Note 1: Restatement

The Company is filing this amendment to its quarterly report on Form 10-Q for the period ended March 31, 2018 to amend and restate financial statements and certain other financial information filed with the SEC. These amendments restate the Consolidated Financial Statements and the other financial information for the three months ended March 31, 2018 and 2017, and the audited consolidated balance sheet as of December 31, 2017 (the “Restatement Periods”). These amendments are being filed to change the Company’s treatment of mortgage recording tax expense for residential mortgage loans originated in Erie County, New York beginning in the fourth quarter of 2016 through the first quarter of 2018.

Effective for the 2015 tax year, New York state tax law was amended and allowed the Company to become eligible to recapture a portion of the special additional mortgage recording tax paid on mortgages and the Company elected to have the overpayment of tax refunded for the years ended December 31, 2015 through December 31, 2017 and the first quarter ended March 31, 2018 rather than used as a credit carryforward. As part of a review of the Company’s 2015 state tax return by the New York State Department of Taxation and Finance, management became aware that the Company had been incorrectly claiming a tax credit for residential mortgages on property located in Erie County, the Company’s second largest county for mortgage originations. Pursuant to New York State Department of Taxation and Finance rules, no tax credit will be allowed for payment of the special additional mortgage recording tax with respect to a mortgage of real property located in Erie County and the mortgage was recorded after 1987.

Upon recommendation of management, the Audit Committee of the Company determined that the effect of reversing the tax credits was necessary for the Restatement Periods. The Company estimates that the cumulative effect of the restatement due to the origination of residential mortgage loans in Erie County beginning in the fourth quarter of 2016 through the first quarter of 2018 is a reduction in income before income taxes of $266,000 and a reduction in income net of income taxes of $178,000.

The effect this restatement had on the Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Stockholders’ Equity, and Consolidated Statements of Cash Flows for the respective periods is as follows:

	At March 31, 2018				At December 31, 2017
Restated Consolidated Balance Sheet:	As Originally Reported		As Restated		As Originally Reported		As Restated
	(Dollars in Thousands)
Other assets	$	3,151	$	2,884	$	2,948	$	2,700
Total assets	$	314,667	$	314,400	$	314,630	$	314,382
Other liabilities	$	1,306	$	1,217	$	1,344	$	1,259
Total liabilities	$	283,352	$	283,263	$	283,411	$	283,326
Retained earnings	$	16,329	$	16,151	$	16,240	$	16,077
Total stockholders’ equity	$	31,315	$	31,137	$	31,219	$	31,056
Total liabilities and stockholders’ equity	$	314,667	$	314,400	$	314,630	$	314,382

	For the Quarter Ended
	March 31, 2018				March 31, 2017
Restated Consolidated Statements of Income:	As Originally Reported		As Restated		As Originally Reported			As Restated
	(Dollars in Thousands, except per share data)
Mortgage fees and taxes	$	33	$	52	$	24		$	48
Total other expenses	$	2,634	$	2,653	$	2,496		$	2,520
Income (loss) before income taxes	$	111	$	92	$	(17	)	$	(41	)
Provision (benefit) for income taxes	$	22	$	18	$	(28	)	$	(36	)
Net income (loss)	$	89	$	74	$	11		$	(5	)
Earnings per share – basic and diluted	$	0.05	$	0.04	$	0.01		$	0.00

	For the Quarter Ended
	March 31, 2018						March 31, 2017
Restated Consolidated Statements of Comprehensive Income (Loss):	As Originally Reported			As Restated			As Originally Reported		As Restated
	(Dollars in Thousands)
Net income (loss)	$	89		$	74		$	11	$	(5	)
Comprehensive income (loss)	$	(3	)	$	(18	)	$	21	$	5

	For the Quarter Ended
	March 31, 2018				March 31, 2017
Restated Consolidated Statements of Stockholders’ Equity:	As Originally Reported		As Restated		As Originally Reported		As Restated
	(Dollars in Thousands)
Balance, beginning of period	$	31,219	$	31,056	$	31,859	$	31,775
Increase (decrease) attributable to net income (loss)	$	89	$	74	$	11	$	(5	)
Balance, end of period	$	31,315	$	31,137	$	31,893	$	31,793

	For the Quarter Ended
	March 31, 2018						March 31, 2017
Restated Consolidated Statements of Cash Flows:	As Originally Reported			As Restated			As Originally Reported			As Restated
	(Dollars in Thousands)
Net income (loss)	$	89		$	74		$	11		$	(5	)
Increase in other assets	$	(203	)	$	(182	)	$	(192	)	$	(168	)
Decrease in other liabilities	$	(10	)	$	(16	)	$	(410	)	$	(418	)

In addition, Note 4 has been amended to reflect these restatements.