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, 2015

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	(I.R.S. Employer Identification No.)
incorporation or organization)

110 Riverbend Avenue, Lewis Center, Ohio 43035

(Address of principal executive offices) (Zip code)

	(740) 657-7000
(Registrant’s telephone number including area code)

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

Yes ¨   No x

As of May 14, 2015, the latest practicable date, 7,287,437 of the registrant’s common shares, no par value, were issued and outstanding.

DCB Financial Corp

Table of Contents

	Page
Part I – Financial Information
Item 1 – Financial Statements
Consolidated Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014	3
Consolidated Statements of Income (unaudited) for the three month periods ended March 31, 2015 and 2014	4
Consolidated Statements of Comprehensive Income (unaudited) for the three month periods ended March 31, 2015 and 2014	5
Consolidated Statements of Shareholder’s Equity (unaudited) for the three month periods ended March 31, 2015 and 2014	6
Consolidated Statements of Cash Flows (unaudited) for the three month periods ended March 31, 2015 and 2014	7
Notes to the Consolidated Financial Statements	8
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3 - Quantitative and Qualitative Disclosures about Market Risk	39
Item 4 – Controls and Procedures	39
Part II – Other Information	40
Item 1 – Legal proceedings	40
Item 1A – Risk Factors	40
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3 – Defaults Upon Senior Securities	40
Item 4 – Mine Safety Disclosures	40
Item 5 – Other Information	40
Item 6 – Exhibits	40
Signatures	42

2.

Part I - Financial Information

Item 1. Financial Statements

DCB Financial Corp

Consolidated Balance Sheets

	March 31, 2015 (unaudited)			December 31, 2014
	(Dollars in thousands, except share and per share data)
Assets:
Cash and due from financial institutions	$	5,998		$	6,247
Interest-bearing deposits		18,047			15,027
Total cash and cash equivalents		24,045			21,274
Securities available-for-sale		85,844			75,909
Loans		377,246			385,444
Less allowance for loan losses		(4,089	)		(4,236	)
Net loans		373,157			381,208
Real estate owned		940			1,111
Investment in FHLB stock		3,250			3,250
Premises and equipment, net		9,891			10,016
Bank-owned life insurance		20,270			20,027
Accrued interest receivable and other assets		3,312			2,587
Total assets	$	520,709		$	515,382
Liabilities and shareholders’ equity
Liabilities:
Deposits:
Non-interest bearing	$	111,286		$	111,022
Interest bearing		353,510			342,170
Total deposits		464,796			453,192
Borrowings		4,801			11,808
Accrued interest payable and other liabilities		3,461			3,171
Total liabilities		473,058			468,171
Shareholders’ equity:
Preferred shares, no par value, 2,000,000 shares authorized, none issued and outstanding		—			—
Common shares, no par value, 17,500,000 shares authorized, 7,541,445 and 7,500,000 shares issued, and 7,287,437 and 7,233,795 shares outstanding for March 31, 2015 and December 31, 2014, respectively		16,456			16,064
Retained earnings		38,294			38,055
Treasury stock, at cost, 307,650 shares at March 31, 2015 and December 31, 2014		(7,416	)		(7,416	)
Accumulated other comprehensive income		848			654
Deferred stock-based compensation		(531	)		(146	)
Total shareholders’ equity		47,651			47,211
Total liabilities and shareholders’ equity	$	520,709		$	515,382
See notes to the consolidated financial statements.
Common shares outstanding		7,287,437			7,233,795
Book value per common share	$	6.54		$	6.53

The accompanying notes are an integral part of the consolidated financial statements.

3.

DCB Financial Corp

Consolidated Statements of Income

	For the three months ended March 31,
	2015		2014
	(Dollars in thousands, except share and per share data)
Interest income:
Loans	$	3,952	$	3,738
Securities		505		553
Federal funds sold and interest bearing deposits		10		13
Total interest income		4,467		4,304
Interest expense:
Deposits:
Savings and money market accounts		142		131
Time accounts		92		128
NOW accounts		16		21
Total		250		280
FHLB advances		35		36
Total interest expense		285		316
Net interest income		4,182		3,988
Provision for loan losses		150		—
Net interest income after provision for loan losses		4,032		3,988
Non-interest income:
Service charges		452		511
Wealth management fees		380		293
Treasury management fees		58		56
Income from bank-owned life insurance		243		239
Loss on the sale of securities available-for-sale		—		(140	)
Loss on loans held for sale		—		(245	)
Net gain on sale of REO		10		—
Gain on sale of branch		—		438
Other non-interest income		15		40
Total non-interest income		1,158		1,192
Non-interest expense:
Salaries and employee benefits		2,712		2,779
Occupancy and equipment		963		804
Professional services		353		421
Advertising		108		81
Office supplies, postage and courier		79		95
FDIC insurance premium		110		168
State franchise taxes		75		65
Other non-interest expense		551		650
Total non-interest expense		4,951		5,063
Income before income taxes		239		117
Income taxes		—		—
Net income	$	239	$	117
Share and Per Share Data
Basic average common shares outstanding		7,237,371		7,192,350
Diluted average common shares outstanding		7,253,840		7,244,716
Basic and diluted earnings per common share	$	0.03	$	0.02

The accompanying notes are an integral part of the consolidated financial statements.

4.

DCB Financial Corp

Consolidated Statements of Comprehensive Income (Unaudited)

	Three months ended March 31,
	2015		2014
	(Dollars in thousands)
Net income	$	239	$	117
Other comprehensive income:
Net unrealized gains on securities available-for-sale, net of taxes of $100 and $769 in 2015 and 2014, respectively		194		1,108
Reclassification adjustment for losses included in net income, net of taxes of $(35) in 2014		—		(92	)
Total other comprehensive income		194		1,016
Comprehensive income	$	433	$	1,133

The accompanying notes are an integral part of the consolidated financial statements.

5.

DCB Financial Corp

Consolidated Statements of Shareholders’ Equity (Unaudited)

	Issued and Outstanding Common Shares		Preferred Stock		Common Stock		Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Deferred Stock-Based Compensation			Total
(Dollars in thousands)
Balance at January 1, 2014		7,192,350	$	—	$	15,771	$	37,683	$	(7,416	)	$	(774	)	$	—		$	45,264
Comprehensive income:
Net income		—		—		—		117		—			—			—			117
Other comprehensive loss, net of taxes		—		—		—		—		—			1,016			—			1,016
Total comprehensive income		—		—		—		—		—			—			—			1,133
Balance at March 31, 2014		7,192,350	$	—	$	15,771	$	37,800	$	(7,416	)	$	242		$	—		$	46,397
Balance at January 1, 2015		7,233,797	$	—	$	16,064	$	38,055	$	(7,416	)	$	654		$	(146	)	$	47,211
Comprehensive income:
Net income		—		—		—		239		—			—			—			239
Other comprehensive income, net of taxes		—		—		—		—		—			194			—			194
Total comprehensive income		—		—		—		—		—			—			—			433
Issuance of restricted stock		53,640		—		392		—		—			—			(392	)		—
Amortization of restricted stock		—		—		—		—		—			—			7			7
Balance at March 31, 2015		7,287,437	$	—	$	16,456	$	38,294	$	(7,416	)	$	848		$	(531	)	$	47,651

The accompanying notes are an integral part of the consolidated financial statements.

6.

DCB Financial Corp

Consolidated Statements of Cash Flows (Unaudited)

	Three months ended March 31
	2015			2014
	(Dollars in thousands)
Cash flows from operating activities
Net income	$	239		$	117
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		254			273
Provision for loan losses		150			—
Loss on sale of securities available-for-sale		—			140
Loss on loans held-for-sale		—			245
Gain on sale of real estate owned		(10	)		—
Gain on sale of branch		—			(438	)
Net stock-based compensation expense		7			60
Premium amortization on securities, net		246			270
Earnings on bank owned life insurance		(243	)		(239	)
Net changes in other assets and other liabilities		(536	)		(3,063	)
Net cash provided by (used in) operating activities		107			(2,635	)
Cash flows from investing activities
Purchases of securities available-for-sale		(12,212	)		(5,949	)
Proceeds from maturities, principal payments and calls of securities available-for-sale		2,326			6,439
Proceeds from sales of securities available-for-sale		—			2,133
Net change in loans		7,901			2,644
Proceeds from sale of real estate owned		181			33
Net cash paid with sale of branch		—			(12,464	)
Premises and equipment expenditures		(129	)		(50	)
Net cash used in investing activities		(1,933	)		(7,214	)
Cash flows from financing activities
Net change in deposits		11,604			9,435
Repayment of borrowings		(7,007	)		(7	)
Proceeds from redemption of FHLB stock		—			549
Net cash provided by financing activities		4,597			9,977
Net change in cash and cash equivalents		2,771			128
Cash and cash equivalents at beginning of period		21,274			25,357
Cash and cash equivalents at end of period	$	24,045		$	25,485
Supplemental disclosures of cash flow information
Cash paid during the period for interest on deposits and borrowings	$	269		$	328
Non-cash investing and financing activities:
Transfer of loans to real estate owned		—			377
Transfer of loans to held for sale		—			87

The accompanying notes are an integral part of the consolidated financial statements.

7.

DCB Financial Corp

Notes to Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

Throughout this report, the terms “Company,” “DCB,” “we,” “our” and “us” refers to the consolidated entity of DCB Financial Corp and its wholly owned subsidiaries, The Delaware County Bank and Trust Company (the “Bank”), DCB Title Services LLC, and DCB Insurance Services, Inc.

The accompanying unaudited financial statements were prepared in accordance with the instructions for Form 10-Q and Regulation S-X and, therefore, do not include information for footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The material under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is written with the presumption that the users of the interim financial statements have read, or have access to, the latest audited financial statements and notes thereto of the Company, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2014, and for the two-year period then ended, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Accordingly, only material changes in the results of operations and financial condition are discussed in the remainder of Part I. Certain amounts from prior year periods are reclassified, when necessary, to conform to the current period presentation.

All adjustments, consisting of only normal recurring items, that in the opinion of management are necessary for a fair presentation of the financial statements have been included in the results of operations for the three months ended March 31, 2015 and 2014. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results anticipated for the year.

To prepare financial statements in conformity with 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 anytime particularly subject to change.

Earnings per share

Earnings per common share is net income divided by the weighted-average number of common shares 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,
	2015		2014
Weighted-average common shares outstanding (basic)		7,237,371		7,192,350
Dilutive effect of assumed exercise of stock options		16,469		52,366
Weighted-average common shares outstanding (diluted)		7,253,840		7,244,716

There were 62,939 shares and 153,506 shares included in the computation of common share equivalents for the three months ended March 31, 2015 and 2014, respectively, because the average fair value of the shares was greater than the exercise price.

At March 31, 2015 and 2014, 9,979 and 45,727 of anti-dilutive shares, respectively, were excluded from the diluted weighted average common share calculations.

8.

DCB Financial Corp

Notes to Consolidated Financial Statements

Stock-Based Compensation

Compensation cost is recognized for restricted stock awards issued to employees and directors based on the fair value of these awards at the date of grant. The market price of the Company’s common stock at the date of grant is used to determine the fair value for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

During the first quarter of 2015, awards for 53,640 restricted shares were granted under the Company's 2014 Restricted Stock Plan. The awards vest ratably over a five year period. There were no grants of restricted shares in the first quarter of 2014. There were 95,085 and 41,445 unvested restricted shares at March 31, 2015 and December 31, 2014, respectively.

The Company’s outstanding stock options may be settled for cash at the recipient’s discretion; therefore, liability accounting applies to the Company’s 2004 Long-Term Stock Incentive Plan under which such stock options were granted. 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 re-measurement dates. Compensation cost is recognized over the required service period, generally defined as the vesting period. 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 Income.

Significant Accounting Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP 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, the Company 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.

9.

DCB Financial Corp

Notes to 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.

10.

DCB Financial Corp

Notes to 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, 2015:

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and agency obligations	$	19,071	$	64	$	(18	)	$	19,117
Corporate bonds		4,968		47		(7	)		5,008
States and municipal obligations		22,063		571		(41	)		22,593
Collateralized mortgage obligations		22,080		71		(112	)		22,039
Mortgage-backed securities		16,378		709		(0	)		17,087
Total	$	84,560	$	1,462	$	(178	)	$	85,844

As of December 31, 2014:

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

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Government and agency obligations	$	11,602	$	31	$	(88	)	$	11,545
Corporate bonds		4,975		33		(21	)		4,987
States and municipal obligations		21,303		423		(69	)		21,657
Collateralized mortgage obligations		19,601		85		(106	)		19,580
Mortgage-backed securities		17,438		702		—			18,140
Total	$	74,919	$	1,274	$	(284	)	$	75,909

11.

DCB Financial Corp

Notes to Consolidated Financial Statements

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014 (dollars in thousands):

	March 31, 2015
	(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		2	$	1,498	$	1		3	$	3,500	$	17		5	$	4,998	$	18
Corporate bonds		1		265		1		3		1,410		6		4		1,675		7
State and municipal obligations		4		1,538		16		3		1,324		25		7		2,862		41
Collateralized mortgage obligations		11		6,653		40		4		3,519		72		15		10,172		112
Mortgage-backed securities and other		—		—		—		—		—		—		—		—		—
Total temporarily impaired securities		18	$	9,954	$	58		13	$	9,753	$	120		31	$	19,707	$	178

	December 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		3	$	2,488	$	9		4	$	4,446	$	79		7	$	6,934	$	88
Corporate bonds		1		503		1		4		1,664		21		5		2,167		21
State and municipal obligations		8		2,699		18		4		1,915		51		12		4,614		69
Collateralized mortgage obligations		9		5,649		21		4		3,649		85		13		9,298		106
Mortgage-backed securities and other		—		—		—		—		—		—		—		—		—
Total temporarily impaired securities		21	$	11,339	$	49		16	$	11,674	$	236		37	$	23,013	$	284

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, 2015 or December 31, 2014.

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”).

There were no sales of securities in the three months ended March 31, 2015. Gross losses on the sale of securities were $140,000 in the first quarter of 2014.

12.

DCB Financial Corp

Notes to Consolidated Financial Statements

At March 31, 2015, 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, 2015, 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	$	18,776	$	18,845
Due after one to five years		30,010		30,236
Due after five to ten years		17,529		17,794
Due after ten years		1,867		1,883
Mortgage-backed and related securities		16,378		17,086
Total	$	84,560	$	85,844

Securities with a fair value of $74.8 million at March 31, 2015 were pledged to secure public deposits and other obligations.

Note 3 – Loans

At March 31, 2015 and December 31, 2014, loans were comprised of the following (in thousands):

	March 31, 2015		December 31, 2014
Commercial and industrial	$	99,946	$	106,222
Commercial real estate		106,334		111,851
Residential real estate and home equity		131,658		129,650
Consumer and credit card		39,074		37,507
Subtotal		377,012		385,230
Add: Net deferred loan origination fees		234		214
Total loans receivable	$	377,246	$	385,444

Note 4 – Credit Quality

Allowance for Loan 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.

13.

DCB Financial Corp

Notes to 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 paydowns, payoffs, credit improvement and charge-offs, 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 tables below present allowance for loan losses by loan portfolio and allocated to loans individually and collectively evaluated for impairment. Commercial real estate includes real estate construction and land development loans (in thousands).

	Quarter ended March 31, 2015
	Consumer and Credit Card			Commercial and Industrial			Commercial Real Estate			Residential Real Estate and Home Equity			Unallocated		Total
Beginning balance	$	190		$	1,132		$	2,376		$	268		$	270	$	4,236
Charge-offs		(42	)		(310	)		(48	)		(29	)		—		(429	)
Recoveries		28			88			7			9			—		132
Provision		7			127			(18	)		20			14		150
Ending balance	$	183		$	1,037		$	2,317		$	268		$	284	$	4,089
Allowance allocated to:
Individually evaluated for impairment	$	—		$	136		$	991		$	—		$	—	$	1,127
Collectively evaluated for impairment		183			901			1,326			268			284		2,962
Ending balance	$	183		$	1,037		$	2,317		$	268		$	284	$	4,089
Loans:
Individually evaluated for impairment	$	447		$	2,267		$	8,351		$	340		$	—	$	11,405
Collectively evaluated for impairment		38,627			97,679			97,983			131,318			—		365,607
Ending balance	$	39,074		$	99,946		$	106,334		$	131,658		$	—	$	377,012

	Quarter ended March 31, 2014
	Consumer and Credit Card			Commercial and Industrial			Commercial Real Estate			Residential Real Estate and Home Equity			Unallocated		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		(40	)		30			(127	)		(36	)		173		—
Transferred to loans  held for sale		—			—			(97	)		—			—		(97	)
Ending balance	$	246		$	2,073		$	2,675		$	178		$	173	$	5,345
Allowance allocated to:
Individually evaluated  for impairment	$	—		$	966		$	1,724		$	—		$	—	$	2,690
Collectively evaluated for impairment		246			1,107			951			178			173		2,655
Ending balance	$	246		$	2,073		$	2,675		$	178		$	173	$	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
Ending balance	$	32,498		$	110,886		$	103,125		$	105,573		$	—	$	352,082

14.

DCB Financial Corp

Notes to Consolidated Financial Statements

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 non-performing 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.

15.

DCB Financial Corp

Notes to Consolidated Financial Statements

The following presents by class, information related to the Company’s impaired loans as of March 31, 2015 and December 31, 2014 (in thousands).

	At March 31, 2015						Quarter ended March 31, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Three months Average Recorded Investment		Three months Interest Income Recognized
With No Related Allowance
Recorded
Consumer and Credit Card	$	447	$	447	$	—	$	449	$	5
Commercial and Industrial		1,255		1,255		—		1,266		7
Commercial Real Estate		22		22		—		729		—
Residential real estate and home equity		340		340		—		—		—
With Allowance Recorded
Commercial and Industrial	$	1,012	$	1,090	$	136	$	817	$	13
Commercial Real Estate		8,329		8,329		991		8,350		138
Total
Consumer and Credit Card	$	447	$	447	$	—	$	449	$	5
Commercial and Industrial		2,267		2,345		136		2,083		20
Commercial Real Estate		8,351		8,351		991		9,079		138
Residential real estate and home equity		340		340		—		—		—
Total	$	11,405	$	11,483	$	1,127	$	11,611	$	163

	At December 31, 2014						Quarter ended March 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With No Related Allowance
Recorded
Consumer and Credit Card	$	455	$	455	$	—	$	—	$	—
Commercial and Industrial		1,288		1,288		—		1,434		19
Commercial Real Estate		1,088		1,088		—		9,816		149
With Allowance Recorded
Commercial and Industrial		740		817		256		4,135		12
Commercial Real Estate		8,602		8,602		1,042		5,495		73
Total
Consumer and Credit Card		455		455		—		—		—
Commercial and Industrial		2,028		2,105		256		5,569		31
Commercial Real Estate		9,690		9,690		1,042		15,311		222
Total	$	12,173	$	12,250	$	1,298	$	20,880	$	253

16.

DCB Financial Corp

Notes to Consolidated Financial Statements

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 non-accrual status at March 31, 2015 and December 31, 2014 are as follows (in thousands):

	March 31,		December 31,
	2015		2014
Consumer and credit card	$	118	$	120
Commercial and industrial		612		632
Commercial real estate		60		298
Residential real estate and home equity		340		334
Total	$	1,130	$	1,384

Credit Quality Indicators

Corporate risk exposure by risk profile was as follows at March 31, 2015 (in thousands):

Category	Commercial and Industrial		Commercial Real Estate
Pass-1-4	$	95,196	$	92,662
Vulnerable-5		985		4,847
Substandard-6		3,765		8,825
Doubtful-7		—		—
Loss-8		—		—
Total	$	99,946	$	106,334

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

Category	Commercial and Industrial		Commercial Real Estate
Pass-1-4	$	106,590	$	90,588
Vulnerable-5		823		6,146
Substandard-6		4,438		9,488
Doubtful—7		—		—
Loss-8		—		—
Total	$	111,851	$	106,222

17.

DCB Financial Corp

Notes to Consolidated Financial Statements

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 that possess a defined credit weakness and the likelihood that such 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.

18.

DCB Financial Corp

Notes to Consolidated Financial Statements

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.

19.

DCB Financial Corp

Notes to Consolidated Financial Statements

Consumer Risk

Consumer risk based on payment activity at March 31, 2015 is as follows (in thousands).

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	38,956	$	131,213
Non-performing		118		445
Total	$	39,074	$	131,658

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

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	37,387	$	128,836
Non-Performing		120		814
Total	$	37,507	$	129,650

Age Analysis of Past Due Loans

The following table presents past due loans aged as of March 31, 2015 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 days and Accruing
Consumer and credit card	$	60	$	3	$	118	$	181	$	38,893	$	39,074	$	—
Commercial and industrial		—		—		—		—		99,946		99,946		—
Commercial real estate		—		—		132		132		106,202		106,334		—
Residential real estate and home equity		190		495		302		987		130,671		131,658		105
Total	$	250	$	498	$	552	$	1,300	$	375,712	$	377,012	$	105

20.

DCB Financial Corp

Notes to Consolidated Financial Statements

The following table presents past due loans aged as of December 31, 2014 (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	$	66	$	7	$	120	$	193	$	37,314	$	37,507	$	—
Commercial and Industrial		68		—		—		68		111,783		111,851		—
Commercial Real Estate		49		—		306		355		105,867		106,222		—
Residential Real Estate and Home Equity		220		30		642		892		128,758		129,650		480
Total	$	403	$	37	$	1,068	$	1,508	$	383,722	$	385,230	$	480

Troubled Debt Restructurings

Information regarding Troubled Debt Restructuring (“TDR”) loans for the three month period ended March 31, 2015 and 2014 is as follows (dollars in thousands):

	For the three months ended March 31,
	2015				2014
	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
Commercial Real Estate		—		—		—		—
Residential Real Estate and Home Equity		—		—		—		—
Total		—	$	—		2	$	58

21.

DCB Financial Corp

Notes to Consolidated Financial Statements

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, 2015 and 2014 (dollars in thousands).

	For the three months ended March 31,
	2015				2014
	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 non-accrual 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.

22.

DCB Financial Corp

Notes to Consolidated Financial Statements

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.

23.

DCB Financial Corp

Notes to Consolidated Financial Statements

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, and is classified as a Level 2 instrument.

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 (Level 2).

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, 2015 and December 31, 2014, 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 at March 31, 2015 and December 31, 2014 (in thousands):

	At March 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	24,045	$	24,045	$	24,045	$	—	$	—
Securities available-for-sale		85,844		85,844		—		85,844		—
Loans (net of allowance)		373,157		371,911		—		—		371,911
FHLB stock		3,250		3,250		—		3,250		—
Accrued interest receivable		1,527		1,527		—		—		1,527
Financial liabilities
Non-interest-bearing deposits	$	111,286	$	111,286		—	$	111,286		—
Interest-bearing deposits		353,510		353,550		—		353,550		—
FHLB advances		4,801		4,801		—		4,801		—
Accrued interest payable		52		52		—		—		52

24.

DCB Financial Corp

Notes to Consolidated Financial Statements

	At December 31, 2014
	Carrying  Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	21,274	$	21,274	$	21,274	$	—	$	—
Securities available-for-sale		75,909		75,909		—		75,909		—
Loans (net of allowance)		381,208		381,224		—		—		381,224
FHLB stock		3,250		3,250				3,250		—
Accrued interest receivable		1,234		1,234		—		—		1,234
Financial liabilities
Non-interest-bearing deposits	$	111,022	$	111,022		—	$	111,022		—
Interest-bearing deposits		342,170		342,318		—		342,318		—
FHLB advances		11,808		11,808		—		11,808		—
Accrued interest payable		36		36		—		—		36

25.

DCB Financial Corp

Notes to 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, 2015 and December 31, 2014 (in thousands):

	At March 31, 2015
			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)
U.S. Government and agency obligations	$	19,117	$	—	$	19,117	$	—
State and municipal obligations		22,593		—		22,593		—
Corporate bonds		5,008		—		5,008		—
Collateralized mortgage obligations		22,039		—		22,039		—
Mortgage-backed securities		17,087		—		17,087		—
Total	$	85,844	$	—	$	85,844	$	—

	At December 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)
U.S. Government and agency obligations	$	11,545	$	—	$	11,545	$	—
State and municipal obligations		21,657		—		21,657		—
Corporate bonds		4,987		—		4,987		—
Collateralized mortgage obligations		19,580		—		19,580		—
Mortgage-backed securities		18,140		—		18,140		—
Total	$	75,909	$	—	$	75,909	$	—

26.

DCB Financial Corp

Notes to 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.

Impaired loans

At March 31, 2015 and December 31, 2014, 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, 2015 and December 31, 2014 (in thousands).

	At March 31, 2015
	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	$	11,405	$	—	$	—	$	11,405
Real estate owned		940		—		—		940

	At December 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	$	12,945		—		—	$	12,945
Real estate owned		1,111		—		—		1,111

27.

DCB Financial Corp

Notes to Consolidated Financial Statements

Note 6 – Sale of Branch and Loans Held for Sale

In March 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		(438	)
Other, net		10
Cash paid to Merchants	$	12,464

28.

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 14 branch offices located in central 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.

29.

Overview of the first quarter of 2015

· Total assets were $520.7 million at March 31, 2015, compared with $515.4 million at December 31, 2014.

· Total loans were $377.2 million at March 31, 2015, compared with $385.4 million at December 31, 2014.

· Total deposits were $464.8 million at March 31, 2015, compared with $453.2 million at December 31, 2014.

· Net income was $293,000 for the three months ended March 31, 2015, compared with $117,000 for the same period in 2014 and $168,000 for the fourth quarter of 2014.

· Net income per diluted share was $0.03 for the three months ending March 31, 2015, compared with $0.02 for the first and fourth quarters of 2014, respectively.

· Net interest income was $4.2 million in the first quarter of 2015, compared with $4.0 million in the first quarter of 2014 and $4.2 million in the fourth quarter of 2015.

· The net interest margin was 3.50% in the first quarter of 2015, compared with 3.47% in the year-ago quarter and 3.62% in the fourth quarter of 2014.

· The provision for loan losses was $150,000 in the first quarter of 2015 and the fourth quarter of 2014. There was no provision for loan losses recorded in the first quarter of 2014.

· Non-interest income was 21.5% of total revenue in the first quarter of 2015, compared with 22.2% in the year-ago quarter and 20.6% in the fourth quarter of 2014.

· Our efficiency ratio was 92.9% in the first quarter of 2015, compared with 98.5% in the year-ago quarter and 94.6% in the fourth quarter of 2014.

· Total non-performing assets (including TDR’s) were $11.8 million or 2.26% of total assets at March 31, 2015, compared with $12.6 million or 2.45% of total assets at December 31, 2014.

· Total non-performing assets (excluding TDR’s) were $2.2 million or 0.42% of total assets at March 31, 2015, compared to $3.0 million or 0.58% at December 31, 2014.

Comparison of Results of Operations

General  

Net income was $239,000 or $0.03 per diluted share for the three months ended March 31, 2015, compared to net income of $117,000 or $0.02 per diluted share for the first quarter of 2014 and net income of $168,000 or $0.02 per diluted share for the fourth quarter of 2014.

Net Interest Income  

Net interest income totaled $4.2 million in the three months ended March 31, 2015, compared with $4.0 million in the year-ago quarter and $4.2 million in the fourth quarter of 2014. Net interest income in the fourth quarter of 2014 included $171,000 of interest income recognized upon the refinance of a non-accrual commercial mortgage that, upon the refinance, was returned to accrual status. The net interest margin was unchanged in the first quarter of 2015 compared with the year-ago quarter, but was 12 basis points lower than the fourth quarter of 2014 due to the $117,000 of interest income recognized on the refinance of a previously non-accrual loan in that quarter.

The net interest margin was at 3.50% in the first quarter of 2015 compared with 3.47% in the first quarter of 2014 and was 3.62% in the fourth quarter of 2014. The net interest margin was 3.48% in the fourth quarter of 2014 without the $171,000 interest recovery.

30.

Our earning assets yield and our cost of interest-bearing liabilities have remained relatively stable over the past five quarters (excluding the impact on our earning-assets yield of non-recurring items in the third and fourth quarters of 2014), and were 3.73% and 0.32% respectively in the first quarter of 2015.

Average interest-earning assets were $484.9 million in the first quarter of 2015, compared with $466.6 million in the year-ago quarter and $465.7 million in the fourth quarter of 2014. Total period end loans outstanding increased $15.7 million between September 30, 2014 and December 31, 2014; however, most of the impact of this growth on the average balances of the loan portfolio was reflected in the first quarter of 2015 as much of the fourth quarter growth occurred in the latter part of that quarter. The average balances of loans increased $21.4 million in the first quarter of 2015 compared with the year-ago quarter, and were $7.1 million higher than the fourth quarter of 2014. Total average loans were 78.6% of total average interest-earning assets in the first quarter of 2015, compared with 77.1% in the year-ago quarter and 80.5% in the fourth quarter of 2014. Total average interest-bearing deposit balances increased $14.8 million in the first quarter of 2015 compared to the first quarter of 2014, with a decrease in the average balance of time deposits of $9.8 million being offset by an increase of $24.6 million in the average balances of lower-costing interest-bearing demand, savings and money market accounts.

31.

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 and loans held for sale. Loan income includes cash received on non-accruing loans.

	Three months ending March 31,
	2015								2014
	Outstanding			Earned/		Yield/			Outstanding			Earned/		Yield/
	balance			paid		rate			balance			paid		rate
Interest-earning assets:
Federal funds sold and other short term	$	19,742		$	10		0.20	%	$	21,750		$	13		0.24	%
Taxable securities		77,139			438		2.30			76,718			466		2.43
Tax-exempt securities		6,850			67		4.03			8,397			86		4.10
Loans		381,125			3,952		4.19			359,769			3,739		4.21
Total interest-earning assets		484,856			4,467		3.73			466,634			4,304		3.74
Non-interest-earning assets		42,201								41,729
Total assets	$	527,057							$	508,363
Interest-bearing liabilities:
Interest-bearing demand, savings and money market accounts	$	279,204		$	158		0.18	%	$	254,633		$	152		0.25	%
Certificates of deposit		76,418			92		0.49			86,204			128		0.60
Total deposits		355,622			250		0.28			340,837			280		0.33
Borrowed funds		6,372			35		2.25			5,280			36		2.76
Total interest-bearing liabilities		361,994			285		0.32			346,117			316		0.37
Non-interest-bearing liabilities:
Demand deposits		113,067								111,505
Other liabilities		5,387								6,130
Shareholders’ equity		46,609								44,611
Total liabilities and shareholders’ equity	$	527,057							$	508,363
Net interest income; interest rate spread				$	4,182		3.41	%				$	3,988		3.37	%
Net interest margin (net interest income as a percent of average interest-earning assets)							3.50	%							3.47	%
Average interest-earning assets to average interest-bearing liabilities		133.94	%							134.82	%

32.

Asset Quality and Allowance for Loan Losses

Delinquent loans (including non-accrual loans) totaled $2.0 million or 0.53% of total loans at March 31, 2015, compared to $2.2 million or 0.58% of total loans at December 31, 2014 and $3.6 million or 0.98% of total loans at September 30, 2014. Non-accrual loans totaled $1.1 million or 0.30% of total loans at March 31, 2015, compared to $1.4 million or 0.36% of total loans at December 31, 2014 and $3.0 million or 0.81% of total loans at September 30, 2014.

Delinquent loans	March 31, 2015					December 31, 2014					September 30, 2014
	$		%(1)			$		%(1)			$		%(1)
	(Dollars in thousands)
30 days past due	$	250		0.07	%	$	336		0.09	%	$	68		0.02	%
60 days past due		498		0.13	%		37		0.01	%		50		0.01	%
90 days past due and still accruing		105		0.03	%		480		0.12	%		520		0.14	%
Non-accrual		1,130		0.30	%		1,384		0.36	%		3,007		0.81	%
Total	$	1,983		0.53	%	$	2,327		0.58	%	$	3,645		0.98	%

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

Non-performing assets were $11.8 million or 2.26% of total assets at March 31, 2015, compared with $12.6 million or 2.45% of total assets at December 31, 2014 and $14.6 million or 2.91% of total assets at September 30, 2014. 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 $9.6 million at both March 31, 2015 and December 31, 2014 and $9.8 million at September 30, 2014.

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

Non-performing assets	March 31, 2015		December 31, 2014		September 30, 2014
	(Dollars in thousands)
Non-accruing loans:
Residential real estate loans and home equity	$	340	$	334	$	343
Commercial real estate		60		298		1,889
Commercial and industrial		612		632		651
Consumer loans and credit cards		118		120		124
Total non-accruing loans		1,130		1,384		3,007
Accruing loans delinquent 90 days or more		105		480		520
Total non-performing loans (excluding TDR’s)		1,235		1,864		3,527
Other real estate and repossessed assets		940		1,111		1,215
Total non-performing assets (excluding TDR’s)	$	2,175	$	2,975	$	4,742
Troubled debt restructurings(1)	$	9,575	$	9,633	$	9,834
Total non-performing loans (including TDR’s)	$	10,810	$	11,497	$	13,361
Total non-performing assets (including TDR’s)	$	11,750	$	12,608	$	14,576

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

33.

Net charge-offs were $297,000 or 0.31% (annualized) of average loans in the first quarter of 2015, compared to net charge-offs of $1.3 million or 1.43% (annualized) of average loans in the year-ago quarter, and $90,000 or 0.10% (annualized) of average loans in the fourth quarter of 2014. Two relationships comprised nearly all of the charge-offs in the first quarter of 2014, which were charged against allowance allocations established in the fourth quarter of 2013.

The provision for loan losses was $150,000 in the first quarter of 2015 and in the fourth quarter of 2014. No provision for loan losses was recorded in the year-ago quarter. The provision for loan losses as a percentage of net charge-offs was 50.5% for the first quarter of 2015, compared to 166.7% in the fourth quarter of 2014.

The allowance for loan losses was $4.1 million at March 31, 2015, compared to $4.2 million at both December 31, 2014 and September 30, 2014. The ratio of the allowance for loan losses to total loans was 1.08% at March 31, 2015, compared with 1.10% at December 31, 2014 and 1.13% at September 30, 2014. The ratio of the allowance for loan losses to non-performing loans (including TDR’s) was 37.8% at March 31, 2015, compared to 38.5% at December 31, 2014 and 31.3% at September 30, 2014. The ratio of the allowance for loan losses to non-accrual loans was 362% at March 31, 2015, compared to 306% at December 31, 2014 and 139% at September 30, 2014.

We assess a number of quantitative and qualitative factors at the individual portfolio level in determining the adequacy of the allowance for loan losses and the required provision expense each quarter. In addition, we analyze certain broader, non-portfolio specific factors in assessing the adequacy of the allowance for credit losses, such as the allowance as a percentage of total loans, the allowance as a percentage of non-performing loans and the provision expense as a percentage of net charge-offs. This portion of the allowance has been considered “unallocated,” which means it is not based on either quantitative or qualitative factors. At March 31, 2015, $284,000 or 6.9% of the allowance for credit losses was considered to be “unallocated,” compared to $270,000 or 6.4% at December 31, 2014 and $307,000 or 7.4% at September 30, 2014.

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 loan losses	Three months ended March 31,
	2015			2014
Allowance for loan losses, beginning of period	$	4,236		$	6,725
Loans charged-off		(429	)		(1,412	)
Recoveries of loans previously charged-off		132			129
Net loans charged-off		(297	)		(1,283	)
Allowance related to loans transferred to held-for-sale		—			(97	)
Provision for loan losses		150			—
Allowance for loan losses, end of period	$	4,089		$	5,345

34.

Non-interest Income

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

	Three months ended March 31,
	2015		2014			$ Change			% Change
Service charges	$	452	$	511		$	(59	)		(13.1	)%
Wealth management income		380		293			87			22.9	%
Treasury management fees		58		56			2			3.5	%
Income from Bank-owned life insurance		243		239			5			2.0	%
Loss on loans held for sale		—		(245	)		245			0.0	%
Gain on sale of REO		10		—			10			100.0	%
Loss on sale of securities available for sale		—		(140	)		140			0.0	%
Gain on sale of branch		—		438			(438	)		0.0	%
Other non-interest income		15		40			(26	)		(185.7	)%
Total non-interest income	$	1,158	$	1,192		$	(34	)		(2.9	)%

Non-interest income was $1.2 million in the first quarter of 2015 and the first quarter of 2014, and was $1.1 million in the fourth quarter of 2014. Non-interest income (net of nonrecurring income, gains and losses and losses on the sales of securities in the first quarter of 2014) accounted for 21.5% of total revenue in the first quarter of 2015, compared with 22.2% in the year-ago quarter and 20.6% in the fourth quarter of 2014.

Non-interest Expense

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

	Three months ended March 31,
	2015		2014		$ Change			% Change
Salaries and benefits	$	2,712	$	2,779	$	(67	)		(2.5	)%
Occupancy and equipment		963		804		159			16.5	%
Professional services		353		421		(68	)		19.3	%
Advertising		108		81		27			25.0	%
Office supplies, postage and courier		79		95		(16	)		20.3	%
FDIC insurance premium		110		168		(58	)		52.7	%
State franchise taxes		75		65		10			13.3	%
Other non-interest expense		551		650		(99	)		18.0	%
Total non-interest expenses	$	4,951	$	5,063	$	(112	)		(2.3	)%

35.

Non-interest expenses were $5.0 million for the first quarter of 2015, compared with $5.1 million in the year-ago quarter and in the fourth quarter of 2014. The Company’s efficiency ratio was 92.9% in the first quarter of 2015, compared with 98.5% in the year-ago quarter and 94.6% in the fourth quarter of 2014.

Income Taxes

We had net deferred tax assets totaling $10.4 million at March 31, 2015 and December 31, 2014, all of which were attributable to net operating loss carry-forwards and timing differences between the provision for loan losses and the charge-off of loans.

Comparison of Financial Condition at March 31, 2015 and December 31, 2014

Total assets were $520.7 million at March 31, 2015, compared with $515.3 million at December 31, 2014. Securities available-for-sale increased $9.9 million during the first quarter of 2015, which offset an $8.2 million decrease in our loan portfolio.

Securities

Investment securities totaled $85.8 million at March 31, 2015, compared with $75.9 million at December 31, 2014. Our portfolio was comprised primarily of investment grade securities. The breakdown of the securities portfolio at March 31, 2015 was 25.7% collateralized mortgage obligations, 19.9% government-sponsored entity guaranteed mortgage-backed securities, 26.3% municipal securities, 22.3% obligations of U.S. government agency obligations and 5.8% corporate bonds.

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, 2015						December 31, 2014
	Amount			Percent			Amount			Percent
Loan portfolio composition
Commercial and industrial	$	99,946			26.5	%	$	106,222			27.6	%
Commercial real estate		106,334			28.2	%		111,851			29.0	%
Real estate and home equity		131,658			34.9	%		129,650			33.7	%
Consumer and credit card		39,074			10.4	%		37,507			9.7	%
Total loans	$	377,012			100.0	%	$	385,230			100.0	%
Net deferred loan costs		234						214
Allowance for loan losses		(4,089	)					(4,236	)
Net loans	$	373,157					$	381,208

Total loans were $377.2 million at March 31, 2015, compared with $385.4 million at December 31, 2014 and $369.7 million at September 30, 2014. The Company entered the first quarter of 2015 with a relatively light loan pipeline due primarily to seasonal factors and a large number of commercial loan closings in the fourth quarter of 2014. Growth in the Company’s commercial loan portfolios in the fourth quarter of 2014 totaled $9.8 million. In addition, prepayments and payoffs in the Company’s commercial loan portfolios were unusually high during the first quarter of 2015, including 5 relationships aggregating $5.7 million that paid off during the quarter.

Deposits

Deposits totaled $464.8 million at March 31, 2015, compared with $453.2 million at December 31, 2014 and $445.5 million at September 30, 2014. Money market accounts increased $9.1 million in the first quarter of 2015 due primarily to seasonal inflows of municipal deposits.

36.

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 $24.0 million at March 31, 2015, compared to $21.3 million at December 31, 2014. Cash and equivalents represented 4.6% of total assets at March 31, 2015 and 4.1% of total assets at December 31, 2014. 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

Shareholders’ equity increased $440,000 in the first quarter and was $47.7 million at March 31, 2015. Net income for the first quarter of $239,000 was augmented by an increase in accumulated other comprehensive income of $194,000 due to an increase in unrealized gains on securities available-for-sale. The Company’s consolidated tangible common equity to assets ratio was 9.15% at March 31, 2015.

Beginning January 1, 2015, the capital requirements for our Company and the Bank changed as a result of the phase-in of certain changes to capital requirements for U.S. banking organizations. On July 2, 2013, the FRB voted to adopt final capital rules implementing Basel III requirements for U.S. banking organizations. The final rules establish an integrated regulatory capital framework to implement in the United States the Basel III regulatory capital reforms from the Basel Committee on Banking Supervision and certain changes required by the Dodd-Frank Act. Under the final rule, minimum requirements increased for both the quantity and quality of capital held by banking organizations. Consistent with the international Basel framework, the final rule includes a new minimum ratio of common equity tier 1 capital (Tier I Common) to risk-weighted assets and a Tier 1 Common capital conservation buffer of 2.5% of risk-weighted assets that will apply to all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets and includes a minimum leverage ratio of 4% for all banking organizations. These new minimum capital ratios will become effective for us on January 1, 2015, and will be fully phased-in on January 1, 2019. The following table shows the phase-in of the Basel III regulatory capital levels from January 1, 2015 until January 1, 2019:

	January 1,
	2015			2016			2017			2018			2019
Tier 1 Common		4.5	%		5.125	%		5.75	%		6.375	%		7.0	%
Tier 1 risk-based capital ratio		6.0	%		6.625	%		7.25	%		7.875	%		8.5	%
Total risk-based capital ratio		8.0	%		8.625	%		9.25	%		9.875	%		10.5	%

37.

Implementing Basel III is not expected to have a material impact on our Company’s or the Bank’s capital ratios and we expect they both will continue to be well-capitalized. In 2015, an institution will be deemed to be well-capitalized if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4.5% or greater, and a Tier 1 leverage ratio of 6% or greater and is not subject to a regulatory order, agreement, or directive to meet and maintain a capital level for any capital measure.

The Bank’s actual regulatory capital ratios and the minimum required capital ratios to be classified well-capitalized are presented below at March 31, 2015:

	Actual			Minimum ratios to be well- capitalized
Tier 1 leverage ratio		8.65	%		6.00	%
Tier 1 risk-based capital ratio		12.69	%		4.50	%
Total risk-based capital ratio		13.83	%		8.00	%

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, 2015
Total risk-based capital
Consolidated	$	50,360		14.08	%	$	28,614		8.0	%		N/A		N/A
Bank	$	49,708		13.83	%	$	28,754		8.0	%	$	35,942		10.0	%
Tier 1 capital
Consolidated	$	46,271		12.94	%	$	14,303		4.0	%		N/A		N/A
Bank	$	45,619		12.69	%	$	14,380		4.0	%	$	21,569		6.0	%
Leverage
Consolidated	$	46,271		8.78	%	$	21,080		4.0	%		N/A		N/A
Bank	$	45,619		8.65	%	$	21,095		4.0	%	$	26,369		5.0	%
As of December 31, 2014
Total risk-based capital
Consolidated	$	50,656		13.88	%	$	29,197		8.0	%		N/A		N/A
Bank	$	49,602		13.56	%	$	29,264		8.0	%	$	36,580		10.0	%
Tier-1 capital
Consolidated	$	46,420		12.72	%	$	14,597		4.0	%		N/A		N/A
Bank	$	45,366		12.40	%	$	14,634		4.0	%	$	21,951		6.0	%
Leverage
Consolidated	$	46,420		9.21	%	$	20,161		4.0	%		N/A		N/A
Bank	$	45,366		9.00	%	$	20,163		4.0	%	$	25,203		5.0	%

38.

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 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of March 31, 2015, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2015.

There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company’s fiscal quarter ended March 31, 2015, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

39.

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, 2014.
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 as amended, incorporated by reference to the Company’s Registration Statement on Form S-8 filed with the Commission on November 7, 2014 (File No. 000-22387).
3.2	Second Amended and Restated Code of Regulations of DCB Financial Corp, incorporated by reference to the Company’s  Registration Statement on Form S-8 filed with the Commission on November 7, 2014 (File No. 000-22387).
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.

40.

101* The following information from DCB Financial Corp.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2015 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, 2015 (unaudited) and December 31, 2014;  (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 (unaudited);  (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014 (unaudited);  (iv) the Condensed Consolidated Statements of Cash Flow for the three months ended March 31, 2015 and 2014 (unaudited); (v) the Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (unaudited); and (vi) the Notes to Condensed Consolidated Financial Statements.

* Filed herewith.

** Furnished herewith.

41.

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)
Dated:  May 15, 2015	/s/ Ronald J. Seiffert
	Ronald J. Seiffert
	President and Chief Executive Officer
	(Principal Executive Officer)
Dated:  May 15, 2015	/s/ J. Daniel Mohr
	J. Daniel Mohr
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

42.

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(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.

Dated:  May 15, 2015	/s/ Ronald J. Seiffert
	Ronald J. Seiffert
	Title:  President and Chief Executive Officer
	(Principal 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.

Dated:    May 15, 2015	/s/ J. Daniel Mohr
	J. Daniel Mohr
	Title:  Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting 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, 2015 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.

Dated: May 15, 2015

/s/ Ronald J. Seiffert

Ronald J. Seiffert

President and Chief Executive Officer

(Principal Executive Officer)

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, 2015 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.

Dated: May 15, 2015

/s/ J. Daniel Mohr

J. Daniel Mohr

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Sale of Branch and Loans Held for Sale (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
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	(438)
Other, net	10
Cash paid to Merchants	$ 12,464

XML

Credit Quality (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Credit Quality Indicators
Consumer risk based on payment activity	$ 377,246	$ 385,444
Consumer and Credit Card [Member]
Credit Quality Indicators
Consumer risk based on payment activity	39,074	37,507
Consumer and Credit Card [Member] | Performing [Member]
Credit Quality Indicators
Consumer risk based on payment activity	38,956	37,387
Consumer and Credit Card [Member] | Non-Performing [Member]
Credit Quality Indicators
Consumer risk based on payment activity	118	120
Residential Real Estate and Home Equity [Member]
Credit Quality Indicators
Consumer risk based on payment activity	131,658	129,650
Residential Real Estate and Home Equity [Member] | Performing [Member]
Credit Quality Indicators
Consumer risk based on payment activity	131,213	128,836
Residential Real Estate and Home Equity [Member] | Non-Performing [Member]
Credit Quality Indicators
Consumer risk based on payment activity	$ 445	$ 814

XML

Securities (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Unrealized loss
Number of investments	31	37
Fair Value	$ 19,707	$ 23,013
Unrealized Losses	178	284
Collateralized Mortgage Obligations [Member]
Unrealized loss
Number of investments	15	13
Fair Value	10,172	9,298
Unrealized Losses	112	106
Less than 12 months [Member]
Unrealized loss
Number of investments	18	21
Fair Value	9,954	11,339
Unrealized Losses	58	49
Less than 12 months [Member] | Collateralized Mortgage Obligations [Member]
Unrealized loss
Number of investments	11	9
Fair Value	6,653	5,649
Unrealized Losses	40	21
12 months or longer [Member]
Unrealized loss
Number of investments	13	16
Fair value	9,753	11,674
Unrealized Losses	120	236
12 months or longer [Member] | Collateralized Mortgage Obligations [Member]
Unrealized loss
Number of investments	4	4
Fair value	3,519	3,649
Unrealized Losses	72	85
U.S. Government and agency obligations [Member]
Unrealized loss
Number of investments	5	7
Fair Value	4,998	6,934
Unrealized Losses	18	88
U.S. Government and agency obligations [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	2	3
Fair Value	1,498	2,488
Unrealized Losses	1	9
U.S. Government and agency obligations [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	3	4
Fair value	3,500	4,446
Unrealized Losses	17	79
Corporate bonds [Member]
Unrealized loss
Number of investments	4	5
Fair Value	1,675	2,167
Unrealized Losses	7	21
Corporate bonds [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	1	1
Fair Value	265	503
Unrealized Losses	1	1
Corporate bonds [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	3	4
Fair value	1,410	1,664
Unrealized Losses	6	21
State and municipal obligations [Member]
Unrealized loss
Number of investments	7	12
Fair Value	2,862	4,614
Unrealized Losses	41	69
State and municipal obligations [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	4	8
Fair Value	1,538	2,699
Unrealized Losses	16	18
State and municipal obligations [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	3	4
Fair value	1,324	1,915
Unrealized Losses	25	51
Mortgage-backed securities and other [Member]
Unrealized loss
Number of investments	0	0
Fair Value	0	0
Unrealized Losses	0	0
Mortgage-backed securities and other [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	0	0
Fair Value	0	0
Unrealized Losses	0	0
Mortgage-backed securities and other [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	0	0
Fair value	0	0
Unrealized Losses	$ 0	$ 0

XML

Fair Value Measurements (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Fair value measurements of assets recurring basis
Securities available-for-sale	$ 85,844	$ 75,909
Collateralized Mortgage Obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	22,039	19,580
U.S. Government and agency obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	19,117	11,545
State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	22,593	21,657
Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	5,008	4,987
Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	17,087	18,140
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] | Collateralized Mortgage 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] | 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	85,844	75,909
Significant Other Observable Inputs, Level 2 [Member] | Collateralized Mortgage Obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	22,039	19,580
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	19,117	11,545
Significant Other Observable Inputs, Level 2 [Member] | State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	22,593	21,657
Significant Other Observable Inputs, Level 2 [Member] | Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	5,008	4,987
Significant Other Observable Inputs, Level 2 [Member] | Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	17,087	18,140
Significant Unobservable Inputs, Level 3 [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Significant Unobservable Inputs, Level 3 [Member] | Collateralized Mortgage Obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
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

XML

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 1 – Summary of Significant Accounting Policies

Throughout this report, the terms “Company,” “DCB,” “we,” “our” and “us” refers to the consolidated entity of DCB Financial Corp and its wholly owned subsidiaries, The Delaware County Bank and Trust Company (the “Bank”), DCB Title Services LLC, and DCB Insurance Services, Inc.

The accompanying unaudited financial statements were prepared in accordance with the instructions for Form 10-Q and Regulation S-X and, therefore, do not include information for footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The material under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is written with the presumption that the users of the interim financial statements have read, or have access to, the latest audited financial statements and notes thereto of the Company, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2014, and for the two-year period then ended, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Accordingly, only material changes in the results of operations and financial condition are discussed in the remainder of Part I. Certain amounts from prior year periods are reclassified, when necessary, to conform to the current period presentation.

All adjustments, consisting of only normal recurring items, that in the opinion of management are necessary for a fair presentation of the financial statements have been included in the results of operations for the three months ended March 31, 2015 and 2014. The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results anticipated for the year. 

To prepare financial statements in conformity with 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 anytime particularly subject to change.

Earnings per share

Earnings per common share is net income divided by the weighted-average number of common shares 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,
	2015		2014
Weighted-average common shares outstanding (basic)		7,237,371		7,192,350
Dilutive effect of assumed exercise of stock options		16,469		52,366
Weighted-average common shares outstanding (diluted)		7,253,840		7,244,716

There were 62,939 shares and 153,506 shares included in the computation of common share equivalents for the three months ended March 31, 2015 and 2014, respectively, because the average fair value of the shares was greater than the exercise price.

At March 31, 2015 and 2014, 9,979 and 45,727 of anti-dilutive shares, respectively, were excluded from the diluted weighted average common share calculations.

Stock-Based Compensation

Compensation cost is recognized for restricted stock awards issued to employees and directors based on the fair value of these awards at the date of grant. The market price of the Company’s common stock at the date of grant is used to determine the fair value for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

During the first quarter of 2015, awards for 53,640 restricted shares were granted under the Company's 2014 Restricted Stock Plan. The awards vest ratably over a five year period. There were no grants of restricted shares in the first quarter of 2014. There were 95,085 and 41,445 unvested restricted shares at March 31, 2015 and December 31, 2014, respectively.

The Company’s outstanding stock options may be settled for cash at the recipient’s discretion; therefore, liability accounting applies to the Company’s 2004 Long-Term Stock Incentive Plan under which such stock options were granted. 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 re-measurement dates. Compensation cost is recognized over the required service period, generally defined as the vesting period. 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 Income. 

Significant Accounting Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP 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, the Company 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) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Allowance allocated to:
Beginning balance	$ 4,236	$ 6,725
Charge-offs	(429)	(1,412)
Recoveries	132	129
Provision	150	0
Transferred to loans held for sale		(97)
Ending balance	4,089	5,345
Allowance allocated to:
Individually evaluated for impairment	1,127	2,690
Collectively evaluated for impairment	2,962	2,655
Ending balance	4,089	5,345
Loans:
Individually evaluated for impairment	11,405	18,838
Collectively evaluated for impairment	365,607	333,244
Ending balance	377,012	352,082
Consumer and Credit Card [Member]
Allowance allocated to:
Beginning balance	190	301
Charge-offs	(42)	(46)
Recoveries	28	31
Provision	7	(40)
Transferred to loans held for sale		0
Ending balance	183	246
Allowance allocated to:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	183	246
Ending balance	183	246
Loans:
Individually evaluated for impairment	447	0
Collectively evaluated for impairment	38,627	32,498
Ending balance	39,074	32,498
Commercial and Industrial [Member]
Allowance allocated to:
Beginning balance	1,132	3,232
Charge-offs	(310)	(1,193)
Recoveries	88	4
Provision	127	30
Transferred to loans held for sale		0
Ending balance	1,037	2,073
Allowance allocated to:
Individually evaluated for impairment	136	966
Collectively evaluated for impairment	901	1,107
Ending balance	1,037	2,073
Loans:
Individually evaluated for impairment	2,267	3,730
Collectively evaluated for impairment	97,679	107,156
Ending balance	99,946	110,886
Commercial Real Estate [Member]
Allowance allocated to:
Beginning balance	2,376	2,974
Charge-offs	(48)	(159)
Recoveries	7	84
Provision	(18)	(127)
Transferred to loans held for sale		(97)
Ending balance	2,317	2,675
Allowance allocated to:
Individually evaluated for impairment	991	1,724
Collectively evaluated for impairment	1,326	951
Ending balance	2,317	2,675
Loans:
Individually evaluated for impairment	8,351	15,108
Collectively evaluated for impairment	97,983	88,017
Ending balance	106,334	103,125
Residential Real Estate and Home Equity [Member]
Allowance allocated to:
Beginning balance	268	218
Charge-offs	(29)	(14)
Recoveries	9	10
Provision	20	(36)
Transferred to loans held for sale		0
Ending balance	268	178
Allowance allocated to:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	268	178
Ending balance	268	178
Loans:
Individually evaluated for impairment	340	0
Collectively evaluated for impairment	131,318	105,573
Ending balance	131,658	105,573
Unallocated Financing Receivables [Member]
Allowance allocated to:
Beginning balance	270	0
Charge-offs	0	0
Recoveries	0	0
Provision	14	173
Transferred to loans held for sale		0
Ending balance	284	173
Allowance allocated to:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	284	173
Ending balance	284	173
Loans:
Individually evaluated for impairment	0	0
Collectively evaluated for impairment	0	0
Ending balance	$ 0	$ 0

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Loans (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Loans
Commercial and industrial	$ 99,946	$ 106,222
Commercial real estate	106,334	111,851
Residential real estate and home equity	131,658	129,650
Consumer and credit card	39,074	37,507
Subtotal	377,012	385,230
Add: Net deferred loan origination fees	234	214
Total loans receivable	$ 377,246	$ 385,444

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Credit Quality (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Financing Receivable, Impaired [Line Items]
Recorded Investment	$ 11,405		$ 12,173
Unpaid Principal Balance	11,483		12,250
Related Allowance	1,127		1,298
Average Recorded Investment	11,611	20,880
Interest Income Recognized	163	253
Consumer and Credit Card [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	447		455
Unpaid Principal Balance	447		455
Related Allowance	0		0
Average Recorded Investment	449	0
Interest Income Recognized	5	0
Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	2,267		2,028
Unpaid Principal Balance	2,345		2,105
Related Allowance	136		256
Average Recorded Investment	2,083	5,569
Interest Income Recognized	20	31
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	8,351		9,690
Unpaid Principal Balance	8,351		9,690
Related Allowance	991		1,042
Average Recorded Investment	9,079	15,311
Interest Income Recognized	138	222
Residential real estate and home equity [member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	340
Unpaid Principal Balance	340
Related Allowance	0
Average Recorded Investment	0
Interest Income Recognized	0
With no related allowance recorded [Member] | Consumer and Credit Card [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	447		455
Unpaid Principal Balance	447		455
Average Recorded Investment	449	0
Interest Income Recognized	5	0
With no related allowance recorded [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,255		1,288
Unpaid Principal Balance	1,255		1,288
Average Recorded Investment	1,266	1,434
Interest Income Recognized	7	19
With no related allowance recorded [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	22		1,088
Unpaid Principal Balance	22		1,088
Average Recorded Investment	729	9,816
Interest Income Recognized	0	149
With no related allowance recorded [Member] | Residential real estate and home equity [member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	340
Unpaid Principal Balance	340
Average Recorded Investment	0
Interest Income Recognized	0
With allowance recorded [Member] | Commercial and Industrial [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,012		740
Unpaid Principal Balance	1,090		817
Related Allowance	136		256
Average Recorded Investment	817	4,135
Interest Income Recognized	13	12
With allowance recorded [Member] | Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Recorded Investment	8,329		8,602
Unpaid Principal Balance	8,329		8,602
Related Allowance	991		1,042
Average Recorded Investment	8,350	5,495
Interest Income Recognized	$ 138	$ 73

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Credit Quality (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	$ 1,130	$ 1,384
Consumer and credit card [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	118	120
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	612	632
Commercial real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	60	298
Residential real estate and home equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	$ 340	$ 334

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities
Net income	$ 239	$ 117
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	254	273
Provision for loan losses	150	0
Loss on sale of securities available-for-sale	0	140
Loss on loans held-for-sale	0	245
Gain on sale of real estate owned	(10)	0
Gain on sale of branch	0	(438)
Net stock-based compensation expense	7	60
Premium amortization on securities, net	246	270
Earnings on bank owned life insurance	(243)	(239)
Net changes in other assets and other liabilities	(536)	(3,063)
Net cash provided by (used in) operating activities	107	(2,635)
Cash flows from investing activities
Purchases of securities available-for-sale	(12,212)	(5,949)
Proceeds from maturities, principal payments and calls of securities available-for-sale	2,326	6,439
Proceeds from sales of securities available-for-sale	0	2,133
Net change in loans	7,901	2,644
Proceeds from sale of real estate owned	181	33
Net cash paid with sale of branch	0	(12,464)
Premises and equipment expenditures	(129)	(50)
Net cash used in investing activities	(1,933)	(7,214)
Cash flows from financing activities
Net change in deposits	11,604	9,435
Repayment of borrowings	(7,007)	(7)
Proceeds from redemption of FHLB stock	0	549
Net cash provided by financing activities	4,597	9,977
Net change in cash and cash equivalents	2,771	128
Cash and cash equivalents at beginning of period	21,274	25,357
Cash and cash equivalents at end of period	24,045	25,485
Cash paid during the period for:
Cash paid during the period for interest on deposits and borrowings	269	328
Non-cash investing and financing activities:
Transfer of loans to real estate owned	0	377
Transfer of loans to held for sale	$ 0	$ 87

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Credit Quality (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Credit Quality Indicators
Loans	$ 377,246	$ 385,444
Commercial and Industrial [Member]
Credit Quality Indicators
Loans	99,946	111,851
Commercial and Industrial [Member] | Pass-1-4 [Member]
Credit Quality Indicators
Loans	95,196	106,590
Commercial and Industrial [Member] | Vulnerable-5 [Member]
Credit Quality Indicators
Loans	985	823
Commercial and Industrial [Member] | Substandard-6 [Member]
Credit Quality Indicators
Loans	3,765	4,438
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	106,334	106,222
Commercial Real Estate [Member] | Pass-1-4 [Member]
Credit Quality Indicators
Loans	92,662	90,588
Commercial Real Estate [Member] | Vulnerable-5 [Member]
Credit Quality Indicators
Loans	4,847	6,146
Commercial Real Estate [Member] | Substandard-6 [Member]
Credit Quality Indicators
Loans	8,825	9,488
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

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Sale of Branch and Loans Held for Sale (Details Textual) (USD $) In Millions, unless otherwise specified	Mar. 31, 2014
Long Lived Assets Held-for-sale [Line Items]
Deposits Liabilities	$ 19.4
Loans Purchase	$ 4.8

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Consolidated Balance Sheets (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Assets:
Cash and due from financial institutions	$ 5,998	$ 6,247
Interest-bearing deposits	18,047	15,027
Total cash and cash equivalents	24,045	21,274
Securities available-for-sale	85,844	75,909
Loans	377,246	385,444
Less allowance for loan losses	(4,089)	(4,236)
Net loans	373,157	381,208
Real estate owned	940	1,111
Investment in FHLB stock	3,250	3,250
Premises and equipment, net	9,891	10,016
Bank-owned life insurance	20,270	20,027
Accrued interest receivable and other assets	3,312	2,587
Total assets	520,709	515,382
Liabilities:
Non-interest bearing	111,286	111,022
Interest bearing	353,510	342,170
Total deposits	464,796	453,192
Borrowings	4,801	11,808
Accrued interest payable and other liabilities	3,461	3,171
Total liabilities	473,058	468,171
Shareholders’ equity:
Preferred shares, no par value, 2,000,000 shares authorized, none issued and outstanding	0	0
Common shares, no par value, 17,500,000 shares authorized, 7,541,445 and 7,500,000 shares issued, and 7,287,437 and 7,233,795 shares outstanding for March 31, 2015 and December 31, 2014, respectively	16,456	16,064
Retained earnings	38,294	38,055
Treasury stock, at cost, 307,650 shares at March 31, 2015 and December 31, 2014	(7,416)	(7,416)
Accumulated other comprehensive income	848	654
Deferred stock-based compensation	(531)	(146)
Total shareholders’ equity	47,651	47,211
Total liabilities and shareholders’ equity	$ 520,709	$ 515,382
Common shares outstanding	7,287,437	7,233,795
Book value per common share	$ 6.54	$ 6.53

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Consolidated Statements of Comprehensive Income [Parenthetical] (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Other than Temporary Impairment Losses, Investments, Portion in Other Comprehensive Loss, Tax, Portion Attributable to Parent, Held-to-maturity Securities	$ 100	$ 769
Other than Temporary Impairment Losses, Investments, Portion in Other Comprehensive Loss, Tax, Portion Attributable to Parent, Available-for-sale Securities		$ (35)

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Credit Quality (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Financing Receivable, Modifications [Line Items]
Number of Contracts	0		2
Post-modification outstanding recorded investment	$ 0		$ 58
Number of Contracts	0		3
Post-modification outstanding recorded investment	0	[1]	520	[1]
Consumer and Credit Card [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0		0
Post-modification outstanding recorded investment	0		0
Number of Contracts	0		0
Post-modification outstanding recorded investment	0	[1]	0	[1]
Commercial and Industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0		2
Post-modification outstanding recorded investment	0		58
Number of Contracts	0		0
Post-modification outstanding recorded investment	0	[1]	0	[1]
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0		0
Post-modification outstanding recorded investment	0		0
Number of Contracts	0		3
Post-modification outstanding recorded investment	0	[1]	520	[1]
Residential Real Estate and Home Equity [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts	0		0
Post-modification outstanding recorded investment	0		0
Number of Contracts	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)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Weighted-average shares for basic and diluted earnings per share
Weighted-average common shares outstanding (basic)	7,237,371	7,192,350
Dilutive effect of assumed exercise of stock options	16,469	52,366
Weighted-average common shares outstanding (diluted)	7,253,840	7,244,716

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Dec. 31, 2013
Financial assets
Cash and cash equivalents, Carrying amount	$ 24,045	$ 21,274	$ 25,485	$ 25,357
Securities available-for-sale, Carrying amount	85,844	75,909
Loans (net of allowance), Carrying amount	373,157	381,208
FHLB stock, Carrying amount	3,250	3,250
Financial liabilities
Noninterest-bearing deposits, Carrying amount	111,286	111,022
Interest-bearing deposits, Carrying amount	353,510	342,170
Level 1 [Member]
Financial assets
Cash and cash equivalents, Fair value	24,045	21,274
Securities available-for-sale, Carrying amount	0	0
Securities available-for-sale, Fair value	0	0
Loans (net of allowance), Fair value	0	0
FHLB stock, Fair value	0	0
Accrued interest receivable, Fair value	0	0
Financial liabilities
Noninterest-bearing deposits, Fair value	0	0
Interest-bearing deposits, Fair value	0	0
FHLB advances, Fair value	0	0
Accrued interest payable, Fair value	0	0
Level 2 [Member]
Financial assets
Cash and cash equivalents, Fair value	0	0
Securities available-for-sale, Carrying amount	85,844	75,909
Securities available-for-sale, Fair value	85,844	75,909
Loans (net of allowance), Fair value	0	0
FHLB stock, Fair value	3,250	3,250
Accrued interest receivable, Fair value	0	0
Financial liabilities
Noninterest-bearing deposits, Fair value	111,286	111,022
Interest-bearing deposits, Fair value	353,550	342,318
FHLB advances, Fair value	4,801	11,808
Accrued interest payable, Fair value	0	0
Level 3 [Member]
Financial assets
Cash and cash equivalents, Fair value	0	0
Securities available-for-sale, Carrying amount	0	0
Securities available-for-sale, Fair value	0	0
Loans (net of allowance), Fair value	371,911	381,224
FHLB stock, Fair value	0	0
Accrued interest receivable, Fair value	1,527	1,234
Financial liabilities
Noninterest-bearing deposits, Fair value	0	0
Interest-bearing deposits, Fair value	0	0
FHLB advances, Fair value	0	0
Accrued interest payable, Fair value	52	36
Carrying amount [Member]
Financial assets
Cash and cash equivalents, Carrying amount	24,045	21,274
Securities available-for-sale, Carrying amount	85,844	75,909
Loans (net of allowance), Carrying amount	373,157	381,208
FHLB stock, Carrying amount	3,250	3,250
Accrued interest receivable, Carrying amount	1,527	1,234
Financial liabilities
Noninterest-bearing deposits, Carrying amount	111,286	111,022
Interest-bearing deposits, Carrying amount	353,510	342,170
FHLB advances, Carrying amount	4,801	11,808
Accrued interest payable, Carrying Amount	52	36
Fair value [Member]
Financial assets
Cash and cash equivalents, Fair value	24,045	21,274
Securities available-for-sale, Fair value	85,844	75,909
Loans (net of allowance), Fair value	371,911	381,224
FHLB stock, Fair value	3,250	3,250
Accrued interest receivable, Fair value	1,527	1,234
Financial liabilities
Noninterest-bearing deposits, Fair value	111,286	111,022
Interest-bearing deposits, Fair value	353,550	342,318
FHLB advances, Fair value	4,801	11,808
Accrued interest payable, Fair value	$ 52	$ 36

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Securities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Fair values of securities available-for-sale
Amortized Costs	$ 84,560	$ 74,919
Gross Unrealized Gains	1,462	1,274
Gross Unrealized Losses	(178)	(284)
Fair Value	85,844	75,909
Collateralized mortgage obligation [Member]
Fair values of securities available-for-sale
Amortized Costs	22,080	19,601
Gross Unrealized Gains	71	85
Gross Unrealized Losses	(112)	(106)
Fair Value	22,039	19,580
U.S. Government and agency obligations [Member]
Fair values of securities available-for-sale
Amortized Costs	19,071	11,602
Gross Unrealized Gains	64	31
Gross Unrealized Losses	(18)	(88)
Fair Value	19,117	11,545
Corporate bonds [Member]
Fair values of securities available-for-sale
Amortized Costs	4,968	4,975
Gross Unrealized Gains	47	33
Gross Unrealized Losses	(7)	(21)
Fair Value	5,008	4,987
States and municipal obligations [Member]
Fair values of securities available-for-sale
Amortized Costs	22,063	21,303
Gross Unrealized Gains	571	423
Gross Unrealized Losses	(41)	(69)
Fair Value	22,593	21,657
Mortgage-backed securities [Member]
Fair values of securities available-for-sale
Amortized Costs	16,378	17,438
Gross Unrealized Gains	709	702
Gross Unrealized Losses	0	0
Fair Value	$ 17,087	$ 18,140

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Consolidated Statements of Shareholders’ Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock [Member]	Preferred Stock [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Deferred Compensation, Share-based Payments [Member]
Balance at Dec. 31, 2013	$ 45,264	$ 15,771	$ 0	$ 37,683	$ (7,416)	$ (774)	$ 0
Balance (in shares) at Dec. 31, 2013		7,192,350
Comprehensive income:
Net income	117	0	0	117	0	0	0
Other comprehensive loss, net of taxes	1,016	0	0	0	0	1,016	0
Total comprehensive income	1,133	0	0	0	0	0	0
Balance at Mar. 31, 2014	46,397	15,771	0	37,800	(7,416)	242	0
Balance (in shares) at Mar. 31, 2014		7,192,350
Balance at Dec. 31, 2014	47,211	16,064	0	38,055	(7,416)	654	(146)
Balance (in shares) at Dec. 31, 2014		7,233,797
Comprehensive income:
Net income	239	0	0	239	0	0	0
Other comprehensive loss, net of taxes	194	0	0	0	0	194	0
Total comprehensive income	433	0	0	0	0	0	0
Issuance of restricted stock	0	392	0	0	0	0	(392)
Issuance of restricted stock (in shares)		53,640
Amortization of restricted stock	7	0	0	0	0	0	7
Balance at Mar. 31, 2015	$ 47,651	$ 16,456	$ 0	$ 38,294	$ (7,416)	$ 848	$ (531)
Balance (in shares) at Mar. 31, 2015		7,287,437

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Consolidated Balance Sheets [Parenthetical] (USD $)	Mar. 31, 2015	Dec. 31, 2014
Preferred Stock, Par or Stated Value Per Share	$ 0	$ 0
Preferred Stock, Shares Authorized	2,000,000	2,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common stock, shares authorized	17,500,000	17,500,000
Common stock, shares issued	7,541,445	7,500,000
Common Stock, Shares, Outstanding	7,287,437	7,233,795
Treasury stock, shares	307,650	307,650

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Securities (Tables)

3 Months Ended

Mar. 31, 2015

Investments, Debt and Equity Securities [Abstract]

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

As of March 31, 2015:

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. Government and agency obligations	$	19,071	$	64	$	(18)	$	19,117
Corporate bonds		4,968		47		(7)		5,008
States and municipal obligations		22,063		571		(41)		22,593
Collateralized mortgage obligations		22,080		71		(112)		22,039
Mortgage-backed securities		16,378		709		(0)		17,087
Total	$	84,560	$	1,462	$	(178)	$	85,844

As of December 31, 2014:

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. Government and agency obligations	$	11,602	$	31	$	(88)	$	11,545
Corporate bonds		4,975		33		(21)		4,987
States and municipal obligations		21,303		423		(69)		21,657
Collateralized mortgage obligations		19,601		85		(106)		19,580
Mortgage-backed securities		17,438		702		—		18,140
Total	$	74,919	$	1,274	$	(284)	$	75,909

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, 2015 and December 31, 2014 (dollars in thousands):

	March 31, 2015
	(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		2	$	1,498	$	1		3	$	3,500	$	17		5	$	4,998	$	18
Corporate bonds		1		265		1		3		1,410		6		4		1,675		7
State and municipal obligations		4		1,538		16		3		1,324		25		7		2,862		41
Collateralized mortgage obligations		11		6,653		40		4		3,519		72		15		10,172		112
Mortgage-backed securities and other		—		—		—		—		—		—		—		—		—
Total temporarily impaired securities		18	$	9,954	$	58		13	$	9,753	$	120		31	$	19,707	$	178

	December 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		3	$	2,488	$	9		4	$	4,446	$	79		7	$	6,934	$	88
Corporate bonds		1		503		1		4		1,664		21		5		2,167		21
State and municipal obligations		8		2,699		18		4		1,915		51		12		4,614		69
Collateralized mortgage obligations		9		5,649		21		4		3,649		85		13		9,298		106
Mortgage-backed securities and other		—		—		—		—		—		—		—		—		—
Total temporarily impaired securities		21	$	11,339	$	49		16	$	11,674	$	236		37	$	23,013	$	284

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available-for-sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	18,776	$	18,845
Due after one to five years		30,010		30,236
Due after five to ten years		17,529		17,794
Due after ten years		1,867		1,883
Mortgage-backed and related securities		16,378		17,086
Total	$	84,560	$	85,844

XML

Document And Entity Information	3 Months Ended
	Mar. 31, 2015	May 14, 2015
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		7,287,437
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2015

XML

Loans (Tables)

3 Months Ended

Mar. 31, 2015

Receivables [Abstract]

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

At March 31, 2015 and December 31, 2014, loans were comprised of the following (in thousands):

	March 31,  2015		December 31,  2014
Commercial and industrial	$	99,946	$	106,222
Commercial real estate		106,334		111,851
Residential real estate and home equity		131,658		129,650
Consumer and credit card		39,074		37,507
Subtotal		377,012		385,230
Add: Net deferred loan origination fees		234		214
Total loans receivable	$	377,246	$	385,444

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Consolidated Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Interest income:
Loans	$ 3,952	$ 3,738
Securities	505	553
Federal funds sold and interest bearing deposits	10	13
Total interest income	4,467	4,304
Interest expense:
Savings and money market accounts	142	131
Time accounts	92	128
NOW accounts	16	21
Total	250	280
FHLB advances	35	36
Total interest expense	285	316
Net interest income	4,182	3,988
Provision for loan losses	150	0
Net interest income after provision for loan losses	4,032	3,988
Non-interest income:
Service charges	452	511
Wealth management fees	380	293
Treasury management fees	58	56
Income from bank-owned life insurance	243	239
Loss on the sale of securities available-for-sale	0	(140)
Loss on loans held for sale	0	(245)
Net gain on sale of REO	10	0
Gain on sale of branch	0	438
Other non-interest income	15	40
Total non-interest income	1,158	1,192
Non-interest expense:
Salaries and employee benefits	2,712	2,779
Occupancy and equipment	963	804
Professional services	353	421
Advertising	108	81
Office supplies, postage and courier	79	95
FDIC insurance premium	110	168
State franchise taxes	75	65
Other non-interest expense	551	650
Total non-interest expense	4,951	5,063
Income before income taxes	239	117
Income taxes	0	0
Net income	$ 239	$ 117
Share and Per Share Data
Basic average common shares outstanding (in shares)	7,237,371	7,192,350
Diluted average common shares outstanding (in shares)	7,253,840	7,244,716
Basic and diluted earnings per common share (in dollars per share)	$ 0.03	$ 0.02

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Credit Quality

3 Months Ended

Mar. 31, 2015

Credit Quality [Abstract]

Credit Quality Disclosure [Text Block]

Note 4 – Credit Quality

Allowance for Loan 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 paydowns, payoffs, credit improvement and charge-offs, 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 tables below present allowance for loan losses by loan portfolio and allocated to loans individually and collectively evaluated for impairment. Commercial real estate includes real estate construction and land development loans (in thousands).

	Quarter ended March 31, 2015
	Consumer						Residential Real
	and		Commercial and		Commercial		Estate and
	Credit Card		Industrial		Real Estate		Home Equity		Unallocated		Total
Beginning balance	$	190	$	1,132	$	2,376	$	268	$	270	$	4,236
Charge-offs		(42)		(310)		(48)		(29)		—		(429)
Recoveries		28		88		7		9		—		132
Provision		7		127		(18)		20		14		150
Ending balance	$	183	$	1,037	$	2,317	$	268	$	284	$	4,089
Allowance allocated to:
Individually evaluated for impairment	$	—	$	136	$	991	$	—	$	—	$	1,127
Collectively evaluated for impairment		183		901		1,326		268		284		2,962
Ending balance	$	183	$	1,037	$	2,317	$	268	$	284	$	4,089
Loans:
Individually evaluated for impairment	$	447	$	2,267	$	8,351	$	340	$	—	$	11,405
Collectively evaluated for impairment		38,627		97,679		97,983		131,318		—		365,607
Ending balance	$	39,074	$	99,946	$	106,334	$	131,658	$	—	$	377,012

	Quarter ended March 31, 2014
	Consumer						Residential Real
	and		Commercial and		Commercial		Estate and
	Credit Card		Industrial		Real Estate		Home Equity		Unallocated		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		(40)		30		(127)		(36)		173		—
Transferred to loans held for sale		—		—		(97)		—		—		(97)
Ending balance	$	246	$	2,073	$	2,675	$	178	$	173	$	5,345
Allowance allocated to:
Individually evaluated for impairment	$	—	$	966	$	1,724	$	—	$	—	$	2,690
Collectively evaluated for impairment		246		1,107		951		178		173		2,655
Ending balance	$	246	$	2,073	$	2,675	$	178	$	173	$	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
Ending balance	$	32,498	$	110,886	$	103,125	$	105,573	$	—	$	352,082

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 non-performing 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, 2015 and December 31, 2014 (in thousands).

	At March 31, 2015						Quarter ended March 31, 2015
							Three months		Three months
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With No Related Allowance
Recorded
Consumer and Credit Card	$	447	$	447	$	—	$	449	$	5
Commercial and Industrial		1,255		1,255		—		1,266		7
Commercial Real Estate		22		22		—		729		—
Residential real estate and home equity		340		340		—		—		—
With Allowance Recorded
Commercial and Industrial	$	1,012	$	1,090	$	136	$	817	$	13
Commercial Real Estate		8,329		8,329		991		8,350		138
Total
Consumer and Credit Card	$	447	$	447	$	—	$	449	$	5
Commercial and Industrial		2,267		2,345		136		2,083		20
Commercial Real Estate		8,351		8,351		991		9,079		138
Residential real estate and home equity		340		340		—		—		—
Total	$	11,405	$	11,483	$	1,127	$	11,611	$	163

	At December 31, 2014						Quarter ended March 31, 2014
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With No Related Allowance
Recorded
Consumer and Credit Card	$	455	$	455	$	—	$	—	$	—
Commercial and Industrial		1,288		1,288		—		1,434		19
Commercial Real Estate		1,088		1,088		—		9,816		149
With Allowance Recorded
Commercial and Industrial		740		817		256		4,135		12
Commercial Real Estate		8,602		8,602		1,042		5,495		73
Total
Consumer and Credit Card		455		455		—		—		—
Commercial and Industrial		2,028		2,105		256		5,569		31
Commercial Real Estate		9,690		9,690		1,042		15,311		222
Total	$	12,173	$	12,250	$	1,298	$	20,880	$	253

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 non-accrual status at March 31, 2015 and December 31, 2014 are as follows (in thousands):

	March 31,		December 31,
	2015		2014
Consumer and credit card	$	118	$	120
Commercial and industrial		612		632
Commercial real estate		60		298
Residential real estate and home equity		340		334
Total	$	1,130	$	1,384

Credit Quality Indicators

Corporate risk exposure by risk profile was as follows at March 31, 2015 (in thousands):

	Commercial and		Commercial
Category	Industrial		Real Estate
Pass-1-4	$	95,196	$	92,662
Vulnerable-5		985		4,847
Substandard-6		3,765		8,825
Doubtful-7		—		—
Loss-8		—		—
Total	$	99,946	$	106,334

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

	Commercial and		Commercial
Category	Industrial		Real Estate
Pass-1-4	$	106,590	$	90,588
Vulnerable-5		823		6,146
Substandard-6		4,438		9,488
Doubtful—7		—		—
Loss-8		—		—
Total	$	111,851	$	106,222

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 that possess a defined credit weakness and the likelihood that such 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, 2015 is as follows (in thousands).

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	38,956	$	131,213
Non-performing		118		445
Total	$	39,074	$	131,658

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

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	37,387	$	128,836
Non-Performing		120		814
Total	$	37,507	$	129,650

Age Analysis of Past Due Loans

The following table presents past due loans aged as of March 31, 2015 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 days and Accruing
Consumer and credit card	$	60	$	3	$	118	$	181	$	38,893	$	39,074	$	—
Commercial and industrial		—		—		—		—		99,946		99,946		—
Commercial real estate		—		—		132		132		106,202		106,334		—
Residential real estate and home equity		190		495		302		987		130,671		131,658		105
Total	$	250	$	498	$	552	$	1,300	$	375,712	$	377,012	$	105

The following table presents past due loans aged as of December 31, 2014 (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	$	66	$	7	$	120	$	193	$	37,314	$	37,507	$	—
Commercial and Industrial		68		—		—		68		111,783		111,851		—
Commercial Real Estate		49		—		306		355		105,867		106,222		—
Residential Real Estate and Home Equity		220		30		642		892		128,758		129,650		480
Total	$	403	$	37	$	1,068	$	1,508	$	383,722	$	385,230	$	480

Troubled Debt Restructurings

Information regarding Troubled Debt Restructuring (“TDR”) loans for the three month period ended March 31, 2015 and 2014 is as follows (dollars in thousands):

	For the three months ended March 31,
	2015				2014
	Number of		Recorded Investment		Number of		Recorded Investment
	Contracts		(as of period end)		Contracts		(as of period end)
Consumer and Credit Card		—	$	—		—	$	—
Commercial and Industrial		—		—		2		58
Commercial Real Estate		—		—		—		—
Residential Real Estate and Home Equity		—		—		—		—
Total		—	$	—		2	$	58

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, 2015 and 2014 (dollars in thousands).

	For the three months ended March 31,
	2015				2014
	Number of		Recorded Investment		Number of		Recorded Investment
	Contracts		as of period end (1)		Contracts		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 non-accrual 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.

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Loans

3 Months Ended

Mar. 31, 2015

Receivables [Abstract]

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

Note 3 – Loans

At March 31, 2015 and December 31, 2014, loans were comprised of the following (in thousands):

	March 31,  2015		December 31,  2014
Commercial and industrial	$	99,946	$	106,222
Commercial real estate		106,334		111,851
Residential real estate and home equity		131,658		129,650
Consumer and credit card		39,074		37,507
Subtotal		377,012		385,230
Add: Net deferred loan origination fees		234		214
Total loans receivable	$	377,246	$	385,444

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Summary of Significant Accounting Policies (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Summary of Significant Accounting Policies [Abstract]
Consumer Loans Charged Off Delinquency Period	120 days
Mortgage Loans Charge Off Delinquency Period	180 days
Interest Income On Mortgage And Commercial Loans Discontinuation Period	90 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number	62,939	153,506
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	9,979	45,727
Restricted Stock [Member]
Summary of Significant Accounting Policies [Abstract]
Stock Issued During Period, Shares, Restricted Stock Award, Gross	53,640
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	95,085		$ 41,445

XML

Credit Quality (Tables)

3 Months Ended

Mar. 31, 2015

Credit Quality [Abstract]

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

The tables below present allowance for loan losses by loan portfolio and allocated to loans individually and collectively evaluated for impairment. Commercial real estate includes real estate construction and land development loans (in thousands).

	Quarter ended March 31, 2015
	Consumer						Residential Real
	and		Commercial and		Commercial		Estate and
	Credit Card		Industrial		Real Estate		Home Equity		Unallocated		Total
Beginning balance	$	190	$	1,132	$	2,376	$	268	$	270	$	4,236
Charge-offs		(42)		(310)		(48)		(29)		—		(429)
Recoveries		28		88		7		9		—		132
Provision		7		127		(18)		20		14		150
Ending balance	$	183	$	1,037	$	2,317	$	268	$	284	$	4,089
Allowance allocated to:
Individually evaluated for impairment	$	—	$	136	$	991	$	—	$	—	$	1,127
Collectively evaluated for impairment		183		901		1,326		268		284		2,962
Ending balance	$	183	$	1,037	$	2,317	$	268	$	284	$	4,089
Loans:
Individually evaluated for impairment	$	447	$	2,267	$	8,351	$	340	$	—	$	11,405
Collectively evaluated for impairment		38,627		97,679		97,983		131,318		—		365,607
Ending balance	$	39,074	$	99,946	$	106,334	$	131,658	$	—	$	377,012

	Quarter ended March 31, 2014
	Consumer						Residential Real
	and		Commercial and		Commercial		Estate and
	Credit Card		Industrial		Real Estate		Home Equity		Unallocated		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		(40)		30		(127)		(36)		173		—
Transferred to loans held for sale		—		—		(97)		—		—		(97)
Ending balance	$	246	$	2,073	$	2,675	$	178	$	173	$	5,345
Allowance allocated to:
Individually evaluated for impairment	$	—	$	966	$	1,724	$	—	$	—	$	2,690
Collectively evaluated for impairment		246		1,107		951		178		173		2,655
Ending balance	$	246	$	2,073	$	2,675	$	178	$	173	$	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
Ending balance	$	32,498	$	110,886	$	103,125	$	105,573	$	—	$	352,082

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, 2015 and December 31, 2014 (in thousands).

	At March 31, 2015						Quarter ended March 31, 2015
							Three months		Three months
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With No Related Allowance
Recorded
Consumer and Credit Card	$	447	$	447	$	—	$	449	$	5
Commercial and Industrial		1,255		1,255		—		1,266		7
Commercial Real Estate		22		22		—		729		—
Residential real estate and home equity		340		340		—		—		—
With Allowance Recorded
Commercial and Industrial	$	1,012	$	1,090	$	136	$	817	$	13
Commercial Real Estate		8,329		8,329		991		8,350		138
Total
Consumer and Credit Card	$	447	$	447	$	—	$	449	$	5
Commercial and Industrial		2,267		2,345		136		2,083		20
Commercial Real Estate		8,351		8,351		991		9,079		138
Residential real estate and home equity		340		340		—		—		—
Total	$	11,405	$	11,483	$	1,127	$	11,611	$	163

	At December 31, 2014						Quarter ended March 31, 2014
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With No Related Allowance
Recorded
Consumer and Credit Card	$	455	$	455	$	—	$	—	$	—
Commercial and Industrial		1,288		1,288		—		1,434		19
Commercial Real Estate		1,088		1,088		—		9,816		149
With Allowance Recorded
Commercial and Industrial		740		817		256		4,135		12
Commercial Real Estate		8,602		8,602		1,042		5,495		73
Total
Consumer and Credit Card		455		455		—		—		—
Commercial and Industrial		2,028		2,105		256		5,569		31
Commercial Real Estate		9,690		9,690		1,042		15,311		222
Total	$	12,173	$	12,250	$	1,298	$	20,880	$	253

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

Loans on non-accrual status at March 31, 2015 and December 31, 2014 are as follows (in thousands):

	March 31,		December 31,
	2015		2014
Consumer and credit card	$	118	$	120
Commercial and industrial		612		632
Commercial real estate		60		298
Residential real estate and home equity		340		334
Total	$	1,130	$	1,384

Financing Receivable Credit Quality Indicators [Table Text Block]

Corporate risk exposure by risk profile was as follows at March 31, 2015 (in thousands):

	Commercial and		Commercial
Category	Industrial		Real Estate
Pass-1-4	$	95,196	$	92,662
Vulnerable-5		985		4,847
Substandard-6		3,765		8,825
Doubtful-7		—		—
Loss-8		—		—
Total	$	99,946	$	106,334

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

	Commercial and		Commercial
Category	Industrial		Real Estate
Pass-1-4	$	106,590	$	90,588
Vulnerable-5		823		6,146
Substandard-6		4,438		9,488
Doubtful—7		—		—
Loss-8		—		—
Total	$	111,851	$	106,222

Consumer Risk [Table Text Block]

Consumer Risk

Consumer risk based on payment activity at March 31, 2015 is as follows (in thousands).

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	38,956	$	131,213
Non-performing		118		445
Total	$	39,074	$	131,658

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

Payment Category	Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	37,387	$	128,836
Non-Performing		120		814
Total	$	37,507	$	129,650

Past Due Financing Receivables [Table Text Block]

The following table presents past due loans aged as of March 31, 2015 (in thousands).

Category	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 days and Accruing
Consumer and credit card	$	60	$	3	$	118	$	181	$	38,893	$	39,074	$	—
Commercial and industrial		—		—		—		—		99,946		99,946		—
Commercial real estate		—		—		132		132		106,202		106,334		—
Residential real estate and home equity		190		495		302		987		130,671		131,658		105
Total	$	250	$	498	$	552	$	1,300	$	375,712	$	377,012	$	105

The following table presents past due loans aged as of December 31, 2014 (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	$	66	$	7	$	120	$	193	$	37,314	$	37,507	$	—
Commercial and Industrial		68		—		—		68		111,783		111,851		—
Commercial Real Estate		49		—		306		355		105,867		106,222		—
Residential Real Estate and Home Equity		220		30		642		892		128,758		129,650		480
Total	$	403	$	37	$	1,068	$	1,508	$	383,722	$	385,230	$	480

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, 2015 and 2014 is as follows (dollars in thousands):

	For the three months ended March 31,
	2015				2014
	Number of		Recorded Investment		Number of		Recorded Investment
	Contracts		(as of period end)		Contracts		(as of period end)
Consumer and Credit Card		—	$	—		—	$	—
Commercial and Industrial		—		—		2		58
Commercial Real Estate		—		—		—		—
Residential Real Estate and Home Equity		—		—		—		—
Total		—	$	—		2	$	58

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, 2015 and 2014 (dollars in thousands).

	For the three months ended March 31,
	2015				2014
	Number of		Recorded Investment		Number of		Recorded Investment
	Contracts		as of period end (1)		Contracts		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, 2015

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 common shares 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,
	2015		2014
Weighted-average common shares outstanding (basic)		7,237,371		7,192,350
Dilutive effect of assumed exercise of stock options		16,469		52,366
Weighted-average common shares outstanding (diluted)		7,253,840		7,244,716

There were 62,939 shares and 153,506 shares included in the computation of common share equivalents for the three months ended March 31, 2015 and 2014, respectively, because the average fair value of the shares was greater than the exercise price.

At March 31, 2015 and 2014, 9,979 and 45,727 of anti-dilutive shares, respectively, were excluded from the diluted weighted average common share calculations.

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

Stock-Based Compensation

Compensation cost is recognized for restricted stock awards issued to employees and directors based on the fair value of these awards at the date of grant. The market price of the Company’s common stock at the date of grant is used to determine the fair value for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

During the first quarter of 2015, awards for 53,640 restricted shares were granted under the Company's 2014 Restricted Stock Plan. The awards vest ratably over a five year period. There were no grants of restricted shares in the first quarter of 2014. There were 95,085 and 41,445 unvested restricted shares at March 31, 2015 and December 31, 2014, respectively.

The Company’s outstanding stock options may be settled for cash at the recipient’s discretion; therefore, liability accounting applies to the Company’s 2004 Long-Term Stock Incentive Plan under which such stock options were granted. 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 re-measurement dates. Compensation cost is recognized over the required service period, generally defined as the vesting period. 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 Income. 

Application Of Critical Accounting Policies [Policy Text Block]

Significant Accounting Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP 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, the Company 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, Real Estate Acquired Through Foreclosure, 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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Fair Value Measurements

3 Months Ended

Mar. 31, 2015

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, and is classified as a Level 2 instrument.

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 (Level 2).

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, 2015 and December 31, 2014, 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 at March 31, 2015 and December 31, 2014 (in thousands):

	At March 31, 2015
	Carrying
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	24,045	$	24,045	$	24,045	$	—	$	—
Securities available-for-sale		85,844		85,844		—		85,844		—
Loans (net of allowance)		373,157		371,911		—		—		371,911
FHLB stock		3,250		3,250		—		3,250		—
Accrued interest receivable		1,527		1,527		—		—		1,527
Financial liabilities
Non-interest-bearing deposits	$	111,286	$	111,286		—	$	111,286		—
Interest-bearing deposits		353,510		353,550		—		353,550		—
FHLB advances		4,801		4,801		—		4,801		—
Accrued interest payable		52		52		—		—		52

	At December 31, 2014
	Carrying
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	21,274	$	21,274	$	21,274	$	—	$	—
Securities available-for-sale		75,909		75,909		—		75,909		—
Loans (net of allowance)		381,208		381,224		—		—		381,224
FHLB stock		3,250		3,250				3,250		—
Accrued interest receivable		1,234		1,234		—		—		1,234
Financial liabilities
Non-interest-bearing deposits	$	111,022	$	111,022		—	$	111,022		—
Interest-bearing deposits		342,170		342,318		—		342,318		—
FHLB advances		11,808		11,808		—		11,808		—
Accrued interest payable		36		36		—		—		36

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, 2015 and December 31, 2014 (in thousands):

	At March 31, 2015
			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)
U.S. Government and agency obligations	$	19,117	$	—	$	19,117	$	—
State and municipal obligations		22,593		—		22,593		—
Corporate bonds		5,008		—		5,008		—
Collateralized mortgage obligations		22,039		—		22,039		—
Mortgage-backed securities		17,087		—		17,087		—
Total	$	85,844	$	—	$	85,844	$	—

	At December 31, 2014
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agency obligations	$	11,545	$	—	$	11,545	$	—
State and municipal obligations		21,657		—		21,657		—
Corporate bonds		4,987		—		4,987		—
Collateralized mortgage obligations		19,580		—		19,580		—
Mortgage-backed securities		18,140		—		18,140		—
Total	$	75,909	$	—	$	75,909	$	—

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. 

Impaired loans

At March 31, 2015 and December 31, 2014, 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, 2015 and December 31, 2014 (in thousands). 

	At March 31, 2015
	Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	11,405	$	—	$	—	$	11,405
Real estate owned		940		—		—		940

	At December 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	$	12,945		—		—	$	12,945
Real estate owned		1,111		—		—		1,111

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Sale of Branch and Loans Held for Sale

3 Months Ended

Mar. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Note 6 – Sale of Branch and Loans Held for Sale 

In March 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		(438)
Other, net		10
Cash paid to Merchants	$	12,464

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2015

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,
	2015		2014
Weighted-average common shares outstanding (basic)		7,237,371		7,192,350
Dilutive effect of assumed exercise of stock options		16,469		52,366
Weighted-average common shares outstanding (diluted)		7,253,840		7,244,716

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Credit Quality (Details 5) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Age analysis of past due loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	$ 250	$ 403
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	498	37
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	552	1,068
Financing Receivable, Recorded Investment, Past Due, Total	1,300	1,508
Financing Receivable, Recorded Investment, Current	375,712	383,722
Financing Receivable, Recorded Investment, Subtotal	377,012	385,230
Recorded Investment greater than 90 days and Accruing	105	480
Consumer and Credit Card [Member]
Age analysis of past due loans
Financing Receivable, Recorded Investment, 30 to 59 Days Past Due	60	66
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	3	7
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	118	120
Financing Receivable, Recorded Investment, Past Due, Total	181	193
Financing Receivable, Recorded Investment, Current	38,893	37,314
Financing Receivable, Recorded Investment, Subtotal	39,074	37,507
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	0	68
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	0	0
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	0	0
Financing Receivable, Recorded Investment, Past Due, Total	0	68
Financing Receivable, Recorded Investment, Current	99,946	111,783
Financing Receivable, Recorded Investment, Subtotal	99,946	111,851
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	0	0
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	132	306
Financing Receivable, Recorded Investment, Past Due, Total	132	355
Financing Receivable, Recorded Investment, Current	106,202	105,867
Financing Receivable, Recorded Investment, Subtotal	106,334	106,222
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	190	220
Financing Receivable, Recorded Investment, 60 to 89 Days Past Due	495	30
Financing Receivable, Recorded Investment, Greater than 90 Days Past Due	302	642
Financing Receivable, Recorded Investment, Past Due, Total	987	892
Financing Receivable, Recorded Investment, Current	130,671	128,758
Financing Receivable, Recorded Investment, Subtotal	131,658	129,650
Recorded Investment greater than 90 days and Accruing	$ 105	$ 480

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Sale of Branch and Loans Held for Sale (Tables)

3 Months Ended

Mar. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Schedule of Disposal Groups, Including Discontinued Operations, Income Statement, Balance Sheet and Additional Disclosures [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		(438)
Other, net		10
Cash paid to Merchants	$	12,464

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Securities (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015
Amortized cost and estimated fair value of all debt securities
Available-for-sale, Amortized Cost, Due in one year or less	$ 18,776
Available-for-sale, Amortized Cost, Due after one to five years	30,010
Available-for-sale, Amortized Cost, Due after five to ten years	17,529
Available-for-sale, Amortized Cost, Due after ten years	1,867
Available-for-sale, Amortized Cost, Mortgage-backed securities	16,378
Available-for-sale, Amortized Cost, Total	84,560
Available-for-sale, Fair Value, Due in one year or less	18,845
Available-for-sale, Fair Value, Due after one to five years	30,236
Available-for-sale, Fair Value, Due after five to ten years	17,794
Available-for-sale, Fair Value, Fair value, Due after ten years	1,883
Available-for-sale, Fair Value, Mortgage-backed securities	17,086
Available-for-sale, Fair Value, Total	$ 85,844

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net income	$ 239	$ 117
Other comprehensive income:
Net unrealized gains on securities available-for-sale, net of taxes of $100 and $769 in 2015 and 2014, respectively	194	1,108
Reclassification adjustment for losses included in net income, net of taxes of $(35) in 2014	0	(92)
Total other comprehensive income	194	1,016
Comprehensive income	$ 433	$ 1,133

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Securities

3 Months Ended

Mar. 31, 2015

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, 2015:

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. Government and agency obligations	$	19,071	$	64	$	(18)	$	19,117
Corporate bonds		4,968		47		(7)		5,008
States and municipal obligations		22,063		571		(41)		22,593
Collateralized mortgage obligations		22,080		71		(112)		22,039
Mortgage-backed securities		16,378		709		(0)		17,087
Total	$	84,560	$	1,462	$	(178)	$	85,844

As of December 31, 2014:

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

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
U.S. Government and agency obligations	$	11,602	$	31	$	(88)	$	11,545
Corporate bonds		4,975		33		(21)		4,987
States and municipal obligations		21,303		423		(69)		21,657
Collateralized mortgage obligations		19,601		85		(106)		19,580
Mortgage-backed securities		17,438		702		—		18,140
Total	$	74,919	$	1,274	$	(284)	$	75,909

The table below indicates the length of time individual securities have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014 (dollars in thousands):

	March 31, 2015
	(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		2	$	1,498	$	1		3	$	3,500	$	17		5	$	4,998	$	18
Corporate bonds		1		265		1		3		1,410		6		4		1,675		7
State and municipal obligations		4		1,538		16		3		1,324		25		7		2,862		41
Collateralized mortgage obligations		11		6,653		40		4		3,519		72		15		10,172		112
Mortgage-backed securities and other		—		—		—		—		—		—		—		—		—
Total temporarily impaired securities		18	$	9,954	$	58		13	$	9,753	$	120		31	$	19,707	$	178

	December 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		3	$	2,488	$	9		4	$	4,446	$	79		7	$	6,934	$	88
Corporate bonds		1		503		1		4		1,664		21		5		2,167		21
State and municipal obligations		8		2,699		18		4		1,915		51		12		4,614		69
Collateralized mortgage obligations		9		5,649		21		4		3,649		85		13		9,298		106
Mortgage-backed securities and other		—		—		—		—		—		—		—		—		—
Total temporarily impaired securities		21	$	11,339	$	49		16	$	11,674	$	236		37	$	23,013	$	284

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, 2015 or December 31, 2014.

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”).

There were no sales of securities in the three months ended March 31, 2015. Gross losses on the sale of securities were $140,000 in the first quarter of 2014.

At March 31, 2015, 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, 2015, 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	$	18,776	$	18,845
Due after one to five years		30,010		30,236
Due after five to ten years		17,529		17,794
Due after ten years		1,867		1,883
Mortgage-backed and related securities		16,378		17,086
Total	$	84,560	$	85,844

Securities with a fair value of $74.8 million at March 31, 2015 were pledged to secure public deposits and other obligations.

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Securities (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net	$ 0	$ 140,000
Investment From Same Issuer As Percentage Of Equity Maximum	10.00%
Pledged Assets Separately Reported, Securities Pledged as Collateral, at Fair Value, Total	$ 74,800,000

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Fair Value Measurements (Details 2) (Fair Value, Measurements, Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Impaired loans [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	$ 11,405	$ 12,945
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	11,405	12,945
Real estate owned [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	940	1,111
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	$ 940	$ 1,111

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

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 at March 31, 2015 and December 31, 2014 (in thousands):

	At March 31, 2015
	Carrying
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	24,045	$	24,045	$	24,045	$	—	$	—
Securities available-for-sale		85,844		85,844		—		85,844		—
Loans (net of allowance)		373,157		371,911		—		—		371,911
FHLB stock		3,250		3,250		—		3,250		—
Accrued interest receivable		1,527		1,527		—		—		1,527
Financial liabilities
Non-interest-bearing deposits	$	111,286	$	111,286		—	$	111,286		—
Interest-bearing deposits		353,510		353,550		—		353,550		—
FHLB advances		4,801		4,801		—		4,801		—
Accrued interest payable		52		52		—		—		52

	At December 31, 2014
	Carrying
	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	21,274	$	21,274	$	21,274	$	—	$	—
Securities available-for-sale		75,909		75,909		—		75,909		—
Loans (net of allowance)		381,208		381,224		—		—		381,224
FHLB stock		3,250		3,250				3,250		—
Accrued interest receivable		1,234		1,234		—		—		1,234
Financial liabilities
Non-interest-bearing deposits	$	111,022	$	111,022		—	$	111,022		—
Interest-bearing deposits		342,170		342,318		—		342,318		—
FHLB advances		11,808		11,808		—		11,808		—
Accrued interest payable		36		36		—		—		36

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, 2015 and December 31, 2014 (in thousands):

	At March 31, 2015
			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)
U.S. Government and agency obligations	$	19,117	$	—	$	19,117	$	—
State and municipal obligations		22,593		—		22,593		—
Corporate bonds		5,008		—		5,008		—
Collateralized mortgage obligations		22,039		—		22,039		—
Mortgage-backed securities		17,087		—		17,087		—
Total	$	85,844	$	—	$	85,844	$	—

	At December 31, 2014
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agency obligations	$	11,545	$	—	$	11,545	$	—
State and municipal obligations		21,657		—		21,657		—
Corporate bonds		4,987		—		4,987		—
Collateralized mortgage obligations		19,580		—		19,580		—
Mortgage-backed securities		18,140		—		18,140		—
Total	$	75,909	$	—	$	75,909	$	—

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, 2015 and December 31, 2014 (in thousands). 

	At March 31, 2015
	Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Impaired loans	$	11,405	$	—	$	—	$	11,405
Real estate owned		940		—		—		940

	At December 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	$	12,945		—		—	$	12,945
Real estate owned		1,111		—		—		1,111