10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: MARCH 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:             0-22387

DCB Financial Corp

(Exact name of registrant as specified in its charter)

Ohio	31-1469837
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

110 Riverbend Avenue, Lewis Center, Ohio  43035

(Address of principal executive offices)

(740) 657-7000

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x          No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filers ¨           Accelerated filer ¨           Non-accelerated filer ¨           Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes ¨     No x

As of May 1, 2014, the latest practicable date, 7,192,350 shares of the registrant’s no par value common stock were issued and outstanding.

DCB FINANCIAL CORP

FORM 10-Q

Table of Contents

	Page
Part I – Financial Information
Item 1 – Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013	3
Condensed Consolidated Statements of Income (unaudited) for the three month period ended March 31, 2014 and 2013	4
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three month period ended March 31, 2014 and 2013	5
Condensed Consolidated Statements of Cash Flows (unaudited) for the three month period ended March 31, 2014 and 2013	6
Notes to the Condensed Consolidated Financial Statements	7
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3 - Quantitative and Qualitative Disclosures about Market Risk	38
Item 4 – Controls and Procedures	38
Part II – Other Information	39
Item 1 – Legal proceedings	39
Item 1A – Risk Factors	39
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3 – Defaults Upon Senior Securities	39
Item 4 – Mine Safety Disclosures	39
Item 5 – Other Information	39
Item 6 – Exhibits	39
Signatures	41

2.

DCB FINANCIAL CORP

FORM 10-Q

CONSOLIDATED STATEMENTS OF CONDITION

	March 31, 2014			December 31, 2013
	(Dollars in thousands, except share and per share data)
	(Unaudited)
Assets
Cash and due from financial institutions	$	7,309		$	6,110
Interest-bearing deposits		18,176			19,247
Total cash and cash equivalents		25,485			25,357
Securities available-for-sale		78,454			79,948
Loans		352,246			356,048
Less allowance for loan losses		(5,345	)		(6,724	)
Net loans		346,901			349,324
Loans held for sale		2,213			7,806
Real estate owned		1,563			1,219
Investment in FHLB stock		3,250			3,799
Premises and equipment, net		10,407			10,641
Premises and equipment held for sale		-			1,405
Bank-owned life insurance		19,535			19,297
Accrued interest receivable and other assets		6,326			3,623
Total assets	$	494,134		$	502,419
Liabilities and stockholders’ equity
Liabilities:
Deposits:
Non-interest bearing	$	104,615		$	109,622
Interest bearing		335,182			317,237
Total deposits		439,797			426,859
Deposits held for sale		-			22,571
Federal Home Loan Bank advances		4,831			4,838
Accrued interest payable and other liabilities		3,109			2,887
Total liabilities		447,737			457,155
Stockholders’ equity:
Common stock, no pm value 7,500,000 shares authorized and issued at March 31, 2014 and December 31, 2013		15,771			15,771
Retained earnings		37,800			37,683
Treasury stock, at cost, 307,650 shares at March 31, 2014 and December 31, 2013		(7,416	)		(7,416	)
Accumulated other comprehensive income (loss)		242			(774	)
Total stockholders’ equity		46,397			45,264
Total liabilities and stockholders’ equity	$	494,134		$	502,419
Common shares outstanding		7,192,350			7,192,350
Book value per common share	$	6.45		$	6.29

See Notes to the consolidated financial statements.

3.

 DCB FINANCIAL CORP

FORM 10-Q

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	For the three months ended March 31,
	2014			2013
	(Dollars in thousands, except share and per share data)
Interest income:
Loans	$	3,738		$	3,551
Securities		553			566
Federal funds sold and interest bearing deposits		13			29
Total interest income		4,304			4,146
Interest expense:
Deposits:
Savings and money market  accounts		131			101
Time accounts		128			324
NOW accounts		21			26
Total		280			451
FHLB advances		36			79
Total interest expense		316			530
Net interest income		3,988			3,616
Provision for loan losses		-			(650	)
Net interest income after provision for loan losses		3,988			4,266
Non-interest income:
Service charges		511			547
Wealth management fees		293			316
Treasury management fees		56			62
Income from bank-owned life insurance		239			240
Loss on loans held for sale		(245	)		-
Gain on the sale of REO		-			84
Loss on the sale of securities available-for-sale		(140	)		-
Gain on sale of branch		438			-
Other non-interest income		40			59
Total non-interest income		1,192			1,308
Non-interest expense:
Salaries and employee benefits		2,779			2,972
Occupancy and equipment		804			793
Professional services		421			456
Advertising		81			107
Office supplies, postage and courier		95			106
FDIC insurance premium		168			210
State franchise taxes		65			153
Other non-interest expense		650			659
Total non-interest expense		5,063			5,456
Income before income taxes		117			118
Income tax benefit		-			(24	)
Net income	$	117		$	142
Share and Per Share Data
Basic average common shares outstanding		7,192,350			7,192,350
Diluted average common shares outstanding		7,244,716			7,223,144
Basic and diluted earnings per common share	$	0.02		$	0.02

See Notes to the consolidated financial statements.

4.

 DCB FINANCIAL CORP

FORM 10-Q

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended March 31,

(Dollars in thousands)

	2014			2013
Net income	$	117		$	142
Other comprehensive income:
Net unrealized gains on securities available-for-sale, net of related taxes of $571		1,108			-
Reclassification adjustment for losses recognized in income statement, net of related taxes of $(48)		(92	)		-
Unrealized gains on securities transferred to available-for-sale, net of  related taxes of $12		-			23
Amortization of unrealized losses on held-to-maturity securities,  net of taxes of $12		-			23
Total other comprehensive income		1,016			46
Comprehensive income	$	1,133		$	188

See Notes to the consolidated financial statements.

5.

DCB FINANCIAL CORP

FORM 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31,

(Dollars in thousands)

	2014			2013
Cash flows from operating activities
Net income	$	117		$	142
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		273			254
Provision for loan losses		-			(650	)
Deferred income taxes		-			(24	)
Loss on loans held for sale		245			-
Loss on sale of securities available-for-sale		140			-
Gain on sale of real estate owned		-			(84	)
Gain on sale of branch		(438	)		-
Stock option plan expense		60			79
Premium amortization on securities, net		270			442
Earnings on bank owned life insurance		(238	)		(240	)
Net changes in other assets and other liabilities		(3,064	)		284
Net cash provided by (used in) operating activities		(2,635	)		203
Cash flows from investing activities
Securities
Purchases		(5,949	)		(6,730	)
Proceeds from sales		2,133			-
Proceeds from maturities, principal payments and calls		6,439			9,299
Net change in loans		2,644			(10,785	)
Proceeds from sale of real estate owned		33			1,393
Premises and equipment expenditures		(50	)		(289	)
Decrease from sale of branch		(12,464	)		-
Net cash used in investing activities		(7,214	)		(7,112	)
Cash flows from financing activities
Net change in deposits		9,435			(1,001	)
Repayment of Federal Home Loan Bank advances		(7	)		(1,114	)
Proceeds from sale of FHLB stock		549			-
Net cash provided by (used in) financing activities		9,977			(2,115	)
Net change in cash and cash equivalents		128			(9,024	)
Cash and cash equivalents at beginning of year		25,357			63,307
Cash and cash equivalents at end of year	$	25,485		$	54,283
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on deposits and borrowings	$	328		$	537
Non-cash investing and financing activities
Transfer of loans to real estate owned	$	377		$	-
Transfer to loans held for sale	$	87		$	-

See Notes to the consolidated financial statements.

6.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary Of Significant Accounting Policies

These consolidated interim financial statements are prepared without audit and reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position of DCB Financial Corp (the “Company”) at March 31, 2014, and its results of operations and cash flows for the three month periods ended March 31, 2014 and 2013. All such adjustments are normal and recurring in nature. The accompanying consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not purport to contain all necessary financial disclosures required by accounting principles generally accepted in the United States of America that might otherwise be necessary in the circumstances, and should be read in conjunction with the consolidated financial statements, and notes thereto, included in its Annual Report as of December 31, 2013. Refer to the accounting policies of the Company described in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report as of December 31, 2013. The Company has consistently followed these policies in preparing this Form 10-Q. 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 entire year.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, The Delaware County Bank and Trust Company (the “Bank”), DCB Title Services LLC, DCB Insurance Services, Inc. and ORECO, Inc. (collectively referred to herein after as the “Company”). All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Management considers the Company to operate within one business segment, banking.

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), management makes estimates and assumptions based on available information. These estimates and assumptions affect amounts reported in the financial statements and disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments and status of contingencies are particularly subject to change.

Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. Deferred tax, net of valuation allowances, at March 31, 2014 and December 31, 2013 were comprised entirely of the deferred tax amount generated by the unrealized gain or loss position of the available for sale securities portfolio.

Earnings per share

Earnings per common share is net income divided by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed including the dilutive effect of additional potential common shares under stock options. Weighted-average shares for basic and diluted earnings per share are presented below.

	Three Months Ended
	March 31,
	2014		2013
Weighted-average common shares outstanding (basic)		7,192,350		7,192,350
Dilutive effect of assumed exercise of stock options		52,366		30,974
Weighted-average common shares outstanding (diluted)		7,244,716		7,223,144

There were 153,506 shares included in the computation of common share equivalents for the three-month period then ended because the average fair value of the shares was greater than the exercise price.

7.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Options to purchase 122,437 shares of common stock with a weighted-average exercise price of $16.46 were outstanding at March 31, 2013. There were 28,918 vested shares included in the computation of common share equivalents for the three-month period then ended because the average fair value of the shares was greater than the exercise price.

Stock-Based Compensation

The Company has a stock option plan for employees and directors as described in Note 6 (Stock-Based Compensation). In addition to equity settlement, the stock option plan also allows for cash settlement of options at the recipient’s discretion; therefore, liability accounting applies to this plan. Compensation expense is recognized based on the fair value of these awards at the reporting date. A Black Scholes model is utilized to estimate the fair value of stock options at the date of grant and subsequent remeasurement dates. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards. The Company’s stock option awards contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. Changes in fair value of the options between the vesting date and option expiration date are also recognized in the Consolidated Statement of Operations.

Significant Accounting Estimates

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the financial services industry. The application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.

The procedures for assessing the adequacy of the allowance for loan losses reflect our evaluation of credit risk after careful consideration of all information available to us. In developing this assessment, we must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require an increase or a decrease in the allowance for loan losses.

The valuation of other assets requires that management utilize a variety of estimates and analysis to determine whether an asset is impaired or other-than-temporarily impaired (“OTTI”). After determining the appropriate methodology for fair value measurement, management then evaluates whether or not declines in fair value below book value are temporary or other-than-temporary impairments. When the Company does not intend to sell a debt security, and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

Loans (including Loans Held for Sale): Loans are classified as held for investment when management has both the intent and ability to hold the loan for the foreseeable future, or until maturity or payoff. Management’s intent and view of the foreseeable future may change based on changes in business strategies, the economic environment, market conditions and the availability of government programs. Loans that are held for investment are reported at the principal balance outstanding, net of unearned interest, unamortized deferred loan fees and costs and the allowance for loan losses. Loans held for sale are carried at the lower of amortized cost or estimated fair value, determined on an aggregate basis for each type of loan. Net unrealized losses are recognized by charges to income.

8.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Interest income is accrued based on the unpaid principal balance and includes amortization of net deferred loan fees and costs over the loan term. Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

When loans are transferred from held for investment to held for sale, specific reserves and allocated pooled reserves included in the allowance for loan and losses are reclassified to reduce the basis of the loans to the lower of cost or estimated fair value less cost to sell.

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable but unconfirmed credit losses, increased by the provision for loan losses and decreased by charge-offs net of recoveries. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the required allowance balance based on past loan loss experience, augmented by additional estimates related to the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, economic conditions and other factors.

The allowance consists of both specific and general components. The specific component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the collateral value, or value of expected discounted cash flows of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’s internal risk rating process. Management utilizes an average of a three year historical loss period. Management has the ability to adjust these loss rates by utilizing risk ratings based on current period trends. If current period trends differ either positively or negatively from the given weighted historical loss rates, adjustments can be made. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risking rating data.

Management also utilizes its assessment of general economic conditions, and other localized economic data to more fully support its loan loss estimates. General economic data may include: inflation rates, savings rates and national unemployment rates. Local data may include: unemployment rates, housing starts, real estate valuations, and other economic data specific to the Company’s market area. Though not specific to individual loans, these economic trends can have an impact on portfolio performance as a whole.

Uncollectibility is usually determined based on a pre-determined number of days delinquent in the case of consumer loans, or, in the case of commercial loans, is based on a combination of factors including delinquency, collateral and other legal considerations. Consumer loans are charged-off prior to 120 days of delinquency, but could be charged off earlier, depending on the individual circumstances. Mortgage loans are charged down prior to 180 days of delinquency, but could be charged off sooner, again, depending upon individual circumstance. Typically, loans collateralized by residential real estate are partially charged down to the estimated liquidation value, which is generally based on appraisal less costs to hold and liquidate. Commercial and commercial real estate loans are evaluated for impairment and typically reserved based on the results of the analysis, then subsequently charged down to a recoverable value when loan repayment is deemed to be collateral dependent. Loans can be partially charged down depending on a number of factors including: the remaining strength of the borrower and guarantor; the type and value of the collateral, and the ease of liquidating collateral; and whether or not collateral is brought onto the bank’s balance sheet via repossession. In the case of commercial and commercial real estate loans, charge-offs, partial or whole, take place when management determines that full collectability of principal balance is unlikely to occur. Subsequent recoveries, if any, are credited to the allowance. Management’s policies for determining impairment, reserves and charge-offs are reviewed and approved by the Board of Directors on an annual basis.

9.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Troubled debt restructuring of loans is undertaken to improve the likelihood that the loan will be repaid in full under the modified terms in accordance with a reasonable repayment schedule.  All modified loans are evaluated to determine whether the loans should be reported as a Troubled Debt Restructuring (“TDR”).  A loan is a TDR when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower by modifying or renewing a loan that the Company would not otherwise consider. To make this determination, the Company must determine whether (a) the borrower is experiencing financial difficulties and (b) the Company granted the borrower a concession. This determination requires consideration of all of the facts and circumstances surrounding the modification.  An overall general decline in the economy or some deterioration in a borrower’s financial condition does not automatically mean the borrower is experiencing financial difficulties.

Note 2 – Securities

As of March 31, 2014:

The amortized cost and estimated fair values of securities available-for-sale were as follows (in thousands):

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and agency obligations	$	13,733	$	25	$	(286	)	$	13,472
Corporate bonds		6,152		38		(49	)		6,141
States and municipal obligations		20,680		346		(298	)		20,728
Mortgage-backed securities		37,522		757		(166	)		38,113
Total	$	78,087	$	1,166	$	(799	)	$	78,454

As of December 31, 2013:

The amortized cost and estimated fair values of securities available-for-sale were as follows (in thousands):

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and agency obligations	$	13,714	$	16	$	(428	)	$	13,302
Corporate bonds		6,187		42		(61	)		6,168
States and municipal obligations		20,651		283		(484	)		20,450
Collateralized debt obligations		1,916		-		(940	)		976
Mortgage-backed securities		38,652		731		(331	)		39,052
Total	$	81,120	$	1,072	$	(2,244	)	$	79,948

There were no credit losses recognized on investments in the three months ended March 31, 2014 and 2013.

10.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at March 31, 2014 and December 31, 2013 (dollars in thousands):

March 31, 2014

	(Less than 12 months)						(12 months or longer)						Total
Description of securities	Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses
U.S. Government and agency obligations		8	$	7,364	$	167		2	$	2,431	$	119		10	$	9,795	$	286
Corporate bonds		5		1,891		24		3		1,403		25		8		3,294		49
State and municipal obligations		21		7,599		182		4		1,546		116		25		9,145		298
Mortgage-backed securities and other		6		4,474		77		2		2,103		89		8		6,577		166
Total temporarily impaired securities		40	$	21,328	$	450		11	$	7,483	$	349		51	$	28,811	$	799

December 31, 2013

	(Less than 12 months)						(12 months or longer)						Total
Description of securities	Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses
U.S. Government and agency obligations		10	$	10,680	$	428		-	$	-	$	-		10	$	10,680	$	428
Corporate bonds		5		2,141		38		2		883		23		7		3,024		61
State and municipal obligations		32		11,012		442		2		822		42		34		11,834		484
Collateralized debt obligations		-		-		-		1		976		940		1		976		940
Mortgage-backed securities and other		11		8,445		231		2		1,189		100		13		9,634		331
Total temporarily impaired securities		58	$	32,278	$	1,139		7	$	3,870	$	1,105		65	$	36,148	$	2,244

The unrealized losses on the Company’s investments in U.S. Government and agency obligations, state and political subdivision obligations, corporate bonds and mortgage-backed securities were caused primarily by changes in interest rates. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be OTTI at March 31, 2014 or December 31, 2013.

Substantially all mortgage-backed securities are backed by pools of mortgages that are insured or guaranteed by the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”).

On March 17, 2014, the Company sold its remaining investment in collateralized debt obligations for a loss of $141,000, this was the only security sold at a loss during the three months ended March 31, 2014. There were no securities sold at a loss during the three months ended March 31 2013.

At March 31, 2014, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders’ equity.

11.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and estimated fair value of all debt securities at March 31, 2014, by contractual maturity, are shown below (in thousands). Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown separately since they are not due at a single maturity date.

	Available-for-sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	502	$	504
Due after one to five years		10,733		10,774
Due after five to ten years		19,201		19,105
Due after ten years		10,129		9,958
Mortgage-backed and related securities		37,522		38,113
Total	$	78,087	$	78,454

Securities with a fair value of $65.9 million at March 31, 2014 were pledged to secure public deposits and other obligations.

Note 3 – Loans

At March 31, 2014 and December 31, 2013, loans were comprised of the following (in thousands):

	March 31,  2014		December 31, 2013
Commercial and industrial	$	110,886	$	122,084
Commercial real estate		103,125		104,692
Residential real estate and home equity		105,573		96,245
Consumer and credit card		32,498		32,862
Subtotal		352,082		355,883
Add: Net deferred loan origination fees		164		165
Total loans receivable	$	352,246	$	356,048

Note 4 – Credit Quality

Allowance for Credit Losses

The Company’s methodology for estimating probable future losses on loans utilizes a combination of probability of loss by loan grade and loss given defaults for its portfolios. The probability of default is based on both market data from a third-party independent source and actual historical default rates within the Company’s portfolio. A loan is impaired when full payment of interest and principal under the original contractual loan terms is not expected. Commercial and industrial loans, commercial real estate, including construction and land development, and multi-family real estate loans are individually evaluated for impairment. If a loan is impaired, the loan amount exceeding fair value, based on the most current information available is reserved. Management has developed a process by which commercial and commercial real estate loans receiving an internal grade of substandard or doubtful are individually evaluated for impairment through a loan quality review (LQR). The LQR details the various attributes of the relationship and collateral and determines based on the most recent available information if a specific reserve needs to be applied and at what level. The LQR process for all loans meeting the specific review criteria is completed on a quarterly basis. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, such loans are not separately identified for impairment disclosures. This methodology recognizes portfolio behavior while allowing for reasonable loss ratios on which to estimate allowance calculations.

12.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Further, the process for estimating probable loan losses is divided into reviewing impaired loans on an individual basis for probable losses and, as noted above, calculating probable future losses based on historical and market data for homogenous loan portfolios. As the Company’s troubled loan portfolios have been reduced through charge-off, the remaining loan portfolios possess better overall credit characteristics, and based on the Company’s methodology require lower rates of reserving than historical levels.

The table below presents allowance for loan losses by loan portfolio. Commercial real estate includes real estate construction and land development loans (in thousands).

Three Months Ended March 31, 2014

	Unallocated		Consumer and Credit Card			Commercial and Industrial			Commercial  Real Estate			Residential Real Estate and  Home Equity			Total
Beginning balance	$	-	$	301		$	3,232		$	2,974		$	218		$	6,725
Charge-offs		-		(46	)		(1,193	)		(159	)		(14	)		(1,412	)
Recoveries		-		31			4			84			10			129
Provision		173		(40	)		30			(127	)		(36	)		-
Transferred to loans  held for sale		-		-			-			(97	)		-			(97	)
Ending balance	$	173	$	246		$	2,073		$	2,675		$	178		$	5,345
Individually evaluated  for impairment	$	-	$	-		$	966		$	1,724		$	-		$	2,690
Collectively evaluated  for impairment		173		246			1,107			951			178			2,655
Ending balance	$	173	$	246		$	2,073		$	2,675		$	178		$	5,345
Loans
Individually evaluated   for impairment	$	-	$	-		$	3,730		$	15,108		$	-		$	18,838
Collectively evaluated for impairment		-		32,498			107,156			88,017			105,573			333,244
Total	$	-	$	32,498		$	110,886		$	103,125		$	105,573		$	352,082

13.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2013

	Consumer and Credit Card			Commercial and Industrial			Commercial Real Estate			Residential Real Estate and Home Equity			Total
Beginning balance	$	365		$	1,621		$	4,692		$	204		$	6,882
Charge-offs		(39	)		(64	)		(102	)		(42	)		(247	)
Recoveries		60			688			10			15			773
Provision		(99	)		(659	)		124			(16	)		(650	)
Ending balance	$	287		$	1,586		$	4,724		$	161		$	6,758
Individually evaluated for impairment	$	-		$	737		$	2,983		$	-		$	3,720
Collectively evaluated for impairment		287			849			1,741			161			3,038
Ending balance	$	287		$	1,586		$	4,724		$	161		$	6,758
Loans
Individually evaluated for impairment	$	-		$	5,586		$	20,980		$	-		$	26,566
Collectively evaluated for impairment		24,452			116,066			88,645			73,026			302,189
Total	$	24,452		$	121,652		$	109,625		$	73,026		$	328,755

Impaired Loans

A loan is considered impaired when based on current information and events it is probable the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Commercial and commercial real estate loans with risk grades Substandard, Vulnerable, Doubtful, or Loss are evaluated for impairment.

14.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following presents by class, information related to the Company’s impaired loans as of March 31, 2014 and December 31, 2013 (in thousands).

At March 31, 2014

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year-to-date Average Recorded Investment		Year-to-date Interest Income Recognized
With No Related Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		1,698		1,698		-		1,434		19
Commercial Real Estate		9,826		9,826		-		9,816		149
Residential RE and Home Equity		-		-		-		-		-
With Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		2,032		2,110		966		4,135		12
Commercial Real Estate		5,282		5,282		1,724		5,495		73
Residential RE and Home Equity		-		-		-		-		-
Total
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		3,730		3,808		966		5,569		31
Commercial Real Estate		15,108		15,108		1,724		15,311		222
Residential RE and Home Equity		-		-		-		-		-
Total	$	18,838	$	18,916	$	2,690	$	20,880	$	253

15.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2013

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year-to-date Average Recorded Investment		Year-to-date Interest Income Recognized
With No Related Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		1,530		1,530		-		3,081		67
Commercial Real Estate		9,892		11,788		-		10,005		615
Residential RE and Home Equity		-		-		-		-		-
With Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		5,691		5,833		2,304		2,686		196
Commercial Real Estate		5,768		7,296		1,862		10,060		308
Residential RE and Home Equity		-		-		-		-		-
Total
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		7,221		7,363		2,304		5,767		263
Commercial Real Estate		15,660		19,084		1,862		20,065		923
Residential RE and Home Equity		-		-		-		-		-
Total	$	22,881	$	26,447	$	4,166	$	25,832	$	1,186

The allowance for impaired loans is included in the Company’s overall allowance for loan losses. The provision necessary to increase this allowance is included in the Company’s overall provision for losses on loans.

Loans on nonaccrual status at March 31, 2014 and December 31, 2013 are as follows (in thousands):

	March 31,		December 31,
	2014		2013
Consumer and credit card	$	-	$	-
Commercial and industrial		1,449		4,702
Commercial real estate		1,317		1,398
Residential real estate and home equity		511		352
Total	$	3,277	$	6,452

16.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Credit Quality Indicators

Corporate risk exposure by risk profile was as follows at March 31, 2014 (in thousands):

Category	Commercial and Industrial		Commercial Real Estate
Pass-1-4	$	99,921	$	85,073
Vulnerable-5		3,318		4,542
Substandard-6		7,647		13,510
Doubtful-7		-		-
Loss-8		-		-
Total	$	110,886	$	103,125

Corporate risk exposure by risk profile was as follows at December 31, 2013:

Category	Commercial and Industrial		Commercial Real Estate
Pass-1-4	$	111,266	$	83,953
Vulnerable-5		2,574		4,785
Substandard-6		8,244		15,954
Doubtful-7		-		-
Loss-8		-		-
Total	$	122,084	$	104,692

Risk Category Descriptions

Pass (Prime – 1, Good – 2, Fair – 3, Compromised – 4)

Loans with a pass grade have a higher likelihood that the borrower will be able to service its obligations in accordance with the terms of the loan than those loans graded 5, 6, 7, or 8. The borrower’s ability to meet its future debt service obligations is the primary focus for this determination. Generally, a borrower’s expected performance is based on the borrower’s financial strength as reflected by its historical and projected balance sheet and income statement proportions, its performance, and its future prospects in light of conditions that may occur during the term of the loan.

Vulnerable (Special Mention) – 5

Loans which possess some credit deficiency or potential weakness which deserves close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential”, versus “well-defined”, impairments to the primary source of loan repayment.

17.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Substandard – 6

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 so classified must have well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. One or more of the following characteristics may be exhibited in loans classified Substandard:

· Loans, which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source, is uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.

· Loans are inadequately protected by the current net worth and paying capacity of the obligor.

· The primary source of repayment is gone, and the Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.

· Loans are characterized by the distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

· Unusual courses of action are needed to maintain a high probability of repayment.

· The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.

· The lender is forced into a subordinated or unsecured position due to flaws in documentation.

· Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

· The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.

· There is a significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

Doubtful – 7

One or more of the following characteristics may be exhibited in loans classified Doubtful:

· Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

· The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

· The possibility of loss is high, but, because of certain important pending factors, which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established during this period of deferring the realization of the loss.

Loss – 8

Loans are considered uncollectible and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

18.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Consumer Risk

Consumer risk based on payment activity at March 31, 2014 is as follows (in thousands).

Payment Category	Consumer and  Credit Card		Residential Real Estate and  Home Equity
Performing	$	32,498	$	105,062
Non-performing		-		511
Total	$	32,498	$	105,573

Consumer risk based on payment activity at December 31, 2013 is as follows (in thousands).

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	32,862	$	95,893
Non-Performing		-		352
Total	$	32,862	$	96,245

Age Analysis of Past Due Loans

The following table presents past due loans aged as of March 31, 2014 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 days and Accruing
Consumer and credit card	$	33	$	67	$	-	$	100	$	32,398	$	32,498	$	-
Commercial and industrial		180		-		751		931		109,955		110,886		-
Commercial real estate		-		63		484		547		102,578		103,125		-
Residential real estate and home equity		621		2		422		1,045		104,528		105,573		-
Total	$	834	$	132	$	1,657	$	2,623	$	349,459	$	352,082	$	-

19.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table presents past due loans aged as of December 31, 2013 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 days and Accruing
Consumer and Credit Card	$	90	$	92	$	-	$	182	$	32,680	$	32,862	$	-
Commercial and Industrial		407		-		1,001		1,408		120,676		122,084		-
Commercial Real Estate		49		-		682		731		103,961		104,692		-
Residential Real Estate and Home Equity		374		-		321		892		95,353		96,245		-
Total	$	920	$	92	$	2,004	$	3,213	$	352,670	$	355,883	$	-

Troubled Debt Restructurings

Information regarding Troubled Debt Restructuring (“TDR”) loans for the three month period ended March 31, 2014 is as follows (in thousands):

	Three Months Ended				Three Months Ended
	March 31, 2014				March 31, 2013
	Number of Contracts		Recorded Investment (as of period end)		Number of Contracts		Recorded Investment (as of period end)
Consumer and Credit Card		-	$	-		-	$	-
Commercial and Industrial		2		58		3		2,230
Commercial Real Estate		-		-		-		-
Residential Real Estate and Home Equity		-		-		-		-
Total		2	$	58		3	$	2,230

The following presents by class loans modified in a TDR that subsequently defaulted within twelve months of the modification (i.e. 60 days or more past due) during the three month period ended March 31, 2014 and 2013 (in thousands).

	Three Months Ended				Three Months Ended
	March 31, 2014				March 31, 2013
	Number of Contracts		Recorded Investment as of period end (1)		Number of Contracts		Recorded Investment as of period end (1)
Consumer and Credit Card		-	$	-		-	$	-
Commercial and Industrial		-		-		-		-
Commercial Real Estate		3		520		-		-
Residential Real Estate and Home Equity		-		-		-		-
Total		3	$	520		-	$	-

(1) Period end balances are inclusive of all partial pay downs and charge-offs since the modification date. Loans modified in a TDR that were fully paid down, charged off, or foreclosed upon by period end are not reported.

20.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

A modification of a loan constitutes a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Company offers various types of concessions when modifying a loan; however, forgiveness of principal is rarely granted. Depending on the financial condition of the borrower, the purpose of the loan and the type of collateral supporting the loan structure; modifications can be either short-term (12 months of less) or long term (greater than one year). Commercial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor may be requested. Commercial mortgage and construction loans modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a TDR may also involve extending the interest-only payment period.

Land loans are also included in the class of commercial real estate loans. Land loans are typically structured as interest-only monthly payments with a balloon payment due at maturity. Land loans modified in a TDR typically involve extending the balloon payment by one to three years, changing the monthly payments from interest-only to principal and interest, while leaving the interest rate unchanged.

Loans modified in a TDR are typically already on nonaccrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR for the Company may have the financial effect of increasing the specific allowance associated with the loan. The allowance for impaired loans that have been modified in a TDR is measured based on the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent or on the present value of expected future cash flows discounted at the loan’s effective interest rate. Management exercises significant judgment in developing these estimates.

As mentioned above, an individual loan is placed on a non-accruing status if, in the judgment of management, it is unlikely that all principal and interest will be received according to the terms of the note. Loans on non-accrual may be eligible to be returned to an accruing status after six months of compliance with the modified terms. However, there are number of factors that could prevent a loan from returning to accruing status, even after remaining in compliance with loan terms for the aforementioned six month period. For example: deteriorating collateral, negative cash flow changes and inability to reduce debt to income ratios.

Note 5 – Fair Value Measurements

The Company accounts for fair value measurements in accordance with FASB ASC 820, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FASB ASC 820 defines fair value as 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. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, 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

The carrying value of certain financial assets and liabilities is impacted by the application of fair value measurements, either directly or indirectly. In certain cases, an asset or liability is measured and reported at fair value on a recurring basis, such as available-for-sale investment securities. In other cases, management must rely on estimates or judgments to determine if an asset or liability not measured at fair value warrants an impairment write-down or whether a valuation reserve should be established. Given the inherent volatility, the use of fair value measurements may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the financial statements, from period to period.

21.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair value is defined as the price that would be received to sell an asset or transfer a liability between market participants at the balance sheet date. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and the Company must use other valuation methods to develop a fair value.

The following methods, assumptions, and valuation techniques were used by the Company to measure different financial assets and liabilities at fair value and in estimating its fair value disclosures for financial instruments.

Cash and Cash Equivalents: The carrying amounts reported in the consolidated statements of financial condition for cash and cash equivalents is deemed to approximate fair value and are classified as Level 1 of the fair value hierarchy.

Available for Sale Investment Securities: Fair values for investment securities are determined by quoted market prices if available (Level 1). For securities where quoted prices are not available, fair values are estimated based on market prices of similar securities. For securities where quoted prices or market prices of similar securities are not available, fair values are estimated using matrix pricing, which is a mathematical technique widely used in the industry to value investment securities without relying exclusively on quoted prices for the specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities (Level 2). Any investment securities not valued based upon the methods above is considered Level 3.

The Company utilizes information provided by a third-party investment securities portfolio manager in analyzing the investment securities portfolio in accordance with the fair value hierarchy of the Fair Value Topic. The portfolio manager’s evaluation of investment security portfolio pricing is performed using a combination of prices and data from other sources, along with internally developed matrix pricing models. The third-party’s month-end pricing process includes a series of quality assurance activities where prices are compared to recent market conditions, previous evaluation prices, and between the various pricing services. These processes produce a series of quality assurance reports on which price exceptions are identified, reviewed and where appropriate, securities are re-priced. In the event of a materially different price, the third party will report the variance and review the pricing methodology in detail. The results of the quality assurance process are incorporated into the selection of pricing providers by the third party.

Loans: For fixed rate loans and for variable rate loans with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values. For loans held on balance sheet, the discounted fair value is further reduced by the amount of reserves held against the loan portfolios. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price and due to the significant judgment involved in evaluating credit quality, loans are classified within Level 3 classification.

Federal Home Loan Bank Stock: The carrying amount presented in the consolidated statements of financial condition is deemed to approximate fair value.

Accrued Interest Receivable and Payable: The fair value for accrued interest approximates its carrying amounts due to the short duration before collection. The valuation is a Level 3 classification which is consistent with its underlying asset or liability.

Deposits: The fair values of deposits with no stated maturity, such as money market demand deposits, savings and NOW accounts have been analyzed by management and assigned estimated maturities and cash flows which are then discounted to derive a value. The fair value of fixed-rate certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The Company classifies the estimated fair value of deposit liabilities as Level 2 in the fair value hierarchy.

22.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Advances from the Federal Home Loan Bank: The fair value of these advances is estimated using the rates currently offered for similar advances of similar remaining maturities or, when available, quoted market prices.

Commitments to Extend Credit: For fixed-rate and adjustable-rate loan commitments, the fair value estimate considers the difference between current levels of interest rates and committed rates. At March 31, 2014 and December 31, 2013, the fair value of loan commitments was not material.

Based on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments are as follows (in thousands):

At March 31, 2014:

	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	25,485	$	25,485	$	25,485	$	-	$	-
Securities available-for-sale		78,454		78,454		-		78,454		-
Loans (net of allowance)(1)		349,114		344,490		-		-		344,490
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,561		1,561		-		-		1,561
Financial liabilities
Noninterest-bearing deposits	$	104,615	$	104,615		-	$	104,615		-
Interest-bearing deposits		335,182		335,356		-		335,356		-
FHLB advances		4,831		4,831		-		4,831		-
Accrued interest payable		100		100		-		-		100

At December 31, 2013:

	Carrying `Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	25,357	$	25,357	$	25,357	$	-	$	-
Securities available-for-sale		79,948		79,948		-		78,972		976
Loans (net of allowance)(1)		357,130		348,295		-		-		348,295
FHLB stock		3,799		3,799				3,799		-
Accrued interest receivable		1,356		1,356		-		-		1,356
Financial liabilities
Noninterest-bearing deposits(2)	$	116,847	$	116,847		-	$	116,847		-
Interest-bearing deposits(2)		336,719		337,590		-		337,590		-
FHLB advances		4,838		4,838		-		4,838		-
Accrued interest payable		112		112		-		-		112

(1) Includes loans held for sale

(2) Includes deposits held for sale

23.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements Using
March 31, 2014	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government and agency obligations	$	13,472	$	-	$	13,472	$	-
State and municipal obligations		20,728		-		20,728		-
Corporate bonds		6,141		-		6,141		-
Mortgage-backed securities and other		38,113		-		38,113		-
Total	$	78,454	$	-	$	78,454	$	-

			Fair Value Measurements Using
December 31, 2013	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government and agency obligations	$	13,302	$	-	$	13,302	$	-
State and municipal obligations		20,450		-		20,450		-
Corporate bonds		6,168		-		6,168		-
Collateralized debt obligation		976				-		976
Mortgage-backed securities and other		39,052		-		39,052		-
Total	$	79,948	$	-	$	78,972	$	976

The table below presents a rollforward of the balance sheet amounts for the quarter ended March 31, 2014 for the collateralized debt obligation measured on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement.

Level 3 Fair Value Measurements Three months ended March 31, 2014
Balance, as of December 31, 2013	$	976
Sold during the quarter		835
Total losses:
Included in earnings		141
Balance, as of March 31, 2014	$	-

24.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following is a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Securities

Certain collateralized debt obligations are classified as held to maturity. The Company calculates fair value based upon a Level 3 estimate of fair value, including a discounted cash flows calculation and a fair value estimate from an independent evaluation of the securities.

Impaired loans

At March 31, 2014 and December 31, 2013, impaired loans consisted primarily of loans secured by nonresidential and commercial real estate. Management has determined fair value measurements on impaired loans primarily through evaluations of appraisals performed.

Real Estate Owned

Real estate acquired through, or in lieu of, loan foreclosure is held for sale and initially recorded at fair value (based on current appraised value) at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated costs to sell. Management has determined fair value measurements on real estate owned primarily through evaluations of appraisals performed.

The following table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2014 and December 31, 2013 (in thousands).

March 31, 2014			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	18,838	$	-	$	-	$	18,838
Real estate owned		1,563		-		-		1,563

December 31, 2013			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	22,881		-		-	$	22,881
Real estate owned		1,219		-		-		1,219

25.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 6 – Stock Based Compensation

The Company’s shareholders approved an employee share option Plan (the “Plan”) in May 2004. This Plan grants certain employees the right to purchase shares at a predetermined price. The Plan is limited to 300,000 shares. The shares granted to employees vest 20% per year over a five year period. The options expire after ten years. At March 31, 2014, options to purchase 142,317 shares were exercisable, and no shares remained available for grant under this plan.

The Company recognizes compensation cost for vested equity-based awards based on their March 31, 2014 fair value. The Company recorded $60,000 and $79,000 in compensation cost for equity-based awards that vested during the three months ended March 31, 2014 and 2013, respectively.

In determining the fair value of the stock options at March 31, 2014, the Company utilized a Black-Scholes valuation model with a risk-free interest rate that corresponds to the expected remaining life of each award, an expected dividend yield of 0%, an expected common stock price volatility of 30%, and an expected life of 8 years from the grant date.

A summary of the status of the Company’s equity compensation plan as of March 31, 2014, and changes during the period then ended are presented below (dollars in thousands):

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at beginning of year		250,518		$	9.91		6.4 years
Exercised		(1,833	)		3.82		—
Forfeited		(5,702	)		20.68		—
Outstanding at March 31, 2014		242,983		$	9.96		6.2 years	$	355
Options exercisable at period end		142,317		$	13.76		4.9 years	$	170
Weighted-average fair value of options granted during the year ended December 31, 2013				$	1.73

There were no options granted in the first quarter of 2014. At March 31, 2014, unrecognized compensation expense to be recognized over the remaining life of outstanding options is $178,000.

The following information applies to options outstanding at March 31, 2014:

Number Outstanding	Range Of Exercise Prices
43,750	$23.00 - $30.70
24,192	$16.90
21,535	$9.00
153,506	$3.50 - $5.40

26.

DCB FINANCIAL CORP

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 7 – Branch Sale

On March 21, 2014, the Bank closed the previously announced sale of its Marysville branch (the “Branch”) to Merchants National Bank, a national bank headquartered in Hillsboro, Ohio (“Merchants”). Merchants acquired certain assets and assumed certain liabilities of the Branch, including the assumption of $19.4 million in deposit liabilities and the purchase of $4.8 million in loans related to the Branch.

The amounts related to the sale are as follows (in thousands):

Deposits assumed	$	19,403
Loans sold (at book value)		(4,750	)
Property and equipment (agreed upon value)		(1,500	)
Cash on hand		(261	)
Premium on deposits		(441	)
Other, net		13
Cash paid to Merchants	$	12,464

Due to operational restrictions, certain loans will be transferred to the buyer after the closing.

27.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

DCB Financial Corp (the “Company” or “DCB”) is a financial holding company formed under the laws of the State of Ohio. The Company is the parent of The Delaware County Bank & Trust Company (the “Bank”), DCB Title Services LLC and DCB Insurance Services, Inc. The Bank is a state-chartered commercial bank, which conducts business from its main offices at 110 Riverbend Avenue in Lewis Center, Ohio, and through its 13 branch offices located in Delaware County, Ohio and surrounding communities. The Bank provides customary retail and commercial banking services to its customers, including checking and savings accounts, time deposits, IRAs, safe deposit facilities, personal loans, commercial loans, commercial leases, real estate mortgage loans, night depository facilities and trust and personalized wealth management services. The Bank also provides cash management, bond registrar and payment services. The Bank operates a wholly-owned subsidiary, ORECO, Inc., which is engaged in the ownership and disposition of the Bank’s foreclosed real estate.

Forward-Looking Statements

Certain statements in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to the financial condition and prospects, lending risks, plans for future business development and marketing activities, capital spending and financing sources, capital structure, the effects of regulation and competition, and the prospective business of both the Company and the Bank. Where used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” and similar words and expressions, related to the Company or the Bank or their respective management, identify forward-looking statements. Such forward-looking statements reflect the current views of the Company and are based on information currently available to the management of the Company and the Bank and upon current expectations, estimates, and projections about the Company and its industry, management’s belief with respect thereto, and certain assumptions made by management. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. 

Potential risks and uncertainties include, but are not limited to: (i) significant increases in competitive pressure in the banking and financial services industries; (ii) changes in the interest rate environment which could reduce anticipated or actual margins; (iii) changes in political conditions or the legislative or regulatory environment; (iv) general economic conditions, either nationally or regionally (especially in central Ohio), becoming less favorable than expected resulting in, among other things, a deterioration in credit quality of assets; (v) changes occurring in business conditions and inflation; (vi) changes in technology; (vii) changes in monetary and tax policies; (viii) changes in the securities markets; and (ix) other risks and uncertainties detailed from time to time in the filings of the Company with the Securities and Exchange Commission.

The Company does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

28.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Overview of the first quarter of 2014

· Total assets were $494.1 million and total deposits were $439.8 million at March 31, 2014, compared with $502.4 million and $449.4 million at December 31, 2013, respectively.

· Net income of $117,000 was recorded for the three months ended March 31, 2014, compared with net income of $142,000 for the same period in 2013.

· Net income per diluted share was $0.02 for the three months ending March 31, 2014 and 2013.

· The net interest margin was 3.50% in the first quarter of 2014 compared with 3.20% in the first quarter of 2013.

· Non-recurring gains and losses in the first quarter of 2014 aggregated $52,000 of net gains, which included a $438,000 gain on sale of a branch, partially offset by a $245,000 loss on loans held for sale, and a $140,000 loss on sale of securities. Non-recurring gains in the year-ago quarter were $84,000 from gains on the sale of REO.

· There was no provision for loan losses recognized in the first quarter of 2014. A negative provision for loan losses of $650,000 was recorded in the year-ago quarter.

· Total non-performing assets were $17.7 million or 3.59% of total assets at March 31, 2014 compared with $21.9 million, or 4.36% at December 31, 2013.

· Noninterest income was 22.2% of total revenue in the first quarter of 2013 compared with 25.3% in the year-ago quarter.

· Our efficiency ratio was 98.5% in the three months ended March 31, 2014 compared with 112.4% for the year-ago quarter.

Comparison of Results of Operations

General

Net income was $117,000 or $0.02 per diluted share for the three months ended March 31, 2014, compared to net income of $142,000 or $0.02 per diluted share for the same period in 2013. Non-recurring gains and losses in the first quarter of 2014 aggregated $52,000 of net gains, compared to net non-recurring gains of $84,000 in the year-ago quarter. In addition, a negative loan loss provision of $650,000 was recorded in the year-ago quarter. There was no loan loss provision in the first quarter of 2014.

Net Interest Income

Net interest income totaled $4.0 million in the three months ended March 31, 2014, compared with $3.6 million in the year-ago quarter and $4.0 million in the fourth quarter of 2013. The net interest margin increased 30 basis points from the year-ago quarter and was 13 basis points higher than the fourth quarter of 2013. Average interest-earning assets increased $7.5 million in the first quarter compared to the year-ago quarter, but were $4.4 million lower than the fourth quarter of 2013. The average balance in time deposits declined $48.1 million from the year-ago quarter, while average balances in lower-costing interest-bearing DDAs, savings and money market accounts increased $35.0 million, and non-interest-bearing DDAs increased $17.0 million over that same period.

The net interest margin was 3.50% in the first quarter of 2014, compared with 3.20% in the year-ago quarter and 3.37% in the fourth quarter of 2013. The earning assets yield increased 7 basis points in the first quarter of 2014 compared with the year-ago quarter, due largely to growth in our loan portfolio which was funded largely from cash on deposit with the Federal Reserve and cash flows from our securities portfolio. The cost of interest-bearing liabilities decreased 28 basis points over the same period as a result of maturing time accounts which either were renewed at lower rates or were transferred into our interest-bearing demand and money market accounts, which earn interest at lower rates than time accounts. Also, we restructured advances from the Federal Home Loan Bank in November, 2013 which contributed to a 275 basis point decrease in the cost of borrowings in the first quarter compared to the year-ago quarter.

29.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Average interest-earning assets were $466.4 million in the first quarter, compared with $458.9 million in the year-ago quarter and $470.7 million in the fourth quarter of 2013. The average balance of loans increased by $40.9 million, while average balance of interest earning cash and cash equivalents decreased $26.4 million and average investments decreased $7.1 million when compared with the year-ago quarter, as we used our excess liquidity position to fund loan growth. Total average loans and leases were 77.1% of total average interest-earning assets in the first quarter of 2014, compared with 69.4% in the year-ago quarter and 76.7% in the fourth quarter of 2013.

Since December 2008, the Federal Reserve has maintained its target fed funds rate between zero and 0.25%, and has carried out a number of policy actions designed to lower long-term interest rates. These monetary policy actions, along with weak economic conditions and federal government economic stimulus efforts, among other factors, have caused yields on U.S. Treasury securities to drop to exceptionally low levels throughout much of the past five years. This persistently low interest rate environment has caused an ongoing decline over the past five years in the returns on our interest-earning assets, consistent with much of the financial industry. As a result, the yield on our securities portfolio decreased 11 basis points for the first quarter of 2014 compared to the year-ago quarter. The yield on our loans decreased 39 basis points for the first quarter of 2014 compared to the year-ago quarter.

The cost of our interest-bearing liabilities decreased throughout 2013 and into the first quarter of 2014 due to a combination of the low interest rate environment, our deposit pricing strategies and a deposit mix that currently is more heavily weighted in low-cost interest-bearing transaction accounts (demand, savings and money market) whose rates can be immediately changed at our discretion. The average cost of time deposits dropped 51 basis points in the first quarter compared to the year-ago quarter. Average time deposits comprised 25.3% of total average interest-bearing deposits in the first quarter, compared to 37.9% in the year-ago period. In addition, the Company restructured advances from the Federal Home Loan Bank, reducing the cost of borrowed funds to 1.81% in the first quarter of 2014, from 3.94% in the fourth quarter of 2013 and 4.56% in the third quarter of 2013.

30.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

The following table presents certain information from the Company’s average balance sheet and reflects the average yield on interest-earning assets and the average cost of interest-bearing liabilities (dollars in thousands). Such yields and costs are derived by dividing income or expense by the average balance of interest-earning assets or interest-bearing liabilities. Average balances are derived from daily balances. Interest on tax-exempt securities is reported on a historical basis without tax-equivalent adjustment. Average loan balances include non-accruing loans. Loan income includes cash received on non-accruing loans.

	Three months ending March 31,
	2014								2013
	outstanding			earned/		Yield/			outstanding		earned/		Yield/
	balance			paid		rate			balance		paid		rate
Interest-earning assets:
Federal funds sold and other short term	$	21,750		$	53		0.97	%	$	48,120	$	29		0.24	%
Taxable securities		80,379			462		2.33			87,854		521		2.41
Tax-exempt securities		4,812			48		3.96			4,391		46		4.25
Loans (includes nonaccrual loans)		359,427			3,740		4.13			318,507		3,551		4.52
Total interest-earning assets		466,368			4,303		3.74			458,872		4,147		3.67
Noninterest-earning assets		41,997								45,806
Total assets	$	508,365							$	504,678
Interest-bearing liabilities:
Interest-bearing demand and money market deposits	$	211,112		$	112		0.21	%	$	181,625	$	113		0.25	%
Savings deposits		43,521			21		0.19			37,980		14		0.15
Certificates of deposit		86,204			102		0.47			134,306		324		0.98
Total deposits		260,061			235		0.36			353,911		451		0.52
Borrowed funds		4,835			22		1.81			7,028		79		4.56
Total interest-bearing liabilities		345,672			275		0.32			360,939		530		0.60
Noninterest-bearing liabilities		116,873								95,339
Total liabilities		462,545								456,278
Shareholders’ equity		45,820								48,400
Total liabilities and shareholders’ equity	$	508,365							$	504,678
Net interest income; interest rate spread				$	4,028		3.43	%			$	3,617		3.07	%
Net interest margin (net interest income as a percent of average interest-earning assets)							3.50	%						3.20	%
Average interest-earning assets to average interest-bearing liabilities		134.92	%											127.13	%

31.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Asset Quality and Allowance for Loan Losses

Delinquent loans (including non-performing) dropped 43.8% in the first quarter, and totaled $4.6 million at March 31, 2014, compared with $8.1 million at December 31, 2013. The largest decline occurred in non-accrual loans, which decreased $3.3 million or 47.8% in the first quarter to a balance of $3.6 million or 1.02% of total loans at March 31, 2014, compared to $6.9 million or 1.90% of total loans at December 31, 2013.

Delinquent loans and leases	March 31, 2014					December 31, 2013					September 30, 2013
	$		%(1)			$		%(1)			$		%(1)
	(Dollars in thousands)
30 days past due	$	834		0.23	%	$	945		0.26	%	$	148		0.04	%
60 days past due		132		0.04	%		290		0.08	%		301		0.08	%
90 days past due and still accruing		—		—			—		—			87		0.02	%
Non-accrual		3,607		1.02	%		6,904		1.90	%		5,551		1.55	%
Total	$	4,573		1.29	%	$	8,139		2.24	%	$	6,087		1.70	%

 (1) As a percentage of total loans, excluding deferred costs

Non-performing assets were $17.7 million or 3.59% of total assets at March 31, 2014, compared with $21.9 million or 4.36% of total assets at December 31, 2013. Troubled debt restructurings (“TDR’s”) which are performing in accordance with the restructured terms and accruing interest, but are included in non-performing assets, were $12.6 million at March 31, 2014 and $12.8 million at December 31, 2013.

The following table represents information concerning the aggregate amount of non-performing assets (includes loans held for sale):

Non-performing assets	March 31, 2014		December 31, 2013		September 30, 2013
	(Dollars in thousands)
Non-accruing loans:
Residential real estate loans and home equity	$	511	$	352	$	257
Commercial real estate		1,647		1,850		3,529
Commercial and industrial		1,449		4,702		1,765
Consumer loans and credit cards		-		-		-
Total non-accruing loans		3,607		6,904		5,551
Accruing loans delinquent 90 days or more		-		-		87
Total non-performing loans (excluding TDR’s)		3,607		6,904		5,638
Collateralized debt obligations		-		976		1,004
Other real estate and repossessed assets		1,563		1,219		1,291
Total non-performing assets (excluding TDR’s)	$	5,170	$	9,099	$	7,933
Troubled debt restructurings(1)	$	12,569	$	12,788	$	13,992
Total non-performing loans (including TDR’s)	$	16,176	$	19,692	$	19,630
Total non-performing assets (including TDR’s)	$	17,739	$	21,887	$	21,925

(1) TDR’s that are in compliance with their modified terms and accruing interest.

32.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Much of the improvement in asset quality in the first quarter has resulted from the execution of previously disclosed strategies developed in the fourth quarter of 2013 to accelerate the disposition of certain troubled assets, in particular two commercial relationships which totaled $5.7 million at the end of 2013. As of March 31, 2014, a total of $4.2 million of cash had been collected on these relationships. One of the relationships, with a carrying amount of $2.7 million at the end of 2013, was paid off in the first quarter. A second relationship with an outstanding balance of $3.0 million and an allowance allocation of $1.5 million at the end of 2013 has been paid down by $1.5 million in the first quarter of 2014. The Company recorded a partial write-down on this second relationship of $750,000 in the first quarter, using the specific loan loss allocation established for this relationship in the fourth quarter of 2013, resulting in a carrying value of $750,000 at March 31, 2014. A specific allowance allocation of $750,000 remains assigned to this relationship at the end of the first quarter. The Company continues to actively pursue collection of the entire amount of the contractual principal amount, however no assurance can be given as to the amount, if any, of additional principal which will be collected.

Also, as part of management’s continued strategy to dispose of certain troubled assets, during the first quarter of 2014, certain loans held for sale were written down by $245,000 with a charge to earnings to reflect indications of fair value.

Net charge-offs (annualized) were $1.3 million or 1.43% of average loans in the first quarter, compared to net recoveries of $526,000 in the year-ago quarter. Two relationships comprised nearly all of the charge-offs in the first quarter, which were charged against allowance allocations established in the fourth quarter of 2013.

There was no provision for loan losses recorded in the first quarter of 2014, as the $3.3 million loan loss provision recorded in the fourth quarter of 2013 included specific allocations for the two large relationships charged-off in the first quarter. A negative provision for loan losses of $650,000 was recorded in the first quarter of 2013 as the result of the net recoveries in that quarter and other credit quality indicators at that time. The provision for loan losses as a percentage of net charge-offs was not meaningful for first quarters of 2014 and 2013.

The allowance for loan losses was $5.3 million at March 31, 2014, compared with $6.8 million at December 31, 2013. The ratio of the allowance for loan losses to total loans was 1.51% at March 31, 2014, compared with 1.85% at December 31, 2013. The ratio of the allowance for loan losses to non-performing loans (including TDR’s) was 33.0% at March 31, 2014, compared with 34.3% at December 31, 2013. The ratio of the allowance for loan losses to non-accrual loans was 148.2% at March 31, 2014, compared with 97.4% at December 31, 2013.

The following table summarizes changes in the allowance for loan losses arising from loans charged off, recoveries on loans previously charged off and additions to the allowance, which have been charged to expense (in thousands).

Allowance for credit losses	Three months ended March 31,
	2014			2013
	(Dollars in thousands)
Allowance for loan losses, beginning of period	$	6,725		$	6,882
Loans charged-off		(1,412	)		(247	)
Recoveries of loans previously charged-off		129			773
Net loans charged-off		5,442			7,408
Allowance related to loans transferred to held-for-sale		(97	)		-
Provision for loan losses		-			(650	)
Allowance for loan losses, end of period	$	5,345		$	6,758

33.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Noninterest Income

The following table sets forth certain information on non-interest income for the years indicated (dollars in thousands):

	Three months ended March 31,
	2014			2013		$ Change			% Change
Service charges	$	511		$	547	$	(36	)		(6.7	)%
Wealth management income		293			316		(23	)		(7.3	)
Treasury management fees		56			62		(6	)		(9.1	)
BOLI income		239			240		(1	)		(0.8	)
Loss on sale of securities		(140	)		-		(140	)		(100.0	)
Loss on loans held for sale		(245	)		-		(245	)		(100.0	)
Gain on sale of REO		-			84		(84	)		(100.0	)
Gain on sale of branch		438			-		438			0.0
Other		40			59		(19	)		(33.4	)
Total noninterest income	$	1,192		$	1,308	$	(116	)		(8.9	)%

Noninterest income was $1.2 million in the first quarter of 2014, which was a decrease of $116,000 or 8.9% from the year-ago quarter. Nonrecurring gains, net of nonrecurring losses were $53,000 in the first quarter of 2014, compared to $84,000 in the first quarter of 2013. There was a decline in service charges due to lower fee-based transaction volume related to changes in customer deposit account utilization. The decrease in wealth management revenue is due largely to one less investment advisor being on staff in the first quarter of 2014 compared to the year-ago quarter.

Non-interest income accounted for 22.2% of total revenue in the first quarter of 2014, compared with 25.3% in the year-ago quarter. Non-interest income accounted for 21.9% of total revenue in the prior quarter.

34.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Noninterest Expense

The following table sets forth certain information on non-interest expenses for the years indicated (dollars in thousands):

	Three months ended March 31,
	2014		2013		$ Change			% Change
Salaries and benefits	$	2,779	$	2,972	$	(193	)		(6.5	)%
Occupancy and equipment		804		793		11			1.4
Professional services		421		456		(35	)		(7.8	)
Advertising		81		107		(26	)		(24.3	)
Postage, freight, courier and supplies		95		106		(11	)		(10.2	)
Deposit insurance premiums		168		210		(42	)		(20.1	)
State franchise taxes		65		153		(88	)		(57.7	)
Other		650		659		(9	)		(1.4	)
Total noninterest expenses	$	5,063	$	5,456	$	(393	)		(7.2	)%

Non-interest expenses were $5.1 million for the first quarter of 2014, compared with $5.5 million in the year-ago quarter and $4.9 million for the prior quarter. The decrease from the year-ago quarter is attributable to a $193,000 decrease in salaries and benefits, an $88,000 decrease in state franchise taxes, a $42,000 decrease in the FDIC insurance premium, and a $35,000 decrease in professional services. The decrease in salaries and benefits is attributable to a decline in incentive compensation expense as loan originations during the quarter are down from the year-ago quarter. The decrease in state franchise taxes is the result of a change in the tax law which changed how the tax is calculated in the first quarter of 2014. The decrease in the FDIC insurance premium is a result of an upgrade in the Bank’s risk classification for insurance assessment purposes. The decrease in professional services is due primarily to the substantial improvement in our asset quality which has reduced the need for outside professional services related to the workout of classified assets.

The increase in noninterest expenses in the first quarter of 2014 compared to the fourth quarter of 2013 is primarily attributable to a $252,000 increase in salaries and benefits, which was the result of the reversal in the fourth quarter of 2014 of accruals recorded in the first three quarters of 2013 for senior management bonuses and deferred compensation.

The Company’s efficiency ratio was 98.5% in the first quarter of 2014, compared with 112.4% in the year-ago quarter.

Income Taxes

The Company had net deferred tax assets totaling $11.3 million and $11.6 million with valuation allowances of $11.4 million and $11.2 million, respectively, at March 31, 2014 and December 31, 2013. Included in net deferred tax assets are gross deferred tax assets of $12.0 million and $11.7 million at March 31, 2014 and December 31, 2013, respectively. Deferred tax liabilities at March 31, 2014 were comprised entirely of the tax liability generated by the unrealized gain position of the available for sale securities portfolio.

35.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Comparison of Financial Condition at March 31, 2014 and December 31, 2013

Total assets were $494.1 million at March 31, 2014, which was a decrease of $8.3 million from $502.4 million at December 31, 2013. Assets transferred in connection with the sale of the Company’s Marysville branch in the first quarter totaled $18.8 million and included cash of $12.7 million, loans held-for-sale of $4.7 million and fixed assets held-for-sale of $1.4 million. Deposits attributable to the branch totaling $19.4 million were assumed by the buyer.

Securities

Investment securities totaled $78.5 million at March 31, 2014, compared with $79.9 million at December 31, 2013. Our portfolio is comprised primarily of investment grade securities. The breakdown of the securities portfolio at March 31, 2014 was 48.6% government-sponsored entity guaranteed mortgage-backed securities, 26.4% municipal securities, 17.2% obligations of U.S. government-sponsored corporations and 7.8% corporate bonds. Mortgage-backed securities, which totaled $36.9 million at March 31, 2014, are comprised primarily of pass-through securities backed by conventional residential mortgages and guaranteed by Fannie-Mae, Freddie-Mac or Ginnie Mae, which in turn are backed by the U.S. government.

Loans

The following table sets forth the composition of our loan portfolio, including loans held-for-sale at the dates indicated (dollars in thousands):

	March 31, 2014						December 31, 2013
	Amount			Percent			Amount			Percent
Loan portfolio composition
Commercial and industrial	$	110,886			31.3	%	$	122,901			33.8	%
Commercial real estate		105,077			29.7	%		106,901			29.4	%
Real estate and home equity		105,573			29.8	%		98,622			27.1	%
Consumer and credit card		32,759			9.2	%		35,265			9.7	%
Total loans	$	354,295			100.0	%		363,689			100.0	%
Net deferred loan costs		164						165
Allowance for loan losses		(5,345	)					(6,724	)
Net loans	$	349,114					$	357,130

Total loans, including loans held for sale, declined $9.4 million in the first quarter and were $354.5 million at March 31, 2014, compared with $363.9 million at the end of 2013. Two large performing commercial loans totaling $5.7 million pre-paid in full during the first quarter, which, together with the sale of $4.7 million of loans in connection with the sale of our Marysville branch, offset originations of new loans in the quarter.

Deposits

Deposits totaled $439.8 million at March 31, 2014, while deposits, including deposits held-for-sale, were $449.4 million at the end of 2013. The sale of $19.4 million of deposits in connection with the sale of the Marysville branch, was partially offset by an increase in public funds deposits of $7.6 million. Low-cost transaction accounts comprised 42.0% of total deposits at the end of the quarter, compared with 42.5% at December 31, 2013 and 40.0% at September 30, 2013. The Bank’s liability mix continues to remain favorably weighted toward transaction accounts as retail and municipal depositors continue to prefer transaction and money market accounts over time accounts in the low interest rate environment, and also because of the build-up of cash on commercial customers’ balance sheets.

36.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

Liquidity

Liquidity is the ability of the Company to fund customers’ needs for borrowing and deposit withdrawals. The purpose of liquidity management is to assure sufficient cash flow to meet all of the financial commitments and to capitalize on opportunities for business expansion. This ability depends on the financial strength, asset quality and types of deposit and investment instruments offered by the Company to its customers. The Company’s principal sources of funds are deposits, loan and security repayments, maturities of securities, sales of securities available for sale and other funds provided by operations. The Bank also has the ability to borrow from the FHLB. While scheduled loan repayments and maturing investments are relatively predictable, deposit flows and early loan and mortgage-backed security prepayments are more influenced by interest rates, general economic conditions, and competition. The Company maintains investments in liquid assets based upon management’s assessment of (1) need for funds, (2) expected deposit flows, (3) yields available on short-term liquid assets and (4) objectives of the asset/liability management program.

Cash and cash equivalents totaled $25.5 million at March 31, 2014, compared to $25.4 million at December 31, 2013. Cash and equivalents represented 5.2% of total assets at September 30, 2013 and 5.0% of total assets at December 31, 2013. The Company has the ability to borrow funds from the FHLB and the Federal Reserve Bank should the Company need to supplement its future liquidity. Management believes the Company’s liquidity position is adequate based on its current level of cash, cash equivalents, core deposits, the stability of its other funding sources, and the support provided by its capital base.

Capital Resources

Stockholders’ equity was $46.4 million at March 31, 2014, compared with $45.3 million at December 31, 2013. The increase is primarily the result of the difference between the unrealized loss on collateralized debt obligations of $940,000 at December 31, 2013, and the actual loss recognized upon the sale of the security in the first quarter of $140,000. Sharply higher demand for these types of securities in the first quarter of 2014 contributed to the increase in the value of our security during the quarter.

The Bank’s Tier 1 leverage ratio was 8.83% and its total risk-based capital ratio was 14.03% at the end of the first quarter, both of which comfortably exceeded the regulatory thresholds required to be classified as a “well-capitalized” institution, which are 5.0% and 10.0%, respectively.

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 initiate certain mandatory and possibly discretionary actions by regulators that, if undertaken, could have a direct material effect on our 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 our assets, liabilities, and certain off balance-sheet items as calculated under regulatory accounting practices. Our capital amounts and classifications 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 Company and its subsidiary bank to maintain minimum amounts and ratios (set forth in the following tables) of total and Tier 1 Capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 Capital (as defined) to average assets (as defined).

37.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

The following table compares our actual capital amounts and ratios with those needed to qualify for the “well-capitalized” category, which is the highest capital category as defined in the regulations, dollars in thousands:

	Actual					For Capital Adequacy Purposes					To Be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2014
Total risk-based capital
Consolidated	$	50,563		14.37	%	$	28,155		>8.00	%		N/A		N/A
Bank	$	49,381		14.03	%	$	28,152		>8.00	%	$	35,190		>10.00	%
Tier 1 capital
Consolidated	$	46,154		13.11	%	$	14,078		>4.00	%		N/A		N/A
Bank	$	44,970		12.78	%	$	14,076		>4.00	%	$	21,114		>6.00	%
Leverage
Consolidated	$	46,154		9.07	%	$	20,362		>4.00	%		N/A		N/A
Bank	$	44,970		8.83	%	$	20,361		>4.00	%	$	25,452		>5.00	%
As of December 31, 2013
December 31, 2013:
Total capital to risk-weighted assets
Consolidated	$	50,644		13.82	%	$	29,321		>8.00	%		N/A		N/A
Bank	$	49,473		13.50	%	$	29,321		>8.00	%	$	36,651		>10.00	%
Tier-1 (core) capital to risk-weighted assets
Consolidated	$	46,036		12.56	%	$	14,661		>4.00	%		N/A		N/A
Bank	$	44,865		12.24	%	$	14,661		>4.00	%	$	21,992		>6.00	%
Tier-1 (core) capital to average assets
Consolidated	$	46,036		9.00	%	$	20,456		>4.00	%		N/A		N/A
Bank	$	44,865		8.77	%	$	20,456		>4.00	%	$	25,570		>5.00	%

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Not required.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13Q-15(e) under the Securities Exchange Act of 1934) as of March 31, 2014, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2014.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended March 31, 2014, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

38.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2014

PART II - OTHER INFORMATION

Item 1 -	Legal Proceedings:
	There are no matters required to be reported under this item.
Item 1A-	Risk Factors
	There has been no material change in the nature of the risk factors set forth in the Company’s Form 10-K for the year ended December 31, 2013.
Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds
	There are no matters required to be reported under this item.
Item 3 -	Defaults upon Senior Securities:
	There are no matters required to be reported under this item.
Item 4 -	Mine Safety Disclosures:
	There are no matters required to be reported under this item.
Item 5 -	Other Information:
	There are no matters required to be reported under this item.
Item 6 -	Exhibits:
	Exhibits – The following exhibits are filed as a part of this report:

Exhibit No.	Exhibit
3.1	Amended and Restated Articles of Incorporation of DCB Financial Corp, incorporated by reference to the Company’s Report on Form 10-Q filed with the Commission on November 14, 2003 (File No 000-22387).
3.2	Amended and Restated Articles of Incorporation of DCB Financial Corp, incorporated by reference to the Company’s Report on Form 10-Q filed with the Commission on November 14, 2003 (File No 000-22387).
10.1	Branch Purchase and Assumption Agreement with Merchants National Bank, incorporated by reference to the Company’s Form 8-K filed with the Commission on January 13, 2013, Exhibit 2.1
31.1	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to 18 U.S.C. 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to 18 U.S.C. 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

39.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2012

PART II - OTHER INFORMATION

101

The following information from DCB Financial Corp.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013;  (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2014 and 2013 (unaudited);  (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2014 and 2013 (unaudited);  (iv) the Condensed Consolidated Statements of Cash Flow for the three months ended March 31, 2014 and 2013 (unaudited); (v) the Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2014 and 2013 (unaudited); and (vi) the Notes to Condensed Consolidated Financial Statements (furnished herewith).

Pursuant to Rule 406T of Regulation S-T, the interactive data files included as Exhibit 101 are furnished and not deemed files or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

40.

DCB FINANCIAL CORP

FORM 10-Q

Quarter ended March 31, 2012

PART II - OTHER INFORMATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	DCB FINANCIAL CORP
	(Registrant)
Date:  May 15, 2014	/s/ Ronald J. Seiffert
	Ronald J. Seiffert
	President and Chief Executive Officer
Date:  May 15, 2014	/s/ J. Daniel Mohr
	J. Daniel Mohr
	Executive Vice President and Chief Financial Officer

41.

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Ronald J. Seiffert certify that:

1. I have reviewed this quarterly report on Form 10-Q of DCB Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(f)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 15, 2014	/s/ Ronald J. Seiffert
	Ronald J. Seiffert
	Title:  President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, J. Daniel Mohr, certify that:

1. I have reviewed this quarterly report on Form 10-Q of DCB Financial Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2014	/s/ J. Daniel Mohr
	J. Daniel Mohr
	Title:  Executive Vice President and Chief Financia Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DCB Financial Corp (the "Company") on Form 10-Q for the period ending March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ronald J. Seiffert, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ronald J. Seiffert

Ronald J. Seiffert

President and Chief Executive Officer

May 15, 2014

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of DCB Financial Corp (the "Company") on Form 10-Q for the period ending March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, J. Daniel Mohr, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J. Daniel Mohr

J. Daniel Mohr

Executive Vice President and Chief Financial Officer

May 15, 2014

XML

Fair Value Measurements (Details 2) (Fair Value, Inputs, Level 3 [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Balance, as of December 31, 2013	$ 976
Sold during the quarter	835
Total losses:
Included in earnings	141
Balance, as of March 31, 2014	$ 0

XML

Credit Quality (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Credit Quality Indicators
Loans	$ 352,246	$ 356,048
Commercial and Industrial [Member]
Credit Quality Indicators
Loans	110,886	122,084
Commercial and Industrial [Member] | Pass-1-4 [Member]
Credit Quality Indicators
Loans	99,921	111,266
Commercial and Industrial [Member] | Vulnerable-5 [Member]
Credit Quality Indicators
Loans	3,318	2,574
Commercial and Industrial [Member] | Substandard-6 [Member]
Credit Quality Indicators
Loans	7,647	8,244
Commercial and Industrial [Member] | Doubtful-7 [Member]
Credit Quality Indicators
Loans	0	0
Commercial and Industrial [Member] | Loss-8 [Member]
Credit Quality Indicators
Loans	0	0
Commercial Real Estate [Member]
Credit Quality Indicators
Loans	103,125	104,692
Commercial Real Estate [Member] | Pass-1-4 [Member]
Credit Quality Indicators
Loans	85,073	83,953
Commercial Real Estate [Member] | Vulnerable-5 [Member]
Credit Quality Indicators
Loans	4,542	4,785
Commercial Real Estate [Member] | Substandard-6 [Member]
Credit Quality Indicators
Loans	13,510	15,954
Commercial Real Estate [Member] | Doubtful-7 [Member]
Credit Quality Indicators
Loans	0	0
Commercial Real Estate [Member] | Loss-8 [Member]
Credit Quality Indicators
Loans	$ 0	$ 0

XML

Securities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Fair values of securities available-for-sale
Amortized Costs	$ 78,087	$ 81,120
Gross Unrealized Gains	1,166	1,072
Gross Unrealized Losses	(799)	(2,244)
Fair Value	78,454	79,948
U.S. Government and agency obligations [Member]
Fair values of securities available-for-sale
Amortized Costs	13,733	13,714
Gross Unrealized Gains	25	16
Gross Unrealized Losses	(286)	(428)
Fair Value	13,472	13,302
Corporate bonds [Member]
Fair values of securities available-for-sale
Amortized Costs	6,152	6,187
Gross Unrealized Gains	38	42
Gross Unrealized Losses	(49)	(61)
Fair Value	6,141	6,168
States and municipal obligations [Member]
Fair values of securities available-for-sale
Amortized Costs	20,680	20,651
Gross Unrealized Gains	346	283
Gross Unrealized Losses	(298)	(484)
Fair Value	20,728	20,450
Mortgage-backed securities [Member]
Fair values of securities available-for-sale
Amortized Costs	37,522	38,652
Gross Unrealized Gains	757	731
Gross Unrealized Losses	(166)	(331)
Fair Value	38,113	39,052
Collateralized debt obligations [Member]
Fair values of securities available-for-sale
Amortized Costs		1,916
Gross Unrealized Gains		0
Gross Unrealized Losses		(940)
Fair Value		$ 976

XML

Stock Based Compensation (Details 1) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Range One [Member]
Stock options outstanding
Number Outstanding	43,750
Exercise Prices, Lower Range	$ 23.00
Exercise Prices, Higher Range	$ 30.70
Range Two [Member]
Stock options outstanding
Number Outstanding	24,192
Range Of Exercise Prices	$ 16.90
Range Three [Member]
Stock options outstanding
Number Outstanding	21,535
Range Of Exercise Prices	$ 9.00
Range Four [Member]
Stock options outstanding
Number Outstanding	153,506
Exercise Prices, Lower Range	$ 3.50
Exercise Prices, Higher Range	$ 5.40

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014		Dec. 31, 2013		Mar. 31, 2013	Dec. 31, 2012
Financial assets
Cash and cash equivalents, Carrying amount	$ 25,485		$ 25,357		$ 54,283	$ 63,307
Securities available-for-sale, Carrying amount	78,454		79,948
Loans (net of allowance), Carrying amount	346,901		349,324
FHLB stock, Carrying amount	3,250		3,799
Financial liabilities
Noninterest-bearing deposits, Carrying amount	104,615		109,622
Interest-bearing deposits, Carrying amount	335,182		317,237
FHLB advances, Carrying amount	4,831		4,838
Level 1 [Member]
Financial assets
Cash and cash equivalents, Fair value	25,485		25,357
Securities available-for-sale, Carrying amount	0		0
Level 2 [Member]
Financial assets
Securities available-for-sale, Carrying amount	78,454		78,972
Securities available-for-sale, Fair value	78,454		78,972
FHLB stock, Fair value	3,250		3,799
Financial liabilities
Noninterest-bearing deposits, Fair value	104,615		116,847	[1]
Interest-bearing deposits, Fair value	335,356		337,590	[1]
FHLB advances, Fair value	4,831		4,838
Level 3 [Member]
Financial assets
Securities available-for-sale, Carrying amount	0		976
Securities available-for-sale, Fair value			976
Loans (net of allowance), Fair value	344,490	[2]	348,295	[2]
Accrued interest receivable, Fair value	1,561		1,356
Financial liabilities
Accrued interest payable, Fair value	100		112
Carrying amount [Member]
Financial assets
Cash and cash equivalents, Carrying amount	25,485		25,357
Securities available-for-sale, Carrying amount	78,454		79,948
Loans (net of allowance), Carrying amount	349,114	[2]	357,130	[2]
FHLB stock, Carrying amount	3,250		3,799
Accrued interest receivable, Carrying amount	1,561		1,356
Financial liabilities
Noninterest-bearing deposits, Carrying amount	104,615		116,847	[1]
Interest-bearing deposits, Carrying amount	335,182		336,719	[1]
FHLB advances, Carrying amount	4,831		4,838
Accrued interest payable, Carrying Amount	100		112
Fair value [Member]
Financial assets
Cash and cash equivalents, Fair value	25,485		25,357
Securities available-for-sale, Fair value	78,454		79,948
Loans (net of allowance), Fair value	344,490	[2]	348,295	[2]
FHLB stock, Fair value	3,250		3,799
Accrued interest receivable, Fair value	1,561		1,356
Financial liabilities
Noninterest-bearing deposits, Fair value	104,615		116,847	[1]
Interest-bearing deposits, Fair value	335,356		337,590	[1]
FHLB advances, Fair value	4,831		4,838
Accrued interest payable, Fair value	$ 100		$ 112

[1] Includes deposits held for sale

[2] Includes loans held for sale

XML

Securities

3 Months Ended

Mar. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 2 – Securities

As of March 31, 2014:

The amortized cost and estimated fair values of securities available-for-sale were as follows (in thousands):

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government and agency obligations	$	13,733	$	25	$	(286)	$	13,472
Corporate bonds		6,152		38		(49)		6,141
States and municipal obligations		20,680		346		(298)		20,728
Mortgage-backed securities		37,522		757		(166)		38,113
Total	$	78,087	$	1,166	$	(799)	$	78,454

As of December 31, 2013:

The amortized cost and estimated fair values of securities available-for-sale were as follows (in thousands):

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government and agency obligations	$	13,714	$	16	$	(428)	$	13,302
Corporate bonds		6,187		42		(61)		6,168
States and municipal obligations		20,651		283		(484)		20,450
Collateralized debt obligations		1,916		-		(940)		976
Mortgage-backed securities		38,652		731		(331)		39,052
Total	$	81,120	$	1,072	$	(2,244)	$	79,948

There were no credit losses recognized on investments in the three months ended March 31, 2014 and 2013.

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at March 31, 2014 and December 31, 2013 (dollars in thousands):

March 31, 2014

	(Less than 12 months)						(12 months or longer)						Total
Description of securities	Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses
U.S. Government and agency obligations		8	$	7,364	$	167		2	$	2,431	$	119		10	$	9,795	$	286
Corporate bonds		5		1,891		24		3		1,403		25		8		3,294		49
State and municipal obligations		21		7,599		182		4		1,546		116		25		9,145		298
Mortgage-backed securities and other		6		4,474		77		2		2,103		89		8		6,577		166
Total temporarily impaired securities		40	$	21,328	$	450		11	$	7,483	$	349		51	$	28,811	$	799

December 31, 2013

	(Less than 12 months)						(12 months or longer)						Total
Description of securities	Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses
U.S. Government and agency obligations		10	$	10,680	$	428		-	$	-	$	-		10	$	10,680	$	428
Corporate bonds		5		2,141		38		2		883		23		7		3,024		61
State and municipal obligations		32		11,012		442		2		822		42		34		11,834		484
Collateralized debt obligations		-		-		-		1		976		940		1		976		940
Mortgage-backed securities and other		11		8,445		231		2		1,189		100		13		9,634		331
Total temporarily impaired securities		58	$	32,278	$	1,139		7	$	3,870	$	1,105		65	$	36,148	$	2,244

The unrealized losses on the Company’s investments in U.S. Government and agency obligations, state and political subdivision obligations, corporate bonds and mortgage-backed securities were caused primarily by changes in interest rates. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be OTTI at March 31, 2014 or December 31, 2013.

Substantially all mortgage-backed securities are backed by pools of mortgages that are insured or guaranteed by the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”) or the Federal Home Loan Mortgage Corporation (“FHLMC”).

On March 17, 2014, the Company sold its remaining investment in collateralized debt obligations for a loss of $141,000, this was the only security sold at a loss during the three months ended March 31, 2014. There were no securities sold at a loss during the three months ended March 31 2013.

At March 31, 2014, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders’ equity.

The amortized cost and estimated fair value of all debt securities at March 31, 2014, by contractual maturity, are shown below (in thousands). Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown separately since they are not due at a single maturity date.

	Available-for-sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	502	$	504
Due after one to five years		10,733		10,774
Due after five to ten years		19,201		19,105
Due after ten years		10,129		9,958
Mortgage-backed and related securities		37,522		38,113
Total	$	78,087	$	78,454

Securities with a fair value of $65.9 million at March 31, 2014 were pledged to secure public deposits and other obligations.

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Stock Based Compensation (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Stock Based Compensation (Textual) [Abstract]
Employee share option plan	300,000
Employee share option plan granted	20.00%
Expected life	8 years
Expected common stock price volatility	30.00%
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total	$ 178,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Vested	$ 60,000	$ 79,000
Fair Value Assumptions, Expected Dividend Rate	0.00%
Plan 2004 [Member]
Stock Based Compensation (Textual) [Abstract]
Shares Granted	142,317

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Loans (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Loans
Commercial and industrial	$ 110,886	$ 122,084
Commercial real estate	103,125	104,692
Residential real estate and home equity	105,573	96,245
Consumer and credit card	32,498	32,862
Subtotal	352,082	355,883
Add: Net deferred loan origination fees	164	165
Total loans receivable	$ 352,246	$ 356,048

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Securities (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 17, 2014
Securities (Textual) [Abstract]
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net	$ 1,100,000
Investment From Same Issuer As Percentage Of Equity Maximum	10.00%
Pledged Assets Separately Reported, Securities Pledged as Collateral, at Fair Value, Total	65,900,000
Debt and Capital Lease Obligations, Total		$ 141,000

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Branch Sale (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Deposits assumed	$ 439,797	$ 426,859
Property and equipment (agreed upon value)	(10,407)	(10,641)
Branch Sale [Member]
Deposits assumed	19,403
Loans sold (at book value)	(4,750)
Property and equipment (agreed upon value)	(1,500)
Cash on hand	(261)
Premium on deposits	(441)
Other, net	13
Cash paid to Merchants	$ 12,464

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Credit Quality (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Financing Receivable, Impaired [Line Items]
Beginning balance	$ 6,724	$ 6,882
Charge-offs	(1,412)	(247)
Recoveries	129	773
Provision	0	(650)
Transferred to loans held for sale	(97)
Ending balance	5,345	6,758
Individually evaluated for impairment	2,690	3,720
Collectively evaluated for impairment	2,655	3,038
Ending balance	5,345	6,758
Loans
Individually evaluated for impairment	18,838	26,566
Collectively evaluated for impairment	333,244	302,189
Total	352,082	328,755
Consumer and Credit Card [Member]
Financing Receivable, Impaired [Line Items]
Beginning balance	301	365
Charge-offs	(46)	(39)
Recoveries	31	60
Provision	(40)	(99)
Transferred to loans held for sale	0
Ending balance	246	287
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	246	287
Ending balance	246	287
Loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	32,498	24,452
Total	32,498	24,452
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Beginning balance	3,232	1,621
Charge-offs	(1,193)	(64)
Recoveries	4	688
Provision	30	(659)
Transferred to loans held for sale	0
Ending balance	2,073	1,586
Individually evaluated for impairment	966	737
Collectively evaluated for impairment	1,107	849
Ending balance	2,073	1,586
Loans
Individually evaluated for impairment	3,730	5,586
Collectively evaluated for impairment	107,156	116,066
Total	110,886	121,652
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Beginning balance	2,974	4,692
Charge-offs	(159)	(102)
Recoveries	84	10
Provision	(127)	124
Transferred to loans held for sale	(97)
Ending balance	2,675	4,724
Individually evaluated for impairment	1,724	2,983
Collectively evaluated for impairment	951	1,741
Ending balance	2,675	4,724
Loans
Individually evaluated for impairment	15,108	20,980
Collectively evaluated for impairment	88,017	88,645
Total	103,125	109,625
Residential Real Estate and Home Equity [Member]
Financing Receivable, Impaired [Line Items]
Beginning balance	218	204
Charge-offs	(14)	(42)
Recoveries	10	15
Provision	(36)	(16)
Transferred to loans held for sale	0
Ending balance	178	161
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	178	161
Ending balance	178	161
Loans
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	105,573	73,026
Total	105,573	73,026
Unallocated Financing Receivables [Member]
Financing Receivable, Impaired [Line Items]
Beginning balance	0
Charge-offs	0
Recoveries	0
Provision	173
Transferred to loans held for sale	0
Ending balance	173
Individually evaluated for impairment	0
Collectively evaluated for impairment	173
Ending balance	173
Loans
Individually evaluated for impairment	0
Collectively evaluated for impairment	0
Total	$ 0

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Credit Quality (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Impaired Loans
Recorded Investment	$ 18,838	$ 22,881
Unpaid Principal Balance	18,916	26,447
Related Allowance	2,690	4,166
Average Recorded Investment	20,880	25,832
Interest Income Recognized	253	1,186
Consumer and Credit Card [Member]
Impaired Loans
Recorded Investment	0	0
Unpaid Principal Balance	0	0
Related Allowance	0	0
Average Recorded Investment	0	0
Interest Income Recognized	0	0
Commercial and industrial [Member]
Impaired Loans
Recorded Investment	3,730	7,221
Unpaid Principal Balance	3,808	7,363
Related Allowance	966	2,304
Average Recorded Investment	5,569	5,767
Interest Income Recognized	31	263
Commercial real estate [Member]
Impaired Loans
Recorded Investment	15,108	15,660
Unpaid Principal Balance	15,108	19,084
Related Allowance	1,724	1,862
Average Recorded Investment	15,311	20,065
Interest Income Recognized	222	923
Residential RE and Home Equity [Member]
Impaired Loans
Recorded Investment	0	0
Unpaid Principal Balance	0	0
Related Allowance	0	0
Average Recorded Investment	0	0
Interest Income Recognized	0	0
With no related allowance recorded [Member] | Consumer and Credit Card [Member]
Impaired Loans
Recorded Investment	0	0
Unpaid Principal Balance	0	0
Related Allowance	0	0
Average Recorded Investment	0	0
Interest Income Recognized	0	0
With no related allowance recorded [Member] | Commercial and industrial [Member]
Impaired Loans
Recorded Investment	1,698	1,530
Unpaid Principal Balance	1,698	1,530
Related Allowance	0	0
Average Recorded Investment	1,434	3,081
Interest Income Recognized	19	67
With no related allowance recorded [Member] | Commercial real estate [Member]
Impaired Loans
Recorded Investment	9,826	9,892
Unpaid Principal Balance	9,826	11,788
Related Allowance	0	0
Average Recorded Investment	9,816	10,005
Interest Income Recognized	149	615
With no related allowance recorded [Member] | Residential RE and Home Equity [Member]
Impaired Loans
Recorded Investment	0	0
Unpaid Principal Balance	0	0
Related Allowance	0	0
Average Recorded Investment	0	0
Interest Income Recognized	0	0
With allowance recorded [Member] | Consumer and Credit Card [Member]
Impaired Loans
Recorded Investment	0	0
Unpaid Principal Balance	0	0
Related Allowance	0	0
Average Recorded Investment	0	0
Interest Income Recognized	0	0
With allowance recorded [Member] | Commercial and industrial [Member]
Impaired Loans
Recorded Investment	2,032	5,691
Unpaid Principal Balance	2,110	5,833
Related Allowance	966	2,304
Average Recorded Investment	4,135	2,686
Interest Income Recognized	12	196
With allowance recorded [Member] | Commercial real estate [Member]
Impaired Loans
Recorded Investment	5,282	5,768
Unpaid Principal Balance	5,282	7,296
Related Allowance	1,724	1,862
Average Recorded Investment	5,495	10,060
Interest Income Recognized	73	308
With allowance recorded [Member] | Residential RE and Home Equity [Member]
Impaired Loans
Recorded Investment	0	0
Unpaid Principal Balance	0	0
Related Allowance	0	0
Average Recorded Investment	0	0
Interest Income Recognized	$ 0	$ 0

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Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 1 - Summary Of Significant Accounting Policies

These consolidated interim financial statements are prepared without audit and reflect all adjustments which, in the opinion of management, are necessary to present fairly the financial position of DCB Financial Corp (the “Company”) at March 31, 2014, and its results of operations and cash flows for the three month periods ended March 31, 2014 and 2013. All such adjustments are normal and recurring in nature. The accompanying consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not purport to contain all necessary financial disclosures required by accounting principles generally accepted in the United States of America that might otherwise be necessary in the circumstances, and should be read in conjunction with the consolidated financial statements, and notes thereto, included in its Annual Report as of December 31, 2013. Refer to the accounting policies of the Company described in the Notes to Consolidated Financial Statements contained in the Company’s Annual Report as of December 31, 2013. The Company has consistently followed these policies in preparing this Form 10-Q. 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 entire year.

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, The Delaware County Bank and Trust Company (the “Bank”), DCB Title Services LLC, DCB Insurance Services, Inc. and ORECO, Inc. (collectively referred to herein after as the “Company”). All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. Management considers the Company to operate within one business segment, banking.

To prepare financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), management makes estimates and assumptions based on available information. These estimates and assumptions affect amounts reported in the financial statements and disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments and status of contingencies are particularly subject to change.

Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. Deferred tax, net of valuation allowances, at March 31, 2014 and December 31, 2013 were comprised entirely of the deferred tax amount generated by the unrealized gain or loss position of the available for sale securities portfolio.

Earnings per share

Earnings per common share is net income divided by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed including the dilutive effect of additional potential common shares under stock options. Weighted-average shares for basic and diluted earnings per share are presented below.

	Three Months Ended
	March 31,
		2014	2013
Weighted-average common shares outstanding (basic)		7,192,350		7,192,350
Dilutive effect of assumed exercise of stock options		52,366		30,974
Weighted-average common shares outstanding (diluted)		7,244,716		7,223,144

There were 153,506 shares included in the computation of common share equivalents for the three-month period then ended because the average fair value of the shares was greater than the exercise price.

Options to purchase 122,437 shares of common stock with a weighted-average exercise price of $16.46 were outstanding at March 31, 2013. There were 28,918 vested shares included in the computation of common share equivalents for the three-month period then ended because the average fair value of the shares was greater than the exercise price.

Stock-Based Compensation

The Company has a stock option plan for employees and directors as described in Note 6 (Stock-Based Compensation). In addition to equity settlement, the stock option plan also allows for cash settlement of options at the recipient’s discretion; therefore, liability accounting applies to this plan. Compensation expense is recognized based on the fair value of these awards at the reporting date. A Black Scholes model is utilized to estimate the fair value of stock options at the date of grant and subsequent remeasurement dates. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards. The Company’s stock option awards contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. Changes in fair value of the options between the vesting date and option expiration date are also recognized in the Consolidated Statement of Operations.

Significant Accounting Estimates 

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the financial services industry. The application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.

The procedures for assessing the adequacy of the allowance for loan losses reflect our evaluation of credit risk after careful consideration of all information available to us. In developing this assessment, we must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require an increase or a decrease in the allowance for loan losses.

 The valuation of other assets requires that management utilize a variety of estimates and analysis to determine whether an asset is impaired or other-than-temporarily impaired (“OTTI”). After determining the appropriate methodology for fair value measurement, management then evaluates whether or not declines in fair value below book value are temporary or other-than-temporary impairments. When the Company does not intend to sell a debt security, and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

Loans (including Loans Held for Sale): Loans are classified as held for investment when management has both the intent and ability to hold the loan for the foreseeable future, or until maturity or payoff. Management’s intent and view of the foreseeable future may change based on changes in business strategies, the economic environment, market conditions and the availability of government programs. Loans that are held for investment are reported at the principal balance outstanding, net of unearned interest, unamortized deferred loan fees and costs and the allowance for loan losses. Loans held for sale are carried at the lower of amortized cost or estimated fair value, determined on an aggregate basis for each type of loan. Net unrealized losses are recognized by charges to income.

Interest income is accrued based on the unpaid principal balance and includes amortization of net deferred loan fees and costs over the loan term. Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

When loans are transferred from held for investment to held for sale, specific reserves and allocated pooled reserves included in the allowance for loan and losses are reclassified to reduce the basis of the loans to the lower of cost or estimated fair value less cost to sell.

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable but unconfirmed credit losses, increased by the provision for loan losses and decreased by charge-offs net of recoveries. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the required allowance balance based on past loan loss experience, augmented by additional estimates related to the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, economic conditions and other factors.

The allowance consists of both specific and general components. The specific component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the collateral value, or value of expected discounted cash flows of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’s internal risk rating process. Management utilizes an average of a three year historical loss period. Management has the ability to adjust these loss rates by utilizing risk ratings based on current period trends. If current period trends differ either positively or negatively from the given weighted historical loss rates, adjustments can be made. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risking rating data.

Management also utilizes its assessment of general economic conditions, and other localized economic data to more fully support its loan loss estimates. General economic data may include: inflation rates, savings rates and national unemployment rates. Local data may include: unemployment rates, housing starts, real estate valuations, and other economic data specific to the Company’s market area. Though not specific to individual loans, these economic trends can have an impact on portfolio performance as a whole.

Uncollectibility is usually determined based on a pre-determined number of days delinquent in the case of consumer loans, or, in the case of commercial loans, is based on a combination of factors including delinquency, collateral and other legal considerations. Consumer loans are charged-off prior to 120 days of delinquency, but could be charged off earlier, depending on the individual circumstances. Mortgage loans are charged down prior to 180 days of delinquency, but could be charged off sooner, again, depending upon individual circumstance. Typically, loans collateralized by residential real estate are partially charged down to the estimated liquidation value, which is generally based on appraisal less costs to hold and liquidate. Commercial and commercial real estate loans are evaluated for impairment and typically reserved based on the results of the analysis, then subsequently charged down to a recoverable value when loan repayment is deemed to be collateral dependent. Loans can be partially charged down depending on a number of factors including: the remaining strength of the borrower and guarantor; the type and value of the collateral, and the ease of liquidating collateral; and whether or not collateral is brought onto the bank’s balance sheet via repossession. In the case of commercial and commercial real estate loans, charge-offs, partial or whole, take place when management determines that full collectability of principal balance is unlikely to occur. Subsequent recoveries, if any, are credited to the allowance. Management’s policies for determining impairment, reserves and charge-offs are reviewed and approved by the Board of Directors on an annual basis.

Troubled debt restructuring of loans is undertaken to improve the likelihood that the loan will be repaid in full under the modified terms in accordance with a reasonable repayment schedule.  All modified loans are evaluated to determine whether the loans should be reported as a Troubled Debt Restructuring (“TDR”).  A loan is a TDR when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower by modifying or renewing a loan that the Company would not otherwise consider. To make this determination, the Company must determine whether (a) the borrower is experiencing financial difficulties and (b) the Company granted the borrower a concession. This determination requires consideration of all of the facts and circumstances surrounding the modification.  An overall general decline in the economy or some deterioration in a borrower’s financial condition does not automatically mean the borrower is experiencing financial difficulties.

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Credit Quality (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Loans on nonaccrual status
Loans on nonaccrual status	$ 3,277	$ 6,452
Consumer and credit card [Member]
Loans on nonaccrual status
Loans on nonaccrual status	0	0
Commercial and industrial [Member]
Loans on nonaccrual status
Loans on nonaccrual status	1,449	4,702
Commercial real estate [Member]
Loans on nonaccrual status
Loans on nonaccrual status	1,317	1,398
Residential real estate and home equity [Member]
Loans on nonaccrual status
Loans on nonaccrual status	$ 511	$ 352

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Fair Value Measurements (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Impaired loans [Member] | Quoted Prices in Active Markets for Identical Assets, Level 1 [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	$ 0	$ 0
Impaired loans [Member] | Significant Other Observable Inputs, Level 2 [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	0	0
Impaired loans [Member] | Significant Unobservable Inputs, Level 3 [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	18,838	22,881
Impaired loans [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	18,838	22,881
Real estate owned [Member] | Quoted Prices in Active Markets for Identical Assets, Level 1 [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	0	0
Real estate owned [Member] | Significant Other Observable Inputs, Level 2 [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	0	0
Real estate owned [Member] | Significant Unobservable Inputs, Level 3 [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	1,563	1,219
Real estate owned [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	$ 1,563	$ 1,219

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CONSOLIDATED STATEMENTS OF CONDITION (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Assets
Cash and due from financial institutions	$ 7,309	$ 6,110
Interest-bearing deposits	18,176	19,247
Total cash and cash equivalents	25,485	25,357
Securities available-for-sale	78,454	79,948
Loans	352,246	356,048
Less allowance for loan losses	(5,345)	(6,724)
Net loans	346,901	349,324
Loans held for sale	2,213	7,806
Real estate owned	1,563	1,219
Investment in FHLB stock	3,250	3,799
Premises and equipment, net	10,407	10,641
Premises and equipment held for sale	0	1,405
Bank-owned life insurance	19,535	19,297
Accrued interest receivable and other assets	6,326	3,623
Total assets	494,134	502,419
Liabilities:
Non-interest bearing	104,615	109,622
Interest bearing	335,182	317,237
Total deposits	439,797	426,859
Deposits held for sale	0	22,571
Federal Home Loan Bank advances	4,831	4,838
Accrued interest payable and other liabilities	3,109	2,887
Total liabilities	447,737	457,155
Stockholders' equity:
Common stock, no pm value 7,500,000 shares authorized and issued at March 31, 2014 and December 31, 2013	15,771	15,771
Retained earnings	37,800	37,683
Treasury stock, at cost, 307,650 shares at March 31, 2014 and December 31, 2013	(7,416)	(7,416)
Accumulated other comprehensive income (loss)	242	(774)
Total stockholders' equity	46,397	45,264
Total liabilities and stockholders' equity	$ 494,134	$ 502,419
Common shares outstanding	7,192,350	7,192,350
Book value per common share	$ 6.45	$ 6.29

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Branch Sale (Details Textual) (USD $) In Millions, unless otherwise specified	Mar. 21, 2014
Deposits Liabilities	$ 19.4
Loans Purchase	$ 4.8

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Parenthetical] (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Net unrealized gains on securities available-for-sale, net of related taxes	$ 571
Reclassification adjustment for losses recognized in income statement, net of related taxes	(48)
Unrealized gains on securities transferred to available-for-sale, net of related taxes		12
Amortization of unrealized losses on held-to-maturity securities, net of taxes		$ 12

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Credit Quality (Details 5) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Age analysis of past due loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	$ 834	$ 920
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	132	92
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	1,657	2,004
Financing Receivable, Recorded Investment, Total Past Due	2,623	3,213
Financing Receivable, Recorded Investment, Current	349,459	352,670
Financing Receivable, Recorded Investment, Subtotal	352,082	355,883
Recorded Investment greater than 90 days and Accruing	0	0
Consumer and Credit Card [Member]
Age analysis of past due loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	33	90
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	67	92
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	0	0
Financing Receivable, Recorded Investment, Total Past Due	100	182
Financing Receivable, Recorded Investment, Current	32,398	32,680
Financing Receivable, Recorded Investment, Subtotal	32,498	32,862
Recorded Investment greater than 90 days and Accruing	0	0
Commercial and Industrial [Member]
Age analysis of past due loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	180	407
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	0	0
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	751	1,001
Financing Receivable, Recorded Investment, Total Past Due	931	1,408
Financing Receivable, Recorded Investment, Current	109,955	120,676
Financing Receivable, Recorded Investment, Subtotal	110,886	122,084
Recorded Investment greater than 90 days and Accruing	0	0
Commercial Real Estate [Member]
Age analysis of past due loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	0	49
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	63	0
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	484	682
Financing Receivable, Recorded Investment, Total Past Due	547	731
Financing Receivable, Recorded Investment, Current	102,578	103,961
Financing Receivable, Recorded Investment, Subtotal	103,125	104,692
Recorded Investment greater than 90 days and Accruing	0	0
Residential real estate and home equity [Member]
Age analysis of past due loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	621	374
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	2	0
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	422	321
Financing Receivable, Recorded Investment, Total Past Due	1,045	892
Financing Receivable, Recorded Investment, Current	104,528	95,353
Financing Receivable, Recorded Investment, Subtotal	105,573	96,245
Recorded Investment greater than 90 days and Accruing	$ 0	$ 0

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Branch Sale (Tables)

3 Months Ended

Mar. 31, 2014

Branch Sale [Abstract]

Schedule OF Amounts Related To Sale [Table Text Block]

The amounts related to the sale are as follows (in thousands):

Deposits assumed	$	19,403
Loans sold (at book value)		(4,750)
Property and equipment (agreed upon value)		(1,500)
Cash on hand		(261)
Premium on deposits		(441)
Other, net		13
Cash paid to Merchants	$	12,464

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Credit Quality (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Troubled Debt Restructurings
Number of Contracts	2		3
Post-modification outstanding recorded investment	$ 58		$ 2,230
Number of Contracts modified	3		0
Post-modification outstanding recorded investment	520	[1]	0	[1]
Consumer and credit card [Member]
Troubled Debt Restructurings
Number of Contracts	0		0
Post-modification outstanding recorded investment	0		0
Number of Contracts modified	0		0
Post-modification outstanding recorded investment	0	[1]	0	[1]
Commercial and industrial [Member]
Troubled Debt Restructurings
Number of Contracts	2		3
Post-modification outstanding recorded investment	58		2,230
Number of Contracts modified	0		0
Post-modification outstanding recorded investment	0	[1]	0	[1]
Commercial Real Estate [Member]
Troubled Debt Restructurings
Number of Contracts	0		0
Post-modification outstanding recorded investment	0		0
Number of Contracts modified	3		0
Post-modification outstanding recorded investment	520	[1]	0	[1]
Residential real estate and home equity [Member]
Troubled Debt Restructurings
Number of Contracts	0		0
Post-modification outstanding recorded investment	0		0
Number of Contracts modified	0		0
Post-modification outstanding recorded investment	$ 0	[1]	$ 0	[1]

[1] Period end balances are inclusive of all partial pay downs and charge-offs since the modification date. Loans modified in a TDR that were fully paid down, charged off, or foreclosed upon by period end are not reported.

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Summary Of Significant Accounting Policies (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Summary of Significant Accounting Policies (Textual) [Abstract]
Consumer Loans Charged Off Delinquency Period	120 days
Mortgage Loans Charge Off Delinquency Period	180 days
Vested shares in computation of common share equivalents	153,506	28,918
Interest Income On Mortgage And Commercial Loans	90 years
Common stock with a weighted-average exercise price	$ 9.96	$ 16.46	$ 9.91
Share Based Compensation Arrangement By Share Based Payment Award Options Available Number		122,437

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities
Net income	$ 117	$ 142
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	273	254
Provision for loan losses	0	(650)
Deferred income taxes	0	(24)
Loss on loans held for sale	245	0
Loss on sale of securities available-for-sale	140	0
Gain on sale of real estate owned	0	(84)
Gain on sale of branch	(438)	0
Stock option plan expense	60	79
Premium amortization on securities, net	270	442
Earnings on bank owned life insurance	(239)	(240)
Net changes in other assets and other liabilities	(3,064)	284
Net cash provided by (used in) operating activities	(2,635)	203
Cash flows from investing activities
Purchases	(5,949)	(6,730)
Proceeds from sales	2,133	0
Proceeds from maturities, principal payments and calls	6,439	9,299
Net change in loans	2,644	(10,785)
Proceeds from sale of real estate owned	33	1,393
Premises and equipment expenditures	(50)	(289)
Decrease from sale of branch	(12,464)	0
Net cash used in investing activities	(7,214)	(7,112)
Cash flows from financing activities
Net change in deposits	9,435	(1,001)
Repayment of Federal Home Loan Bank advances	(7)	(1,114)
Proceeds from sale of FHLB stock	549	0
Net cash provided by (used in) financing activities	9,977	(2,115)
Net change in cash and cash equivalents	128	(9,024)
Cash and cash equivalents at beginning of year	25,357	63,307
Cash and cash equivalents at end of year	25,485	54,283
Cash paid during the period for:
Interest on deposits and borrowings	328	537
Non-cash investing and financing activities
Transfer of loans to real estate owned	377	0
Transfer to loans held for sale	$ 87	$ 0

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CONSOLIDATED STATEMENTS OF CONDITION [Parenthetical]	Mar. 31, 2014	Dec. 31, 2013
Common stock, shares authorized	7,500,000	7,500,000
Common stock, shares issued	7,500,000	7,500,000
Treasury stock, shares	307,650	307,650

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Securities (Tables)

3 Months Ended

Mar. 31, 2014

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

As of March 31, 2014:

The amortized cost and estimated fair values of securities available-for-sale were as follows (in thousands):

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government and agency obligations	$	13,733	$	25	$	(286)	$	13,472
Corporate bonds		6,152		38		(49)		6,141
States and municipal obligations		20,680		346		(298)		20,728
Mortgage-backed securities		37,522		757		(166)		38,113
Total	$	78,087	$	1,166	$	(799)	$	78,454

As of December 31, 2013:

The amortized cost and estimated fair values of securities available-for-sale were as follows (in thousands):

	Amortized Costs		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government and agency obligations	$	13,714	$	16	$	(428)	$	13,302
Corporate bonds		6,187		42		(61)		6,168
States and municipal obligations		20,651		283		(484)		20,450
Collateralized debt obligations		1,916		-		(940)		976
Mortgage-backed securities		38,652		731		(331)		39,052
Total	$	81,120	$	1,072	$	(2,244)	$	79,948

Schedule of Temporary Impairment Losses, Investments [Table Text Block]

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at March 31, 2014 and December 31, 2013 (dollars in thousands):

March 31, 2014

	(Less than 12 months)						(12 months or longer)						Total
Description of securities	Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses
U.S. Government and agency obligations		8	$	7,364	$	167		2	$	2,431	$	119		10	$	9,795	$	286
Corporate bonds		5		1,891		24		3		1,403		25		8		3,294		49
State and municipal obligations		21		7,599		182		4		1,546		116		25		9,145		298
Mortgage-backed securities and other		6		4,474		77		2		2,103		89		8		6,577		166
Total temporarily impaired securities		40	$	21,328	$	450		11	$	7,483	$	349		51	$	28,811	$	799

December 31, 2013

	(Less than 12 months)						(12 months or longer)						Total
Description of securities	Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses		Number of investments		Fair value		Unrealized losses
U.S. Government and agency obligations		10	$	10,680	$	428		-	$	-	$	-		10	$	10,680	$	428
Corporate bonds		5		2,141		38		2		883		23		7		3,024		61
State and municipal obligations		32		11,012		442		2		822		42		34		11,834		484
Collateralized debt obligations		-		-		-		1		976		940		1		976		940
Mortgage-backed securities and other		11		8,445		231		2		1,189		100		13		9,634		331
Total temporarily impaired securities		58	$	32,278	$	1,139		7	$	3,870	$	1,105		65	$	36,148	$	2,244

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available-for-sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	502	$	504
Due after one to five years		10,733		10,774
Due after five to ten years		19,201		19,105
Due after ten years		10,129		9,958
Mortgage-backed and related securities		37,522		38,113
Total	$	78,087	$	78,454

XML

Document And Entity Information	3 Months Ended
	Mar. 31, 2014	May 01, 2014
Document Information [Line Items]
Entity Registrant Name	DCB FINANCIAL CORP
Entity Central Index Key	0001025877
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	DCBF
Entity Common Stock, Shares Outstanding		7,192,350
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2014

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Loans (Tables)

3 Months Ended

Mar. 31, 2014

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

At March 31, 2014 and December 31, 2013, loans were comprised of the following (in thousands):

	March 31,  2014		December 31, 2013
Commercial and industrial	$	110,886	$	122,084
Commercial real estate		103,125		104,692
Residential real estate and home equity		105,573		96,245
Consumer and credit card		32,498		32,862
Subtotal		352,082		355,883
Add: Net deferred loan origination fees		164		165
Total loans receivable	$	352,246	$	356,048

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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Interest income:
Loans	$ 3,738	$ 3,551
Securities	553	566
Federal funds sold and interest bearing deposits	13	29
Total interest income	4,304	4,146
Interest expense:
Savings and money market accounts	131	101
Time accounts	128	324
NOW accounts	21	26
Total	280	451
FHLB advances	36	79
Total interest expense	316	530
Net interest income	3,988	3,616
Provision for loan losses	0	(650)
Net interest income after provision for loan losses	3,988	4,266
Non-interest income:
Service charges	511	547
Wealth management fees	293	316
Treasury management fees	56	62
Income from bank-owned life insurance	239	240
Loss on loans held for sale	(245)	0
Gain on the sale of REO	0	84
Loss on sale of securities available-for-sale	(140)	0
Gain on sale of branch	438	0
Other non-interest income	40	59
Total non-interest income	1,192	1,308
Non-interest expense:
Salaries and employee benefits	2,779	2,972
Occupancy and equipment	804	793
Professional services	421	456
Advertising	81	107
Office supplies, postage and courier	95	106
FDIC insurance premium	168	210
State franchise taxes	65	153
Other non-interest expense	650	659
Total non-interest expense	5,063	5,456
Income before income taxes	117	118
Income tax benefit	0	(24)
Net income	$ 117	$ 142
Share and Per Share Data
Basic average common shares outstanding (in shares)	7,192,350	7,192,350
Diluted average common shares outstanding (in shares)	7,244,716	7,223,144
Basic and diluted earnings per common share (in dollars per share)	$ 0.02	$ 0.02

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Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Note 5 – Fair Value Measurements

The Company accounts for fair value measurements in accordance with FASB ASC 820, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FASB ASC 820 defines fair value as 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. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, 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

The carrying value of certain financial assets and liabilities is impacted by the application of fair value measurements, either directly or indirectly. In certain cases, an asset or liability is measured and reported at fair value on a recurring basis, such as available-for-sale investment securities. In other cases, management must rely on estimates or judgments to determine if an asset or liability not measured at fair value warrants an impairment write-down or whether a valuation reserve should be established. Given the inherent volatility, the use of fair value measurements may have a significant impact on the carrying value of assets or liabilities, or result in material changes to the financial statements, from period to period.

Fair value is defined as the price that would be received to sell an asset or transfer a liability between market participants at the balance sheet date. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to observable market data for similar assets and liabilities. However, certain assets and liabilities are not traded in observable markets and the Company must use other valuation methods to develop a fair value.

The following methods, assumptions, and valuation techniques were used by the Company to measure different financial assets and liabilities at fair value and in estimating its fair value disclosures for financial instruments.

Cash and Cash Equivalents: The carrying amounts reported in the consolidated statements of financial condition for cash and cash equivalents is deemed to approximate fair value and are classified as Level 1 of the fair value hierarchy.

Available for Sale Investment Securities: Fair values for investment securities are determined by quoted market prices if available (Level 1). For securities where quoted prices are not available, fair values are estimated based on market prices of similar securities. For securities where quoted prices or market prices of similar securities are not available, fair values are estimated using matrix pricing, which is a mathematical technique widely used in the industry to value investment securities without relying exclusively on quoted prices for the specific investment securities but rather relying on the investment securities’ relationship to other benchmark quoted investment securities (Level 2). Any investment securities not valued based upon the methods above is considered Level 3.

The Company utilizes information provided by a third-party investment securities portfolio manager in analyzing the investment securities portfolio in accordance with the fair value hierarchy of the Fair Value Topic. The portfolio manager’s evaluation of investment security portfolio pricing is performed using a combination of prices and data from other sources, along with internally developed matrix pricing models. The third-party’s month-end pricing process includes a series of quality assurance activities where prices are compared to recent market conditions, previous evaluation prices, and between the various pricing services. These processes produce a series of quality assurance reports on which price exceptions are identified, reviewed and where appropriate, securities are re-priced. In the event of a materially different price, the third party will report the variance and review the pricing methodology in detail. The results of the quality assurance process are incorporated into the selection of pricing providers by the third party.

Loans: For fixed rate loans and for variable rate loans with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values. For loans held on balance sheet, the discounted fair value is further reduced by the amount of reserves held against the loan portfolios. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price and due to the significant judgment involved in evaluating credit quality, loans are classified within Level 3 classification.

Federal Home Loan Bank Stock: The carrying amount presented in the consolidated statements of financial condition is deemed to approximate fair value.

Accrued Interest Receivable and Payable: The fair value for accrued interest approximates its carrying amounts due to the short duration before collection. The valuation is a Level 3 classification which is consistent with its underlying asset or liability.

Deposits: The fair values of deposits with no stated maturity, such as money market demand deposits, savings and NOW accounts have been analyzed by management and assigned estimated maturities and cash flows which are then discounted to derive a value. The fair value of fixed-rate certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The Company classifies the estimated fair value of deposit liabilities as Level 2 in the fair value hierarchy.

Advances from the Federal Home Loan Bank: The fair value of these advances is estimated using the rates currently offered for similar advances of similar remaining maturities or, when available, quoted market prices.

Commitments to Extend Credit: For fixed-rate and adjustable-rate loan commitments, the fair value estimate considers the difference between current levels of interest rates and committed rates. At March 31, 2014 and December 31, 2013, the fair value of loan commitments was not material.

Based on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments are as follows (in thousands):

At March 31, 2014:

	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	25,485	$	25,485	$	25,485	$	-	$	-
Securities available-for-sale		78,454		78,454		-		78,454		-
Loans (net of allowance)(1)		349,114		344,490		-		-		344,490
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,561		1,561		-		-		1,561
Financial liabilities
Noninterest-bearing deposits	$	104,615	$	104,615		-	$	104,615		-
Interest-bearing deposits		335,182		335,356		-		335,356		-
FHLB advances		4,831		4,831		-		4,831		-
Accrued interest payable		100		100		-		-		100

At December 31, 2013:

	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	25,357	$	25,357	$	25,357	$	-	$	-
Securities available-for-sale		79,948		79,948		-		78,972		976
Loans (net of allowance)(1)		357,130		348,295		-		-		348,295
FHLB stock		3,799		3,799				3,799		-
Accrued interest receivable		1,356		1,356		-		-		1,356
Financial liabilities
Noninterest-bearing deposits(2)	$	116,847	$	116,847		-	$	116,847		-
Interest-bearing deposits(2)		336,719		337,590		-		337,590		-
FHLB advances		4,838		4,838		-		4,838		-
Accrued interest payable		112		112		-		-		112

(1)	Includes loans held for sale
(2)	Includes deposits held for sale

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements Using
March 31, 2014	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government and agency obligations	$	13,472	$	-	$	13,472	$	-
State and municipal obligations		20,728		-		20,728		-
Corporate bonds		6,141		-		6,141		-
Mortgage-backed securities and other		38,113		-		38,113		-
Total	$	78,454	$	-	$	78,454	$	-

			Fair Value Measurements Using
December 31, 2013	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government and agency obligations	$	13,302	$	-	$	13,302	$	-
State and municipal obligations		20,450		-		20,450		-
Corporate bonds		6,168		-		6,168		-
Collateralized debt obligation		976				-		976
Mortgage-backed securities and other		39,052		-		39,052		-
Total	$	79,948	$	-	$	78,972	$	976

The table below presents a rollforward of the balance sheet amounts for the quarter ended March 31, 2014 for the collateralized debt obligation measured on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement.

Level 3 Fair Value Measurements Three months ended March 31, 2014
Balance, as of December 31, 2013	$	976
Sold during the quarter		835
Total losses:
Included in earnings		141
Balance, as of March 31, 2014	$	-

The following is a description of the valuation methodologies used for instruments measured at fair value on a non-recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Securities

Certain collateralized debt obligations are classified as held to maturity. The Company calculates fair value based upon a Level 3 estimate of fair value, including a discounted cash flows calculation and a fair value estimate from an independent evaluation of the securities.

Impaired loans

At March 31, 2014 and December 31, 2013, impaired loans consisted primarily of loans secured by nonresidential and commercial real estate. Management has determined fair value measurements on impaired loans primarily through evaluations of appraisals performed.

Real Estate Owned

Real estate acquired through, or in lieu of, loan foreclosure is held for sale and initially recorded at fair value (based on current appraised value) at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less estimated costs to sell. Management has determined fair value measurements on real estate owned primarily through evaluations of appraisals performed.

The following table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2014 and December 31, 2013 (in thousands).

March 31, 2014			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	18,838	$	-	$	-	$	18,838
Real estate owned		1,563		-		-		1,563

December 31, 2013			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	22,881		-		-	$	22,881
Real estate owned		1,219		-		-		1,219

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Credit Quality

3 Months Ended

Mar. 31, 2014

Credit Quality [Abstract]

Credit Quality Disclosure [Text Block]

Note 4 – Credit Quality

Allowance for Credit Losses

The Company’s methodology for estimating probable future losses on loans utilizes a combination of probability of loss by loan grade and loss given defaults for its portfolios. The probability of default is based on both market data from a third-party independent source and actual historical default rates within the Company’s portfolio. A loan is impaired when full payment of interest and principal under the original contractual loan terms is not expected. Commercial and industrial loans, commercial real estate, including construction and land development, and multi-family real estate loans are individually evaluated for impairment. If a loan is impaired, the loan amount exceeding fair value, based on the most current information available is reserved. Management has developed a process by which commercial and commercial real estate loans receiving an internal grade of substandard or doubtful are individually evaluated for impairment through a loan quality review (LQR). The LQR details the various attributes of the relationship and collateral and determines based on the most recent available information if a specific reserve needs to be applied and at what level. The LQR process for all loans meeting the specific review criteria is completed on a quarterly basis. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, are collectively evaluated for impairment, and accordingly, such loans are not separately identified for impairment disclosures. This methodology recognizes portfolio behavior while allowing for reasonable loss ratios on which to estimate allowance calculations.

Further, the process for estimating probable loan losses is divided into reviewing impaired loans on an individual basis for probable losses and, as noted above, calculating probable future losses based on historical and market data for homogenous loan portfolios. As the Company’s troubled loan portfolios have been reduced through charge-off, the remaining loan portfolios possess better overall credit characteristics, and based on the Company’s methodology require lower rates of reserving than historical levels.

The table below presents allowance for loan losses by loan portfolio. Commercial real estate includes real estate construction and land development loans (in thousands).

Three Months Ended March 31, 2014

	Unallocated		Consumer and Credit Card		Commercial and Industrial		Commercial  Real Estate		Residential Real Estate and  Home Equity		Total
Beginning balance	$	-	$	301	$	3,232	$	2,974	$	218	$	6,725
Charge-offs		-		(46)		(1,193)		(159)		(14)		(1,412)
Recoveries		-		31		4		84		10		129
Provision		173		(40)		30		(127)		(36)		-
Transferred to loans held for sale		-		-		-		(97)		-		(97)
Ending balance	$	173	$	246	$	2,073	$	2,675	$	178	$	5,345
Individually evaluated for impairment	$	-	$	-	$	966	$	1,724	$	-	$	2,690
Collectively evaluated for impairment		173		246		1,107		951		178		2,655
Ending balance	$	173	$	246	$	2,073	$	2,675	$	178	$	5,345
Loans
Individually evaluated for impairment	$	-	$	-	$	3,730	$	15,108	$	-	$	18,838
Collectively evaluated for impairment		-		32,498		107,156		88,017		105,573		333,244
Total	$	-	$	32,498	$	110,886	$	103,125	$	105,573	$	352,082

Three Months Ended March 31, 2013

	Consumer and Credit Card		Commercial and Industrial		Commercial Real Estate		Residential Real Estate and Home Equity		Total
Beginning balance	$	365	$	1,621	$	4,692	$	204	$	6,882
Charge-offs		(39)		(64)		(102)		(42)		(247)
Recoveries		60		688		10		15		773
Provision		(99)		(659)		124		(16)		(650)
Ending balance	$	287	$	1,586	$	4,724	$	161	$	6,758
Individually evaluated for impairment	$	-	$	737	$	2,983	$	-	$	3,720
Collectively evaluated for impairment		287		849		1,741		161		3,038
Ending balance	$	287	$	1,586	$	4,724	$	161	$	6,758
Loans
Individually evaluated for impairment	$	-	$	5,586	$	20,980	$	-	$	26,566
Collectively evaluated for impairment		24,452		116,066		88,645		73,026		302,189
Total	$	24,452	$	121,652	$	109,625	$	73,026	$	328,755

Impaired Loans

A loan is considered impaired when based on current information and events it is probable the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Commercial and commercial real estate loans with risk grades Substandard, Vulnerable, Doubtful, or Loss are evaluated for impairment.

The following presents by class, information related to the Company’s impaired loans as of March 31, 2014 and December 31, 2013 (in thousands).

At March 31, 2014

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year-to-date Average Recorded Investment		Year-to-date Interest Income Recognized
With No Related Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		1,698		1,698		-		1,434		19
Commercial Real Estate		9,826		9,826		-		9,816		149
Residential RE and Home Equity		-		-		-		-		-
With Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		2,032		2,110		966		4,135		12
Commercial Real Estate		5,282		5,282		1,724		5,495		73
Residential RE and Home Equity		-		-		-		-		-
Total
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		3,730		3,808		966		5,569		31
Commercial Real Estate		15,108		15,108		1,724		15,311		222
Residential RE and Home Equity		-		-		-		-		-
Total	$	18,838	$	18,916	$	2,690	$	20,880	$	253

At December 31, 2013

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year-to-date Average Recorded Investment		Year-to-date Interest Income Recognized
With No Related Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		1,530		1,530		-		3,081		67
Commercial Real Estate		9,892		11,788		-		10,005		615
Residential RE and Home Equity		-		-		-		-		-
With Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		5,691		5,833		2,304		2,686		196
Commercial Real Estate		5,768		7,296		1,862		10,060		308
Residential RE and Home Equity		-		-		-		-		-
Total
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		7,221		7,363		2,304		5,767		263
Commercial Real Estate		15,660		19,084		1,862		20,065		923
Residential RE and Home Equity		-		-		-		-		-
Total	$	22,881	$	26,447	$	4,166	$	25,832	$	1,186

The allowance for impaired loans is included in the Company’s overall allowance for loan losses. The provision necessary to increase this allowance is included in the Company’s overall provision for losses on loans.

Loans on nonaccrual status at March 31, 2014 and December 31, 2013 are as follows (in thousands): 

	March 31,		December 31,
	2014		2013
Consumer and credit card	$	-	$	-
Commercial and industrial		1,449		4,702
Commercial real estate		1,317		1,398
Residential real estate and home equity		511		352
Total	$	3,277	$	6,452

Credit Quality Indicators

Corporate risk exposure by risk profile was as follows at March 31, 2014 (in thousands):

Category	Commercial and Industrial		Commercial Real Estate
Pass-1-4	$	99,921	$	85,073
Vulnerable-5		3,318		4,542
Substandard-6		7,647		13,510
Doubtful-7		-		-
Loss-8		-		-
Total	$	110,886	$	103,125

Corporate risk exposure by risk profile was as follows at December 31, 2013:

Category	Commercial and Industrial		Commercial Real Estate
Pass-1-4	$	111,266	$	83,953
Vulnerable-5		2,574		4,785
Substandard-6		8,244		15,954
Doubtful-7		-		-
Loss-8		-		-
Total	$	122,084	$	104,692

Risk Category Descriptions

Pass (Prime – 1, Good – 2, Fair – 3, Compromised – 4)

Loans with a pass grade have a higher likelihood that the borrower will be able to service its obligations in accordance with the terms of the loan than those loans graded 5, 6, 7, or 8. The borrower’s ability to meet its future debt service obligations is the primary focus for this determination. Generally, a borrower’s expected performance is based on the borrower’s financial strength as reflected by its historical and projected balance sheet and income statement proportions, its performance, and its future prospects in light of conditions that may occur during the term of the loan.

Vulnerable (Special Mention) – 5

Loans which possess some credit deficiency or potential weakness which deserves close attention, but which do not yet warrant substandard classification. Such loans pose unwarranted financial risk that, if not corrected, could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential”, versus “well-defined”, impairments to the primary source of loan repayment.

Substandard – 6

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 so classified must have well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. One or more of the following characteristics may be exhibited in loans classified Substandard:

· Loans, which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source, is uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.

· Loans are inadequately protected by the current net worth and paying capacity of the obligor.

· The primary source of repayment is gone, and the Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.

· Loans are characterized by the distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

· Unusual courses of action are needed to maintain a high probability of repayment.

· The borrower is not generating enough cash flow to repay loan principal; however, continues to make interest payments.

· The lender is forced into a subordinated or unsecured position due to flaws in documentation.

· Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

· The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.

· There is a significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

Doubtful – 7

One or more of the following characteristics may be exhibited in loans classified Doubtful:

· Loans have all of the weaknesses of those classified as Substandard. Additionally, however, these weaknesses make collection or liquidation in full based on existing conditions improbable.

· The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

· The possibility of loss is high, but, because of certain important pending factors, which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established during this period of deferring the realization of the loss.

Loss – 8

Loans are considered uncollectible and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

Consumer Risk

Consumer risk based on payment activity at March 31, 2014 is as follows (in thousands).

Payment Category	Consumer and Credit Card		Residential Real Estate and  Home Equity
Performing	$	32,498	$	105,062
Non-performing		-		511
Total	$	32,498	$	105,573

Consumer risk based on payment activity at December 31, 2013 is as follows (in thousands).

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	32,862	$	95,893
Non-Performing		-		352
Total	$	32,862	$	96,245

Age Analysis of Past Due Loans

The following table presents past due loans aged as of March 31, 2014 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 days and Accruing
Consumer and credit card	$	33	$	67	$	-	$	100	$	32,398	$	32,498	$	-
Commercial and industrial		180		-		751		931		109,955		110,886		-
Commercial real estate		-		63		484		547		102,578		103,125		-
Residential real estate and home equity		621		2		422		1,045		104,528		105,573		-
Total	$	834	$	132	$	1,657	$	2,623	$	349,459	$	352,082	$	-

The following table presents past due loans aged as of December 31, 2013 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total  Past Due		Current		Total Loans		Recorded Investment > 90 days and Accruing
Consumer and Credit Card	$	90	$	92	$	-	$	182	$	32,680	$	32,862	$	-
Commercial and Industrial		407		-		1,001		1,408		120,676		122,084		-
Commercial Real Estate		49		-		682		731		103,961		104,692		-
Residential Real Estate and Home Equity		374		-		321		892		95,353		96,245		-
Total	$	920	$	92	$	2,004	$	3,213	$	352,670	$	355,883	$	-

Troubled Debt Restructurings

Information regarding Troubled Debt Restructuring (“TDR”) loans for the three month period ended March 31, 2014 is as follows (in thousands):

	Three Months Ended				Three Months Ended
	March 31, 2014				March 31, 2013
	Number of Contracts		Recorded Investment (as of period end)		Number ofContracts		Recorded Investment (as of period end)
Consumer and Credit Card		-	$	-		-	$	-
Commercial and Industrial		2		58		3		2,230
Commercial Real Estate		-		-		-		-
Residential Real Estate and Home Equity		-		-		-		-
Total		2	$	58		3	$	2,230

The following presents by class loans modified in a TDR that subsequently defaulted within twelve months of the modification (i.e. 60 days or more past due) during the three month period ended March 31, 2014 and 2013 (in thousands).

	Three Months Ended				Three Months Ended
	March 31, 2014				March 31, 2013
	Number of Contracts		Recorded Investment  as of period end (1)		Number of Contracts		Recorded Investment  as of period end (1)
Consumer and Credit Card		-	$	-		-	$	-
Commercial and Industrial		-		-		-		-
Commercial Real Estate		3		520		-		-
Residential Real Estate and Home Equity		-		-		-		-
Total		3	$	520		-	$	-

(1) Period end balances are inclusive of all partial pay downs and charge-offs since the modification date. Loans modified in a TDR that were fully paid down, charged off, or foreclosed upon by period end are not reported.

A modification of a loan constitutes a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Company offers various types of concessions when modifying a loan; however, forgiveness of principal is rarely granted. Depending on the financial condition of the borrower, the purpose of the loan and the type of collateral supporting the loan structure; modifications can be either short-term (12 months of less) or long term (greater than one year). Commercial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor may be requested. Commercial mortgage and construction loans modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a TDR may also involve extending the interest-only payment period.

Land loans are also included in the class of commercial real estate loans. Land loans are typically structured as interest-only monthly payments with a balloon payment due at maturity. Land loans modified in a TDR typically involve extending the balloon payment by one to three years, changing the monthly payments from interest-only to principal and interest, while leaving the interest rate unchanged.

Loans modified in a TDR are typically already on nonaccrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR for the Company may have the financial effect of increasing the specific allowance associated with the loan. The allowance for impaired loans that have been modified in a TDR is measured based on the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent or on the present value of expected future cash flows discounted at the loan’s effective interest rate. Management exercises significant judgment in developing these estimates.

As mentioned above, an individual loan is placed on a non-accruing status if, in the judgment of management, it is unlikely that all principal and interest will be received according to the terms of the note. Loans on non-accrual may be eligible to be returned to an accruing status after six months of compliance with the modified terms. However, there are number of factors that could prevent a loan from returning to accruing status, even after remaining in compliance with loan terms for the aforementioned six month period. For example: deteriorating collateral, negative cash flow changes and inability to reduce debt to income ratios.

XML

Summary Of Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Weighted-average shares for basic and diluted earnings per share
Weighted-average common shares outstanding (basic)	7,192,350	7,192,350
Dilutive effect of assumed exercise of stock options	52,366	30,974
Weighted-average common shares outstanding (diluted)	7,244,716	7,223,144

XML

Credit Quality (Tables)

3 Months Ended

Mar. 31, 2014

Credit Quality [Abstract]

Allowance for Credit Losses on Financing Receivables [Table Text Block]

The table below presents allowance for loan losses by loan portfolio. Commercial real estate includes real estate construction and land development loans (in thousands).

Three Months Ended March 31, 2014

	Unallocated		Consumer and Credit Card		Commercial and Industrial		Commercial  Real Estate		Residential Real Estate and  Home Equity		Total
Beginning balance	$	-	$	301	$	3,232	$	2,974	$	218	$	6,725
Charge-offs		-		(46)		(1,193)		(159)		(14)		(1,412)
Recoveries		-		31		4		84		10		129
Provision		173		(40)		30		(127)		(36)		-
Transferred to loans held for sale		-		-		-		(97)		-		(97)
Ending balance	$	173	$	246	$	2,073	$	2,675	$	178	$	5,345
Individually evaluated for impairment	$	-	$	-	$	966	$	1,724	$	-	$	2,690
Collectively evaluated for impairment		173		246		1,107		951		178		2,655
Ending balance	$	173	$	246	$	2,073	$	2,675	$	178	$	5,345
Loans
Individually evaluated for impairment	$	-	$	-	$	3,730	$	15,108	$	-	$	18,838
Collectively evaluated for impairment		-		32,498		107,156		88,017		105,573		333,244
Total	$	-	$	32,498	$	110,886	$	103,125	$	105,573	$	352,082

Three Months Ended March 31, 2013

	Consumer and Credit Card		Commercial and Industrial		Commercial Real Estate		Residential Real Estate and Home Equity		Total
Beginning balance	$	365	$	1,621	$	4,692	$	204	$	6,882
Charge-offs		(39)		(64)		(102)		(42)		(247)
Recoveries		60		688		10		15		773
Provision		(99)		(659)		124		(16)		(650)
Ending balance	$	287	$	1,586	$	4,724	$	161	$	6,758
Individually evaluated for impairment	$	-	$	737	$	2,983	$	-	$	3,720
Collectively evaluated for impairment		287		849		1,741		161		3,038
Ending balance	$	287	$	1,586	$	4,724	$	161	$	6,758
Loans
Individually evaluated for impairment	$	-	$	5,586	$	20,980	$	-	$	26,566
Collectively evaluated for impairment		24,452		116,066		88,645		73,026		302,189
Total	$	24,452	$	121,652	$	109,625	$	73,026	$	328,755

Recorded investment, unpaid balance and related allowance [Table Text Block]

The following presents by class, information related to the Company’s impaired loans as of March 31, 2014 and December 31, 2013 (in thousands).

At March 31, 2014

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year-to-date Average Recorded Investment		Year-to-date Interest Income Recognized
With No Related Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		1,698		1,698		-		1,434		19
Commercial Real Estate		9,826		9,826		-		9,816		149
Residential RE and Home Equity		-		-		-		-		-
With Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		2,032		2,110		966		4,135		12
Commercial Real Estate		5,282		5,282		1,724		5,495		73
Residential RE and Home Equity		-		-		-		-		-
Total
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		3,730		3,808		966		5,569		31
Commercial Real Estate		15,108		15,108		1,724		15,311		222
Residential RE and Home Equity		-		-		-		-		-
Total	$	18,838	$	18,916	$	2,690	$	20,880	$	253

At December 31, 2013

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Year-to-date Average Recorded Investment		Year-to-date Interest Income Recognized
With No Related Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		1,530		1,530		-		3,081		67
Commercial Real Estate		9,892		11,788		-		10,005		615
Residential RE and Home Equity		-		-		-		-		-
With Allowance Recorded
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		5,691		5,833		2,304		2,686		196
Commercial Real Estate		5,768		7,296		1,862		10,060		308
Residential RE and Home Equity		-		-		-		-		-
Total
Consumer and Credit Card	$	-	$	-	$	-	$	-	$	-
Commercial and Industrial		7,221		7,363		2,304		5,767		263
Commercial Real Estate		15,660		19,084		1,862		20,065		923
Residential RE and Home Equity		-		-		-		-		-
Total	$	22,881	$	26,447	$	4,166	$	25,832	$	1,186

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

Loans on nonaccrual status at March 31, 2014 and December 31, 2013 are as follows (in thousands): 

	March 31,		December 31,
	2014		2013
Consumer and credit card	$	-	$	-
Commercial and industrial		1,449		4,702
Commercial real estate		1,317		1,398
Residential real estate and home equity		511		352
Total	$	3,277	$	6,452

Financing Receivable Credit Quality Indicators [Table Text Block]

Corporate risk exposure by risk profile was as follows at March 31, 2014 (in thousands):

Category	Commercial and Industrial		Commercial Real Estate
Pass-1-4	$	99,921	$	85,073
Vulnerable-5		3,318		4,542
Substandard-6		7,647		13,510
Doubtful-7		-		-
Loss-8		-		-
Total	$	110,886	$	103,125

Corporate risk exposure by risk profile was as follows at December 31, 2013:

Category	Commercial and Industrial		Commercial Real Estate
Pass-1-4	$	111,266	$	83,953
Vulnerable-5		2,574		4,785
Substandard-6		8,244		15,954
Doubtful-7		-		-
Loss-8		-		-
Total	$	122,084	$	104,692

Consumer Risk [Table Text Block]

Consumer risk based on payment activity at March 31, 2014 is as follows (in thousands).

Payment Category	Consumer and Credit Card		Residential Real Estate and  Home Equity
Performing	$	32,498	$	105,062
Non-performing		-		511
Total	$	32,498	$	105,573

Consumer risk based on payment activity at December 31, 2013 is as follows (in thousands).

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	32,862	$	95,893
Non-Performing		-		352
Total	$	32,862	$	96,245

Past Due Financing Receivables [Table Text Block]

The following table presents past due loans aged as of March 31, 2014 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Financing Receivables		Recorded Investment > 90 days and Accruing
Consumer and credit card	$	33	$	67	$	-	$	100	$	32,398	$	32,498	$	-
Commercial and industrial		180		-		751		931		109,955		110,886		-
Commercial real estate		-		63		484		547		102,578		103,125		-
Residential real estate and home equity		621		2		422		1,045		104,528		105,573		-
Total	$	834	$	132	$	1,657	$	2,623	$	349,459	$	352,082	$	-

The following table presents past due loans aged as of December 31, 2013 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total  Past Due		Current		Total Loans		Recorded Investment > 90 days and Accruing
Consumer and Credit Card	$	90	$	92	$	-	$	182	$	32,680	$	32,862	$	-
Commercial and Industrial		407		-		1,001		1,408		120,676		122,084		-
Commercial Real Estate		49		-		682		731		103,961		104,692		-
Residential Real Estate and Home Equity		374		-		321		892		95,353		96,245		-
Total	$	920	$	92	$	2,004	$	3,213	$	352,670	$	355,883	$	-

Schedule of Debtor Troubled Debt Restructuring, Current Period [Table Text Block]

Information regarding Troubled Debt Restructuring (“TDR”) loans for the three month period ended March 31, 2014 is as follows (in thousands):

	Three Months Ended				Three Months Ended
	March 31, 2014				March 31, 2013
	Number of Contracts		Recorded Investment (as of period end)		Number ofContracts		Recorded Investment (as of period end)
Consumer and Credit Card		-	$	-		-	$	-
Commercial and Industrial		2		58		3		2,230
Commercial Real Estate		-		-		-		-
Residential Real Estate and Home Equity		-		-		-		-
Total		2	$	58		3	$	2,230

The following presents by class loans modified in a TDR that subsequently defaulted within twelve months of the modification (i.e. 60 days or more past due) during the three month period ended March 31, 2014 and 2013 (in thousands).

	Three Months Ended				Three Months Ended
	March 31, 2014				March 31, 2013
	Number of Contracts		Recorded Investment  as of period end (1)		Number of Contracts		Recorded Investment  as of period end (1)
Consumer and Credit Card		-	$	-		-	$	-
Commercial and Industrial		-		-		-		-
Commercial Real Estate		3		520		-		-
Residential Real Estate and Home Equity		-		-		-		-
Total		3	$	520		-	$	-

(1) Period end balances are inclusive of all partial pay downs and charge-offs since the modification date. Loans modified in a TDR that were fully paid down, charged off, or foreclosed upon by period end are not reported.

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Summary Of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Earnings Per Share, Policy [Policy Text Block]

Earnings per share

Earnings per common share is net income divided by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is computed including the dilutive effect of additional potential common shares under stock options. Weighted-average shares for basic and diluted earnings per share are presented below.

	Three Months Ended
	March 31,
		2014	2013
Weighted-average common shares outstanding (basic)		7,192,350		7,192,350
Dilutive effect of assumed exercise of stock options		52,366		30,974
Weighted-average common shares outstanding (diluted)		7,244,716		7,223,144

There were 153,506 shares included in the computation of common share equivalents for the three-month period then ended because the average fair value of the shares was greater than the exercise price.

Options to purchase 122,437 shares of common stock with a weighted-average exercise price of $16.46 were outstanding at March 31, 2013. There were 28,918 vested shares included in the computation of common share equivalents for the three-month period then ended because the average fair value of the shares was greater than the exercise price.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

The Company has a stock option plan for employees and directors as described in Note 6 (Stock-Based Compensation). In addition to equity settlement, the stock option plan also allows for cash settlement of options at the recipient’s discretion; therefore, liability accounting applies to this plan. Compensation expense is recognized based on the fair value of these awards at the reporting date. A Black Scholes model is utilized to estimate the fair value of stock options at the date of grant and subsequent remeasurement dates. Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards. The Company’s stock option awards contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period. Changes in fair value of the options between the vesting date and option expiration date are also recognized in the Consolidated Statement of Operations.

Application Of Critical Accounting Policies [Policy Text Block]

Significant Accounting Estimates 

The Company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the financial services industry. The application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.

The procedures for assessing the adequacy of the allowance for loan losses reflect our evaluation of credit risk after careful consideration of all information available to us. In developing this assessment, we must rely on estimates and exercise judgment regarding matters where the ultimate outcome is unknown, such as economic factors, developments affecting companies in specific industries and issues with respect to single borrowers. Depending on changes in circumstances, future assessments of credit risk may yield materially different results, which may require an increase or a decrease in the allowance for loan losses.

 The valuation of other assets requires that management utilize a variety of estimates and analysis to determine whether an asset is impaired or other-than-temporarily impaired (“OTTI”). After determining the appropriate methodology for fair value measurement, management then evaluates whether or not declines in fair value below book value are temporary or other-than-temporary impairments. When the Company does not intend to sell a debt security, and it is more likely than not that the Company will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income.

Loans and Leases Receivable, Valuation, Policy [Policy Text Block]

Loans (including Loans Held for Sale): Loans are classified as held for investment when management has both the intent and ability to hold the loan for the foreseeable future, or until maturity or payoff. Management’s intent and view of the foreseeable future may change based on changes in business strategies, the economic environment, market conditions and the availability of government programs. Loans that are held for investment are reported at the principal balance outstanding, net of unearned interest, unamortized deferred loan fees and costs and the allowance for loan losses. Loans held for sale are carried at the lower of amortized cost or estimated fair value, determined on an aggregate basis for each type of loan. Net unrealized losses are recognized by charges to income.

Interest income is accrued based on the unpaid principal balance and includes amortization of net deferred loan fees and costs over the loan term. Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in process of collection. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

When loans are transferred from held for investment to held for sale, specific reserves and allocated pooled reserves included in the allowance for loan and losses are reclassified to reduce the basis of the loans to the lower of cost or estimated fair value less cost to sell.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable but unconfirmed credit losses, increased by the provision for loan losses and decreased by charge-offs net of recoveries. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the required allowance balance based on past loan loss experience, augmented by additional estimates related to the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, economic conditions and other factors.

The allowance consists of both specific and general components. The specific component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the collateral value, or value of expected discounted cash flows of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected loss given default derived from the Bank’s internal risk rating process. Management utilizes an average of a three year historical loss period. Management has the ability to adjust these loss rates by utilizing risk ratings based on current period trends. If current period trends differ either positively or negatively from the given weighted historical loss rates, adjustments can be made. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risking rating data.

Management also utilizes its assessment of general economic conditions, and other localized economic data to more fully support its loan loss estimates. General economic data may include: inflation rates, savings rates and national unemployment rates. Local data may include: unemployment rates, housing starts, real estate valuations, and other economic data specific to the Company’s market area. Though not specific to individual loans, these economic trends can have an impact on portfolio performance as a whole.

Uncollectibility is usually determined based on a pre-determined number of days delinquent in the case of consumer loans, or, in the case of commercial loans, is based on a combination of factors including delinquency, collateral and other legal considerations. Consumer loans are charged-off prior to 120 days of delinquency, but could be charged off earlier, depending on the individual circumstances. Mortgage loans are charged down prior to 180 days of delinquency, but could be charged off sooner, again, depending upon individual circumstance. Typically, loans collateralized by residential real estate are partially charged down to the estimated liquidation value, which is generally based on appraisal less costs to hold and liquidate. Commercial and commercial real estate loans are evaluated for impairment and typically reserved based on the results of the analysis, then subsequently charged down to a recoverable value when loan repayment is deemed to be collateral dependent. Loans can be partially charged down depending on a number of factors including: the remaining strength of the borrower and guarantor; the type and value of the collateral, and the ease of liquidating collateral; and whether or not collateral is brought onto the bank’s balance sheet via repossession. In the case of commercial and commercial real estate loans, charge-offs, partial or whole, take place when management determines that full collectability of principal balance is unlikely to occur. Subsequent recoveries, if any, are credited to the allowance. Management’s policies for determining impairment, reserves and charge-offs are reviewed and approved by the Board of Directors on an annual basis.

Troubled debt restructuring of loans is undertaken to improve the likelihood that the loan will be repaid in full under the modified terms in accordance with a reasonable repayment schedule.  All modified loans are evaluated to determine whether the loans should be reported as a Troubled Debt Restructuring (“TDR”).  A loan is a TDR when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower by modifying or renewing a loan that the Company would not otherwise consider. To make this determination, the Company must determine whether (a) the borrower is experiencing financial difficulties and (b) the Company granted the borrower a concession. This determination requires consideration of all of the facts and circumstances surrounding the modification.  An overall general decline in the economy or some deterioration in a borrower’s financial condition does not automatically mean the borrower is experiencing financial difficulties.

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Stock Based Compensation

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 6 – Stock Based Compensation

The Company’s shareholders approved an employee share option Plan (the “Plan”) in May 2004. This Plan grants certain employees the right to purchase shares at a predetermined price. The Plan is limited to 300,000 shares. The shares granted to employees vest 20% per year over a five year period. The options expire after ten years. At March 31, 2014, options to purchase 142,317 shares were exercisable, and no shares remained available for grant under this plan.

The Company recognizes compensation cost for vested equity-based awards based on their March 31, 2014 fair value. The Company recorded $60,000 and $79,000 in compensation cost for equity-based awards that vested during the three months ended March 31, 2014 and 2013, respectively.

In determining the fair value of the stock options at March 31, 2014, the Company utilized a Black-Scholes valuation model with a risk-free interest rate that corresponds to the expected remaining life of each award, an expected dividend yield of 0%, an expected common stock price volatility of 30%, and an expected life of 8 years from the grant date.

A summary of the status of the Company’s equity compensation plan as of March 31, 2014, and changes during the period then ended are presented below (dollars in thousands):

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at beginning of year	250,518	$	9.91	6.4 years
Exercised	(1,833)		3.82	—
Forfeited	(5,702)		20.68	—
Outstanding at March 31, 2014	242,983	$	9.96	6.2 years	$	355
Options exercisable at period end	142,317	$	13.76	4.9 years	$	170
Weighted-average fair value of options granted during the year ended December 31, 2013		$	1.73

There were no options granted in the first quarter of 2014. At March 31, 2014, unrecognized compensation expense to be recognized over the remaining life of outstanding options is $178,000.

The following information applies to options outstanding at March 31, 2014:

Number Outstanding	Range Of Exercise Prices
43,750	$23.00 - $30.70
24,192	$16.90
21,535	$9.00
153,506	$3.50 - $5.40

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Branch Sale

3 Months Ended

Mar. 31, 2014

Branch Sale [Abstract]

Schudle Of Branch Sale Disclosure [Text Block]

Note 7 – Branch Sale

On March 21, 2014, the Bank closed the previously announced sale of its Marysville branch (the “Branch”) to Merchants National Bank, a national bank headquartered in Hillsboro, Ohio (“Merchants”). Merchants acquired certain assets and assumed certain liabilities of the Branch, including the assumption of $19.4 million in deposit liabilities and the purchase of $4.8 million in loans related to the Branch.

The amounts related to the sale are as follows (in thousands):

Deposits assumed	$	19,403
Loans sold (at book value)		(4,750)
Property and equipment (agreed upon value)		(1,500)
Cash on hand		(261)
Premium on deposits		(441)
Other, net		13
Cash paid to Merchants	$	12,464

Due to operational restrictions, certain loans will be transferred to the buyer after the closing.

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Summary Of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Weighted-average shares for basic and diluted earnings per share [Table Text Block]

Weighted-average shares for basic and diluted earnings per share are presented below.

	Three Months Ended
	March 31,
		2014	2013
Weighted-average common shares outstanding (basic)		7,192,350		7,192,350
Dilutive effect of assumed exercise of stock options		52,366		30,974
Weighted-average common shares outstanding (diluted)		7,244,716		7,223,144

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Credit Quality (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Consumer Risk
Consumer risk based on payment activity	$ 352,246	$ 356,048
Consumer and Credit Card [Member]
Consumer Risk
Consumer risk based on payment activity	32,498	32,862
Consumer and Credit Card [Member] | Performing [Member]
Consumer Risk
Consumer risk based on payment activity	32,498	32,862
Consumer and Credit Card [Member] | Non-Performing [Member]
Consumer Risk
Consumer risk based on payment activity	0	0
Residential real estate and home equity [Member]
Consumer Risk
Consumer risk based on payment activity	105,573	96,245
Residential real estate and home equity [Member] | Performing [Member]
Consumer Risk
Consumer risk based on payment activity	105,062	95,893
Residential real estate and home equity [Member] | Non-Performing [Member]
Consumer Risk
Consumer risk based on payment activity	$ 511	$ 352

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Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

A summary of the status of the Company’s equity compensation plan as of March 31, 2014, and changes during the period then ended are presented below (dollars in thousands):

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at beginning of year	250,518	$	9.91	6.4 years
Exercised	(1,833)		3.82	—
Forfeited	(5,702)		20.68	—
Outstanding at March 31, 2014	242,983	$	9.96	6.2 years	$	355
Options exercisable at period end	142,317	$	13.76	4.9 years	$	170
Weighted-average fair value of options granted during the year ended December 31, 2013		$	1.73

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

The following information applies to options outstanding at March 31, 2014:

Number Outstanding	Range Of Exercise Prices
43,750	$23.00 - $30.70
24,192	$16.90
21,535	$9.00
153,506	$3.50 - $5.40

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Securities (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Unrealized loss
Number of investments	51	65
Fair value	$ 28,811	$ 36,148
Unrealized losses	799	2,244
Collateralized debt obligations [Member]
Unrealized loss
Number of investments		1
Fair value		976
Unrealized losses		940
Less than 12 months [Member]
Unrealized loss
Number of investments	40	58
Fair value	21,328	32,278
Unrealized losses	450	1,139
Less than 12 months [Member] | Collateralized debt obligations [Member]
Unrealized loss
Number of investments		0
Fair value		0
Unrealized losses		0
12 months or longer [Member]
Unrealized loss
Number of investments	11	7
Fair value	7,483	3,870
Unrealized losses	349	1,105
12 months or longer [Member] | Collateralized debt obligations [Member]
Unrealized loss
Number of investments		1
Fair value		976
Unrealized losses		940
U.S. Government and agency obligations [Member]
Unrealized loss
Number of investments	10	10
Fair value	9,795	10,680
Unrealized losses	286	428
U.S. Government and agency obligations [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	8	10
Fair value	7,364	10,680
Unrealized losses	167	428
U.S. Government and agency obligations [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	2	0
Fair value	2,431	0
Unrealized losses	119	0
Corporate bonds [Member]
Unrealized loss
Number of investments	8	7
Fair value	3,294	3,024
Unrealized losses	49	61
Corporate bonds [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	5	5
Fair value	1,891	2,141
Unrealized losses	24	38
Corporate bonds [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	3	2
Fair value	1,403	883
Unrealized losses	25	23
State and municipal obligations [Member]
Unrealized loss
Number of investments	25	34
Fair value	9,145	11,834
Unrealized losses	298	484
State and municipal obligations [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	21	32
Fair value	7,599	11,012
Unrealized losses	182	442
State and municipal obligations [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	4	2
Fair value	1,546	822
Unrealized losses	116	42
Mortgage-backed securities and other [Member]
Unrealized loss
Number of investments	8	13
Fair value	6,577	9,634
Unrealized losses	166	331
Mortgage-backed securities and other [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	6	11
Fair value	4,474	8,445
Unrealized losses	77	231
Mortgage-backed securities and other [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	2	2
Fair value	2,103	1,189
Unrealized losses	$ 89	$ 100

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Stock Based Compensation (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Summary of stock option plan
Outstanding at beginning of year, Shares	250,518
Exercised, Shares	(1,833)
Forfeited, Shares	(5,702)
Outstanding at end of year, Shares	242,983
Options exercisable at period end, Shares	142,317
Outstanding at beginning of year, Weighted Average Exercise Price	$ 9.91	$ 16.46
Exercised, Weighted Average Exercise Price	$ 3.82
Forfeited, Weighted Average Exercise Price	$ 20.68
Outstanding at end of period, Weighted Average Exercise Price	$ 9.96	$ 16.46
Options exercisable at year end, Weighted Average Exercise Price	$ 13.76
Weighted-average fair value of options granted	$ 1.73
Outstanding at beginning of year, Weighted Average Remaining Contractual Life	6 years 4 months 24 days
Outstanding at end of period, Weighted Average Remaining Contractual Life	6 years 2 months 12 days
Options exercisable at period end, Weighted Average Remaining Contractual Life	4 years 10 months 24 days
Outstanding at Ending of year, Aggregate Intrinsic Value	$ 355
Option exercisable at period end, Aggregate Intrinsic value	$ 170

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Net income	$ 117	$ 142
Other comprehensive income:
Net unrealized gains on securities available-for-sale, net of related taxes of $571	1,108	0
Reclassification adjustment for losses recognized in income statement, net of related taxes of $(48)	(92)	0
Unrealized gains on securities transferred to available-for-sale, net of related taxes of $12	0	23
Amortization of unrealized losses on held-to-maturity securities, net of taxes of $12	0	23
Total other comprehensive income	1,016	46
Comprehensive income	$ 1,133	$ 188

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Loans

3 Months Ended

Mar. 31, 2014

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3 – Loans

At March 31, 2014 and December 31, 2013, loans were comprised of the following (in thousands):

	March 31,  2014		December 31, 2013
Commercial and industrial	$	110,886	$	122,084
Commercial real estate		103,125		104,692
Residential real estate and home equity		105,573		96,245
Consumer and credit card		32,498		32,862
Subtotal		352,082		355,883
Add: Net deferred loan origination fees		164		165
Total loans receivable	$	352,246	$	356,048

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Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014
Amortized cost and estimated fair value of all debt securities
Available-for-sale, Amortized Cost, Due in one year or less	$ 502
Available-for-sale, Amortized Cost, Due after one to five years	10,733
Available-for-sale, Amortized Cost, Due after five to ten years	19,201
Available-for-sale, Amortized Cost, Due after ten years	10,129
Available-for-sale, Amortized Cost, Mortgage-backed and related securities	37,522
Available-for-sale, Amortized Cost, Total	78,087
Available-for-sale, Fair Value, Due in one year or less	504
Available-for-sale, Fair Value, Due after one to five years	10,774
Available-for-sale, Fair Value, Due after five to ten years	19,105
Available-for-sale, Fair Value, Fair value, Due after ten years	9,958
Available-for-sale, Fair Value, Mortgage-backed and related securities	38,113
Available-for-sale, Fair Value, Total	$ 78,454

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Fair Value Measurements (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Fair value measurements of assets recurring basis
Securities available-for-sale	$ 78,454	$ 79,948
State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	20,728	20,450
Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	6,141	6,168
Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	38,113	39,052
Collateralized debt obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale		976
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | U.S. Government and agency obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Significant Other Observable Inputs, Level 2 [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	78,454	78,972
Significant Other Observable Inputs, Level 2 [Member] | U.S. Government and agency obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	13,472	13,302
Significant Other Observable Inputs, Level 2 [Member] | State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	20,728	20,450
Significant Other Observable Inputs, Level 2 [Member] | Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	6,141	6,168
Significant Other Observable Inputs, Level 2 [Member] | Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	38,113	39,052
Significant Other Observable Inputs, Level 2 [Member] | Collateralized debt obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale		0
Significant Unobservable Inputs, Level 3 [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	976
Significant Unobservable Inputs, Level 3 [Member] | U.S. Government and agency obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Significant Unobservable Inputs, Level 3 [Member] | State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Significant Unobservable Inputs, Level 3 [Member] | Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Significant Unobservable Inputs, Level 3 [Member] | Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Significant Unobservable Inputs, Level 3 [Member] | Collateralized debt obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale		976
Fair Value, Measurements, Recurring [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	78,454	79,948
Fair Value, Measurements, Recurring [Member] | U.S. Government and agency obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	13,472	13,302
Fair Value, Measurements, Recurring [Member] | State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	20,728	20,450
Fair Value, Measurements, Recurring [Member] | Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	6,141	6,168
Fair Value, Measurements, Recurring [Member] | Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	38,113	39,052
Fair Value, Measurements, Recurring [Member] | Collateralized debt obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale		$ 976

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping [Table Text Block]

Based on the foregoing methods and assumptions, the carrying value and fair value of the Company’s financial instruments are as follows (in thousands):

At March 31, 2014:

	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	25,485	$	25,485	$	25,485	$	-	$	-
Securities available-for-sale		78,454		78,454		-		78,454		-
Loans (net of allowance)(1)		349,114		344,490		-		-		344,490
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,561		1,561		-		-		1,561
Financial liabilities
Noninterest-bearing deposits	$	104,615	$	104,615		-	$	104,615		-
Interest-bearing deposits		335,182		335,356		-		335,356		-
FHLB advances		4,831		4,831		-		4,831		-
Accrued interest payable		100		100		-		-		100

At December 31, 2013:

	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	25,357	$	25,357	$	25,357	$	-	$	-
Securities available-for-sale		79,948		79,948		-		78,972		976
Loans (net of allowance)(1)		357,130		348,295		-		-		348,295
FHLB stock		3,799		3,799				3,799		-
Accrued interest receivable		1,356		1,356		-		-		1,356
Financial liabilities
Noninterest-bearing deposits(2)	$	116,847	$	116,847		-	$	116,847		-
Interest-bearing deposits(2)		336,719		337,590		-		337,590		-
FHLB advances		4,838		4,838		-		4,838		-
Accrued interest payable		112		112		-		-		112

(1)	Includes loans held for sale
(2)	Includes deposits held for sale

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2014 and December 31, 2013 (in thousands):

			Fair Value Measurements Using
March 31, 2014	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government and agency obligations	$	13,472	$	-	$	13,472	$	-
State and municipal obligations		20,728		-		20,728		-
Corporate bonds		6,141		-		6,141		-
Mortgage-backed securities and other		38,113		-		38,113		-
Total	$	78,454	$	-	$	78,454	$	-

			Fair Value Measurements Using
December 31, 2013	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government and agency obligations	$	13,302	$	-	$	13,302	$	-
State and municipal obligations		20,450		-		20,450		-
Corporate bonds		6,168		-		6,168		-
Collateralized debt obligation		976				-		976
Mortgage-backed securities and other		39,052		-		39,052		-
Total	$	79,948	$	-	$	78,972	$	976

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The table below presents a rollforward of the balance sheet amounts for the quarter ended March 31, 2014 for the collateralized debt obligation measured on a recurring basis and classified as Level 3. The classification of an item as Level 3 is based on the significance of the unobservable inputs to the overall fair value measurement.

Level 3 Fair Value Measurements Three months ended March 31, 2014
Balance, as of December 31, 2013	$	976
Sold during the quarter		835
Total losses:
Included in earnings		141
Balance, as of March 31, 2014	$	-

Fair Value Measurements, Recurring and Nonrecurring [Table Text Block]

The following table presents the fair value measurements of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2014 and December 31, 2013.

March 31, 2014			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	18,838	$	-	$	-	$	18,838
Real estate owned		1,563		-		-		1,563

December 31, 2013			Fair Value Measurements Using
	FairValue		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	22,881		-		-	$	22,881
Real estate owned		1,219		-		-		1,219