NOTE

2—

MERGER

November 16, 2017,

the Company entered into a definitive merger agreement with First West Virginia Bancorp, Inc. (“FWVB”), the holding company for Progressive Bank, N.A. (“PB”), a national association. The FWVB merger was completed effective

April 30, 2018,

following the receipt of shareholder and regulatory approvals and the satisfaction of other customary closing conditions. In addition, effective

April 30, 2018,

PB merged into the Bank. The FWVB merger enhanced the Bank’s exposure into the core of the Tri-State region. Through the FWVB merger, the Company anticipates future revenue and earnings growth from an expanded menu of financial services expanding the Company’s business footprint into the Ohio Valley. The FWVB merger resulted in the addition of

eight

branches and expanded the Company’s reach into West Virginia with

seven

branches and

one

branch in Eastern Ohio. The FWVB merger value was approximately

$51.3

million. In connection with the FWVB merger, the Company issued

1,317,647

shares of common stock based on the Company’s closing stock price on

April 30, 2018,

$31.9068,

and paid cash consideration of

$9.8

million in exchange for all the outstanding shares of FWVB common stock.

Merger-related expenses are recorded in the Consolidated Statement of Income and include costs relating to the Company’s acquisition of FWVB, as described above. These charges represent

one

-time costs associated with acquisition activities and do

not

represent ongoing costs of the fully integrated combined organization. Accounting guidance requires that acquisition-related transactional and restructuring costs incurred by the Company be charged to expense as incurred. There were approximately

$1.2

million of cumulative merger-related expenses, of which

$854,000

and

$356,000,

were recorded in the Consolidated Statement of Income for the years ended

December 31, 2018

and

2017,

respectively.

As of the date of merger, FWVB had approximately

$334.0

million of assets,

$96.8

million of loans, and

$282.9

million of deposits held across a network of

branches located in West Virginia and eastern Ohio. The Company stockholders and FWVB stockholders now own approximately

76%

and

24%

of the combined company, respectively.

The FWVB merger is accounted for as an acquisition in accordance with the acquisition method of accounting as detailed in Accounting Standards Codification ("ASC")

805,

Business Combinations

. The acquisition method of accounting requires an acquirer to recognize the assets acquired and the liabilities assumed based on their fair values as of the date of acquisition. This process is heavily reliant on measuring and estimating the fair values of all the assets and liabilities of the acquired entity. To the extent we did

not

have the requisite expertise to determine the fair values of the assets acquired and liabilities assumed, we engaged

third

-party valuation specialists to assist us in determining such values. The results of the fair value evaluation generated goodwill and intangible assets. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual obligations or other legal rights.

The assets acquired and liabilities assumed of FWVB were recorded on the Company’s Consolidated Statement of Financial Condition at their estimated fair values as of

April 30, 2018.

Based on a purchase price allocation, the Company recorded

$23.5

million in goodwill and

$9.1

million in core deposit intangibles related to FWVB acquisition.

None

of the goodwill is deductible for income tax purposes, as the acquisition is accounted for as a tax-free exchange for tax purposes.

The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed in FWVB merger provisionally determined as of

June 30, 2018

and as subsequently revised for measurement-period adjustments, including a reconciliation to the total purchase consideration, are as follows (dollars in thousands):

Consideration Paid:	Provision at June 30, 2018			Measurement Period Adjustments			December 31, 2018
Cash Paid for Redemption of FWVB Common Stock	$	9,801		$	-		$	9,801
CB Financial Common Stock Issued in - Exchange for FWVB Common Stock		41,527			-			41,527
Total Consideration Paid		51,328			-			51,328

Assets Acquired:
Cash and Cash Equivalents		30,433			-			30,433
Net Loans		95,456			-			95,456
Investment Securities		187,628			-			187,628
Premises and Equipment		13,047			(9,335	)		3,712
Bank Owned Life Insurance		4,212			-			4,212
Core Deposit Intangible		12,789			(3,662	)		9,127
Deferred Tax Assets		(87	)		1,411			1,324
Other Assets		3,030			-			3,030
Total Assets Acquired		346,508			(11,586	)		334,922

Liabilities Assumed:
Deposits		281,620			-			281,620
Borrowings		22,329			-			22,329
Other Liabilities		3,117			-			3,117
Total Liabilities Assumed		307,066			-			307,066
Total Identifiable Net Assets		39,442			(11,586	)		27,856
Goodwill Recognized	$	11,886		$	11,586		$	23,472

The measurement-period adjustments were the result of continued refinement of certain estimates, particularly regarding the valuation of identified intangible assets, fixed assets, certain tax positions and deferred income taxes. As of

December 31, 2018,

we consider these balances to be complete. Goodwill of

$23.5

million arising from the acquisition, included in the Community Banking segment.

As part of the FWVB merger, the Company identified employees from FWVB who would be retained and estimated a severance cost of

$100,000

if those employees were terminated without cause within the

first

year of the merger.

The operating results of FWVB have been included in the Company’s Consolidated Statement of Income since the

April 30, 2018,

acquisition date. Total income of the acquired operations of FWVB consisted of net interest income of approximately

$7.4

million, noninterest income of approximately

$620,000,

noninterest expense of approximately

$6.0

million and net income of approximately

$1.5

million from

May 1, 2018

through

December 31, 2018.

The following unaudited combined pro forma information presents the operating results for the years ended

December 31, 2018

and

2017,

respectively, as if the FWVB acquisition had occurred on

January 1, 2017.

The pro forma results have been prepared for comparative purposes only and require significant estimates and judgments. As a result, they are

not

necessarily indicative of the results that would have been obtained had the FWVB merger actually occurred on

January 1, 2017

nor are they intended to be indicative of future results of operations (dollars in thousands, except per share data).

	Years Ended December 31,
	2018		2017
Net Interest Income	$	41,357	$	37,944
Noninterest Income		8,649		8,779
Noninterest Expense		39,737		33,733
Net Income		8,010		8,444

Earnings Per Share:
Basic	$	1.61	$	1.69
Diluted		1.59		1.68