NOTE

2—MERGER

Effective

April 30, 2018,

the Company completed the merger with First West Virginia Bancorp, Inc. (“FWVB”), the holding company for Progressive Bank, N.A. (“PB”), a national association. 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 with the addition of

seven

branches in West Virginia 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

was recorded in the Consolidated Statement of Income for the year ended

December 31, 2018.

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. After the merger, the Company stockholders and FWVB stockholders owned approximately

76%

and

24%

of the combined company, respectively.

The FWVB merger was accounted for as an acquisition in accordance with the acquisition method of accounting as detailed in ASC Topic

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. The goodwill of

$23.5

million is included in the Community Banking segment. In addition, the goodwill is

not

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

The fair values of major classes of assets acquired and liabilities assumed in the FWVB merger are as follows (dollars in thousands):

	December 31,
	2018
Consideration Paid:
Cash Paid for Redemption of FWVB Common Stock	$	9,801
CB Financial Common Stock Issued in Exchange for FWVB Common Stock		41,527
Total Consideration Paid		51,328

Assets Acquired:
Cash and Cash Equivalents		30,433
Net Loans		95,456
Investment Securities		187,628
Premises and Equipment		3,712
Bank Owned Life Insurance		4,212
Core Deposit Intangible		9,127
Deferred Tax Assets		1,324
Other Assets		3,030
Total Assets Acquired		334,922

Liabilities Assumed:
Deposits		281,620
Borrowings		22,329
Other Liabilities		3,117
Total Liabilities Assumed		307,066
Total Identifiable Net Assets		27,856
Goodwill Recognized	$	23,472

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.

As part of the FWVB merger agreement, 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. For the year ended

December 31, 2019,

the Company incurred

$52,000

in severance cost. In accordance with U.S. GAAP, the

$48,000

severance accrual that was remaining as of the

one

-year anniversary of the merger was reversed and recorded as an offset to compensation expense.