30 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Ending Balance

  $237  $1,067  $18  $351  $14  $111  $1,798 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Individually Evaluated for Impairment

  $—    $—    $9  $—    $—    $—    $9 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively Evaluated for Potential Impairment

  $237�� $1,067  $9  $351  $14  $111  $1,789 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Loans and Related Allowance for Loan Losses (continued)

   2014 
   Real
Estate
Residential
  Real
Estate
Commercial
  Real
Estate
Construction
   Commercial
and
Industrial
  Consumer  Other   Total 

Beginning Balance

  $247  $1,316  $15   $125  $28  $134   $1,865 

Charge-offs

   —     (36  —      (5  (16  —      (57

Recoveries

   —     —     —      —     5   —      5 

Provision

   (51  (25  51    8   (2  19    —   
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Ending Balance

  $196  $1,255  $66   $128  $15  $153   $1,813 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Individually Evaluated for Impairment

  $—    $78  $9   $39  $1  $—     $127 
  

 

 

  

 

 

  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

 

Collectively Evaluated for Potential Impairment

  $196  $1,177  $57   $89  $14  $153   $1,686 

The following tables present the major classifications of loans summarized by individually evaluated for impairment and collectively evaluated for potential impairment as of December 31, 2016 and 2015:

   (Dollars in thousands) 
   2016 
   Real
Estate
Residential
   Real
Estate
Commercial
   Real
Estate
Construction
   Commercial
and
Industrial
   Consumer   Other   Total 

Individually Evaluated for Impairment

  $47   $1,418   $—     $—     $—     $—     $1,465 

Collectively Evaluated for Potential Impairment

   29,674    42,626    595    12,280    2,716    7,736    95,627 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $29,721   $44,044   $595   $12,280   $2,716   $7,736   $97,092 
  

��

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2015 
   Real
Estate
Residential
   Real
Estate
Commercial
   Real
Estate
Construction
   Commercial
and
Industrial
   Consumer   Other   Total 

Individually Evaluated for Impairment

  $65   $2,649   $350   $—     $—     $—     $3,064 

Collectively Evaluated for Potential Impairment

   28,049    41,908    411    13,191    2,836    10,639    97,034 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $28,114   $44,557   $761   $13,191   $2,836   $10,639   $100,098 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5. Premises and Equipment

Major classifications of premises and equipment are summarized as follows:

   (Dollars in thousands) 
   2016   2015 

Land

  $1,984   $1,984 

Land improvements

   470    421 

Leasehold Improvements

   1,087    1,089 

Building

   6,999    6,998 

Furniture, Fixtures, and Equipment

   4,209    4,328 
  

 

 

   

 

 

 
   14,749    14,820 

Less Accumulated Depreciation and Amortization

   (7,120   (6,867
  

 

 

   

 

 

 

Total Premises and Equipment

  $7,629   $7,953 
  

 

 

   

 

 

 

Depreciation and amortization expense on premises and equipment was $625,000, $629,000 and $606,000 for the years ended December 31, 2016, 2015, and 2014, respectively.

Note 6. Deposits

The following table shows the maturities of time deposits for the next five years and beyond as of December 31, 2016 (dollars in thousands):

   2016 

2017

  $27,928 

2018

   8,060 

2019

   4,349 

2020

   8,009 

2021

   7,053 

Beyond 2021

   95 
  

 

 

 

Total

  $55,494 
  

 

 

 

The balance in time deposits that meet or exceed the FDIC insurance limit of $250,000 totaled $5.2 million and $4.6 million as of December 31, 2016 and 2015, respectively. Interest expense on certificates of deposit of $250,000 or more was $51,000, $55,000 and $72,000 at December 31, 2016, 2015 and 2014, respectively.

Note 7. Repurchase Agreements

For repurchase agreements, First West Virginia transfers various securities to customers in exchange for cash at the end of each business day and agrees to reacquire the securities at the end of the next business day for the cash exchanged plus interest. The process is repeated at the end of each business day until the agreement is terminated. The securities underlying the agreements remained under First West Virginia’s control. The risk involved in this type of transaction is that the fair value of the securities transferred may decline below the amount of First West Virginia’s obligation which would require First West Virginia to pledge additional amounts. First West Virginia attempts to manage this risk by monitoring the fair value of securities pledged compared to the repurchase agreement amounts. Additional securities are pledged as necessary to secure First West Virginia’s obligation.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Repurchase Agreements (continued)

The following table summarizes information related to repurchase agreements as of the years indicated:

   (Dollars in thousands) 
   2016  2015 
   Amount   Weighted
Average
Rate
  Amount   Weighted
Average
Rate
 

Securities Sold Under Agreements to Repurchase:

       

Balance at Period End

   22,531    0.80  23,619    0.89

Average Balance Outstanding During the Period

   23,299    0.83   24,602    0.88 

Maximum Amount Outstanding at any Month End

   26,042     28,048   

Securities Collateralizing the Agreements atPeriod-End:

       

Carrying Value

   32,338     34,254   

Fair Value

   32,138     34,399   

The following table shows repurchase agreements accounted for as secured borrowings (in thousands):

   December 31, 2016 
   Remaining Contractual Maturity 

Repurchase Agreements Accounted for as Secured Borrowings

  Overnight and Continuous 

U.S. Government Corporations and Agencies

  $1,357 

Obligations of States and Political Subdivisions

   4,317 

Mortgage-Backed Securities

   16,857 
  

 

 

 

Total Securities Pledged for Repurchase Agreements

  $22,531 
  

 

 

 

Note 8. Federal Home Loan Bank Borrowings

Other borrowed funds consist of fixed rate, long-term advances from the FHLB with remaining maturities as follows:

   (Dollars in thousands) 
   2016  2015 
   Amount   Weighted
Average
Rate
  Amount   Weighted
Average
Rate
 

Due in One Year

  $110    4.78 $103    4.78

Due After One Year to Two Years

   1,760    4.76   110    4.78 

Due After Two Years to Three Years

   43    4.81   1,760    4.76 

Due After Three Years to Four Years

   45    4.81   43    4.81 

Due After Four Years to Five Years

   47    4.81   45    4.81 

Due After Five Years

   1,211    4.81   1,259    4.81 
  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $3,216    4.78 $3,320    4.78
  

 

 

   

 

 

  

 

 

   

 

 

 

First West Virginia maintains a credit arrangement with the FHLB. The FHLB borrowings are secured by a blanket security agreement on outstanding residential mortgage loans or securities with a market value at least equal to the outstanding balances. The remaining maximum borrowing capacity with the FHLB at December 31, 2016 was approximately $43.9 million subject to the purchase of additional FHLB stock. The FHLB borrowings were $3,216,000 and $3,320,000 at December 31, 2016 and 2015, respectively. At December 31, 2016, the subsidiary bank had three fixed rate amortizing advances which totaled $3,216,000 with interest rates ranging from 4.65% to 4.89% of which two advances for $1,790,000 will mature through 2018 and one advance for $1,426,000 will mature through 2023. The collateral securing these borrowings totaled $3,388,000 at December 31, 2016.

Progressive Bank also has a line of credit agreement with the Federal Home Loan Bank which matures on May 1, 2017. The maximum credit available is $24.1 million under the agreement. There were no borrowings outstanding under this agreement at December 31, 2016 and 2015, respectively.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Income Taxes

The provision for income taxes is summarized as follows:

   (Dollars in thousands) 
   2016   2015   2014 

Current Payable:

      

Federal

  $271   $405   $58 

State

   44    66    51 

Deferred:

      

Federal

   (71   (111   (33

State

   3    23    (11
  

 

 

   

 

 

   

 

 

 

Total Provision

  $247   $383   $65 
  

 

 

   

 

 

   

 

 

 

The tax effects of deductible and taxable temporary differences that gave rise to the total of the current year income tax due or refundable and the change in thenet deferred tax assets and liabilities. Deferredasset at December 31 are as follows:

   (Dollars in thousands) 
   2016   2015 

Allowance for Loan Losses

  $709   $709 

Deferred Origination Fees and Costs

   52    51 

Accrued Interest on Nonaccrual Loans

   218    188 

Deferred Compensation

   64    61 

Depreciation

   (180   (167

Amortization

   —      2 

Goodwill

   (372   (335

Alternative Minimum Tax

   1,534    1,446 

Deferred State Income Tax

   (27   (28
  

 

 

   

 

 

 

Total Deferred Tax Asset - Federal

   1,998    1,927 

Total Deferred Tax Asset - State

   80    82 
  

 

 

   

 

 

 
   2,078    2,009 

Deferred Tax Assets (Liabilities) arising from market adjustments of Securities Available For Sale:

    

Federal

   196    (160

State

   1,149    (27
  

 

 

   

 

 

 

Net Deferred Tax Asset before Valuation Allowance

   3,423    1,822 
  

 

 

   

 

 

 

Valuation Allowance:

    

Beginning balance

   (225   (225

Increase during the period

   —      —   
  

 

 

   

 

 

 

Ending balance

   (225   (225
  

 

 

   

 

 

 

Net Deferred Tax Asset

  $3,198   $1,597 
  

 

 

   

 

 

 

As of December 31, 2016, First West Virginia had approximately $1,534,000 of alternative minimum tax assets and liabilities are the estimatedcredits available to offset future tax consequences attributable to differences between the financial statements’ carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The realization of deferred tax assets is assessed and a valuation allowance provided, when necessary, for that portion of the asset which is not likely to be realized. Management believes, based upon current facts, that it is more likely than not there will be sufficient taxable income in future years to realize the deferred tax assets. The Company and its subsidiaries file a consolidated federal income tax return.taxes. The Companycredits have no expiration date. First West Virginia is no longer subject to aexamination by authorities for years before 2013.

Deferred taxes at December 31, 2016 and 2015, are included in other assets in the accompanying Consolidated Balance Sheet.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Income Taxes (continued)

A reconciliation of the federal income tax examinationexpense at statutory income tax rates and the actual income tax expense on income before taxes is shown below:

   (Dollars in thousands) 
   2016  2015  2014 
   Amount  Percent
of
Pre-tax
Income
  Amount  Percent
of
Pre-tax
Income
  Amount  Percent
of
Pre-tax
Income
 

Provision at Statutory Rate

  $631   34.0 $944   34.0 $669   34.0

State Taxes (Net of Federal Benefit)

   57   3.1   30   1.1   23   1.2 

Effect ofTax-Free Income

   (451  (24.3  (582  (21.0  (787  (40.0

BOLI Income

   (39  (2.1  (37  (1.3  (37  (1.9

Other

   49   2.6   28   1.0   197   10.0 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Actual Tax Expense and Effective Rate

  $247   13.3 $383   13.8 $65   3.3
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Note 10. Commitments and Contingent Liabilities

The subsidiary bank is a party to financial instruments withoff-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of these instruments reflect the extent of involvement First West Virginia has in particular classes of financial instruments.

First West Virginia’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 letters of credit is represented by the contractual amount of those instruments. First West Virginia uses the same credit policies in making commitments and conditional obligations as it does foron-balance-sheet instruments.

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

   (Dollars in thousands) 
   2016   2015 

Standby Letters of Credit

  $376   $318 

Construction Mortgages

   2,363    2,988 

Personal Lines of Credit

   1,468    1,540 

Overdraft Protection Lines

   2,801    2,855 

Home Equity Lines of Credit

   3,877    2,644 

Commercial Lines of Credit

   6,307    1,819 
  

 

 

   

 

 

 
  $17,192   $12,164 
  

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Commitments and Contingent Liabilities (continued)

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. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. First West Virginia evaluates each customer’s creditworthiness on acase-by-case basis. The amount of collateral obtained, if deemed necessary by First West Virginia 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.

Standby letters of credit are conditional commitments issued by First West Virginia to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements.

The standby letters of credit in the amount of $80,000 expire in 2017 and $296,000 expire in 2021. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

First West Virginia and its subsidiary are parties to various legal and administrative proceedings and claims. Although any litigation contains an element of uncertainty, management believes that the outcome of these events will not have a material effect on the consolidated financial position and results of operations of First West Virginia.

Note 11. Regulatory Capital

First West Virginia and Progressive 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 First West Virginia’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 certainoff-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. Quantitative measures established by regulation to ensure capital adequacy require First West Virginia and Progressive Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of December 31, 2016, that First West Virginia and Progressive Bank meet all capital adequacy requirements to which they are subject.

As of December 31, 2016, the most recent notifications from the Office of the Comptroller of the Currency categorized Progressive Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes has changed the capital category.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Regulatory Capital (continued)

The capital ratios of First West Virginia’s subsidiary bank, along with the regulatory framework for adequately capitalized and well capitalized institutions are depicted as set forth in the following table:

   (Dollars in thousands) 
   December 31, 2016  December 31, 2015 
   Amount   Ratio  Amount   Ratio 

Common Equity Tier 1 Capital (to Risk-Weighted Assets)

       

Actual

  $32,141    22.02 $32,101    21.98

For Capital Adequacy Purposes

   6,569    4.50   6,572    4.50 

To Be Well Capitalized

   9,489    6.50   9,493    6.50 

Tier I Capital (to Risk-Weighted Assets)

       

Actual

   32,141    22.02   32,101    21.98 

For Capital Adequacy Purposes

   8,759    6.00   8,763    6.00 

To Be Well Capitalized

   11,679    8.00   11,684    8.00 

Total Capital (to Risk-Weighted Assets)

       

Actual

   33,938    23.25   33,899    23.21 

For Capital Adequacy Purposes

   11,679    8.00   11,684    8.00 

To Be Well Capitalized

   14,599    10.00   14,605    10.00 

Tier I Leverage Capital (to Adjusted Total Assets)

       

Actual

   32,141    9.55   32,101    9.42 

For Capital Adequacy Purposes

   13,457    4.00   13,625    4.00 

To Be Well Capitalized

   16,821    5.00   17,031    5.00 

Basel is a committee of central banks and bank regulators from major industrialized countries that develops broad policy guidelines for use by each country’s regulators with the purpose of ensuring that financial institutions have adequate capital given the risk levels of assets andoff-balance-sheet financial instruments. In 2013, the Federal Reserve approved final rules that substantially amend the regulatory risk-based capital rules. The FDIC and the OCC subsequently approved these rules. The final rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to two consultative documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank capital, leverage and liquidity requirements.

The rules include new risk-based capital and leverage ratios, which are phased in from 2015 to 2019, and would refine the definition of what constitutes “capital” for purposes of calculating those ratios. The new minimum capital level requirements applicable to institutions under the final rules are as follows: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions.

The final rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital. The capital conservation buffer will bephased-in over four years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. This will result in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Regulatory Capital (continued)

Basel III provided discretion for regulators to impose an additional buffer, the “countercyclical buffer,” of up to 2.5% of common equity Tier 1 capital to take into account the macro-financial environment and periods of excessive credit growth. However, the final rules permit the countercyclical buffer to be applied only to “advanced approach banks” (i.e., banks with $250 billion or more in total assets or $10 billion or more in total foreign exposures). The final rules also implement revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, and unrealized gains and losses, as well as certain instruments that will no longer qualify as Tier 1 capital, some of which will be phased out over time. However, the final rules provide that small depository institution holding companies with less than $15 billion in total assets as of December 31, 2009 will be able to permanently includenon-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to 2010. May 19, 2010, in additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature.

The Company had no uncertain tax positionsfinal rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions if their capital levels begin to show signs of weakness. These revisions took effect January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions will be required to meet the following increased capital level requirements in order to qualify as “well capitalized:” (i) a new common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5% (increased from 4%).

The final rules set forth certain changes for the calculation of risk-weighted assets, which we were required to utilize beginning January 1, 2015. The standardized approach final rule utilizes an increased number of credit risk exposure categories and risk weights, and also addresses: (i) an alternative standard of creditworthiness consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-style transactions; and (v) disclosure requirements fortop-tier banking organizations with $50 billion or more in total assets that are not subject to the “advance approach rules” that apply to banks with greater than $250 billion in consolidated assets.

Note 12. Operating Leases

First West Virginia’s Bank affiliates leased certain land used for banking purposes under long-term leases, expiring at various dates. These leases contain renewal options and generally provide that First West Virginia will pay for insurance, taxes, and maintenance. Minimum future rental payments under noncancelable operating leases with initial terms in excess of one year at December 31, 20132016, are as follows (dollars in thousands):

   2016 

2017

  $234 

2018

   226 

2019

   227 

2020

   228 

2021

   200 

2022 & thereafter

   59 
  

 

 

 

Total

  $1,174 
  

 

 

 

Rental expense recorded was $242,000, $220,000 and 2012.$220,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

Investment

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13. 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 Affordable Housing Projectsan 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 Company accounted for its limited partnership intereststhree levels of fair value hierarchy are as follows:

Level IFair value is based on unadjusted quoted prices in active markets that are accessible to First West Virginia for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.
Level IIFair 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 affordable housing projects under the cost-recovery method. 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 Company received tax credits each year overfollowing table presents the financial assets measured at fair value on a 10 year period. The investment was completely amortized atrecurring basis and reported on the Consolidated Balance Sheet as of December 31, 2005.

At December 31, 20132016 and 2012, there was approximately $619,000 and $954,0002015, by level within the fair value hierarchy. The majority of credits, respectively, that have not been utilized. The credits have been reflected as an asset andFirst West Virginia’s securities are available to be used to offset future taxes payable, withincluded in Level II of the credits expiring in years 2021 through 2025. Management believes based upon current facts that it is more likely than not there will be sufficient income in future years to be able to use the tax credits.

Fair Value of Financial Instruments

fair value hierarchy. Fair values arefor 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. In some instances, the fair value of certain securities cannot be determined using these techniques due to the lack of relevant market data. As such, these securities are valued using an alternative technique and classified within Level 3 of the fair value hierarchy.

Repurchases of Common Stock

Repurchases of shares of FedFirst Financial’s common stock are recorded as a reduction of stockholders’ equity and the shares are retired upon purchase.

Earnings Per Share

Basic earnings per common share is calculated by dividing the net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share isbased or independently sourced market parameters.

 

Table A

  Valuation
Hierarchy
   (Dollars in thousands)
December 31,
 
     2016   2015 

Available for Sale Securities:

      

U.S. Government Agencies

   Level II   $54,877   $56,902 

Obligations of States and Political Subdivisions

   Level II    34,402    31,956 

Mortgage-Backed Securities - Government-Sponsored Enterprises

   Level II    107,119    114,519 

Equity Securities - Mutual Funds

   Level I    679    187 

Equity Securities - Other

   Level I    129    15 
    

 

 

   

 

 

 

Total Available for Sale Securities

    $197,206   $203,579 
    

 

 

   

 

 

 

LOGO

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

computed in a manner similar to basic earnings per common share except that the weighted-average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Common stock equivalents include restricted stock awards and stock options. Anti-dilutive shares are common stock equivalents with weighted-average exercise prices in excess of the weighted-average market value for the periods presented. Unallocated common shares held by the Employee Stock Ownership Plan (“ESOP”) are not included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted earnings per common share until they are committed to be released.

Stock-Based Compensation

In 2006, FedFirst Financial Corporation’s stockholders approved the 2006 Equity Incentive Plan (the “2006 Plan”). The purpose of the Plan is to promote the Company’s success and enhance its value by linking the personal interests of its employees, officers, directors and directors emeritus to those of the Company’s stockholders, and by providing participants with an incentive for outstanding performance. All of the Company’s salaried employees, officers and directors are eligible to participate in the 2006 Plan. The 2006 Plan authorizes the granting of options to purchase shares of the Company’s stock, which may be non-statutory stock options or incentive stock options, and restricted stock which is subject to restrictions on transferability and subject to forfeiture. The 2006 Plan reserved an aggregate number of 214,787 shares of which 153,419 may be issued in connection with the exercise of stock options and 61,367 may be issued as restricted stock.

In 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan’s details related to purpose, eligibility, and granting of shares are the same as noted above for the 2006 Plan. The 2011 Plan reserved an aggregate number of 204,218 shares of which 145,870 may be issued in connection with the exercise of stock options and 58,348 may be issued as restricted stock.

Awards are typically granted with a five year vesting period and a vesting rate of 20% per year. The contractual life of stock options is typically 10 years from the date of grant. The exercise price for options is the closing price on the date of grant. The Company recognizes expense associated with the awards over the vesting period. Unrecognized compensation cost related to nonvested stock-based compensation is recognized ratably over the remaining service period. The per share weighted-average fair value of stock options granted with an exercise price equal to the market value on the date of grant is calculated using the Black-Scholes-Merton option pricing model, using assumptions for expected life, expected dividend rate, risk-free interest rate, and an expected volatility. The Company uses the simplified method to determine the expected term because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its shares have been publicly traded.

Advertising Costs

The Company follows the policy of charging the costs of advertising to expense as incurred. Total advertising expense was approximately $498,000 and $221,000 for the years ended December 31, 2013 and 2012, respectively.

Revenue Recognition of Insurance Commissions and Contingency Fees

Exchange Underwriters records insurance commission based on the method in which the policy is billed. For policies that Exchange Underwriters directly bills to policyholders, income is recorded when billed. For policies an insurance company directly bills to policyholders on behalf of Exchange Underwriters, income is recorded as payments are received. Commissions are recorded net of cancellations.

Exchange Underwriters also receives guaranteed supplemental payments and contingency fees that may be significant to its financial results. Guaranteed supplemental payments and contingency fees are dependent on several factors, which include, but are not limited to, eligible written premiums, earned premiums, incurred losses, and stop loss charges.

 

LOGONote 13. Fair Value Disclosure (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Guaranteed supplemental payments are only accrued when insurance companies offer a lock-in provision and Exchange Underwriters agrees to a stipulated amount that typically includes a predetermined percentage adjusting the final payout calculations. Otherwise, contingency fees are recorded on a cash basis when received based on final calculations. Contingency fees are typically received in the first quarter of the year. Since insurance companies are not required to provide any estimates, the Company is not able to accrue contingency fees in the period earned as it does with guaranteed supplemental payments.

Reclassifications of Prior Year’s Statements

Certain previously reported items have been reclassified to conform to the current year’s classifications.

Recent Accounting Pronouncements

ASU 2013-02 Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. In February 2013, the FASB issued ASU 2013-02,Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires entities to disclose additional information about reclassification adjustments including changes in accumulated other comprehensive income (“AOCI”) balances by component and significant items reclassified out of AOCI. The ASU is intended to help entities improve the transparency of changes in other comprehensive income (“OCI”) and items reclassified out of AOCI in their financial statements. It does not amend any existing requirements for reporting net income or OCI in the financial statements. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. The adoption of this ASU did not have a material impact on the Company’s financial condition and results of operation.

ASU 2013-11 Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. In July 2013, the FASB issued ASU 2013-11,Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. The ASU is intended to eliminate diversity in practice resulting from a lack of guidance on this topic in current GAAP. Under the ASU, an entity generally must present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operation.

ASU 2014-04 Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. In January 2014, the FASB issued ASU 2014-04Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure, to reduce diversity in practice by clarifying when an in substance repossession of foreclosure occurs, that is, when a creditor should be considered to have received physical possession of a residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operation.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.Securities

The following table sets forth the amortized cost and fair value of securities available-for-sale at the dates indicated (dollars in thousands).

December 31, 2013

  Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair
Value
 

Municipal bonds

  $7,988    $207    $225    $7,970  

Mortgage-backed—GSEs

   7,740     452     —       8,192  

REMICs

   6,946     98     25     7,019  

Corporate debt

   3,996     —       405     3,591  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available-for-sale

  $26,670    $757    $655    $26,772  
  

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2012

  Amortized
Cost
   Gross
Unrealized
Gains
   Gross
Unrealized
Losses
   Fair
Value
 

Municipal bonds

  $8,756     435     10    $9,181  

Mortgage-backed—GSEs

   12,120     695     —       12,815  

REMICs

   18,345     355     —       18,700  

Corporate debt

   3,995     —       2,113     1,882  

Equities

   4     —       —       4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total securities available-for-sale

  $43,220    $1,485    $2,123    $42,582  
  

 

 

   

 

 

   

 

 

   

 

 

 

Securities with an amortized cost and fair value of $8.4 million at December 31, 2013 and $12.8 million and $13.3 million, respectively, at December 31, 2012 were pledged to secure public deposits and repurchase agreements.

There were no sales of securities available-for-sale for the year ended December 31, 2013 and 2012.

The amortized cost and fair value of securities at December 31, 2013 by contractual maturity were as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties (dollars in thousands).

   Amortized
Cost
   Fair
Value
 

Due in less than one year

  $1    $1  

Due from one to five years

   2,106     2,314  

Due from five to ten years

   6,482     6,501  

Due after ten years

   18,081     17,956  
  

 

 

   

 

 

 

Total

  $26,670    $26,772  
  

 

 

   

 

 

 

The following table presents gross unrealized losses and fair value of securities aggregated by category and length of time that individual securities have been in a continuous loss position at the dates indicated (dollars in thousands).

  Less than 12 months  12 months or more  Total 

December 31, 2013

 Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
  Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
  Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
 

Municipal Bonds

  2   $4,147   $142    1   $1,058   $83    3   $5,205   $225  

REMICs

  3    2,532    25    —      —      —      3    2,532    25  

Corporate debt

  —      —      —      3    3,591    405    3    3,591    405  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total securities temporarily impaired

  5   $6,679   $167    4   $4,649   $488    9   $11,328   $655  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  Less than 12 months  12 months or more  Total 

December 31, 2012

 Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
  Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
  Number
of
Securities
  Fair
Value
  Gross
Unrealized
Losses
 

Municipal Bonds

  1   $1,151   $10    —     $—     $—      1   $1,151   $10  

Corporate debt

  —      —      —      3    1,882    2,113    3    1,882    2,113  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total securities temporarily impaired

  1   $1,151   $10    3   $1,882   $2,113    4   $3,033   $2,123  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The Company reviews its investment portfolio on a quarterly basis for indications of impairment. This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer including any specific events that may influence the operations of the issuer, and the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market.

Municipal bonds—At December 31, 2013, the Company had two municipal bonds with an unrealized loss of $142,000 in an unrealized loss position of less than 12 months and one municipal bond with an unrealized loss of $83,000 in an unrealized loss position of 12 months or more. An evaluation was performed on each bond. For the two bonds in an unrealized loss position of less than 12 months, there were no events to indicate deterioration in credit with unchanged, investment grade credit ratings. The Company believes the unrealized loss on these two bonds is due to market conditions, specifically rising interest rates impacting the value of the bonds. For the bond in an unrealized loss position of 12 months or more, the credit rating was initially downgraded in 2012 primarily due to budgetary challenges and more recently in July 2013 primarily due to accreditation concerns; however the credit rating remains investment grade and the strong income indicators of the economic base and sound financial policies and practices of the municipality, and the municipality’s ability to levy a property tax that is sufficient to be used for bond payment are expected to allow it to repay debt and meet its contractual obligations. Therefore, the Company believes the unrealized loss of this bond is due to changes in market conditions. The Company does not intend to sell the bonds and it is more likely than not that the Company will not be required to sell the bonds before recovery. The Company expects to recover the entire amortized cost basis and concluded that there was no OTTI on these bonds at December 31, 2013.

Corporate debt—At December 31, 2013, the Company had three securities consisting of two pools of corporate debt obligations (“CDOs”) collateralized by the trust preferred securities of insurance companies that were in an unrealized loss position for 12 months or greater at an amount of $405,000. These securities were downgraded from their original rating issuance to below investment grade in 2009 after purchase. The lack of liquidity in the market for this type of security, credit rating downgrades and market uncertainties are factors contributing to the unrealized losses on these securities.

The following table provides additional information related to the Company’s CDOs at December 31, 2013 (dollars in thousands):

Pool

 Class Tranche Amortized
Cost
  Fair
Value
  Unrealized
Loss
  S&P
Rating
 Current
Number of
Insurance
Companies
  Total
Collateral
  Current
Deferrals
and
Defaults
  Performing
Collateral
  Additional
Immediate
Deferrals/
Defaults
Before
Causing an
Interest
Shortfall(a)
  Additional
Immediate
Deferrals/
Defaults
Before
Causing a
Break in
Yield(b)
 

I-PreTSL I

 Mezzanine B-3 $1,500   $1,281   $(219 CCC-  16   $188,300   $32,500   $155,800   $102,460   $45,500  

I-PreTSL II

 Mezzanine B-3  2,496    2,310    (186 BB+  23    305,500    24,500    281,000    175,947    112,000  
 

 

 

 

 

 

 

  

 

 

  

 

 

  

 

 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   $3,996   $3,591   $(405       
   

 

 

  

 

 

  

 

 

        

(a)A temporary interest shortfall is caused by an amount of deferrals/defaults high enough such that there is insufficient cash flow available to pay current interest on the given tranche or by breaching the principal coverage test of the tranche immediately senior to the given tranche. Amounts presented represent additional deferrals/defaults beyond those currently existing that must occur before the security would experience an interest shortfall.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(b)A break in yield for a given tranche means that deferrals/defaults have reached such a level that the tranche would not receive all of its contractual cash flows (principal and interest) by maturity (so not just a temporary interest shortfall, but an actual loss in yield on the investment). In other words, the magnitude of the defaults/deferrals has depleted all of the credit enhancement (excess interest and over-collateralization) beneath the given tranche. Amounts presented represent additional deferrals/defaults beyond those currently existing that must occur before the security would experience a break in yield.

These securities are evaluated for OTTI by determining whether it is probable that an adverse change in estimated cash flows has occurred. Determining whether there has been an adverse change in estimated cash flows involves the calculation of the present value of remaining cash flows compared to previously projected cash flows. We consider the discounted cash flow analysis to be our primary evidence when determining whether credit-related OTTI exists. Additionally, reports are reviewed that provide information for the amount of deferral/defaults that would have to occur to prevent the tranche from collecting contractual cash flows (principal and interest). None of these securities are projecting a cash flow disruption, nor have any of these securities experienced a cash flow disruption. The Company also reviewed each of the issues’ collateral participants, including their financial condition, ratings provided by A. M. Best (for insurance companies), and adverse conditions specifically related to industry or geographic area. This information did not suggest additional deferrals or defaults in the future that would result in the securities not receiving all of their contractual cash flows. Based on the analysis performed and the fact that the Company does not expect to sell these securities, and because it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis, the Company concluded that there was no OTTI on these securities at December 31, 2013.

In December 2013, the OCC adopted final regulations implementing section 619 of the Dodd-Frank Wall Street Reform and Protection Act, commonly known as the “Volcker Rule”, which restricts the ability of a banking entity to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund (referred to as a “covered fund”). A banking entity must divest its holding in covered funds by July 15, 2015. A covered fund is defined to include any issuer that would be an investment company under the Investment Company Act of 1940, but relies on the exemption for funds sold to fewer than 100 investors or the exemption for funds sold only to qualified purchasers. An issuer that could rely on a different exemption from the definition of investment company under the Investment Company Act would not be considered a covered fund, and therefore would not be subject to the Volcker Rule. In particular, the federal banking regulators have noted that some issuers of CDOs may qualify for exemption under Investment Company Act Rule 3a-7, which exempts non-managed fixed income funds from the definition of investment company. Therefore, if the issuer meets the requirements of Rule 3a-7, the CDOs will not be subject to the Volcker Rule. Based on our review, the CDOs held by the Bank as of December 31, 2013 satisfy all conditions for relying on the exemption under Investment Company Act Rule 3a-7, and therefore are not considered a covered fund that require divesture by July 15, 2015. The CDOs were in an unrealized loss position of $405,000 at December 31, 2013.

Other Securities—This category may include mortgage-backed securities and REMICS. At December 31, 2013, the Company had three REMIC securities that were issued and backed by a Government-Sponsored Enterprise (“FNMA” and “FHLMC”) with an unrealized loss of $25,000. The securities were in an unrealized loss position for less than 12 months. The Company believes the unrealized loss of the securities is due to changes in market interest rates or changes in market conditions as there was no indication that the issuers were having financial difficulties. The Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before their recovery. The Company expects to recover the entire amortized cost basis of the securities and concluded that there was no OTTI at December 31, 2013.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.Loans

The following table sets forth the composition of the Company’s loan portfolio at the dates indicated (dollars in thousands).

December 31,

  2013  2012 

Real estate—mortgage:

   

One-to four-family residential

   

Originated

  $104,870   $110,754  

Purchased

   6,888    10,188  
  

 

 

  

 

 

 

Total one-to four-family residential

   111,758    120,942  

Multi-family

   

Originated

   7,083    11,101  

Purchased

   3,768    4,226  
  

 

 

  

 

 

 

Total multi-family

   10,851    15,327  

Commercial

   61,889    45,504  
  

 

 

  

 

 

 

Total real estate—mortgage

   184,498    181,773  
  

 

 

  

 

 

 

Real estate—construction:

   

Residential

   3,337    1,931  

Commercial

   15,979    5,231  
  

 

 

  

 

 

 

Total real estate—construction

   19,316    7,162  
  

 

 

  

 

 

 

Consumer:

   

Home equity:

   

Loan-to-value ratio of 80% or less

   47,543    41,537  

Loan-to-value ratio of greater than 80%

   9,247    7,841  
  

 

 

  

 

 

 

Total home equity

   56,790    49,378  

Other

   1,666    1,923  
  

 

 

  

 

 

 

Total consumer

   58,456    51,301  
  

 

 

  

 

 

 

Commercial business

   20,023    15,055  
  

 

 

  

 

 

 

Total loans

  $282,293   $255,291  
  

 

 

  

 

 

 

Net premium on loans purchased

   93    106  

Net deferred loan costs

   351    450  

Loans in process

   (10,617  (3,431

Allowance for loan losses

   (3,308  (2,886
  

 

 

  

 

 

 

Loans, net

  $268,812   $249,530  
  

 

 

  

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans to Executive Officers and Directors. The Bank has made loans to executive officers and directors in the ordinary course of business under the same terms and conditions, including interest rates and collateral, as those prevailing for comparable transaction with other customers and did not, in the opinion of management, involve more than normal credit risk. The following table sets forth the changes to loans to executive officers and directors at the dates indicated (dollars in thousands).

December 31,

  2013  2012 

Balance, beginning of year

  $3,919   $2,758  

Additions

   134    1,821  

Repayments

   (138  (626

Loans in process

   —      (34
  

 

 

  

 

 

 

Balance, end of year

  $3,915   $3,919  
  

 

 

  

 

 

 

Delinquencies. The following table provides information about delinquencies in our loan portfolio at the dates indicated (dollars in thousands).

December 31,

  2013   2012 
   30-59
Days
Past
Due
   60-89
Days
Past
Due
   90 Days
or Greater
Past Due
   30-59
Days
Past
Due
   60-89
Days
Past
Due
   90 Days
or Greater
Past Due
 

Real estate—mortgage:

            

One- to four-family residential

            

Originated

  $1,012    $427    $627    $1,052    $138    $281  

Purchased

   —       —       307     —       —       595  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total one-to four-family residential

   1,012     427     934     1,052     138     876  

Commercial

   30     —       493     456     —       74  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total real estate—mortgage

   1,042     427     1,427     1,508     138     950  

Real estate—construction:

            

Residential

   715     —       —       —       —       —    

Consumer:

            

Home equity

            

Loan-to-value ratio of 80% or less

   1     —       —       510     —       —    

Loan-to-value ratio of greater than 80%

   144     158     30     406     36     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total home equity

   145     158     30     916     36     —    

Other

   —       3     —       5     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consumer

   145     161     30     921     36     —    

Commercial business

   —       —       —       8     —       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total delinquencies

  $1,902    $588    $1,457    $2,437    $174    $950  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Nonperforming Assets. The following table provides information with respect to our nonperforming assets at the dates indicated (dollars in thousands).

December 31,

  Number of
Contracts
   2013  Number of
Contracts
   2012 

Nonaccrual loans:

       

Real estate—mortgage:

       

One- to four-family residential

       

Originated

   4    $1,595    2    $1,269  

Purchased

   4     307    5     763  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total one- to four-family residential

   8     1,902    7     2,032  

Commercial

   2     493    2     172  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total real estate—mortgage

   10     2,395    9     2,204  

Consumer:

       

Home equity (loan-to-value ratio of greater than 80%)

   1     30    —       —    
  

 

 

   

 

 

  

 

 

   

 

 

 

Total nonaccrual loans

   11     2,425    9     2,204  
  

 

 

   

 

 

  

 

 

   

 

 

 

Accruing loans past due 90 days or more

   —       —      —       —    
  

 

 

   

 

 

  

 

 

   

 

 

 

Total nonaccrual loans and accruing loans past due 90 days or more

   11     2,425    9     2,204  

Real estate owned

   1     126    2     146  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total nonperforming assets

   12    $2,551    11    $2,350  
  

 

 

   

 

 

  

 

 

   

 

 

 

Troubled debt restructurings:

       

In nonaccrual status

   1    $968    3    $1,254  

Performing under modified terms

   8     2,358    7     1,501  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total troubled debt restructurings

   9    $3,326    10    $2,755  
  

 

 

   

 

 

  

 

 

   

 

 

 

Total nonperforming loans to total loans

     0.86    0.86

Total nonperforming assets to total assets

     0.80      0.74  

Total nonperforming assets and troubled debt restructurings performing under modified terms to total assets (1)

     1.54      1.21  
    

 

 

    

 

 

 

(1)Troubled debt restructurings in nonaccrual status are included in nonperforming assets.

Troubled Debt Restructurings. Loans whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties are considered TDRs. 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 our portfolio primarily consist of, but are not limited to, capitalization of principal and interest due, reverting from payment of principal and interest to interest-only, or extending a maturity date through a signed forbearance agreement. Certain TDRs were placed in nonaccrual status at the time of restructure and will remain in that classification for a minimum of six consecutive months until uncertainty with respect to collectability no longer exists. Loans that were current at the time of classification remained on an accrual basis and are monitored to ensure restructured contractual terms are met.

TDRs are typically evaluated for any possible impairment similar to other impaired loans based on the current fair value of the collateral, less selling costs, for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through a specific allowance for loan losses. In periods subsequent to modification, we continue to evaluate all TDRs for any additional impairment and will adjust any specific allowances accordingly.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables provide information related loans modified as TDRs during the periods indicated (dollars in thousands). The pre-modification outstanding recorded investment represents the balance outstanding when the loan was determined to be a TDR. The post-modification outstanding recorded investment represents the outstanding balance at period end.

  In Nonaccrual Status  Performing Under Modified Terms 

December 31, 2013

 Number
of
Contracts
  Pre-
Modification
Outstanding
Recorded
Investment
  Post-
Modification
Outstanding
Recorded
Investment
  Specific
Allowance
  Number
of
Contracts
  Pre-
Modification
Outstanding
Recorded
Investment
  Post-
Modification
Outstanding
Recorded
Investment
  Specific
Allowance
 

Real estate—mortgage:

        

Commercial

  —     $—     $—     $—      1   $653   $653   $—    

Consumer:

        

Home equity (loan-to-value ratio of 80% or less)

  —      —      —      —      1    373    273    —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total troubled debt restructurings

  —     $—     $—     $—      2   $1,026   $926   $—    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  In Nonaccrual Status  Performing Under Modified Terms 

December 31, 2012

 Number
of
Contracts
  Pre-
Modification
Outstanding
Recorded
Investment
  Post-
Modification
Outstanding
Recorded
Investment
  Specific
Allowance
  Number
of
Contracts
  Pre-
Modification
Outstanding
Recorded
Investment
  Post-
Modification
Outstanding
Recorded
Investment
  Specific
Allowance
 

Real estate—mortgage:

        

One- to four-family residential

        

Originated

  1   $993   $988   $—      —     $—     $—     $—    

Purchased

  1    168    168    —      —      —      —      —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total one- to four-family residential

  2    1,161    1,156    —      —      —      —      —    

Commercial

  —      —      —      —      1    9    9    —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total troubled debt restructurings

  2   $1,161   $1,156   $—      1   $9   $9   $—    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

During the year ended December 31, 2013, one commercial real estate loan TDR with a balance of $76,000 and one other consumer loan TDR with a balance of $7,000 were paid off. In addition, one purchased residential loan with a balance of $166,000 was charged-off. During the year ended December 31, 2012, one commercial real estate loan TDR with a balance of $66,000 was paid off.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impaired Loans.The following tables summarize information in regards to impaired loans by loan portfolio class at the dates indicated (dollars in thousands).

December 31, 2013

  Recorded
Investment
   Unpaid
Principal
Balance
   Related
Allowance
   Average
Recorded
Investment
   Interest
Income
Recognized
 

Impaired loans with no related allowance recorded

          

One- to four-family originated residential

  $1,505    $1,505    $—      $1,515    $65  

Commercial real estate

   2,705     2,705     —       2,742     149  

Home equity (loan-to-value ratio of 80% or less)

   405     405     —       409     10  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $4,615    $4,615    $—      $4,666    $224  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2012

  Recorded
Investment
   Unpaid
Principal
Balance
   Related
Allowance
   Average
Recorded
Investment
   Interest
Income
Recognized
 

Impaired loans with no related allowance recorded

          

One- to four-family originated residential

  $1,528    $1,528    $—      $1,625    $16  

One- to four-family purchased residential

   309     509     —       411     2  

Commercial real estate

   2,571     2,683     —       2,799     168  

Home equity (loan-to-value ratio of 80% or less)

   136     136     —       138     9  

Other consumer

   8     8     —       10     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total impaired loans

  $4,552    $4,864    $—      $4,983    $195  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Allowance for loan losses. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a valuation allowance on impaired loans; and (2) a valuation allowance on the remainder of the loan portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.

Allowance on Impaired Loans.We establish an allowance for loans that are individually evaluated and determined to be impaired. The amount of impairment is determined by the difference between the present value of the expected cash flows related to the loan, using current interest rates and its recorded value, or, as a practical measure in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans less estimated selling costs. At December 31, 2013, there were seven loan relationships that were individually evaluated for impairment, of which five were considered TDRs. At December 31, 2012, there were seven loan relationships that were individually evaluated for impairment, of which four were considered TDRs. TDR and impaired loan information and any related specific allowances were previously summarized in the“Troubled Debt Restructurings” and“Impaired Loans” sections.

Allowance on the Remainder of the Loan Portfolio. We establish an allowance for loans that are not determined to be impaired. Management determines historical loss experience for each group of loans with similar risk characteristics within the portfolio based on loss experience for loans in each group. Loan categories will represent groups of loans with similar risk characteristics and may include types of loans categorized by product, large credit exposures, concentrations, loan grade, or any other characteristic that causes a loan’s risk profile to be similar to another. We utilize previous years’ net charge-off experience by loan category as a basis in determining loss projections. In addition, there are two categories of loans considered to be higher risk concentrations that are evaluated separately when calculating the allowance for loan losses:

Loans purchased in the secondary market. Prior to 2006, pools of multi-family and one- to four-family residential mortgage loans located in areas outside of our primary geographic lending area in southwestern Pennsylvania were

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

acquired in the secondary market. Although these loans were underwritten to our lending standards, they are considered higher risk given our unfamiliarity with the geographic areas where the properties are located and ability to timely identify problem loans through servicer correspondence.

Home equity loans with a loan-to-value ratio greater than 80%. These loans are considered higher risk given the pressure on property values and reduced credit alternatives available to leveraged borrowers.

We also consider qualitative or environmental factors that are likely to cause estimated credit losses associated with the bank’s existing portfolio to differ from historical loss experience. Our qualitative and environmental factors are reviewed on a quarterly basis to ensure they are reflective of current conditions in our loan portfolio and economy. In 2013, the qualitative factors were adjusted by applying factors to commercial construction loans to ensure potential losses are captured as disbursements are occurring. Our historical loss experience is typically updated on an annual basis when another complete year of loss history is available. At December 31, 2013, we adjusted our historical loss data by utilizing the three most recent years of loss history and periods where we did not experience any losses were excluded from determining the historical average loss for each loan class. It was determined that the most recent three years of loss history represented the most relevant data. At December 31, 2012, we utilized six years of loss history and, generally, periods where we did not experience any losses were excluded from determining the historical average loss for each loan class.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transactions in the allowance for loan losses during 2013 are summarized as follows (dollars in thousands):

  Real estate
- mortgage
  Real estate
- construction
  Consumer          
  

One- to

four-family

residential

  Multi-family           

Home equity

(loan-to-

value ratio of

             
  (originated)  (purchased)  (originated)  (purchased)  Commercial  Residential  Commercial  80%
or
less)
  greater
than

80%)
  Other
Consumer
  Commercial
business
  Unallocated  Total 

Loan Balance

 $104,870   $6,888   $7,083   $3,768   $61,889   $3,337   $15,979   $47,543   $9,247   $1,666   $20,023    $282,293  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for loan losses:

             

December 31, 2012

 $466   $372   $33   $102   $802   $3   $8   $434   $246   $19   $245   $156   $2,886  

Charge-offs

  (12  (199  —      —      —      —      —      —      (121  (13  —      —      (345

Recoveries

  13    —      —      —      9    —      —      —      2    3    —      —      27  

Provision

  (35  113    81    (68  214    3    95    41    141    2    187    (34  740  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2013

 $432   $286   $114   $34   $1,025   $6   $103   $475   $268   $11   $432   $122   $3,308  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively evaluated on historical loss experience

 $113   $143   $—     $—     $54   $—     $—     $30   $89   $6   $19   $—     $454  

Collectively evaluated on qualitative factors

  319    143    114    34    971    6    103    445    179    5    413    —      2,732  

Unallocated

  —      —      —      —      —      —      —      —      —      —      —      122    122  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total allowance for loan losses

 $432   $286   $114   $34   $1,025   $6   $103   $475   $268   $11   $432   $122   $3,308  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Percent of Allowance

  13.1  8.6  3.4  1.0  31.0  0.2  3.1  14.4  8.1  0.3  13.1  3.7  100.0

Percent of Loans (1)

  37.1  2.4  2.5  1.3  21.9  1.2  5.7  16.9  3.3  0.6  7.1   100.0

(1)Represents percentage of loans in each category to total loans

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transactions in the allowance for loan losses during 2012 are summarized as follows (dollars in thousands):

   Real estate—mortgage  Real estate—construction  Consumer          
   One- to four-family                 Home equity (loan-
to-value ratio of
             
   residential  Multi-family           80%  greater  Other  Commercial       
   (originated)  (purchased)  (originated)  (purchased)  Commercial  Residential  Commercial  or less)  than 80%)  Consumer  business  Unallocated  Total 

Loan Balance

  $110,754   $10,188   $11,101   $4,226   $45,504   $1,931   $5,231   $41,537   $7,841   $1,923   $15,055    $255,291  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Allowance for loan losses:

              

December 31, 2011

  $534   $465   $39   $124   $858   $6   $12   $379   $267   $24   $242   $148   $3,098  

Charge-offs

   (136  (309  —      —      (33  —      —      —      (49  (1  (15  —      (543

Recoveries

   7    —      —      —      1    —      —      10    3    —      —      —      21  

Provision

   61    216    (6  (22  (24  (3  (4  45    25    (4  18    8    310  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

December 31, 2012

  $466   $372   $33   $102   $802   $3   $8   $434   $246   $19   $245   $156   $2,886  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Collectively evaluated on historical loss experience

  $138   $166   $—     $64   $90   $—     $—     $61   $97   $14   $8   $—     $638  

Collectively evaluated on qualitative factors

   328    206    33    38    712    3    8    373    149    5    237    —      2,092  

Unallocated

   —      —      —      —      —      —      —      —      —      —      —      156    156  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total allowance for loan losses

  $466   $372   $33   $102   $802   $3   $8   $434   $246   $19   $245   $156   $2,886  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Percent of Allowance

   16.1  12.9  1.2  3.5  27.8  0.1  0.3  15.0  8.5  0.7  8.5  5.4  100.0

Percent of Loans (1)

   43.4  4.0  4.3  1.7  17.8  0.8  2.0  16.3  3.0  0.8  5.9   100.0

(1)Represents percentage of loans in each category to total loans

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Quality Information. Federal regulations require us to review and classify our assets on a regular basis. In addition, the OCC has the authority to identify problem assets and, if appropriate, require them to be classified. There are four classifications for problem assets: special mention, substandard, doubtful and loss. The following table presents the classes of the loan portfolio and shows our credit risk profile by internally assigned risk rating at the dates indicated (dollars in thousands).

  Real estate - mortgage  Real estate - construction  Consumer       
                       Home equity (loan-          
  One- to four-family                 to-value ratio of          
  residential  Multi-family           80%  greater  Other  Commercial  Total 

December 31, 2013

 (originated)  (purchased)  (originated)  (purchased)  Commercial  Residential  Commercial  or less)  than 80%)  Consumer  business  loans 

Grade:

            

Pass

 $103,275   $6,581   $5,231   $3,768   $58,311   $3,337   $15,979   $46,934   $9,217   $1,666   $17,964   $272,263  

Special Mention

  —      —      1,852    —      676    —      —      —      —      —      2,059    4,587  

Substandard

  1,595    307    —      —      2,902    —      —      609    30    —      —      5,443  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $104,870   $6,888   $7,083   $3,768   $61,889   $3,337   $15,979   $47,543   $9,247   $1,666   $20,023   $282,293  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  Real estate - mortgage  Real estate - construction  Consumer       
                       Home equity (loan-          
  One- to four-family                 to-value ratio of          
  residential  Multi-family           80%  greater  Other  Commercial  Total 

December 31, 2012

 (originated)  (purchased)  (originated)  (purchased)  Commercial  Residential  Commercial  or less)  than 80%)  Consumer  business  loans 

Grade:

            

Pass

 $109,226   $9,425   $11,101   $4,226   $42,243   $1,931   $5,231   $41,401   $7,841   $1,915   $14,990   $249,530  

Special Mention

  —      —      —      —      443    —      —      —      —      —      65    508  

Substandard

  1,528    763    —      —      2,818    —      —      136    —      8    —      5,253  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $110,754   $10,188   $11,101   $4,226   $45,504   $1,931   $5,231   $41,537   $7,841   $1,923   $15,055   $255,291  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.Premises and Equipment

Premises and equipment are summarized by major classifications as follows (dollars in thousands).

December 31,

  2013   2012 

Land and land improvements

  $576    $522  

Buildings and leasehold improvements

   4,471     4,287  

Furniture, fixtures and equipment

   4,232     4,109  
  

 

 

   

 

 

 

Total, at cost

   9,279     8,918  
  

 

 

   

 

 

 

Less: accumulated depreciation

   7,427     7,121  
  

 

 

   

 

 

 

Premises and equipment, net

  $1,852    $1,797  
  

 

 

   

 

 

 

Depreciation expense was approximately $306,000 and $372,000 for the years ended December 31, 2013 and 2012, respectively.

5.Deposits

Deposits are summarized as follows (dollars in thousands).

December 31,

  2013   2012 

Noninterest-bearing demand deposits

  $27,247    $23,987  

Interest-bearing demand deposits

   30,733     17,878  

Savings accounts

   24,415     24,271  

Money market accounts

   48,746     55,047  

Certificates of deposit

   88,091     92,874  
  

 

 

   

 

 

 

Total deposits

  $219,232    $214,057  
  

 

 

   

 

 

 

Interest expense by deposit category was as follows (dollars in thousands).

Years ended December 31,

  2013   2012 

Interest-bearing demand deposits

  $23    $20  

Savings accounts

   12     39  

Money market accounts

   77     227  

Certificates of deposit

   1,307     1,722  
  

 

 

   

 

 

 

Total interest expense

  $1,419    $2,008  
  

 

 

   

 

 

 

The aggregate amount of certificates of deposit with a minimum denomination of $100,000 totaled $34.2 million and $31.5 million at December 31, 2013 and 2012, respectively. Generally deposits in excess of $250,000 are not federally insured.

Scheduled maturities of certificates of deposit were as follows (dollars in thousands):

December 31,

  2013      2012 

2014

  $46,567    2013  $41,248  

2015

   11,385    2014   16,716  

2016

   8,351    2015   7,922  

2017

   3,618    2016   7,140  

2018

   7,009    2017   3,551  

Thereafter

   11,161    Thereafter   16,297  
  

 

 

     

 

 

 

Total

  $88,091    

Total

  $92,874  
  

 

 

     

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.Borrowings

We utilize borrowings as a supplemental source of funds for loans and securities. The primary sources of borrowings are FHLB advances and, to a limited extent, repurchase agreements. At December 31, 2013 and 2012, we had $45.9 million and $49.1 million of borrowings, respectively, of which $42.9 million and $46.1 million, respectively, were FHLB advances and $3.0 million were repurchase agreements. At December 31, 2013 and 2012, our FHLB advances consisted of fixed rate advances.

In 2010, the Company modified a $12.0 million convertible select advance into a new five year fixed rate FHLB advance. The debt modification resulted in an $864,000 prepayment penalty which is deferred and amortized in future periods on a straight-line basis over the life of the new borrowing. The Company concluded that the revised terms constituted a debt modification rather than a debt extinguishment because the change in the present value of cash flows of the new borrowing changed by less than 10% compared to the present value of the remaining cash flows of the old borrowing.

The following table sets forth borrowings based on their stated maturities and weighted average rates at December 31, 2013 and 2012 (dollars in thousands).

   Weighted
Average Rate
       
    Balance 

December 31,

  2013  2012  2013  2012 

Due in one year or less

   1.81  1.52 $33,860   $19,120  

Due in one to two years

   3.82    3.41    12,000    18,000  

Due in two to three years

   —      3.82    —      12,000  
  

 

 

  

 

 

  

 

 

  

 

 

 

Advances

   2.34%  2.77% $45,860   $49,120  

Less: deferred premium on modification

     (269  (442
    

 

 

  

 

 

 

Total advances

    $45,591   $48,678  
    

 

 

  

 

 

 

Advances from the FHLB are secured by the Bank’s stock in the FHLB and a blanket lien on the Bank’s qualifying loans. Securities with an amortized cost of $3.0 million and fair value of $3.2 million at December 31, 2013 compared to $4.4 million and $4.5 million at December 31, 2012, respectively, were pledged to adequately secure the repurchase agreements.

The maximum remaining borrowing capacity at the FHLB at December 31, 2013 and 2012 was approximately $105.4 million and $114.5 million, respectively. The advances are subject to restrictions or penalties in the event of prepayment. The Bank also has the ability to borrow from the Federal Reserve based upon eligible collateral and has two unsecured discretionary lines of credit totaling $13.0 million.

7.Earnings Per Share

The following table sets forth basic and diluted earnings per common share at December 31, 2013 and 2012.

Years Ended December 31,

  2013   2012 
(Dollars in thousands, except per share amounts)        

Net income

  $2,235    $2,255  

Weighted-average shares outstanding:

    

Basic

   2,405,295     2,799,765  

Effect of dilutive stock options and awards

   43,957     3,336  
  

 

 

   

 

 

 

Diluted

   2,449,252     2,803,101  

Earnings per share:

    

Basic

  $0.93    $0.81  

Diluted

   0.91     0.80  
  

 

 

   

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The dilutive effect on average shares outstanding is the result of stock options outstanding. As of December 31, 2013 and 2012, options to purchase 139,036 and 218,017 shares of common stock, respectively, at a weighted average exercise price of $19.95 and $16.39 per share, respectively, were outstanding but were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares.

8.Operating Leases

The Company leases certain properties under operating leases expiring in various years through 2017. Lease expense was $176,000 and $177,000 for the years ended December 31, 2013 and 2012, respectively.

Minimum future rental payments under noncancelable operating leases are as follows (dollars in thousands). In January 2014, the Company exercised its option to extend a lease at one of its properties. This extension is reflected in the below table.

December 31,

  2013 

2014

  $178  

2015

   178  

2016

   128  

2017

   56  

2018

   11  

Thereafter

   7  
  

 

 

 

Total

  $558  
  

 

 

 

9.Other Comprehensive Income (Loss)

The following table sets forth the tax effects allocated to each component of the Company’s other comprehensive income (loss) at the dates indicated (dollars in thousands).

December 31, 2013

  Before
Income Tax
Expense
  Income
Tax
Expense
  Net of
Income Tax
Expense
 
    
    

Other comprehensive gain:

    

Unrealized gain on securities available-for-sale,

  $740   $290   $450  

December 31, 2012

  Before
Income Tax
(Benefit)
  Income
Tax
(Benefit)
  Net of
Income Tax
(Benefit)
 
    
    

Other comprehensive loss:

    

Unrealized loss on securities available-for-sale,

  $(364 $(143 $(221

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.Income Taxes

The difference between actual income tax expense and the amount computed by applying the federal statutory income tax rate of 34% to income before income tax expenses were reconciled as follows (dollars in thousands).

Years ended December 31,

  2013  2012 

Computed income tax expense

  $1,163   $1,192  

Increase (decrease) resulting from:

   

State taxes (net of federal benefit)

   90    279  

Nontaxable BOLI income

   (83  (98

Stock-based compensation (ISOs)

   32    22  

Tax exempt interest income

   (82  (172

Other, net

   66    28  
  

 

 

  

 

 

 

Actual income tax expense

  $1,186   $1,251  
  

 

 

  

 

 

 

Effective tax rate

   33.9  35.4
  

 

 

  

 

 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as follows (dollars in thousands).

December 31,

  2013  2012 

Deferred tax assets:

   

Allowance for loan losses

  $1,125   $981  

Investments in affordable housing projects

   62    74  

Postretirement benefits

   73    80  

Net operating loss carryforwards—federal

   —      186  

Tax credit carryforwards

   755    1,014  

Depreciation and amortization

   21    —    

Stock-based compensation (NSOs)

   193    140  

Net unrealized loss on securities available-for-sale

   —      250  

Other deferred tax assets

   48    3  
  

 

 

  

 

 

 

Total deferred tax assets

   2,277    2,728  

Deferred tax liabilities:

   

Deferred loan costs

   (119  (153

Depreciation and amortization

   —      (31

Net unrealized gain on securities available-for-sale

   (40  —    

Other deferred tax liabilities

   —      (33
  

 

 

  

 

 

 

Total deferred tax liabilities

   (159  (217
  

 

 

  

 

 

 

Net deferred tax assets

  $2,118   $2,511  
  

 

 

  

 

 

 

The tax credit carryforwards expiring in 2022 through 2025 are available to offset future taxes payable. The Company determined that it was not required to establish a valuation allowance for deferred tax assets since it is more likely than not that the deferred tax assets will be realized through future taxable income and future reversals of existing taxable temporary differences. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax expense is summarized as follows (dollars in thousands).

Years ended December 31,

  2013   2012 

Current

  $1,083    $524  

Deferred

   103     727  
  

 

 

   

 

 

 

Total income tax expense

  $1,186    $1,251  
  

 

 

   

 

 

 

11.Regulatory Matters

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

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Generally, a savings association is considered to be “undercapitalized” if it has a ratio of total capital to risk-weighted assets of less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less than 4% or a ratio of core capital to total assets of less than 4%. At December 31, 2013 and 2012, the Bank met all capital adequacy requirements to which it is subject and notifications from the regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain Total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes would change the Bank’s categorization. The following table sets forth the Bank’s regulatory capital amounts and ratios, as well as the minimum amounts and ratios required to be well capitalized (dollars in thousands).

   Actual  For Capital
Adequacy

Purposes
  To Be Well
Capitalized

Under Prompt
Corrective Action
 

December 31, 2013

  Amount   Ratio  Amount   Ratio  Amount   Ratio 

Total capital (to risk-weighted assets)

  $47,346     21.84 $17,341     8.00 $21,676     10.00

Tier 1 capital (to risk-weighted assets)

   44,629     20.59    8,670     4.00    13,006     6.00  

Tier 1 capital (to adjusted total assets)

   44,629     14.06    12,697     4.00    15,872     5.00  

Tangible capital (to tangible assets)

   44,629     14.06   4,761     1.50   N/A     N/A  

December 31, 2012

  Amount   Ratio  Amount   Ratio  Amount   Ratio 

Total capital (to risk-weighted assets)

  $47,011     23.81 $15,758     8.00 $19,748     10.00

Tier 1 capital (to risk-weighted assets)

   44,537     22.55    7,899     4.00    11,849     6.00  

Tier 1 capital (to adjusted total assets)

   44,537     14.02    12,706     4.00    15,883     5.00  

Tangible capital (to tangible assets)

   44,537     14.02   4,765     1.50   N/A     N/A  

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a reconciliation of the Bank’s equity under GAAP to regulatory capital at the dates indicated (dollars in thousands).

December 31,

  2013  2012 

GAAP equity

  $45,819   $45,330  

Goodwill and certain other intangible assets

   (1,128  (1,181

Accumulated other comprehensive income (loss)

   (62  388  
  

 

 

  

 

 

 

Tier 1 capital

   44,629    44,537  

General regulatory allowance for loan losses*

   2,717    2,474  
  

 

 

  

 

 

 

Total capital

  $47,346   $47,011  
  

 

 

  

 

 

 

*Limited to 1.25% of risk-weighted assets

Federal banking regulations place certain restrictions on dividends paid by the Bank to the Company. The total amount of dividends that may be paid at any date is generally limited to the earnings of the Bank for the year-to-date plus retained earnings for the prior two fiscal years, net of any prior capital distributions. In addition, dividends paid by the Bank to the Company would be prohibited if the distribution would cause the Bank’s capital to be reduced below the applicable minimum capital requirements. In 2013 and 2012, the Bank paid dividends to the Company totaling $2.5 million and $3.5 million, respectively.

The Company maintains a liquidation account for the benefit of certain depositors of the Bank who remain depositors of the Bank at the time of liquidation. The liquidation account is designed to provide payments to these depositors of their liquidation interests in the event of a liquidation of the Company and the Bank, or the Bank alone. The liquidation account will be reduced annually to the extent that eligible depositors have reduced their qualifying deposits. The Company may not pay dividends if those dividends would reduce equity capital below the required liquidation account amount. Subsequent increases will not restore an eligible account holder’s interest in the liquidation account. In the unlikely event that the Company and the Bank were to liquidate in the future, all claims of creditors, including those of depositors, would be paid first, followed by distribution to eligible depositors of the liquidation account maintained by the Company. Also, in a complete liquidation of both entities, or of just the Bank, when the Company has insufficient assets to fund the liquidation account distribution due to depositors and the Bank has positive net worth, the Bank would immediately pay amounts necessary to fund the Company’s remaining obligations under the liquidation account. If the Company is completely liquidated or sold apart from a sale or liquidation of the Bank, then the rights of such depositors in the liquidation account maintained by the Company would be surrendered and treated as a liquidation account in the Bank - the “bank liquidation account” - and these depositors shall have an equivalent interest in the bank liquidation account and the same rights and terms as the liquidation account.

After two years from the date of conversion and upon the written request of the OCC, the Company may eliminate or transfer the liquidation account and the interests in such account to the Bank and the liquidation account would become the liquidation account of the Bank and not subject in any manner or amount to the Company’s creditors. Also, under the rules and regulations of the OCC, no post-conversion merger, consolidation, or similar combination or transaction with another depository institution in which the Company or the Bank is not the surviving institution would be considered liquidation and, in such a transaction, the liquidation account would be assumed by the surviving institution.

12.Benefit Plans

401(k) Plan

The Company maintains a 401(k) plan for all full-time employees and may make a discretionary contribution to the plan based on a computation in relation to net income and compensation expense. The Company also matches the first 5% of employee deferrals on a graduated scale of 100% of the first 3% and 50% for the next 2% for a maximum match of 4%.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Plan expense was approximately $151,000 and $145,000 for the years ended December 31, 2013 and 2012, respectively. A full-time employee is eligible to participate in the plan after three months of employment, the attainment of age 21, and completion of 250 hours of service each Plan year.

Supplemental Executive Retirement Plan

The Company maintains a nonqualified defined benefit supplemental executive retirement plan (“SERP”) for certain directors. The present value of estimated supplemental retirement benefits is charged to operations. A set retirement benefit is provided to the directors. The expense for the SERP plan for the years ended December 31, 2013 and 2012 was approximately $2,000 and $4,000, respectively.

The agreements for the nonqualified defined contribution SERP between the Bank and certain current and former key executive officers were terminated in November 2011. Benefit payments occurred in the fourth quarter of 2012.

Employee Stock Ownership Plan

Effective January 1, 2005, the Bank established a leveraged ESOP that purchased 122,735 shares of Company common stock with funds borrowed from the Company. A full-time employee is eligible to participate in the plan after three months of employment, the attainment of age 21, and completion of 250 hours of service in a plan year. Each plan year, the Bank may, at its discretion, make additional contributions to the plan; however, at a minimum, the Bank has agreed to provide a contribution in the amount necessary to service the debt incurred to release the stock.

Shares are scheduled for release as the loan is repaid based on the interest method. The present amortization schedule calls for 8,182 shares to be released each December 31. The Company utilized current year dividends on allocated and unallocated shares in the payment of the current year loan payment in accordance with the plan document. The use of allocated dividends reduces compensation expense and participants will receive an equivalent allocation of shares in relation to their respective dividends to compensate for use of dividends in the loan payment.

As shares in the ESOP are earned and committed to be released, compensation expense is recorded based on their average fair value. The difference between the average fair value of the shares committed to be released and the cost of those shares to the ESOP is charged or credited to additional paid-in capital. The balance of unearned shares held by the ESOP is shown as a reduction of stockholders’ equity. Only those shares in the ESOP that have been earned and are committed to be released are included in the computation of earnings per share.

ESOP compensation expense was $142,000 for the year ended December 31, 2013 compared to $102,000 for the year ended December 31, 2012. There were 8,182 shares earned and committed to be released and 49,482 allocated shares at December 31, 2013. At December 31, 2012, there were 8,182 shares earned and committed to be released and 44,963 allocated shares. The 49,095 and 57,277 remaining unearned/unallocated shares at December 31, 2013 and 2012, respectively, had an approximate fair market value of $956,000 and $931,000, respectively.

13.Stock-Based Compensation

In 2013 and 2012, the Company granted restricted shares of common stock and options to purchase shares of common stock to certain directors, executive officers and key employees of the Company. The restricted shares and options vest over five years at the rate of 20% per year and the stock options have a 10 year contractual life from the date of grant. The closing price of the Company’s common stock on the grant date is the exercise price of the options.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Details of the grants are summarized as follows at the dates indicated (dollars in thousands).

   2013  2012 
   October 1   April 2  September 25  April 2 

Number of restricted shares granted

   15,500     14,750    —      16,240  

Number of stock options granted

   —       74,170    68,000    17,000  

Grant date common stock price

  $19.00    $17.65   $15.00   $13.92  

Restricted shares market value before tax

   295     260    —      226  

Stock options market value before tax

   —       277    204    53  

Stock option pricing assumptions

      

Expected life in years

   N/A     7    7    7  

Expected dividend yield

   N/A     0.91  0.87  0.86

Risk-free interest rate

   N/A     0.82  0.71  1.02

Expected volatility

   N/A     21.8  20.8  22.6

Weighted average grant date fair value

   N/A    $3.73   $3.00   $3.14  

The Company recognizes expense associated with the awards over the five-year vesting period. Compensation expense was $270,000 for the year ended December 31, 2013 compared to $156,000 for the year ended December 31, 2012. As of December 31, 2013, there was $1.2 million of total unrecognized compensation cost related to nonvested stock-based compensation compared to $644,000 at December 31, 2012. The compensation expense cost at December 31, 2013 is expected to be recognized ratably over the weighted average remaining service period of 4.0 years. The Company realized a tax benefit for stock options (NSOs) of $53,000 for the year ended December 31, 2013 compared to $22,000 for the year ended December 31, 2012.

As of December 31, 2013, there were 3,882 shares available to be issued in connection with the exercise of stock options and 141 shares that may be issued as restricted stock for the 2006 Plan. As of December 31, 2013, there were no shares available to be issued in connection with the exercise of stock options and 18,627 shares that may be issued as restricted stock for the 2011 Plan. The 74,170 stock option shares and 30,250 of the 48,877 restricted stock shares available to be issued from the 2011 Plan as of December 31, 2012 were granted in 2013.

   Stock Options 

Stock-Based Compensation

  Number
of

Shares
  Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Term
 

Outstanding at December 31, 2011

   140,119   $16.86     6.86  

Granted

   85,000    14.78    
  

 

 

  

 

 

   

 

 

 

Outstanding at December 31, 2012

   225,119  $16.07    7.29 

Granted

   74,170    17.65    

Exercised or converted

   (1,326  14.15    

Forfeited

   (283  14.15    

Expired

   (3,599  19.22    
  

 

 

  

 

 

   

 

 

 

Outstanding at December 31, 2013

   294,081  $16.44    7.08 
  

 

 

  

 

 

   

 

 

 

Exercisable at December 31, 2013

   118,691  $17.52    4.69 
  

 

 

  

 

 

   

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   Stock Options   Restricted Stock Awards 
   Number of  Fair-Value   Number of  Fair-Value 
   Shares  Price   Shares  Price 

Nonvested at December 31, 2011

   64,020   $3.55     9,632   $13.90  

Granted

   85,000    3.03     16,240    13.92  

Vested

   (15,945  3.94     (3,320  14.12  
  

 

 

  

 

 

   

 

 

  

 

 

 

Nonvested at December 31, 2012

   133,075  $3.17    22,552  $13.88 

Granted

   74,170    3.73     30,250    18.34  

Vested

   (31,572  3.36     (5,946  13.63  

Forfeited

   (283  6.04     (141  14.15  
  

 

 

  

 

 

   

 

 

  

 

 

 

Nonvested at December 31, 2013

   175,390  $3.37    46,715  $16.80 
  

 

 

  

 

 

   

 

 

  

 

 

 

14.Concentration of Credit Risk

The risk of loss from lending and investing activities includes the possibility that a loss may occur from the failure of another party to perform according to the terms of the loan or investment agreement. This possibility of loss is known as credit risk. Credit risk can be reduced by diversifying the Company’s assets to prevent imprudent concentrations. The Company has adopted policies designed to prevent imprudent concentrations within its security and loan portfolio.

The primary investment vehicles for the Company for the years ended December 31, 2013 and 2012 were mortgage-backed securities, which are comprised of diversified individual residential mortgage notes, and REMICs (real estate mortgage investment conduits), which represent a participation interest in a pool of mortgages. Mortgage-backed securities are guaranteed as to the timely repayment of principal and interest by a Government-sponsored enterprise. REMICs are created by redirecting the cash flows from the pool of mortgages underlying those securities to create two or more classes (or tranches) with different maturity or risk characteristics designed to meet a variety of investor needs and preferences. REMICs may be sponsored by U.S. Government agencies and Government-sponsored enterprises. Investments in other securities consist of Government-sponsored enterprise securities and municipal bonds which are made to provide and maintain liquidity within the guidelines of applicable regulations.

Substantially all of the Company’s loans, excluding those serviced by others, are made to customers located in southwestern Pennsylvania. The Company does not have any other concentration of credit risk representing greater than 10% of loans.

Off-Balance Sheet Risk

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to fund construction loans, standby letters of credit, and commitments to extend credit on consumer and commercial lines of credit, fixed rate residential, and home equity installment commitments, and are summarized as follows at the dates indicated (dollars in thousands). The Company utilizes standby letters of credit through the FHLB to secure public deposits.

December 31,

  2013   2012 

Loans in process

  $10,617    $3,431  

Standby letters of credit

   12,700     —    

Unused consumer revolving lines of credit

   4,732     4,072  

Unused commercial lines of credit

   13,836     6,962  

One - to four-family residential commitments

   1,188     65  

Commercial commitments

   6,190     7,933  

Consumer commitments

   140     1,632  
  

 

 

   

 

 

 

Total commitments outstanding

  $49,403    $24,095  
  

 

 

   

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.Fair Value Measurements and Fair Values of Financial Instruments

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of December 31, 2013 and 2012 and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to December 31, 2013 and 2012 may be different than the amounts reported at each period end.

The fair value hierarchy prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 – Quoted prices for identical instruments in active markets.
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are active, and model-derived valuations in which significant inputs or significant drivers are observable in active markets.
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant drivers are unobservable.

The following is a discussion of assets and liabilities measured at fair value on a recurring basis and the valuation techniques used:

Securities available for sale. The majority of the Company’s securities are included in Level 2 of the fair value hierarchy. Fair values 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. In some cases, the fair value was determined from a broker who is able to quote a price based on observable inputs in a liquid market for similar securities.

In some instances, the fair value of certain securities cannot be determined using these techniques due to the lack of relevant market data. As such, these securities are valued using an alternative technique and classified within Level 3 of the fair value hierarchy. At December 31, 2013, Level 3 includes three corporate debt securities with a fair value of $3.6 million.

The corporate debt securities are pooled trust preferred CDOs collateralized by the trust preferred securities of insurance companies in the United States. The CDOs, which were rated A at purchase and are currently rated below investment grade, could not be priced using quoted market prices, observable market activity or comparable trades, and the financial market was considered not active. The trust preferred market has been severely impacted by the lack of liquidity in the credit markets and concern over the financial services industry. There has been little or no active trading in these securities; therefore it was more appropriate to determine fair value using a discounted cash flow analysis.

The Bank utilized a third party pricing service that performed a two-step process to determine the fair value of the CDOs. First, an asset analysis was performed to evaluate the credit quality of the collateral and the deal structure using probability of default values for each underlying issuer and loss given default values by asset type. Probability of default is the likelihood that the issuer of the CDOs will go into default and stop paying and was estimated using an expected default frequency approach, which considers the market value and volatility of a firm’s assets and the threshold for default. Probability of default was combined with correlation assumptions,

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

which is the tendency of companies to default once other companies have defaulted. CDOs are more likely to experience stress at the same time since they are concentrated in the same sector, therefore a 50% asset correlation was assumed for issuers in the same industry. Loss given default is the amount of cash lost to the investor at the time of default and is related to the recovery rate. Loss and recovery estimates determine how much cash remains when an issuer goes into default. Deferrals are a common feature of CDOs and were treated as defaults in the analysis. Loss given default has been historically high for CDOs and therefore a 0% recovery rate was assumed on currently defaulted and deferring assets, which resulted in a 100% loss given default.

Second, a liability analysis was performed in which the expected cash flows produced based off the expected credit events of the asset analysis were allocated across the tranches to determine the tranches that would get paid or incur a loss. These expected cash flows were discounted at a risk free interest rate plus a premium for illiquidity (3 month LIBOR plus 300 basis points) to produce a discounted cash flow valuation and determine an estimated fair value.

For financial assets measured at fair value on a recurring basis, the following tables set forth the fair value measurements by fair value hierarchy at the dates indicated (dollars in thousands).

December 31,

  2013   2012 

Significant other observable inputs (Level 2)

    

Securities available-for-sale

    

Municipal bonds

  $7,970    $9,181  

Mortgage-backed - GSEs

   8,192     12,815  

REMICs

   7,019     18,700  

Equities

   —       4�� 
  

 

 

   

 

 

 

Total significant other observable inputs (Level 2)

   23,181     40,700  

Significant unobservable inputs (Level 3)

    

Securities available-for-sale

    

Corporate debt

   3,591     1,882  
  

 

 

   

 

 

 

Total significant unobservable inputs (Level 3)

   3,591     1,882  
  

 

 

   

 

 

 

Total securities available-for-sale

  $26,772    $42,582  
  

 

 

   

 

 

 

Total assets measured at fair value on a recurring basis

  $26,772    $42,582  
  

 

 

   

 

 

 

   Significant
Unobservable Inputs
(Level 3)
 

December 31, 2011

  $1,486  

Total unrealized gains included in other comprehensive income

   428  

Paydowns and maturities

   (14

Net transfers out of level 3

   (18
  

 

 

 

December 31, 2012

  $1,882  

Total unrealized gains included in other comprehensive income

   1,708  

Discount accretion

   1  
  

 

 

 

December 31, 2013

  $3,591  
  

 

 

 

Seven mortgage-backed securities were transferred out of Level 3 and into Level 2 in 2012 because a reliable price could be obtained using a model based valuation technique or through a broker quote.

We may be required to measure certain assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or writedowns of individual assets.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a discussion of assets and liabilities measured at fair value on a nonrecurring basis.

Impaired loans. Certain impaired loans over $250,000 are individually reviewed to determine the amount of each loan that may be at risk of noncollection. When repayment is expected solely from the collateral, the impaired loans are reported at the fair value of the underlying collateral using property appraisals less any projected selling costs or financial statements.

Real estate owned. The fair value of real estate owned is estimated using property appraisals less any projected selling costs.

For financial assets measured at fair value on a nonrecurring basis on the following tables set forthConsolidated Balance Sheet as of the dates indicated by level within the fair value measurements by fair value hierarchy:

   December 31, 2013   December 31, 2012 

(Dollars in thousands)

  Carrying
Value
   Fair Value   Carrying
Value
   Fair Value 

Level 3

        

Impaired loans

  $586    $586    $4,552    $4,552  

Real estate owned

   465     465     146     146  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets measured at fair value on a nonrecurring basis

  $1,051    $1,051    $4,698    $4,698  
  

 

 

   

 

 

   

 

 

   

 

 

 

For Level 3 assets measured at fair value on a recurring or nonrecurring basis as of December 31, 2013, the followinghierarchy. The table sets forthalso 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: observable inputs employed by certified appraisers or an internal evaluation, for similar assets classified as Level II inputs adjusted for qualitative factors and estimated liquidation expenses. 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
  Valuation Technique 

Significant

Unobservable Inputs

 Significant
Unobservable
Input Value
 

Recurring basis

    

Securities available-for-sale:

    

Corporate debt

 $3,591   Discounted cash flow 

Average probability of default

  1.28
   

Correlation for issuers in the same industry

  50
   

Deferral/default recovery rate on currently defaulted/deferring assets and projected defaults

  0
   

Prepayment

  0

Nonrecurring basis

    

Impaired loans

  586   Appraisal value 

Selling costs

  10-20

Real estate owned

  465   Appraisal value 

Selling costs

  10-20

Table B

     (Dollars in thousands)              Range /
(Weighted
Average)
      Fair Value at December 31,   

Valuation

Techniques

          

Financial Asset

  

Valuation

Hierarchy

  2016   2015        

Unobservable Inputs

    

Impaired Loans

  Level III  $—     $341   Appraisal of collateral   (1)  Appraisal adjustments  (2) 0.0% (0.0%)
           Liquidation expenses  (2) 9.0% (9.0%)

(1)The fair value is determined through independent appraisals by certified appraisers or internal evaluators of the underlying collateral.
(2)Appraisals and evaluations may be adjusted by management for qualitative factors and estimated liquidation expenses. The range and weighted- average of liquidation expenses are expressed as a percentage of discounted collateral value and other appraisal adjustments are presented as a percentage of the appraised amounts.

Collateral-dependent Impaired Loans

The following presents theestimated fair value of financial instruments. In cases where quoted market prices are not available, fair valuecollateral-dependent impaired loans is based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derivedappraised fair value estimates cannot be sustained by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. In addition, the following information should not be interpreted as an estimatecollateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level III of the fair value hierarchy.

First West Virginia considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the Company since a fair value calculationloan is only provided for a limited portiondependent on the sale of the Company’s assetscollateral.

Financial Instruments

The reported fair values of financial instruments are based on a variety of factors. Where possible, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions concerning the amount and liabilities. Duetiming of estimated future cash flows and assumed discount rates reflecting varying degrees of risk. Intangible values assigned to a wide range of valuation techniques andcustomer relationships are not reflected in the degree of subjectivity used in makingreported fair values. Accordingly, the estimates, comparisons between the Company’s disclosures and those of other companiesfair values may not represent actual values of the financial instruments that could have been realized as ofyear-end or that will be meaningful.

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

realized in the future.

The following methods and assumptions were used by First West Virginia in estimating the fair value disclosures for financial instruments:

Cash and Cash Equivalents: The carrying amount for cash and cash equivalents is a reasonable estimate of fair value.

Investment Securities Available for Sale: Where quoted market prices are available in an active market, securities are classified within Level I of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters. Such securities are classified in Level II of the valuation hierarchy.

Loans: The fair value for net loans is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13. Fair Value Disclosure (continued)

Accrued Interest Receivable: The carrying amount of accrued interest receivable approximates its fair value.

Deposits: The fair values of noninterest-bearing and interest-bearing demand deposits and savings deposits are based on the discounted value of cash flows after estimating the weighted-average remaining term. The fair values for time deposits are based on the discounted value of cash flows. A wholesale cost of funds is used to discount the cash flows.

Repurchase Agreements: The carrying amount of repurchase agreements is considered to be a reasonable estimate of fair value.

Federal Home Loan Bank Borrowings: The discounted cash flow method is used to estimate the fair values of the Company’s financial instruments at December 31, 2013 and 2012:

Cash and Cash Equivalents

The carrying amounts approximate the asset’s fair values.

Securities

See previous discussion on securities available-for-sale measured at fair value on a recurring basis for further details on the valuation techniques used to determine the fair value of securities available-for-sale.

Loans

The fair values for residential real estate loans are estimated using discounted cash flow analyses using mortgage commitment rates from either FNMA or FHLMC. The fair values of consumer and commercial business loans are estimated using discounted cash flow analyses, using interest rates reported in various government releases. The fair values of multi-family and commercial real estate loans are estimated using discounted cash flow analysis, using interest rates based on national commitment rates on similar loans. The carrying value is net of the allowance for loan losses. Due to the significant judgment involved in evaluating credit quality and the allowance for loan losses, loans are classified as Level 3.

Federal Home Loan Bank Stockborrowings.

Accrued Interest Payable: The carrying amount of accrued interest payable approximates the asset’sits fair value.

Accrued Interest Receivable and Accrued Interest Payable

Off-Balance-Sheet Instruments: The fair value of these instruments approximates the carrying value.

Deposits

The fair values disclosed for demand deposits (e.g., savings accounts) are, by definition, equal to the amount payable on demand at the repricing date (i.e., their carrying amounts). Fair values of certificates of deposits arecommitments is estimated using a discounted cash flow calculation that applies the FHLB of Pittsburgh advance yield curve to the maturity schedule of the Bank’s certificates of deposit.

Borrowings

The fair value of the FHLB advances and repurchase agreements are estimated using a discounted cash flow calculation using the current FHLB advance yield curve. This is the method that the FHLB of Pittsburgh used to determine the cost of terminating the borrowing contract.

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, 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,taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. The amount of fees currently charged on commitments is determined to be insignificant and, therefore, the carrying value and fair value ofoff-balance-sheet instruments are not considered material for disclosure purposes.shown.

The estimated fair values of First West Virginia’s financial instruments at December 31, 2016 and 2015, are as follows:

Table C

      (Dollars in thousands) 
       2016   2015 
   Valuation
Method
Used
   Carrying
Value
   Fair Value   Carrying
Value
   Fair Value 

Financial Assets:

          

Cash and Cash Equivalents

   Level I   $22,877   $22,877   $25,929   $25,929 

Investment Securities: Available for Sale

   See Table A    197,206    197,206    203,579    203,579 

Loans, Net

   Level III    95,295    97,215    98,300    100,697 

Accrued Interest Receivable

   Level I    1,113   ��1,113    1,028    1,028 

Financial Liabilities:

          

Non-Maturing Deposits

   Level I    220,212    209,754    223,118    210,276 

Time Deposits

   Level II    55,494    54,803    59,169    58,686 

Repurchase Agreements

   Level I    22,531    22,531    23,619    23,619 

Federal Home Loan Bank Borrowings

   Level II    3,216    3,415    3,320    3,667 

Accrued Interest Payable

   Level I    84    84    102    102 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 14. Other Noninterest Expense

LOGOThe details for other noninterest expense for First West Virginia’s consolidated statement of income for the years ended December 31, 2016, 2015 and 2014, are as follows:

   (Dollars in thousands) 
   2016   2015   2014 

OTHER NONINTEREST EXPENSE

      

Directors’ fees

  $171   $180   $152 

Stationery and supplies

   152    141    141 

Regulatory assessment and deposit insurance

   264    297    293 

Advertising

   234    205    187 

Postage and transportation

   153    161    161 

Other taxes

   144    73    100 

Service Expense

   445    474    522 

Other

   753    906    890 
  

 

 

   

 

 

   

 

 

 

TOTAL OTHER NONINTEREST EXPENSE

  $2,316   $2,437   $2,446 
  

 

 

   

 

 

   

 

 

 

Note 15. Limitations on Dividends

The approval of the Comptroller of the Currency is required to pay dividends if the total of all dividends declared by a national bank in any calendar year exceeds the total of its net profits (as defined) for the year, combined with its retained net profits of the preceding two years. Under this formula, First West Virginia’s subsidiary bank can declare dividends in 2017, without approval of the Comptroller of the Currency, of approximately $1,196,000, plus an additional amount equal to Progressive Bank’s net profit for 2017 up to the date of any such dividend declaration. The subsidiary bank is the primary source of funds to pay dividends to the stockholders of First West Virginia Bancorp, Inc.

Note 16. Employee Benefit Plans

First West Virginia has anon-contributory profit-sharing plan for employees meeting certain service requirements. First West Virginia makes annual contributions to the profit-sharing plan based on income of First West Virginia as defined. Total expenses for the plan were $100,000, $138,000 and $113,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

First West Virginia also offers a 401(k) plan in which it matches a portion of the employee’s contribution up to 4 percent of their salary. The expense related to the 401(k) plan was $29,000, $26,000 and $23,000 in 2016, 2015 and 2014, respectively.

Note 17. Concentrations of Credit Risk

Most of the subsidiary bank’s loans and commitments have been granted to customers in Progressive Bank’s primary market area of Northern and Central West Virginia, Eastern Ohio, and Southwestern Pennsylvania. In the normal course of business, however, Progressive Bank has purchased participation loans and originated loans outside of its primary market area. The aggregate loan balances outstanding in any one geographic area, other than Progressive Bank’s primary lending areas, do not exceed 10 percent of total loans. Concentrations of credit are measured by categorizing loans by the North American Industry Classification codes. Loans equal to or exceeding 25% of Tier I Capital are considered concentrations of credit. At December 31, 2016, concentrations of credit were as follows(dollars expressed in thousands):

   Amount   Percent of
Tier 1 Capital
 

Lessors of Nonresidential Buildings

  $17,756    55.2

Lessors of Residential Buildings

  $9,463    29.4

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 18. Related Party Transactions

Deposits from related parties held by the subsidiary totaled $2,746,000 and $2,052,000 at December 31, 2016 and 2015, respectively. Refer to Note 4 “Loans and Related Allowance for Loan Losses” for information on loans to related parties.

Dlesk Realty and Investment Company, which is owned by the late Mr. Sylvan J. Dlesk and his wife Rosalie J. Dlesk, serves as landlord to First West Virginia’s subsidiary bank, under a lease agreement to rent property for use as banking premises. The lease was for an initial5-year term at an annual rental fee of $58,000. This lease was renewed in 2007, 2012, and 2017 for additional5-year terms at an annual rental fee of $60,000, $64,000, and $67,000, respectively, and has options to renew for five5-year terms.

Note 19. Accumulated Other Comprehensive Income (Loss)

The activity in accumulated other comprehensive income (loss) at December 31 is as follows:

   Unrealized Gains
(Losses) on Securities
Available for Sale (1)
 
   Year Ended
December 31,
 
   2016   2015 

Beginning Balance

  $310   $835 

Other comprehensive income (loss) before reclassifications

   (1,852   195 

Amounts reclassified from accumulated other comprehensive income (loss)

   (688   (720
  

 

 

   

 

 

 

Period Change

   (2,540   (525
  

 

 

   

 

 

 

Ending Balance

  $(2,230  $310 
  

 

 

   

 

 

 

(1)All amounts are net of tax. Related income tax expense or benefit is calculated using a combined Federal and State income tax rate approximating 39.5%.

   Amount Reclassified from
Accumulated Other
Comprehensive Income (Loss)
   

Details About Accumulated Other Comprehensive Income (Loss) Components

  For the Year Ended
December 31,
  

Affected Line Item in the
Statement of Income

(dollars in thousands)

  2016  2015   

Securities available for sale(1):

    

Net securities gains reclassified into earnings

  $(1,103 $(1,154 Net gains on available for sale securities

Related income tax expense

   415   434  Income tax expense
  

 

 

  

 

 

  

Net effect on accumulated other comprehensive income (loss) for the period

  $(688 $(720 Net of tax
  

 

 

  

 

 

  

Total reclassifications for the period

  $(688 $(720 Net of tax
  

 

 

  

 

 

  

(1)For additional detail related to unrealized gains (losses) on securities and related amounts reclassified from accumulated other comprehensive income (loss) see Note 3 “Investment Securities.”

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 20. Condensed Financial Statements of Parent Company

Financial information pertaining only to First West Virginia Bancorp, Inc., is as follows:

Condensed Balance Sheets

   (Dollars in thousands) 
   December 31, 
   2016   2015 

ASSETS

    

Cash and Due From Banks

  $42   $31 

Investment Securities,Available-for-Sale

   321    203 

Investment in Bank Subsidiary

   32,835    35,219 

Other Assets

   79    97 
  

 

 

   

 

 

 

TOTAL ASSETS

  $33,277   $35,550 
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Other Liabilities

  $218   $187 

Stockholders’ Equity

   33,059    35,363 
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $33,277   $35,550 
  

 

 

   

 

 

 

Condensed Statements of Income

   (Dollars in thousands) 
   Years Ended December 31, 
   2016   2015   2014 

Interest and Dividend Income

  $—     $—     $—   

Dividend from Bank Subsidiary

   1,378    1,419    1,378 

Noninterest Income

   255    224    181 

Noninterest Expense

   173    260    224 
  

 

 

   

 

 

   

 

 

 

Income Before Undistributed Net Income of Subsidiary and Income Taxes

   1,460    1,383    1,335 

Undistributed Net Income of Subsidiary

   175    1,021    546 
  

 

 

   

 

 

   

 

 

 

Income Before Income Taxes

   1,635    2,404    1,881 

Income Tax Expense (Benefit)

   25    12    (23
  

 

 

   

 

 

   

 

 

 

NET INCOME

  $1,610   $2,392   $1,904 
  

 

 

   

 

 

   

 

 

 

Condensed Statement of Comprehensive Income (Loss)

   Years Ended December 31, 
   2016   2015   2014 

Net Income

  $1,610   $2,392   $1,904 

Other Comprehensive (Loss) Income:

      

Unrealized Gains (Losses) onAvailable-for-Sale Securities Net of Income Tax of ($12), $5, and ($2) for the Years Ended December 31, 2016, 2015, and 2014, Respectively

   20    (8   4 

Reclassification Adjustment for Gains (Losses) on Securities Included in Net Income, Net of Income Tax of $1 for the Year Ended December 31, 2016

   (1   —      —   

Equity in Other Comprehensive Income (Loss) of Subsidiary

   (2,559   (517   3,549 
  

 

 

   

 

 

   

 

 

 

Other Comprehensive (Loss) Income, Net of Income (Benefit) Tax

   (2,540   (525   3,553 
  

 

 

   

 

 

   

 

 

 

Total Comprehensive Income

  $(930  $1,867   $5,457 
  

 

 

   

 

 

   

 

 

 

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the carrying amount and estimated fair value of financial instruments (dollars in thousands).

   Carrying   Estimated   Fair Value Measurements 

December 31, 2013

  Amount   Fair Value   Level 1   Level 2   Level 3 

Financial assets:

          

Cash and cash equivalents

  $5,552    $5,552    $5,552    $—      $—    

Securities

   26,772     26,772     —       23,181     3,591  

Loans, net

   268,812     271,038     —       —       271,038  

FHLB stock

   2,589     2,589     —       2,589     —    

Accrued interest receivable

   993     993     —       993     —    

Financial liabilities:

          

Deposits

   219,232     219,538     —       219,538     —    

Borrowings

   45,591     46,446     —       46,446     —    

Accrued interest payable

   251     251     —       251     —    

   Carrying   Estimated   Fair Value Measurements 

December 31, 2012

  Amount   Fair Value   Level 1   Level 2   Level 3 

Financial assets:

          

Cash and cash equivalents

  $5,874    $5,874    $5,874    $—      $—    

Securities

   42,582     42,582     —       40,700     1,882  

Loans, net

   249,530     260,538     —       —       260,538  

FHLB stock

   3,787     3,787     —       3,787     —    

Accrued interest receivable

   1,035     1,035     —       1,035     —    

Financial liabilities:

          

Deposits

   214,057     215,863     —       215,863     —    

Borrowings

   48,678     50,347     —       50,347     —    

Accrued interest payable

   302     302     —       302     —    

16.Note 20. Condensed Financial Statements of Parent Company

Financial information pertaining only to FedFirst Financial Corporation (dollars in thousands).

Statements of Financial ConditionParent Company (continued)

December 31,

  2013   2012 

Assets:

    

Cash and cash equivalents

  $4,086    $6,067  

Investment in First Federal Savings Bank

   45,819     45,330  

Loan receivable, ESOP

   1,283     1,458  

Other assets

   585     409  
  

 

 

   

 

 

 

Total assets

  $51,773    $53,264  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity:

    

Other liabilities

   27     30  

Stockholders’ equity

   51,746     53,234  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

  $51,773    $53,264  
  

 

 

   

 

 

 

 

Gains and losses on securities are reported as noninterest income on the Parent Company Statement of Income. Gross gains were $3,000 for each of the years ended December 31, 2016 and 2015. Gross losses were $1,000 and $3,000 for the years ended December 31, 2016 and 2015, respectively. Gross gains and gross losses for the year ended December 31, 2014 are not considered material for financial reporting purposes. The income tax effect of $1,000 for the year ended December 31, 2016 is included in income tax expense on the Parent Company Statement of Income.

LOGOCondensed Statements of Cash Flows

 

   (Dollars in thousands) 
   Years Ended December 31, 
   2016  2015  2014 

OPERATING ACTIVITIES

    

Net Income

  $1,610  $2,392  $1,904 

Adjustments to Reconcile Net Income to Net Cash Provided By (Used In) Operating Activities:

    

Undistributed Net Income of Subsidiary

   (175  (1,021  (546

Gain on Sales of Investment Securities

   (2  —     —   

Other, Net

   38   (127  127 
  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY OPERATING ACTIVITIES

   1,471   1,244   1,485 
  

 

 

  

 

 

  

 

 

 

INVESTING ACTIVITIES

    

Purchases of Securities

   (124  (56  (27

Proceeds from Sales of Securities

   39   48   29 
  

 

 

  

 

 

  

 

 

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

   (85  (8  2 
  

 

 

  

 

 

  

 

 

 

FINANCING ACTIVITIES

    

Cash Dividends Paid

   (1,375  (1,375  (1,375
  

 

 

  

 

 

  

 

 

 

NET CASH USED IN FINANCING ACTIVITIES

   (1,375  (1,375  (1,375
  

 

 

  

 

 

  

 

 

 

INCREASE (DECREASE) IN CASH AND EQUIVALENTS

   11   (139  112 

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

   31   170   58 
  

 

 

  

 

 

  

 

 

 

CASH AND CASH EQUIVALENTS AT END OF YEAR

  $42  $31  $170 
  

 

 

  

 

 

  

 

 

 
   124   125   973 
   82   94   803 

Note 21. Subsequent Events

In February 2017, First West Virginia’s subsidiary bank notified applicable customers of the closure of the branch located in Weston, WV effective May 12, 2017. The Weston branch is ProgressiveBank’s smallest, with deposits at December 31, 2016 of $7.0 million. ProgressiveBank intends to continue to serve its customers in Weston at the Buckhannon, WV branch as well as through online banking and other remote services. By closing this office, management expects to save the costs of operating the facility. The effect on futurepre-tax income ultimately depends on the amount of business that is retained after the closure.

The costs of closing the branch will be expensed as incurred. Progressive Bank does not anticipate lease settlement costs or severance pay associated with this branch closure. Other costs of closing the branch have not yet been determined and are expected to be recorded primarily in the second quarter of 2017.

Subsequent events have been evaluated through the date of the Independent Auditor’s Report, which is the date the consolidated financial statements were available to be issued.

FIRST WEST VIRGINIA BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Statements of Operations

Years ended December 31,

  2013  2012 

Interest income

  $84   $93  

Dividend from bank subsidiary

   2,512    3,463  

Noninterest expense

   315    320  
  

 

 

  

 

 

 

Income before undistributed net loss of subsidiary and income tax benefit

   2,281    3,236  

Undistributed net loss of subsidiary

   (125  (1,059
  

 

 

  

 

 

 

Income before income tax benefit

   2,156    2,177  
  

 

 

  

 

 

 

Income tax benefit

   (79  (78
  

 

 

  

 

 

 

Net income

  $2,235   $2,255  
  

 

 

  

 

 

 

Statements of Cash Flows

Years ended December 31,

  2013  2012 

Cash flows from operating activities:

   

Net income

  $2,235   $2,255  

Adjustments to reconcile net income to net cash provided by operating activities:

   

Undistributed net loss of subsidiary

   125    1,059  

Noncash expense for stock-based compensation

   270    156  

Increase in other assets

   (195  (58

(Decrease) increase in other liabilities

   (2  4  
  

 

 

  

 

 

 

Net cash provided by operating activities

   2,433    3,416  
  

 

 

  

 

 

 

Cash flows from investing activities:

   

ESOP loan principal payments received

   175    165  
  

 

 

  

 

 

 

Net cash provided by investing activities

   175    165  
  

 

 

  

 

 

 

Cash flows from financing activities:

   

Purchase of common stock for retirement

   (4,061  (6,751

Cash dividends paid

   (528  (1,084
  

 

 

  

 

 

 

Net cash used in financing activities

   (4,589  (7,835
  

 

 

  

 

 

 

Net decrease in cash and cash equivalents

   (1,981  (4,254

Cash and cash equivalents, beginning of year

   6,067    10,321  
  

 

 

  

 

 

 

Cash and cash equivalents, end of year

  $4,086   $6,067  
  

 

 

  

 

 

 

LOGO

Note 22. Quarterly Financial Information (Unaudited)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.Segment and Related Information

The consolidated operating results of FedFirst Financial are presented as a single financial services segment. FedFirst Financial is the parent company of the Bank, which owns FFEC. FFEC has an 80% controlling interest in Exchange Underwriters. Exchange Underwriters is managed separately from the banking and related financial services that the Company offers. Exchange Underwriters is an independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products.

Following is a table of selected financial data for the Company’s subsidiaries and consolidated results for 2013 and 2012 (dollars in thousands).

   First Federal
Savings Bank
   Exchange
Underwriters,
Inc.
   FedFirst
Financial
Corporation
  Net
Eliminations
  Consolidated 

December 31, 2013

                  

Assets

  $319,381    $1,438    $51,773   $(53,565 $319,027  

Liabilities

   273,457     578     27    (6,886  267,176  

Stockholders’ equity

   45,924    860     51,746    (46,679  51,851  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

December 31, 2012

                  

Assets

  $318,576    $1,034    $53,264   $(54,114 $318,760  

Liabilities

   273,186     401     30    (8,151  265,466  

Stockholders’ equity

   45,390    633     53,234    (45,963  53,294  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Year Ended December 31, 2013

                  

Total interest income

  $12,920    $—      $2,596   $(2,596 $12,920  

Total interest expense

   2,778    —       —      (84  2,694  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income

   10,142     —       2,596    (2,512  10,226  

Provision for loan losses

   740    —       —      —      740  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income after provision for loan losses

   9,402     —       2,596    (2,512  9,486  

Noninterest income

   1,095     3,222     —      —      4,317  

Noninterest expense

   7,443     2,547     315    —      10,305  

Undistributed net income (loss) of subsidiary

   385    —       (125  (260  —    
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary

   3,439     675     2,156    (2,772  3,498  

Income tax expense (benefit)

   975    290     (79  —      1,186  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   2,464     385     2,235    (2,772  2,312  

Noncontrolling interest in net income of consolidated subsidiary

   77     —       —      —      77  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income

  $2,387   $385    $2,235   $(2,772 $2,235  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   First Federal
Savings Bank
   Exchange
Underwriters,
Inc.
   FedFirst
Financial
Corporation
  Net
Eliminations
  Consolidated 

Year Ended December 31, 2012

                  

Total interest income

  $13,948    $1    $3,556   $(3,556 $13,949  

Total interest expense

   3,725    —       —      (93  3,632  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income

   10,223     1     3,556    (3,463  10,317  

Provision for loan losses

   310    —       —      —      310  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net interest income after provision for loan losses

   9,913     1     3,556    (3,463  10,007  

Noninterest income

   1,011     2,464     —      —      3,475  

Noninterest expense

   7,452     2,172     320    —      9,944  

Undistributed net income (loss) of subsidiary

   159    —       (1,059  900    —    
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Income before income tax expense (benefit) and noncontrolling interest in net income of consolidated subsidiary

   3,631     293     2,177    (2,563  3,538  

Income tax expense (benefit)

   1,195    134     (78  —      1,251  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   2,436     159     2,255    (2,563  2,287  

Noncontrolling interest in net income of consolidated subsidiary

   32     —       —      —      32  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Net income

  $2,404   $159    $2,255   $(2,563 $2,255  
  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18.Quarterly Financial Information (Unaudited)

The following table summarizestables summarize selected information regarding the Company’sFirst West Virginia’s results of operations for the periods indicated (dollars in thousands, except per share data)date). Quarterly earnings per share data may vary from annual earnings per share due to rounding.

 

   Three Months Ended 

2013

  March 31   June 30   September 30   December 31 

Interest income

  $3,244    $3,282    $3,155    $3,239  

Interest expense

   714     681     658     641  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   2,530     2,601     2,497     2,598  

Provision for loan losses

   —       165     200     375  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

   2,530     2,436     2,297     2,223  

Noninterest income

   1,269     1,084     1,008     956  

Noninterest expense

   2,612     2,592     2,551     2,550  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense and noncontrolling interest in net income of consolidated subsidiary

   1,187     928     754     629  

Income tax expense

   351     342     273     220  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   836     586     481     409  

Noncontrolling interest in net income of consolidated subsidiary

   42     10     18     7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $794    $576    $463    $402  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share—basic

  $0.32    $0.24    $0.20    $0.17  

Earnings per share—diluted

   0.32     0.23     0.19     0.17  

Dividends per share—regular

   0.04     0.06     0.06     0.06  

   Three Months Ended 

2012

  March 31   June 30   September 30   December 31 

Interest income

  $3,619    $3,490    $3,500    $3,340  

Interest expense

   1,056     964     851     761  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   2,563     2,526     2,649     2,579  

Provision for loan losses

   160     50     100     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

   2,403     2,476     2,549     2,579  

Noninterest income

   857     856     830     932  

Noninterest expense

   2,522     2,399     2,379     2,644  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense and noncontrolling interest in net income of consolidated subsidiary

   738     933     1,000     867  

Income tax expense

   265     335     346     305  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income before noncontrolling interest in net income of consolidated subsidiary

   473     598     654     562  

Noncontrolling interest in net income of consolidated subsidiary

   17     4     5     6  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $456    $594    $649    $556  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share basic and diluted

  $0.16    $0.21    $0.23    $0.20  

Dividends per share—regular

   0.03     0.04     0.04     0.04  

Dividends per share—special

   —       —       —       0.25  

   Three Months Ended 

2016

  March 31   June 30  September 30  December 31 

Interest Income

  $2,318   $2,335  $2,262  $2,288 

Interest Expense

   318    306   305   262 
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Interest Income

   2,000    2,029   1,957   2,026 

Provision for Loan Losses

   —      —     —     —   
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Interest Income after Provision for Loan Losses

   2,000    2,029   1,957   2,026 

Noninterest Income

   794    322   791   245 

Noninterest Expense

   1,982    2,077   2,142   2,106 
  

 

 

   

 

 

  

 

 

  

 

 

 

Income before Income Taxes

   812    274   606   165 

Income Taxes

   155    (27  104   15 
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Income

  $657   $301  $502  $150 
  

 

 

   

 

 

  

 

 

  

 

 

 

Earnings Per Share - Basic

  $0.38   $0.18  $0.29  $0.09 

Earnings Per Share - Diluted

   0.38    0.18   0.29   0.09 

Dividends Per Share

   0.20    0.20   0.20   0.20 
   Three Months Ended 

2015

  March 31   June 30  September 30  December 31 

Interest Income

  $2,531   $2,305  $2,325  $3,223 

Interest Expense

   351    348   344   334 
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Interest Income

   2,180    1,957   1,981   2,889 

Provision for Loan Losses

   —      —     30   —   
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Interest Income after Provision for Loan Losses

   2,180    1,957   1,951   2,889 

Noninterest Income

   1,198    426   240   249 

Noninterest Expense

   2,013    2,097   2,029   2,176 
  

 

 

   

 

 

  

 

 

  

 

 

 

Income before Income Taxes

   1,365    286   162   962 

Income Taxes

   327    (46  (90  192 
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Income

  $1,038   $332  $252  $770 
  

 

 

   

 

 

  

 

 

  

 

 

 

Earnings Per Share - Basic

  $0.60   $0.20  $0.14  $0.45 

Earnings Per Share - Diluted

   0.60    0.20   0.14   0.45 

Dividends Per Share

   0.20    0.20   0.20   0.20 
   Three Months Ended 

2014

  March 31   June 30  September 30  December 31 

Interest Income

  $4,578   $4,625  $4,613  $7,025 

Interest Expense

   470    443   427   620 
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Interest Income

   4,108    4,182   4,186   6,405 

Provision for Loan Losses

   —      —     —     —   
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Interest Income after Provision for Loan Losses

   4,108    4,182   4,186   6,405 

Noninterest Income

   724    774   855   1,465 

Noninterest Expense

   3,457    4,047   4,034   5,260 
  

 

 

   

 

 

  

 

 

  

 

 

 

Income before Income Taxes

   1,375    909   1,007   2,610 

Income Taxes

   296    170   268   875 
  

 

 

   

 

 

  

 

 

  

 

 

 

Net Income

  $1,079   $739  $739  $1,735 
  

 

 

   

 

 

  

 

 

  

 

 

 

Earnings Per Share - Basic

  $0.46   $0.31  $0.32  $0.50 

Earnings Per Share - Diluted

   0.46    0.31   0.32   0.50 

Dividends Per Share

   0.21    0.21   0.21   0.21 

LOGO

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19.Related Parties

In 2002, the Company purchased an 80% controlling interest in Exchange Underwriters. The President of Exchange Underwriters is Richard B. Boyer, who owns the remaining 20% of Exchange Underwriters (“Shareholder”). Mr. Boyer is on the board of directors of the Company.

The stock purchase agreement between FFEC and the Shareholder includes an obligation for the Company to purchase the Shareholder’s 20% stake upon the earliest of (1) the termination of the Shareholder’s employment for any reason, (2) June 1, 2014 (the twelfth anniversary of the closing date of the stock purchase agreement), or (3) the transfer by the Shareholder of any of his shares. The Shareholder has a right of first refusal to purchase the FFEC’s interest in Exchange Underwriters prior to the FFEC selling or transferring such shares and has “tag-along” rights to participate in any sale to a buyer on the same terms and conditions as FFEC.

AnnexAPPENDIX A

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

CB FINANCIAL SERVICES, INC.

AND

FEDFIRST FINANCIAL CORPORATIONFIRST WEST VIRGINIA BANCORP, INC.

DATED AS OF

APRIL 14, 2014

November 16, 2017


TABLE OF CONTENTS

 

ARTICLE I CERTAIN DEFINITIONS

   A-5A-1 

1.1

Certain Definitions.

Definitions
   A-5A-1
ARTICLE II THE MERGERA-10 

ARTICLE II THE MERGER2.1

MergerA-10

2.2

Closing; Effective TimeA-10

2.3

Articles of Incorporation and BylawsA-10

2.4

Directors of the Surviving CorporationA-10

2.5

Effects of the Merger   A-11 

2.1       Merger.2.6

Tax Consequences   A-11 

2.2       Closing; Effective Time.2.7

Possible Alternative Structures   A-11 

2.3       Articles of Incorporation and Bylaws.2.8

Bank Merger   A-11 

2.4       Directors of the Surviving Corporation.2.9

  A-11

2.5       EffectsAbsence of the Merger.

Control
   A-12 

2.6       Tax Consequences.

A-12

2.7       Possible Alternative Structures.

A-12

2.8       Bank Merger.

A-12

2.9       Absence of Control.

A-12

ARTICLE III CONVERSION OF SHARES

   A-12 

3.1

Conversion of FedFirstFirst West Virginia Common Stock; Merger Consideration.

Consideration
   A-12 

3.2

Election Procedures.

and Proration Procedures
   A-14 

3.3

Procedures for Exchange of FedFirstFirst West Virginia Common Stock.

A-15

3.4       Stock Options and Other Stock-Based Awards.

   A-16 

3.5       3.4

Reservation of Shares.

Shares
   A-17A-18 

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FEDFIRST

A-17

4.1       Standard.

A-17

4.2       Organization.

A-17

4.3       Capitalization.

first west virginia
   A-18 

4.4       Authority; No Violation.4.1

Standard   A-18 

4.5       Consents.4.2

OrganizationA-18

4.3

Capitalization   A-19 

4.6       Financial Statements.4.4

  A-19

4.7       Taxes.

A-19

4.8Authority; No Material Adverse Effect.

Violation
   A-20 

4.9       Material Contracts; Leases; Defaults.4.5

  A-20

4.10     Ownership of Property; Insurance Coverage.

Consents
   A-21 

4.11     Legal Proceedings.4.6

Financial StatementsA-21

4.7

Taxes   A-22 

4.12     Compliance with Applicable Law.4.8

  A-22

4.13     Employee Benefit Plans.

No Material Adverse Effect
   A-23 

4.14     Brokers, Finders and Financial Advisors.4.9

Material Contracts; Leases; DefaultsA-23

4.10

Ownership of Property; Insurance Coverage   A-25 

4.15     Environmental Matters.4.11

  A-25

4.16     Loan Portfolio.

Legal Proceedings
   A-26 

4.17     Related Party Transactions.4.12

Compliance with Applicable Law   A-26 

4.18     Deposits.4.13

  A-26

4.19     Board Approval.

Employee Benefit Plans
   A-27 

4.20     Risk Management Instruments.4.14

  A-27

4.21     Fairness Opinion.

A-27

4.22     Intellectual Property.

A-27

4.23     Duties as Fiduciary.

A-27

4.24     Employees; Labor Matters.

A-27

4.25     FedFirst Information Supplied.

A-28

4.26     Securities Documents.

A-28

4.27     Internal Controls.

A-28

4.28     Bank Owned Life Insurance.

A-29

4.29     EU Stock Purchase Agreement.

A-29

ARTICLE V REPRESENTATIONS AND WARRANTIES OF CB

A-29

5.1       Standard.

A-29

5.2       Organization.

A-29

5.3       Capitalization.

Brokers, Finders and Financial Advisors
   A-30 

5.4       Authority; No Violation.4.15

Environmental Matters   A-30 

5.5       Consents.4.16

  A-31

5.6       Financial Statements.

A-31

5.7       Taxes.

A-31

5.8       No Material Adverse Effect.

Loan Portfolio
   A-32 

5.9       Ownership of Property; Insurance Coverage.4.17

  A-32

5.10     Legal Proceedings.

Related Party Transactions
   A-33 

5.11     Compliance with Applicable Law.4.18

Deposits   A-33 

5.12     Employee Benefit Plans.4.19

Board ApprovalA-33

4.20

Risk Management InstrumentsA-33

4.21

Fairness Opinion   A-34 

5.13     Brokers, Finders and Financial Advisors.4.22

Intellectual PropertyA-34

4.23

Duties as Fiduciary   A-35 

5.14     Environmental Matters.4.24

Employees; Labor Matters   A-35 

5.15     Loan Portfolio.4.25

  A-35

5.16     Related Party Transactions.

First West Virginia Information Supplied
   A-36 

5.17     Board Approval.4.26

Internal Controls   A-36 

5.18     Risk Management Instruments.4.27

Bank Owned Life Insurance   A-36A-37 

5.19     Fairness Opinion.

ARTICLE V REPRESENTATIONS AND WARRANTIES OF CB
   A-37 

5.20     Duties as Fiduciary.5.1

Standard   A-37 

5.21     Employees; Labor Matters.5.2

Organization   A-37 

5.22     CB Information Supplied.5.3

  A-37

5.23     Internal Controls.

A-37

5.24     CB Common Stock.

Capitalization
   A-38 

5.25     Available Funds5.4

Authority; No Violation   A-38A-39 

ARTICLE VI COVENANTS OF FEDFIRST5.5

Consents   A-38A-40 

6.1       Conduct of Business.5.6

Financial Statements   A-38A-40 

6.2       Subsidiaries.5.7

Taxes   A-41 

A-i


6.3       Current Information.5.8

  A-41

6.4       Access to Properties and Records.

No Material Adverse Effect
   A-42 

6.5       Financial and Other Statements.5.9

Ownership of Property; Insurance Coverage   A-42 

6.6       Maintenance of Insurance.5.10

  A-42

6.7       Disclosure Supplements.

Legal Proceedings
   A-43 

6.8       Consents and Approvals of Third Parties.5.11

Compliance with Applicable Law   A-43 

6.9       All Reasonable Efforts.5.12

  A-43

6.10     Failure to Fulfill Conditions.

A-43

6.11     No Solicitation.

A-43

6.12     FedFirst ESOP Termination.

Employee Benefit Plans
   A-44 

6.13     FedFirst 401(k) Plan Termination.5.13

Brokers, Finders and Financial Advisors   A-44A-45 

6.14     Stockholder Litigation.5.14

Environmental Matters   A-44A-46

5.15

Loan PortfolioA-47

5.16

Related Party TransactionsA-48

5.17

Board ApprovalA-48

5.18

Risk Management InstrumentsA-48

5.19

Fairness OpinionA-48

5.20

Duties as FiduciaryA-49

5.21

Employees; Labor MattersA-49

5.22

CB Information SuppliedA-49

5.23

Internal ControlsA-50

5.24

Securities DocumentsA-50

5.25

CB Common StockA-51

5.26

Available FundsA-51
ARTICLE VI COVENANTS OF FIRST WEST VIRGINIAA-51

6.1

Conduct of BusinessA-51

6.2

Current InformationA-55

6.3

Access to Properties and RecordsA-57

6.4

Financial and Other StatementsA-57

6.5

Maintenance of InsuranceA-58

6.6

Disclosure SupplementsA-58

6.7

Consents and Approvals of Third PartiesA-58

6.8

All Reasonable EffortsA-58

6.9

Failure to Fulfill ConditionsA-58

6.10

No SolicitationA-59

6.11

Termination of Certain First West Virginia Benefit PlansA-60

6.12

Stockholder LitigationA-60 
ARTICLE VII COVENANTS OF CB   A-44A-61 

7.1

Conduct of Business.

Business
   A-44A-61 

7.2       Access to Properties

Financial and Records.

Other Statements
   A-45A-61 

7.3       Financial and Other Statements.

Disclosure Supplements   A-45A-61 

7.4       Disclosure Supplements.

  A-45

7.5       Consents and Approvals of Third Parties.

Parties
   A-46A-62

7.5

All Reasonable EffortsA-62 

7.6       All Reasonable Efforts.

Failure to Fulfill Conditions   A-46A-62 

7.7       Failure to Fulfill Conditions.

Employee Matters   A-46A-62 

7.8       Employee Matters.

  A-46

7.9       Directors and Officers Indemnification and Insurance.

Insurance
   A-47A-64

7.9

Stock ListingA-66 

7.10

Reservation of Stock Listing.

   A-48A-66 

7.11     Reservation of Stock.

Communications to First West Virginia Employees; Training   A-48A-66 

7.12     Communications to FedFirst Employees; Training.

A-48

7.13     Exemption from Liability Under Section 16(b).

A-49

7.14     Amendment of Articles of Incorporation.

A-49

ARTICLE VIII REGULATORY AND OTHER MATTERS

   A-49A-66 

8.1       Meeting

Meetings of Stockholders.

Stockholders
   A-49A-66 

8.2

Joint Proxy Statement-Prospectus; Merger Registration Statement.

Statement
   A-49A-68 

8.3

Regulatory Approvals.

Approvals
   A-50A-69 

ARTICLE IX CLOSING CONDITIONS

   A-50A-70 

9.1

Conditions to Each Party’s Obligations Under this Agreement.

Agreement
   A-50A-70 

9.2

Conditions to the Obligations of CB Under this Agreement.

Agreement
   A-50A-70 

9.3

Conditions to the Obligations of FedFirstFirst West Virginia Under this Agreement.

Agreement
   A-51A-71
ARTICLE X TERMINATION, AMENDMENT AND WAIVERA-72

10.1

TerminationA-72

10.2

Effect of TerminationA-73

10.3

Amendment, Extension and WaiverA-75 

A-ii


ARTICLE X TERMINATION, AMENDMENT AND WAIVER

XI MISCELLANEOUS
   A-51

10.1     Termination.

A-51

10.2     Effect of Termination.

A-52

10.3     Amendment, Extension and Waiver.

A-53

ARTICLE XI MISCELLANEOUS

A-54A-75 

11.1     Confidentiality.

Confidentiality   A-54A-75 

11.2

Public Announcements.

Announcements
   A-54A-76 

11.3     Survival.

Survival   A-54A-76 

11.4     Notices.

Notices   A-54A-76 

11.5

Parties in Interest.

Interest
   A-55A-77 

11.6

Complete Agreement.

Agreement
   A-55A-77 

11.7     Counterparts.

Counterparts   A-55A-77 

11.8     Severability.

Severability   A-55A-78 

11.9

Governing Law.

Law
   A-55A-78 

11.10   Interpretation.

Interpretation   A-55A-78 

11.11

Specific Performance.

Performance
   A-55A-78 

11.12

Waiver of Trial by Jury.

Jury
   A-56A-79 

EXHIBITS

 

AForm of Voting Agreement
BAgreement and Plan of Bank Merger
CEmployment Agreement between Community Bank and Patrick G. O’Brien
DEmployment Agreement between Community Bank and Richard B. Boyer
EChange in Control Agreement between Community Bank and Jennifer L. George

A-iii


AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “Agreement”) dated as of April 14, 2014,November 16, 2017, is entered into by and between CB Financial Services, Inc., a Pennsylvania corporation, (“CB”)and First West Virginia Bancorp, Inc., and FedFirst Financial Corporation, a Maryland corporation (“FedFirst”).West Virginia corporation.

Recitals

1.    The Board of Directors of each of CB and FedFirstFirst West Virginia (i) has determined that this Agreement and the business combination and related transactions contemplated hereby are advisable and in the best interests of their respective companies and the shareholders of CB and the stockholders, of FedFirst, (ii) has determined that this Agreement and the transactions contemplated hereby are consistent with and in furtherance of their respective business strategies and (iii) has approved this Agreement.

2.    As a condition to the willingness of CB to enter into this Agreement, (i) all of the directors and executive officers of FedFirstFirst West Virginia have entered into a Voting Agreement, substantially in the form ofExhibit A hereto, dated as of the date hereof, with CB (the “Voting Agreement”), pursuant to which each such director and executive officer has agreed, among other things, to vote all shares of FedFirstFirst West Virginia Common Stock (as defined herein) owned by such Person in favor of the approval of this Agreement and the transactions contemplated hereby, upon the terms and subject to the conditions set forth in such Voting Agreement, and (ii) certain executive officers of FedFirst, FFSB and/or EU (as defined herein) each have entered into an employment agreement or a change in control agreement with Community Bank (as defined herein), substantially in the forms ofExhibits C, D and E hereto, to be effective upon the consummation of the Merger (as defined herein).Agreement.

3. The parties intend the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and that this Agreement be and is hereby adopted as a “plan of reorganization” within the meaning of Sections 354 and 361 of the Code.

4.    The parties desire to make certain representations, warranties and agreements in connection with the business transactions described in this Agreement and to prescribe certain conditions thereto.

In consideration of the mutual covenants, representations, warranties and agreements herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

1.1Certain Definitions.Definitions.

As used in this Agreement, the following terms have the following meanings.

ACA” shall mean the Patient Protection and Affordable Care Act.

Acquisition Proposal” shall mean any proposal or offer, whether or not in writing, as to any of the following (other than the transactions contemplated hereunder) involving First West Virginia or any First West Virginia Subsidiary: (i) any merger, consolidation, share exchange, business combination, or other similar transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of the assets of First West Virginia and the First West Virginia Subsidiaries, taken as a whole, in a single transaction or series of transactions; (iii) any tender offer or exchange offer for 25% or more of the outstanding shares of capital stock of First West Virginia or the filing of a registration statement under the Securities Act in connection therewith; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

Advisory Board” shall have the meaning set forth in Section 6.11.7.7.7.

Affiliate” shall mean any Person who directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person and, without limiting the generality of the foregoing, includes any executive officer or director of such Person and any Affiliate of such executive officer or director.

Agreement” shall mean this agreement, the exhibits and schedules hereto and any amendment hereto.

Bank Merger” shall mean the merger of FFSBProgressive Bank with and into Community Bank, with Community Bank as the surviving or resulting institution.

Bank Regulator” shall mean any Federalfederal or state banking regulator, including but not limited to the PDOB, the FRB, the OCC and the FDIC, which regulates or has the statutory authority to regulate Community Bank, FFSB,Progressive Bank, and their respective holding companies and subsidiaries, as the case may be, and the Department of Justice or the Federal Trade Commission, or any other relevant Federalfederal or state regulator, as it relates to anticompetitive matters.

Benefit Schedule” shall have the meaning set forth in Section 4.13.12.

BHCA” shall mean the Bank Holding Company Act of 1956, as amended.

BOLI” shall have the meaning set forth in Section 4.28.4.27.

Business Day” shall mean any day other than a Saturday, Sunday, or day on which banks in the Commonwealth of Pennsylvania are authorized or obligated by law or executive order to close.

Cash Consideration” shall have the meaning set forth in Section 3.1.4.

Cash Election” shall have the meaning set forth in Section 3.1.4.

Cash Election Shares” shall have the meaning set forth in Section 3.1.4.

Cash Option Payment” shall have the meaning set forth in Section 3.4(b).

CB” shall mean CB Financial Services, Inc., a Pennsylvania corporation with its principal offices located at 100 N. Market Street, Carmichaels, Pennsylvania 15320.

CB Amendment” shall have the meaning set forth in Section 7.14.

CB Benefit Plans” shall have the meaning set forth in Section 5.12.1.

CB Common Stock” shall mean the common stock, par value $0.4167 per share, of CB.

CB Disclosure Schedule” shall mean the collective written disclosure schedules delivered by CB to FedFirstFirst West Virginia pursuant hereto.

CB Financial Statements” shall mean the (i) the audited consolidated statements of financial condition of CB as of December 31, 20132016 and 20122015 and the related consolidated statements of income, comprehensive income, changes in shareholders’stockholders’ equity and cash flows (including related notes and schedules, if any) of CB for the years ended December 31, 20132016 and 2012,2015, as set forth in CB’s annual report on Form10-K for the year ended December 31, 2016, and (ii) the unaudited interim consolidated financial statements of CB as of the end of each calendar quarter following December 31, 2013,2016, and for the periods then ended.ended, as filed by CB in the CB SEC Reports.

CB 401(k) Plan” shall mean the Community Bank 401(k) Profit Sharing Plan.

CB Loan Property” shall have the meaning set forth in Section 5.14.2.

CB Preferred Stock” shall have the meaning set forth in Section 5.3.1.

CB Regulatory Reports” shall mean the Call Reports of Community Bank, and accompanying schedules (other than such schedules as are required to be kept confidential pursuant to applicable law or regulatory requirements), filed or to be filed with the FDIC with respect to each calendar quarter beginning with the quarter ended December 31, 2013,2016, through the Closing Date, and all Reports on Form FRY-10 filed with the FRB by CB from December 31, 20132016 through the Closing Date.

CB SEC Reports” shall have the meaning set forth in Section 5.24.

CB Stock” shall have the meaning set forth in Section 5.3.1.

CB Stockholder Approval” shall have the meaning set forth in Section 5.4.1.

CB Stockholders Meeting” shall have the meaning set forth in Section 8.1.1.

CB Subsidiary” shall mean any corporation, partnership, limited liability company or other entity, 10% or more of the equity securities or equity interests of which is owned, either directly or indirectly, by CB, except any entity the stock or equity interest of which is held in the ordinary course of the lending activities of Community Bank.

CB Termination Fee” shall have the meaning set forth in Section 10.2.2(C).

Certificate” shall mean a certificate or book entry evidencing shares of FedFirstFirst West Virginia Common Stock.

Change of Recommendation” shall have the meaning set forth in Section 8.1.2.

Claim” shall have the meaning set forth in Section 7.9.2.7.8.2.

Closing” shall have the meaning set forth in Section 2.2.

Closing Date” shall have the meaning set forth in Section 2.2.

COBRA” shall have the meaning set forth in Section 4.13.5.4.13.2.

Code” shall havemean the meaning set forth in the recitals.Internal Revenue Code of 1986, as amended.

Community Bank” shall mean Community Bank, a Pennsylvania commercial bank with its principal office located at 100 N. Market Street, Carmichaels, Pennsylvania 15320, which is a wholly owned subsidiary of CB.

Confidentiality Agreement” shall mean the confidentiality agreement dated as of December 4, 2013June 1, 2017 between CB and FedFirst.First West Virginia.

Continuing Employees” shall have the meaning set forth in Section 7.8.1.7.7.1.

CRA” shall have the meaning set forth in Section 4.12.1.

Director Agreements” shall have the meaning set forth in Section 7.8.5.

Dissenting Shares” shall have the meaning set forth in Section 3.1.7.

Dissenting Stockholder” shall have the meaning set forth in Section 3.1.7.3.1.7

Effective Time” shall have the meaning set forth in Section 2.2.

Election Deadline” shall have the meaning set forth in Section 3.2.3.

Election Form” shall have the meaning set forth in Section 3.2.2.

Environmental Laws” shall mean any applicable federal, state or local law, statute, ordinance, rule, regulation, code, license, permit, approval, consent, order, judgment, decree, injunction or agreement with any Governmental Entity as in effect on or prior to the date of this Agreement relating to (1) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (2) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Materials of Environmental Concern. The term Environmental Law“Environmental Laws” includes without limitation (a) the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601, et seq; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901, et seq; the Clean Air Act, as amended, 42 U.S.C. § 7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C. § 2601, et seq; the Emergency Planning and Community Right to Know Act, 42 U.S.C. § 11001, et seq; the Safe Drinking Water Act, 42 U.S.C. § 300f, et seq; and all comparable state and local laws, and (b) any common law (including without limitation common law that may impose strict liability) that may impose liability or obligations for injuries or damages due to the presence of or exposure to any Materials of Environmental Concern as in effect on or prior to the date of this Agreement.

ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate” shall mean, with respect to any Person, any other Person that, together with such Person, would be treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

ESOP Termination Date” shall have the meaning set forth in Section 6.12.

Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

Exchange Agent” shall mean Registrar and Transfer Company,Computershare, Inc., or such other bank or trust company or other agent as mutually agreed upon by CB and FedFirst,First West Virginia, which shall act as agent for CB in connection with the exchange procedures for exchanging Certificates for the Merger Consideration.

Exchange Fund” shall have the meaning set forth in Section 3.3.1.

Exchange Ratio” shall have the meaning set forth in Section 3.1.3, subject to adjustment under Section 3.1.10.

EU” shall mean Exchange Underwriters, Inc., a Pennsylvania corporation with its principal office located at 121 West Pike Street, Canonsburg, Pennsylvania 15317, of which 80% of the issued and outstanding capital stock is owned by FedFirst Exchange.

EU Stock Purchase Agreement” shall have the meaning set forth in Section 4.30.3.1.8.

FDIC” shall mean the Federal Deposit Insurance Corporation.

FedFirstFirst West Virginia” shall mean FedFirst Financial Corporation,First West Virginia Bancorp, Inc., a MarylandWest Virginia corporation with its principal office located at 565 Donner1701 Warwood Avenue, Monessen, Pennsylvania 15602.Wheeling, West Virginia 26003.

FedFirstFirst West Virginia Benefit Plans” shall have the meaning set forth in Section 4.13.1.

FedFirstFirst West Virginia Common Stock” shall mean the common shares,stock, par value $0.01$5.00 per share, of FedFirst.First West Virginia.

FedFirstFirst West Virginia Disclosure Schedule” shall mean the collective written disclosure schedules delivered by FedFirstFirst West Virginia to CB pursuant hereto.

FedFirst ESOP” shall mean the First Federal Savings Bank Employee Stock Ownership Plan or any successor thereto.

FedFirst Exchange” shall mean FedFirst Exchange Corporation, a Pennsylvania corporation and a wholly-owned subsidiary of FFSB.

FedFirstWest Virginia Financial Statements” shall mean (i) the audited consolidated statementsbalance sheets of financial condition of FedFirstFirst West Virginia as of December 31, 20132016 and 20122015 and the related consolidated statements of operations,income, comprehensive income, changes in stockholders’ equity and cash flows (including related notes and schedules, if any) of FedFirstFirst West Virginia for each of the years ended December 31, 20132016 and 2012, as set forth in FedFirst’s annual report on Form 10-K for the year ended December 31, 20132015 and (ii) the unaudited interim consolidated financial statements of FedFirstFirst West Virginia as of the end of each calendar quarter following December 31, 2013,2016, and for the periods then ended, as filed by FedFirst in the FedFirst SEC Reports.ended.

FedFirstFirst West Virginia 401(k) Plan” shall mean the First Federal Savings Bank RetirementWest Virginia Bancorp, Inc. Profit Sharing 401(k) Plan and Trust or any successor thereto.

FedFirstFirst West Virginia Loan Property” shall have the meaning set forth in Section 4.15.2.

FedFirst First West VirginiaNon-qualified Deferred Compensation Plan”shall have the meaning set forth in Section 4.13.9.

FedFirst Preferred Stock” shall have the meaning set forth in Section 4.3.1.

FedFirstFirst West Virginia Regulatory Reports” shall mean the Call Reports of FFSB,Progressive Bank, and accompanying schedules (other than such schedules as are required to be kept confidential pursuant to applicable law or regulatory requirements), filed or to be filed with the OCC with respect to each calendar quarter beginning with the quarter ended December 31, 2013,2016, through the Closing Date, and all Reports on Form FRY-10 filed with the FRB by FedFirstFirst West Virginia from December 31, 20132016 through the Closing Date.

FedFirst Restricted Stock” shall have the meaning set forth in Section 3.4(c).

FedFirst SEC Reports” shall have the meaning set forth in Section 4.26.

FedFirst Severance Plan” shall mean the First Federal Savings Bank Employee Severance Compensation Plan, as amended as of the date hereof.

FedFirstWest Virginia Stockholder Approval” shall have the meaning set forth in Section 4.4.1.

FedFirstFirst West Virginia Stockholders Meeting” shall have the meaning set forth in Section 8.1.

FedFirst Stock” shall have the meaning set forth in Section 4.3.1

FedFirst Stock Option” shall have the meaning set forth in Section 3.4(b).

FedFirst Stock Plans” shall have the meaning set forth in Section 3.4(a).

FedFirstFirst West Virginia Subsidiary” shall mean any corporation, partnership, limited liability company or other entity, 10% or more of the equity securities or equity interests of which is owned, either directly or indirectly, by FedFirst,First West Virginia, except any entity the stock or equity interest of which is held in the ordinary course of the lending activities of FFSB.

FedFirst Termination Fee” shall have the meaning set forth in Section 10.2.2(D).

FFSB” shall mean First Federal Savings Bank, a federally-chartered savings bank with its principal office located at 565 Donner Avenue, Monessen, Pennsylvania 15602, which is a wholly owned subsidiary of FedFirst.Progressive Bank.

FHLB” shall mean the Federal Home Loan Bank of Pittsburgh.

401(k) Plan Termination Date” shall have the meaning set forth in Section 6.13.6.11.1

FRB” shall mean the Board of Governors of the Federal Reserve System and any applicable Federal Reserve Bank.

GAAP” shall mean accounting principles generally accepted in the United States of America, applied on a consistent basis.

Governmental Entity” shall mean any Federalfederal or state court, department, administrative agency or commission or other governmental authority or instrumentality.

HOLAHIPAA” shall mean the Home Owners’ Loan Act of 1933, as amended.Health Insurance Portability and Accountability Act.

Indemnified Parties” shall have the meaning set forth in Section 7.9.2.7.8.2.

Insurance Regulator” shall mean the Pennsylvania Insurance Department and any other Governmental Entity whichthat has authority to regulate a Pennsylvania insurance agency.

Intellectual Property” shall have the meaning set forth in Section 4.22.

IRS” shall mean the United States Internal Revenue Service.

Joint Proxy Statement-Prospectus” shall have the meaning set forth in Section 8.2.1.

Knowledge” as used with respect to a Person (including references to such Person being aware of a particular matter) shall mean those facts that are actually known or should have been known by the senior officers and directors of such Person after reasonable inquiry.inquiry by (i) with respect First West Virginia, (a) William G. Petroplus, (b) Francie Reppy, (c) Brad Winwood, (d) Kerrie A. Weisenborn, (e) Gary S. Martin, (f) David E. Wharton and (g) Deborah A. Kloeppner and (ii) with respect to CB, (a) Barron P. McCune, Jr., (b) Patrick G. O’Brien, (c) Kevin D. Lemley, (d) Ralph Burchianti, (e) Marlene Walker and (f) Korey Kottke.

Mailing Date” shall have the meaning set forth in Section 3.2.2.

Material Adverse Effect” shall mean, with respect to CB or FedFirst,First West Virginia, respectively, any effect that (1) is material and adverse to the financial condition, results of

operations or business of CB and the CB Subsidiaries, taken as a whole, or FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries, taken as a whole, respectively, or (2) materially impairs the ability of either FedFirstFirst West Virginia or CB to perform its respective obligations under this Agreement or otherwise materially impedes the consummation of the transactions contemplated by this Agreement;provided,however, that none of the following shall constitute, or be considered in determining whether there has occurred, a Material Adverse Effect: (i) the impact of (x) changes in laws, rules or regulations affecting banks or thriftfinancial institutions or their holding companies generally, or interpretations thereof by courts or governmental agencies, (y) changes in GAAP, or (z) changes in regulatory accounting requirements, in any such case applicable to financial institutions or their holding companies generally and not specifically relating to FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary, on the one hand, or CB or any CB Subsidiary, on the other hand, (ii) the announcement of this Agreement or any action or omission of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary on the one hand, or CB or any CB Subsidiary, on the other hand, required under this Agreement or taken or omitted to be taken with the express written permission of CB or FedFirst,First West Virginia, respectively, (iii) the direct effects of compliance with this Agreement on the operating performance of the parties, including expenses incurred by the parties in investigating, negotiating, documenting, effecting and consummating the transactions contemplated by this Agreement, (iv) any changes after the date of this Agreement in general economic or capital market conditions affecting banksfinancial institutions or their holding companies generally, and (v) any changes in national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States.States, except with respect to clauses (i), (iv) and (v), to the extent that the effects of such change uniquely affects CB or First West Virginia or its Subsidiaries as compared to comparable U.S. banking organizations.

Materials of Environmental Concern” shall mean pollutants, contaminants, wastes, toxic or hazardous substances, petroleum and petroleum products, and any other materials regulated under Environmental Laws.

Maximum Amount” shall have the meaning set forth in Section 7.7.1.

Merger” shall mean the merger of FedFirstFirst West Virginia with and into CB pursuant to the terms hereof.

Merger Consideration” shall mean the Stock Consideration and the Cash Consideration.

Merger Registration Statement” shall mean the registration statement, together with all amendments, filed with the SEC under the Securities Act for the purpose of registeringto register the offer of shares of CB Common Stock to be offered to holders of FedFirstFirst West Virginia Common Stock in connection with the Merger.

MGCL” shall mean the Maryland General Corporation Law, as amended.

Non-Election Shares” shall have the meaning set forth in Section 3.1.5.

Notice of Superior Proposal” shall have the meaning set forth in Section 10.1.8.

OCC” shall mean the Office of the Comptroller of the Currency.

Participant” shall have the meaning set forth in Section 7.8.5.

PBCL” shall mean the Pennsylvania Business Corporation Law of 1988, as amended.

PBGC” shall mean the Pension Benefit Guaranty Corporation.

PDOB” shall mean the Pennsylvania Department of Banking and Securities.

Person” shall mean any individual, corporation, limited liability company, partnership, joint venture, association, trust or “group” (as that term is defined under the Exchange Act).

Proxy Statement-ProspectusProgressive Bank” shall have the meaning set forth in Section 8.2.1.mean Progressive Bank, N.A., a national association with its principal office located at 1701 Warwood Avenue, Wheeling, West Virginia 26003, which is a wholly owned subsidiary of First West Virginia.

Regulatory Agreement” shall have the meaning set forth in Section 4.12.3.

Regulatory Approval”shall mean the approval of any Bank Regulator necessary in connection with the consummation of the Merger, the Bank Merger and the related transactions contemplated by this Agreement.

Regulatory Communication” shall have the meaning set forth in Section 8.3.

Representative” shall have the meaning set forth in Section 3.2.2.

Rights” shall mean puts, calls, warrants, options, conversion, redemption, repurchase or other rights, convertible securities, stock appreciation rights and other arrangements or commitments whichthat obligate an entity to issue or dispose of any of its capital stock or other ownership interests or whichthat provide for compensation based on the equity appreciation of its capital stock.

SEC” shall mean the United States Securities and Exchange Commission.

Securities Act” shall mean the Securities Act of 1933, as amended.

Securities Laws” shall mean the Securities Act, the Exchange Act, the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, and the Trust Indenture Act of 1939, as amended, and, in each case, the rules and regulations of the SEC promulgated thereunder.

Shortfall Number” shall have the meaning set forth in Section 3.2.6.

Stock Consideration” shall have the meaning set forth in Section 3.1.3

Stock Conversion Number” shall have the meaning set forth in Section 3.2.1.

Stock Election” shall have the meaning set forth in Section 3.1.3.

Stock Election Number” shall have the meaning set forth in Section 3.2.5.

Stock Election Shares” shall have the meaning set forth in Section 3.1.3.

Subsidiary” shall mean any corporation, 10% or more of the capital stock of which is owned, either directly or indirectly, except any corporation the stock of which is held in the ordinary course of the lending activities, of either Community Bank or FFSB,Progressive Bank, as applicable.

Superior Proposalshall havemeans an unsolicited, bona fide written offer made by a third party to consummate an Acquisition Proposal that: (i) First West Virginia’s Board of Directors determines in good faith, after consulting with its outside legal counsel and its financial advisor, would, if consummated, result in a transaction that is more favorable to the meaning set forthstockholders of First West Virginia from a financial point of view than the transactions contemplated hereby (taking into account all factors relating to such proposed transaction deemed relevant by First West Virginia’s Board of Directors, including without limitation, the amount and form of consideration, the timing of payment, the risk of consummation of the transaction, the financing thereof and all other conditions thereto (including any adjustments to the terms and conditions of such transactions proposed by CB in Section 6.11.response to such Acquisition Proposal)); (ii) is for 100% of the outstanding shares of First West Virginia Common Stock or all or substantially all of the assets of First West Virginia; and (iii) is reasonably likely to be completed on the terms proposed, in each case taking into account all legal, financial, regulatory and other aspects of the proposal.

Surviving Corporation” shall have the meaning set forth in Section 2.1.

Tax” shall mean any federal, state, local, foreign or provincial income, gross receipts, property, sales, service, use, license, lease, excise, franchise, employment, payroll, withholding, employment, unemployment insurance, workers’ compensation, social security, alternative or added minimum, ad valorem, value added, stamp, business license, occupation, premium, environmental, windfall profit, customs, duties, estimated, transfer or excise tax, or any other tax, custom, duty, premium, governmental fee or other assessment or charge of any kind whatsoever, together with any interest, penalty or additional tax imposed by any Governmental Entity.

Tax Return” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

Termination Date” shall mean March 31, 2015.September 30, 2018.

Termination Fee” shall have the meaning set forth in Section 10.2.2(C).

Treasury Stock” shall have the meaning set forth in Section 3.1.2.

“Voting Agreement” shall have the meaning set forth in the recitals.

“WVBCA”shall have the meaning set forth in Section 2.1

Other terms used herein are defined in the preamble and elsewhere in this Agreement.

ARTICLE II

THE MERGER

2.1Merger.

Subject to the terms and conditions of this Agreement, in accordance with the PBCL and the MGCL,West Virginia Business Corporation Ac (the “WVBCA”), at the Effective Time: (a) FedFirstFirst West Virginia shall merge with and into CB, with CB as the resulting or surviving corporation (the “Surviving Corporation”); and (b) the separate existence of FedFirstFirst West Virginia shall cease and all of the rights, privileges, powers, franchises, properties, assets, liabilities and obligations of FedFirstFirst West Virginia shall be vested in and assumed by CB. As part of the Merger, each outstanding share of FedFirstFirst West Virginia Common Stock will be converted into the right to receive the Merger Consideration pursuant to the terms of Article III.

2.2Closing; Effective Time.

The closing of the Merger (“Closing”) shall occur no later than the close of business on the fifth Business Day following the satisfaction or (to the extent permitted by applicable law) waiver of the conditions set forth in Article IX (other than those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by applicable law) waiver of those conditions), or such other date that may be agreed to in writing by the parties. The Merger shall be effected by the filing of articles of merger with the Secretary of State of the Commonwealth of Pennsylvania, in accordance with the PBCL, and articles of merger with the MarylandSecretary of State Department of Assessments and Taxation,the State of West Virginia, in accordance with the MGCL,WVBCA, on the day of the Closing (the “Closing Date”). The MergerTheMerger shall be effective on the date and time specified in the articles of merger filed with the Secretary of State of the Commonwealth of Pennsylvania and the articles of merger filed with the MarylandSecretary of State Department of Assessments and Taxationthe State of West Virginia (the“Effective Time”). Apre-closing of the transactions contemplated hereby shall take place at the offices of Luse Gorman, Pomerenk & Schick, P.C.,PC, at 10:00 a.m. on the day prior to the Closing Date.

2.3Articles of Incorporation and Bylaws.

The articles of incorporation and bylaws of CB as in effect immediately prior to the Effective Time (subject to the CB Amendment) shall be the articles of incorporation and bylaws of the Surviving Corporation, until thereafter amended as provided therein and by applicable law.

2.4Directors of the Surviving Corporation.

CB shall take all appropriate action, prior to the Closing Date, so that the number of directors constituting the Board of Directors of CB shall be increased by fourthree so that, effective immediately after the Closing Date, John M. Swiatekone current director of First West Virginia shall be appointed to the class of directors whose terms expire at the annual meeting of shareholdersstockholders to be held in 2015, Richard B. Boyer and Patrick G. O’Brien2018, one current director of First West Virginia shall be appointed to the class of directors whose terms expire at the annual meeting of shareholdersstockholders to be held in 2016,2019, and John J. LaCarteone current director of First West Virginia shall be appointed to the class of directors whose terms expire at the annual meeting of shareholdersstockholders to be held in 2017.2020. These fourthree individuals (which shall consist of William G. Petroplus and two directors to be selected by mutual agreement

between CB and First West Virginia), together with the directors of CB serving immediately prior to the Effective Time, shall be the directors of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified.

2.5Effects of the Merger.

At and after the Effective Time, the Merger shall have the effects set forth in this Agreement and in the applicable provisions of the PBCL and the MGCL.WVBCA.

2.6Tax Consequences.

It is intended that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Code and that this Agreement shall constitute a “plan of reorganization” as that term is used in Sections 354 and 361 of the Code.

2.7Possible Alternative Structures.

Notwithstanding anything to the contrary contained in this Agreement and subject to the satisfaction of the conditions set forth in Article IX, prior to the Effective Time, CB may revise the structure for effecting the Merger described in Section 2.1 or the Bank Merger including, without limitation, by substituting a wholly owned subsidiary for CB or Community Bank, as applicable, provided thatthat: (i) any such subsidiary shall become a party to, and shall agree to be bound by, the terms of this Agreement; (ii) such modification shall not adversely affect the Federalfederal income tax consequences of the Merger to CB, Community Bank, FedFirst, FFSBFirst West Virginia, Progressive Bank or to the holders of FedFirstFirst West Virginia Common Stock or prevent the rendering of the opinions contemplated in Sections 9.2.4 and 9.3.4; (iii) the consideration to be paid to the holders of FedFirstFirst West Virginia Common Stock under this Agreement is not thereby changed in kind or value or reduced in amount; and (iv) such modification will not delay materially or jeopardize receipt of any Regulatory Approvals or other consents and approvals relating to the consummation of the Merger or otherwise materially impede or delay consummation of the Merger or cause any condition to Closing set forth in Article IX not to be capable of being fulfilled. The parties hereto agree to appropriately amend this Agreement and any related documents in order to reflect any such revised structure.

2.8Bank Merger.

CB intends to cause the merger of FFSBProgressive Bank with and into Community Bank, with Community Bank as the surviving or resulting institution. Following the execution and delivery of this Agreement, (i) CB will cause Community Bank, and FedFirstFirst West Virginia will cause FFSB,Progressive Bank, to execute and deliver an agreement and plan of merger in respect of the Bank Merger, substantially in the form ofExhibit B hereto, (ii) CB, as the sole shareholderstockholder of Community Bank, shall approve the agreement and plan of merger in respect of the Bank Merger, and (iii) FedFirst,First West Virginia, as the sole shareholderstockholder of FFSB,Progressive Bank, shall approve the agreement and plan of merger in respect of the Bank Merger. The parties agree that the Bank Merger shall become effective immediately or as soon as practicable after the Effective Time.

2.9Absence of Control.

It is the intent of the parties hereto that until the Effective Time, CB, by reason of this Agreement, shall not be deemed to control, directly or indirectly, FedFirstFirst West Virginia or to exercise, directly or indirectly, a controlling influence over the management or policies of FedFirst.First West Virginia.

ARTICLE III

CONVERSION OF SHARES

3.1Conversion of FedFirstFirst West Virginia Common Stock; Merger Consideration.

At the Effective Time, by virtue of the Merger and without any action on the part of CB, FedFirstFirst West Virginia or the holders of any of the shares of FedFirstFirst West Virginia Common Stock, the Merger shall be effected in accordance with the following terms:

3.1.1    Each share of CB Common Stock that is issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding following the Effective Time and shall be unchanged by the Merger.

3.1.2    All shares of FedFirstFirst West Virginia Common Stock held in the treasury of FedFirstFirst West Virginia and each share of FedFirstFirst West Virginia Common Stock owned by CB prior to the Effective Time (other than shares held in a fiduciary capacity or in connection with debts previously contracted) (“Treasury Stock”) and shares held by the FedFirst ESOP that are remitted to FedFirst prior to the Effective Time as contemplated by Section 6.13 shall, at the Effective Time, cease to exist, and such shares, including any Certificates therefor, shall be canceled as promptly as practicable thereafter, and no payment or distribution shall be made in consideration therefor.

3.1.3    Each outstanding share of FedFirstFirst West Virginia Common Stock with respect to which an election to receive CB Common Stock has been effectively made and not revoked or lost, pursuant to Section 3.2.3 (a“Stock Election”), shall be converted into the right to receive (i) 1.15900.9583 (the “Exchange Ratio”) of a share of CB Common Stock, subject to adjustment as provided in Section 3.1.103.1.8 and to the provisions of Section 3.2 (the “Stock Consideration”) (collectively, the“Stock Election Shares”).

3.1.4    Subject to the provisions of Section 3.2, each outstanding share of FedFirstFirst West Virginia Common Stock with respect to which an election to receive cash has been effectively made and not revoked or lost, pursuant to Section 3.2.3 (a“Cash Election”), shall be converted into the right to receive a cash payment, without interest, equal to $23.00$28.50 (the“Cash Consideration”) (collectively, the“Cash Election Shares”).

3.1.5    Each outstanding share of FedFirstFirst West Virginia Common Stock other than as to which a Cash Election or a Stock Election has been effectively made and not revoked or lost, pursuant to Section 3.2.3 (collectively,“Non-Election Shares”), shall be converted into the right to receive such Stock Consideration and/or Cash Consideration as shall be determined in accordance with Section 3.2.

3.1.6    Except as set forth in Section 3.1.2 or 3.1.7, upon the Effective Time, outstanding shares of FedFirstFirst West Virginia Common Stock shall no longer be outstanding and

shall automatically be canceled and shall cease to exist, and shall thereafter by operation of this Section 3.1 represent only the right to receive the Merger Consideration and any dividends or distributions with respect thereto or any dividends or distributions with a record date prior to the Effective Time that were declared or made by FedFirstFirst West Virginia on such shares of FedFirstFirst West Virginia Common Stock in accordance with the terms of this Agreement on or prior to the Effective Time and whichthat remain unpaid at the Effective Time.

3.1.7    Each outstanding share of FedFirstFirst West Virginia Common Stock, the holder of which has perfected his right to dissent under the MGCLWVBCA and has not effectively withdrawn or lost such right as of the Effective Time (the “Dissenting Shares”), shall not be converted into or represent athe right to receive the Merger Consideration hereunder and the holder thereof shall be entitled only to such rights as are granted byavailable to such holder pursuant to the applicable law. FedFirst shall give CB immediate notice upon receipt by FedFirst of any such demands for paymentprovisions of the fairWVBCA. Each holder of a Dissenting Share shall be entitled to receive the value of such shares of FedFirst Common Stock and of withdrawals of such notice and any other related communications (any stockholder duly making such demand being hereinafter called a “Dissenting Stockholder”), and CB shall have the right to participate in all discussions, negotiations and proceedings with respect to any such demands. FedFirst shall not, except with the prior written consent of CB, voluntarily make any payment with respect to, or settle or offer to settle, any such demand for payment, or waive any failure to timely deliver a written demand for appraisal or the taking of any other actionShare held by such Dissenting Stockholder as may be necessary to perfect appraisal rights under applicable law. Any payments made in respect of Dissenting Shares shall be made by the Surviving Institution.

3.1.8 If any Dissenting Stockholder withdraws or loses (through failure to perfect or otherwise) his right to such payment at or prior to the Effective Time, such holder’s shares of FedFirst Common Stock shall be converted into a right to receive the Merger Considerationhim in accordance with the applicable provisions of this Agreement.the WVBCA;provided, thatsuch holder complies with the procedures contemplated by and set forth in the applicable provisions of the WVBCA. If any holder of any Dissenting Share shall effectively withdraw or lose such holder withdraws or loses (through failure to perfect or otherwise) his right toholder’s dissenter’s rights under the applicable provisions of the WVBCA, each such payment after the Effective Time, each share of FedFirst Common Stock of such holderDissenting Share shall be entitledexchangeable for the right to receive the Merger Consideration.

3.1.93.1.8    Notwithstanding anything to the contrary contained herein, no certificates or scrip representing fractional shares of CB Common Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to CB Common Stock shall be payable on or with respect to any fractional share interests, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholderstockholder of CB. In lieu of the issuance of any such fractional share, CB shall pay to each former holder of FedFirstFirst West Virginia Common Stock who otherwise would be entitled to receive a fractional share of CB Common Stock, an amount in cash, rounded to the nearest cent and without interest, equal to the product of (i) the fraction of a share to which such holder would otherwise have been entitled and (ii) the volume weighted average price of a share of CB Common Stock for the twenty (20)fifteen (15) trading days immediately precedingending on the third Business Day prior to the Closing Date. For purposes of determining any fractional share interest, all shares of FedFirstFirst West Virginia Common Stock owned by a FedFirst StockholderFirst West Virginia stockholder shall be combined so as to calculate the maximum number of whole shares of CB Common Stock issuable to such FedFirst Stockholder.First West Virginia stockholder.

3.1.103.1.9    If CB changes (or the CB Board sets a related record date that will occur before the Effective Time for a change in) the number or kind of shares of CB Common Stock outstanding by way of a stock split, stock dividend, recapitalization, reclassification, reorganization or similar transaction, then the Merger Consideration (and any other

dependent items) will be adjusted proportionately to account for such change. If FedFirstFirst West Virginia changes (or the FedFirstFirst West Virginia Board sets a related record date that will occur before the Effective Time for a change in) the number or kind of shares of FedFirstFirst West Virginia Common Stock (or Rights thereto) outstanding by way of a stock split, stock dividend, recapitalization, reclassification, reorganization or similar transaction, then the Merger Consideration (and any other dependent items) will be adjusted proportionately to account for such change.

3.2Election and Proration Procedures.

3.2.1    Holders of record of FedFirstFirst West Virginia Common Stock may elect to receive shares of CB Common Stock or cash in exchange for their shares of FedFirstFirst West Virginia Common Stock. The total number of shares of FedFirstFirst West Virginia Common Stock to be converted into Stock Consideration pursuant to this Section 3.2.1 shall be equal to the product obtained by multiplying (x) the number of shares of FedFirstFirst West Virginia Common Stock outstanding immediately prior to the Effective Time by (y) 0.650.80 (the “Stock Conversion Number”). All other shares of FedFirstFirst West Virginia Common Stock shall be converted into Cash Consideration.

3.2.2    An election form and other appropriate customary transmittal material in such form as CB and FedFirstFirst West Virginia shall mutually agree (“Election Form”) will be mailed no more than forty (40) business daysBusiness Days and no less than twenty (20) business daysBusiness Days prior to the Election Deadline or on such earlier date as CB and FedFirstFirst West Virginia shall mutually agree (the “(the“Mailing Date”) to each holder of record of FedFirstFirst West Virginia Common Stock permitting such holder, subject to the allocation and election procedures set forth in this Section 3.2, (i) to specify the number of shares of FedFirstFirst West Virginia Common Stock owned by such holder with respect to which such holder desires to make a Cash Election in accordance with the provision of Section 3.1.4, (ii) to specify the number of shares of FedFirstFirst West Virginia Common Stock owned by such holder with respect to which such holder desires to make a Stock Election in accordance with the provision of Section 3.1.3, or (iii) to indicate that such record holder has no preference as to the receipt of cash or CB Common Stock for such shares. Holders of record of shares of FedFirstFirst West Virginia Common Stock who hold such shares as nominees, trustees or in other representative capacities (a “Representative”) may submit multiple Election Forms, provided that each such Election Form covers all the shares of FedFirstFirst West Virginia Common Stock held by each Representative for a particular beneficial owner. Any shares of FedFirstFirst West Virginia Common Stock with respect to which the holder thereof shall not, as of the Election Deadline (as defined in Section 3.2.3), have made an election by submission to the Exchange Agent of an effective, properly completed Election Form shall be deemedNon-Election Shares. Any Dissenting Shares shall be deemed shares subject to a Cash Election, and with respect to such shares the holders thereof shall in no event receive consideration comprised of CB Common Stock. CB shall make available one or more Election Forms as may reasonably be requested in writing from time to time by all Persons who become holders (or beneficial owners) of FedFirstFirst West Virginia Common Stock between the record date for the initial mailing of Election Forms and the close of business on the business dayBusiness Day prior to the Election Deadline (as defined in Section 3.2.3), and FedFirstFirst West Virginia shall provide to the Exchange Agent all information reasonably necessary for it to perform as specified herein.

3.2.3    The term “Election Deadline,, as used below, shall mean 5:00 p.m., Eastern time, on the later of (i) the date of the FedFirstFirst West Virginia Stockholders Meeting and (ii) the date that CB and FedFirstFirst West Virginia shall agree is as near as practicable to five (5) business daysBusiness Days prior to the expected Closing Date, or such other time and date as CB and FedFirstFirst West Virginia may mutually agree. An election shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline. Any Election Form may be revoked or changed by the Person submitting

such Election Form to the Exchange Agent by written notice to the Exchange Agent only if such notice of revocation or change is actually received by the Exchange Agent at or prior to the Election Deadline. The Certificate or Certificates relating to any revoked Election Form shall be promptly returned without charge to the Person submitting the Election Form to the Exchange Agent. Subject to the terms of this Agreement and of the Election Form, the Exchange Agent shall have discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in the Election Forms, and any good faith decisions of the Exchange Agent regarding such matters shall be binding and conclusive. Neither CB nor the Exchange Agent shall be under any obligation to notify any Person of any defect in an Election Form.

3.2.4    No later than five (5) business daysBusiness Days after the later to occur of the Election Deadline or the Effective Time, CB shall cause the Exchange Agent to effect the allocation among holders of FedFirstFirst West Virginia Common Stock of rights to receive the Cash Consideration and the Stock Consideration as set forth in Sections 3.2.5 and 3.2.6.

3.2.5    If the aggregate number of shares of FedFirstFirst West Virginia Common Stock with respect to which Stock Elections shall have been made (the “Stock Election Number”) exceeds the Stock Conversion Number, then all Cash Election Shares and allNon-Election Shares of each holder thereof shall be converted into the right to receive the Cash Consideration, and Stock Election Shares of each holder thereof will be converted into the right to receive the Stock Consideration in

respect of that number of Stock Election Shares (rounded down to the nearest whole number) equal to the product obtained by multiplying (x) the number of Stock Election Shares held by such holder by (y) the fraction, the numerator of which is the Stock Conversion Number and the denominator of which is the Stock Election Number, with the remaining number of such holders’ Stock Election Shares being converted into the right to receive the Cash Consideration.

3.2.6    If the Stock Election Number is less than the Stock Conversion Number (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the “Shortfall Number”), then all Stock Election Shares shall be converted into the right to receive the Stock Consideration and theNon-Election Shares and Cash Election Shares shall be treated in the following manner:

(A)    If the Shortfall Number is less than or equal to the number ofNon-Election Shares, then all Cash Election Shares shall be converted into the right to receive the Cash Consideration and theNon-Election Shares of each holder thereof shall convert into the right to receive the Stock Consideration in respect of that number ofNon-Election Shares (rounded down to the nearest whole number) equal to the product obtained by multiplying (x) the number ofNon-Election Shares held by such holder by (y) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number ofNon-Election Shares, with the remaining number of such holder’sNon-Election Shares being converted into the right to receive the Cash Consideration; or

(B)    If the Shortfall Number exceeds the number ofNon-Election Shares, then allNon-Election Shares shall be converted into the right to receive the Stock

Consideration and Cash Election Shares of each holder thereof shall convert into the right to receive the Stock Consideration in respect of that number of Cash Election Shares (rounded down to the nearest whole number) equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) a fraction, the numerator of which is the amount by which (1) the Shortfall Number exceeds (2) the total number ofNon-Election Shares and the denominator of which is the total number of Cash Election Shares, with the remaining number of such holder’s Cash Election Shares being converted into the right to receive the Cash Consideration.

3.3Procedures for Exchange of FedFirstFirst West Virginia Common Stock.

3.3.1CB to Make Merger Consideration Available. Prior to the Effective Time, CB shall deposit, or shall cause to be deposited, with the Exchange Agent for the benefit of the holders of FedFirstFirst West Virginia Common Stock, for exchange in accordance with this Section 3.3, an aggregate amount of cash sufficient to pay the aggregate amount of cash payable pursuant to this Article III and shall instruct the Exchange Agent to issue such cash and shares of CB Common Stock for exchange in accordance with this Section 3.3 (such cash and shares of CB Common Stock, together with any dividends or distributions with respect thereto (without any interest thereon) being hereinafter referred to as the “Exchange Fund”).

3.3.2Exchange of Certificates. CB shall take all steps necessary to cause the Exchange Agent, not later than five (5) Business Days after the Effective Time, to mail to each holder of a Certificate or Certificates who did not previously submit their Certificates with a completed Election Form a form letter of transmittal for return to the Exchange Agent and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration and cash in lieu of fractional shares into which the FedFirstFirst West Virginia Common Stock represented by such Certificates shall have been converted as a result of the Merger, if any. The letter of transmittal shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent. Upon proper surrender of a Certificate for exchange and cancellation to the Exchange Agent, together with a properly completed letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive the Merger Consideration in exchange therefor the Merger Consideration and the Certificate so surrendered shall be cancelled. No interest will be paid or accrued on the Merger Consideration or any cash payable in lieu of fractional shares or any unpaid dividends and distributions, if any, payable to holders of Certificates.

3.3.3Rights of Certificate Holders after the Effective Time. The holder of a Certificate that prior to the Merger represented issued and outstanding FedFirstFirst West Virginia Common Stock shall have no rights, after the Effective Time, with respect to such FedFirstFirst West Virginia Common Stock except to surrender the Certificate in exchange for the Merger Consideration as provided in this Agreement. No dividends or other distributions declared after the Effective Time with respect to CB Common Stock shall be paid to the holder of any unsurrendered Certificate until the holder thereof shall surrender such Certificate in accordance with this Section 3.3. After the surrender of a Certificate in accordance with this Section 3.3, the record holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of CB Common Stock represented by such Certificate.

3.3.4Surrender by Persons Other than Record Holders. If the Person surrendering a Certificate and signing the accompanying letter of transmittal is not the record holder thereof, then it shall be a condition of the payment of the Merger Consideration that: (i) such Certificate is properly endorsed to such Person or is accompanied by appropriate stock powers, in either case signed exactly as the name of the record holder appears on such Certificate, and is otherwise in proper form for transfer, or is accompanied by appropriate evidence of the authority of the Person surrendering such Certificate and signing the letter of transmittal to do so on behalf of the record holder; and (ii) the Person requesting such exchange shall pay to the Exchange Agent in advance any transfer or other similar taxes required by reason of the payment to a Person other than the registered holder of the Certificate surrendered, or required for any other reason, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable.

3.3.5Closing of Transfer Books. From and after the Closing Date, there shall be no transfers on the stock transfer books of FedFirstFirst West Virginia of the FedFirstFirst West Virginia Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be exchanged for the Merger Consideration and canceled as provided in this Section 3.3.

3.3.6Return of Exchange Fund. At any time following the nine (9)twelve (12) month period after the Effective Time, CB shall be entitled to require the Exchange Agent to deliver to it any portion of the Exchange Fund whichthat had been made available to the Exchange Agent and not disbursed to holders of Certificates (including, without limitation, all interest and other income received by the Exchange Agent in respect of all funds made available to it), and thereafter such holders shall be entitled to look to CB (subject to abandoned property, escheat and other similar laws) with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither CB nor the Exchange Agent shall be liable to any holder of a Certificate for any Merger Consideration delivered in respect of such Certificate to a public official pursuant to any abandoned property, escheat or other similar law.

3.3.7Lost, Stolen or Destroyed Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and the posting by such Person of a bond in such amount as the Exchange Agent may reasonably direct as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof.

3.3.8Withholding. CB or the Exchange Agent will be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement or the transactions contemplated hereby to any holder of FedFirstFirst West Virginia Common Stock such amounts as CB (or any Affiliate thereof) or the Exchange Agent are required to deduct and withhold with respect to the making of such payment under the Code, or any applicable provision of U.S. federal, state, local ornon-U.S. tax law. To the extent that such amounts are properly withheld by CB or the Exchange Agent, such withheld amounts will be treated for all

purposes of this Agreement as having been paid to the holder of the FedFirstFirst West Virginia Common Stock in respect of whom such deduction and withholding were made by CB or the Exchange Agent.

3.4Stock Options and Other Stock-Based Awards.

(a)FedFirst Disclosure Schedule 3.4(a) lists each plan or arrangement sponsored by FedFirst under which stock options, restricted stock and other stock-based awards are granted (the“FedFirst Stock Plans”).

(b) Each stock option issued pursuant to a FedFirst Stock Plan as of the date hereof (a“FedFirst Stock Option”), whether vested or unvested, that is outstanding and unexercised immediately before the Effective Time shall be cancelled and converted into the right to receive from FedFirst immediately prior to the Effective Time a cash payment in an amount, subject to applicable Tax withholdings, equal to the product of (x) the number of shares of FedFirst Common Stock subject to the FedFirst Stock Option and (y) the amount by which the Cash Consideration exceeds the exercise price of the FedFirst Stock Option (the “Cash Option Payment”). If the exercise price of a FedFirst Stock Option exceeds the Cash Consideration, then at the Effective Time such FedFirst Stock Option shall be cancelled without any payment made in exchange therefor. Prior to the Effective Time, FedFirst shall take all actions as necessary to give effect to the transactions contemplated by this Section 3.4(b), including, without limitation, obtaining written consent from each option holder to the cancellation of the FedFirst Stock Options in exchange for the Cash Option Payment.

(c) Each restricted stock award issued pursuant to a FedFirst Stock Plan as of the date hereof (“FedFirst Restricted Stock”) that is outstanding immediately before the Effective Time shall vest in full and the restrictions thereon shall lapse, and, as of the Effective Time, each share of FedFirst Common Stock that was formerly FedFirst Restricted Stock shall be entitled to receive the Stock Consideration in accordance with Section 3.1.3.

3.5Reservation of Shares.

CB shall reserve for issuance a sufficient number of shares of the CB CommonCBCommon Stock for the purpose of issuing shares of CB Common Stock to the FedFirstFirst West Virginia stockholders in accordance with this Article III.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF FEDFIRSTFIRST WEST VIRGINIA

FedFirstFirst West Virginia represents and warrants to CB as set forth in this Article IV, subject to the standard set forth in Section 4.1 and except as (i) set forth in the FedFirstFirst West Virginia Disclosure Schedule delivered by FedFirstFirst West Virginia to CB on the date hereof, or (ii) disclosed in any report, schedule, form or other document filed with the SEC by FedFirst prior to the date hereof and on or after the date on which FedFirst filed with the SEC its annual report on Form 10-K for the year ended December 31, 2013,provided,however, that disclosure in any section of such FedFirstFirst West Virginia Disclosure Schedule shall apply only to the indicated Section of this Agreement except to the extent that it is reasonably apparent that such disclosure is relevant to another section of this Agreement. FedFirstFirst West Virginia has made a good faith, diligent effort to ensure that the disclosure on each schedule of the FedFirstFirst West Virginia Disclosure Schedule corresponds to the section referenced herein. References to the Knowledge of FedFirstFirst West Virginia shall include the Knowledge of the FedFirstFirst West Virginia Subsidiaries.

4.1Standard.

Except as set forth in the following sentence, no representation or warranty of FedFirstFirst West Virginia contained in this Article IV shall be deemed untrue or incorrect, and FedFirstFirst West Virginia shall not be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, circumstance or event unless such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with any paragraph of this Article IV, has had or reasonably would be expected to have a Material Adverse Effect, disregarding for these purposes (x) any qualification or exception for, or reference to, materiality in any such representation or warranty and (y) any use of the terms “material,” “materially,” “in all material respects,” “Material Adverse Effect” or similar terms or phrases in any such representation or warranty. The foregoing standard shall not apply to representations and warranties contained in Sections 4.2 (other than Sections 4.2.3, 4.2.4, 4.2.5 and the last sentence of each of Sections 4.2.1 and 4.2.2), or 4.4.1, 4.4.2(i) and 4.3,(ii), 4.14, 4.19 and 4.21, which shall be true and correct in all material respects, and in Section 4.3, which shall be true in all respects.

4.2Organization.

4.2.1    FedFirstFirst West Virginia is a corporation duly organized and validly existing and in good standing under the laws of the State of Maryland,West Virginia, and is duly registered as a savings and loanbank holding company under the HOLA. FedFirstBHCA. First West Virginia has full corporate power and authority to carry on its business as now conducted. FedFirstFirst West Virginia is duly licensed or qualified to do business in the states of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires such qualification.

4.2.2    FFSBProgressive Bank is a federally chartered savings banknational association duly organized and validly existing under the laws of the United States. The deposits in FFSBProgressive Bank are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid by FFSBProgressive Bank when due. FFSBProgressive Bank is a member in good standing of the FHLB and owns the requisite amount of FHLB stock.

4.2.3FedFirstFirst West Virginia Disclosure Schedule 4.2.3 sets forth each FedFirstFirst West Virginia Subsidiary and its jurisdiction of incorporation or organization. Each FedFirstFirst West Virginia Subsidiary (other than FFSB)Progressive Bank) is a corporation, limited liability company or other legal entity as set forth onFedFirstFirst West Virginia Disclosure Schedule 4.2.3, duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each FedFirstFirst West Virginia Subsidiary is duly licensed or qualified to do business in the states of the United States and foreign jurisdictions where its ownership or leasing of property or conduct of its business requires such qualification.

4.2.4    The respective minute books of FedFirst, FFSBFirst West Virginia, Progressive Bank and each other FedFirstFirst West Virginia Subsidiary accurately record all corporate actions of their respective stockholders and Boards of Directors (including committees).

4.2.5    Prior to the date of this Agreement, FedFirstFirst West Virginia has made available to CB true and correct copies of the articles of incorporation or articles of association, as applicable, and bylaws or other governing documents of FedFirst, FFSBFirst West Virginia, Progressive Bank and each other FedFirstFirst West Virginia Subsidiary.

4.3Capitalization.

4.3.1    The authorized capital stock of FedFirstFirst West Virginia consists of (i) 20,000,0002,000,000 shares of FedFirstFirst West Virginia Common Stock and 10,000,000 shares of preferred stock, $0.01 par value (“FedFirst Preferred Stock” and collectively with FedFirst Common Stock,“FedFirst Stock”).Stock. As of the date hereof, there are 2,315,8101,728,730 shares of FedFirstFirst West Virginia Common Stock validly issued and outstanding, fully paid andnon-assessable and free of preemptive rights and (ii) no10,000 shares of FedFirstFirst West Virginia Common Stock held by FedFirstFirst West Virginia as Treasury Stock, and (iii) no shares of FedFirst Preferred Stock outstanding. FedFirstStock. First West Virginia does not own, of record or beneficially, any shares of FedFirstFirst West Virginia Common Stock whichthat are not Treasury Stock. Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has or is bound by any Rights or other arrangements of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on, any capital stock of FedFirst,First West Virginia, or any other security of FedFirstFirst West Virginia or a FedFirstFirst West Virginia Subsidiary or any securities representing the right to vote, purchase or otherwise receive any capital stock of FedFirstFirst West Virginia or a FedFirstFirst West Virginia Subsidiary or any other security of FedFirstFirst West Virginia or any FedFirst Subsidiary, other than shares of FedFirst Common Stock underlying the FedFirst Stock Options and FedFirst Restricted Stock.FedFirst Disclosure Schedule 4.3.1 sets forth: (x) the name of each holder of a FedFirst Stock Option, identifying the number of shares each such individual may acquire pursuant to the exercise of such options, the grant, vesting schedule and expiration dates, and the exercise price relating to the options held, and (y) the name of each holder of FedFirst Restricted Stock, identifying the number of shares each such individual holds and the grant and vesting dates. All shares of FedFirst Common Stock issuable pursuant to the FedFirst Stock Plans are or will be duly authorized, validly issued, fully paid and non-assessable when issued upon the terms and conditions specified in the instruments pursuant to which they are issuable.First West Virginia Subsidiary.

4.3.2    FedFirstFirst West Virginia owns all of the capital stock of each FedFirstFirst West Virginia Subsidiary, other than EU, free and clear of all liens, security interests, pledges, charges, encumbrances, agreements and restrictions of any kind or nature. Except for the FedFirstFirst West Virginia Subsidiaries, FedFirstFirst West Virginia does not possess, directly or indirectly, any equity interest in any corporate or other legal entity, except for equity interests held in the investment portfolios of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary, including stock in the

FHLB (which as to any one issuer, dodoes not exceed five percent (5%) of such issuer’s outstanding equity securities) and equity interests held in connection with the lending activities of FFSB, including stock in the FHLB.Progressive Bank.

4.3.3    To FedFirst’sExcept as disclosed onFirst West Virginia Disclosure Schedule 4.3.3, to First West Virginia’s Knowledge, except as set forth in Schedules 13D or 13G filed with the SEC, as of the date hereof no Person is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of five percent (5%) or more of the outstanding shares of FedFirstFirst West Virginia Common Stock.

4.3.4    No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which FedFirst’sFirst West Virginia’s stockholders may vote have been issued by FedFirstFirst West Virginia and are outstanding.

4.4Authority; No Violation.

4.4.1    FedFirstFirst West Virginia has full corporate power and authority to execute and deliver this Agreement and, subject to the receipt of the Regulatory Approvals and the approval of this Agreement by FedFirst’sFirst West Virginia’s stockholders (the “FedFirstFirst West Virginia Stockholder Approval”), to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by FedFirstFirst West Virginia and the completion by FedFirstFirst West Virginia of the transactions contemplated hereby, including the Merger, have been duly and validly approved by the Board of Directors of FedFirst.First West Virginia. This Agreement has been duly and validly executed and delivered by FedFirst,First West Virginia, and subject to FedFirstFirst West Virginia Stockholder Approval, the CB Stockholder Approval and the receipt of the Regulatory Approvals and assuming due and valid execution and delivery of this Agreement by CB, constitutes the valid and binding obligation of FedFirst,First West Virginia, enforceable against FedFirstFirst West Virginia in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity.

4.4.2    Neither the execution and delivery of this Agreement by FedFirst,First West Virginia, nor the consummation of the transactions contemplated hereby, nor compliance by FedFirstFirst West Virginia with the terms and provisions hereof will (i) conflict with or result in a breach of any provision of the articles of incorporation or articles of association, as applicable, and bylaws of FedFirstFirst West Virginia or FFSB;Progressive Bank; (ii) subject to receipt of all Regulatory Approvals, violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to FedFirstFirst West Virginia or FFSBProgressive Bank or any of their respective properties or assets; or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which,that, with notice or lapse of time, or both, would constitute a default) under, result in the termination or amendment of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of FedFirstFirst West Virginia or FFSBProgressive Bank under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other investment or obligation to which FedFirstFirst West Virginia or FFSBProgressive Bank is a party, or by which they or any of their respective properties or assets may be bound or affected.

4.5Consents.

Except as set forth onFirst West Virginia Disclosure Schedule 4.5 and for (a) the receipt of the Regulatory Approvals and compliance with any conditions contained therein, (b) compliance with applicable requirements of the Securities Act, the Exchange Act and state securities or “blue sky” laws, (c) the filing of the articles of merger with the Secretary of State of the Commonwealth of Pennsylvania and the articles of merger with the Maryland DepartmentSecretary of Assessments and Taxation,State of the State of West Virginia, and (d) the receipt of FedFirstCB Stockholder Approval and First West Virginia Stockholder Approval, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity or Bank Regulator are necessary, and to the Knowledge of FedFirst, no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with (x) the execution and delivery of this Agreement by FedFirst,First West Virginia, the completion by FedFirstFirst West Virginia of the Merger and the performance by FedFirstFirst West Virginia of its obligations hereunder or (y) the execution and delivery of the agreement and plan of merger in respect of the Bank Merger and the completion of the Bank Merger. FedFirstFirst West Virginia has no reason to believe that (i) any Regulatory Approvals or other required consents or approvals will not be received or will include the imposition of any condition (financial or otherwise) or requirement that could reasonably be expected by FedFirstFirst West Virginia to result in a Material Adverse Effect on FedFirstFirst West Virginia and FFSB,Progressive Bank, taken as a whole, or CB and Community Bank, taken as a whole, or that (ii) any public body or authority having jurisdiction over the affairs of FedFirstFirst West Virginia or FFSB,Progressive Bank, the consent or approval of which is not required or pursuant to the rules of which a filing is not required, will object to the completion of the transactions contemplated by this Agreement.

4.6Financial Statements.

4.6.1    The FedFirstFirst West Virginia Regulatory Reports have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such reports.

4.6.2    FedFirstFirst West Virginia has previously made available to CB the FedFirstFirst West Virginia Financial Statements. The FedFirstFirst West Virginia Financial Statements fairly present in each case in all material respects (subject in the case of the unaudited interim statements to normalyear-end adjustments) the consolidated financial position, results of operations and cash flows of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries as of and for the respective periods ending on the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto, or in the case of unaudited statements, as permitted by Form 10-Q.GAAP.

4.6.3    At the date of the most recent consolidated statement of financial conditionbalance sheet included in the FedFirstFirst West Virginia Financial Statements or in the FedFirstFirst West Virginia Regulatory Reports, FedFirstFirst West Virginia did not have any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such FedFirstFirst West Virginia Financial Statements or in the FedFirstFirst West Virginia Regulatory Reports or in the footnotes thereto whichthat are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies whichthat are not material, individually or in the aggregate, or whichthat are incurred in the ordinary course of business, consistent with past practice, and subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.

4.7Taxes.

FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries are members of the same affiliated group within the meaning of Section 1504(a) of the Code. FedFirst,First West Virginia, on behalf of itself and the FedFirstFirst West Virginia Subsidiaries, has timely filed or caused to be filed all Tax Returns (including, but not limited to, those filed on a consolidated, combined or unitary basis) required to have been filed by FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries prior to the date hereof, or requests for extensions to file such returns and reports have been timely filed. All such Tax Returns are true, correct, and complete in all material respects. FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries have timely paid or, prior to the Effective Time will pay, all Taxes, whether or not shown on such returns or reports, due or claimed to be due to any Governmental Entity prior to the Effective Time other than Taxes whichthat are being contested in good faith. FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries have declared on their Tax Returns all positions taken therein that could give rise to a substantial underpayment of United States Federal Income Tax within the meaning of Section 6662 of the Code (or any corresponding provision of state or local laws). The accrued but unpaid Taxes of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries did not, as of the most recent FedFirstFirst West Virginia Financial Statements, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the most recent FedFirstFirst West Virginia balance sheet (rather than in any notes thereto). FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries are subject to Tax audits in the ordinary course of business. FedFirstFirst West Virginia management does not believe that an adverse resolution to any of such audits of which it has Knowledge would be reasonably likely to have a Material Adverse Effect on FedFirst. FedFirstFirst West Virginia. First West Virginia and the FedFirstFirst West Virginia Subsidiaries have not been notified in writing by any jurisdiction that the jurisdiction believes that FedFirstFirst West Virginia or any of the FedFirstFirst West Virginia Subsidiaries were required to file any Tax Return in such jurisdiction that was not filed.

Neither FedFirstFirst West Virginia nor any of the FedFirstFirst West Virginia Subsidiaries: (i) has been a member of a group with which they have filed or been included in a combined, consolidated or unitary income Tax Return other than a group the common parent of which was FedFirst;First West Virginia; or (ii) has any liability for the Taxes of any Person (other than FedFirstFirst West Virginia or any of the FedFirstFirst West Virginia Subsidiaries) under Treas. Reg.1.1502-6 (or any similar provision of state, local, ornon-U.S. law), as a transferee or successor, by contract, or otherwise. As of the date hereof, all deficiencies proposed in writing as a result of any audits have been paid or settled. There are no written claims or assessments pending against FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary for any alleged deficiency in any Tax, and neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has been notified in writing of any proposed Tax claims or assessments against FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary. FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries each have duly and timely withheld, collected and paid over to the appropriate taxing authority all amounts required to be so withheld and paid under all applicable laws, and have duly and timely filed all Tax Returns with respect to such withheld Taxes, within the time prescribed under any applicable law. FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries have delivered to CB true and complete copies of all Tax Returns of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries for taxable periods ending on or after

December 31, 2010.2014. Neither FedFirstFirst West Virginia nor any of the FedFirstFirst West Virginia Subsidiaries is or has been a party to any “reportable transaction,” as defined in Section 6707A(c)(1) of the Code and Treas.Reg. 1.6011-4(b). Neither FedFirstFirst West Virginia nor any of the FedFirstFirst West Virginia Subsidiaries has distributed stock of another Person, nor has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code. Neither FedFirstFirst West Virginia nor any of the FedFirstFirst West Virginia Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

4.8No Material Adverse Effect.

Since December 31, 2013,2016, to FedFirst’sFirst West Virginia’s Knowledge, no event has occurred or circumstance arisen that has had or reasonably would be expected to have a Material Adverse Effect on FedFirst.First West Virginia.

4.9Material Contracts; Leases; Defaults.

4.9.1    Except as set forth onFedFirstFirst West Virginia Disclosure Schedule 4.9.1, neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary is a party to or subject to: (i) any employment, consulting or severance contract or arrangement with any past or present officer, director, employee or consultant of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary, except for “at will” arrangements; (ii) any plan, arrangement or contract providing for bonuses, pensions, options, deferred compensation, retirement payments, profit sharing or similar arrangements for or with any past or present officers, directors, employees or consultants of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary; (iii) any agreement which by its terms limits or affects the payment of dividends by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary; (iv) any instrument evidencing or related to indebtedness for borrowed money in excess of $500,000, whether directly or indirectly, by way of purchase money obligation, conditional sale, lease purchase, guaranty or otherwise, in respect of which FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary is an obligor to any Person, which instrument evidences or relates to indebtedness other than deposits, FHLB advances with a term to maturity not in excess of one (1) year, repurchase agreements, bankers’ acceptances, and transactions in “federal funds” or whichthat contains financial covenants or othernon-customary restrictions (other than those relating to the payment of principal and interest when due) whichthat would be applicable on or after the Closing Date to FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary; (v) any other agreement, written or oral, whichthat is not terminable without cause on sixty (60) days’ notice or less without penalty or payment, or that obligates FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary for the payment of more than $30,000 annually or for the payment of more than $50,000 over its remaining term; or (vi) any agreement (other than this Agreement), contract, arrangement, commitment or understanding (whether written or oral) that materially restricts or limits the conduct of business by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary.

4.9.2    Each real estate lease that will require the consent of the lessor or its agent as a result of the Merger or the Bank Merger by virtue of the terms of any such lease is listed onFedFirstFirst West Virginia Disclosure Schedule 4.9.2 identifying the section of the lease that

contains such prohibition or restriction. Subject to any consents that may be required as a result of the transactions contemplated by this Agreement, to FedFirst’sFirst West Virginia’s Knowledge, neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary is in material default under any material contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which it is a party, by which its assets, business, or operations may be bound or affected, or under which it or its assets, business, or operations receive benefits, and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default.

4.9.3    True and correct copies of agreements, contracts, arrangements and instruments referred to in Section 4.9.1 and 4.9.2 have been made available to CB on or before the date hereof, and are in full force and effect on the date hereof. Except as set forth onFedFirst Disclosure Schedule 4.9.3, noNo such agreement, plan, contract, or arrangement: (i) provides for acceleration of the vesting of benefits or payments due thereunder upon the occurrence of a change in

ownership or control of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary or upon the occurrence of a subsequent event; (ii) requires FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary to provide a benefit in the form of FedFirstFirst West Virginia Common Stock or determined by reference to the value of FedFirstFirst West Virginia Common Stock; or (iii) contains provisions whichthat permit an employee, director or independent contractor to terminate such agreement or arrangement without cause and continue to accrue future benefits thereunder.

4.9.4    Since December 31, 2013,2016, through and including the date of this Agreement, except as set forth onFedFirstFirst West Virginia Disclosure Schedule 4.9.4, neither FedFirst orFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has: (i) except for (A) normal increases for employees (other than officers subject to the reporting requirements of Section 16(a) of the Exchange Act)executive officers) made in the ordinary course of business consistent with past practice, or (B) as required by applicable law, increased wages, salaries, compensation, pension or other fringe benefits or perquisites payable to any executive officer, employee or director, granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay (except as required under the terms of agreements or severance plans, and as previously disclosed by FedFirst)First West Virginia), or paid any bonus other than the customaryyear-end bonuses in amounts consistent with past practice; (ii) granted any options or warrants to purchase shares of FedFirstFirst West Virginia Common Stock or shares of capital stock of any FedFirstFirst West Virginia Subsidiary, or any right to acquire any shares of capital stock to any executive officer, director or employee of FedFirstFirst West Virginia or any FedFirst Subsidiary, other than grants to employees (other than officers subject to the reporting requirements of Section 16(a) of the Exchange Act) made in the ordinary course of business consistent with past practice under the FedFirst Stock Plans;First West Virginia Subsidiary; (iii) increased or established any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards), stock purchase or other employee benefit plan; (iv) made any material election for federal or state income tax purposes; (v) made any material change in the credit policies or procedures of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary, the effect of which was or is to make any such policy or procedure less restrictive in any material respect; (vi) made any material acquisition or disposition of any assets or properties, or any contract for any such acquisition or disposition entered into other than loans and loan commitments; (vii) entered into any lease of real or personal property requiring annual payments in excess of $50,000, other than in connection with foreclosed property or in the ordinary course of business consistent with past practice; (viii) changed any accounting methods, principles or practices of FedFirstFirst West Virginia or any FedFirst First West Virginia

Subsidiary affecting its assets, liabilities or businesses, including any reserving, renewal or residual method, practice or policy; or (ix) suffered any strike, work stoppage, slow-down, or other labor disturbance.

4.10Ownership of Property; Insurance Coverage.

4.10.1    FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary has good and, as to real property, marketable title to all assets and properties owned by FedFirstFirst West Virginia or such FedFirstFirst West Virginia Subsidiary, as applicable, in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent consolidated statement of financial conditionbalance sheet contained in the FedFirstFirst West Virginia Financial Statements or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such consolidated statement of financial condition)balance sheet), subject to no encumbrances, liens, mortgages, security interests or pledges, except: (i) those items whichthat secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to FHLB, inter-bank credit facilities, reverse repurchase agreements or any transaction by a FedFirstFirst West Virginia Subsidiary acting in a fiduciary capacity; and (ii) statutory liens for amounts not yet delinquent or whichthat are being contested in good faith. FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries, as lessee, have the right under valid and existing leases of real and personal properties used by FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them. Such existing leases and commitments to lease constitute or will constitute operating leases for both tax and financial accounting purposes and the lease expense and minimum rental commitments with respect to such leases and lease commitments are as disclosed in all material respects in the notes to the FedFirstFirst West Virginia Financial Statements.

4.10.2    With respect to all material agreements pursuant to which FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary has purchased securities subject to an agreement to resell, if any, FedFirstFirst West Virginia or such FedFirstFirst West Virginia Subsidiary, as the case may be, has a lien or security interest (which to FedFirst’sFirst West Virginia’s Knowledge is a valid, perfected first lien) in the securities or other collateral securing the repurchase agreement, and the value of such collateral equals or exceeds the amount of the debt secured thereby.

4.10.3    FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary currently maintain insurance considered by each of them to be reasonable for their respective operations. Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has received notice from any insurance carrier on or before the date hereof that: (i) such insurance will be canceled or that coverage thereunder will

be reduced or eliminated; or (ii) premium costs with respect to such policies of insurance will be substantially increased. Except as listed onFedFirst Disclosure Schedule 4.10.3, thereThere are presently no claims pending under such policies of insurance and no notices of claim have been given by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary under such policies. All such insurance is valid and enforceable and in full force and effect (other than insurance that expires in accordance with its terms), and within the last three (3) years FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any

claims submitted under any of its insurance policies.FedFirstFirst West Virginia Disclosure Schedule 4.10.3 identifies all policies of insurance maintained by FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary, including the name of the insurer, the policy number, the type of policy and any applicable deductibles, as well as the other matters required to be disclosed under this Section 4.10.3. FedFirstFirst West Virginia has made available to CB copies of all of the policies listed onFedFirstFirst West Virginia Disclosure Schedule 4.10.3.

4.11Legal Proceedings.

Except as disclosed onFedFirstFirst West Virginia Disclosure Schedule 4.11, neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary is a party to any, and there are no pending or, to FedFirst’sFirst West Virginia’s Knowledge, threatened, legal, administrative, arbitration or other proceedings, claims (whether asserted or unasserted), actions or governmental investigations or inquiries of any nature, (i) against FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary, (ii) to which FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary’s assets are or may be subject, (iii) challenging the validity or propriety of any of the transactions contemplated by this Agreement, or (iv) whichthat reasonably could be expected to adversely affect the ability of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary to perform under this Agreement.

4.12Compliance with Applicable Law.

Except as set forth onFedFirst Disclosure Schedule 4.12 and in Section 4.15:

4.12.1    To FedFirst’sFirst West Virginia’s Knowledge, FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, its conduct of business and its relationship with its employees, including, without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, the Equal Credit Opportunity Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Consumer Credit Protection Act, the Fair Credit Reporting Act, the Fair Debt Collections Act, the Fair Housing Act, the Community Reinvestment Act of 1977 (“CRA”), Regulation O of the Federal Reserve Board, the Home Mortgage Disclosure Act, and all other applicable fair lending laws and other laws relating to discriminatory business practices, and neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has received any written notice to the contrary.

4.12.2    FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities and Bank Regulators that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to the Knowledge of FedFirst,First West Virginia, no suspension or cancellation of any such permit, license, certificate, order or approval is threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining the Regulatory Approvals.

4.12.3    Since January 1, 2011,2014, neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has received any written notification or any other communication from

any Bank Regulator (i) asserting that FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary is not in material compliance with any of the statutes, regulations or ordinances whichthat such Bank Regulator enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization; (iii) requiring or threatening to require FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary, or indicating that FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement with any federal or state governmental agency or authority whichthat is charged with the supervision or regulation of banks, or engages in the insurance of bank deposits, restricting or limiting, or purporting to restrict or limit the operations of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit the operations of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter referred to as a “Regulatory Agreement”). Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has consented to or entered into any Regulatory Agreement that is currently in effect.

The most recent regulatory rating given to Progressive Bank as to compliance with the CRA is “Satisfactory” or better.

4.13Employee Benefit Plans.

4.13.1FedFirstFirst West Virginia Disclosure Schedule 4.13.1 contains a list of all written and unwritten pension, retirement, profit-sharing, thrift, savings, deferred compensation, stock option, employee stock ownership, employee stock purchase, restricted stock, severance pay, retention, vacation, bonus or other incentive plans, all employment, change in control, consulting, severance and retention agreements, all other written employee programs, arrangements or agreements, all medical, vision, dental, disability, life insurance, workers’ compensation, employee assistance or other health or welfare plans (including paidtime-off policies and any other material benefit policies and procedures), and all other employee benefit or fringe benefit plans, including “employee benefit plans” as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or contributed to by, FedFirst,First West Virginia, any FedFirstFirst West Virginia Subsidiary or any of itstheir ERISA Affiliates for the benefit of employees, former employees, retirees (or the dependents, including spouses, of the foregoing), directors, independent contractors or other service providers to FedFirstFirst West Virginia or any First West Virginia Subsidiary and under which employees, former employees, retirees, dependents, spouses, directors, or other service providers of FedFirstFirst West Virginia are eligible to participate (collectively, the “FedFirstFirst West Virginia Benefit Plans”). Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has any written or oral commitment to create any additional FedFirstFirst West Virginia Benefit Plan or to materially modify, change or renew any existing FedFirstFirst West Virginia Benefit Plan (any modification or change that increases the cost of such plan would be deemed material), except as required to maintain the qualified status thereof. FedFirst has made availablethereof or to CB truecomply with changes to applicable law including, but not limited to ERISA and correct copies of each FedFirst Benefit Plan.regulations and guidance issued pursuant thereto.

4.13.2    All FedFirstExcept as set forth onFirst West Virginia Disclosure Schedule 4.13.2, all First West Virginia Benefit Plans are in material compliance with (and have been managed and administrated in accordance with) the applicable terms of ERISA, the Code and any other applicable laws. Except as set forth onFedFirst Disclosure Schedule 4.13.2laws, including but not limited to the Age Discrimination in Employment Act, the

notice and continuation requirements of Parts 6 and 7 of Subtitle B of Title I of ERISA and Section 4980B of the Code (“COBRA”), each FedFirstand the regulations thereunder, HIPAA and ACA and any regulations promulgated thereunder, and all material filings, disclosures and notices required by ERISA, the Code, the Age Discrimination in Employment Act, COBRA, HIPAA and ACA and any other applicable law have been timely made or any interest, fines, penalties or other impositions for late filings have been paid in full. Each First West Virginia Benefit Plan governed by ERISA that is intended to be a qualified retirement plan under Section 401(a) of the Code has either: (i) received a favorable determination letter from the IRS (and FedFirst is not aware of anythere are no circumstances likely to result in revocation of any such favorable determination letter) or timely application has been made therefor; or (ii) is maintained under a prototype plan whichthat has been approved by the IRS and is entitled to rely upon the IRS National Office opinion letter issued to the prototype plan sponsor. To the Knowledge of FedFirst,First West Virginia, there exists no fact whichthat would adversely affect the qualification of any of the FedFirstFirst West Virginia Benefit Plans intended to be qualified under Section 401(a) of the Code, or any threatened or pending claim against any of the FedFirstFirst West Virginia Benefit Plans or their fiduciaries by any participant, beneficiary or Governmental Entity (other than routine claims for benefits). Neither FedFirstTo First West Virginia’s Knowledge, neither First West Virginia nor any FedFirstFirst West Virginia Subsidiary has engaged in a transaction, or omitted to take any action with respect to any FedFirstFirst West Virginia Benefit Plan that would reasonably be expected to subject FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary to a material unpaid tax or penalty imposed by Chapter 43 of the Code or Sections 409 or 502 of ERISA.

4.13.3    No FedFirstFirst West Virginia Benefit Plan is a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which FedFirstFirst West Virginia or any ERISA Affiliate could incur liability under Section 4063 or 4064 of ERISA or a pension plan maintained by more than one employer as described in Section 413(c) of the Code. Neither FedFirstFirst West Virginia nor any ERISA Affiliate hashave ever maintained or contributed to any FedFirstFirst West Virginia Benefit Plan that is or was subject to Title IV of ERISA, Section 412 of the Code, Section 302 of ERISA or is a multiemployer plan (as defined in Section 3(37) of ERISA) and neither FedFirst nor any ERISA Affiliate, nor any trust created thereunder, nor any trustee or administrator thereof, could reasonably be expected to be subject to either a civil liability or penalty pursuant to Section 409 or 502 of ERISA or a tax imposed pursuant to Chapter 43 of the Code..

4.13.4    All material contributions required to be made under the terms of any FedFirstFirst West Virginia Benefit Plan have been timely made, and all anticipated contributions and funding obligations are accrued on FedFirst’sFirst West Virginia’s consolidated financial statements to the extent required by GAAP and Section 412 of the Code. FedFirstGAAP. First West Virginia and each FedFirstFirst West Virginia Subsidiary has expensed and accrued as a liability the present value of future benefits under each applicable FedFirstFirst West Virginia Benefit Plan for financial reporting purposes to the extent required by GAAP.

4.13.5    FedFirst has complied in all material respects with the notice and continuation requirements of Parts 6 and 7 of Subtitle B of Title I of ERISA and Section 4980B of the Code (“COBRA”), and the regulations thereunder. All reports, statements, returns and other information required to be furnished or filed with respect to FedFirst Benefit Plans have been timely furnished, filed or both in accordance with Sections 101 through 105 of ERISA and Sections 6057 through 6059 of the Code, and they are true, correct and complete. To FedFirst’s Knowledge, records with respect to FedFirst Benefit Plans have been maintained in compliance with Section 107 of ERISA. To FedFirst’sFirst West Virginia’s Knowledge, neither FedFirstFirst West Virginia nor any otherFirst West Virginia Subsidiary, nor any director or employee of First West Virginia or any First West Virginia Subsidiary who is a fiduciary (as that term is defined in Section 3(21) of ERISA) with respect to any of FedFirstFirst West Virginia Benefit Plans has any liability for any breach of any fiduciary duties under Sections 404, 405 or 409 of ERISA. No FedFirst Benefit Plan fails to meet the applicable requirements of Section 105(h)(2) of the Code (determined without regard to whether such FedFirst Benefit Plan is self-insured).

4.13.6    FedFirstWith respect to each First West Virginia Benefit Plan, if applicable, First West Virginia has furnished or otherwise made available to CB true and complete copies of: (i) the current plan documents, the most recent summary plan descriptions,description, current underlying participant distribution election forms, loan documents, loan amortization schedules and benefit schedules (as applicable) for each written FedFirstFirst West Virginia Benefit Plan;Plan, if any; (ii) a summary of each unwritten FedFirstFirst West Virginia Benefit Plan (if applicable);Plan; (iii) the annual report (Form 5500 series) for the three (3)two (2) most recent years for each FedFirst Benefit Plan (if applicable);years; (iv) the actuarial valuation reports and financial statements as of the most recently completed plan year for each FedFirstFirst West Virginia Benefit Plan, including the total accrued and vested liabilities, all contributions made by FedFirstFirst West Virginia and any FedFirstFirst West Virginia Subsidiary and assumptions on which the calculations are based; (v) all related trust agreements, insurance contracts or other funding agreements whichthat currently implement the FedFirstFirst West Virginia Benefit Plans (if applicable);Plans; (vi) the most recent IRS determination letter with respect to eachtax-qualified FedFirst First West Virginia Benefit Plan (or, for a FedFirstFirst West Virginia Benefit Plan maintained under apre-approved prototype or volume submitter plan, the IRS determinationadvisory letter issued on suchpre-approved plan); and (vii) all substantive correspondence relating to any liability of ornon-compliance relating to any FedFirstFirst West Virginia Benefit Plan addressed to or received from the IRS, the Department of Labor or any other Governmental Entity within the past three (3) years.

4.13.7    Except as set forthlisted onFedFirst First West Virginia Disclosure Schedule 4.13.7,, FedFirst First West Virginia has no liability for retiree health, life or disability insurance, or any retiree death benefits under any FedFirstFirst West Virginia Benefit Plan other than any benefits required under COBRA or similar state laws. There has been no communication to employees by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary that would reasonably be expected to promise or guarantee such employees retiree health, life or disability insurance, or any retiree death benefits.benefits, other than respecting the First West Virginia Benefit Plans listed on First West Virginia Disclosure Schedule 4.13.17.

4.13.8    Except as set forth onFedFirst First West Virginia Disclosure Schedule 4.13.8,, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will: (i) result in any payment (including severance)severance other than as provided pursuant to Sections 7.7.4 and 7.7.5) becoming due to any director or any employee of FedFirstFirst West Virginia from FedFirstFirst West Virginia under any FedFirstFirst West Virginia Benefit Plan; (ii) increase any benefits otherwise payable under any FedFirstFirst West Virginia Benefit Plan; or (iii) result in any acceleration of the time of payment or vesting of any such benefit. Except as set forth onFedFirst Disclosure Schedule 4.13.8, noNo payment whichthat in connection with the transactions contemplated by this Agreement is or may reasonably be expected to be made by, from or with respect to any FedFirstFirst West Virginia Benefit Plan, either alone or in conjunction with any other paymentpayments will or could properly be characterized as an “excess parachute payment” under Section 280G of the Code on which an excise tax under Section 4999 of the Code is payable or will or could, either individually or collectively, provide for any payment by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary that would not be deductible under Section 162(m) of the Code.

4.13.9FedFirstFirst West Virginia Disclosure Schedule 4.13.9 identifies each FedFirstFirst West Virginia Benefit Plan that provides for the deferral of compensation and may be subject to Section 409A of the Code (“FedFirst First West VirginiaNon-qualified Deferred Compensation Plan”) and the aggregate amounts deferred or accrued, if any, under each such FedFirst First West

VirginiaNon-qualified Deferred Compensation Plan as of March 31, 2014. Each FedFirst September 30, 2017. Except with respect to any action taken pursuant to Section 6.11.2, as to which no representation or warranty is made, each First West VirginiaNon-qualified Deferred Compensation Plan has been maintained and operated in compliance withis either (1) grandfathered under Section 409A of the Code, such that no penalties pursuant(2) exempt from Section 409A of the Code, or (3) subject to Section 409A, and if subject to Section 409A of the Code, may be imposed on participants in such plans. All FedFirst Stock Options havethen (i) no action or inaction has been granted with a per share exercise pricetaken or reference price at least equal toomitted by First West Virginia that would materially violate the fair market valueapplicable requirements of Section 409A of the underlying stock on the dateCode with respect to such First West Virginia Benefit Plan and (ii) no provision of grant, within the meaning ofsuchnon-grandfathered,non-exempt First West Virginia Benefit Plan is a document failure under Section 409A of the Code.

4.13.10    ThereExcept as set forth onFirst West Virginia Disclosure Schedule 4.13.10, there is not, and has not been, any trust or fund maintained by or contributed to by FedFirstFirst West Virginia or its employees to fund an employee benefit plan whichthat would constitute a Voluntary Employees’ Beneficiary Association or a “welfare benefit fund” within the meaning of Section 419(a) of the Code.

4.13.11    No claim, lawsuit, arbitration or other action has been asserted or instituted or, to the Knowledge of FedFirst,First West Virginia, has been threatened or is anticipated, against any FedFirstFirst West Virginia Benefit Plan (other than routine claims for benefits and appeals of such claims), FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary or any director, officer or employee thereof, with respect to any First West Virginia Benefit Plan, or any of the assets of any trust of any FedFirstFirst West Virginia Benefit Plan.

4.13.12FedFirst Disclosure Schedule 4.13.12 includes a schedule    There are no stock option or stock appreciation or similar rights, earned dividends or dividend equivalents, or shares of all termination benefits and related payments that would be payable to the individuals identified thereonrestricted stock, outstanding under any employment agreement, change in control agreement, severance arrangementsFirst West Virginia Benefit Plan or policies, supplemental executive retirement plans, deferred bonus plans, deferred compensation plans, salary continuation plans or any material compensation arrangement, or other pension benefit or welfare benefit plan maintained by FedFirst or any FedFirst Subsidiary for the benefit of officers, employees or directors of FedFirst or any FedFirst Subsidiary (the “Benefits Schedule”), assuming their employment or service is terminated without causeotherwise as of September 1, 2014 and the Effective Time occurs on such date and based on other assumptions specified in such schedule. No other individuals are entitled to benefits under any such plans.

4.13.13FedFirst Disclosure Schedule 4.13.13 includes the amendment adopted by FFSB to the FedFirst Severance Plan contemporaneously with the execution of this Agreement. Such amendment provides that any employee of

FedFirst or any FedFirst Subsidiary, other than an employee who is a party to an individual employment agreement or change in control agreement with FedFirst, FFSB and/or EU, whose employment is involuntarily terminated without cause within one year following the Effective Time, would receive a severance payment in an amount equal to two weeks of base salary or weekly wage rate then in effect for each completed year of service, subject to a minimum of four weeks and maximum of 26 weeks, and further subject to a minimum of 12 weeks if the employee has a job title of Assistant Vice President or higher with FedFirst or any FedFirst Subsidiary immediately prior to the Effective Time.hereof.

4.14Brokers, Finders and Financial Advisors.

Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary, nor any of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any such Person in connection with the transactions contemplated by this Agreement except for the retention of Mufson Howe HunterD.A. Davidson & Company LLCCo. by FedFirstFirst West Virginia and the fee payable pursuant thereto. A true and correct copy of the engagement agreement with Mufson Howe HunterD.A. Davidson & Company LLC,Co., setting forth the fee payable to Mufson Howe HunterD.A. Davidson & Company LLCCo. for its services rendered to FedFirstFirst West Virginia in connection with the Merger and transactions contemplated by this Agreement is attachedhas been delivered toFedFirst Disclosure Schedule 4.14. CB.

4.15Environmental Matters.

4.15.1    Except as set forth onFedFirst Disclosure Schedule 4.15, withWith respect to FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary:

(A)    To the Knowledge of FedFirst,First West Virginia, each of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries, and the FedFirstFirst West Virginia Loan Properties (as defined in Section 4.15.2) are, and have been, in material compliance with any Environmental Laws;

(B)    Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has received written notice in the last five (5) years that there is any material suit, claim, action, demand, executive or administrative order, directive, request for information, investigation or proceeding pending and, to the Knowledge of FedFirst,First West Virginia, no such action is threatened, before any court, governmental agency or other forum against them or any FedFirstFirst West Virginia Loan Property (x) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Materials of Environmental Concern, whether or not occurring at or on a site owned, leased or operated by FedFirst,First West Virginia, or any of the FedFirstFirst West Virginia Subsidiaries;

(C)    To the Knowledge of FedFirst,First West Virginia, the properties currently owned or operated by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary (including, without limitation, soil, groundwater or surface water on, or under the properties, and buildings thereon) are not contaminated with and do not otherwise contain any Materials of Environmental Concern other than in amounts permitted under applicable Environmental Law or whichthat are de minimis in nature and extent;

(D)    To the Knowledge of FedFirst,First West Virginia, there are no underground storage tanks on, in or under any properties owned or operated by FedFirstFirst West Virginia or any of the FedFirstFirst West Virginia Subsidiaries, and no underground storage tanks have been closed or removed from any properties owned or operated by FedFirstFirst West Virginia or any of the FedFirstFirst West Virginia Subsidiaries except as in compliance with Environmental Laws; and

(E)    During the period of (a) FedFirst’sFirst West Virginia’s or any of the FedFirstFirst West Virginia Subsidiaries’ ownership or operation of any of their respective current properties or (b) FedFirst’sFirst West Virginia’s or any of the FedFirstFirst West Virginia Subsidiaries’ participation in the management of any FedFirstFirst West Virginia Loan Property, to the Knowledge of FedFirst,First West Virginia, there has been no material contamination by or material release of Materials of Environmental Concern in, on, under or affecting such properties. To the Knowledge of FedFirst,First West Virginia, prior to the period of (x) FedFirst’sFirst West Virginia’s or any of the FedFirstFirst West Virginia Subsidiaries’ ownership or operation of any of their respective current properties or (y) FedFirst’sFirst West Virginia’s or any of the FedFirstFirst West Virginia Subsidiaries’ participation in the management of any FedFirstFirst West Virginia Loan Property, there was no material contamination by or release of Materials of Environmental Concern in, on, under or affecting such properties.

(F)    Neither FedFirstFirst West Virginia nor any other FedFirstFirst West Virginia Subsidiary has conducted any environmental studies during the past five (5) years (other than Phase I studies or Phase II studies whichthat did not indicate any contamination of the environment by Materials of Environmental Concern above reportable levels) with respect to any properties owned or leased by it or any of the FedFirstFirst West Virginia Subsidiaries, or with respect to any FedFirstFirst West Virginia Loan Property.

4.15.2    For purposes of this Section 4.15, “FedFirstFirst West Virginia Loan Property” means any property in which FedFirstFirst West Virginia or a FedFirstFirst West Virginia Subsidiary presently holds a direct or indirect security interest securing a loan or other extension of credit made by them, including through a participation interest in a loan or other extension of credit other than by FedFirstFirst West Virginia or a FedFirstFirst West Virginia Subsidiary.

4.16Loan Portfolio.

4.16.1    The allowancesallowance for loan losses reflected in the notes to FedFirst’sFirst West Virginia’s audited consolidated statements of financial condition at December 31, 20132016 and 20122015 were, and the allowance for loan losses shown in the notes to the unaudited consolidated financial statements for periods ending after December 31, 20132016 were, or will be, adequate, as of the dates thereof, under GAAP.

4.16.2FedFirstFirst West Virginia Disclosure Schedule 4.16.2 sets forth a listing, as of the most recently available date (and in no event earlier than March 31, 2014)September 30, 2017), by account, of: (A) each borrower, customer or other party whichthat has notified FFSBProgressive Bank during the past twelve (12) months of, or has asserted against FedFirstFirst West Virginia or FFSB,Progressive Bank, in each case in writing, any “lender liability” or similar claim, and, to the Knowledge of FedFirst,First West Virginia, each borrower, customer or other party whichthat has given FedFirstFirst West Virginia or FFSBProgressive Bank any oral notification of, or orally asserted to or against FedFirstFirst West Virginia or FFSB,Progressive Bank, any such claim; and (B) all loans, (1) that are contractually past due ninety (90) days or more in the payment of principal and/or interest, (2) that are onnon-accrual status, (3) that as of March 31, 2014September 30, 2017 are classified as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Watch list” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the obligor thereunder, (4) where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, or (5) where a specific reserve allocation exists in connection therewith; and (C) all other assets classified by FedFirstFirst West Virginia or FFSBProgressive Bank as real estate acquired through foreclosure or in lieu of foreclosure, includingin-substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure.

4.16.3    All loans receivable (including discounts) and accrued interest entered on the books of FedFirstFirst West Virginia and FFSBProgressive Bank arose out of bona fidearm’s-length transactions, were made for good and valuable consideration in the ordinary course of FedFirst’sFirst West Virginia’s and FFSB’sProgressive Bank’s respective businesses, and the notes or other evidences of indebtedness with respect to such loans (including discounts) are true and genuine and are what they purport to be. The loans, discounts and the accrued interest reflected on the books of FedFirstFirst West Virginia and FFSBProgressive Bank are subject to no defenses,set-offs or counterclaims (including, without limitation, those afforded by usury ortruth-in-lending laws), except as may be provided by bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by general principles of equity. All such loans are owned by FedFirstFirst West Virginia or FFSBProgressive Bank free and clear of any liens.

4.16.4    The notes and other evidences of indebtedness evidencing the loans described above, and all pledges, mortgages, deeds of trust and other collateral documents or security instruments relating thereto are valid, true and genuine, and what they purport to be.

4.17Related Party Transactions.

Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary is a party to any transaction (including any loan or other credit accommodation) with any Affiliate of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary, except as set forth onFedFirstFirst West Virginia Disclosure Schedule 4.17. All such transactions (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve more than the normal risk of collectability or present other unfavorable features. No loan or credit accommodation to any Affiliate of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary is presently in default or, during the three (3)-year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended. Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary has been notified that principal or interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation is inappropriate.

4.18Deposits.

Except as disclosed onFedFirst Disclosure Schedule 4.18, noneNone of the deposits of FFSBProgressive Bank as of March 31, 2014September 30, 2017 are a “brokered deposit” as defined in 12 C.F.R. Section 337.6(a)(2).

4.19Board Approval.

The Board of Directors of FedFirstFirst West Virginia has determined that the Merger is fair to, and in the best interests of, FedFirstFirst West Virginia and its stockholders, has approved and declared advisable this Agreement, the Merger, the Bank Merger and the other transactions contemplated hereby, has resolved to recommend adoptionapproval of this Agreement to the holders of FedFirstFirst West Virginia Common Stock and has directed that this Agreement be submitted to the holders of FedFirstFirst West Virginia Common Stock for their adoption.approval. The Board of Directors of FedFirstFirst West Virginia has taken all action so that CB and Community Bank will not be prohibited from entering into or consummating a business combination with FedFirstFirst West Virginia as a result of the execution of this Agreement or the consummation of the transactions in the manner contemplated hereby pursuant to any anti-takeover laws.

4.20Risk Management Instruments.

All interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for FedFirst’sFirst West Virginia’s own account, or for the account of one or more of FedFirst’sFirst West Virginia’s Subsidiaries or their customers, in force and effect as of March 31, 2014,September 30, 2017, were entered into in compliance with all applicable laws, rules, regulations and regulatory policies, and to the Knowledge of FedFirst,First West Virginia, with counterparties believed to be financially responsible at the time; and to the Knowledge of FedFirstFirst West Virginia each of them constitutes the valid and legally binding obligation of FedFirstFirst West Virginia or such FedFirstFirst West Virginia Subsidiary, enforceable in

accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles), and is in full force and effect. Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary, nor any other party thereto, is in breach of any of its obligations under any such agreement or arrangement.

4.21Fairness Opinion.

The Board of Directors of FedFirstFirst West Virginia has received an opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion dated the same date) from Mufson Howe HunterD.A. Davidson & Company LLCCo. to the effect that, subject to the terms, conditions, assumptions and qualifications set forth therein, as of the date thereof,hereof, the Merger Consideration to be received by the stockholders of FedFirstFirst West Virginia pursuant to this Agreement is fair to such stockholders from a financial point of view. Such opinion has not been amended or rescinded as of the date of this Agreement.

4.22Intellectual Property.

FedFirstFirst West Virginia and each FedFirst Subsidiaryof its Subsidiaries owns or to FedFirst’s Knowledge, possesses valid and binding licenses and other rights (subject to expirations in accordance with their terms) to use (in the manner and the geographic areas in which they are currently used) without payment all patents, copyrights, trade secrets, trade names, computer software, service marks and trademarks usedmaterial to its business.First West Virginia Disclosure Schedule 4.22 sets forth a complete and correct list of all material trademarks, trade names, service marks and copyrights owned by or licensed to First West Virginia or any of its Subsidiaries for use in its respective business, and neither FedFirstall licenses and other agreements relating thereto and all agreements relating to third party intellectual property that First West Virginia or any of its Subsidiaries is licensed or authorized to use in its business, including without limitation any software licenses but excluding any so-called “shrink-wrap” license agreements and other similar computer software licensed in the ordinary course of business and/or otherwise resident on desktop computers (collectively, the “Intellectual Property”). With respect to each item of Intellectual Property owned by First West Virginia or any of its Subsidiaries, the owner possesses all right, title and interest in and to the item, free and clear of any Lien. With respect to each item of Intellectual Property that First West Virginia or any of its Subsidiaries is licensed or authorized to use, the license, sublicense or agreement covering such item is legal, valid, binding, enforceable and in full force and effect as to First West Virginia and the Subsidiaries. Neither First West Virginia nor any FedFirst Subsidiaryof its Subsidiaries has received any charge, complaint, claim, demand or notice alleging any interference, infringement, misappropriation or violation with or of breachany intellectual property rights of a third party (including any claims that First West Virginia or any of its Subsidiaries must license or refrain from using any intellectual property rights of a third party). Neither First West Virginia nor any of its Subsidiaries has interfered with, infringed upon, misappropriated or otherwise come into conflict with respect thereto that asserts theany intellectual property rights of others. FedFirstthird parties and each FedFirst Subsidiary have performed all the obligations required to be performed, and are not in default inno third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with any respect, under any contract, agreement, arrangementintellectual property rights of First West Virginia or commitment relating to any of the foregoing.its Subsidiaries.

4.23Duties as FiduciaryFiduciary..

FFSBProgressive Bank (i) is not presently engaged in any line of business whichthat requires it to act in a “fiduciary capacity” to any other Person and (ii) has, if required by virtue of any line of business in which it previously was engaged in a “fiduciary capacity,” performed all of its duties in a fashion that complied with all applicable laws, regulations, orders, agreements, wills, instruments, and common law standards in effect at that time. FFSBProgressive Bank has not received notice of any claim, allegation, or complaint from any Person that FFSBProgressive Bank failed to perform these duties in a manner that complied with all applicable laws, regulations, orders, agreements, wills, instruments, and common law standards, except for notices involving matters that have been resolved and any cost of such resolution is reflected in FedFirst’sFirst West Virginia’s Financial Statements. For purposes of this Section 4.23, the term “fiduciary capacity” (i) shall mean (a) acting as trustee, executor, administrator, registrar of stocks and bonds, transfer agent, guardian, assignee, receiver, or custodian under a uniform gifts to minors act and (b) possessing investment discretion on behalf of another, and (ii) shall exclude FFSB’sProgressive Bank’s capacity with respect to individual retirement accounts or the FedFirstFirst West Virginia Benefit Plans.

4.24Employees; Labor Matters.

4.24.1FedFirstFirst West Virginia Disclosure Schedule 4.24.1 sets forth the following information with respect to each employee of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries as of March 31, 2014:September 30, 2017: job location, job title, current annual base salary, most recent cash bonus and year of hire.

4.24.2    There are no labor or collective bargaining agreements to which FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary is a party. There is no union organizing effort pending or, to the Knowledge of FedFirst,First West Virginia, threatened against FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary. There is no labor strike, labor dispute (other than routine employee grievances that are not related to union employees), work slowdown, stoppage or lockout pending or, to the Knowledge of FedFirst,First West Virginia, threatened against FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary. There is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of FedFirst,First West Virginia, threatened against FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary (other than routine employee grievances that are not related to union employees). FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and are not engaged in any unfair labor practice. Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary is a party to, or bound by, any agreement for the leasing of employees.

4.24.3    To FedFirst’sFirst West Virginia’s Knowledge, all Persons who have been treated as independent contractors by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary for Tax purposes have met the criteria to be so treated under all applicable federal, state and local Tax laws, rules and regulations.

4.25FedFirstFirst West Virginia Information Supplied.

The information relating to FedFirstFirst West Virginia and any FedFirstFirst West Virginia Subsidiary to be contained in the Merger Registration Statement, or in any other document filed with any Bank Regulator or other Governmental Entity in connection with the transactions contemplated by this Agreement, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

4.26Securities Documents.

FedFirst has filed with the SEC all forms, reports, schedules, registration statements, definitive proxy statements and information statements or other filings (“FedFirst SEC Reports”) required to be filed by it with the SEC since January 1, 2011. As of their respective dates, the FedFirst SEC Reports complied as to form with the requirements of the Exchange Act or the Securities Act, as applicable, and the applicable rules and regulations of the SEC promulgated thereunder in all material respects. As of their respective dates and as of the date any information from the FedFirst SEC Reports has been incorporated by reference, the FedFirst SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein made, in light of the circumstances under which they were made, not misleading. FedFirst has filed all material contracts, agreements and other documents or instruments required to be filed as exhibits to the FedFirst SEC Reports.

4.27Internal Controls.

4.27.14.26.1    The records, systems, controls, data and information of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of FedFirstFirst West Virginia or the FedFirstFirst West Virginia Subsidiaries or accountants (including all means of access thereto and therefrom), except for anynon-exclusive ownership andnon-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described in the following sentence. FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. FedFirstFirst West Virginia has designed and implemented disclosure controls and procedures (within the meaning of Rules13a-15(e) and15d-15(e) of the Exchange Act) to ensure that material information relating to it and the FedFirstFirst West Virginia Subsidiaries is made known to its management by others within those entities as appropriate to allow timely decisions regarding required disclosure and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act.disclosure.

4.27.2 FedFirst4.26.2    First West Virginia has previously disclosed, based on its most recent evaluation prior to the date hereof, to its auditors and the audit committee of the Board of Directors of FedFirst:First West Virginia: (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal controls over financial reporting.

4.27.34.26.3    Since December 31, 2013,2016, (i) neither FedFirstFirst West Virginia nor any of the FedFirstFirst West Virginia Subsidiaries nor, to its knowledge,Knowledge, any director, officer, employee, auditor, accountant or representative of FedFirstFirst West Virginia or any of the FedFirstFirst West Virginia Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of it or any of its subsidiariesSubsidiaries or their respective internal

accounting controls, including any material complaint, allegation, assertion or claim that it or any of its subsidiariesSubsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing FedFirstFirst West Virginia or any of the FedFirstFirst West Virginia Subsidiaries, whether or not employed by it or any of the FedFirstFirst West Virginia Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by FedFirstFirst West Virginia or any of its officers, directors, employees or agents to its Board of Directors or any committee thereof or to any of its directors or officers.

4.28

4.27    Bank Owned Life Insurance.

FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary has obtained the written consent of each employee on whose behalf bank owned life insurance (“BOLI”) has been purchased. FFSBProgressive Bank has taken all actions necessary to comply with applicable law in connection with its purchase of BOLI.

4.29EU Stock Purchase Agreement.

FedFirst Disclosure Schedule 4.30 contains a copy of the definitive stock purchase agreement (the “EU Stock Purchase Agreement”), which has been executed concurrently with or immediately prior to the execution of this Agreement, pursuant to which FedFirst Exchange shall acquire all of the issued and outstanding capital stock of EU which FedFirst Exchange does not own as of the date of this Agreement.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF CB

CB represents and warrants to FedFirstFirst West Virginia as set forth in this Article V, subject to the standard set forth in Section 5.1 and except as (i) set forth in the CB Disclosure Schedule delivered by CB to FedFirstFirst West Virginia on the date hereof or (ii) disclosed in any report, schedule, form or other document filed with the SEC by CB prior to the date hereof and on or after the date on which CB filed with the SEC its annual report on Form10-K for the year ended December 31, 2016,provided,however, that disclosure in any sectionschedule of such CB Disclosure Schedule shall apply only to the indicated Section of this Agreement except to the extent that it is reasonably apparent that such disclosure is relevant to another section of this Agreement. CB has made a good faith, diligent effort to ensure that the disclosure on each schedule of the CB Disclosure Schedule corresponds to the Section referenced herein. References to the Knowledge of CB shall include the Knowledge of Community Bank.

5.1Standard.

Except as set forth in the following sentence, no representation or warranty of CB contained in this Article V shall be deemed untrue or incorrect, and CB shall not be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, circumstance or event unless such fact, circumstance or event, individually or taken together with all other facts, circumstances or events inconsistent with any paragraph of this Article V, has had or reasonably would be expected to have a Material Adverse Effect, disregarding for these purposes (x) any qualification or exception for, or reference to, materiality in any such representation or warranty and (y) any use of the terms “material,” “materially,” “in all material respects,” “Material Adverse Effect” or similar terms or phrases in any such representation or warranty. The foregoing standard shall not apply to representations and warranties contained in Sections 5.2 (other than Sections 5.2.3, 5.2.4 and 5.2.5 and the last sentence of each of Sections 5.2.1 and 5.2.2), 5.4.1, 5.4.2(i) and 5.3,(ii), and 5.13, 5.17 and 5.19, which shall be true and correct in all material respects, and in Section 5.3, which shall be true in all respects.

5.2Organization.

5.2.1    CB is a corporation duly organized and validly existing under the laws of the Commonwealth of Pennsylvania, and is duly registered as a bank holding company under the BHCA. CB has full corporate power and authority to carry on its business as now conducted and is duly licensed or qualified to do business in the states of the United States and foreign jurisdictions where its ownership or leasing of property or the conduct of its business requires such qualification.

5.2.2    Community Bank is a commercial bank duly organized and validly existing under the laws of the Commonwealth of Pennsylvania. The deposits in Community Bank are insured by the FDIC to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due. Community Bank is a member in good standing of the FHLB and owns the requisite amount of FHLB stock.

5.2.3CB Disclosure Schedule 5.2.3 sets forth each CB Subsidiary and its jurisdiction of incorporation or organization. Each CB Subsidiary (other than Community Bank) is a corporation, limited liability company or other legal entity as set forth onCB Disclosure Schedule 5.2.3, duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization. Each CB Subsidiary is duly licensed or qualified to do business in the states of the United States and foreign jurisdictions where its ownership or leasing of property or conduct of its business requires such qualification.

5.2.4    The respective minute books of CB, Community Bank and each other CB subsidiary accurately record all corporate actions of their respective shareholdersstockholders and Boards of Directors (including committees).

5.2.5    Prior to the date of this Agreement, CB has made available to FedFirstFirst West Virginia true and correct copies of the articles of incorporation charter or certificate of incorporation, as applicable, and bylaws or other governing documents of CB and Community Bank and each other CB Subsidiary. CB has amended and restated its bylaws to read in the form attached toCB Disclosure Schedule 5.2.5.

5.3Capitalization.

5.3.1    The authorized capital stock of CB consists of (i) 35,000,000 shares of CB Common Stock and (ii) 5,000,000 shares of preferred stock, no par value per share (“CB Preferred Stock” and collectively with the CB Common Stock, the “CB Stock”). As of the date hereof, there are (i) 2,630,8794,088,025 shares of CB Common Stock validly issued and outstanding, fully paid andnon-assessable, (ii) 291,884275,321 shares of CB Common Stock held by CB in its treasury, (iii) no shares of CB Preferred Stock outstanding, and (iv) 11,100223,625 shares of CB Common Stock reserved for issuance upon the exercise of outstanding stock options. Community BankCB does not own, of record or beneficially, any shares of CB Stock, other than shares held as treasury stock. Neither CB nor any CB Subsidiary has or is bound by any Rights or other arrangements of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on, any capital stock of CB, or any other security of CB or anany CB Subsidiary or any securities representing the right to vote, purchase or otherwise receive any capital stock of CB or anany CB Subsidiary or any other security of CB or any CB Subsidiary, other than shares of CB Common Stock underlying the options granted pursuant to benefit plans maintained by CB. All shares of CB Common Stock issuable pursuant to option plans maintained by CB are or will be duly authorized, validly issued, fully paid andnon-assessable when issued upon the terms and conditions specified in the instruments pursuant to which they are issuable. 

5.3.2    CB owns all of the capital stock of each CB Subsidiary free and clear of all liens, security interests, pledges, charges, encumbrances, agreements and restrictions of any kind or nature. Except for the CB Subsidiaries, and as set forth onCB Disclosure Schedule 5.3.2, CB does not possess, directly or indirectly, any equity interest in any corporate or other legal entity, except for equity interests held in the investment portfolios of CB or any CB Subsidiary, including stock in the FHLB (which as to any one issuer, dodoes not exceed five percent (5%) of such issuer’s outstanding equity securities) and equity interests held in connection with the lending activities of Community Bank, including stock in the FHLB.Bank.

5.3.3    To CB’s Knowledge, except as set onCB Disclosure Schedule 5.3.3,forth in Schedules 13D or 13G filed with the SEC, as of the date hereof, no Person is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of five percent (5%) or more of the outstanding shares of CB Common Stock.

5.3.4    No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which CB’s shareholdersstockholders may vote have been issued by CB and are outstanding.

5.4Authority; No Violation.

5.4.1    CB has full corporate power and authority to execute and deliver this Agreement and, subject to the receipt of the Regulatory Approvals and the approval of this Agreement by CB’s stockholders (the“CB Stockholder Approval”), to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by CB and the completion by CB of the transactions contemplated hereby, including the Merger, have been duly and validly approved by the Board of Directors of CB. This Agreement has been duly and validly executed and delivered by CB, and subject to FedFirstFirst West Virginia Stockholder Approval, the CB Stockholder Approval and the receipt of the Regulatory Approval,Approvals, and assuming due and valid execution and delivery of this Agreement by FedFirst,First West Virginia, constitutes the valid and binding obligation of CB, enforceable against CB in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity.

5.4.2    Neither the execution and delivery of this Agreement by CB nor the consummation of the transactions contemplated hereby, nor compliance by CB with the terms and provisions hereof will (i) conflict with or result in a breach of any provision of the articles of incorporation or articles of association, as applicable, and bylaws of CB or any

CB Subsidiary;Community Bank; (ii) subject to receipt of all Regulatory Approvals, violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to CB or any CB SubsidiaryCommunity Bank or any of their respective properties or assets; or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which,that, with notice or lapse of time, or both, would constitute a default) under, result in the termination or amendment of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of CB or any CB SubsidiaryCommunity Bank under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other investment or obligation to which CB or any CB SubsidiaryCommunity Bank is a party, or by which they or any of their respective properties or assets may be bound or affected.

5.5Consents.

Except for (a) the receipt of the Regulatory Approvals and compliance with any conditions contained therein, (b) compliance with applicable requirements of the Securities Act, the Exchange Act and state securities or “blue sky” laws, (c) the filing of the articles of merger with the Secretary of State of the Commonwealth of Pennsylvania and the articles of merger with the Maryland DepartmentSecretary of Assessments and Taxation,State of the State of West Virginia, (d) the filing with the SEC of the Merger Registration Statement and the obtaining from the SEC of such orders as may be required in connection therewith, (e) approval of the application of the listing of CB Common Stock to be issued in the Merger on the NASDAQ Global SelectStock Market, and (f) the receipt of the FedFirstCB Stockholder Approval and the First West Virginia Stockholder Approval, no consents, waivers or approvals of, or filings or registrations with, any Governmental Entity or Bank Regulator are necessary, and to the Knowledge of CB, no consents, waivers or approvals of, or filings or registrations with, any other third parties are necessary, in connection with (x) the execution and delivery of this Agreement by CB, the completion by CB of the Merger and the performance by CB of its obligations hereunder or (y) the execution and delivery of the agreement and plan of merger in respect of the Bank Merger and the completion of the Bank Merger. CB has no reason to believe that (i) any Regulatory Approvals or other required consents or approvals will not be received or will include the imposition of any condition (financial or otherwise) or requirement that could reasonably be expected by CB to result in a Material Adverse Effect on CB and Community Bank, taken as a whole, or FedFirstFirst West Virginia and FFSB,Progressive Bank, taken as a whole, or that (ii) any public body or authority having jurisdiction over the affairs of CB and Community Bank, the consent or approval of which is not required or pursuant to the rules of which a filing is not required, will object to the completion of the transactions contemplated by this Agreement.

5.6Financial Statements.

5.6.1    The CB Regulatory Reports have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such reports.

5.6.2    CB has previously made available to FedFirstFirst West Virginia the CB Financial Statements. The CB Financial Statements fairly present in each case in all material respects (subject in the case of the unaudited interim statements to normalyear-end adjustments) the consolidated financial position, results of operations and cash flows of CB and the CB Subsidiaries as of and for the respective periods ending on the dates thereof, in accordance with GAAP during the periods involved, except as indicated in the notes thereto, or in the case of unaudited statements, as permitted by GAAP.

5.6.3    At the date of the most recent consolidated statement of financial condition included in the CB Financial Statements or in the CB Regulatory Reports, CB did not have any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such CB Financial Statements or in the footnotes thereto whichthat are not fully reflected or reserved against therein or

fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies whichthat are not material, individually or in the aggregate, or whichthat are incurred in the ordinary course of business, consistent with past practice, and subject, in the case of any unaudited statements, to normal, recurring audit adjustments and the absence of footnotes.

5.7Taxes.

5.7.1    CB and the CB Subsidiaries are members of the same affiliated group within the meaning of Section 1504(a) of the Code. CB, on behalf of itself and the CB Subsidiaries, has timely filed or caused to be filed all Tax Returns (including, but not limited to, those filed on a consolidated, combined or unitary basis) required to have been filed by CB and the CB Subsidiaries prior to the date hereof, or requests for extensions to file such returns and reports have been timely filed. All such Tax Returns are true, correct, and complete in all material respects. CB and the CB Subsidiaries have timely paid or, prior to the Effective Time will pay, all Taxes, whether or not shown on such returns or reports, due or claimed to be due to any Governmental Entity prior to the Effective Time other than Taxes whichthat are being contested

in good faith. CB and the CB Subsidiaries have declared on their Tax Returns all positions taken therein that could give rise to a substantial underpayment of United States Federal Income Tax within the meaning of Section 6662 of the Code (or any corresponding provision of state or local laws). The accrued but unpaid Taxes of CB and the CB Subsidiaries did not, as of the most recent CB Financial Statements, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the most recent CB balance sheetstatement of financial condition (rather than in any notes thereto). CB and the CB Subsidiaries are subject to Tax audits in the ordinary course of business. CB management does not believe that an adverse resolution to any of such audits of which it has Knowledge would be reasonably likely to have a Material Adverse Effect on CB. CB and the CB Subsidiaries have not been notified in writing by any jurisdiction that the jurisdiction believes that CB or any of the CB Subsidiaries were required to file any Tax Return in such jurisdiction that was not filed. Neither CB nor any of the CB Subsidiaries: (i) has been a member of a group with which they have filed or been included in a combined, consolidated or unitary income Tax Return other than a group the common parent of which was CB; or (ii) has any liability for the Taxes of any Person (other than CB or any of the CB Subsidiaries) under Treas. Reg.1.1502-6 (or any similar provision of state, local, ornon-U.S. law), as a transferee or successor, by contract, or otherwise. As of the date hereof, all deficiencies proposed in writing as a result of any audits have been paid or settled. There are no written claims or assessments pending against CB or any CB Subsidiary for any alleged deficiency in any Tax, and neither CB nor any CB Subsidiary has been notified in writing of any proposed Tax claims or assessments against CB or any CB Subsidiary. CB and the CB Subsidiaries each have duly and timely withheld, collected and paid over to the appropriate taxing authority all amounts required to be so withheld and paid under all applicable laws, and have duly and timely filed all Tax Returns with respect to such withheld Taxes, within the time prescribed under any applicable law. CB and the CB Subsidiaries have delivered to FedFirst true and complete copies of all Tax Returns of CB and the CB Subsidiaries for taxable periods ending on or after December 31, 2010. Neither CB nor any of the CB Subsidiaries is or has been a party to any “reportable transaction,” as defined in Section 6707A(c)(1) of the Code and Treas.Reg. 1.6011-4(b). Neither CB nor any of the CB Subsidiaries has distributed stock of another Person, nor has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code. Neither CB nor any of

the CB Subsidiaries has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.

5.7.2    Neither CB nor any of the CB Subsidiaries or Affiliates has taken or agreed to take any action, has failed to take any action or knows of any fact, agreement, plan or other circumstance that could reasonably be expected to prevent the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

5.8No Material Adverse Effect.

Since December 31, 2013,2016, to CB’s Knowledge, no event has occurred or circumstance arisen that has had or reasonably would be expected to have a Material Adverse Effect on CB.

5.9Ownership of Property; Insurance Coverage.

5.9.1    CB and each CB Subsidiary has good and, as to real property, marketable title to all assets and properties owned by CB or such CB Subsidiary, as applicable, in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent consolidated statement of financial condition contained in the CB Financial Statements or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such consolidated statement of financial condition), subject to no encumbrances, liens, mortgages, security interests or pledges, except: (i) those items whichthat secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to FHLB, inter-bank credit facilities, reverse repurchase agreements or any transaction by an CB Subsidiary acting in a fiduciary capacity; and (ii) statutory liens for amounts not yet delinquent or whichthat are being contested in good faith. CB and the CB Subsidiaries, as lessee, have the right under valid and existing leases of real and personal properties used by CB and the CB Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them. Such existing leases and commitments to lease constitute or will constitute operating leases for both tax and financial accounting purposes and the lease expense and minimum rental commitments with respect to such leases and lease commitments are as disclosed in all material respects in the notes to the CB Financial Statements.

5.9.2    With respect to all material agreements pursuant to which CB or any CB Subsidiary has purchased securities subject to an agreement to resell, if any, CB or such CB Subsidiary, as the case may be, has a lien or security interest (which to CB’s Knowledge is a valid, perfected first lien) in the securities or other collateral securing the repurchase agreement, and the value of such collateral equals or exceeds the amount of the debt secured thereby.

5.9.3    CB and each CB Subsidiary currently maintain insurance considered by each of them to be reasonable for their respective operations. Neither CB nor any CB Subsidiary has received notice from any insurance carrier on or before the date hereof that: (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated;

or (ii) premium costs with respect to such policies of insurance will be substantially increased. Except as listed onCB Disclosure Schedule 5.9.3, thereThere are presently no claims pending under such policies of insurance and no notices of claim have been given by CB or any CB Subsidiary under such policies. All such insurance is valid and enforceable and in full force and effect (other than insurance that expires in accordance with its terms), and within the last three (3) years CB and each CB Subsidiary has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any claims submitted under any of its insurance policies.CB Disclosure Schedule 5.9.3 identifies all policies of insurance maintained by CB and each CB Subsidiary, including the name of the insurer, the policy number, the type of policy and any applicable deductibles, as well as the other matters required to be disclosed under this Section 5.9.3. CB has made available to FedFirstFirst West Virginia copies of all of the policies listed onCB Disclosure Schedule 5.9.3.

5.10Legal Proceedings.

Except as disclosed onCB Disclosure Schedule 5.10, neither CB nor any CB Subsidiary is a party to any, and there are no pending or, to the Knowledge of CB, threatened, legal, administrative, arbitration or other proceedings, claims (whether asserted or unasserted), actions or governmental investigations or inquiries of any nature (i) against CB or any CB Subsidiary, (ii) to which CB or any CB Subsidiary’s assets are or may be subject, (iii) challenging the validity or propriety of any of the transactions contemplated by this Agreement, or (iv) whichthat reasonably could be expected to adversely affect the ability of CB or any CB Subsidiary to perform under this Agreement.

5.11Compliance with Applicable Law.

Except as set forth onCB Disclosure Schedule 5.11:

5.11.1    To CB’s Knowledge, CB and each CB Subsidiary is in compliance in all material respects with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, its conduct of business and its relationship with its employees, including, without limitation, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, the Equal Credit Opportunity Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Consumer Credit Protection Act, the Fair Credit Reporting Act, the Fair Debt Collections Act, the Fair Housing Act, the CRA, Regulation O of the Federal Reserve Board, the Home Mortgage Disclosure Act, and all other applicable fair lending laws and other laws relating to discriminatory business practices, and neither CB nor any CB Subsidiary has received any written notice to the contrary.

5.11.2    CB and each CB Subsidiary has all material permits, licenses, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Entities and Bank Regulators that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted; all such permits, licenses, certificates of authority, orders and approvals are in full force and effect and, to the Knowledge of CB, no suspension or cancellation of any such permit, license, certificate, order or approval is threatened or will result from the consummation of the transactions contemplated by this Agreement, subject to obtaining the Regulatory Approvals.

5.11.3    Since January 1, 2011,2014, neither CB nor any CB Subsidiary has received any written notification or any other communication from any Bank Regulator or Insurance Regulator (i) asserting that CB or any CB Subsidiary is not in material compliance with any of the statutes, regulations or ordinances whichthat such Bank Regulator or Insurance Regulator enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization; (iii) requiring or threatening to require CB or any CB Subsidiary, or indicating that CB or any CB Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement with any federal or state governmental agency or authority whichthat is charged with the supervision or regulation of banks or bank holding companies, or engages in the insurance of bank deposits, restricting or limiting, or purporting to restrict or limit the operations of CB or any CB Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit the operations of CB or any

CB Subsidiary. Neither CB nor any CB Subsidiary has consented to or entered into any Regulatory Agreement that is currently in effect. The most recent regulatory rating given to Community Bank as to compliance with the CRA is “Satisfactory” or better.

5.12Employee Benefit Plans.

5.12.1CB Disclosure Schedule 5.12.1 contains a list of all written and unwritten pension, retirement, profit-sharing, thrift, savings, deferred compensation, stock option, employee stock ownership, employee stock purchase, restricted stock, severance pay, retention, vacation, bonus or other incentive plans, all employment, change in control, consulting, severance and retention agreements, all other written employee programs, arrangements or agreements, all medical, vision, dental, disability, life insurance, workers’ compensation, employee assistance or other health or welfare plans (including paidtime-off policies and other material benefit policies and procedures), and all other employee benefit or fringe benefit plans, including “employee benefit plans” as that term is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or contributed to by, CB, any CB Subsidiary or any of itstheir ERISA Affiliates for the benefit of employees, former employees, retirees (or the dependents, including spouses, of the foregoing), directors, independent contractors or other service providers to CB or any CB Subsidiary and under which employees, former employees, retirees, dependents, spouses, directors, or other service providers of CB are eligible to participate (collectively, the “CB Benefit Plans”).

5.12.2    All CB Benefit Plans are in material compliance with (and have been managed and administrated in accordance with) the applicable terms of ERISA, the Code and any other applicable laws. Except as set forth onCB Disclosure Schedule 5.12.2, eachlaws, including but not limited to the Age Discrimination in Employment Act, COBRA, HIPAA and ACA and any regulations promulgated thereunder, and all material filings, disclosures and notices required by ERISA, the Code, the Age Discrimination in Employment Act, COBRA HIPAA and ACA and any other applicable law have been timely made or any interest, fines, penalties or other impositions for late filings have been paid in full. Each CB Benefit Plan governed by ERISA that is intended to be a qualified retirement plan under Section 401(a) of the Code has either: (i) received a favorable determination letter from the IRS (and CB is not aware of anythere are no circumstances likely to result in revocation of any such favorable determination letter) or timely application has been made therefor; or (ii) is maintained under a prototype plan whichthat has been approved by the IRS and is entitled to rely

upon the IRS National Office opinion letter issued to the prototype plan sponsor. To the Knowledge of CB, there exists no fact whichthat would adversely affect the qualification of any of the CB Benefit Plans intended to be qualified under Section 401(a) of the Code, or any threatened or pending claim against any of the CB Benefit Plans or their fiduciaries by any participant, beneficiary or Governmental Entity (other than routine claims for benefits). NeitherTo CB’s Knowledge, neither CB nor any CB Subsidiary has engaged in a transaction, or omitted to take any action with respect to any CB Benefit Plan that would reasonably be expected to subject CB or any CB Subsidiary to a material unpaid tax or penalty imposed by Chapter 43 of the Code or Sections 409 or 502 of ERISA.

5.12.3    No CB Benefit Plan is a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which FedFirstFirst West Virginia or any ERISA Affiliate could incur liability under Section 4063 or 4064 of ERISA or a pension plan maintained by more than one employer as described in Section 413(c) of the Code. Neither CB nor any ERISA Affiliate has ever maintained or contributed to any CB Benefit Plan that is or was subject to Title IV of ERISA, Section 412 of the Code, Section 302 of ERISA or is a multiemployer plan (as defined in Section 3(37) of ERISA) and neither CB nor any ERISA Affiliate, nor any trust created thereunder, nor any trustee or administrator thereof, could reasonably be expected to be subject to either a civil liability or penalty pursuant to Section 409 or 502 of ERISA or a tax imposed pursuant to Chapter 43 of the Code..

5.12.4    All material contributions required to be made under the terms of any CB Benefit Plan have been timely made, and all anticipated contributions and funding obligations are accrued on CB’s consolidated financial statements to the extent required by GAAP and Section 412 of the Code.GAAP. CB and each CB Subsidiary hashave expensed and accrued as a liability the present value of future benefits under each applicable CB Benefit Plan for financial reporting purposes to the extent required by GAAP.

5.12.5    CB has complied in all material respects with the notice and continuation requirements of COBRA, and the regulations thereunder. All reports, statements, returns and other information required to be furnished or filed with respect to CB Benefit Plans have been timely furnished, filed or both in accordance with Sections 101 through 105 of ERISA and Sections 6057 through 6059 of the Code, and they are true, correct and complete. To CB’s Knowledge, records with respect to CB Benefit Plans have been maintained in compliance with Section 107 of ERISA. To CB’s Knowledge, neither CB nor any otherCB Subsidiary, nor any director or employee of CB or any CB Subsidiary who is a fiduciary (as that term is defined in Section 3(21) of ERISA) with respect to any of CB Benefit Plans has any liability for any breach of any fiduciary duties under Sections 404, 405 or 409 of ERISA. No CB Benefit Plan fails to meet the applicable requirements of Section 105(h)(2) of the Code (determined without regard to whether such CB Benefit Plan is self-insured).

5.12.6    No claim, lawsuit, arbitration or other action has been asserted or instituted or, to the Knowledge of CB, has been threatened or is anticipated, against any CB Benefit Plan (other than routine claims for benefits and appeals of such claims), CB or any CB Subsidiary or any director, officer or employee thereof, or any of the assets of any trust of any CB Benefit Plan.

5.13Brokers, Finders and Financial Advisors.

Neither CB nor any CB Subsidiary, nor any of their respective officers, directors, employees or agents, has employed any broker, finder or financial advisor in connection with the transactions contemplated by this Agreement, or incurred any liability or commitment for any fees or commissions to any such Person in connection with the transactions contemplated by this Agreement, except for the retention of Keefe, Bruyette & Woods, Inc. by CB and the fee payable pursuant thereto.

5.14Environmental Matters.

5.14.1    Except as set forth onCB Disclosure Schedule 5.14, with respect to CB and each CB Subsidiary:

(A)    To the Knowledge of CB, each of CB and the CB Subsidiaries, and the CB Loan Properties (as defined in Section 5.14.2) are, and have been, in material compliance with any Environmental Laws;

(B)    Neither CB nor any CB Subsidiary has received written notice in the last five (5) years that there is any material suit, claim, action, demand, executive or administrative order, directive, request for information, investigation or proceeding pending and, to the Knowledge of CB, no such action is threatened, before any court, governmental agency or other forum against them or any CB Loan Property (x) for alleged noncompliance (including by any predecessor) with, or liability under, any Environmental Law or (y) relating to the presence of or release into the environment of any Materials of Environmental Concern, whether or not occurring at or on a site owned, leased or operated by CB, or any of the CB Subsidiaries;

(C)    To the Knowledge of CB, the properties currently owned or operated by CB or any CB Subsidiary (including, without limitation, soil, groundwater or surface water on, or under the properties, and buildings thereon) are not contaminated with and do not otherwise contain any Materials of Environmental Concern other than in amounts permitted under applicable Environmental Law or whichthat are de minimis in nature and extent;

(D)    To the Knowledge of CB, there are no underground storage tanks on, in or under any properties owned or operated by CB or any of the CB Subsidiaries and no underground storage tanks have been closed or removed from any properties owned or operated by CB or any of the CB Subsidiaries except as in compliance with Environmental Laws; and

(E)    During the period of (a) CB’s or any of the CB Subsidiaries’ ownership or operation of any of their respective current properties or (b) CB’s or any of the CB Subsidiaries’ participation in the management of any CB Loan Property, to the Knowledge of CB, there has been no material contamination by or material release of Materials of Environmental Concern in, on, under or affecting such properties. To the Knowledge of CB, prior to the period of (x) CB’s or any of the CB Subsidiaries’ ownership or operation of any of their respective current properties or (y) CB’s or any of the CB Subsidiaries’ participation in the management of any CB Loan Property, there was no material contamination by or release of Materials of Environmental Concern in, on, under or affecting such properties.

(F)    Neither CB nor any other CB Subsidiary has conducted any environmental studies during the past five (5) years (other than Phase I studies or Phase II studies whichthat did not indicate any contamination of the environment by Materials of Environmental Concern above reportable levels) with respect to any properties owned or leased by it or any of the CB Subsidiaries, or with respect to any CB Loan Property.

5.14.2    For purposes of this Section 5.14, “CB Loan Property” means any property in which CB or an CB Subsidiary presently holds a direct or indirect security interest securing a loan or other extension of credit made by them, including through a participation interest in a loan or other extension of credit other than by CB or ana CB Subsidiary.

5.15Loan Portfolio.

5.15.1    The allowancesallowance for loan losses reflected in the notes to CB’s audited consolidated statements of financial condition at December 31, 20132016 and 20122015 were, and the allowance for loan losses shown in the notes to the unaudited consolidated financial statements for periods ending after December 31, 20132016 were, or will be, adequate, as of the dates thereof, under GAAP.

5.15.2CB Disclosure Schedule 5.15.2 sets forth a listing, as of the most recently available date (and in no event earlier than March 31, 2014)September 30, 2017), by account, of: (A) each borrower, customer or other party whichthat has notified CBCommunity Bank during the past twelve (12) months of, or has asserted against CB or Community Bank, in each case in writing, any “lender liability” or similar claim, and, to the Knowledge of CB, each borrower, customer or other party whichthat has given CB or Community oral notification of, or orally asserted to or against CB or Community, any such claim; and (B) all loans (1) that are contractually past due ninety (90) days or more in the payment of principal and/or interest, (2) that are onnon-accrual status, (3) that as of March 31, 2014September 30, 2017 are classified as “Other Loans Specially Mentioned,” “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Watch list” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such Loan and the identity of the obligor thereunder, (4) where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, or (5) where a specific reserve allocation exists in connection therewith; and (C) all other assets classified by CB or Community Bank as real estate acquired through foreclosure or in lieu of foreclosure, includingin-substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure.

5.15.3    All loans receivable (including discounts) and accrued interest entered on the books of CB and Community Bank arose out of bona fidearm’s-length transactions, were made for good and valuable consideration in the ordinary course of CB’s and Community Bank’s respective businesses, and the notes or other evidences of indebtedness with respect to such loans (including discounts) are true and genuine and are what they purport to be. The loans, discounts and the accrued interest reflected on the books of CB and Community Bank are subject to no defenses,set-offs or counterclaims (including, without limitation, those afforded by usury ortruth-in-lending laws), except as may be provided by bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by general principles of equity. All such loans are owned by CB or Community Bank free and clear of any liens.

5.15.4    The notes and other evidences of indebtedness evidencing the loans described above, and all pledges, mortgages, deeds of trust and other collateral documents or security instruments relating thereto are valid, true and genuine, and what they purport to be.

5.16Related Party Transactions.

Neither CB nor any CB Subsidiary is a party to any transaction (including any loan or other credit accommodation) with any Affiliate of CB or any CB Subsidiary, except as set forth onCB Disclosure Schedule 5.16. Except as described onCB Disclosure Schedule 5.16, allAll such transactions (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other Persons, and (c) did not involve more than the normal risk of collectability or present other unfavorable features. No loan or credit accommodation to any Affiliate of CB or any CB Subsidiary is presently in default or, during the three (3)-year period prior to the date of this Agreement, has been in default or has been restructured, modified or extended. Neither CB nor any CB Subsidiary has been notified that principal or interest with respect to any such loan or other credit accommodation will not be paid when due or that the loan grade classification accorded such loan or credit accommodation is inappropriate.

5.17Board Approval.

The Board of Directors of CB determined that the Merger is fair to, and in the best interests of, CB, and its stockholders, approved and declared advisable this Agreement, the Merger, the Bank Merger and the other transactions contemplated hereby. The Board of Directors of CB has taken all action so that FedFirst and FFSB will not be prohibited from entering into or consummating a business combination with CB as a result of the executionhereby, resolved to recommend approval of this Agreement orto the consummationholders of CB Common Stock, and directed that this Agreement be submitted to the transactions in the manner contemplated hereby pursuant to any anti-takeover laws.holders of CB Common Stock for their approval.

5.18Risk Management Instruments.

All interest rate swaps, caps, floors, option agreements, futures and forward contracts and other similar risk management arrangements, whether entered into for CB’s own account, or for the account of one or more of CB’s Subsidiaries or their customers, in force and effect as of March 31, 2014,September 30, 2017, were entered into in compliance with all applicable laws, rules, regulations and regulatory policies, and to the Knowledge of CB, with counterparties believed to be financially responsible at the time; and to CB’s and eachthe Knowledge of CB Subsidiary’s Knowledge each of them constitutes the valid and legally binding obligation of CB or such CB Subsidiary, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles), and is in full force and effect. Neither CB nor any CB Subsidiary, nor any other party thereto, is in breach of any of its obligations under any such agreement or arrangement.

5.19Fairness Opinion.

The Board of Directors of CB has received an opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion dated the same date) from Keefe, Bruyette & Woods, Inc., to the effect that, subject to the terms, conditions, assumptions and qualifications set forth therein, as of the date thereof,hereof, the Merger Consideration is fair, from a financial point of view, to CB. Such opinion has not been amended or rescinded as of the date of this Agreement.

5.20Duties as Fiduciary.

Except as disclosed onCB Disclosure Schedule 5.20, Community Bank (i) is not presently engaged in any line of business whichthat requires it to act in a “fiduciary capacity” to any other Person and (ii) has, if required by virtue of any line of business in which it previously was engaged in a “fiduciary capacity,” performed all of its duties in a fashion that complied with all applicable laws, regulations, orders, agreements, wills, instruments, and common law standards in effect at that time. Community Bank has not received notice of any claim, allegation, or complaint from any Person that Community Bank failed to perform these duties in a manner that complied with all applicable laws, regulations, orders, agreements, wills, instruments, and common law standards, except for notices involving matters that have been resolved and any cost of such resolution is reflected in CB’s Financial Statements. For purposes of this Section 5.20 the term “fiduciary capacity” (i) shall mean (a) acting as trustee, executor, administrator, registrar of stocks and bonds, transfer agent, guardian, assignee, receiver, or custodian under a uniform gifts to minors act, and (b) possessing investment discretion on behalf of another, and (ii) shall exclude Community Bank’s capacity with respect to individual retirement accounts or the CB Benefit Plans.

5.21Employees; Labor Matters.

5.21.1    There are no labor or collective bargaining agreements to which CB or any CB Subsidiary is a party. There is no union organizing effort pending or, to the Knowledge of CB, threatened against CB or any CB Subsidiary. There is no labor strike, labor dispute (other than routine employee grievances that are not related to union employees), work slowdown, stoppage or lockout pending or, to the Knowledge of CB, threatened against CB or any CB Subsidiary. There is no unfair labor practice or labor arbitration proceeding pending or, to the Knowledge of CB, threatened against CB or any CB Subsidiary (other than routine employee grievances that are not related to union employees). CB and each CB Subsidiary is in compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and are not engaged in any unfair labor practice. Neither CB nor any CB Subsidiary is a party to, or bound by, any agreement for the leasing of employees.

5.21.2    To CB’s Knowledge, all Persons who have been treated as independent contractors by CB or any CB Subsidiary for Tax purposes have met the criteria to be so treated under all applicable federal, state and local Tax laws, rules and regulations.

5.22CB Information Supplied.

The information relating to CB and any CB Subsidiary to be contained in the Merger Registration Statement, or in any other document filed with any Bank Regulator or other Governmental Entity in connection with the transactions contemplated by this Agreement, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

5.23Internal Controls.

5.23.1    The records, systems, controls, data and information of CB and the CB Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of CB or the CB Subsidiaries or accountants (including all means of access thereto and therefrom), except for anynon-exclusive ownership andnon-direct control that would not reasonably be expected to have a material adverse effect on the system of internal accounting controls described in the following sentence. CB and the CB Subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. CB has designed and implemented disclosure controls and procedures (within the meaning of Rules13a-15(e) and15d-15(e) of the Exchange Act) to ensure that material information relating to it and the CB Subsidiaries is made known to its management by others within those entities as appropriate to allow timely decisions regarding required disclosure and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act.

5.23.2    CB has previously disclosed, based on its most recent evaluation prior to the date hereof, to its auditors and the audit committee of the Board of Directors of CB; (A) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting, and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal controls over financial reporting.

5.23.3    Since December 31, 2013,2016, (i) neither CB nor any of the CB Subsidiaries nor, to its knowledge,Knowledge, any director, officer, employee, auditor, accountant or representative of CB or any of the CB Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods (including with respect to loan loss reserves, write-downs, charge-offs and accruals) of it or any of its subsidiariesSubsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that it or any of its subsidiariesSubsidiaries has engaged in questionable accounting or auditing practices, and (ii) no attorney representing CB or any of the CB Subsidiaries, whether or not employed by it or any of the CB Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by CB or any of its officers, directors, employees or agents to its Board of Directors or any committee thereof or to any of its directors or officers.

5.24Securities Documents.

CB has filed with the SEC all forms, reports, schedules, registration statements, definitive proxy statements and information statements or other filings (“CB SEC Reports”) required to be filed by it with the SEC since January 1, 2015. As of their respective dates, the CB SEC Reports complied as to form with the requirements of the Exchange Act or the Securities Act, as applicable, and the applicable rules and regulations of the SEC promulgated thereunder in all material respects. As of their respective dates and as of the date any information from the CB

SEC Reports has been incorporated by reference into the CB SEC Reports, the CB SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein made, in light of the circumstances under which they were made, not misleading. CB has filed all material contracts, agreements and other documents or instruments required to be filed as exhibits to the CB SEC Reports.

5.25    CB Common Stock.

The shares of CB Common Stock to be issued pursuant to this Agreement, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid andnon-assessable and subject to Section 7.14, not subject to preemptive rights.

5.255.26    Available Funds

Immediately prior to the Effective Time, CB will have sufficient cash to pay the aggregate Cash Consideration as required by Section 3.3.

ARTICLE VI

COVENANTS OF FEDFIRSTFIRST WEST VIRGINIA

6.1Conduct of Business.

6.1.1Affirmative Covenants.During the period from the date of this Agreement to the Effective Time, except with the written consent of CB, which consent will not be unreasonably withheld, conditioned or delayed, FedFirstFirst West Virginia will, and it will cause each FedFirstFirst West Virginia Subsidiary to: operate its business only in the usual, regular and ordinary course of business; use reasonable efforts to preserve intact its business organization and assets and maintain its rights and franchises; and voluntarily take no action whichthat would: (i) materially adversely affect the ability of the parties to obtain the Regulatory Approvals or materially increase the period of time necessary to obtain the Regulatory Approvals or consummate the Merger (other than as contemplated in Section 6.10); (ii) materially adversely affect its ability to perform its covenants and agreements under this AgreementAgreement; or (iii) result in the representations and warranties contained in Article IV of this Agreement not being true and correct on the date of this Agreement or at any future date on or prior to the Closing Date or in any of the conditions set forth in Article IX hereof not being satisfied.

6.1.2Negative Covenants. FedFirstFirst West Virginia agrees that from the date of this Agreement to the Effective Time, except as otherwise specifically permitted or required by this Agreement or consented to by CB in writing, which consent (which may include consent via electronic mail) will not be unreasonably withheld, conditioned or delayed, it will not, and it will cause each of the FedFirstFirst West Virginia Subsidiaries not to:

(A)    take any action that would, or is reasonably likely to, prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;

(B)    change or waive any provision of its articles of incorporation (or charterarticles of association in the case of FFSB)Progressive Bank) or bylaws, except as required by law;

(C)    issue any shares of FedFirstFirst West Virginia Common Stock, or issue or grant any Right or agreement of any character relating to its authorized or issued capital stock (such as stock options or restricted stock awards) or any securities convertible into shares of such stock, make any grant or award under the FedFirst Stock Plans, or split, combine or reclassify any shares of capital stock, or declare, set aside or pay any dividend or other distribution in respect of capital stock, or redeem or otherwise acquire any shares of capital stock, except that FedFirst:that: (i) may issue shares of FedFirst Common Stock upon the valid exercise, in accordance with the information set forth onFedFirst Disclosure Schedule 4.3.1, of presently

outstanding FedFirst Stock Options issued under the FedFirst Stock Plans; (ii) may issue up to 18,768 shares of restricted stock under the FedFirst Stock Plans; (iii) may permit the vesting of FedFirst Restricted Stock; (iv)First West Virginia shall continue to declare and pay regular quarterly cash dividends of no more than $0.08$0.20 per share with payment and record dates consistent with past practice (provided that the declaration of the last quarterly dividend by FedFirstFirst West Virginia prior to the Effective Time and the payment thereof shall be coordinated with CB so that holders of FedFirstFirst West Virginia Common Stock do not receive dividends on both FedFirstFirst West Virginia Common Stock and CB Common Stock received in the Merger in respect of suchthe same quarter or fail to receive aany dividend on at least one of the FedFirstFirst West Virginia Common Stock or CB Common Stock received in the Merger in respect of such quarter); and (v)(ii) any FedFirstFirst West Virginia Subsidiary may pay dividends to its parent company (as permitted under applicable law or regulations), it being understood that immediately prior to the Effective Time EU will pay a dividend to its shareholders equal to year-to-date net income (after taxes);provided, however, that EU determines year-to-date net income (after taxes) in a manner consistent with the determinations made in prior years,provided, further, that at least three (3) business days prior to the payment of the dividend, EU affords CB the opportunity to review the methodology for determining the amount of the dividend, andprovided, further that CB consents to the amount of the dividend, which consent shall not be unreasonable withheld, conditioned or delayed..

(D)    enter into, amend in any material respect or terminate any material contract or agreement (including without limitation any settlement agreement with respect to litigation) in excess of $50,000, except as contemplated by this Agreement;

(E)    make application for the opening or closing of any, or open or close any, branch or automated banking facility;

(F)    increase salary or wages, grant or agree to pay any bonus (discretionary or otherwise) or severance or termination pay to, or enter into, renew or amend any employment agreement, severance agreement and/or supplemental executive agreement with, or increase in any manner the compensation or fringe benefits of, any of its directors, officers, employees or consultants, except: (i) as may be required pursuant to commitments existing on the date hereof and set forth onFedFirst Disclosure Schedules 4.9.1 and 4.13.1 or as required pursuant to this Agreement; (ii) for bonuses, incentive payments and salary adjustments in the ordinary course of business consistent with past practice, provided that any increases to such amounts shall not exceed fourthree percent (4%(3%) (except to the extent such increase in excess of 4% is mandated by the terms of a relevant written plan currently in existence)except as set forth onFirst West Virginia Disclosure Schedule 6.1.2(F); or (iii)(ii) as otherwise contemplated by this Agreement. Neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary shall hire or promote any employee to a rank having a title of vice president or other more senior rank or hire any new employee at an annual rate of compensation in excess of $75,000;$50,000; provided, however, that a FedFirstFirst West Virginia Subsidiary may hireat-will,non-officer employees at an annual compensation rate not to exceed $75,000$50,000 to fill vacancies that may from time to time arise in the ordinary course of business; provided, further, that that neither FedFirstFirst West Virginia nor any FedFirstFirst West Virginia Subsidiary shall hire any new employee without first seeking to fill any position internally;

(G)    enter into or, except as may be required by law or regulatory guidance or any such plan or agreement or by the terms of this Agreement and the transactions contemplated herein, modify any pension, retirement, stock purchase, stock appreciation right, stock grant, savings, profit sharing, deferred compensation, supplemental

retirement, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan or arrangement, or any trust agreement related thereto, in respect of any of its directors, officers or employees, or make any contributions to any defined contribution or defined benefit plan not in the ordinary course of business and consistent with past practice;

(H)    merge or consolidate FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary with any other Person; sell or lease all or any substantial portion of the assets or business of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary; make any acquisition of all or any substantial portion of the business or assets of any other Person other than in connection with foreclosures, settlements in lieu of foreclosure, troubled loan or debt restructuring, or the collection of any loan or credit arrangement between FedFirstFirst West Virginia or FFSBProgressive Bank and any other Person; enter into a purchase and assumption transaction with respect to deposits and liabilities; incur deposit liabilities, other than liabilities incurred in the ordinary course of business consistent with past practice andpractice; increase the rate of interest paid on deposits, except in keepingthe ordinary course of business consistent with prevailing competitive rates;the past practice; permit the revocation or surrender by FFSBProgressive Bank of its certificate of authority to maintain, or file an application for the relocation of, any existing branch office;

(I)    except for transactions with the FHLB, subject any asset of FedFirstFirst West Virginia or of any FedFirstFirst West Virginia Subsidiary to a lien, pledge, security interest or other encumbrance (other than in connection with deposits, repurchase agreements, bankers acceptances, pledges in connection with acceptance of governmental deposits, and transactions in “federal funds” and the satisfaction of legal requirements in the exercise of trust powers) other than in the ordinary course of business consistent with past practice; incur any indebtedness for borrowed money (or guarantee any indebtedness for borrowed money), except in the ordinary course of business consistent with past practice;

(J)    change its method, practicemethods, practices or principleprinciples of accounting, except as may be required from time to time by GAAP (without regard to any optional early adoption date) or regulatory accounting principles or by any Bank Regulator responsible for regulating FedFirstFirst West Virginia or FFSB;Progressive Bank; 

(K)    waive, release, grant or transfer any rights of value or modify or change any existing indebtedness to which FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary is a party other than in the ordinary course of business consistent with past practice;

(L)    purchase any securities except securities: (i) rated “A” or higher by either Standard & Poor’s Ratings Services or Moody’s Investors Service; (ii) having a face amount in the aggregate of not more than $1,000,000; and (iii) with a duration of not more than five (5) years; and (iv) otherwise in the ordinary course of business consistent with past practice;

(M) except for commitments issued prior to the date of this Agreement which have not yet expired and which have been disclosed onFedFirst Disclosure Schedule 6.1.2(M), and    except for the renewal of existing lines of credit, (i) make or acquire any new loan or other credit facility commitment (including without limitation, loan participations, lines of credit and letters of credit) in excess of $2.0$1.5 million or (ii) make or

acquire any new loan or other credit facility commitment (including without limitation, loan participations, lines of credit and letters of credit) in any amount that would result in a lending relationship to a borrower or an affiliated group of borrowers in excess of $2.0$1.5 million;

(N)    sell, transfer, mortgage, encumber or otherwise dispose of any of its real property (including any real estate owned acquired through foreclosure) with a book value in excess of $500,000 to any person, except as set forth onFirst West Virginia Disclosure Schedule 6.1.2(N);

(O)    enter into, renew, extend or modify any other transaction (other than a deposit transaction) with any Affiliate;

(O)(P)    enter into any futures contracts, options, interest rate caps, interest rate floors, interest rate exchange agreements or other agreements or take any other action for purposes of hedging the exposure of its interest-earning assets and interest-bearing liabilities to changes in market rates of interest;

(P)(Q)    except for the execution of this Agreement, and actions taken or whichthat will be taken in accordance with this Agreement and performance hereunder, take any action that would give rise to a right of payment to any individual under any employment or change in control agreement;

(Q)(R)    make any change in policies in existence on the date of this Agreement with regard to: the extension of credit, or the establishment of reserves with respect to the possible loss thereon or the charge off of losses incurred thereon; investments; asset/liability management; or other banking policies except as may be required by changes in applicable law or regulations, GAAP or regulatory accounting principles or by a Bank Regulator;

(R)(S)    except for the execution of this Agreement, and the transactions contemplated hereby and any terminations of employment, take any action that would give rise to an acceleration of the right to payment to any individual under any FedFirstFirst West Virginia Benefit Plan;

(S)(T)    make any capital expenditures in excess of $25,000 individually or $50,000 in the aggregate, other than pursuant to binding commitments existing on the date hereof or as set forth onFedFirstFirst West Virginia Disclosure Schedule 6.1.2(S)6.1.2(T).;

(T)(U)    purchase or otherwise acquire, or sell or otherwise dispose of, any assets or incur any liabilities other than in the ordinary course of business consistent with past practices and policies;

(U) except for existing commitments to sell any participation interest in any loan,(V)    sell any participation interest in any loan (other than sales of loans secured byone- to four-family real estate that are consistent with past practice) unless CB has been given the first opportunity and a reasonable time to purchase any loan participation being sold, or purchase any participation interest in any loan other than purchases of participation interests from CB;

(V)

(W)    undertake or enter into any lease, contract or other commitment for its account, other than in the ordinary course of providing credit to customers as part of its banking business, involving a payment by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary of more than $25,000 annually, or containing any financial commitment extending beyond twelve (12) months from the date hereof;

(W)(X)    pay, discharge, settle or compromise any claim, action, litigation, arbitration or proceeding, other than any such payment, discharge, settlement or compromise in the ordinary course of business consistent with past practice that involves solely money damages in the amount not in excess of $25,000 individually or $50,000 in the aggregate, and that does not create negative precedent for other pending or potential claims, actions, litigation, arbitration or proceedings;

(X)(Y)    foreclose upon or take a deed or title to any commercial real estate without having a Phase I environmental assessment of the property conducted as of a reasonably current date and, if such Phase I environmental assessment of the property indicates the presence of Materials of Environmental Concern, providing notice to CB thereof prior to final sale;

(Y)(Z)    purchase or sell any mortgage loan servicing rights other than in the ordinary course of business consistent with past practice;

(Z)(AA)    issue any broadly distributed communication of a general nature to employees (including general communications relating to benefits and compensation) without prior consultation with CB and, to the extent relating to post-Closing employment, benefit or compensation information without the prior consent of CB (which shall not be unreasonably withheld, conditioned or delayed) or issue any broadly distributed communication of a general nature to customers without the prior approval of CB (which shall not be unreasonably withheld, conditioned or delayed), except as required by law or for communications in the ordinary course of business consistent with past practice that do not relate to the Merger or other transactions contemplated hereby;

(AA)(BB)    make, change or rescind any material election concerning Taxes or Tax Returns, file any amended Tax Return, enter into any closing agreement with respect to Taxes, settle or compromise any material Tax claim or assessment or surrender any right to claim a refund of Taxes or obtain any Tax ruling; or

(BB)(CC)    enter into any contract with respect to, or otherwise agree or commit to do, any of the foregoing.

6.2Subsidiaries.

In accordance with the EU Stock Purchase Agreement, FedFirst shall cause FedFirst Exchange to become the owner of record of all of the issued and outstanding shares of capital stock of EU for total consideration not to exceed $1,200,000.

6.3Current Information.

6.3.16.2.1    During the period from the date of this Agreement to the Effective Time, FedFirstFirst West Virginia will cause one or more of its representatives to confer with representatives of CB to inform CB regarding FedFirst’sFirst West Virginia’s operations at such times as CB may reasonably request. FedFirstFirst West Virginia will promptly notify CB of any material change in the ordinary course of its business or in the operation of its properties and, to the extent permitted by applicable law, of any governmental complaints, investigations or hearings (or

communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary. Without limiting the foregoing, senior officers of CB and FedFirstFirst West Virginia shall meet monthly to review, to the extent permitted by applicable law, the financial and operational affairs of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries, and FedFirstFirst West Virginia shall give due consideration to CB’s input on such matters, with the understanding that, notwithstanding any other provision contained in this Agreement, (i) neither CB nor Community Bank shall under any circumstance be permitted to exercise control of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary prior to the Effective Time.Time and (ii) First West Virginia shall not be under any obligation to act in a manner that could reasonably be deemed to constitute anticompetitive behavior under federal or state antitrust laws.

6.3.2 FedFirst6.2.2    First West Virginia and CB shall cooperate regarding a plan for the conversion of data processing and related electronic informational systems of FedFirstFirst West Virginia to those used by CB, which planning shall include, but not be limited to,to: discussion of the possible termination by FedFirstFirst West Virginia of third-party service provider arrangements effective at the Effective Time or at a date thereafter, thereafter;non-renewal of personal property leases and software licenses used by FedFirstFirst West Virginia in connection with its systems operations,operations; retention of outside consultants and additional employees to assist with the conversion,conversion; and outsourcing, as appropriate, of proprietary or self-provided system services, it being understood that FedFirstFirst West Virginia shall not be obligated to take any such action prior to the Effective Time and, unless FedFirstFirst West Virginia otherwise agrees and provided it is permitted by applicable law, no conversion shall take place prior to the Effective Time. CB and Community Bank shall indemnify FedFirstFirst West Virginia for any reasonableout-of-pocket fees, expenses, or charges that FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary may incur as a result of taking, at the request of CB or any CB Subsidiary, any action to facilitate the conversion.

6.3.3 FedFirst6.2.3    First West Virginia shall provide CB, within fifteen (15) Business Days of the end of each calendar month, a written list of nonperformingnon-performing assets (the term “nonperforming“non-performing assets,” for purposes of this subsection, means (i) loans that are “troubled debt restructuring”restructurings” as defined in Accounting Standards Codification310-40, (ii) loans on nonaccrual,non-accrual, (iii) real estate owned, (iv) all loans ninety (90) days or more past due as of the end of such month and (v) and impaired loans. On a monthly basis, FedFirstFirst West Virginia shall provide CB with a schedule of all (x) loan grading changes and (y) loan approvals, which schedule shall indicate the loan amount, loan type and other material features of the loan. FedFirstFirst West Virginia will promptly prepare and provide CB with the minutes of all FedFirstFirst West Virginia and FFSBProgressive Bank officer and director loan committee meetings.

6.3.4 FedFirst6.2.4    First West Virginia shall promptly inform CB, to the extent permitted by applicable law, upon receiving notice of any legal, administrative, arbitration or other proceedings, demands, notices, audits or investigations (by any federal, state or local commission, agency or board) relating to the alleged liability of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary under any labor or employment law.all applicable laws.

6.4

6.3    Access to Properties and Records.

Subject to Section 11.1, FedFirstFirst West Virginia shall permit CB access upon reasonable notice and at reasonable times to its properties and those of the FedFirstFirst West Virginia Subsidiaries, and shall disclose and make available to CB during normal business hours all of its books and records relating to the assets, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors’ and stockholders’ meetings (other than minutes that discuss any of the transactions contemplated by this Agreement or any other subject matter that FedFirstFirst West Virginia reasonably determines should be kept confidential), organizational documents, bylaws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees, and any other business activities or prospects in which CB may have a reasonable interest; provided, however, that FedFirstFirst West Virginia shall not be required to take any action that would provide access to or to disclose information where such access or disclosure, in FedFirst’sFirst West Virginia’s reasonable judgment, would interfere with the normal conduct of FedFirst’sFirst West Virginia’s business or would violate or prejudice the rights or business interests or confidences of any customer or other Person or entity or would result in the waiver by it of the privilege protecting communications between it and any of its counsel or contravene any applicable law. FedFirstFirst West Virginia shall provide and shall request its auditors to provide CB with such historical financial information regarding it (and related audit reports and consents) as CB may reasonably request for Securities Law disclosure purposes. CB shall use commercially reasonable efforts to minimize any interference with FedFirst’sFirst West Virginia’s regular business operations during any such access to FedFirst’sFirst West Virginia’s property, books and records. FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary shall permit CB, at CB’s expense, to (i) cause a Phase I or Phase II environmental assessment to be performed at any physical location owned or occupied by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary and (ii) cause an appraisal to be performed in respect of any real property owned by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary. CB shall indemnify First West Virginia and its Subsidiaries for all costs and expenses associated with returning any physical location to its previous condition.

6.56.4    Financial and Other Statements.

6.5.16.4.1    Promptly upon receipt thereof, FedFirstFirst West Virginia will furnish to CB copies of each annual, interim or special audit of the financial statements of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries made by its independent registered public accountants and copies of all internal control reports submitted to FedFirstFirst West Virginia by such accountants, or by any other accounting firm rendering internal audit services, in connection with each annual, interim or special audit of the financial statements of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries made by such accountants.

6.5.26.4.2    As soon as reasonably available, but in no event later than the date such documents are filed with the FDIC, OCC or FRB, FedFirstFirst West Virginia will deliver to CB the FedFirstFirst West Virginia Regulatory Report filed by FedFirstFirst West Virginia or FFSB.Progressive Bank. Within twenty-five (25) days after the end of each month, FFSBProgressive Bank will deliver to CB a consolidating balance sheet and a consolidating statement of operations, without related notes, for such month prepared in accordance with current financial reporting practices, as well as amonth-end and year to date comparison to budget.

6.5.3 FedFirst shall permit CB to review substantially final drafts of its quarterly and annual reports on Forms 10-Q and 10-K, respectively, at least two (2) Business Days prior to the date such documents are filed with the SEC. FedFirst promptly will advise upon receipt and permit review by CB of any inquiry or examination report of any Bank Regulator with respect to the condition or activities of FedFirst or FFSB.

6.5.4

6.4.3    With reasonable promptness, FedFirstFirst West Virginia will furnish to CB such additional financial data that FedFirstFirst West Virginia possesses and as CB may reasonably request, including without limitation, detailed monthly financial statements and loan reports and detailed deposit reports.

6.66.5    Maintenance of Insurance.

FedFirstFirst West Virginia shall use commercially reasonable efforts to maintain, and to cause the FedFirstFirst West Virginia Subsidiaries to maintain, insurance in such amounts as are reasonable to cover such risks as are customary in relation to the character and location of its properties and the nature of its business, with such coverage and in such amounts not less than that maintained by FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries as of the date of this Agreement and set forth onFedFirstFirst West Virginia Disclosure Schedule 4.10.3. FedFirstFirst West Virginia will promptly inform CB if FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary receives notice from an insurance carrier that (i) an insurance policy will be canceled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to any policy of insurance will be substantially increased.

6.76.6    Disclosure Supplements.

From time to time prior to the Effective Time, FedFirstClosing Date, First West Virginia will promptly supplement or amend the FedFirstFirst West Virginia Disclosure Schedule delivered in connection herewith with respect to any matter hereafter arising which,that, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such FedFirstFirst West Virginia Disclosure Schedule or whichthat is necessary to correct any information in such FedFirstFirst West Virginia Disclosure Schedule whichthat has been rendered materially inaccurate thereby. No supplement or amendment to such FedFirstFirst West Virginia Disclosure Schedule shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article IX.

6.86.7    Consents and Approvals of Third Parties.

FedFirstFirst West Virginia shall use its commercially reasonable efforts, and shall cause each FedFirstFirst West Virginia Subsidiary to use its commercially reasonable efforts, to obtain as soon as practicable all consents and approvals of any other Persons or entities necessary for the consummation of the transactions contemplated by this Agreement. 

6.96.8    All Reasonable Efforts.

Subject to the terms and conditions herein provided, FedFirstFirst West Virginia agrees to use, and agrees to cause each FedFirstFirst West Virginia Subsidiary to use, all reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the transactions contemplated by this Agreement.

6.106.9    Failure to Fulfill Conditions.

If FedFirstFirst West Virginia determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify CB.

6.11

6.10    No Solicitation.

6.10.1    From and after the date hereofof this Agreement until the earlier to occur of the Closing or the termination of this Agreement FedFirstin accordance with its terms, First West Virginia shall not, and shall not authorize or permit any FedFirst Subsidiaryof its Subsidiaries or any of their respectiveits Subsidiaries’ officers, directors or employees representatives, agents and affiliates (including, without limitation,or any investment banker, financial advisor, attorney, accountant or accountantother representative retained by FedFirstFirst West Virginia or any of the FedFirst Subsidiaries),its Subsidiaries to, directly or indirectly, (i) solicit, initiate, solicitinduce or knowingly encourage, (including by way of furnishing non-public information or assistance)take any other action to facilitate, any inquiries, offers, discussions or the making of any proposal that constitutes or maycould reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any information or data regarding First West Virginia or any of its Subsidiaries or afford access to any person in connection with or in response to an Acquisition Proposal or an inquiry or indication of interest that would reasonably be expected to lead to an Acquisition Proposal, (iii) continue or otherwise participate in any discussions or negotiations, or otherwise communicate in any way with any person (other than CB), regarding an Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal, (as defined below),(v) release any person from, waive any provisions of, or fail to enforce any confidentiality agreement or standstill agreement to which First West Virginia or any of its subsidiaries is a party or (vi) enter into or maintainconsummate any agreement, agreement in principle, letter of intent, arrangement or continueunderstanding contemplating any Acquisition Proposal or requiring First West Virginia to abandon, terminate or fail to consummate the transactions contemplated hereby. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any officer, director or employee of First West Virginia or any of its Subsidiaries or any investment banker, financial advisor, attorney, accountant or other representative retained by First West Virginia or any of its Subsidiaries shall be deemed to be a breach of this Section 6.10 by First West Virginia. Notwithstanding the foregoing, prior to the adoption and approval of this Agreement by First West Virginia’s stockholders at the First West Virginia Stockholder Meeting, this Section 6.10(a) shall not prohibit First West Virginia from furnishingnon-public information regarding First West Virginia and its Subsidiaries to, or entering into discussions or negotiate with, any Personperson in furtheranceresponse to an Acquisition Proposal that is submitted to First West Virginia by such person (and not withdrawn) if (1) the Acquisition Proposal constitutes or is reasonably expected to result in a Superior Proposal, (2) First West Virginia has not breached any of such inquiries or agree to or endorse any Acquisition Proposal;provided,however, that nothing containedthe covenants set forth in this Section 6.11 shall prohibit the6.10, (3) First West Virginia’s Board of Directors of FedFirst from (i) complying with its disclosure obligations under federal or state law; or (ii) prior to the time that the FedFirst Stockholders Meeting has occurred, furnishing information to, or engaging in discussions or negotiations with, any Person that makes an Acquisition Proposal, if, and only to the extent that, (A) the Board of Directors of FedFirst determines in good faith, (afterafter consultation with and after receiving the advice of its financial andoutside legal advisors), taking into account all legal, financial and regulatory aspects ofcounsel, that the proposal and the Person making the proposal, that such proposal, if consummated, isfailure to do so would be reasonably likely to result in a transaction more favorable to FedFirst’s stockholders from a financial pointviolation of view than the Merger; and (B) such Acquisition Proposal was not solicited by FedFirst and did not otherwise result from a breach of this Section 6.11 by FedFirst (such proposal that satisfies clauses (A) and (B) being referred to herein as a “Superior Proposal”); andprovided,further, nothing contained in this Agreement shall prohibit FedFirst from (i) issuing a “stop-look-and-listen communication” pursuant to Rule 14d-9(f) or taking and disclosing to its stockholders a position as required by Rule 14d-9 or Rule 14e-2 promulgated under the Exchange Act or (ii) otherwise disclosing any information to its stockholders that the Board of Directors of FedFirst determines in good faith (after consultation with its outside legal counsel) that it is required to disclose in order to not breach its fiduciary dutiesobligations to FedFirst’sthe First West Virginia’s stockholders under applicable law, subjectand (4) at least two (2) Business Days prior to compliancefurnishing anynon-public information to, or entering into discussions with, such person, First West Virginia gives CB written notice of the requirementsidentity of this Section 6.11. FedFirst shall promptly, butsuch person and of First West Virginia’s intention to furnishnon-public information to, or enter into discussions with, such person and First West Virginia receives from such person an executed confidentiality agreement on terms no more favorable to such person than the confidentiality agreement between CB and First West Virginia is to CB.

6.10.2    First West Virginia will notify CB in no event later thanwriting within two (2) calendar days notifyof receipt of any Acquisition Proposal, any request fornon-public information that could reasonably be expected to lead to an Acquisition Proposal, or any inquiry with respect to or that could reasonably be expected to lead to an Acquisition Proposal, including, in each case, the

identity of the person making such Acquisition Proposal, request or inquiry and the terms and conditions thereof and shall provide to CB of such inquiries, proposals or offersany written materials received by any such information requested from, or any such discussions or negotiations sought to be initiated or continued with FedFirstFirst West Virginia or any of its representatives indicating,Subsidiaries in connection with such notice, the name of such Person and the material terms and conditionstherewith. First West Virginia will keep CB informed immediately of any inquiries, proposalsdevelopments with respect to any such Acquisition Proposal, request or offers. In addition, priorinquiry orally (within one (1) calendar day) upon the occurrence thereof.

6.10.3    First West Virginia will immediately cease and cause to furnishingbe terminated any information to, or engaging inexisting activities, discussions or negotiations with any such Person, FedFirst shall receive from such Person an executed confidentiality agreement in form and substance identical in all material respects to the Confidentiality Agreement. For purposes of this Agreement, “Acquisition Proposal” shall mean any proposal or offer as to any of the following (other than the transactions contemplated hereunder) involving FedFirst or any FedFirst Subsidiary: (i) any merger, consolidation, share exchange, business

combination, or other similar transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 25% or more of the assets of FedFirst and the FedFirst Subsidiaries, taken as a whole, in a single transaction or series of transactions; (iii) any tender offer or exchange offer for 25% or more of the outstanding shares of capital stock of FedFirst or the filing of a registration statement under the Securities Act in connection therewith; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

6.12FedFirst ESOP Termination.

The FedFirst ESOP shall be terminated no later than three (3) Business Daysparties conducted prior to the Effective Time (the “ESOP Termination Date”). On the ESOP Termination Date, FedFirst shall direct the FedFirst ESOP trustee(s) to remit a sufficient number of shares of FedFirst Common Stock held by the ESOP’s Unallocated Company Stock Suspense Account (as defined in Section 1.50 of the FedFirst ESOP) to FedFirst or any other lender (as applicable) to repay the full outstanding balance of the FedFirst ESOP loan(s). All remaining shares of FedFirst Common Stock held by the FedFirst ESOP as of the Effective Time shall be converted into the right to receive the Merger Consideration. As soon as practicable, FedFirst shall file or cause to be filed all necessary documents with the IRS for a determination letter for termination of the FedFirst ESOP. As soon as practicable following the receipt of a favorable determination letter from the IRS regarding the qualified status of the FedFirst ESOP upon its termination, the account balances in the FedFirst ESOP shall either be distributed to participants and beneficiaries or transferred to an eligible tax-qualified retirement plan or individual retirement account as a participant or beneficiary may direct. FedFirst and FFSB shall adopt the necessary amendment(s) and board resolution(s) to effect the provisions of this Section 6.12. From the date of this Agreement until the ESOP Termination Date, contributions by FedFirst orwith respect to any FedFirst Subsidiary to the FedFirst ESOP shall be made solely in accordance with the FedFirst ESOP loan amortization schedule(s) in effect as of the dateforegoing.

6.11    Termination of this Agreement.

6.13FedFirst 401(k) Plan Termination.Certain First West Virginia Benefit Plans

6.11.1    The FedFirstFirst West Virginia 401(k) Plan shall be terminated immediately prior to the Effective Time (the “401(k) Plan Termination Date”). As soon as practicable FedFirstthereafter, CB shall file or cause to be filed all necessary documents with the IRS for a determination letter that the termination of the Plan as of the 401(k) Plan Termination Date will not adversely affect the FedFirstFirst West Virginia 401(k) Plan’s qualified status. As soon as practicable following receipt of a favorable determination letter from the IRS regarding the qualified status of the FedFirstFirst West Virginia 401(k) Plan upon termination, the account balances in the FedFirstFirst West Virginia 401(k) Plan shall be distributed to participants and beneficiaries (and alternative payees, if any,) or transferred to an eligibletax-qualified plan or individual retirement account as a participant or beneficiary (or alternative payee, as the case may direct. FedFirstbe,) may direct, and FFSBin accordance with Plan terms. First West Virginia and Progressive Bank shall adopt the necessary amendment(s) and board resolution(s) to effect the provisions of this Section 6.13.6.11.1.

6.146.11.2 As of the Effective Time, First West Virginia shall, in cooperation with and pursuant to the irrevocable action of CB, terminate each First West VirginiaNon-qualified Deferred Compensation Plan, and the amounts due thereunder shall be paid in a lump sum on January 2, 2019 to the participants therein, in accordance with Section 409A of the Code. First West Virginia and Progressive Bank shall adopt the necessary amendment(s) and board resolution(s) to effect the provisions of this Section 6.11.2, except where doing so would violate Section 409A of the Code.

6.11.3 If requested by CB in writing at least thirty (30) days prior to the Effective Time, First West Virginia shall cause the Progressive Bank Executive Supplemental Life Insurance Plan to be terminated in accordance with its terms, effective immediately prior to the Effective Time.

6.11.4 If requested by CB in writing at least thirty (30) days prior to the Effective Time, First West Virginia shall cause Progressive Bank to send notice of its withdrawal from participation in any First West Virginia Benefit Plan that is a multiple employee welfare arrangement (within the meaning of Section 3(40) of ERISA) in accordance with its terms, effective immediately prior to the Effective Time.

6.12    Stockholder Litigation.

FedFirstFirst West Virginia shall promptly notify CB of any stockholder litigation against FedFirstFirst

West Virginia and/or its directors or Affiliates relating to the transactions contemplated by this Agreement and shall give CB the opportunity to participate at its own expense in the defense or settlement of any such litigation. No such settlement shall be agreed to without CB’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

ARTICLE VII

COVENANTS OF CB

7.1Conduct of Business.

7.1.1Covenants of CB.CB.

(A)    During the period from the date of this Agreement to the Effective Time, except with the written consent of FedFirst,First West Virginia, which consent will not be unreasonably withheld, conditioned or delayed, CB will, and it will cause each CB Subsidiary to: operate its business only in the usual, regular and ordinary course of business; use reasonable best efforts to preserve intact its business organization and assets and maintain its rights and franchises; and voluntarily take no action whichthat would (i) change or waive any provision of its certificatearticles of incorporation (or articles of organization in the case of Community Bank) or bylaws in any way adverse to the rights of FedFirst shareholders,First West Virginia stockholders, except as required by law; (ii) materially adversely affect the ability of the parties to obtain the Regulatory Approvals or materially increase the period of time necessary to obtain such approvalsthe Regulatory Approvals or consummate the Merger; (iii) materially adversely affect its ability to perform its covenants and agreements under this

Agreement; (iv) result in the representations and warranties contained in Article V of this Agreement not being true and correct on the date of this Agreement or at any future date on or prior to the Closing Date or in any of the conditions set forth in Article IX hereof not being satisfied; or (v) prevent or impede, or be reasonably likely to prevent or impede, the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

(B)    Prior to the Effective Time, CB shall deposit, or shall cause to be deposited, with the Exchange Agent the Exchange Fund.

(C) CB agrees that from the date of this Agreement to the Effective Time, except as otherwise specifically permitted or required by this Agreement or consented to by FedFirst in writing, which consent (which may include consent via electronic mail) will not be unreasonably withheld, conditioned or delayed), it will not, and it will cause each of the CB Subsidiaries not to issue any shares of CB Common Stock, or issue or grant any Right or agreement of any character relating to its authorized or issued capital stock or any securities convertible into shares of such stock, or split, combine or reclassify any shares of capital stock, except that CB may issue shares of CB Common Stock upon the valid exercise of presently outstanding options to acquire CB Common Stock.

7.2Access to Properties and Records.

Subject to Section 11.1, CB shall permit FedFirst access upon reasonable notice and at reasonable times to its properties and those of the CB Subsidiaries, and shall disclose and make available to FedFirst during normal business hours all of its books and records relating to the assets, properties, operations, obligations and liabilities, including, but not limited to, all books of account (including the general ledger), tax records, minute books of directors’ and shareholders’ meetings (other than minutes that discuss any of the transactions contemplated by this Agreement or any other subject matter that CB reasonably determines should be kept confidential), organizational documents, bylaws, material contracts and agreements, filings with any regulatory authority, litigation files, plans affecting employees, and any other business activities or prospects in which FedFirst may have a reasonable interest; provided, however, that CB shall not be required to take any action that would provide access to or to disclose information where such access or disclosure, in CB’s reasonable judgment, would interfere with the normal conduct of CB’s business or would violate or prejudice the rights or business interests or confidences of any customer or other Person or entity or would result in the waiver by it of the privilege protecting communications between it and any of its counsel or contravene any applicable law.

7.3Financial and Other Statements.

7.3.17.2.1    Promptly upon receipt thereof, CB will furnish to FedFirstFirst West Virginia copies of each annual, interim or special audit of the financial statements of CB and the CB Subsidiaries made by its independent registered public accountants and copies of all internal control reports submitted to CB by such accountants, or by any other accounting firm rendering internal audit services, in connection with each annual, interim or special audit of the financial statements of CB and the CB Subsidiaries made by such accountants.

7.3.27.2.2    As soon as reasonably available, but in no event later than the date such documents are filed with the PDOB, FDIC or FRB, CB will deliver to FedFirstFirst West Virginia the CB Regulatory Report filed by CB or Community Bank. Within twenty-five (25) days after the end of each month, CB will deliver to FedFirst a consolidating balance sheet and a consolidating statement of operations, without related notes, for such month prepared in accordance with current financial reporting practices, as well as a month-end and year to date comparison to budget.

7.3.3 With reasonable promptness, CB will furnish to FedFirst such additional financial data that CB possesses and as FedFirst may reasonably request, including without limitation, detailed monthly financial statements and loan reports and detailed deposit reports.

7.47.3    Disclosure Supplements.

From time to time prior to the Effective Time,Closing Date, CB will promptly supplement or amend the CB Disclosure Schedule delivered in connection herewith with respect to any matter hereafter arising which,that, if existing, occurring or known at the date of this Agreement, would have been required to be set forth or described in such CB Disclosure Schedule or whichthat is necessary to

correct any information in such CB Disclosure Schedule whichthat has been rendered materially inaccurate thereby. No supplement or amendment to such CB Disclosure Schedule shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article IX.

7.57.4    Consents and Approvals of Third Parties.

CB shall use its commercially reasonable efforts, and shall cause each CB Subsidiary to use its commercially reasonable efforts, to obtain as soon as practicable all consents and approvals of any other Persons necessary for the consummation of the transactions contemplated by this Agreement.

7.67.5    All Reasonable Efforts.

Subject to the terms and conditions herein provided, CB agrees to use and agrees to cause each CB Subsidiary to use reasonable best efforts in good faith to take, or cause to be taken, all action and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the transactions contemplated by this Agreement as promptly as practicable.

7.77.6    Failure to Fulfill Conditions.

If CB determines that a condition to its obligation to complete the Merger cannot be fulfilled and that it will not waive that condition, it will promptly notify FedFirst.First West Virginia. 

7.87.7    Employee Matters.

7.8.17.7.1    Except as otherwise provided in this Agreement, CB will review all the FedFirstFirst West Virginia Benefit Plans to determine whether to maintain, terminate or continue such plans after the Effective Time. In the event that any FedFirst Benefit Plan is frozen or terminated by CB, CB will use best efforts so that the former employees of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary who become employees of CB or Community Bank after the Effective Time (“Continuing Employees”) will become eligible to participate in any CB Benefit Plan of similar character (to extent that one exists, other than any CB or CB Subsidiarynon-qualified deferred compensation plan, employment agreement, change in control agreement or equity incentive plan or other similar-typesimilar type of arrangement).arrangement for “top hat” or key employees), to the extent such participation would not result in the duplication of benefits for the same period of service. Continuing Employees who become participants in a CB Benefits Plan shall for purposes of determining eligibility for and any applicable vesting periods of such employee benefits only (and not for benefit accrual purposes) be given credit for meeting eligibility and vesting requirements (but not for benefit accrual purposes, except as set forth onCB Disclosure Schedule 7.7.1) in such plans for service as an employee of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary prior to the Effective Time. This Agreement shall not be construed to limit the ability of CB or Community Bank to terminate the employment of any employee of FedFirstFirst West Virginia or FedFirstFirst West Virginia Subsidiary or to review any FedFirstFirst West Virginia Benefit Plan from time to time and to make such changes (including terminating any such plan) as they deem appropriate. Except to the extent of commitments herein or other contractual commitments, if any, specifically made or assumed by CB hereunder or by operation of law, CB or any CB Subsidiary shall have no obligation arising from and after the Effective Time to continue in its employ or in any specific job or to provide to any specified level of compensation or any incentive payments, benefits or perquisites to any Person who is an employee of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary as of the Effective Time.

7.8.2 CB shall honor the terms of the change in control severance agreements listed onFedFirst Disclosure Schedule 4.13.1 unless superseded by an agreement entered into with CB or any CB Subsidiary. The estimated amounts payable under such change in control severance agreements are provided in the Benefits Schedule.

7.8.3 CB shall honor the terms of the FedFirst Severance Plan, as amended as of the date hereof, provided, however that any employee of FedFirst or any FedFirst Subsidiary receiving a payment thereunder enters into a release of claims against CB, Community Bank and their affiliates in a form satisfactory to CB. The estimated amounts payable under the FedFirst Severance Plan are set forth in the Benefits Schedule.

7.8.4 In the event of any termination of any FedFirst or any FedFirst Subsidiary health plan or consolidation of any such plan with any CB or Community Bank health plan,7.7.2    CB shall make available to Continuing Employees and their dependents employer-provided health coverage on the same basis as it provides such coverage to CB and Community Bank employees. Unless a Continuing Employee affirmatively terminates coverage under a FedFirstFirst West Virginia or FedFirstFirst West Virginia Subsidiary health plan prior to the time that such Continuing Employee becomes eligible to participate in the CB health plan, no coverage of any of the Continuing Employees or their dependents shall terminate under any of the FedFirstFirst West Virginia or FedFirstFirst West Virginia Subsidiary health plans prior to the time such Continuing Employees and their dependents become eligible to participate in the health plans, programs and benefits common to all employees of CB or Community Bank and their dependents. Continuing Employees who become covered under health plans, programs and benefits of CB or any of its Subsidiaries shall receive credit for anyco-payments and deductibles paid under First West Virginia’s health plan for the plan year in which coverage commences under CB’s health plan and shall not be subject to anypre-existing conditions under any such plans. In the event of a termination or consolidation of any FedFirstFirst West Virginia or FedFirstFirst West Virginia Subsidiary health plan, terminated employees of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary and qualified beneficiaries will have the right to continued coverage under group health plans of CB in accordance with COBRA.

7.8.5FedFirst Disclosure Schedule 4.13.1 provides each individual (“Participant”) who has entered into a Director Fee Continuation Agreement with FedFirst or any FedFirst Subsidiary (collectively, the “Director Agreements”), and the projected accrued benefits payable thereunder are set forth in the Benefits Schedule. CB shall on the Effective Time: (i) take such actions as permitted to irrevocably terminate the Director Agreements; and (ii) subject to the execution of an acknowledgment of payment agreement with CB and Community Bank in a form satisfactory to the parties, distribute to each Participant in accordance with the terms of the Director Agreements and Section 409A of the Code, a lump sum cash amount equal to the liquidation value of such Participant’s accrued benefit. The liquidation value of each Participant’s accrued benefit under the Director Agreement to be paid at the Effective Time shall be determined by FedFirst and approved by CB by no later than five (5) business days prior to the Effective Time.

7.8.6Executive Officers. Community Bank shall take all appropriate action so that, immediately following the Effective Time: (i) Patrick G. O’Brien shall serve as Executive Vice President and Chief Operating Officer of Community Bank; and (ii) Richard B. Boyer shall serve as Vice President of Insurance of Community Bank.

7.8.7Corporate Governance. In addition to the obligations of CB set forth in Section 2.4, CB shall cause Community Bank, prior to the Closing Date, to take all appropriate action so that, effective immediately after the Closing Date, Patrick G. O’Brien, Richard B. Boyer, John J. LaCarte and John M. Swiatek shall be appointed to the Board of Directors of Community Bank, in each case until their respective successors are duly elected or appointed and qualified, and CB, as the sole shareholder of Community Bank, shall vote its shares of Community Bank in favor of the election of such persons as directors of Community Bank. The Board of Directors of CB shall appoint John L. LaCarte and John M. Swiatek to one or more of the Executive Committee, Nominating Committee, Audit Committee and Governance Committee.

7.8.8FedFirst ESOP and FedFirst 401(k) Plan.7.7.3    CB agrees to take all other actions necessary to complete the termination of the FedFirst ESOP and FedFirstFirst West Virginia 401(k) Plan, including filing final Form 5500s,Forms 5500 and 5310, that arise or are ongoing after the Effective Time. CB agrees to permit participants in the FedFirstFirst West Virginia 401(k) Plan and/or FedFirst ESOP who are Continuing Employees to roll over their account balances from such plans to the CB 401(k) Plan, to the extent permitted by applicable law and in accordance with the CB 401(k) Plan. Prior to the Effective Time, CB or Community Bank shall take any necessary action, including amending the CB 401(k) Plan, to provide that: (i) all Continuing Employees are given service credit with FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiary for purposes of determining eligibility and vesting under the CB 401(k) Plan, and (ii) Continuing Employees who satisfy the eligibility requirements of the CB 401(k) Plan shall enter the CB 401(k) Plan immediately following the Effective Time.

7.97.7.4    CB agrees that each full-time First West Virginia employee who is involuntarily terminated by CB (other than for “Cause” as determined by CB ) at or within one year of the Effective Time and who is not covered by a separate severance, change in control or employment agreement or arrangement that specifically provides for severance payment on termination of employment, shall, upon executing an appropriate release in the form reasonably determined by CB, receive a severance payment equal to two weeks of base pay (at the rate in effect on the termination date) for each year of service at First West Virginia, with a minimum of four weeks of base pay and a maximum equal to 26 weeks of base pay. For purposes of calculating the number of years of service, fractional years of service shall be rounded up or down to the nearest full year. For purposes of calculating base pay, First West Virginia employees who are paid on an hourly basis shall be deemed to have a base pay equal to the employee’s average weekly compensation over the two months prior to the termination date.

7.7.5    CB agrees to make payments to certain specified individuals in the form and amounts as set forth onCB Disclosure Schedule 7.7.5, and such individuals set forth in CB Disclosure Schedule 7.7.5 shall not be eligible for severance pursuant to Section 7.7.4 hereof.

7.7.6    CB shall establish a retention/stay bonus pool in an amount as set forth onCB Disclosure Schedule 7.7.6 for employees of First West Virginia and its Subsidiaries as designated by CB in consultation with and First West Virginia to help retain key employees. The amount and payment date of the retention/stay bonus for each such employee shall be determined by CB in consultation with First West Virginia, but in the aggregate shall not exceed the amount provided onCB Disclosure Schedule 7.7.6.

7.7.7    As soon as reasonably practical after the Effective Time, CB agrees to form an Advisory Board (the “Advisory Board”), which shall be comprised of certain members of the Board of Directors of First West Virginia as of the date of this Agreement who do not become members of the Board of Directors of CB and representatives from the communities served by First West Virginia, in each case as selected by CB. CB shall maintain the Advisory Board for a period of at least twelve (12) months after the Effective Time. The Advisory Board shall meet on a quarterly basis and shall receive compensation for such service in an amount to be determined by CB prior to the Effective Time.

7.8    Directors and Officers Indemnification and Insurance.

7.9.17.8.1    For six (6) years following the Effective Time, CB shall maintain in effect First West Virginia’s current directors’ and officers’ liability insurance covering the persons who are presentlyeach person currently covered by FedFirst’s currentFirst West Virginia’s directors’ and officers’ liability insurance policy with respect to actions, omissions,claims against such persons arising from facts or events occurring at or matters occurring prior to the Effective Time on terms which are at least substantially equivalent to the terms of said current policy; Time;provided,however, that in no event shall CB be required to expend annuallyin the aggregate pursuant to this Section 7.9.17.8.1 more than an amount equal to 200% of the current annual amount expendedpremiums currently paid by FedFirst with respect toFirst West Virginia for such insurance as set forth onFedFirst Disclosure Schedule 7.9.1 (the “Maximum Amount”); provided, further, thatand, if the amount of the aggregate premium necessaryCB is unable to maintain or procure such insurance coverage exceeds the Maximum Amount,policy as a result of this proviso, CB shall maintainobtain the most advantageous policies of directors and officers insurance obtainable for an annual premiumas is available by payment of the amount equal to the Maximum Amount. In lieu of the foregoing,aforementioned cap;provided,further, that CB or FedFirst upon the consent of CB, which consent will not be unreasonably withheld, may (i) request that First West Virginia obtain at or prior to the Effective Time a prepaid “tail” policy providing single limit equivalent coverage to that described in the preceding sentence for a premium cost not to exceed 450% of the annual premium most recently paid by FedFirst. In connection with the foregoing, FedFirst agrees in order for CB to fulfill its agreement to providean extended reporting period endorsement under First West Virginia’s existing directors’ and officers’ liability insurance policy or (ii) substitute therefor “tail” policies for six (6) years to provide such insurer or substitute insurer with such representations as such insurer may request withthe material terms of which, including coverage and amount, are no less favorable in any material respect to such person than First West Virginia’s existing insurance policies as of the reporting of any prior claims.date hereof.

7.9.27.8.2    In addition to Section 7.9.1, CB shall, from and after7.8.1, following the Effective Date, CB shall to the fullest extent permitted under applicable law and the current provisions of the articles of incorporation and bylaws (or comparable organizational documents) of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries (to the extent not prohibited by federal law), indemnify, defend and hold harmless each Person who is now, or who has been at any time before the date hereof or who becomes before the Effective Time, an officer or director of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary (the “Indemnified Parties”) against all losses, claims, damages, costs, expenses (including attorneys’ fees), liabilities or

judgments or amounts that are paid in settlement (which settlement shall require the prior written consent of CB, which consent shall not be unreasonably withheld, conditioned or delayed) of or in connection with any claim, action, suit, proceeding or investigation, whether

civil, criminal, or administrative (each, a “Claim”) in which an Indemnified Party is or is threatened to be made a party or witness in whole or in part or arising in whole or in part out of the fact that such Person is or was an officer or director of FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary or was prior to the Effective Time serving at the request of any such party as a director, officer, employee, trustee or partner of another Person or benefit plan if such Claim pertains to any matter of fact arising, existing, or occurring before the Effective Time (including, without limitation, the Merger and the other transactions contemplated hereby), regardless of whether such Claim is asserted or claimed before, or after, the Effective Time. Any Indemnified Party wishing to claim indemnification under this Section 7.9.27.8.2 upon learning of any Claim, shall notify CB (but the failure so to notify CB shall not relieve itCB from any liability whichthat it may have under this Section 7.9.2,7.8.2, except to the extent such failure materially prejudices CB). In the event of any such Claim (whether arising before or after the Effective Time) (1) CB shall have the right to assume the defense thereof (in which event the Indemnified Parties will cooperate in the defense of any such matter) and upon such assumption CB shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if CB elects not to assume such defense, or counsel for the Indemnified Parties reasonably advises the Indemnified Parties that there are or may be (whether or not any have yet actually arisen) issues whichthat raise conflicts of interest between CB and the Indemnified Parties, the Indemnified Parties may retain counsel reasonably satisfactory to them, and CB shall pay the reasonable fees and expenses of such counsel for the Indemnified Parties, (2) except to the extent otherwise required due to conflicts of interest, CB shall be obligated pursuant to this paragraph to pay for only one (1) firm of counsel for all Indemnified Parties unless there is a conflict of interest that necessitates more than one law firm, and (3) CB shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). CB shall also advance expenses as incurred in each case upon receipt of an undertaking from the Indemnified Party to repay such advanced expenses if it is determined by a final and nonappealable judgment of a court of competent jurisdiction that such Indemnified Party was not entitled to indemnification hereunder.

7.9.37.8.3    If either CB or any of its successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving company or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of CB shall assume the obligations set forth in this Section 7.9.7.8.

7.9.47.8.4    The obligations of CB provided under this Section 7.97.8 are intended to be enforceable against CB directly by the Indemnified Parties and shall be binding on all respective successors and permitted assigns of CB.

7.107.8.5    Any indemnification payments made pursuant to this Section 7.8 are subject to and conditioned on their compliance with Section 18(k) of the Federal Deposit Insurance Act (12 U.S.C. 1828(k)) and the regulations promulgated thereunder by the Federal Deposit Insurance Corporation (12 C.F.R. Part 359).

7.9    Stock Listing.

CB agrees to file with the Nasdaq Stock Market, prior to the Effective Time, an applicationa notification form for the listing on the NASDAQ Global Market (or such other national securities exchange on which the shares of CB Common Stock shall be listed as of the Closing Date) of theall shares of CB Common Stock to be issued in the Merger.

7.117.10    Reservation of Stock.

CB agrees at all times from the date of this Agreement until the Merger Consideration has been paid in full to reserve a sufficient number of shares of CB Common Stock to fulfill its obligations under this Agreement.

7.127.11    Communications to FedFirstFirst West Virginia Employees; Training.

CB and FedFirstFirst West Virginia agree that as promptly as practicable following the execution of this Agreement, meetings with employees of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries shall be held at such locations as CB and FedFirstFirst West Virginia shall mutually agree, provided that representatives of FedFirstFirst West Virginia shall be permitted to attend such meetings. CB and FedFirstFirst West Virginia shall mutually agree in advance as to the scope and content of all communications to the employees of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries regarding this Agreement and the transactions contemplated thereunder. At mutually agreed upon times following execution of this Agreement, representatives of CB shall be permitted to meet with the employees of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries to discuss employment opportunities with CB, provided that representatives of FedFirstFirst West Virginia shall be permitted to attend any such meeting. From and after the first date on which all Regulatory Approvals (and waivers, if applicable) the CB Stockholder Approval and the FedFirstFirst West Virginia Stockholder Approval (disregarding any waiting period) have been obtained, CB shall also be permitted to conduct training sessions outside of normal business hours or at other times as FedFirstFirst West Virginia may agree, with the employees of FedFirstFirst West Virginia and the FedFirstFirst West Virginia Subsidiaries and may conduct such training seminars at any branch location of FFSB;Progressive Bank; provided that CB will in good faith attempt to schedule such training sessions in a manner whichthat does not unreasonably interfere with FFSB’sProgressive Bank’s normal business operations.

7.13Exemption from Liability Under Section 16(b).

Prior to the Effective Time, CB shall take all steps as may be required to cause any acquisitions of CB Common Stock resulting from the transactions contemplated by this Agreement by each director or officer of FedFirst who becomes subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to CB to be exempt under Rule 16b-3 promulgated under the Exchange Act.

7.14Amendment of Articles of Incorporation.

As promptly as practicable following the execution of this Agreement, CB will take all steps necessary to duly call, give notice of, convene and hold a special meeting of its shareholders for the purpose of amending its Articles of Incorporation to remove Article 7 thereof (the “CB Amendment”). The Board of Directors of CB shall recommend to CB’s shareholders the approval of the CB Amendment and use its best efforts to obtain the approval of CB’s shareholders. In the event that approval is not obtained at such shareholder meeting, CB shall include a proposal to approve (and the Board of Directors shall recommend approval of) the CB Amendment at its first annual meeting of shareholders after the Closing Date.

ARTICLE VIII

REGULATORY AND OTHER MATTERS

8.1MeetingMeetings of Stockholders.

FedFirst8.1.1    CB and First West Virginia will each: (i) take all steps necessary to duly call, give notice of, convene and hold a special meeting of its stockholders as promptly as practicable after the Merger Registration Statement is declared effective by the SEC for the purpose of consideringapproving this Agreement and the Merger (the meeting of the stockholders of CB referred to herein as the FedFirstCB Stockholders Meeting” and the meeting of the stockholders of First West Virginia referred to herein as the “First West Virginia Stockholders Meeting”), except as otherwise provided in this section,section; (ii) subject to Section 8.1.2 in the following sentence,case of First

West Virginia, in connection with the solicitation of proxies, with respect to the FedFirst Stockholders Meeting, have its Board of Directors recommend approval of this Agreement to its respective stockholders; (iii) include such recommendation in the FedFirst stockholders;Joint Proxy Statement-Prospectus; (iv) use commercially reasonable efforts to obtain from its respective stockholders a vote approving and (iii)adopting this Agreement; and (v) cooperate and consult with CBeach other with respect to each of the foregoing matters. The

8.1.2    Notwithstanding anything in this Agreement to the contrary, at any time prior to the First West Virginia Stockholders Meeting, First West Virginia’s Board of Directors of FedFirst may, failif it concludes in good faith (after consultation with its outside legal advisors) that the failure to make such a recommendation referreddo so would cause it to in clause (ii) above, orviolate its fiduciary duties under applicable law, withdraw, modify or change its recommendation that the stockholders of First West Virginia approve this Agreement in a manner adverse to CB (a “Change of Recommendation”); provided that prior to any such recommendation only if suchChange of Recommendation, First West Virginia shall have complied in all material respects with Section 6.10, given CB written notice promptly (and in any event within twenty-four (24) hours) advising it of the decision of First West Virginia’s Board of Directors to take such action and, if the decision relates to an Acquisition Proposal, given CB the material terms and conditions of the Acquisition Proposal or inquiry, including the identity of the person making any such Acquisition Proposal; andprovided,further, that if the decision relates to an Acquisition Proposal: (i) First West Virginia shall have given CB two (2) Business Days after having consulted withdelivery of such notice to CB to propose revisions to the terms of this Agreement (or make another proposal) and consideredif CB proposes to revise the adviceterms of this Agreement, First West Virginia shall have negotiated, and shall have caused its financial and legal advisors hasto negotiate, in good faith with CB with respect to such proposed revisions or other proposal; and (ii) First West Virginia’s Board of Directors shall have determined thatin good faith, after considering the makingresults of such recommendation,negotiations and giving effect to any proposals, amendments or modifications made or agreed to by CB, if any, that such Acquisition Proposal constitutes a Superior Proposal. If First West Virginia’s Board of Directors does not make the failuredetermination that such Acquisition Proposal constitutes a Superior Proposal and thereafter determines not to withdraw, modify or change its recommendation would reasonablythat the stockholders of First West Virginia approve this Agreement in connection with a new Acquisition Proposal, the procedures referred to above shall apply anew and shall also apply to any subsequent withdrawal, amendment or change. In the event of any material revisions to the Acquisition Proposal that result in terms that are less favorable to First West Virginia, First West Virginia shall be likelyrequired to constitutedeliver a new written notice to CB and to again comply with the requirements of this Section 8.1.2 with respect to such new written notice, except that the three (3) Business Day period referred to above shall be reduced to two (2) Business Days. Nothing contained in this Agreement shall prohibit First West Virginia from otherwise disclosing any information to its stockholders that the Board of Directors of First West Virginia determines in good faith (after consultation with its outside legal counsel) that it is required to disclose in order to not breach of theits fiduciary duties of such directorsto First West Virginia’s stockholders under applicable law.law, subject to compliance with the requirements of Section 8.1.2.

8.2Joint Proxy Statement-Prospectus; Merger Registration Statement.

8.2.1    For the purposes of (i) registering CB Common Stock to be offered to holders of FedFirstFirst West Virginia Common Stock in connection with the Merger with the SEC under the Securities Act, and (ii) holding the FedFirstCB Stockholders Meeting and the First West Virginia Stockholders Meeting, CB shall prepare, and FedFirstFirst West Virginia shall cooperate in the preparation of, the Merger Registration Statement, including a proxy statement and prospectus satisfying all applicable requirements of applicable state securities and banking laws and the Securities Act and the Exchange Act, and the rules and regulations thereunder (such proxy statement/prospectus in the form mailed by FedFirstCB to the FedFirstCB stockholders and by First West Virginia to the First West Virginia stockholders, together with any and all amendments or supplements thereto, being herein referred to as the “Joint Proxy Statement-Prospectus”). CB shall provide FedFirstFirst West Virginia and its counsel with appropriate opportunity to review and comment on the Joint Proxy Statement-Prospectus, and shall incorporate all appropriate comments thereto, prior to the time it is initially filed with the SEC or any amendments are filed with the SEC. Each of CB and FedFirstFirst West Virginia shall use its reasonable best efforts to have the Merger Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, and FedFirstCB and First West Virginia shall thereafter promptly mail the Joint Proxy Statement-Prospectus to its respective stockholders. CB shall also use its reasonable best efforts to obtain all necessary state securities law or “blue sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and FedFirstFirst West Virginia shall furnish all information concerning FedFirstFirst West Virginia and the holders of FedFirstFirst West Virginia Common Stock as may be reasonably requested in connection with any such action.

8.2.2    CB shall, as soon as practicable after the date of this Agreement, file the Merger Registration Statement with the SEC under the Securities Act in connection with the transactions contemplated by this Agreement. CB will advise FedFirstFirst West Virginia promptly after CB receives notice of the time when the Merger Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the registration of the shares of CB Common Stock issuable pursuant to the Merger Registration Statement, or the initiation or threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Merger Registration Statement, or for additional information, and CB will provide FedFirstFirst West Virginia with as many copies of such Merger Registration Statement and all amendments thereto promptly upon the filing thereof as FedFirstFirst West Virginia may reasonably request.

8.2.3    FedFirstFirst West Virginia and CB shall promptly notify the other party if at any time it becomes aware that the Joint Proxy Statement-Prospectus or the Merger Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, FedFirstFirst West Virginia shall cooperate with CB in the preparation of a supplement or amendment to such Joint Proxy Statement-Prospectus that corrects such misstatement or omission, and CB shall file an amended Merger Registration Statement with the SEC, and FedFirstCB and First West Virginia shall each mail an amended Joint Proxy Statement-Prospectus to its respective stockholders.

8.3Regulatory Approvals.

Each of FedFirstFirst West Virginia and CB will cooperate with the other and use reasonable efforts to promptly prepare and as soon as practicable following the date hereof file all necessary documentation to obtain all necessary permits, consents, waivers, approvals and authorizations of the Bank Regulators or any other third parties or Governmental Entities necessary to consummate the transactions contemplated by this Agreement. FedFirstFirst West Virginia and CB will furnish each other and each other’s counsel with all information concerning themselves, their Subsidiaries, directors, officers and shareholdersstockholders and such other matters as may be necessary or advisable in connection with any application, petition or other statement made by or on behalf of FedFirstFirst West Virginia or CB to any Bank Regulator or Governmental Entity in connection with the Merger, Bank Merger and the other transactions contemplated by this Agreement. FedFirstFirst West Virginia shall have the right to review and approve in advance all characterizations of the information relating to FedFirstFirst West Virginia and any FedFirstFirst West Virginia Subsidiary whichthat appears in any filing made in connection with the transactions contemplated by this Agreement with any Governmental Entity. In addition, FedFirstFirst West Virginia and CB shall each furnish to the other for review a copy of each such filing made in connection with the transactions contemplated by this Agreement with any Governmental Entity prior to its filing. Each of FedFirstFirst West Virginia and CB will cooperate with each other and use their reasonable best efforts to address any conditions in any regulatory approval to allow for the consummation of the transactions contemplated by this Agreement. Each of CB and First West Virginia agrees to keep the other party apprised of the status of material matters relating to completion of the transactions contemplated hereby, including advising the other party upon receiving any communication from a Bank Regulator or Governmental Entity, the consent or approval of which is required for the consummation of the Merger and the other transactions contemplated by this Agreement, that causes such party to believe that there is a reasonable likelihood that any required consent or approval from a Bank Regulator or Governmental Entity will not be obtained or that the receipt of such consent or approval may be materially delayed (a “Regulatory Communication”). Upon the receipt of a Regulatory Communication, without limiting the scope of the foregoing, CB shall, to the extent permitted by applicable law (i) promptly advise First West Virginia of the receipt of any substantive communication from a Bank Regulator or Governmental Entity with respect to the transactions contemplated hereby, (ii) provide First West Virginia with a reasonable opportunity to participate in the preparation of any response thereto and the preparation of any other substantive submission or communication to any Bank Regulator or Governmental Entity with respect to the transactions contemplated hereby and to review any such response, submission or communication prior to the filing or submission thereof, and (iii) provide First West Virginia (as permitted by such Bank Regulators) with a reasonable opportunity to participate in any meetings or substantive telephone conversations that CB or any CB Subsidiaries or their respective representatives may have from time to time with any Bank Regulator or Governmental Entity with respect to the transactions contemplated by this Agreement

ARTICLE IX

CLOSING CONDITIONS

9.1Conditions to Each Party’sPartys Obligations Under this Agreement.

The respective obligations of each party to effect the Closing shall be subject to the fulfillment at or prior to the Closing Date of the following conditions, none of which may be waived:

9.1.1Stockholder Approval. This Agreement and each transaction contemplated hereby requiring stockholder approval shall have been approved and adopted by the requisite vote of each of the stockholders of FedFirst.CB and First West Virginia.

9.1.2Injunctions. None of the parties hereto shall be subject to any order, decree or injunction of a court or agency of competent jurisdiction, and no statute, rule or regulation shall have been enacted, entered, promulgated, interpreted, applied or enforced by any Governmental Entity or Bank Regulator, that enjoins or prohibits the consummation of the transactions contemplated by this Agreement.

9.1.3Regulatory Approvals. All Regulatory Approvals required to complete the Merger and the Bank Merger shall have been obtained and shall remain in full force and effect and all waiting periods relating thereto shall have expired and no such approval, authorization or consent shall include any condition or requirement that would result in a Material Adverse Effect on CB or FedFirst.First West Virginia.

9.1.4Effectiveness of Merger Registration Statement. The Merger Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Merger Registration Statement shall have been issued, and no proceedings for that purpose shall have been initiated or threatened by the SEC and, if the offer and sale of CB Common Stock in the Merger is subject to the state securities or “blue sky” laws of any state, shall not be subject to a stop order of any state securities commissioner.

9.1.5Nasdaq Listing. TheCB shall have filed with the Nasdaq Stock Market a notification form for the listing of all shares of CB Common Stock shall have been approved for listing onto be issued in the Merger, and the Nasdaq Stock Market upon noticeshall have authorized and not have objected to the listing of issuance.

such shares of CB Common Stock.

9.2Conditions to the Obligations of CBUnder this Agreement.

The obligations of CB to effect the Closing shall be further subject to the satisfaction of the following conditions at or prior to the Closing Date, unless waived by CB:

9.2.1Representations and Warranties. Each of the representations and warranties of FedFirstFirst West Virginia set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date with the same effect as though all such representations and warranties had been made as of the Closing Date (except to the extent such representations and warranties speak as of an earlier date, which representations and warranties only need be true and correct as of such earlier date), in any case subject to the standard set forth in Section 4.1; and FedFirstFirst West Virginia shall have delivered to CB a certificate to such effect signed by the Chief Executive Officer and the Chief Financial Officer of FedFirstFirst West Virginia as of the Closing Date.

9.2.2Agreements and Covenants. FedFirstFirst West Virginia and each FedFirstFirst West Virginia Subsidiary shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants to be performed or complied with by each of them at or prior to the Effective Time, and CB shall have received a certificate signed on behalf of FedFirstFirst West Virginia by the Chief Executive Officer and Chief Financial Officer of FedFirstFirst West Virginia to such effect dated as of the Closing Date.

9.2.3No Material Adverse Effect. Since the date of this Agreement there shall not have occurred any event or circumstance that has had a Material Adverse Effect on FedFirst.First West Virginia.

9.2.4Tax Opinion.CB shall have received an opinion of Luse Gorman, Pomerenk & Schick, P.C.,PC, counsel to CB, dated the Closing Date, to the effect that the Merger constitutes a reorganization under Section 368(a) of the Code. In rendering its opinion, such counsel may require and rely upon customary representations contained in certificates of officers of CB, FedFirstFirst West Virginia and their respective Subsidiaries, reasonably satisfactory in form and substance to such counsel.

9.2.5Buy-OutDissenting Shares. As of EU. FedFirst Exchange shall have becomeimmediately prior to the owner of record of allEffective Time, not more than 10.0% of the issued and outstanding capital stockshares of EU as set forthFirst West Virginia Common Stock shall have perfected their right to dissent under the WVBCA in accordance with Section 6.2.3.1.7 herein.

9.3Conditions to the Obligations of FedFirst First West VirginiaUnder this Agreement.

The obligations of FedFirstFirst West Virginia to effect the Closing shall be further subject to the satisfaction of the following conditions at or prior to the Closing Date, unless waived by FedFirst:First West Virginia:

9.3.1Representations and Warranties. Each of the representations and warranties of CB set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date with the same effect as though all such representations and warranties had been made as of the Closing Date (except to the extent such representations and warranties speak as of an earlier date, which representations and warranties only need be true and correct as of such earlier date), in any case subject to the standard set forth in Section 5.1; and CB shall have delivered to FedFirstFirst West Virginia a certificate to such effect signed by the Chief Executive Officer and Chief Financial Officer of CB as of the Closing Date.

9.3.2Agreements and Covenants. CB and Community Bank shall have performed in all material respects all obligations and complied in all material respects with all agreements or covenants to be performed or complied with by each of them at or prior to the Effective Time, and FedFirstFirst West Virginia shall have received a certificate signed on behalf of CB by the Chief Executive Officer and Chief Financial Officer of CB to such effect dated as of the Closing Date.

9.3.3No Material Adverse Effect.Since the date of this Agreement there shall not have occurred any event or circumstance that has had a Material Adverse Effect on CB.

9.3.4Tax Opinion. FedFirstFirst West Virginia shall have received an opinion of Kilpatrick Townsend & StocktonBowles Rice LLP, special counsel to FedFirst,First West Virginia, dated the Closing Date, to the effect that the Merger constitutes a reorganization under Section 368(a) of the Code. In rendering its opinion, such counsel may require and rely upon customary representations contained in certificates of officers of CB, FedFirstFirst West Virginia and their respective Subsidiaries, reasonably satisfactory in form and substance to such counsel.

ARTICLE X

TERMINATION, AMENDMENT AND WAIVER

10.1Termination.

This Agreement may be terminated at any time prior to the Closing Date, whether before or after approval of the Merger by the stockholders of FedFirstCB and First West Virginia (except as otherwise indicated below):

10.1.1    By the mutual written agreement of CB and FedFirst;First West Virginia;

10.1.2    By either party (provided,(provided, that the terminating party is not then in breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a breach of any of the representations or

warranties set forth in this Agreement on the part of the other party, which breach by its nature cannot be cured prior to the Closing Date or shall not have been cured within thirty (30) days after written notice of such breach by the terminating party to the other party, conditioned upon the breaching party promptly commencing to cure the breach and thereafter continuing to cure the breach;provided,however, that neither party shall have the right to terminate this Agreement pursuant to this Section 10.1.2 unless the breach of representation or warranty, together with all other such breaches, would entitle the terminating party not to consummate the transactions contemplated hereby under Section 9.2.1 (in the case of a breach of a representation or warranty by FedFirst)First West Virginia) or Section 9.3.1 (in the case of a breach of a representation or warranty by CB);

10.1.3    By either party (provided,(provided, that the terminating party is not then in breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a failure to perform or comply with any of the covenants or agreements set forth in this Agreement on the part of the other party, which failure by its nature cannot be cured prior to the Closing Date or shall not have been cured within thirty (30) days after written notice of such failure by the terminating party to the other party, conditioned upon the breaching party promptly commencing to cure the breach and thereafter continuing to cure;provided,however, that neither party shall have the right to terminate this Agreement pursuant to this Section 10.1.3 unless the breach of covenant or agreement, together with all other such breaches, would entitle the terminating party not to consummate the transactions contemplated hereby under Section 9.2.2 (in the case of a breach of covenant by FedFirst)First West Virginia) or Section 9.3.2 (in the case of a breach of covenant by CB);

10.1.4    By either party, if the Closing shall not have occurred by the Termination Date, or such later date as shall have been agreed to in writing by CB and FedFirst; First West Virginia;provided, that no party may terminate this Agreement pursuant to this Section 10.1.4 if the failure of the Closing to have occurred on or before said date was due to such party’s material breach of any representation, warranty, covenant or other agreement contained in this Agreement;

10.1.5    By either party, ifin the event of the failure of (i) First West Virginia’s stockholders of FedFirst shall have votedto approve the Agreement at the FedFirst Stockholders Meeting onFirst West Virginia Stockholder Meeting;provided,however, that First West Virginia shall only be entitled to terminate the transactions contemplated byAgreement pursuant to this Agreement and such vote shall not have been sufficientclause if it has complied in all material respects with its obligations under Section 8.1.1 (subject to Section 8.1.2) or (ii) CB’s stockholders to approve and adopt such transactions.the Agreement at the CB Stockholders Meeting;provided,however, that CB shall only be entitled to terminate the Agreement pursuant to this clause if it has complied in all material respects with its obligations under Section 8.1.1;

10.1.6    By either party if (i) final action has been taken by a Bank Regulator whose approval is required in order to satisfy the conditions to the parties’ obligations to consummate the transactions contemplated hereby as set forth in Article IX, which final action (x) has become unappealable and (y) does not approve this Agreement or the transactions contemplated hereby, (ii) any court of competent jurisdiction or other Governmental Entity shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and unappealable;

10.1.7    By CB, if FedFirst has received a Superior Proposal and FedFirst has entered into an acquisition agreement with respect(i) First West Virginia shall have breached its obligations under Section 6.10 or 8.1 (subject to the Superior ProposalSection 8.1.2) or the Board of Directors of FedFirst has withdrawn its recommendation of this Agreement, has failed to make such recommendation, or has modified or qualified its recommendation in a manner adverse to CB.

10.1.8 By FedFirst(ii) if FedFirstFirst West Virginia has received a Superior Proposal and the Board of Directors of FedFirstFirst West Virginia does not publicly recommend in the Joint Proxy Statement-Prospectus that stockholders approve this Agreement or if, after recommending in the Joint Proxy Statement-Prospectus that stockholders approve this Agreement, the Board of Directors effects a Change of Recommendation.

10.1.8    By First West Virginia if First West Virginia has received a Superior Proposal and the Board of Directors of First West Virginia has made a determination to accept such Superior Proposal; providedProposal but only if First West Virginia’s Board of Directors has determined in good faith, after consultation with legal counsel, that FedFirst shall not terminate this Agreement pursuantthe failure to this Section 10.1.8 and enter into a definitive agreement with respecttake such action would cause the Board of Directors to the Superior Proposal until the expiration of five (5) Business Days following CB’s receipt of written notice advising CB that FedFirst has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal (and including a copy thereof with all accompanying documentation, if in writing) identifying the Person making the Superior Proposal and stating whether FedFirst intends to enter into a definitive agreement with respect to the Superior Proposal (a “Notice of Superior Proposal”). After providing such Notice of Superior Proposal, FedFirst shall provide a reasonable opportunity to CB during the five (5)-day period to make such adjustments in the terms and conditions of this Agreement as would enable FedFirst to proceed with the Merger on such adjusted terms. Any material amendment of such Superior Proposal shall require a new Notice of Superior Proposal and FedFirst shall be required to comply again with the requirements of this Section 10.1.8;provided,however, that references to the five (5) Business Day period above shall be deemed to be references to a two (2) Business Day period.violate its fiduciary duties under applicable law.

10.2Effect of Termination.

10.2.1    If this Agreement is terminated pursuant to any provision of Section 10.1, this Agreement shall forthwith become void and have no further force, except that (i) the provisions of Sections 10.2, 11.1, 11.2, 11.4, 11.5, 11.6, 11.8, 11.9, 11.10, 11.11, and any other section which,that, by its terms, relates to post-termination rights or obligations, shall survive such termination of this Agreement and remain in full force and effect.

10.2.2    If this Agreement is terminated, expenses and damages of the parties hereto shall be determined as follows:

(A)    Except as provided below, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expenses.

(B)    If this Agreement is terminated because of a willful and material breach of any representation, warranty, covenant or agreement contained in this Agreement, the breaching party shall remain liable for any and all damages, costs and expenses, sustained or incurred by thenon-breaching party as a result thereof or in connection therewith or with respect to the enforcement of its rights hereunder.

(C)    As a condition of CB’s willingness, and in order to induce CB to enter into this Agreement, and to reimburse CB for incurring the costs and expenses related to entering into this Agreement and consummating the transactions contemplated by this Agreement, FedFirstFirst West Virginia hereby agrees to pay CB, and CB shall be entitled to payment of, $2,750,000$2,500,000 (the“CB Termination Fee”Fee) by wire transfer of same day funds on the earlier of (x) the date of termination or, if such date is not a Business Day, on the next following Business Day or (y) within three (3) Business Days after written demand for payment is made by CB, as applicable, following the occurrence of any of the events set forth below:

(i)    FedFirstFirst West Virginia terminates this Agreement pursuant to Section 10.1.8 or CB terminates this Agreement pursuant to Section 10.1.7; or

(ii)    In the event that (a) a bona fide Acquisition Proposal has been publicly announced or otherwise made known to the senior management or Board of Directors of FedFirst,First West Virginia, (b) thereafter, this Agreement is terminated (1) by CB pursuant to Section 10.1.2 or 10.1.3 because of a breach by FedFirstFirst West Virginia or any FedFirstFirst West Virginia Subsidiary; (2) by CB pursuant to Section 10.1.4; or (3) by CB or FedFirstFirst West Virginia pursuant to Section 10.1.5 because of the failure of the stockholders of FedFirstFirst West Virginia to approve this Agreement at the FedFirstFirst West Virginia Stockholders Meeting, and (c) within one (1) year after such termination, FedFirstFirst West Virginia enters into a definitive agreement relating to an Acquisition Proposal or the consummates an Acquisition Proposal.

(D)    As a condition of FedFirst’sFirst West Virginia’s willingness, and in order to induce FedFirstFirst West Virginia to, enter into this Agreement, and to reimburse FedFirstFirst West Virginia for incurring the costs and expenses related to entering into this Agreement and consummating the transactions contemplated by this Agreement, CB hereby agrees to pay FedFirst,First West Virginia, and FedFirstFirst West Virginia shall be entitled to the payment of, $2,750,000 (the“FedFirst Termination Fee”)the amount of First West Virginia’s actual and documentedout-of-pocket expenses incurred in connection with due diligence, negotiation and execution of this Agreement and

undertaking the transactions contemplated by this Agreement, not to exceed $500,000, by wire transfer of same day funds within three (3) Business Days after written demand for payment (with appropriate supporting documentation) is made by FedFirstFirst West Virginia only in the event that (i) a bona fide Acquisition Proposal with respect to CB has been publicly announced or otherwise made known to the senior management or Board of Directors of CB, (ii) thereafter, this Agreement is terminated (a) by FedFirstFirst West Virginia pursuant to (i) Section 10.1.2 or 10.1.3 because of a breach by CB of the terms of Section 8.1.1 or any CB Subsidiary; or (b) by FedFirst pursuant(ii) Section 10.1.5 so long as the failure of CB’s stockholders to approve this Agreement results from CB’s breach of the terms of Section 10.1.4; and (iii) within one (1) year after such termination, CB enters into a definitive agreement relating to an Acquisition Proposal or consummates an Acquisition Proposal.8.1.1.

(E)    FedFirstFirst West Virginia and CB acknowledge that the agreements contained in this Section 10.2.2 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, neither party would enter into this Agreement. The amounts payable by FedFirstFirst West Virginia and CB pursuant to this Section 10.2.2 constitute liquidated damages and not a penalty and shall be the sole and exclusive monetary remedy of such party if this Agreement is terminated on the bases specified in such section.

10.3Amendment, Extension and Waiver.

Subject to applicable law, at any time prior to the Effective Time (whether before or after approval thereof by the stockholders of FedFirst)CB and First West Virginia), the parties hereto by action of their respective Boards of Directors, may (a) amend this Agreement, (b) extend the time for the performance of any of the obligations or other acts of any other party hereto, (c) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (d) waive compliance with any of the agreements or conditions contained herein;provided,however, that after any approval of this Agreement and the transactions contemplated hereby by the stockholders of FedFirst,CB or First West Virginia, there may not be, without further approval of such stockholders, any amendment of this Agreement whichthat decreases the amount or value, or changes the form of, the Merger Consideration to be delivered to FedFirst’sFirst West Virginia’s stockholders pursuant to this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Any agreement on the part of a party hereto to any extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party, but such waiver or failure to insist on strict compliance with such obligation, covenant, agreement or condition shall not operate as a

waiver of, or estoppel with respect to, any subsequent or other failure. Any termination of this Agreement pursuant to this Article X may only be effected upon a vote of a majority of the entire Board of Directors of the terminating party.

ARTICLE XI

MISCELLANEOUS

11.1Confidentiality.

Except as specifically set forth herein, CB and FedFirstFirst West Virginia mutually agree to be bound by the terms of the Confidentiality Agreement, which are hereby incorporated herein by reference, and all information furnished by either party to the other party or its representatives pursuant hereto (including pursuant to Sections 6.2 and 6.3)6.3 and Sections 7.2 and 7.3) shall be subject to, and the parties shall hold such information in confidence in accordance with, the

provisions of the Confidentiality Agreement. The parties hereto agree that the Confidentiality Agreement shall continue in accordance with their terms, notwithstanding the termination of this Agreement.

11.2Public Announcements.

FedFirstFirst West Virginia and CB shall cooperate with each other in the development and distribution of all news releases and other public disclosures with respect to this Agreement, and except as may be otherwise required by law, neither FedFirstFirst West Virginia nor CB shall issue any news release, or other public announcement or communication with respect to this Agreement unless such news release or other public announcement or communication has been mutually agreed upon by the parties heretoprovided,however, that nothing in this Section 11.2 shall be deemed to prohibit any party from making any disclosure whichthat it deems necessary in order to satisfy such party’s disclosure obligations imposed by law.

11.3Survival.

All representations, warranties and covenants in this Agreement or in any instrument delivered pursuant hereto shall expire and be terminated and extinguished at the Effective Time, except for those covenants and agreements contained herein whichthat by their terms apply in whole or in part after the Effective Time.

11.4Notices.

All notices or other communications hereunder shall be in writing and shall be deemed given if delivered by (i) receipted hand delivery, (ii) facsimile with confirmation of transmission, (iii) mailed by prepaid registered or certified mail (return receipt requested), or (iv) by recognized overnight courier addressed as follows:

 

If to FedFirst,First West Virginia, to:  PatrickWilliam G. O’BrienPetroplus, Esq.
  Chairman, President and Chief Executive Officer
  First West Virginia Bancorp, Inc.
  FedFirst Financial Corporation1701 Warwood Avenue
  565 Donner AvenueWheeling, West Virginia 26003
Monessen, Pennsylvania 15602

With required copies to:  AaronSandra M. Kaslow,Murphy, Esq.
  Kilpatrick Townsend & StocktonBowles Rice LLP
  607 14th600 Quarrier Street NW, Suite 900
  Washington, DC 20005Charleston, West Virginia 25301
If to CB, to:  Barron P. McCune, Jr.
  PresidentVice Chairman and Chief Executive Officer
  CB Financial Services, Inc.
  90 West Chestnut Street
  Washington, Pennsylvania 15301
With required copies to:  

Eric Luse, Esq.

Victor L. Cangelosi,

Scott Brown, Esq.

  Luse Gorman, Pomerenk & Schick, P.C.PC
  5335 Wisconsin Avenue, NW,
Suite 700780
  Washington, DC 20015

or such other address as shall be furnished in writing by any party.

11.5Parties in Interest.

This Agreement and the Voting Agreements shall be binding upon and shall inure to the benefit of the parties hereto or thereto and their respective successors and assigns;provided,however, that neither this Agreement and the Voting Agreements nor any of the rights, interests or obligations hereunder or thereunder shall be assigned by any party hereto without the prior written consent of the other party. Except for Sections 7.6.6, 6.77.7 and 7.77.8 hereof nothing in this Agreement is intended to confer upon any Person or entity other than the parties hereto any rights or remedies under or by reason of this Agreement.

11.6Complete Agreement.

This Agreement, including the Exhibits and Disclosure Schedules hereto and the documents and other writings referred to herein or therein or delivered pursuant hereto, and the Confidentiality Agreement, contains the entire agreement and understanding of the parties with respect to its subject matter. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties other than those expressly set forth herein or therein. This Agreement supersedes all prior agreements and understandings (other than the Confidentiality Agreement) between the parties, both written and oral, with respect to its subject matter.

11.7Counterparts.

This Agreement may be executed in one or more counterparts all of which shall be considered one and the same agreement and each of which shall be deemed an original. A facsimile copy of a signature page shall be deemed to be an original signature page.

11.8Severability.

If any one or more provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable in any respect, by any court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement and the parties shall use their reasonable efforts to substitute a valid, legal and enforceable provision which,that, insofar as practical, implements the purposes and intents of this Agreement.

11.9Governing Law.

This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to principles of conflicts of law.

11.10Interpretation.

When a reference is made in this Agreement to Articles, Sections or Exhibits, such reference shall be to an Article or Section of or Exhibit to this Agreement unless otherwise indicated. The recitals hereto constitute an integral part of this Agreement. References to sections include subsections, which are part of the related Section (e.g., a section numbered “Section 5.5.1” would be part of “Section 5.5” and references to “Section 5.5” would also refer to material contained in the subsection described as “Section 5.5.1”). The table of contents, index and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”,“include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.limitation.” The phrases “the date of this Agreement”,Agreement,” “the date hereof” and terms of similar import, unless the context otherwise requires, shall be deemed to refer to the date set forth in the Preamble to this Agreement. The parties have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

11.11Specific Performance.

The parties hereto agree that irreparable damage would occur if the provisions contained in this Agreement were not performed in accordance with its specific terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions, without the posting of bond or other security, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Each party agrees that it will not seek and will agree to waive any requirement for the securing or posting of a bond in connection with the other party’s seeking or obtaining such relief.relief;provided,however, that no specific performance will be available to either party if it has already received a termination fee pursuant to Section 10.2.

11.12Waiver of Trial by Jury.

The parties hereto hereby knowingly, voluntarily and intentionally waive the right any may have to a trial by jury in respect to any litigation based on, or rising out of, under, or in connection with this Agreement and any agreement contemplated to be executed in connection herewith, or any course of conduct, course of dealing, statements (whether verbal or written) or actions of either party in connection with such agreements.

[Signature page follows this page.]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their duly authorized officers as of the date first set forth above.

 

CB FINANCIAL SERVICES, INC.INC

/s/ Barron P. McCune, Jr.

Name:Barron P. McCune, Jr.
Title: PresidentVice Chairman and Chief Executive Officer

FEDFIRST FINANCIAL CORPORATIONFIRST WEST VIRGINIA BANCORP, INC.

/s/ PatrickWilliam G. O’BrienPetroplus, Esq.

Name: PatrickWilliam G. O’BrienPetroplus, Esq.
Title:Chairman, President and Chief Executive Officer

AnnexAPPENDIX B

 

LOGOLOGO

April 14, 2014November 16, 2017

The Board of Directors

FedFirstCB Financial CorporationServices, Inc.

565 Donner Avenue100 North Market Street

Monessen,Carmichaels, PA 1506215320

Members of the Board:

You have requested ourthe opinion of Keefe, Bruyette & Woods, Inc. (“KBW” or “we”) as investment bankers (the “Opinion”) as to the fairness, from a financial point of view, to CB Financial Services, Inc. (“CB Financial”) of the stockholdersAggregate Merger Consideration (as defined below) in the proposed merger of FedFirst Financial CorporationFirst West Virginia Bancorp, Inc. (“FedFirst”First West Virginia”) with regardand into CB Financial (the “Merger”), pursuant to the Agreement and Plan of Merger dated as of April 14, 2014 (the “Agreement”) to be entered into by and between CB Financial Services, Inc. (“CB”) and FedFirst, with CB being the surviving corporation in the proposed merger (the “Merger”).First West Virginia. Pursuant to the Agreement and subject to the terms, conditions and limitations set forth therein, at the Effective Time (as defined in the Agreement), by virtue of the Agreement, each shareMerger and without any action on the part of FedFirstCB Financial, First West Virginia or any holders of common stock, par value $0.01$5.00 per share, of First West Virginia (“First West Virginia Common Stock”), each share of First West Virginia Common Stock that is issued and outstanding immediately prior to the Effective Time ofshall be converted into the merger (as defined inright to receive, at the Agreement) shall, by virtue of the Agreement and without any action on the partelection of the holder thereof be converted into(subject to proration and exchangeable forreallocation as set forth in the rightAgreement, as to receive 1.1590 shareswhich we express no opinion), either: (i) 0.9583 of CB common stocka share (the “Stock Consideration”) or cash in an amount equal to $23.00of common stock, par value $0.4167 per share, of CB Financial (“CB Financial Common Stock”) or (ii) $28.50 in cash, without interest (the “Cash Consideration”), with a maximum of 65%; provided that, in the aggregate, 80% of the total number of shares of FedFirst common stockFirst West Virginia Common Stock issued and outstanding being exchanged for stock.immediately prior to the Effective Time will be converted into the Stock Consideration and 20% of such shares will be converted into the Cash Consideration. The aggregate Stock Consideration and the aggregate Cash Consideration, taken together, are also knownreferred to herein as the “Aggregate Merger Consideration.” The terms and conditions of the Merger are more fully set forth in the Agreement.

Mufson Howe Hunter & Company LLC (“Mufson Howe Hunter” or “we”The Agreement further provides that, following the execution and delivery of the Agreement, CB Financial intends to cause the merger of Progressive Bank, N.A., a wholly-owned subsidiary of First West Virginia, with and into Community Bank, a wholly-owned subsidiary of CB Financial, with Community Bank as the surviving entity, pursuant to a separate agreement and plan of bank merger (such transaction, the “Bank Merger”).

KBW has acted as financial advisor to FedFirst. InCB Financial and not as an advisor to or agent of any other person. As part of our investment banking business, we are continually engaged in the valuation of bank and bank holding company securities in connection with our opinion,acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for various other purposes. As specialists in the securities of banking companies, we have among other things:experience in, and knowledge of, the valuation of banking enterprises. We and our affiliates, in the ordinary course of our and their broker-dealer businesses (and in the case of CB Financial,

Keefe, Bruyette & Woods, Inc. ● 1600 Market Street, Suite 1450, Philadelphia, PA 19103

 

i.reviewed and analyzed a draft copy of the Agreement dated April 10, 2014;

ii.reviewed and analyzed the audited consolidated financial statements of FedFirst for the fiscal year ended December 31, 2013;

iii.reviewed and analyzed the audited consolidated financial statements of CB for the fiscal year ended December 31, 2013;

iv.reviewed and analyzed certain other publicly available information concerning FedFirst and CB;

v.held discussions with FedFirst and CB’s senior management and advisors, including, without limitation, discussions regarding estimates of certain cost savings, operating synergies, merger charges and the pro forma financial impact of the Merger on CB;

vi.reviewed certain non-publicly available information concerning FedFirst, including without limitation, internal financial analyses and forecasts prepared by its management, and held discussions with FedFirst’s senior management regarding recent developments and regulatory matters;

vii.reviewed certain non-publicly available information concerning CB, including without limitation, internal financial analyses and forecasts prepared by its management, and held discussions with CB’s senior management regarding recent developments and regulatory matters;

viii.participated in certain discussions and negotiations between representatives of FedFirst and CB;


April 14, 2014The Board of Directors – CB Financial Services, Inc.

November 16, 2017

Page 2 of 4

6

 

further to certain existing sales and trading relationships between a KBW broker-dealer affiliate and CB Financial), may from time to time purchase securities from, and sell securities to, CB Financial and First West Virginia. In addition, as market makers in securities, we and our affiliates may from time to time have long or short positions in, and buy or sell, debt or equity securities of CB Financial or First West Virginia for our and their own respective accounts and for the accounts of our and their respective customers and clients. We have acted exclusively for the board of directors of CB Financial (the “Board”) in rendering this opinion and will receive a fee from CB Financial for our services. A portion of our fee is payable upon the rendering of this opinion, and a significant portion is contingent upon the successful completion of the Merger. In addition, CB Financial has agreed to indemnify us for certain liabilities arising out of our engagement.

ix.reviewed the reported prices and trading activity of the equity securities of FedFirst and CB;

Other than this present engagement, in the past two years, KBW has not provided investment banking and financial advisory services to CB Financial for which compensation has been received. KBW provided investment banking assistance to CB Financial in the past two years in regard to a potential transaction that was considered but not consummated by CB Financial, in connection with which KBW did not enter into an engagement agreement or receive compensation. In the past two years, KBW has not provided investment banking and financial advisory services to First West Virginia. We may in the future provide investment banking and financial advisory services to CB Financial or First West Virginia and receive compensation for such services.

x.analyzed certain publicly available information concerning the terms of selected merger and acquisition transactions that we considered relevant to our analysis;

xi.reviewed and analyzed certain publicly available financial and stock market data relating to selected public companies that we deemed relevant to our analysis;

xii.conducted such other financial studies, analyses and investigations and considered such other information as we deemed necessary or appropriate for purposes of our opinion; and

xiii.took into account our assessment of general economic, market and financial conditions and our experience in other transactions, as well as our experience and knowledge of the banking industry generally.

In connection with this opinion, we have reviewed, analyzed and relied upon material bearing upon the financial and operating condition of CB Financial and First West Virginia and bearing upon the Merger, including among other things, the following: (i) a draft of the Agreement dated November 15, 2017 (the most recent draft made available to us); (ii) the audited financial statements and the Annual Reports on Form 10-K for the three fiscal years ended December 31, 2016, of CB Financial; (iii) the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2017, June 30, 2017 and September 30, 2017 of CB Financial; (iv) the audited financial statements and the Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and the audited financial statements for the two fiscal years ended December 31, 2016 of First West Virginia; (v) the unaudited quarterly financial statements for the fiscal quarters ended March 31, 2017, June 30, 2017 and September 30, 2017 of First West Virginia; (vi) certain regulatory filings of the respective subsidiaries of CB Financial and First West Virginia, including the quarterly call reports filed with respect to each quarter during the three years ended December 31, 2016 and the quarters ended March 31, 2017, June 30, 2017 and September 30, 2017; (vii) certain other interim reports and other communications of CB Financial and First West Virginia to their respective stockholders; and (viii) other financial information concerning the businesses and operations of CB Financial and First West Virginia furnished to us by CB Financial and First West Virginia or which we were otherwise directed to use for purposes of our analysis. Our consideration of financial information and other factors that we deemed appropriate under the circumstances or relevant to our analyses included, among others, the following: (i) the historical and current financial position and results of operations of CB Financial and First West Virginia; (ii) the assets and liabilities of CB Financial and First West Virginia; (iii) the nature and terms of certain other merger transactions and business combinations in the banking industry; (iv) a comparison of certain financial and stock market information of CB Financial and certain financial information of First West Virginia with similar information for certain other companies, the securities of which are publicly traded; (v) financial and operating forecasts and

Keefe, Bruyette & Woods, Inc. ● 1600 Market Street, Suite 1450, Philadelphia, PA 19103

The Board of Directors – CB Financial Services, Inc.

November 16, 2017

Page 3 of 6

projections of First West Virginia with respect to fiscal years 2017 and 2018 that were prepared by, and provided to us and discussed with us by, First West Virginia management, and assumed First West Virginia growth rates with respect to periods thereafter that were provided to and discussed with us by CB Financial management, all of which information was used and relied upon by us, based on such discussions, at the direction of CB Financial management and with the consent of the Board; (vi) the publicly available consensus “street estimates” of CB Financial, as well as assumed CB Financial long-term growth rates provided to us by CB Financial management, all of which information was discussed with us by such management and used and relied upon by us at the direction of such management and with the consent of the Board; and (vii) estimates regarding certain pro forma financial effects of the Merger on CB Financial (including without limitation the potential cost savings and related expenses expected to result or be derived from the Merger) that were prepared by CB Financial management, provided to and discussed with us by such management, and used and relied upon by us at the direction of such management and with the consent of the Board. We have also performed such other studies and analyses as we considered appropriate and have taken into account our assessment of general economic, market and financial conditions and our experience in other transactions, as well as our experience in securities valuation and knowledge of the banking industry generally. We have also participated in discussions that were held with the managements of CB Financial and First West Virginia regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as we have deemed relevant to our inquiry.

In conducting our review and arriving at our opinion, we have relied upon and assumed without independent verification, the accuracy and completeness of all of the financial and other information that was provided to Mufson Howe Hunter byus or on behalf of FedFirst or CB, or that was otherwise reviewed by Mufson Howe Hunter,publicly available and we have not independently verified the accuracy or completeness of any such information or assumed any responsibility or liability for independently verifying any of such information.verification, accuracy or completeness. We have further relied onupon the assurances by FedFirst ormanagement of First West Virginia, with the consent of CB that eachFinancial, as to the reasonableness and achievability of them is unawarethe financial and operating forecasts and projections of any facts that would make their respective information incomplete or misleading. WithFirst West Virginia with respect to fiscal years 2017 and 2018 (and the financial forecasts suppliedassumptions and bases therefor) referred to us by FedFirstabove, and CB (including, without limitation, potential cost savings and operating synergies realized by a potential acquirer), we have assumed that thesuch forecasts and projections were reasonably prepared on the basis reflectingand represent the best currently available estimates and judgments of such management, and that such forecasts and projections will be realized in the management of FedFirstamounts and in the time periods currently estimated by such management. We have further relied upon CB as applicable,Financial management as to the future operatingreasonableness and achievability of the assumed long term growth rates of First West Virginia, the publicly available consensus “street estimates” of CB Financial, the assumed long-term growth rates of CB Financial, and the estimates regarding certain pro forma financial performanceeffects of FedFirstthe Merger on CB Financial, all as referred to above (and the assumptions and bases for all such information, including, without limitation, the cost savings and related expenses expected to result or be derived from the Merger), and we have assumed that all such information was reasonably prepared and represents, or in the case of the publicly available consensus “street estimates” of CB as applicable,Financial referred to above that such estimates are consistent with, the best currently available estimates and judgments of CB Financial management and that theythe forecasts, projections and estimates reflected in such information will be realized in the amounts and in the time periods currently estimated.

Keefe, Bruyette & Woods, Inc. ● 1600 Market Street, Suite 1450, Philadelphia, PA 19103

The Board of Directors – CB Financial Services, Inc.

November 16, 2017

Page 4 of 6

It is understood that the portion of the foregoing financial information of CB Financial and First West Virginia that was provided to and discussed with us was not prepared with the expectation of public disclosure, that all of the foregoing financial information, including the publicly available consensus “street estimates” of CB Financial referred to above, is based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions and that, accordingly, actual results could vary significantly from those set forth in such information. We have assumed, based on discussions with the respective managements of CB Financial and First West Virginia, that all such information provides a reasonable basis upon which we could form our Opinion. Such forecasts were not prepared withopinion and we express no view as to any such information or the expectation of public disclosure. Mufson Howe Hunter hasassumptions or bases therefor. We have relied on all such forecastsinformation without independent verification or analysesanalysis and doesdo not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

We also have assumed that there werehave been no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either FedFirstCB Financial or CBFirst West Virginia since the date of the last financial statements of each companysuch entity that were made available to us. We are not experts in the independent verification of the adequacy of allowances for loan and lease losses and we have also assumed, without independent verification and with your consent, that the aggregate allowances for loan and lease losses set forth in the respective financial statements of FedFirstfor CB Financial and CBFirst West Virginia are in the aggregate, adequate to cover all such losses. We didIn rendering our opinion, we have not makemade or obtainobtained any independent evaluation, appraisalevaluations or appraisals or physical inspection of either FedFirst’s or CB’sthe property, assets or liabilities (contingent or otherwise) of CB Financial or First West Virginia, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor didhave we reviewexamined any individual loan or credit files, nor did we evaluate the solvency, financial capability or fair value of FedFirstCB Financial or CB.First West Virginia under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, Mufson Howe Hunter assumeswe assume no responsibility or liability for their accuracy.

We relied on advicehave assumed, in all respects material to our analyses, the following: (i) that the Merger and any related transactions (including the Bank Merger) will be completed substantially in accordance with the terms set forth in the Agreement (the final terms of FedFirst’s counsel aswhich we have assumed will not differ in any respect material to certain legal mattersour analyses from the draft version reviewed) with no adjustments to the Aggregate Merger Consideration and with no other consideration or payments in respect to FedFirst,of First West Virginia Common Stock; (ii) that the representations and warranties of each party in the Agreement and in all related documents and instruments referred to in the MergerAgreement are true and other matters containedcorrect; (iii) that each party to the Agreement or contemplated therein. In addition, we have assumed, with your consent,any of the related documents will perform all of the covenants and agreements required to be performed by such party under such documents; (iv) that there are no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the Merger or any related transaction (including the Bank Merger) and that all conditions to the completion of the Merger and any related transaction will be satisfied without any waivers or modifications to the Agreement or any related documents; and not waived. We have assumed(v) that in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the Merger and any related transactions (including the Bank Merger), no restrictions, including any divestiture requirements, termination or other

Keefe, Bruyette & Woods, Inc. ● 1600 Market Street, Suite 1450, Philadelphia, PA 19103

The Board of Directors – CB Financial Services, Inc.

November 16, 2017

Page 5 of 6

payments or amendments or modifications, will be consummated substantiallyimposed that will have a material adverse effect on the terms and conditions described infuture results of operations or financial condition of CB Financial, First West Virginia or the Agreement, without any waiver of material terms and conditions by FedFirstpro forma entity, or any other party, and that obtaining any necessary regulatory approvals or satisfying any other conditions for consummationthe contemplated benefits of the Merger, will not have an adverse effect on FedFirstincluding without limitation the cost savings and related expenses expected to result or CB.be derived from the Merger. We have assumed that the Merger will be consummated in a mattermanner that complies in all respects with the applicable provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all other applicable federal and state statutes, rules and regulations. We have further been advised by representatives of CB Financial that CB Financial has relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to CB Financial, First West Virginia, the Merger and any related transaction (including the Bank Merger), and the Agreement. KBW has not provided advice with respect to any such matters.

This opinion addresses only the fairness, from a financial point of view, as of the date hereof, of the Aggregate Merger Consideration in the Merger to CB Financial. We express no view or opinion as to any other terms or aspects of the Merger or any terms or aspects of any related transaction (including the Bank Merger), including without limitation, the form or structure of the Merger (including the form of Aggregate Merger Consideration or the allocation thereof between cash and stock) or any such related transaction, any consequences of the Merger or any such related transaction to CB Financial, its stockholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, retention, consulting, voting, support, cooperation, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the Merger, any such related transaction, or otherwise. Our Opinionopinion is necessarily based solely on economic, market, monetary, financial and otherupon conditions as they exist and can be evaluated on the date hereof and on the information made available to us as of,through the date of this letter.hereof. It is understood that subsequent developments may affect the conclusionsconclusion reached in this Opinionopinion and that Mufson Howe HunterKBW does not have or assume anyan obligation to update, revise or reaffirm this Opinion.opinion. For purposes of our analyses, we have not incorporated previously publicly-announced proposed changes to United States tax laws regarding corporate tax rates. Our Opinionopinion does not address, and we express no view or opinion with respect to, (i) the underlying business decision of CB Financial to engage in the Merger or enter into the Agreement, (ii) the relative merits of the Merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by CB Financial or the Board, (iii) any business, operational or other plans with respect to First West Virginia or the pro forma entity that may be currently contemplated by CB Financial or the Board or that may be implemented by CB Financial or the Board subsequent to the closing of the Merger, (iv) the fairness of the amount or nature of any compensation to any of CB Financial’s officers, directors or employees, or any class of such persons, relative to any compensation to the holders of CB Financial Common Stock or relative to the Aggregate Merger Consideration, (v) the effect of the Merger or any related transaction (including the Bank Merger) on, or the fairness of the consideration to be received by, holders of any class of securities of CB Financial, First West Virginia or any other party to any transaction contemplated by the Agreement, (vi) any election by holders of First West Virginia Common Stock to receive the Cash Consideration or the Stock Consideration or any combination thereof, or the actual allocation among such holders between cash and stock (including, without limitation, any reallocation thereof as a result of proration or otherwise pursuant to the Agreement) or the relative fairness of the Cash Consideration and the Stock Consideration, (vii) whether CB Financial has sufficient cash, available lines of credit or other sources of funds to enable it to pay the aggregate

Keefe, Bruyette & Woods, Inc. ● 1600 Market Street, Suite 1450, Philadelphia, PA 19103

The Board of Directors – CB Financial Services, Inc.

November 16, 2017

Page 6 of 6

Cash Consideration to the holders of First West Virginia Common Stock at the closing of the Merger, (viii) the actual value of CB Financial Common Stock to be issued in the Merger, (ix) the prices, trading range or volume at which CB Financial Common Stock will trade following the public announcement of the Merger or following the consummation of the Merger, (x) any advice or opinions provided by any other advisor to any of the parties to the Merger or any other transaction contemplated by the Agreement, or (xi) any legal, regulatory, accounting, tax or similar matters relating to CB Financial, First West Virginia, any of their respective shareholders, or relating to or arising out of or as a consequence of the Merger or any related transaction (including the Bank Merger), including whether or not the Merger would qualify as a tax-free reorganization for United States federal income tax purposes.

This opinion is solely for the information of, and is directed to, the FedFirst Board of Directors (the “Board”) for(in its information and assistancecapacity as such) in connection with its consideration of the financial terms of the Merger and is not to be relied upon by any shareholder of FedFirst or CB or any other person or entity. Our OpinionMerger. This opinion does not constitute a recommendation to the Board as to how the Boardit should vote on the Merger or to any holder of CB Financial Common Stock or any shareholder of FedFirst or CBany other entity as to how to vote in connection with the Merger or any other matter (including, with respect to holders of First West Virginia Common Stock, what election any such shareholder should vote at any shareholders’ meeting at whichmake with respect to the Merger is considered,Stock Consideration or the Cash Consideration), nor does it constitute a recommendation as to whether or not any FedFirstsuch shareholder should enter into a voting, shareholders’, affiliates’ or affiliates’other agreement with respect to the Merger

April 14, 2014

Page 3 of 4

or exercise any dissenters’ or appraisal rights that may be available to such shareholder.

This opinion has been reviewed and approved by our Fairness Opinion Committee in conformity with our policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Aggregate Merger Consideration in the Merger is fair, from a financial point of view, to CB Financial.

Very truly yours,

LOGO

Keefe, Bruyette & Woods, Inc.

Keefe, Bruyette & Woods, Inc. ● 1600 Market Street, Suite 1450, Philadelphia, PA 19103

APPENDIX C

LOGO

November 16, 2017

Board of Directors

First West Virginia Bancorp, Inc.

1701 Warwood Avenue

Wheeling, WV 26003

Members of the Board:

We understand that First West Virginia Bancorp, Inc. (the “Company”) proposes to enter into an Agreement and Plan of Merger (the “Agreement”) with CB Financial Services, Inc. (“Parent”), pursuant to which, among other things, the Company will merge with and into Parent (the “Transaction”) with Parent as the surviving entity, and each share of the common stock of the Company (the “Company Common Stock”) issued and outstanding immediately prior to the Effective Time shall be converted into the right to elect to receive a number of shares of Parent Common Stock (the “Stock Election Shares”) equal to 0.9583 (the “Exchange Ratio”), subject to adjustment as provided in the Agreement (the “Stock Consideration”) or $28.50 per share in cash (the “Cash Election Shares”), subject to adjustment as provided in the Agreement (the “Cash Consideration”). Together, the Stock Consideration and the Cash Consideration equal the Merger Consideration (the “Merger Consideration”). The Exchange Ratio is subject to adjustments pursuant to the Agreement, as to which adjustments we express no opinion. The terms and conditions of the Transaction are more fully set forth in the Agreement.

Capitalized terms used herein without definition have the respective meanings ascribed to them in the Agreement.

You have requested our opinion as to the fairness, from a financial point of view, to the holders of the Company Common Stock of the Merger Consideration to be paid to such holders in the proposed Transaction.

In connection with preparing our opinion, we have reviewed, among other things:

(i)a draft of the Agreement, dated November 15, 2017;

(ii)certain financial statements and other historical financial and business information about the Parent and the Company made available to us from published sources and/or from the internal records of the Parent and the Company that we deemed relevant;

(iii)certain publicly available analyst earnings estimates for Parent for the years ending December 31, 2017, December 31, 2018 and December 31, 2019 and estimated long-term growth rate for the years thereafter, in each case as discussed with senior management of the Company and Parent;

(iv)financial projections for the Company for the years ending December 31, 2017 and December 31, 2018 as discussed with, and confirmed by, senior management of the Company and estimated long-term growth rate for the years thereafter as discussed with senior management of the Company;

(v)the current market environment generally and the banking environment in particular;

Investment Banking

111 S. Calvert Street ● Suite 2830 ● Baltimore, MD 21202 ● (410)369-1172

www.davidsoncompanies.com/ecm/


(vi)the financial terms of certain other transactions in the financial institutions industry, to the extent publicly available;

(vii)the market and trading characteristics of public companies and public bank holding companies in particular;

(viii)the pro forma financial impact of the Transaction, taking into consideration the amounts and timing of the transaction costs and cost savings;

(ix)the net present value of the Company with consideration of projected financial results;

(x)the net present value of Parent with consideration of projected financial results; and

(xi)such other financial studies, analyses and investigations and financial, economic and market criteria and other information as we considered relevant including discussions with management and other representatives and advisors of the Parent and the Company concerning the business, financial condition, results of operations and prospects of the Parent and the Company.

In arriving at our opinion, we have, with your consent, assumed and relied upon the accuracy and completeness of all information that was publicly available or supplied or otherwise made available to, discussed with or reviewed by or for us. We have not independently verified (nor have we assumed responsibility for independently verifying) such information or its accuracy or completeness. We have not undertaken or been provided with any independent evaluation or appraisal of any of the assets or liabilities (contingent or otherwise) of the Company, and we did not make an independent appraisal or analysis of the Company with respect to the Transaction. In addition, we have not assumed any obligation to conduct, nor have we conducted, any physical inspection of the Opinionproperties or facilities of the Company, and have not been provided with any reports of such physical inspections. We have assumed that there has been no material change in the Company’s business, assets, financial condition, results of operations, cash flows or prospects since the date of the most recent financial statements provided to us, and that neither the Company nor Parent is party to any material pending transaction, including without limitation any financing, recapitalization, acquisition or merger, divestiture orspin-off, other than the Transaction.

With respect to the financial forecasts and other analyses (including information relating to certain pro forma financial effects of, and strategic implications and operational benefits anticipated to result from, the Transaction) provided to or otherwise reviewed by or for or discussed with us, we have been advised by management of the Company, and have assumed with your consent, that such forecasts and other analyses were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of management of the Company as to the future financial performance of the Company and the other matters covered thereby, and that the financial results (including the potential strategic implications and operational benefits anticipated to result from the Transaction) reflected in such forecasts and analyses will be realized in the amounts and at the times projected. We assume no responsibility for and express no opinion as to these forecasts and analyses or the assumptions on which they were based. We have relied on the assurances of management of the Company that they are not aware of any facts or circumstances that would make any of such information, forecasts or analyses inaccurate or misleading.

We are not experts in the evaluation of loan and lease portfolios, classified loans or other real estate owned or in assessing the adequacy of the allowance for loan losses with respect thereto, and we did not make an independent evaluation or appraisal thereof, or of any other specific assets, the collateral securing assets or the liabilities (contingent or otherwise) of the Company or Parent or any of their respective subsidiaries. We have not reviewed any individual loan or credit files relating to the Company or Parent. We have assumed,

with your consent, that the respective allowances for loan and lease losses for both the Company and Parent are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. We did not make an independent evaluation of the quality of the Company’s or Parent’s deposit base, nor have we independently evaluated potential deposit concentrations or the deposit composition of the Company or Parent. We did not make an independent evaluation of the quality of the Company’s or Parent’s investment securities portfolio, nor have we independently evaluated potential concentrations in the investment securities portfolio of the Company or Parent.

We have assumed that all of the representations and warranties contained in the Agreement and all related agreements are true and correct in all respects material to our analysis, and that the Transaction will be consummated in accordance with the terms of the Agreement, without waiver, modification or amendment of any term, condition or covenant thereof the effect of which would be in any respect material to our analysis. We also have assumed that all material governmental, regulatory or other consents, approvals, and waivers necessary for the consummation of the Transaction will be obtained without any material adverse effect on the Company or the contemplated benefits of the Transaction. Further, we have assumed that the executed Agreement will not differ in any material respect from the draft Agreement, dated November 15, 2017, reviewed by us.

We have assumed in all respects material to our analysis that the Company will remain as a going concern for all periods relevant to our analysis. We express no opinion regarding the liquidation value of the Company or any other entity.

Our opinion is limited to the fairness, from a financial point of view, of the Merger Consideration to be paid to the holders of the Company Common Stock in the proposed Transaction. We do not express any view on, and our opinion does not compareaddress, any other term or aspect of the Agreement or Transaction (including, without limitation, the form or structure of the Transaction) or any term or aspect of any other agreement or instrument contemplated by the Agreement or entered into in connection with the Transaction, including the fairness of the Transaction to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of the Company, or as to the underlying decision by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of the Company, or any class of such persons, relative to the Merger Consideration to be paid to the holders of the Company Common Stock in the Transaction, or with respect to the fairness of any such compensation.

We express no view as to, and our opinion does not address, the relative merits of the MergerTransaction as compared to any alternative business transactions or strategies, or whether such alternative transactions or strategies could be achieved or are available. We note that we were not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of the Company or any other alternative transaction or business strategystrategy. In addition, our opinion does not address any legal, regulatory, tax or accounting matters, as to which maywe understand that the Company obtained such advice as it deemed necessary from qualified professionals.

We do not express any opinion as to the value of any asset of the Company whether at current market prices or in the future, or as to the price at which the Company or its assets could be sold in the future. We also express no opinion as to the price at which the Company Common Stock or Parent will trade following announcement of the Transaction or at any future time.

We have been availablenot evaluated the solvency or fair value of the Company under any state, federal or other laws relating to FedFirstbankruptcy, insolvency or similar matters. This opinion is not a solvency opinion and does not in any way address the underlying business decisionsolvency or financial condition of the BoardParent. We are not expressing any opinion as to the impact of the Transaction on the solvency or FedFirstviability of the Company or Parent or the ability of the Company or Parent to proceed with the Merger or any aspect thereof.pay their respective obligations when they come due.

Mufson Howe Hunter, as part of its investment banking services, is regularly engaged in the independent valuation of businesses and securities in connection with mergers, acquisitions, private placements and valuations for corporate and other purposes.

We have acted as the Company’s financial advisor to FedFirst in connection with the MergerTransaction and will receive a fee for our services, a substantialportion of which is payable upon the rendering of this opinion and a significant portion of which is contingent upon the completionconsummation of the Merger.Transaction. In addition, FedFirstthe Company has agreed to reimburse our reasonable expenses and indemnify us foragainst certain liabilities arising out of our engagement.

Mufson Howe Hunter’sPlease be advised that during the two years preceding the date of this letter, neither we nor our affiliates have had any other material financial advisory or other material commercial or investment banking relationships with the Company or the Parent.

In the ordinary course of our business, D.A. Davidson & Co. and its affiliates may actively trade or hold securities of the Company or Parent for our own accounts or for the accounts of our customers and, accordingly, may at any time hold long or short positions in such securities. We may seek to provide investment banking or other financial services to the Company or Parent in the future for which we would expect to receive compensation.

This fairness opinion was reviewed and approved by a D.A. Davidson & Co. Fairness Opinion Committee has approvedCommittee.

It is understood that this letter is for the issuanceinformation of this opinion. Our Opinion maythe Board of Directors of the Company in connection with and for the purposes of its consideration of the Transaction. This opinion is not intended to be and does not constitute a recommendation as to how the shareholders of the Company should vote or act with respect to the Transaction or any matter relating thereto.

This opinion is for the information of the Board of Directors of the Company and shall not be disclosed, referred to, published or otherwise used to refer to,(in whole or in part), nor shall any public referencereferences to Mufson Howe Hunterus be made, without our prior written consent, except that a copy of this opinion may be included in accordanceits entirety in any regulatory filing that the Company is required to make in connection with the termsTransaction if such inclusion is required by applicable law.

Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, our engagement letter with FedFirst.the date hereof. Events occurring after the date hereof may affect this opinion and the assumptions used in preparing it, and we do not assume any obligation to update, revise or reaffirm this opinion.

Based upon and subject to the foregoing, we are of theit is our opinion that, as of the date hereof, the Merger Consideration to be received from CBpaid to the holders of the Company Common Stock in the Merger pursuant to the AgreementTransaction is fair, to holders of shares of FedFirst common stock, from a financial point of view.view, to such holders.

Very truly yours,

 

Respectfully,
/s/ Mufson Howe Hunter & Company LLC
Mufson Howe Hunter & Company LLC

LOGO

D.A. Davidson & Co.

APPENDIX D

WEST VIRGINIA BUSINESS CORPORATION ACT§§31D-13-130131D-13-1331

Article 13. Appraisal Rights

PART 1. RIGHT TO APPRAISAL AND PAYMENT FOR SHARES.

§31D-13-1301. Definitions.

In this article:

(1) “Affiliate” means a person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with another person or is a senior executive. For purposes of subdivision (4), subsection (b), section one thousand three hundred two of this article, a person is deemed to be an affiliate of its senior executives.

(2) “Beneficial shareholder” means a person who is the beneficial owner of shares held in a voting trust or by a nominee on the beneficial owner’s behalf.

(3) “Corporation” means the issuer of the shares held by a shareholder demanding appraisal and, for matters covered in sections one thousand three hundredtwenty-two, one thousand three hundred twenty-three, one thousand three hundred twenty-four, one thousand three hundred twenty-five, one thousand three hundredtwenty-six, one thousand three hundred thirty and one thousand three hundredthirty-one of this article, includes the surviving entity in a merger.

(4) “Fair value” means the value of the corporation’s shares determined:

(A) Immediately before the effectuation of the corporate action to which the shareholder objects;

(B) Using customary and current valuation concepts and techniques generally employed for similar businesses in the context of the transaction requiring appraisal; and

(C) Without discounting for lack of marketability or minority status except, if appropriate, for amendments to the articles pursuant to subdivision (5), subsection (a), section one thousand three hundred two of this article.

(5) “Interest” means interest from the effective date of the corporate action until the date of payment, at the rate of interest on judgments in this state on the effective date of the corporate action.

(6) “Preferred shares” means a class or series of shares whose holders have preference over any other class or series with respect to distributions.

(7) “Record shareholder” means the person in whose name shares are registered in the records of the corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with the corporation.

(8) “Senior executive” means the chief executive officer, chief operating officer, chief financial officer and anyone in charge of a principal business unit or function.

(9) “Shareholder” means both a record shareholder and a beneficial shareholder.

§31D-13-1302. Right to appraisal.

(a) A shareholder is entitled to appraisal rights, and to obtain payment of the fair value of that shareholder’s shares, in the event of any of the following corporate actions:

(1) Consummation of a merger to which the corporation is a party: (A) If shareholder approval is required for the merger by section one thousand one hundred four, article eleven of this chapter and the shareholder is entitled to vote on the merger, except that appraisal rights may not be available to any shareholder of the corporation with respect to shares of any class or series that remain outstanding after consummation of the merger; or (B) if the corporation is a subsidiary and the merger is governed by section one thousand one hundred five, article eleven of this chapter;

(2) Consummation of a share exchange to which the corporation is a party as the corporation whose shares will be acquired if the shareholder is entitled to vote on the exchange, except that appraisal rights may not be available to any shareholder of the corporation with respect to any class or series of shares of the corporation that is not exchanged;

(3) Consummation of a disposition of assets pursuant to section one thousand two hundred two, article twelve of this chapter if the shareholder is entitled to vote on the disposition;

(4) An amendment of the articles of incorporation with respect to a class or series of shares that reduces the number of shares of a class or series owned by the shareholder to a fraction of a share if the corporation has the obligation or right to repurchase the fractional share so created; or

(5) Any other amendment to the articles of incorporation, merger, share exchange or disposition of assets to the extent provided by the articles of incorporation, bylaws or a resolution of the board of directors.

(b) Notwithstanding subsection (a) of this section, the availability of appraisal rights under subdivisions (1), (2), (3) and (4), subsection (a) of this section are limited in accordance with the following provisions:

(1) Appraisal rights may not be available for the holders of shares of any class or series of shares which is:

(A) Listed on the New York stock exchange or the American stock exchange or designated as a national market system security on an interdealer quotation system by the national association of securities dealers, inc.; or

(B) Not so listed or designated, but has at least two thousand shareholders and the outstanding shares of a class or series has a market value of at least twenty million dollars, exclusive of the value of the shares held by its subsidiaries, senior executives, directors and beneficial shareholders owning more than ten percent of the shares.

(2) The applicability of subdivision (1), subsection (b) of this section is to be determined as of:

(A) The record date fixed to determine the shareholders entitled to receive notice of, and to vote at, the meeting of shareholders to act upon the corporate action requiring appraisal rights; or

(B) The day before the effective date of the corporate action if there is no meeting of shareholders.

(3) Subdivision (1), subsection (b) of this section is not applicable and appraisal rights are to be available pursuant to subsection (a) of this section for the holders of any class or series of shares who are required by the terms of the corporate action requiring appraisal rights to accept for the shares anything other than cash or shares of any class or any series of shares of any corporation, or any other proprietary interest of any other entity, that satisfies the standards set forth in subdivision (1), section (b) of this section at the time the corporate action becomes effective.

(4) Subdivision (1), subsection (b) of this section is not applicable and appraisal rights are to be available pursuant to subsection (a) of this section for the holders of any class or series of shares where any of the shares or assets of the corporation are being acquired or converted, whether by merger, share exchange or otherwise, pursuant to the corporate action by a person, or by an affiliate of a person, who: (A) Is, or at any time in theone-year period immediately preceding approval by the board of directors of the corporate action requiring appraisal rights was, the beneficial owner of twenty percent or more of the voting power of the corporation, excluding any shares acquired pursuant to an offer for all shares having voting power if the offer was made within one year prior to the corporate action requiring appraisal rights for consideration of the same kind and of a value equal to or less than that paid in connection with the corporate action; or (B) for purpose of voting their shares of the corporation, each member of the group formed is deemed to have acquired beneficial ownership, as of the date of the agreement, of all voting shares of the corporation beneficially owned by any member of the group.

(c) Notwithstanding any other provision of section one thousand three hundred two of this article, the articles of incorporation as originally filed or any amendment to the articles of incorporation may limit or eliminate appraisal rights for any class or series of preferred shares, but any limitation or elimination contained in an amendment to the articles of incorporation that limits or eliminates appraisal rights for any of the shares that are outstanding immediately prior to the effective date of the amendment or that the corporation is or may be required to issue or sell pursuant to any conversion, exchange or other right existing immediately before the effective date of the amendment does not apply to any corporate action that becomes effective within one year of that date if the action would otherwise afford appraisal rights.

(d) A shareholder entitled to appraisal rights under this article may not challenge a completed corporate action for which appraisal rights are available unless the corporate action:

(1) Was not effectuated in accordance with the applicable provisions of article ten, eleven or twelve of this chapter or the corporation’s articles of incorporation, bylaws or board of directors’ resolution authorizing the corporate action; or

(2) Was procured as a result of fraud or material misrepresentation.

§31D-13-1303. Assertion of rights by nominees and beneficial owners.

(a) A record shareholder may assert appraisal rights as to fewer than all the shares registered in the record shareholder’s name but owned by a beneficial shareholder only if the record shareholder objects with respect to all shares of the class or series owned by the beneficial shareholder and notifies the corporation in writing of the name and address of each beneficial shareholder on whose behalf appraisal rights are being asserted. The rights of a record shareholder who asserts appraisal rights for only part of the shares held of record in the record shareholder’s name under this subsection are to be determined as if the shares as to which the record shareholder objects and the record shareholder’s other shares were registered in the names of different record shareholders.

(b) A beneficial shareholder may assert appraisal rights as to shares of any class or series held on behalf of the shareholder only if the shareholder:

(1) Submits to the corporation the record shareholder’s written consent to the assertion of the rights no later than the date referred to in paragraph (D), subdivision (2), subsection (b), section one thousand three hundredtwenty-two of this article; and

(2) Does so with respect to all shares of the class or series that are beneficially owned by the beneficial shareholder.

PART 2. PROCEDURE FOR EXERCISE OF APPRAISAL RIGHTS.

§31D-13-1320. Notice of appraisal rights.

(a) If proposed corporate action described in subsection (a), section one thousand three hundred two of this article is to be submitted to a vote at a shareholders’ meeting, the meeting notice must state that the corporation has concluded that shareholders are, are not or may be entitled to assert appraisal rights under this article. If the corporation concludes that appraisal rights are or may be available, a copy of this article must accompany the meeting notice sent to those record shareholders entitled to exercise appraisal rights.

(b) In a merger pursuant to section one thousand one hundred five, article eleven of this chapter, the parent corporation must notify in writing all record shareholders of the subsidiary who are entitled to assert appraisal rights that the corporate action became effective. The notice must be sent within ten days after the corporate action became effective and include the materials described in section one thousand three hundredtwenty-two of this article.

§31D-13-1321. Notice of intent to demand payment.

(a) If proposed corporate action requiring appraisal rights under section one thousand three hundred two of this article is submitted to a vote at a shareholders’ meeting, a shareholder who wishes to assert appraisal rights with respect to any class or series of shares:

(1) Must deliver to the corporation before the vote is taken written notice of the shareholder’s intent to demand payment if the proposed action is effectuated; and

(2) Must not vote, or cause or permit to be voted, any shares of the class or series in favor of the proposed action.

(b) A shareholder who does not satisfy the requirements of subsection (a) of this section is not entitled to payment under this article.

§31D-13-1322. Appraisal notice and form.

(a) If proposed corporate action requiring appraisal rights under subsection (a), section one thousand three hundred two of this article becomes effective, the corporation must deliver a written appraisal notice and form required by subdivision (1), subsection (b) of this section to all shareholders who satisfied the requirements of section one thousand three hundredtwenty-one of this article. In the case of a merger under section one thousand one hundred five, article eleven of this chapter, the parent must deliver a written appraisal notice and form to all record shareholders who may be entitled to assert appraisal rights.

(b) The appraisal notice must be sent no earlier than the date the corporate action became effective and no later than ten days after that date and must:

(1) Supply a form that specifies the date of the first announcement to shareholders of the principal terms of the proposed corporate action and requires the shareholder asserting appraisal rights to certify: (A) Whether or not beneficial ownership of those shares for which appraisal rights are asserted was acquired before that date; and (B) that the shareholder did not vote for the transaction;

(2) State:

(A) Where the form must be sent and where certificates for certificated shares must be deposited and the date by which those certificates must be deposited, which date may not be earlier than the date for receiving the required form under this subdivision;

(B) A date by which the corporation must receive the form which date may not be fewer than forty nor more than sixty days after the date the appraisal notice and form required by subsection (a) of this section are sent and state that the shareholder is deemed to have waived the right to demand appraisal with respect to the shares unless the form is received by the corporation by the specified date;

(C) The corporation’s estimate of the fair value of the shares;

(D) That, if requested in writing, the corporation will provide, to the shareholder so requesting, within ten days after the date specified in paragraph (B) of this subdivision the number of shareholders who return the forms by the specified date and the total number of shares owned by them; and

(E) The date by which the notice to withdraw under section one thousand three hundred twenty-three of this article must be received, which date must be within twenty days after the date specified in paragraph (B) of this subdivision; and

(3) Be accompanied by a copy of this article.

§31D-13-1323. Perfection of rights; right to withdraw.

(a) A shareholder who receives notice pursuant to section one thousand three hundredtwenty-two of this article and who wishes to exercise appraisal rights must certify on the form sent by the corporation whether the beneficial owner of the shares acquired beneficial ownership of the shares before the date required to be set forth in the notice pursuant to subdivision (1), subsection (b), section one thousand three hundredtwenty-two of this article. If a shareholder fails to make this certification, the corporation may elect to treat the shareholder’s shares as after-acquired shares under section one thousand three hundred twenty-five of this article. In addition, a shareholder who wishes to exercise appraisal rights must execute and return the form and, in the case of certificated shares, deposit the shareholder’s certificates in accordance with the terms of the notice by the date referred to in the notice pursuant to paragraph (B), subdivision (2), subsection (b), section one thousand three hundredtwenty-two of this article. Once a shareholder deposits the shareholder’s certificates or, in the case of uncertificated shares, returns the executed forms, that shareholder loses all rights as a shareholder unless the shareholder withdraws pursuant to subsection (b) of this section.

(b) A shareholder who has complied with subsection (a) of this section may decline to exercise appraisal rights and withdraw from the appraisal process by so notifying the corporation in writing by the date set forth in the appraisal notice pursuant to paragraph (E), subdivision (2), subsection (b), section one thousand three hundredtwenty-two of this article. A shareholder who fails to withdraw from the appraisal process by that date may not withdraw without the corporation’s written consent.

(c) A shareholder who does not execute and return the form and, in the case of certificated shares, deposit the shareholder’s share certificates where required, each by the date set forth in the notice described in subsection (b), section one thousand three hundredtwenty-two of this article, is not entitled to payment under this article.

§31D-13-1324. Payment.

(a) Except as provided in section one thousand three hundred twenty-five of this article, within thirty days after the form required by paragraph (B), subdivision (2), subsection (b), section one thousand three hundredtwenty-two of this article is due, the corporation shall pay in cash to those shareholders who complied with subsection (a), section one thousand three hundred twenty-three of this article the amount the corporation estimates to be the fair value of their shares, plus interest.

(b) The payment to each shareholder pursuant to subsection (a) of this article must be accompanied by:

(1) Financial statements of the corporation that issued the shares to be appraised, consisting of a balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders’ equity for that year and the latest available interim financial statements, if any;

(2) A statement of the corporation’s estimate of the fair value of the shares, which estimate must equal or exceed the corporation’s estimate given pursuant to paragraph (C), subdivision (2), subsection (b), section one thousand three hundredtwenty-two of this article; and

(3) A statement that shareholders described in subsection (a) of this section have the right to demand further payment under section one thousand three hundredtwenty-six of this article and that if any shareholder does not make a demand for further payment within the time period specified, shareholder is deemed to have accepted the payment in full satisfaction of the corporation’s obligations under this article.

§31D-13-1325. After-acquired shares.

(a) A corporation may elect to withhold payment required by section one thousand three hundred twenty-four of this article from any shareholder who did not certify that beneficial ownership of all of the shareholder’s shares for which appraisal rights are asserted was acquired before the date set forth in the appraisal notice sent pursuant to subdivision (1), subsection (b), section one thousand three hundredtwenty-two of this article.

(b) If the corporation elected to withhold payment under subsection (a) of this section, it must, within thirty days after the form required by paragraph (B), subdivision (2), subsection (b), section one thousand three hundredtwenty-two of this article is due, notify all shareholders who are described in subsection (a) of this section:

(1) Of the information required by subdivision (1), subsection (b), section one thousand three hundred twenty-four of this article;

(2) Of the corporation’s estimate of fair value pursuant to subdivision (2), subsection (b), section one thousand three hundred twenty-four of this article;

(3) That they may accept the corporation’s estimate of fair value, plus interest, in full satisfaction of their demands or demand appraisal under section one thousand three hundredtwenty-six of this article;

(4) That those shareholders who wish to accept the offer must notify the corporation of their acceptance of the corporation’s offer within thirty days after receiving the offer; and

(5) That those shareholders who do not satisfy the requirements for demanding appraisal under section one thousand three hundredtwenty-six of this article are deemed to have accepted the corporation’s offer.

(c) Within ten days after receiving the shareholder’s acceptance pursuant to subsection (b) of this section, the corporation must pay in cash the amount it offered under subdivision (2), subsection (b) of this section to each shareholder who agreed to accept the corporation’s offer in full satisfaction of the shareholder’s demand.

(d) Within forty days after sending the notice described in subsection (b) of this section, the corporation must pay in cash the amount it offered to pay under subdivision (2), subsection (b) of this section to each shareholder described in subdivision (5), subsection (b) of this section.

§31D-13-1326. Procedure if shareholder dissatisfied with payment or offer.

(a) A shareholder paid pursuant to section one thousand three hundred twenty-four of this article who is dissatisfied with the amount of the payment must notify the corporation in writing of that shareholder’s estimate of the fair value of the shares and demand payment of that estimate plus interest and less any payment due under section one

thousand three hundred twenty-four of this article. A shareholder offered payment under section one thousand three hundred twenty-five of this article who is dissatisfied with that offer must reject the offer and demand payment of the shareholder’s stated estimate of the fair value of the shares plus interest.

(b) A shareholder who fails to notify the corporation in writing of that shareholder’s demand to be paid the shareholder’s stated estimate of the fair value plus interest under subsection (a) of this section within thirty days after receiving the corporation’s payment or offer of payment under sections one thousand three hundred twenty-four or one thousand three hundred twenty-five of this article, respectively, waives the right to demand payment under this section and is entitled only to the payment made or offered pursuant to those respective sections.

PART 3. JUDICIAL APPRAISAL OF SHARES.

§31D-13-1330. Court action.

(a) If a shareholder makes demand for payment under section one thousand three hundredtwenty-six of this article which remains unsettled, the corporation shall commence a proceeding within sixty days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within thesixty-day period, it shall pay in cash to each shareholder the amount the shareholder demanded pursuant to section one thousand three hundredtwenty-six of this article plus interest.

(b) The corporation shall make all shareholders, whether or not residents of this state, whose demands remain unsettled parties to the proceeding as in an action against their shares, and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law.

(c) The jurisdiction of the court in which the proceeding is commenced is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it. The shareholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings. There is no right to a jury trial.

(d) Each shareholder made a party to the proceeding is entitled to judgment: (1) For the amount, if any, by which the court finds the fair value of the shareholder’s shares, plus interest, exceeds the amount paid by the corporation to the shareholder for the shares; or (2) for the fair value, plus interest, of the shareholder’s shares for which the corporation elected to withhold payment under section one thousand three hundred twenty-five of this article.

§31D-13-1331. Court costs and counsel fees.

(a) The court in an appraisal proceeding commenced under section one thousand three hundred thirty of this article shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess costs against all or some of the shareholders demanding appraisal, in amounts the court finds equitable, to the extent the court finds the shareholders acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this article.

(b) The court in an appraisal proceeding may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:

(1) Against the corporation and in favor of any or all shareholders demanding appraisal if the court finds the corporation did not substantially comply with the requirements of section one thousand three hundred twenty, one thousand three hundredtwenty-two, one thousand three hundred twenty-four or one thousand three hundred twenty-five of this article; or

(2) Against either the corporation or a shareholder demanding appraisal, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by this article.

(c) If the court in an appraisal proceeding finds that the services of counsel for any shareholder were of substantial benefit to other shareholders similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to counsel reasonable fees to be paid out of the amounts awarded the shareholders who were benefitted.

(d) To the extent the corporation fails to make a required payment pursuant to section one thousand three hundred twenty-four, one thousand three hundred twenty-five, or one thousand three hundredtwenty-six of this article, the shareholder may sue directly for the amount owed and, to the extent successful, are to be entitled to recover from the corporation all costs and expenses of the suit, including counsel fees.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

 

ITEM 20.INDEMNIFICATION OF DIRECTORS AND OFFICERS.

CB Financial is a Pennsylvania corporation subject to the applicable indemnification provisions of the Pennsylvania Business Corporation Law of the Commonwealth of Pennsylvania (the “PBCL”).

Section 1741 of the Pennsylvania Business Corporation Law (“PBCL”) provides, in general, that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that the person is or was a representative of the corporation, or is or was serving at the request of the corporation as a representative of another enterprise. Such indemnity may be against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the action or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the corporation and if, with respect to any criminal proceeding, the person did not have reasonable cause to believe his conduct was unlawful.

Section 1742 of the PBCL provides, in general, that a corporation shall have the power to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a representative of the corporation or is or was serving at the request of the corporation as a representative of another entity. Such indemnity may be against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of the action if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the corporation, except no indemnification shall be made in respect of any claim, issue, or matter as to which the person has been adjudged to be liable to the corporation unless and only to the extent that the court of common pleas of the judicial district embracing the county in which the registered office of the corporation is located or the court in which the action was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for the expenses that the court of common pleas or other court deems proper.

Section 1743 of the PBCL provides, in general, that a corporation must indemnify any representative of a business corporation who has been successful on the merits or otherwise in defense of any action or proceeding referred to in Section 1741 or Section 1742 or in defense of any claim, issue, or matter therein, against expenses (including attorney fees) actually and reasonably incurred therein.

Section 1747 of the PBCL provides, in general, that a corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a representative of the corporation or is or was serving at the request of the corporation as a representative of another entity against any liability asserted against the person in any capacity, or arising out of the person’s status as such, regardless of whether the corporation would have the power to indemnify him against that liability under the provisions of the PBCL.

The foregoing is only a general summary of certain aspects of Sections 1741, 1742 and 1743 of the PBCL, and does not purport to be complete. It is qualified in its entirety by reference to the detailed provisions of Sections 1741, 1742, and 1743 of the PBCL.

Articles 8 and 9 of the articles of incorporation of CB Financial (referenced therein as the “Company”) sets forth circumstances under which directors, officers, employees and agents of CB Financial may be insured or indemnified against liability which they incur in their capacities as such:

 

II-1


Article 8.Elimination of Directors’ Liability.

A director of the Company shall not be personally liable, as such, for monetary damages for any action taken unless: (i) the director has breached or failed to perform such director’s fiduciary duties, or other duties under Chapter 17, Subchapter B of the BCL, of such director’s office, and (ii) the breach or failure to perform constitutes self-dealing, willful misconduct, or recklessness; provided, however, that the foregoing shall not apply to (i) the responsibility or liability of a director pursuant to any criminal statute; or (ii) the liability of a director for the payment of taxes pursuant to federal, state or local law. If the laws of the Commonwealth of Pennsylvania are amended after the effective date of these Articles of Incorporation to eliminate or further limit the liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by law.


Any repeal or modification of the foregoing paragraph by the stockholders of the Company shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification.

 

Article 9.Indemnification of Officers, Directors, Employees, and Agents.

A.Persons. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, including actions by or in the right of the Company, whether civil, criminal, administrative, or investigative, by reason of the fact that such person is or was a director, officer, employee, fiduciary, trustee, or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee, fiduciary, trustee, or agent of another corporation, partnership, joint venture, trust, or other enterprise.

B.Extent—Extent – Derivative Actions. In the case of a threatened, pending, or completed action or suit by or in the right of the Company against a person named in paragraph A by reason of such person holding a position named in paragraph A, the Company shall indemnify such person if such person satisfies the standard in paragraph C, for expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of the action or suit.

C.Standard—Standard – Derivative Suits. In the case of a threatened, pending, or completed action or suit by or in the right of the Company, a person named in paragraph A shall be indemnified only if:

1. such person is successful on the merits or otherwise; or

2. such person acted in good faith in the transaction that is the subject of the suit or action, and in a manner reasonably believed to be in, or not opposed to, the best interests of the Company. However, such person shall not be indemnified in respect of any claim, issue, or matter as to which such person has been adjudged liable to the Company unless (and only to the extent that) the court of common pleas or the court in which the suit was brought shall determine, upon application, that despite the adjudication of liability but in view of all the circumstances, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.

D.Extent—Extent – Nonderivative Suits. In case of a threatened, pending, or completed suit, action, or proceeding (whether civil, criminal, administrative, or investigative), other than a suit by or in the right of the Company, together hereafter referred to as a nonderivative suit, against a person named in paragraph A by reason of such person holding a position named in paragraph A, the Company shall indemnify such person if such person satisfies the standard in paragraph E, for amounts actually and reasonably incurred by such person in connection with the defense or settlement of the nonderivative suit, including, but not limited to (i) expenses (including attorneys’ fees), (ii) amounts paid in settlement, (iii) judgments, and (iv) fines.

E.Standard—Standard – Nonderivative Suits. In case of a nonderivative suit, a person named in paragraph A shall be indemnified only if:

1. such person is successful on the merits or otherwise; or

II-2


2. such person acted in good faith in the transaction that is the subject of the nonderivative suit and in a manner such person reasonably believed to be in, or not opposed to, the best interests of the Company. The termination of a nonderivative suit by judgment, order, settlement, conviction, or upon a plea ofnolo contendere or its equivalent shall not, in itself, create a presumption that the person failed to satisfy the standard of this paragraph E.2.

F.Determination That Standard Has Been Met. A determination that the standard of paragraph C or E has been satisfied may be made by a court, or, except as stated in paragraph C.2 (second sentence), the determination may be made by:

1.    the Board of Directors by a majority vote of a quorum consisting of directors of the Company who were not parties to the action, suit, or proceeding;

2.    if such a quorum is not obtainable or if obtainable and a majority of a quorum of disinterested directors so directs, by independent legal counsel in a written opinion; or

3.    the stockholders of the Company.

G.Proration. Anyone making a determination under paragraph F may determine that a person has met the standard as to some matters but not as to others, and may reasonably prorate amounts to be indemnified.

H.Advancement of Expenses. Reasonable expenses incurred by a director, officer, employee, or agent of the Company in defending a civil or criminal action, suit, or proceeding described in paragraph A of this Article 9 may be paid by the Company in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the Company.


I.Other Rights. The indemnification and advancement of expenses provided by or pursuant to this Article 9 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any insurance or other agreement, vote of stockholders or directors, or otherwise, both as to actions in their official capacity and as to actions in another capacity while holding an office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person.

J.Insurance. The Company shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Company would have the power to indemnify such person against such liability under the provisions of this Article 9.

K.Security Fund; Indemnity Agreements. By action of the Board of Directors (notwithstanding their interest in the transaction), the Company may create and fund a trust fund or fund of any nature, and may enter into agreements with its officers, directors, employees, and agents for the purpose of securing or insuring in any manner its obligation to indemnify or advance expenses provided for in this Article 9.

L.Modification. The duties of the Company to indemnify and to advance expenses to any person as provided in this Article 9 shall be in the nature of a contract between the Company and each such person, and no amendment or repeal of any provision of this Article 9, and no amendment or termination of any trust or other fund created pursuant to Article 9.K hereof, shall alter to the detriment of such person the right of such person to the advancement of expenses or indemnification related to a claim based on an act or failure to act which took place prior to such amendment, repeal, or termination.

M.Proceedings Initiated by Indemnified Persons. Notwithstanding any other provision in this Article 9, the Company shall not indemnify a director, officer, employee, or agent for any liability incurred in an

II-3


action, suit, or proceeding initiated by (which shall not be deemed to include counter-claims or affirmative defenses) or participated in as an intervenor or amicus curiae by the person seeking indemnification unless such initiation of or participation in the action, suit, or proceeding is authorized, either before or after its commencement, by the affirmative vote of a majority of the directors then in office.

N.Savings Clause. If this Article 9 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify each director, officer, employee, and agent of the Company as to costs, charges, and expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement with respect to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, including an action by or in the right of the Company to the fullest extent permitted by any applicable portion of this Article 9 that shall not have been invalidated and to the fullest extent permitted by applicable law.

If the laws of the Commonwealth of Pennsylvania are amended to permit further indemnification of the directors, officers, employees, and agents of the Company, then the Company shall indemnify such persons to the fullest extent permitted by law. Any repeal or modification of this Article 9 by the stockholders of the Company shall not adversely affect any right or protection of a director, officer, employee, or agent existing at the time of such repeal or modification.

 

ITEM 21.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) A list of the exhibits included as part of this registration statement is set forth on the index of exhibits immediately preceding such exhibits and is incorporated herein by reference.

(b) All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are not required, amounts which would otherwise be required to be shown with respect to any item are not material, are inapplicable or the required information has already been provided elsewhere in the registration statement.

(c) The opinion of Mufson Howe Hunter & Company LLC is included as Annex B to the proxy statement/prospectus.follows:

 

NUMBER

DESCRIPTION

2Agreement and Plan of Merger by and between CB Financial Services, Inc. and First West Virginia Bancorp, Inc., dated as of November  16, 2017 (included as Appendix A to the joint proxy statement/prospectus included in this registration statement). Certain schedules and exhibits have been omitted as filed with the SEC.  The omitted information is considered immaterial from an investor’s perspective. The registrant will furnish to the SEC supplementally a copy of any omitted schedule or exhibit upon request from the SEC.
3.1Amended and Restated Articles of Incorporation of CB Financial Services, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on FormS-4 filed by the registrant with the SEC on June 13, 2014 (FileNo. 333-196749)).
3.2Bylaws of CB Financial Services, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on FormS-4 filed by the registrant with the SEC on June 13, 2014 (FileNo. 333-196749)).
4Form of Common Stock Certificate of CB Financial Services, Inc. (incorporated by reference to Exhibit 4 to the Registration Statement on FormS-4 filed by the registrant with the SEC on June 13, 2014 (FileNo. 333-196749)).
5Opinion of Luse Gorman, PC regarding the legality of the securities being registered.*
8.1Opinion of Luse Gorman, PC as to federal income tax matters.*
8.2Opinion of Bowles Rice LLP as to federal income tax matters.*
10.1Retention and Consulting Agreement, dated as of November 16, 2017, by and between Community Bank and William G. Petroplus.*
21Subsidiaries of the registrant (incorporated by reference to Exhibit 21 to the Annual Report on Form10-K for the year ended December 31, 2016, filed by the registrant with the SEC on March 13, 2017 (FileNo. 001-36706)).
23.1Consent of Luse Gorman, PC (contained inExhibit 5 andExhibit 8.1 hereto).*
23.2Consent of Bowles Rice LLP (contained in Exhibit 8.2 hereto).*
23.3Consent of Baker Tilly Virchow Krause, LLP (accountants for the registrant).
23.4Consent of BKD, LLP (accountants for First West Virginia Bancorp, Inc.).
24Power of Attorney (included on signature page).*
99.1Form of proxy of the registrant.
99.2Form of proxy of First West Virginia Bancorp, Inc.
99.3Consent of D.A. Davidson & Co.
99.4Consent of Keefe, Bruyette & Woods, Inc.
99.5Consent of William G. Petroplus pursuant to SEC Rule 438.*
99.6Consent of Roberta Robinson Olejasz pursuant to SEC Rule 438.
99.7Consent of Jonathan A. Bedway pursuant to SEC Rule 438.

*Previously filed.

II-4


ITEM 22.UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement (notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement); and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2)That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof.

(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4)That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof.

(5)That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the registrant undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

(6)That every prospectus (i) that is filed pursuant to paragraph (5) above, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment has become effective, and that for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fideoffering thereof.

(7)To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;II-5


(8)To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of, and included in, this registration statement when it became effective.

(9)Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

II-6


(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) (1) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

(2) The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(d) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(e) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.


SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the CityBorough of Carmichaels, in the Commonwealth of Pennsylvania, on July 28, 2014.February 16, 2018.

 

CB FINANCIAL SERVICES, INC.

By: 

/s/ Barron P. McCune, Jr.

 Barron P. McCune, Jr.
 President and Chief Executive Officer

POWER OF ATTORNEY

We, the undersigned directors and officers of CB Financial Services, Inc. hereby severally constitute and appoint Barron P. McCune, Jr. with full power of substitution, our true and lawful attorney-in-fact and agent, to do any and all things in our names in the capacities indicated below which he may deem necessary or advisable to enable CB Financial Services, Inc. to comply with the Securities Act of 1933, as amended, and any rules regulations and requirements of the Securities and Exchange Commission, in connection with the Registration Statement on Form S-4 of CB Financial Services, Inc., including specifically but not limited to, power and authority to sign for us in our names in the capacities indicated below, the registration statement and any and all amendments (including post-effective amendments) thereto; and we hereby ratify and confirm all that said Barron P. McCune, Jr. shall lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons and in the capacities and on the dates indicated.

 

Signatures

  

Title

 

Date

/s/ Barron P. McCune, Jr.

Barron P. McCune, Jr.

  President, Chief Executive Officer and Vice Chairman of the Board of Directors (Principal Executive Officer) July 28, 2014February 16, 2018
Barron P. McCune, Jr.

/s/ Kevin D. Lemley*

Kevin D. Lemley*

  SeniorPresident and DirectorFebruary 16, 2018
Patrick G. O’Brien

*

Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) July 28, 2014February 16, 2018
Kevin D. Lemley

/s/ *

Chairman of the Board of DirectorsFebruary 16, 2018
Ralph J. Sommers, Jr.*

Ralph J. Sommers, Jr.

  Director (Chairman of the Board)July 28, 2014

/s/ Mark E. Fox*

Mark E. Fox

DirectorJuly 28, 2014

/s/ William C. Groves*

William C. Groves

DirectorJuly 28, 2014

/s/ David F. Pollock*

David F. Pollock

DirectorJuly 28, 2014

/s/ Karl G. Baily*

Karl G. Baily*

  

Director

 July 28, 2014February 16, 2018
Karl G. Baily


Director

Richard B. Boyer

*

DirectorFebruary 16, 2018
Mark E. Fox

*

DirectorFebruary 16, 2018
William C. Groves

 

Director

Charles R. Guthrie

  

Director

 July 28, 2014
Joseph N. Headlee

/s/ Joseph N. Headlee*

Joseph N. Headlee*

  DirectorFebruary 16, 2018
John J. LaCarte

Director*

  July 28, 2014DirectorFebruary 16, 2018
David F. Pollock

*

DirectorFebruary 16, 2018
John M. Swiatek

 

*Pursuant to a Power of Attorney contained onin the signature page ofto the Registration Statement on Form S-4 of CB Financial Services, Inc. Filedfiled on June 13, 2014January 11, 2018.


EXHIBIT LIST

EXHIBIT
NUMBER

DESCRIPTION OF EXHIBIT

  2Agreement and Plan of Merger by and between CB Financial Services, Inc. and FedFirst Financial Corporation, dated as of April 14, 2014 (included as Annex A to the proxy statement/prospectus included in this registration statement). Certain schedules and exhibits have been omitted from the Agreement of Merger as filed with the SEC. The omitted information is considered immaterial from an investor’s perspective. The Registrant will furnish to the SEC supplementally a copy of any omitted schedule or exhibit upon request from the SEC.
  3.1Amended and Restated Articles of Incorporation of CB Financial Services, Inc.*
  3.2Bylaws of CB Financial Services, Inc.*
  4Form of Common Stock Certificate of CB Financial Services, Inc.*
  5Opinion of Luse Gorman Pomerenk & Schick, PC regarding the legality of the securities being registered
  8.1Opinion of Luse Gorman Pomerenk & Schick, PC as to federal income tax matters
  8.2Opinion of Kilpatrick Townsend & Stockton LLP as to federal income tax matters
10.1Executive Employment Agreement by and between Community Bank and Barron P. McCune, Jr. dated April 26, 1999*
10.2Executive Employment Agreement by and between Community Bank and Kevin D. Lemley dated April 18, 2012*
10.3Executive Employment Agreement by and between Community Bank and Ralph Burchianti dated January 2, 2001*
10.4Executive Employment Agreement between Community Bank and Ralph J. Sommers, Jr. dated July 1, 1994*
10.5Form of Employment Agreement by and between Community Bank and Barron P. McCune, Jr.*
10.6Form of Employment Agreement by and between Community Bank and Kevin D. Lemley*
10.7Form of Employment Agreement by and between Community Bank and Ralph Burchianti*
10.8Form of Employment Agreement by and between Community Bank and Ralph J. Sommers, Jr.*
10.9Employment Agreement by and between Community Bank and Patrick G. O’Brien dated April 14, 2014*
10.10Employment Agreement by and among Community Bank, Exchange Underwriters, Inc. and Richard B. Boyer dated April 14, 2014*
10.11Split Dollar Life Insurance Agreement between Community Bank and Barron P. McCune, Jr. dated April 1, 2005*
10.12Split Dollar Life Insurance Agreement between Community Bank and Ralph Burchianti dated April 1, 2005*
10.13Split Dollar Life Insurance Agreement between Community Bank and Ralph J. Sommers, Jr. dated April 1, 2005*
10.14CB Financial Services, Inc. Directors’ Stock Option Plan*
21Subsidiaries of Registrant*
23.1Consent of Luse Gorman Pomerenk & Schick, PC (contained in Exhibits 5 and 8.1 hereto)
23.2Consent of Kilpatrick Townsend & Stockton LLP (contained in Exhibit 8.2 hereto)
23.3Consent of ParenteBeard LLC (CB Financial Services, Inc.)
23.4Consent of ParenteBeard LLC (FedFirst Financial Corporation)
24Power of Attorney (included on signature page)*
99.1Form of Proxy of FedFirst Financial Corporation


EXHIBIT
NUMBER

DESCRIPTION OF EXHIBIT

99.2Voting Instruction Forms for FedFirst Financial Corporation Stock Benefit Plans
99.3Consent of Mufson Howe Hunter & Company LLC*
99.4Consent of Patrick G. O’Brien Pursuant to SEC Rule 438*
99.5Consent of Richard B. Boyer Pursuant to SEC Rule 438*
99.6Consent of John J. LaCarte Pursuant to SEC Rule 438*
99.7Consent of John M. Swiatek Pursuant to SEC Rule 438*

*Previously filed.