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: September 30, 2016

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 November 10, 2016, the latest practicable date, 7,339,232 of the registrant’s common shares, no par value, were issued and outstanding.

DCB Financial Corp

Table of Contents

	Page
Part I – Financial Information	3
Item 1 – Financial Statements	3
Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015	3
Consolidated Statements of Operations (unaudited) for the three and nine month periods ended September 30, 2016 and 2015	4
Consolidated Statements of Comprehensive Operations (unaudited) for the three and nine month periods ended September 30, 2016 and 2015	5
Consolidated Statements of Shareholders’ Equity (unaudited) for the nine month periods ended September 30, 2016 and 2015	6
Consolidated Statements of Cash Flows (unaudited) for the nine month periods ended September 30, 2016 and 2015	7
Notes to the Consolidated Financial Statements	8
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3 – Quantitative and Qualitative Disclosures about Market Risk	37
Item 4 – Controls and Procedures	37
Part II – Other Information	38
Item 1 – Legal Proceedings	38
Item 1A – Risk Factors	38
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	41
Signatures	42

Part I – Financial Information

Item 1. Financial Statements

DCB Financial Corp

Consolidated Balance Sheets

	September 30, 2016			December 31, 2015
	(unaudited)
	(Dollars in thousands, except share and per share data)
Assets:
Cash and due from financial institutions	$	6,092		$	6,929
Interest-bearing deposits		25,190			24,963
Total cash and cash equivalents		31,282			31,892
Securities available-for-sale		95,676			87,797
Loans		390,750			378,513
Less allowance for loan losses		(4,592	)		(4,333	)
Net loans		386,158			374,180
Loans held for sale		755			-
Real estate owned		68			68
Investment in FHLB stock		3,250			3,250
Premises and equipment, net		9,810			5,091
Premises and equipment held-for-sale		-			4,771
Bank-owned life insurance		21,329			20,760
Deferred tax asset, net		10,467			10,440
Accrued interest receivable and other assets		6,622			3,015
Total assets	$	565,417		$	541,264
Liabilities and shareholders’ equity
Liabilities:
Deposits:
Non-interest bearing	$	123,353		$	124,023
Interest bearing		366,195			350,514
Total deposits		489,548			474,537
Borrowings		4,293			4,520
Obligations under capital lease		8,016			-
Accrued interest payable and other liabilities		4,167			3,360
Total liabilities		506,024			482,417
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, 7,661,632 and 7,588,887 shares issued, and 7,339,232 and 7,281,237 shares outstanding for September 30, 2016 and December 31, 2015, respectively		16,907			16,410
Retained earnings		49,820			49,799
Treasury stock, at cost, 322,400 and 307,650 shares at September 30, 2016 and December 31, 2015, respectively		(7,520	)		(7,416	)
Accumulated other comprehensive income		994			436
Deferred stock-based compensation		(808	)		(382	)
Total shareholders’ equity		59,393			58,847
Total liabilities and shareholders’ equity	$	565,417		$	541,264
Common shares outstanding		7,339,232			7,281,237
Book value per common share	$	8.09		$	8.08

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

3.

DCB Financial Corp

Consolidated Statements of Income (Loss) (Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
	(Dollars in thousands, except share and per share data)
Interest income:
Loans	$	4,157		$	3,979		$	12,154		$	11,884
Securities		494			473			1,508			1,460
Federal funds sold and interest bearing deposits		28			17			80			46
Total interest income		4,679			4,469			13,742			13,390
Interest expense:
Deposits:
Savings and money market accounts		202			153			560			445
Time accounts		81			88			229			272
NOW accounts		20			16			56			49
Total		303			257			845			766
Obligation under capital lease		81			-			215			-
FHLB advances		41			35			126			106
Total interest expense		425			292			1,186			872
Net interest income		4,254			4,177			12,556			12,518
Provision for loan losses		-			(150	)		-			-
Net interest income after provision for loan losses		4,254			4,327			12,556			12,518
Non-interest income:
Service charges		560			523			1,596			1,475
Wealth management fees		463			438			1,355			1,217
Treasury management fees		134			81			348			203
Income from bank-owned life insurance		163			163			569			571
Gain on sales of loans		351			-			829			-
Net losses on sales of REO		-			(19	)		-			(20	)
Other non-interest income		47			37			144			115
Total non-interest income		1,718			1,223			4,841			3,561
Non-interest expense:
Salaries and employee benefits		3,186			2,771			9,356			8,302
Occupancy and equipment		1,016			1,000			2,963			2,965
Professional services		218			405			905			1,042
Merger related expenses		987			-			987			-
Advertising		108			169			506			418
Office supplies, postage and courier		87			81			250			232
FDIC insurance premium		60			95			238			302
State franchise taxes		118			75			352			225
Other non-interest expense		808			554			2,052			1,810
Total non-interest expense		6,588			5,150			17,609			15,296
Income (loss) before income tax expense (benefit)		(616	)		400			(212	)		783
Income tax benefit		(190	)		(10,688	)		(233	)		(10,688	)
Net income (loss)	$	(426	)	$	11,088		$	21		$	11,471
Share and Per Share Data
Basic average common shares outstanding		7,339,710			7,282,365			7,332,482			7,269,222
Diluted average common shares outstanding		7,339,710			7,302,174			7,355,709			7,288,237
Basic and diluted earnings (loss) per common share	$	(0.06	)	$	1.52		$	0.00		$	1.58

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

4.

DCB Financial Corp

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

	Three months ended September 30,					Nine months ended September 30,
	2016			2015		2016		2015
	(In thousands)
Net income (loss)	$	(426	)	$	11,088	$	21	$	11,471
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available-for-sale, net of taxes of $(24) and $287 for the three and nine months ended September 30, 2016, respectively, and $60 and $(10) for the three and nine months ended September 30, 2015, respectively.		(47	)		116		558		(45	)
Total other comprehensive income (loss)		(47	)		116		558		(45	)
Comprehensive income (loss)	$	(473	)	$	11,204	$	579	$	11,426

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, 2015		7,233,797		$	-	$	16,064		$	38,055	$	(7,416	)	$	654		$	(146	)	$	47,211
Net income		-			-		-			11,471		-			-			-			11,471
Other comprehensive income, net of taxes		-			-		-			-		-			(45	)		-			(45	)
Issuance of restricted stock		55,785			-		407			-		-			-			(407	)		-
Forfeiture of restricted stock		(9,290	)		-		(59	)		-		-			-			59			-
Amortization of restricted stock		-			-		-			-		-			-			59			59
Balance at September 30, 2015		7,280,292		$	-	$	16,412		$	49,526	$	(7,416	)	$	609		$	(435	)	$	58,696
Balance at January 1, 2016		7,281,237		$	-	$	16,410		$	49,799	$	(7,416	)	$	436		$	(382	)	$	58,847
Net income		-			-		-			21		-			-			-			21
Other comprehensive income, net of taxes		-			-		-			-		-			558			-			558
Issuance of restricted stock		78,036			-		532			-		-			-			(532	)		-
Repurchase of common shares		(14,750	)		-		-			-		(104	)		-			-			(104	)
Restricted stock withheld upon vesting for payment of taxes		(1,857	)		-		(12	)		-		-			-			-			(12	)
Forfeiture of restricted stock		(3,434	)		-		(23	)		-		-			-			23			-
Amortization of restricted stock		-			-		-			-		-			-			83			83
Balance at September 30, 2016		7,339,232		$	-	$	16,907		$	49,820	$	(7,520	)	$	994		$	(808	)	$	59,393

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

6.

DCB Financial Corp

Consolidated Statements of Cash Flows (Unaudited)

	Nine months ended September 30,
	2016			2015
	(In thousands)
Cash flows from operating activities
Net income	$	21		$	11,471
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		677			729
Provision for loan losses		-			-
Deferred taxes		(233	)		(10,688	)
Net loss on sale of real estate owned		-			20
Net gain on sale of loans		(829	)		-
Gain on calls of securities		(18	)		-
Net stock-based compensation expense		57			132
Premium amortization on securities, net		712			790
Originations of mortgage loans held for sale		(10,997	)		-
Proceeds from sale of mortgage loans		10,466			-
Proceeds from sale of guaranteed portion of SBA loans		6,975			-
Earnings on bank owned life insurance		(569	)		(571	)
Net changes in other assets and other liabilities		(2,948	)		(545	)
Net cash provided by operating activities		3,314			1,338
Cash flows from investing activities
Purchases of securities available-for-sale		(30,042	)		(25,696	)
Proceeds from maturities, principal payments and calls of securities available-for-sale		22,296			18,728
Net change in loans		(12,581	)		5,124
Net proceeds from sale of premises and equipment		2,347			-
Proceeds from sale of real estate owned		-			307
Premises and equipment expenditures		(410	)		(662	)
Net cash used in investing activities		(18,390	)		(2,199	)
Cash flows from financing activities
Net change in deposits		15,011			21,715
Proceeds from short-term borrowings		4,293			-
Repayment of capital lease		(214	)		-
Repayment of borrowings		(4,520	)		(7,097	)
Repurchase of common stock		(104	)		-
Net cash provided by financing activities		14,466			14,618
Net change in cash and cash equivalents		(610	)		13,757
Cash and cash equivalents at beginning of period		31,892			21,274
Cash and cash equivalents at end of period	$	31,282		$	35,031
Supplemental disclosures of cash flow information
Cash paid during the period for interest on deposits and borrowings	$	1,195		$	834
Transfer from portfolio loans to loans held for sale		6,132			-
Transfer from loans held for sale to portfolio loans		2,540			-
Non-cash investing and financing activities:
Loan to finance sale of premises and equipment		5,530			-
Capital lease obligation		8,230			-

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

7.

Note 1 – Summary of Significant Accounting Policies

Unless the context indicates otherwise, all references in this report to “Delaware,” “DCB,” “we,” “us,” “our company,” “corporation” and “our” refer to DCB Financial Corp and its direct and indirect subsidiaries The Delaware County Bank and Trust Company, our wholly owned bank subsidiary (the “Bank”), DCB Title Services, LLC, DCB Insurance Services, LLC, DataTasx LLC, ORECO, Inc., and 110 Riverbend, LLC.

DCB Financial Corp is a financial holding company headquartered in Lewis Center, Ohio, and was incorporated under the laws of the State of Ohio in 1997, as a bank holding company under the Bank Holding Company Act of 1956, as amended. DCB is the holding company for The Delaware County Bank and Trust Company, a commercial bank organized in 1950 and chartered under the laws of the State of Ohio (the “Bank”).

We also have two wholly-owned, non-bank subsidiaries, DCB Title Services, LLC, an Ohio limited liability company (“DCB Title”), and DCB Insurance Services, LLC, an Ohio limited liability company (“DCB Insurance”). DCB Title provides standard real estate title services, while DCB Insurance provides a variety of insurance products. The activities of each of these subsidiaries are not material to our operations. The Bank has two wholly-owned subsidiaries, ORECO, Inc., an Ohio corporation, which is used to hold the Bank’s foreclosed real estate, and 110 Riverbend, LLC, which was used to hold real estate owned by the Bank prior to the sale of such real estate in January 2016.

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, 2015, 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, 2015. 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 and nine months ended September 30, 2016 and 2015. The results of operations are not necessarily indicative of the results anticipated for the year.

To prepare financial statements in conformity with U.S. GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect amounts reported in the financial statements and disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments and status of contingencies are particularly subject to change.

Earnings per Common Share

Earnings per common share is computed using the two-class method. Basic earnings per common share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period which excludes the participating securities. All outstanding unvested restricted stock awards containing rights to non-forfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares from stock compensation awards, but excludes awards considered participating securities.

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 shares 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.

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 Operations.

8.

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 the Company’s evaluation of credit risk after careful consideration of all information available to the Company. 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

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 non-accrual 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 non-accrual 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.

9.

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.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred tax assets are reduced by a valuation allowance, if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment. The Company recognizes interest and penalties on income taxes, if applicable, as a component of income tax expense. The Company files consolidated income tax returns with its subsidiaries.

10.

New Accounting Pronouncements

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was issued to provide financial statement users with information about expected credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. For public business entities, the new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

- A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and

- A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in ASU 2016-01 supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be re-measured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. The amendments improve financial reporting by providing relevant information about an entity’s equity investments and reducing the number of items that are recognized in other comprehensive income. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this guidance is not expected to have a material effect on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new guidance supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In April 2015, the FASB approved deferral of the effective date of this guidance, which is now effective prospectively for the Company for annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

11.

Note 2 – Securities

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

	September 30, 2016
	Amortized  Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government and agency obligations	$	27,282	$	34	$	19	$	27,297
Corporate bonds		2,800		68		2		2,866
States and municipal obligations		20,501		738		13		21,226
Collateralized mortgage obligations		27,577		161		28		27,710
Mortgage-backed securities		15,510		570		-		16,080
Other equity securities		500		-		3		497
Total	$	94,170	$	1,571	$	65	$	95,676

	December 31, 2015
	Amortized Cost		Gross  Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Government and agency obligations	$	20,904	$	26	$	88	$	20,842
Corporate bonds		3,714		26		13		3,727
States and municipal obligations		21,954		388		81		22,261
Collateralized mortgage obligations		22,862		46		107		22,801
Mortgage-backed securities		17,702		505		41		18,166
Total	$	87,136	$	991	$	330	$	87,797

Securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated are as follows (dollars in thousands):

	September 30, 2016
	(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		11	$	15,225	$	19		-	$	-	$	-		11	$	15,225	$	19
Corporate bonds		-		-		-		1		499		2		1		499		2
State and municipal obligations		3		1,158		13		-		-		-		3		1,158		13
Collateralized mortgage obligations		10		7,654		14		6		2,323		14		16		9,977		28
Mortgage-backed  securities		1		1,234		-		-		-		-		1		1,234		-
Other equity securities		1		497		3		-		-		-		1		497		3
Total temporarily impaired securities		26	$	25,768	$	49		7	$	2,822	$	16		33	$	28,590	$	65

	December 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		14	$	15,333	$	55		2	$	1,964	$	33		16	$	17,297	$	88
Corporate bonds		2		759		5		3		1,400		8		5		2,159		13
State and municipal obligations		9		3,902		48		4		1,355		33		13		5,257		81
Collateralized mortgage obligations		13		11,298		63		6		2,551		44		19		13,849		107
Mortgage-backed securities		5		5,176		41		-		-		-		5		5,176		41
Total temporarily impaired securities		43	$	36,468	$	212		15	$	7,270	$	118		58	$	43,738	$	330

The unrealized losses on the Company’s 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 September 30, 2016 or December 31, 2015.

12.

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 nine months ended September 30, 2016 and 2015.

At September 30, 2016, 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 September 30, 2016, 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.

	Amortized Cost		Fair Value
Due in one year or less	$	3,726	$	3,730
Due after one to five years		32,422		32,674
Due after five to ten years		10,835		11,214
Due after ten years		3,600		3,771
Mortgage-backed and related securities		43,587		44,287
Total	$	94,170	$	95,676

Securities with a fair value of $75.6 million at September 30, 2016 were pledged to secure public deposits and other obligations.

Note 3 – Loans

Loans were comprised of the following at the dates indicated (in thousands):

	September 30, 2016			December 31, 2015
Consumer and credit card	$	36,158		$	40,587
Residential real estate and home equity		150,362			137,645
Commercial and industrial		104,108			99,213
Commercial real estate		99,505			100,743
		390,133			378,188
Net deferred loan costs		617			325
Loans	$	390,750		$	378,513
Allowance for loan losses		(4,592	)		(4,333	)
Net loans	$	386,158		$	374,180

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 loan relationships with balances of $250,000 or greater are assigned an internal risk grade based on relevant information about the ability of the borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. Borrower’s receiving an internal risk 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.

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 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 summarize activity in the allowance for loan losses for the periods indicated (in thousands).

	Three months ended September 30, 2016
	Consumer and Credit Card			Residential Real Estate and Home Equity			Commercial and Industrial			Commercial Real Estate			Unallocated		Total
Beginning balance	$	122		$	544		$	1,521		$	2,140		$	263	$	4,590
Charge-offs		(63	)		(3	)		(2	)		-			-		(68	)
Recoveries		23			12			23			12			-		70
Net (charge-offs) recoveries		(40	)		9			21			12			-		2
Provision		38			(24	)		(26	)		(71	)		83		-
Ending balance	$	120		$	529		$	1,516		$	2,081		$	346	$	4,592

	Nine months ended September 30, 2016
	Consumer and Credit Card			Residential Real Estate and Home Equity			Commercial and Industrial			Commercial Real Estate			Unallocated		Total
Beginning balance	$	144		$	561		$	1,321		$	1,999		$	308	$	4,333
Charge-offs		(142	)		(12	)		(2	)		-			-		(156	)
Recoveries		56			35			240			84			-		415
Net (charge-offs) recoveries		(86	)		23			238			84			-		259
Provision		62			(55	)		(43	)		(2	)		38		-
Ending balance	$	120		$	529		$	1,516		$	2,081		$	346	$	4,592

	Three months ended September 30, 2015
	Consumer and Credit Card			Residential Real Estate and Home Equity		Commercial and Industrial			Commercial Real Estate			Unallocated			Total
Beginning balance	$	172		$	315	$	1,035		$	2,195		$	447		$	4,164
Charge-offs		(63	)		-		-			-			-			(63	)
Recoveries		50			30		157			18			-			255
Net (charge-offs) recoveries		(13	)		30		157			18			-			192
Provision		-			156		(63	)		(217	)		(26	)		(150	)
Ending balance	$	159		$	501	$	1,129		$	1,996		$	421		$	4,206

	Nine months ended September 30, 2015
	Consumer and Credit Card			Residential Real Estate and Home Equity			Commercial and Industrial			Commercial Real Estate			Unallocated		Total
Beginning balance	$	190		$	268		$	1,132		$	2,376		$	270	$	4,236
Charge-offs		(122	)		(73	)		(311	)		(64	)		-		(570	)
Recoveries		109			97			297			37			-		540
Net charge-offs		(13	)		24			(14	)		(27	)		-		(30	)
Provision		(18	)		209			11			(353	)		151		-
Ending balance	$	159		$	501		$	1,129		$	1,996		$	421	$	4,206

14.

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.

The following presents by class, information related to the Company’s impaired loans as of the dates indicated (in thousands).

	At September 30, 2016						Period ended September 30, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Three months Average Recorded Investment		Three months Interest Income Recognized		Nine months Average Recorded Investment		Nine months Interest Income Recognized
With no related allowance recorded:
Consumer and credit card	$	282	$	282		-	$	283	$	5	$	376	$	14
Residential real estate and home equity		668		668		-		672		-		660		1
Commercial and industrial		572		572		-		579		5		862		16
Commercial real estate		2,284		2,284		-		2,292		19		842		19
		3,806		3,806		-		3,826		29		2,740		50
With an allowance recorded:
Commercial and industrial	$	1,545	$	1,623	$	344	$	1,407	$	17	$	1,263	$	46
Commercial real estate		4,831		4,831		581		4,841		56		4,751		168
		6,376		6,454		925		6,248		73		6,014		214
Total:
Consumer and credit card	$	282	$	282	$	-	$	283	$	5	$	376	$	14
Residential real estate and home equity		668		668		-		672		-		660		1
Commercial and industrial		2,117		2,195		344		1,986		22		2,125		62
Commercial real estate		7,115		7,115		581		7,133		75		5,593		187
Total	$	10,182	$	10,260	$	925	$	10,074	$	102	$	8,754	$	264

	At December 31, 2015						Period ended September 30, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Three months Average Recorded Investment		Three months Interest Income Recognized		Nine months Average Recorded Investment		Nine months Interest Income Recognized
With no related allowance recorded:
Consumer and credit card	$	548	$	548		-	$	469	$	7	$	469	$	19
Residential real estate and home equity		668		668		-		733		-		552		8
Commercial and industrial		926		926		-		914		5		1,106		21
Commercial real estate		126		126		-		451		2		468		2
		2,268		2,268		-		2,567		14		2,595		50
With an allowance recorded:
Commercial and industrial	$	944	$	1,021	$	144	$	1,134	$	13	$	1,016	$	43
Commercial real estate		4,579		4,579		435		6,706		53		7,727		163
		5,523		5,600		579		7,840		66		8,743		206
Total:
Consumer and credit card	$	548	$	548	$	-	$	469	$	7	$	469	$	19
Residential real estate and home equity		668		668		-		733		-		552		8
Commercial and industrial		1,870		1,947		144		2,048		18		2,122		64
Commercial real estate		4,705		4,705		435		7,157		55		8,195		165
Total	$	7,791	$	7,868	$	579	$	10,407	$	80	$	11,338	$	256

15.

The allocation of the allowance for loan losses summarized on the basis of the Company’s impairment methodology was as follows at the dates indicated (in thousands):

	Consumer and Credit Card		Residential Real Estate and Home Equity		Commercial and Industrial		Commercial Real Estate		Total
September 30, 2016
Individually evaluated for impairment	$	-	$	-	$	344	$	581	$	925
Collectively evaluated for impairment		120		529		1,172		1,500		3,321
Allocated	$	120	$	529	$	1,516	$	2,081		4,246
Unallocated										346
									$	4,592
December 31, 2015
Individually evaluated for impairment	$	-	$	-	$	144	$	435	$	579
Collectively evaluated for impairment		144		561		1,177		1,564		3,446
Allocated	$	144	$	561	$	1,321	$	1,999		4,025
Unallocated										308
									$	4,333

The recorded investment in loans summarized on the basis of the Company’s impairment methodology at the dates indicated was as follows (in thousands):

	Consumer and Credit Card		Residential Real Estate and Home Equity		Commercial and Industrial		Commercial Real Estate		Total
September 30, 2016
Individually evaluated for impairment	$	282	$	668	$	2,117	$	7,115	$	10,182
Collectively evaluated for impairment		35,876		149,694		101,991		92,390		379,951
Ending balance	$	36,158	$	150,362	$	104,108	$	99,505	$	390,133

	Consumer and Credit Card		Residential Real Estate and Home Equity		Commercial and Industrial		Commercial Real Estate		Total
December 31, 2015
Individually evaluated for impairment	$	548	$	668	$	1,870	$	4,705	$	7,791
Collectively evaluated for impairment		40,039		136,977		97,343		96,038		370,397
Ending balance	$	40,587	$	137,645	$	99,213	$	100,743	$	378,188

Loans on non-accrual status were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2016		2015
Consumer and credit card	$	-	$	-
Residential real estate and home equity		816		668
Commercial and industrial		236		554
Commercial real estate		2,315		-
Total	$	3,367	$	1,222

Credit Quality Indicators

The Company uses the following definitions for criticized and classified commercial loans and commercial real estate loans which are consistent with regulatory guidelines:

Special Mention

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 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.

16.

Substandard

Loans that are inadequately protected by the current sound 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.

Doubtful

Loans that have all the weaknesses inherent in a Substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Specific pending factors may strengthen the credit, therefore deferring a Loss classification.

Loss

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.

As of the dates indicated and based on the most recent analysis performed, the recorded investment by risk category and class of loans is as of the dates indicated (in thousands):

	September 30, 2016				December 31, 2015
	Commercial and Industrial		Commercial Real Estate		Commercial and Industrial		Commercial Real Estate
Pass	$	101,331	$	92,499	$	96,225	$	91,132
Special mention		1,200		4,374		925		4,592
Substandard		1,577		2,632		2,063		5,019
Total	$	104,108	$	99,505	$	99,213	$	100,743

For residential real estate and consumer loan classes, the Company evaluates credit quality primarily based upon the aging status of the loan and by payment activity.

The following table presents the recorded investment in residential real estate and consumer loans based on payment activity as of the dates indicated (in thousands):

	September 30, 2016				December 31, 2015
	Consumer and Credit Card		Residential Real Estate and Home Equity		Consumer and Credit Card		Residential Real Estate and Home Equity
Performing	$	36,158	$	149,546	$	40,587	$	136,975
Non-performing		-		816		-		670
Total	$	36,158	$	150,362	$	40,587	$	137,645

17.

Age Analysis of Past Due Loans

The following tables present past due loans aged as of the dates indicated (in thousands).

	September 30, 2016
	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total  Past Due		Loans Not Past Due		Total Loans
Consumer and credit card	$	103	$	34	$	-	$	137	$	36,021	$	36,158
Residential real estate and home equity		72		89		434		595		149,767		150,362
Commercial and industrial		99		-		168		267		103,841		104,108
Commercial real estate		-		-		2,315		2,315		97,190		99,505
Total	$	274	$	123	$	2,917	$	3,314	$	386,819	$	390,133

	December 31, 2015
	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total  Past Due		Loans Not Past Due		Total Loans
Consumer and credit card	$	48	$	13	$	-	$	61	$	40,526	$	40,587
Residential real estate and home equity		160		98		401		659		136,986		137,645
Commercial and industrial		236		-		-		236		98,977		99,213
Commercial real estate		-		-		-		-		100,743		100,743
Total	$	444	$	111	$	401	$	956	$	377,232	$	378,188

Troubled Debt Restructurings

The following table summarizes troubled debt restructurings that occurred during the periods indicated (dollars in thousands):

	For the three months ended September 30,
	2016				2015
	Number of Contracts		Recorded Investment (as of period end)		Number of Contracts		Recorded Investment (as of period end)
Consumer and credit card		-	$	-		1	$	188
Total		-	$	-		1	$	188

	For the nine months ended September 30,
	2016				2015
	Number of Contracts		Recorded Investment (as of period end)		Number of Contracts		Recorded Investment (as of period end)
Consumer and credit card		-	$	-		7	$	279
Commercial real estate		4		392		-		-
Total		4	$	392		7	$	279

There were no 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 and nine months ended September 30, 2016 and 2015.

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.

18.

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.

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.

19.

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 Held for Sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in Level 2 classification.

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 September 30, 2016 and December 31, 2015, the fair value of loan commitments was not material.

20.

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

	September 30, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	31,282	$	31,282	$	31,282	$	-	$	-
Securities available-for-sale		95,676		95,676		-		95,179		497
Loans held for sale		755		755		-		755		-
Loans (net of allowance)		386,158		382,919		-		-		382,919
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,383		1,383		-		-		1,383
Financial liabilities
Non-interest-bearing deposits	$	123,353	$	123,353	$	-	$	123,353	$	-
Interest-bearing deposits		366,195		366,187		-		366,187		-
Borrowings		4,293		4,293		-		4,293		-
Accrued interest payable		65		65		-		-		65

	December 31, 2015
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	31,892	$	31,892	$	31,892	$	-	$	-
Securities available-for-sale		87,797		87,797		-		87,797		-
Loans (net of allowance)		374,180		371,930		-		-		371,930
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,307		1,307		-		-		1,307
Financial liabilities
Non-interest-bearing deposits	$	124,023	$	124,023	$	-	$	124,023	$	-
Interest-bearing deposits		350,514		350,957		-		350,957		-
Borrowings		4,520		4,520		-		4,520		-
Accrued interest payable		74		74		-		-		74

21.

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 the dates indicated (in thousands):

	September 30, 2016
			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	$	27,297	$	-	$	27,297	$	-
Corporate bonds		2,866		-		2,866		-
State and municipal obligations		21,226		-		21,226		-
Collateralized mortgage obligations		27,710		-		27,710		-
Mortgage-backed securities		16,080		-		16,080		-
Other equity securities		497		-		-		497
Total	$	95,676	$	-	$	95,179	$	497

	December 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	$	20,842	$	-	$	20,842	$	-
Corporate bonds		3,727		-		3,727		-
State and municipal obligations		22,261		-		22,261		-
Collateralized mortgage obligations		22,801		-		22,801		-
Mortgage-backed securities		18,166		-		18,166		-
Total	$	87,797	$	-	$	87,797	$	-

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 September 30, 2016 and December 31, 2015, impaired loans consisted primarily of loans secured by 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.

22.

The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at the dates indicated (in thousands).

	September 30, 2016
	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	$	10,182	$	-	$	-	$	10,182
Real estate owned		68		-		-		68

	December 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	$	7,791	$	-	$	-	$	7,791
Real estate owned		68		-		-		68

Note 6 – Sale-Leaseback and Capital Lease Obligation

In January 2016, the Company entered into a sale-leaseback of its corporate headquarters building. Under the arrangement, the Company sold and leased the building back for a period of fifteen years, with options to extend the term of the lease for two additional periods of ten years each. The gain of $3.1 million realized in the transaction has been netted against the right of use asset and will result in a reduction of depreciation expense over the term of the lease.

The lease has been accounted for as a capital lease, and the building is included in property and equipment. The present value of the net minimum lease payments has been capitalized and is being amortized over the life of the lease. Under the terms of the lease agreements, minimum payments of $54,000 are due monthly, increasing 2% annually thereafter, through January 2031. The lease has been imputed with interest at an annual rate of 3.91%.

At September 30, 2016, property under capital leases consists of the corporate headquarters with a cost, net of the deferred gain, of $5.0 million. Accumulated depreciation on the property under capital leases was $274,000 at September 30, 2016.

Depreciation expense on property under capital leases was $51,000 and $136,000 for the three and nine months ended September 30, 2016, respectively.

The future minimum lease payments under capital leases are as follows (in thousands):

2016	$	161
2017		655
2018		668
2019		682
2020		695
Thereafter		7,798
Total minimum lease payments		10,659
Less amounts representing interest		2,643
Present value of net minimum lease payments	$	8,016

23.

Note 7 – Federal Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and franchise tax returns in Ohio. Income tax benefit for the dates indicated include the following components (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2016			2015			2016			2015
Current	$	(11	)	$	-		$	73		$	-
Deferred		(179	)		96			(306	)		96
Valuation allowance		-			(10,784	)		-			(10,784	)
Total	$	(190	)	$	(10,688	)	$	(233	)	$	(10,688	)

The difference between the financial statement tax provision and amounts computed by applying the statutory federal income tax rate to income before income taxes was as follows (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2016			2015			2016			2015
Federal income taxes calculated at the expected statutory rate	$	(209	)	$	136		$	(72	)	$	266
Increase (decrease) in taxes resulting from:
Nontaxable dividend and interest income		(30	)		(29	)		(71	)		(70	)
Increase in cash surrender value of life insurance - net		(55	)		(56	)		(193	)		(194	)
Nondeductible acquisition costs		98			-			98			-
Other		6			45			5			94
Valuation allowance		-			(10,784	)		-			(10,784	)
Income tax benefit per financial statements	$	(190	)	$	(10,688	)	$	(233	)	$	(10,688	)

Deferred tax assets and liabilities were comprised of the following at the dates indicated (in thousands):

	September 30, 2016			December 31, 2015
Deferred tax assets:
Allowance for loan losses	$	1,561		$	1,473
Deferred compensation		308			300
Alternative minimum tax carry forward		212			155
Expenses on foreclosed property		-			14
Deferred gain on sale of building		1,009			-
NOL carry forward		8,258			9,020
Other		307			98
Subtotal		11,655			11,060
Deferred tax liabilities:
FHLB stock dividends		(307	)		(307	)
Unrealized gains on available-for-sale securities		(512	)		(225	)
Depreciation		(55	)		(55	)
Other		(314	)		(33	)
Subtotal		(1,188	)		(620	)
Net deferred tax asset		10,467			10,440
Less: valuation allowance		-			-
Total	$	10,467		$	10,440

At September 30, 2016, the Company had a $24.3 million net operating loss carryforward that begins to expire in 2030.

24.

Note 8 - Earnings per Common Share

The Company issued restricted stock awards with non-forfeitable dividend rights, which are considered participating securities. As such, earnings per share is computed using the two-class method as required by Accounting Standard Codification (“ASC”) 206-10-45. Basic earnings per common share is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period which excludes the participating securities. Diluted earnings per common share includes the dilutive effect of additional potential common shares from stock compensation awards and warrants, but excludes awards considered participating securities.

Basic and diluted net income per common share calculations for the three and nine months ended September 30 are as follows (in thousands, except share and per share amounts):

follows (in thousands, except share and per share amounts):

	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Basic
Net income (loss)	$	(426	)	$	11,088		$	21		$	11,471
Less: undistributed earnings allocated to unvested restricted shares		(8	)		137			-			121
Net earnings (losses) allocated to common shareholders	$	(418	)	$	10,951		$	21		$	11,350
Weighted average common shares outstanding including shares considered participating securities		7,339,710			7,282,365			7,332,482			7,269,222
Less: average participating securities		(140,205	)		(90,015	)		(132,977	)		(76,872	)
Weighted average shares		7,199,505			7,192,350			7,199,505			7,192,350
Basic earnings (loss) per common share	$	(0.06	)	$	1.52		$	0.00		$	1.58
Diluted
Net earnings (losses) allocated to common shareholders	$	(418	)	$	10,951		$	21		$	11,350
Weighted average common shares outstanding for basic earnings per common share		7,199,505			7,192,350			7,199,505			7,192,350
Dilutive effect of assumed exercise of average participating securities		-			19,809			23,227			19,015
Average participating securities		140,205			90,015			132,977			76,872
Average common shares outstanding – diluted		7,339,710			7,302,174			7,355,709			7,288,237
Diluted earnings (loss) per common share	$	(0.06	)	$	1.52		$	0.00		$	1.58

At September 30, 2016, 51,578 stock options were excluded from the diluted weighted average common share calculation for the three months ended September 30, 2016, due to the net loss for the quarter.

There were 14,985 of anti-dilutive stock options excluded from the diluted weighted average common share calculation for the three months ended September 30, 2016. At September 30, 2015, 19,324 of anti-dilutive stock options were excluded from the diluted weighted average common share calculations.

25.

Note 9 – 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 shares 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.

Awards for 78,036 and 53,640 restricted shares were granted under the Company’s 2014 Restricted Stock Plan during the nine months ended September 30, 2016 and 2015, respectively. The awards vest ratably over a five-year period. There were 1,429 shares and 3,434 restricted shares forfeited in the three months and nine months ended September 30, 2016, respectively. There were 9,290 restricted shares forfeited in the three months and nine months ended September 30, 2015. There were 146,411 and 81,732 unvested restricted shares at September 30, 2016 and December 31, 2015, respectively. Compensation expense associated with amortization of restricted stock was $22,000 and $25,000 for the three months ended September 30, 2016 and 2015, respectively. Compensation expense associated with the amortization of restricted stock was $83,000 and $59,000 in the nine months ended September 30, 2016 and 2015, 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.

Note 10 – Subsequent Event

On October 3, 2016, First Commonwealth Financial Corporation (“First Commonwealth”) and the Company announced that they had entered into a definitive merger agreement which provides for the merger of the Company with and into First Commonwealth following the satisfaction of certain closing conditions, including approval by the Company’s shareholders and approval by appropriate bank regulatory authorities (the “Merger”). Under the terms of the definitive merger agreement, which has been unanimously approved by the board of directors of both companies, the Company’s shareholders will be entitled to receive either 1.427 shares of First Commonwealth common stock or $14.50 in cash for each common share of the Company, subject to proration provisions set forth in the definitive merger agreement. Aggregate cash consideration to Company shareholders is fixed at $21,283,773, which is approximately 20% of the Merger consideration, and the remaining Merger consideration will be in the form of stock consideration. The Merger is expected to be completed in the second quarter of 2017.

26.

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

Introduction

DCB Financial Corp is a financial holding company headquartered in Lewis Center, Ohio, and was incorporated under the laws of the State of Ohio in 1997, as a bank holding company under the Bank Holding Company Act of 1956, as amended. DCB is the holding company for The Delaware County Bank and Trust Company, a commercial bank organized in 1950 and chartered under the laws of the State of Ohio (the “Bank”).

We also have two wholly-owned, non-bank subsidiaries, DCB Title Services, LLC, an Ohio limited liability company (“DCB Title”) and DCB Insurance Services, LLC, an Ohio limited liability company (“DCB Insurance”). DCB Title provides standard real estate title services, while DCB Insurance provides a variety of insurance products. The activities of each of these subsidiaries are not material to our operations. The Bank has two wholly-owned subsidiaries, ORECO, Inc., an Ohio corporation, which is used to hold the Bank’s foreclosed real estate, and 110 Riverbend, LLC, which was used to hold real estate owned by the Bank prior to the sale of such real estate in January 2016.

We offer full-service banking with a broad range of financial products to meet the needs of our commercial, retail, government, and investment management customers located primarily in Delaware, Franklin and Union Counties in Ohio. Depository account services include interest and non-interest-bearing checking accounts, money market accounts, savings accounts, time deposit accounts, and individual retirement accounts. Our lending activities include the making of residential and commercial mortgage loans, business lines of credit, working capital facilities and business term loans, as well as installment loans, home equity loans, and personal lines of credit to individuals. Investment management and trust services include personal trust, employee benefit trust, investment management, custodial, and financial planning. Through Raymond James Financial Services, Inc., member FINRA/SIPC, we provide financial counseling and brokerage services. We also offer safe deposit boxes, wire transfers, collection services, drive-up banking facilities, 24-hour night depositories, automated teller machines, 24-hour telephone banking, and internet banking.

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; (ix) other risks and uncertainties detailed from time to time in the filings of the Company with the Securities and Exchange Commission; (x) ability to obtain regulatory approvals for the Merger in a timely manner and without significant expense or other burdens; (xi) ability to meet other closing conditions to the Merger, including approval by our shareholders; (xii) delay in closing the Merger; (xiii) difficulties and delays in integrating the businesses of our Company and First Commonwealth or fully realizing cost savings and other benefits; and (xiv) business disruption following the Merger.

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.

27.

Overview of the third quarter of 2016

· Total assets were $565.4 million at September 30, 2016, compared with $541.3 million at December 31, 2015.

· Total loans were $391.5 million at September 30, 2016, compared with $378.5 million at December 31, 2015.

· Total deposits were $489.5 million at September 30, 2016, compared with $474.5 million at December 31, 2015.

· Net loss was $426,000 for the three months ended September 30, 2016, compared with net income of $11.1 million for the year-ago quarter and $331,000 for the second quarter of 2016. For the nine months ended September 30, 2016, net income was $21,000, compared with $11.5 million for the first nine months of 2015.

· Net income (loss) per diluted share was $(0.06) for the three months ended September 30, 2016, compared with $1.52 per diluted share for the year-ago quarter and $0.04 per diluted share for the second quarter of 2016. Net income per diluted share was $0.00 for the nine months ended September 30, 2016 compared with $1.58 per diluted share for the same period in 2015.

· Third quarter results for 2016 included after-tax costs associated with the recently announced acquisition of the Company by First Commonwealth Financial Corporation ("First Commonwealth") of $651,000 or $0.09 per diluted share. In the third quarter of 2015, the Company reversed a valuation allowance that had previously been recorded against its net deferred tax assets, resulting in a one-time tax benefit in the third quarter of 2015 of $10.7 million or $1.46 per diluted share.

· A pre-tax loss of $616,000 or $0.08 per diluted share was recorded for the third quarter of 2016, compared with pre-tax income of $400,000 or $0.06 per diluted share in the year-ago quarter. A pre-tax loss of $212,000 or $0.03 per diluted share was recorded for the nine months ended September 30, 2016, compared with pre-tax income of $783,000 or $0.11 per diluted share for the nine months ended September 30, 2015.

· Net interest income was $4.2 million for each of the three months ended September 30, 2016, September 30, 2015 and June 30, 2016. Net interest income was $12.6 million for the nine months ended September 30, 2016 and $12.5 million for the year ago period.

· The net interest margin was 3.31% for the three months ended September 30, 2016, compared with 3.35% in the year-ago quarter and 3.41% in the second quarter of 2016. The net interest margin was 3.33% in the first nine months of 2016, compared with 3.41% in the year-ago period.

· There was no provision for loan losses recorded in the three months ended September 30, 2016, compared to a negative provision for loan losses in the year ago quarter. There was no provision for loan losses recorded in the nine months ended September 30, 2016 and 2015..

· Non-interest income was 28.8% of total revenue in the quarter ended September 30, 2016, compared to 22.0% in the year-ago quarter and 29.8% in the second quarter of 2016.

· Our efficiency ratio was 110.3% for the three months ended September 30, 2016, compared to 95.0% in the year-ago quarter and 93.7% in the second quarter of 2016.

· Income tax benefit was $190,000 in the third quarter of 2016. An income tax benefit of $233,000 was recorded for the nine months ended September 30, 2016. There was a $10.7 million income tax benefit recorded in the third quarter and first nine monthsof 2015.

· Total non-performing assets (including troubled debt restructurings ”TDR’s”) were $9.9 million or 1.37% of total assets at September 30, 2016, compared to $8.0 million or 1.43% of total assets at June 30, 2016 and $7.3 million or 1.35% of total assets at December 31, 2015.

· Total non-performing assets (excluding TDR’s) were $3.4 million or 0.23% of total assets at September 30, 2016, compared to $1.5 million or 0.27% of total assets at June 30, 2016 and $1.3 million or 0.24% at December 31, 2015.

28.

Pending Merger

On October 3, 2016, we announced that we entered into a definitive merger agreement which provides for the merger of the Company with and into First Commonwealth following the satisfaction of certain closing conditions, including approval by the Company’s shareholders and approval by appropriate bank regulatory authorities (the “Merger”). Under the terms of the definitive merger agreement, which has been unanimously approved by the board of directors of both companies, the Company’s shareholders will be entitled to receive either 1.427 shares of First Commonwealth common stock or $14.50 in cash for each common share of the Company, subject to proration provisions set forth in the definitive merger agreement. Aggregate cash consideration to Company shareholders is fixed at $21,283,773, which is approximately 20% of the Merger consideration, and the remaining Merger consideration will be in the form of stock consideration. The Merger is expected to be completed in the second quarter of 2017.

Comparison of Results of Operations

General

A net loss of $426,000 or $0.06 per diluted share was recorded for the three months ended September 30, 2016, compared to net income of $11.1 million or $1.52 per diluted share for the same period in 2015 and to net income of $331,000 or $0.04 per diluted share for the second quarter of 2016.

Net income was $21,000 or $0.00 per diluted share for the nine months ended September 30, 2016, compared to net income of $11.5 million or $1.58 per diluted share for the same period in 2015.

Third quarter results for 2016 included after-tax costs associated with the recently announced acquisition of the Company by First Commonwealth of $651,000 or $0.09 per share. In the third quarter of 2015, we reversed a valuation allowance that had previously been recorded against our net deferred tax assets, resulting in a one-time tax benefit in the third quarter of 2015 of $10.7 million or $1.46 per diluted share. A pre-tax loss of $616,000 or $0.08 per diluted share was recorded for the third quarter of 2016, compared with pre-tax income of $400,000 or $0.06 per diluted share in the year-ago quarter.

Net income was $21,000 or $0.00 per diluted share for the nine months ended September 30, 2016, compared to net income of $11.5 million or $1.58 per diluted share for the same period in 2015. A pre-tax loss of $212,000 or $0.03 per diluted share was recorded for the nine months ended September 30, 2016, compared with pre-tax income of $783,000 or $0.11 per diluted share for the nine months ended September 30, 2015.

Net Interest Income

Net interest income totaled $4.3 million in the quarter ended September 30, 2016, compared to $4.2 million in third quarter of 2015 and $4.2 million in the second quarter of 2016. The net interest margin was 3.31% in the third quarter of 2016, compared to 3.35% in the year-ago quarter and 3.41% in the second quarter of 2016. The decline in the net interest margin compared to the second quarter of 2016 was attributable to growth in interest-earning assets being concentrated in lower yielding securities and cash.

Average interest-earning assets were $509.6 million in the third quarter of 2016, compared to $496.5 million in the year-ago quarter and $499.1 million in the second quarter of 2016. Average loans outstanding in the third quarter of 2016 were $394.4 million or 69.2% of total average interest-earning assets, compared with $383.3 million or 71.5% in the year-ago quarter and $395.7 million or 79.3% of total average interest-earning assets in the second quarter of 2016.

Average interest-bearing deposit balances were $356.8 million in the third quarter of 2016, compared to $350.4 million in the year-ago quarter and $342.6 million in the second quarter of 2016. The average balances of interest-bearing demand, savings and money market accounts (transaction accounts) increased $24.2 million to $301.4 million in the third quarter of 2016 compared to the year-ago quarter, partially offsetting a decrease in the average balance of time deposits of $17.7 million compared to the year-ago quarter. Transaction accounts comprised 84.5% of total interest-bearing deposits in the third quarter of 2016, compared to 79.1% in the year-ago quarter and 84.7% of total interest-bearing deposits in the secondquarter of 2016.

Net interest income totaled $12.6 million in the nine months ended September 30, 2016 and $12.5 million in the year-ago period. The net interest margin was 3.33% for the nine months ended September 30, 2016, compared with 3.41% in the year-ago period.

Average interest-earning assets were $501.5 million in the first nine months of 2016, which was an increase of $9.8 million or 2.0% from the year-ago period. Average loans outstanding in the first nine months of 2016 increased $9.8 million compared to the year-ago period, and totaled 77.9% of total interest-earning assets in the nine months ended September 30, 2016, compared with 77.4% in the year-ago period.

29.

The average balance in time deposits decreased $18.5 million in the first nine months of 2016 compared with the year-ago period, while the average balances in lower-costing transaction accounts increased $13.4 million. Transaction accounts comprised 83.8% of total interest-bearing deposits in the first nine months of 2016, compared to 78.9% in the first nine months of 2015. The changes in the composition of average deposit balances in the three and nine months ended September 30, 2016 was primarily the result of the movement of large municipal time deposit maturities into money market accounts and overnight sweep accounts.

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 ended September 30,
	2016								2015
	Outstanding balance			Interest Earned/paid		Yield/rate			Outstanding balance			Interest Earned/paid		Yield/rate
Assets
Interest earning assets:
Interest bearing deposits		21,473			28		0.51	%		27,563			17		0.26	%
Investment securities		93,711			494		2.11	%		85,648			473		2.16	%
Consumer loans and credit cards		37,494			494		5.23	%		39,972			530		5.26	%
Residential real estate loans and home equity		151,217			1,477		3.88	%		135,455			1,285		3.76	%
Commercial and industrial		104,682			1,070		4.00	%		100,732			1,003		3.90	%
Commercial real estate		100,999			1,116		4.33	%		107,164			1,161		4.30	%
Total loans		394,392			4,157		4.16	%		383,323			3,979		4.10	%
Total interest-earning assets		509,576			4,679		3.63	%		496,534			4,469		3. 55%
Non-interest-earning assets:
Other assets		63,080								42,822
Allowance for loan losses		(4,601	)							(4,254	)
Net unrealized gains on securities AFS		1,586								864
Total assets		569,641								535,966
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Interest-bearing demand		88,129			60		0.27	%		80,287			26		0.13	%
Savings		50,777			15		0.11	%		43,628			12		0.10	%
Money market		162,468			147		0.36	%		153,318			131		0.34	%
Time accounts		55,406			81		0.57	%		73,151			88		0.48	%
Total interest-bearing deposits		356,780			303		0.34	%		350,384			257		0.29	%
Borrowed funds		9,690			41		1.66	%		7,759			35		1.81	%
Obligations under capital lease		8,069			81		3.97	%		-			-		-
Total interest-bearing liabilities		374,539			425		0.45	%		358,143			292		0.32	%
Non-interest-bearing liabilities and shareholders’ equity:
Demand deposits		123,214								126,128
Other liabilities		12,731								4,927
Shareholders’ equity		59,157								46,768
Total liabilities and shareholders’ equity		569,641								535,966
Net interest income; interest rate spread					4,254		3.18	%					4,177		3.23	%
Net interest margin (net interest income as a percent of average interest-earning assets)							3.31	%							3.35	%
Average interest-earning assets to average interest-bearing liabilities		136.05	%							138.64	%

30.

	Nine months ended September 30,
	2016								2015
	Outstanding balance			Interest Earned/paid		Yield/rate			Outstanding balance			Interest Earned/paid		Yield/rate
Assets
Interest earning assets:
Interest bearing deposits		20,658			80		0.51	%		26,167			46		0.24	%
Investment securities		90,273			1,508		2.23	%		84,756			1,460		2.27	%
Consumer loans and credit cards		39,059			1,513		5.16	%		39,210			1,598		5.45	%
Residential real estate loans and home equity		145,654			4,214		3.91	%		133,544			3,792		3.80	%
Commercial and industrial		102,624			3,037		3.89	%		102,350			3,036		3.91	%
Commercial real estate		103,276			3,390		4.31	%		105,720			3,458		4.91	%
Total loans		390,613			12,154		4.12	%		380,824			11,884		4.30	%
Total interest-earning assets		501,544			13,742		3.63	%		491,747			13,390		3.74	%
Non-interest-earning assets:
Other assets		56,757								43,175
Allowance for loan losses		(4,471	)							(4, 209)
Net unrealized gains on securities AFS		1,327								1,094
Total assets		555,157								531,807
Liabilities and shareholders’ equity
Interest-bearing liabilities:
Interest-bearing demand		84,861			157		0.25	%		80,583			71		0.12	%
Savings		49,396			41		0.11	%		43,425			33		0.10	%
Money market		158,822			418		0.35	%		155,706			390		0.34	%
Time accounts		56,513			229		0.54	%		74,972			272		0.49	%
Total interest-bearing deposits		349,592			845		0.32	%		354,686			766		0.29	%
Borrowed funds		10,717			126		1.56	%		6,304			106		2.25	%
Obligations under capital lease		8,121			215		3.49	%		-			-		-
Total interest-bearing liabilities		368,430			1,186		0.43	%		360,990			872		0.32	%
Non-interest-bearing liabilities and shareholders’ equity:
Demand deposits		123,364								119,593
Other liabilities		4,775								4,491
Shareholders’ equity		58,588								46,733
Total liabilities and shareholders’ equity		555,157								531,807
Net interest income; interest rate spread					12,556		3.20	%					12,518		3.42	%
Net interest margin (net interest income as a percent of average interest-earning assets)							3.33	%							3.41	%
Average interest-earning assets to average interest-bearing liabilities		136.11	%							134.22	%

31.

Asset Quality and Allowance for Loan Losses

Delinquent loans (including non-accrual loans) totaled $3.7 million or 0.94% of total loans at September 30, 2016, compared to $1.6 million or 0.41% of total loans at June 30, 2016 and $1.5 million or 0.41% of total loans at December 31, 2015. Non-accrual loans totaled $3.4 million or 0.86% of total loans at September 30, 2016, compared to $1.4 million or 0.36% of total loans at June 30, 2016 and $1.2 million or 0.32% of total loans at December 31, 2015. The increase in non-accrual loans resulted from a commercial real estate mortgage with a balance of $2.1 million that was moved to non-accrual status in the third quarter of 2016.

The following tables present past due loans aged as of the dates indicated (dollars in thousands).

Delinquent loans	September 30, 2016					June 30, 2016					December 31, 2015
	$		%(1)			$		%(1)			$		%(1)
30 days past due	$	202		0.05	%	$	158		0.04	%	$	191		0.05	%
60 days past due		123		0.03	%		56		0.01	%		111		0.03	%
90 days past due and still accruing		-		0.00	%		-		0.00	%		2		0.01	%
Non-accrual		3,367		0.86	%		1,423		0.36	%		1,222		0.32	%
Total	$	3,692		0.94	%	$	1,637		0.41	%	$	1,526		0.41	%

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

Non-performing assets were $9.9 million or 1.43% of total assets at September 30, 2016, compared to $8.0 million or 1.43% of total assets at June 30, 2016 and $7.3 million or 1.35% of total assets at December 31, 2015. 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 $6.5 million at September 30, 2016, compared to $6.5 million at June 30, 2016 and $6.0 million at December 31, 2015.

The following table represents information concerning the aggregate amount of non-performing assets (in thousands):

Non-performing assets	September 30, 2016		June 30, 2016		December 31, 2015
Non-accruing loans:
Consumer loans and credit cards	$	-	$	-	$	-
Residential real estate loans and home equity		816		742		668
Commercial and industrial		236		539		554
Commercial real estate		2,315		142		-
Total non-accruing loans		3,367		1,423		1,222
Accruing loans delinquent 90 days or more		-		-		2
Total non-performing loans (excluding TDR’s)		3,367		1,423		1,224
Other real estate and repossessed assets		68		68		68
Total non-performing assets (excluding TDR’s)	$	3,435	$	1,491	$	1,292
Restructured loans not included above(1)	$	6,431	$	6,486	$	6,040
Total non-performing loans (including TDR’s)	$	9,798	$	7,909	$	7,264
Total non-performing assets (including TDR’s)	$	9,866	$	7,977	$	7,332

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

Net recoveries of $2,000 were recorded in the third quarter of 2016, compared to net recoveries of $255,000 in the second quarter of 2016 and net recoveries of $192,000 in the year ago quarter. There was no provision for loan losses recorded in the three months and nine months ended September 30, 2016. We recorded a negative provision for loan losses of $150,000 in the third quarter of 2015, due primarily to the net recoveries recorded in that quarter and to the favorable impact on the allowance for loan losses of the reduction in non-performing loans during that quarter. The negative provision for loan losses recorded in the third quarter of 2015 had the effect of offsetting the provision for loan losses of $150,000 that was recorded in the first quarter of 2015, resulting in no provision for loan losses for the nine months ended September 30, 2015. The allowance for loan losses was $4.6 million at both September 30, 2016 and at June 30, 2016 and was $4.3 million at December 31, 2015. The ratio of the allowance for loan losses to total loans was 1.18% at September 30, 2016, compared to 1.17% at June 30, 2016 and 1.14% at December 31, 2015.

The ratio of the allowance for loan losses to non-performing loans (including TDR’s) was 46.9% at September 30, 2016, compared to 58.0% at June 30, 2016 and 59.7% at December 31, 2015. The ratio of the allowance for loan losses to non-accrual loans was 136% at September 30, 2016, compared to 323% at June 30, 2016 and 355% at December 31, 2015.

32.

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 loan 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 September 30, 2016, $346,000 or 7.5% of the allowance for loan losses was considered to be “unallocated,” compared to $263,000 or 5.7% of the allowance for loan losses at June 30, 2016 and $308,000 or 7.1% of the allowance for loan losses at December 31, 2015.

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).

	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Allowance for loan losses, beginning of period	$	4,590		$	4,164		$	4,333		$	4,236
Loans charged-off		(68	)		(63	)		(156	)		(570	)
Recoveries of loans previously charged-off		70			255			415			540
Net recoveries (charge-offs)		2			192			259			(30	)
Provision for loan losses		-			(150	)		-			-
Allowance for loan losses, end of period	$	4,592		$	4,206		$	4,592		$	4,206

Non-interest Income

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

	Three months ended September 30,										Nine months ended September 30,
	2016		2015			$ Change		% Change			2016		2015			$ Change			% Change
Service charges	$	560	$	523		$	37		7.07	%	$	1,596	$	1,475		$	121			8.20	%
Wealth management fees		463		438			25		5.71	%		1,355		1,217			138			11.34	%
Treasury management fees		134		81			53		65.43	%		348		203			145			71.34	%
Income from Bank-owned life insurance		163		163			-		0.00	%		569		571			(2	)		(0.35	)%
Net gain on sale of loans		351		-			351		100.00	%		829		-			829			100.00	%
Net losses on sale of REO		-		(19	)		19		100.00	%		-		(20	)		20			100.00	%
Other non-interest income		47		37			10		27.03	%		144		115			29			25.22	%
Total non-interest income	$	1,718	$	1,223		$	495		40.47	%	$	4,841	$	3,561		$	1,280			35.94	%

Non-interest income was $1.7 million in the third quarter of 2016, compared to $1.2 million in the year-ago quarter and $1.8 million in the second quarter of 2016. Gains on sales of loans totaled $351,000 in the third quarter of 2016, and $829,000 in the first nine months of 2016, reflecting the launch since the second quarter of secondary market sales of SBA and residential mortgage loans. The total principal amount of loan sales in the third quarter was $9.6 million, of which $2.1 million were the 75% guaranteed portion of SBA loans and $7.5 million were residential mortgages. Gains on sales of SBA loans and residential mortgages in the third quarter totaled $191,000 and $160,000, respectively, compared to $414,000 and $64,000 in the second quarter. The Company did not sell any loans in 2015 or in the second quarter of 2016. Service charges, wealth management fees and treasury management fees increased an aggregate $115,000 or 11.0% in the third quarter of 2016 compared with the year-ago quarter, primarily from the impact of changes to certain of the Bank’s fees and service charges and from business development activities.

Non-interest income was $4.8 million in the first nine months of 2016, compared to $3.6 million in the first nine months of 2015. Gains on sales of loans accounted for approximately 65% of the increase in non-interest income, with the balance of the increase being driven by changes to certain of the Bank’s fees and service charges and from business development activities.

Non-interest income accounted for 28.8% of total revenue in the third quarter of 2016, compared to 22.0% in the year-ago quarter and 29.8% in the second quarter of 2016. Non-interest income accounted for 27.8% of total revenue in the first nine months of 2016, compared with 22.1% in the year-ago period.

33.

Non-interest Expense

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

	Three months ended September 30,										Nine months ended September 30,
	2016		2015		$ Change			% Change			2016		2015		$ Change			% Change
Salaries and benefits	$	3,186	$	2,771	$	415			14.98	%	$	9,356	$	8,302	$	1,054			12.70	%
Occupancy and equipment		1,016		1,000		16			1.60	%		2,963		2,965		(2	)		(0.07	)%
Professional services		218		405		(187	)		(46.17	)%		905		1,042		(137	)		(13.15	)%
Merger related expenses		987		-		987			-%			987		-		987			0.00	%
Advertising		108		169		(61	)		(36.09	)%		506		418		88			21.05	%
Office supplies, postage and courier		87		81		6			7.41	%		250		232		18			7.76	%
FDIC insurance premium		60		95		(35	)		(36.84	)%		238		302		(64	)		(21.19	)%
State franchise taxes		118		75		43			57.33	%		352		225		127			56.44	%
Other non-interest expense		808		554		254			45.85	%		2,052		1,810		242			13.37	%
Total non-interest expenses	$	6,588	$	5,150	$	1,438			27.92	%	$	17,609	$	15,296	$	2,313			15.12	%

Non-interest expenses were $6.6 million for the third quarter of 2016, compared with $5.2 million in the year-ago quarter and $5.7 million for the second quarter of 2016. Merger related expenses accounted for approximately 69% of the increase in non-interest expenses compared to the year-ago quarter. Salaries and benefits increased $415,000 in the third quarter of 2016 compared to the year-ago quarter due primarily to the previously-announced hiring of the small business lending team and residential mortgage originators in the fourth quarter of 2015.

Non-interest expenses were $17.6 million in the first nine months of 2016, compared to $15.3 million in the first nine months of 2015. Merger related expenses accounted for $987,000, or 43% of the increase in non-interest expenses compared to the year-ago period. Salaries and benefits increased $1.1 million due primarily to the hiring of the small business lending team and residential mortgage originators.

The Company’s efficiency ratio was 110.3% in the third quarter of 2016, compared with 95.0% in the year-ago quarter and 93.7% in the second quarter of 2016. The efficiency ratio was 101.2% for the first nine months of 2016, compared to 95.0% in the year-ago period.

Income Taxes

We had net deferred tax assets totaling $10.5 million at September 30, 2016, compared with $10.4 million at December 31, 2015, of which the majority are attributable to net operating loss carry-forwards and timing differences between provision for loan losses and the charge-off of loans.

Income tax benefit was $190,000 in the third quarter of 2016. An income tax benefit of $233,000 was recorded for the nine months ended September 30, 2016. The amount of income tax expense or benefit recognized in each of the three quarters of 2016 was impacted by the overall amount of pre-tax income and the amount of pre-tax income that is not subject to federal income taxes, which is comprised primarily of income from bank-owned life insurance that was partially offset by non-deductible merger related expenses.

Comparison of Financial Condition at September 30, 2016 and December 31, 2015

Total assets were $565.4 million at September 30, 2016, compared with $556.1 million at June 30, 2016 and $541.3 million at December 31, 2015. Much of the increase in assets in the first nine months of 2016 was in the Company’s loan portfolio (including held for sale), which increased $13.0 million or 3.4%, to $391.5 million at September 30, 2016.

Securities

Investment securities totaled $95.7 million at September 30, 2016, compared with $87.8 million at December 31, 2015. Our portfolio was comprised primarily of investment grade securities. The breakdown of the securities portfolio at September 30, 2016 was 26.7% collateralized mortgage obligations, 20.5% government-sponsored entity guaranteed mortgage-backed securities, 26.1% municipal securities, 22.8% obligations of U.S. government agencies and 3.9% corporate bonds.

34.

Loans

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

	September 30, 2016						June 30, 2016						December 31, 2015
	Amount			Percent			Amount			Percent			Amount			Percent
Loan portfolio composition
Consumer and credit card	$	36,158			9.2	%	$	37,615			9.5	%	$	40,587			10.7	%
Real estate and home equity		151,117			38.7	%		149,383			37.7	%		137,645			36.4	%
Commercial and industrial		104,108			26.6	%		105,530			26.7	%		99,213			26.2	%
Commercial real estate		99,505			25.5	%		103,408			26.1	%		100,743			26.7	%
Total loans	$	390,888			100.0	%	$	395,936			100.0	%	$	378,188			100.0	%
Net deferred loan costs		617						617						325
Loans		391,505						396,553						378,513
Allowance for loan losses		(4,592	)					(4,590	)					(4,333	)
Net loans	$	386,913					$	391,963					$	374,180

Total loans were $391.5 million at September 30, 2016, compared with $378.5 million at December 31, 2015. At September 30, 2016, total loans included $755,000 in residential mortgages held for sale.

Deposits

The following table sets forth the composition of our deposit accounts, at the dates indicated (dollars in thousands):

	September 30, 2016					June 30, 2016					December 31, 2015
	Amount		Percent			Amount		Percent			Amount		Percent
Non-interest bearing demand	$	123,353		25.2	%	$	119,808		25.6	%	$	124,023		26.1	%
Interest bearing demand		86,239		17.6	%		87,873		18.8	%		77,616		16.4	%
Total demand		209,594		42.8	%		207,681		44.4	%		201,639		42.5	%
Savings		52,026		10.6	%		49,722		10.6	%		47,333		10.0	%
Money market		171,817		35.1	%		157,136		33.6	%		154,119		32.5	%
Time deposits		56,113		11.5	%		53,053		11.4	%		71,446		15.0	%
Total deposits	$	489,548		100.0	%	$	467,592		100.0	%	$	474,537		100.0	%

Deposits totaled $489.6 million at September 30, 2016, compared with $467.6 million at June 30, 2016 and $474.5 million at December 31, 2015. Most of the increase during the quarter was the result of an increase in municipal deposit balances of $19.5 million during the quarter.

Liquidity

Liquidity is the ability of the Company to fund loan originations and 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 $31.3 million at September 30, 2016, compared to $31.9 million at December 31, 2015. Cash and cash equivalents represented 5.5% of total assets at September 30, 2016 and 5.9% of total assets at December 31, 2015. 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.

35.

Capital Resources

Shareholders’ equity was $59.4 million at September 30, 2016, compared with $58.8 million at December 31, 2015. The increase in shareholders’ equity in the first nine months of 2016 was attributable primarily to net income of $21,000 and to an increase in accumulated other comprehensive income of $558,000 due to higher unrealized gains on securities available-for-sale. Treasury stock increased $104,000 during the second quarter of 2016 as the result of repurchases of 14,750 of the Company’s common shares under the stock repurchase program announced in May 2016. The Company’s tangible common equity to tangible assets ratio was 10.5% at September 30, 2016, compared with 10.9% at December 31, 2015.

Regulatory Capital Requirements

The Bank’s common equity tier 1 capital ratio was 12.26% and its total risk-based capital ratio was 13.44% at September 30, 2016, both of which were well above the regulatory thresholds required to be classified as a “well-capitalized” institution, which are 6.5% and 10.0%, respectively.

Beginning on January 1, 2015, the capital requirements for our Company and the Bank increased as a result of the phase-in of certain changes to capital requirements for U.S. banking organizations. Consistent with the international Basel III framework, the capital requirements include a new minimum ratio of common equity tier 1 capital to risk-weighted assets and a Tier 1 common capital conservation buffer of 2.5% of risk-weighted assets that applies to all supervised financial institutions. The rule also raises the minimum ratio of tier 1 capital to risk-weighted assets to 6.0% and includes a minimum leverage ratio of 4.0% for all banking organizations. These new minimum capital ratios became effective for us on January 1, 2015, and will be fully phased-in on January 1, 2019.

The following table compares our actual capital amounts for the Bank 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 September 30, 2016
Total risk-based capital	$	52,393		13.44	%	$	31,186		8.0	%	$	38,983		10.0	%
Tier 1 capital	$	47,801		12.26	%	$	23,394		6.0	%	$	31,192		8.0	%
Common equity tier 1 capital	$	47,801		12.26	%	$	17,545		4.5	%	$	25,343		6.5	%
Leverage	$	47,801		8.84	%	$	21,629		4.0	%	$	27,037		5.0	%
As of December 31, 2015
Total risk-based capital	$	52,500		14.29	%	$	29,391		8.0	%	$	36,739		10.0	%
Tier-1 capital	$	48,167		13.11	%	$	22,044		6.0	%	$	29,393		8.0	%
Common equity tier 1 capital	$	48,167		13.11	%	$	16,533		4.5	%	$	23,881		6.5	%
Leverage	$	48,167		9.11	%	$	21,149		4.0	%	$	26,436		5.0	%

36.

Share Repurchase Program

On April 28, 2016, the Board of Directors of Directors of the Company approved a share repurchase program of up to three percent of the Company’s outstanding common shares, or approximately 220,000 shares, up to $1.7 million.  The share repurchase program is authorized for up to one year. As of September 30, 2016, the Company has repurchased 14,750 shares under this program for a total amount of $104,000. The share repurchase program was suspended in June 2016.

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 September 30, 2016, 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 September 30, 2016.

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 September 30, 2016, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting

37.

Part II Other Information

Item 1. Legal Proceedings.

There are no matters required to be reported under this item.

Item 1A. Risk Factors.

Our operations involve various risks that could have adverse consequences, including those described below and in Part I, Item 1A, “Risk Factors” in our 2015 Annual Report on Form 10-K.

Risks Related to the Merger with First Commonwealth Financial Corporation

The Merger cannot be completed unless a number of conditions in the merger agreement are satisfied or waived.

The merger agreement contains a number of conditions that must be satisfied or waived in order to complete the Merger. Those conditions include: approval of the Merger by our shareholders, receipt of all required regulatory approvals, absence of any law, statute or regulation, or any order, injunction or other legal restraint or prohibition preventing the completion of the Merger, effectiveness of the registration statement filed in connection with the Merger, the accuracy of the representations and warranties of both parties to the merger agreement, the performance by both parties to the merger agreement of their respective covenants and agreements, and the receipt by both parties of legal opinions from their respective tax counsels. There can be no assurance that the conditions to closing of the Merger will be fulfilled or that the Merger will be completed.

Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.

Before the Merger may be completed, various approvals must be obtained from bank regulatory agencies and other governmental authorities. These governmental entities may not grant approval of the Merger, or may impose conditions on the granting of their approvals. The conditions or changes they impose, as well as the process of obtaining regulatory approvals, could have the effect of delaying completion of the Merger or of imposing additional costs or limitations on First Commonwealth following the Merger. First Commonwealth may elect not to consummate the Merger if, in connection with any regulatory approval needed for the Merger, any governmental or regulatory entity imposes a restriction, requirement or condition on First Commonwealth that, individually or in the aggregate, would be reasonably likely to have a material and adverse effect on First Commonwealth and its subsidiaries, taken as a whole, after giving effect to the Merger. As a result, there can be no assurance that the desired regulatory approvals for the Merger will be obtained or that the Merger will be completed.

Termination of the merger agreement could negatively affect our businesses and the market price of our common shares.

If the merger agreement is terminated, there may be various consequences, including:

• our businesses may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger; and

• the market price of our common shares may decline to the extent that the current market price reflects a market assumption that the Merger will be completed.

If the merger agreement is terminated and our board of directors seeks another merger or business combination, our shareholders cannot be certain that we will be able to find a party willing to offer equivalent or more attractive consideration than the consideration First Commonwealth has agreed to pay in the Merger.

If the merger agreement is terminated under certain circumstances, we may be required to pay First Commonwealth a termination fee of $5.3 million.

If the Merger is not completed, we will have incurred substantial expenses without our shareholders realizing the expected benefits of the Merger.

We have already incurred, and will continue to incur, substantial expenses in connection with the Merger and the transactions contemplated thereby, which are charged to earnings as incurred. If the Merger is not completed, these expenses will have a material adverse impact on our operating results even though we will not have realized the expected benefits of the Merger. There can be no assurance that the Merger will be completed.

38.

The merger agreement limits our ability to pursue alternatives to the Merger with First Commonwealth

The merger agreement contains provisions that restrict our ability to discuss, facilitate or enter into agreements with third parties to acquire us. We are not required to comply with this restriction if compliance would reasonably be expected to cause our board of directors to breach its fiduciary duties. Even if we were to avail ourselves of that limited exception, we could be obligated to pay First Commonwealth a termination fee of $5.3 million if either we or First Commonwealth terminates the merger agreement under specified circumstances. In any event, the presence of those restrictions in the merger agreement could discourage a potential competing acquiror that may have an interest in acquiring us from proposing or considering an acquisition even if that potential acquiror were prepared to pay a higher price to our shareholders than the Merger consideration offered by First Commonwealth.

We will be subject to business uncertainties and contractual restrictions while the Merger is pending.

Uncertainties about the effect of the Merger on employees and customers may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed, and could cause customers and others who deal with us to consider changing existing business relationships with us. Retention of certain employees may be challenging during the pendency of the Merger, as certain employees may experience uncertainty about their future roles with the combined company. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, our business prior to the Merger.

The pursuit of the Merger and the preparation for the integration may place a significant burden on management and internal resources. Any significant diversion of management attention away from the ongoing business and any difficulties encountered in the transition and integration process could affect our financial results.

In addition, the merger agreement restricts us from taking specified actions relative to our business without the prior consent of First Commonwealth. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Merger.

Some of our directors and executive officers have interests in the Merger that may differ from the interests of our shareholders including, if the Merger is completed, the receipt of financial and other benefits.

Our directors and executive officers may have economic interests in the Merger that are different from, or in addition to, the interests of our shareholders generally. For example, once the Merger is completed, it is expected that each of our executive officers will be entitled to change-in-control payments and accelerated vesting of equity-based compensation under our compensation programs. In addition, the executive officers may receive “stay bonuses” if they remain employed by us through the closing date of the Merger.

Our directors will receive, once the Merger is completed, accelerated vesting of equity-based compensation. Additionally, following completion of the Merger, the First Commonwealth and First Commonwealth Bank boards of directors will each be enlarged by one seat, and one of our directors, as mutually agreed upon by First Commonwealth and us, will be appointed to serve on the First Commonwealth and First Commonwealth Bank boards of directors. The merger agreement also provides for the continued indemnification of our current and former directors and executive officers following the Merger and for the continuation of directors’ and officers’ insurance for these individuals for six years after the Merger.

Our shareholders will have a reduced ownership and voting interest after the Merger and will exercise less influence over management.

Following the Merger, our shareholders are expected to hold approximately 9% of the outstanding shares of First Commonwealth common stock. As a result, our shareholders will have only limited ability to influence First Commonwealth’s business. Our shareholders will not have separate approval rights with respect to any actions or decisions of First Commonwealth or have separate representation on First Commonwealth’s or First Commonwealth Bank’s board of directors.

The shares of First Commonwealth common stock to be received by our shareholders as consideration in the Merger will have different rights from our common shares.

The rights associated with our common shares are different from the rights associated with First Commonwealth common stock in certain significant respects. Upon completion of the Merger, our shareholders who receive shares of First Commonwealth common stock as consideration in the Merger will become First Commonwealth shareholders and their rights as shareholders will be governed by the articles of incorporation and by-laws of First Commonwealth and provisions of Pennsylvania law applicable to companies formed in Pennsylvania, like First Commonwealth.

39.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

a) Not applicable

b) Not applicable

c) On May 2, 2016, the Company announced that its Board of Directors had authorized the repurchase of up to 3% of the Company’s outstanding common stock, or approximately 220,683 shares, over a 12-month period. The share repurchase program was suspended in June 2016. The table below sets forth the information with respect to purchases made by the Company of its common stock during the quarter ended September 30, 2016:

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan		Maximum Number of Shares that May Yet be Purchased Under the Plan
7/1/2016 – 7/31/2016		-	$	-		-		205,933
8/1/2016 – 8/31/2016		-	$	-		-		205,933
9/1/2016 – 9/30/2016		-	$	-		-		205,933
Total		-	$	-		-

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.

40.

Item 6. Exhibits.

Exhibits – The following exhibits are filed as a part of this report:

Exhibit No.	Exhibit
2.1	Agreement and Plan of Merger by and between First Commonwealth Financial Corporation and DCB Financial Corp, dated October 2, 2016 (incorporated herein by reference to Exhibit 2.1 to DCB Financial Corp’s Current Report on Form 8-K filed with the SEC on October 3, 2016)
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.
101*	The following information from DCB Financial Corp.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016 formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015;  (ii) the Consolidated Statements of Income (Loss) (unaudited) for the three and nine months ended September 30, 2016 and 2015;  (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2016 and 2015;  (iv) the Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the nine month periods ended September 30, 2016 and 2015; (v) the Consolidated Statements of Cash Flows (unaudited) for the nine month periods ended September 30, 2016 and 2015; and (vi) the Notes to 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:  November 14 , 2016	/s/ Ronald J. Seiffert
	Ronald J. Seiffert
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
Dated:  November 14, 2016	/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:  November 14 , 2016	/s/ Ronald J. Seiffert
	Ronald J. Seiffert
	Title:  Chairman, 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: November 14, 2016	/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 September 30, 2016 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: November 14, 2016

/s/ Ronald J. Seiffert

Ronald J. Seiffert

Chairman, 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 September 30, 2016 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: November 14 , 2016

/s/ J. Daniel Mohr

J. Daniel Mohr

Executive Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 10, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
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		7,339,232

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Assets:
Cash and due from financial institutions	$ 6,092	$ 6,929
Interest-bearing deposits	25,190	24,963
Total cash and cash equivalents	31,282	31,892
Securities available-for-sale	95,676	87,797
Loans	390,750	378,513
Less allowance for loan losses	(4,592)	(4,333)
Net loans	386,158	374,180
Loans held for sale	755	0
Real estate owned	68	68
Investment in FHLB stock	3,250	3,250
Premises and equipment, net	9,810	5,091
Premises and equipment held-for-sale	0	4,771
Bank-owned life insurance	21,329	20,760
Deferred tax asset, net	10,467	10,440
Accrued interest receivable and other assets	6,622	3,015
Total assets	565,417	541,264
Deposits:
Non-interest bearing	123,353	124,023
Interest bearing	366,195	350,514
Total deposits	489,548	474,537
Borrowings	4,293	4,520
Obligations under capital lease	8,016	0
Accrued interest payable and other liabilities	4,167	3,360
Total liabilities	506,024	482,417
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, 7,661,632 and 7,588,887 shares issued, and 7,339,232 and 7,281,237 shares outstanding for September 30, 2016 and December 31, 2015, respectively	16,907	16,410
Retained earnings	49,820	49,799
Treasury stock, at cost, 322,400 and 307,650 shares at September 30, 2016 and December 31, 2015, respectively	(7,520)	(7,416)
Accumulated other comprehensive income	994	436
Deferred stock-based compensation	(808)	(382)
Total shareholders’ equity	59,393	58,847
Total liabilities and shareholders’ equity	$ 565,417	$ 541,264
Common shares outstanding	7,339,232	7,281,237
Book value per common share	$ 8.09	$ 8.08

XML

Consolidated Balance Sheets [Parenthetical] - $ / shares	Sep. 30, 2016	Dec. 31, 2015
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, No Par Value	$ 0	$ 0
Common stock, shares authorized	17,500,000	17,500,000
Common stock, shares issued	7,661,632	7,588,887
Common Stock, Shares, Outstanding	7,339,232	7,281,237
Treasury stock, shares	322,400	307,650

XML

Consolidated Statements of Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Interest income:
Loans	$ 4,157	$ 3,979	$ 12,154	$ 11,884
Securities	494	473	1,508	1,460
Federal funds sold and interest bearing deposits	28	17	80	46
Total interest income	4,679	4,469	13,742	13,390
Interest expense:
Savings and money market accounts	202	153	560	445
Time accounts	81	88	229	272
NOW accounts	20	16	56	49
Total	303	257	845	766
Obligation under capital lease	81	0	215	0
FHLB advances	41	35	126	106
Total interest expense	425	292	1,186	872
Net interest income	4,254	4,177	12,556	12,518
Provision for loan losses	0	(150)	0	0
Net interest income after provision for loan losses	4,254	4,327	12,556	12,518
Non-interest income:
Service charges	560	523	1,596	1,475
Wealth management fees	463	438	1,355	1,217
Treasury management fees	134	81	348	203
Income from bank-owned life insurance	163	163	569	571
Gain on sales of loans	351	0	829	0
Net losses on sales of REO	0	(19)	0	(20)
Other non-interest income	47	37	144	115
Total non-interest income	1,718	1,223	4,841	3,561
Non-interest expense:
Salaries and employee benefits	3,186	2,771	9,356	8,302
Occupancy and equipment	1,016	1,000	2,963	2,965
Professional services	218	405	905	1,042
Merger related expenses	987	0	987	0
Advertising	108	169	506	418
Office supplies, postage and courier	87	81	250	232
FDIC insurance premium	60	95	238	302
State franchise taxes	118	75	352	225
Other non-interest expense	808	554	2,052	1,810
Total non-interest expense	6,588	5,150	17,609	15,296
Income (loss) before income tax expense (benefit)	(616)	400	(212)	783
Income tax benefit	(190)	(10,688)	(233)	(10,688)
Net income (loss)	$ (426)	$ 11,088	$ 21	$ 11,471
Share and Per Share Data
Basic average common shares outstanding	7,339,710	7,282,365	7,332,482	7,269,222
Diluted average common shares outstanding	7,339,710	7,302,174	7,355,709	7,288,237
Basic and diluted earnings (loss) per common share	$ (0.06)	$ 1.52	$ 0.00	$ 1.58

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net income (loss)	$ (426)	$ 11,088	$ 21	$ 11,471
Other comprehensive income (loss):
Net unrealized gains (losses) on securities available-for-sale, net of taxes of $(24) and $287 for the three and nine months ended September 30, 2016, respectively, and $60 and $(10) for the three and nine months ended September 30, 2015, respectively.	(47)	116	558	(45)
Total other comprehensive income (loss)	(47)	116	558	(45)
Comprehensive income (loss)	$ (473)	$ 11,204	$ 579	$ 11,426

XML

Consolidated Statements of Comprehensive Income (Loss) [Parenthetical] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Tax	$ (24)	$ 60	$ 287	$ (10)

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Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Preferred Stock [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Deferred Stock-Based Compensation [Member]
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
Net income	11,471	$ 0	0	11,471	0	0	0
Other comprehensive income, net of taxes	(45)	0	0	0	0	(45)	0
Issuance of restricted stock	0	$ 407	0	0	0	0	(407)
Issuance of restricted stock (in Shares)		55,785
Forfeiture of restricted stock	0	$ (59)	0	0	0	0	59
Forfeiture of restricted stock (in shares)		(9,290)
Amortization of restricted stock	59	$ 0	0	0	0	0	59
Balance at Sep. 30, 2015	58,696	$ 16,412	0	49,526	(7,416)	609	(435)
Balance (in shares) at Sep. 30, 2015		7,280,292
Balance at Dec. 31, 2015	58,847	$ 16,410	0	49,799	(7,416)	436	(382)
Balance (in shares) at Dec. 31, 2015		7,281,237
Net income	21	$ 0	0	21	0	0	0
Other comprehensive income, net of taxes	558	0	0	0	0	558	0
Issuance of restricted stock	0	$ 532	0	0	0	0	(532)
Issuance of restricted stock (in Shares)		78,036
Repurchase of common shares	(104)	$ 0	0	0	(104)	0	0
Repurchase of common shares (in shares)		(14,750)
Restricted stock withheld upon vesting for payment of taxes	(12)	$ (12)	0	0	0	0	0
Restricted stock withheld upon vesting for payment of taxes (in shares)		(1,857)
Forfeiture of restricted stock	0	$ (23)	0	0	0	0	23
Forfeiture of restricted stock (in shares)		(3,434)
Amortization of restricted stock	83	$ 0	0	0	0	0	83
Balance at Sep. 30, 2016	$ 59,393	$ 16,907	$ 0	$ 49,820	$ (7,520)	$ 994	$ (808)
Balance (in shares) at Sep. 30, 2016		7,339,232

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities
Net income	$ 21	$ 11,471
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	677	729
Provision for loan losses	0	0
Deferred taxes	(233)	(10,688)
Net loss on sale of real estate owned	0	20
Net gain on sale of loans	(829)	0
Gain on calls of securities	(18)	0
Net stock-based compensation expense	57	132
Premium amortization on securities, net	712	790
Originations of mortgage loans held for sale	(10,997)	0
Proceeds from sale of mortgage loans	10,466	0
Proceeds from sale of guaranteed portion of SBA loans	6,975	0
Earnings on bank owned life insurance	(569)	(571)
Net changes in other assets and other liabilities	(2,948)	(545)
Net cash provided by operating activities	3,314	1,338
Cash flows from investing activities
Purchases of securities available-for-sale	(30,042)	(25,696)
Proceeds from maturities, principal payments and calls of securities available-for-sale	22,296	18,728
Net change in loans	(12,581)	5,124
Net proceeds from sale of premises and equipment	2,347	0
Proceeds from sale of real estate owned	0	307
Premises and equipment expenditures	(410)	(662)
Net cash used in investing activities	(18,390)	(2,199)
Cash flows from financing activities
Net change in deposits	15,011	21,715
Proceeds from short-term borrowings	4,293	0
Repayment of capital lease	(214)	0
Repayment of borrowings	(4,520)	(7,097)
Repurchase of common stock	(104)	0
Net cash provided by financing activities	14,466	14,618
Net change in cash and cash equivalents	(610)	13,757
Cash and cash equivalents at beginning of period	31,892	21,274
Cash and cash equivalents at end of period	31,282	35,031
Supplemental disclosures of cash flow information
Cash paid during the period for interest on deposits and borrowings	1,195	834
Transfer from portfolio loans to loans held for sale	6,132	0
Transfer from loans held for sale to portfolio loans	2,540	0
Non-cash investing and financing activities:
Loan to finance sale of premises and equipment	5,530	0
Capital lease obligation	$ 8,230	$ 0

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 1 – Summary of Significant Accounting Policies

Unless the context indicates otherwise, all references in this report to “Delaware,” “DCB,” “we,” “us,” “our company,” “corporation” and “our” refer to DCB Financial Corp and its direct and indirect subsidiaries The Delaware County Bank and Trust Company, our wholly owned bank subsidiary (the “Bank”), DCB Title Services, LLC, DCB Insurance Services, LLC, DataTasx LLC, ORECO, Inc., and 110 Riverbend, LLC.

DCB Financial Corp is a financial holding company headquartered in Lewis Center, Ohio, and was incorporated under the laws of the State of Ohio in 1997, as a bank holding company under the Bank Holding Company Act of 1956, as amended. DCB is the holding company for The Delaware County Bank and Trust Company, a commercial bank organized in 1950 and chartered under the laws of the State of Ohio (the “Bank”).

We also have two wholly-owned, non-bank subsidiaries, DCB Title Services, LLC, an Ohio limited liability company (“DCB Title”), and DCB Insurance Services, LLC, an Ohio limited liability company (“DCB Insurance”). DCB Title provides standard real estate title services, while DCB Insurance provides a variety of insurance products. The activities of each of these subsidiaries are not material to our operations. The Bank has two wholly-owned subsidiaries, ORECO, Inc., an Ohio corporation, which is used to hold the Bank’s foreclosed real estate, and 110 Riverbend, LLC, which was used to hold real estate owned by the Bank prior to the sale of such real estate in January 2016.

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, 2015, 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, 2015. 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 and nine months ended September 30, 2016 and 2015. The results of operations are not necessarily indicative of the results anticipated for the year.

To prepare financial statements in conformity with U.S. GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect amounts reported in the financial statements and disclosures provided, and future results could differ. The allowance for loan losses, fair values of financial instruments and status of contingencies are particularly subject to change.

Earnings per Common Share

Earnings per common share is computed using the two-class method. Basic earnings per common share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period which excludes the participating securities. All outstanding unvested restricted stock awards containing rights to non-forfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares from stock compensation awards, but excludes awards considered participating securities.

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 shares 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.

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 Operations.

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 the Company’s evaluation of credit risk after careful consideration of all information available to the Company. 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

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 non-accrual 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 non-accrual 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.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred tax assets are reduced by a valuation allowance, if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment. The Company recognizes interest and penalties on income taxes, if applicable, as a component of income tax expense. The Company files consolidated income tax returns with its subsidiaries.

New Accounting Pronouncements

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was issued to provide financial statement users with information about expected credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. For public business entities, the new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

- A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and

- A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in ASU 2016-01 supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be re-measured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. The amendments improve financial reporting by providing relevant information about an entity’s equity investments and reducing the number of items that are recognized in other comprehensive income. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this guidance is not expected to have a material effect on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new guidance supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In April 2015, the FASB approved deferral of the effective date of this guidance, which is now effective prospectively for the Company for annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

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Securities

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

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

Note 2 – Securities

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

	September 30, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. Government and agency obligations	$	27,282	$	34	$	19	$	27,297
Corporate bonds		2,800		68		2		2,866
States and municipal obligations		20,501		738		13		21,226
Collateralized mortgage obligations		27,577		161		28		27,710
Mortgage-backed securities		15,510		570		-		16,080
Other equity securities		500		-		3		497
Total	$	94,170	$	1,571	$	65	$	95,676

	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. Government and agency obligations	$	20,904	$	26	$	88	$	20,842
Corporate bonds		3,714		26		13		3,727
States and municipal obligations		21,954		388		81		22,261
Collateralized mortgage obligations		22,862		46		107		22,801
Mortgage-backed securities		17,702		505		41		18,166
Total	$	87,136	$	991	$	330	$	87,797

Securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated are as follows (dollars in thousands):

	September 30, 2016
	(Less than 12 months)						(12 months or longer)						Total
	Number of		Fair		Unrealized		Number of		Fair		Unrealized		Number of		Fair		Unrealized
Description of securities	investments		value		losses		investments		value		losses		investments		value		losses
U.S. Government and agency obligations		11	$	15,225	$	19		-	$	-	$	-		11	$	15,225	$	19
Corporate bonds		-		-		-		1		499		2		1		499		2
State and municipal obligations		3		1,158		13		-		-		-		3		1,158		13
Collateralized mortgage obligations		10		7,654		14		6		2,323		14		16		9,977		28
Mortgage-backed  securities		1		1,234		-		-		-		-		1		1,234		-
Other equity securities		1		497		3		-		-		-		1		497		3
Total temporarily impaired securities		26	$	25,768	$	49		7	$	2,822	$	16		33	$	28,590	$	65

	December 31, 2015
	(Less than 12 months)						(12 months or longer)						Total
	Number of		Fair		Unrealized		Number of		Fair		Unrealized		Number of		Fair		Unrealized
Description of securities	investments		value		losses		investments		value		losses		investments		value		losses
U.S. Government and agency obligations		14	$	15,333	$	55		2	$	1,964	$	33		16	$	17,297	$	88
Corporate bonds		2		759		5		3		1,400		8		5		2,159		13
State and municipal obligations		9		3,902		48		4		1,355		33		13		5,257		81
Collateralized mortgage obligations		13		11,298		63		6		2,551		44		19		13,849		107
Mortgage-backed securities		5		5,176		41		-		-		-		5		5,176		41
Total temporarily impaired securities		43	$	36,468	$	212		15	$	7,270	$	118		58	$	43,738	$	330

The unrealized losses on the Company’s 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 September 30, 2016 or December 31, 2015.

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 nine months ended September 30, 2016 and 2015.

At September 30, 2016, 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 September 30, 2016, 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.

	Amortized Cost		Fair Value
Due in one year or less	$	3,726	$	3,730
Due after one to five years		32,422		32,674
Due after five to ten years		10,835		11,214
Due after ten years		3,600		3,771
Mortgage-backed and related securities		43,587		44,287
Total	$	94,170	$	95,676

Securities with a fair value of $75.6 million at September 30, 2016 were pledged to secure public deposits and other obligations.

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Loans

9 Months Ended

Sep. 30, 2016

Receivables [Abstract]

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

Note 3 – Loans

Loans were comprised of the following at the dates indicated (in thousands):

	September 30,			December 31,
	2016			2015
Consumer and credit card	$	36,158		$	40,587
Residential real estate and home equity		150,362			137,645
Commercial and industrial		104,108			99,213
Commercial real estate		99,505			100,743
		390,133			378,188
Net deferred loan costs		617			325
Loans	$	390,750		$	378,513
Allowance for loan losses		(4,592	)		(4,333	)
Net loans	$	386,158		$	374,180

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Credit Quality

9 Months Ended

Sep. 30, 2016

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 loan relationships with balances of $250,000 or greater are assigned an internal risk grade based on relevant information about the ability of the borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. Borrower’s receiving an internal risk 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 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 summarize activity in the allowance for loan losses for the periods indicated (in thousands).

	Three months ended September 30, 2016
	Consumer		Residential
	and		Real Estate		Commercial
	Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Unallocated		Total
Beginning balance	$	122	$	544	$	1,521	$	2,140	$	263	$	4,590
Charge-offs		(63)		(3)		(2)		-		-		(68)
Recoveries		23		12		23		12		-		70
Net (charge-offs) recoveries		(40)		9		21		12		-		2
Provision		38		(24)		(26)		(71)		83		-
Ending balance	$	120	$	529	$	1,516	$	2,081	$	346	$	4,592

	Nine months ended September 30, 2016
	Consumer		Residential
	and		Real Estate		Commercial
	Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Unallocated		Total
Beginning balance	$	144	$	561	$	1,321	$	1,999	$	308	$	4,333
Charge-offs		(142)		(12)		(2)		-		-		(156)
Recoveries		56		35		240		84		-		415
Net (charge-offs) recoveries		(86)		23		238		84		-		259
Provision		62		(55)		(43)		(2)		38		-
Ending balance	$	120	$	529	$	1,516	$	2,081	$	346	$	4,592

	Three months ended September 30, 2015
	Consumer		Residential
	and		Real Estate		Commercial
	Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Unallocated		Total
Beginning balance	$	172	$	315	$	1,035	$	2,195	$	447	$	4,164
Charge-offs		(63)		-		-		-		-		(63)
Recoveries		50		30		157		18		-		255
Net (charge-offs) recoveries		(13)		30		157		18		-		192
Provision		-		156		(63)		(217)		(26)		(150)
Ending balance	$	159	$	501	$	1,129	$	1,996	$	421	$	4,206

	Nine months ended September 30, 2015
	Consumer and Credit Card		Residential Real Estate and Home Equity		Commercial and Industrial		Commercial Real Estate		Unallocated		Total
Beginning balance	$	190	$	268	$	1,132	$	2,376	$	270	$	4,236
Charge-offs		(122)		(73)		(311)		(64)		-		(570)
Recoveries		109		97		297		37		-		540
Net charge-offs		(13)		24		(14)		(27)		-		(30)
Provision		(18)		209		11		(353)		151		-
Ending balance	$	159	$	501	$	1,129	$	1,996	$	421	$	4,206

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.

The following presents by class, information related to the Company’s impaired loans as of the dates indicated (in thousands).

	At September 30, 2016						Period ended September 30, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Three months Average Recorded Investment		Three months Interest Income Recognized		Nine months Average Recorded Investment		Nine months Interest Income Recognized
With no related allowance recorded:
Consumer and credit card	$	282	$	282		-	$	283	$	5	$	376	$	14
Residential real estate and home equity		668		668		-		672		-		660		1
Commercial and industrial		572		572		-		579		5		862		16
Commercial real estate		2,284		2,284		-		2,292		19		842		19
		3,806		3,806		-		3,826		29		2,740		50
With an allowance recorded:
Commercial and industrial	$	1,545	$	1,623	$	344	$	1,407	$	17	$	1,263	$	46
Commercial real estate		4,831		4,831		581		4,841		56		4,751		168
		6,376		6,454		925		6,248		73		6,014		214
Total:
Consumer and credit card	$	282	$	282	$	-	$	283	$	5	$	376	$	14
Residential real estate and home equity		668		668		-		672		-		660		1
Commercial and industrial		2,117		2,195		344		1,986		22		2,125		62
Commercial real estate		7,115		7,115		581		7,133		75		5,593		187
Total	$	10,182	$	10,260	$	925	$	10,074	$	102	$	8,754	$	264

	At December 31, 2015						Period ended September 30, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Three months Average Recorded Investment		Three months Interest Income Recognized		Nine months Average Recorded Investment		Nine months Interest Income Recognized
With no related allowance recorded:
Consumer and credit card	$	548	$	548		-	$	469	$	7	$	469	$	19
Residential real estate and home equity		668		668		-		733		-		552		8
Commercial and industrial		926		926		-		914		5		1,106		21
Commercial real estate		126		126		-		451		2		468		2
		2,268		2,268		-		2,567		14		2,595		50
With an allowance recorded:
Commercial and industrial	$	944	$	1,021	$	144	$	1,134	$	13	$	1,016	$	43
Commercial real estate		4,579		4,579		435		6,706		53		7,727		163
		5,523		5,600		579		7,840		66		8,743		206
Total:
Consumer and credit card	$	548	$	548	$	-	$	469	$	7	$	469	$	19
Residential real estate and home equity		668		668		-		733		-		552		8
Commercial and industrial		1,870		1,947		144		2,048		18		2,122		64
Commercial real estate		4,705		4,705		435		7,157		55		8,195		165
Total	$	7,791	$	7,868	$	579	$	10,407	$	80	$	11,338	$	256

The allocation of the allowance for loan losses summarized on the basis of the Company’s impairment methodology was as follows at the dates indicated (in thousands):

			Residential
	Consumer		Real Estate		Commercial
	and Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Total
September 30, 2016
Individually evaluated for impairment	$	-	$	-	$	344	$	581	$	925
Collectively evaluated for impairment		120		529		1,172		1,500		3,321
Allocated	$	120	$	529	$	1,516	$	2,081		4,246
Unallocated										346
									$	4,592
December 31, 2015
Individually evaluated for impairment	$	-	$	-	$	144	$	435	$	579
Collectively evaluated for impairment		144		561		1,177		1,564		3,446
Allocated	$	144	$	561	$	1,321	$	1,999		4,025
Unallocated										308
									$	4,333

The recorded investment in loans summarized on the basis of the Company’s impairment methodology at the dates indicated was as follows (in thousands):

			Residential
	Consumer		Real Estate		Commercial
	and Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Total
September 30, 2016
Individually evaluated for impairment	$	282	$	668	$	2,117	$	7,115	$	10,182
Collectively evaluated for impairment		35,876		149,694		101,991		92,390		379,951
Ending balance	$	36,158	$	150,362	$	104,108	$	99,505	$	390,133

			Residential
	Consumer		Real Estate		Commercial
	and Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Total
December 31, 2015
Individually evaluated for impairment	$	548	$	668	$	1,870	$	4,705	$	7,791
Collectively evaluated for impairment		40,039		136,977		97,343		96,038		370,397
Ending balance	$	40,587	$	137,645	$	99,213	$	100,743	$	378,188

Loans on non-accrual status were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2016		2015
Consumer and credit card	$	-	$	-
Residential real estate and home equity		816		668
Commercial and industrial		236		554
Commercial real estate		2,315		-
Total	$	3,367	$	1,222

Credit Quality Indicators

The Company uses the following definitions for criticized and classified commercial loans and commercial real estate loans which are consistent with regulatory guidelines:

Special Mention

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 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

Loans that are inadequately protected by the current sound 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.

Doubtful

Loans that have all the weaknesses inherent in a Substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Specific pending factors may strengthen the credit, therefore deferring a Loss classification.

Loss

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.

As of the dates indicated and based on the most recent analysis performed, the recorded investment by risk category and class of loans is as of the dates indicated (in thousands):

	September 30, 2016				December 31, 2015
	Commercial		Commercial		Commercial		Commercial
	and Industrial		Real Estate		and Industrial		Real Estate
Pass	$	101,331	$	92,499	$	96,225	$	91,132
Special mention		1,200		4,374		925		4,592
Substandard		1,577		2,632		2,063		5,019
Total	$	104,108	$	99,505	$	99,213	$	100,743

For residential real estate and consumer loan classes, the Company evaluates credit quality primarily based upon the aging status of the loan and by payment activity.

The following table presents the recorded investment in residential real estate and consumer loans based on payment activity as of the dates indicated (in thousands):

	September 30, 2016				December 31, 2015
			Residential				Residential
	Consumer and		Real Estate and		Consumer and		Real Estate and
	Credit Card		Home Equity		Credit Card		Home Equity
Performing	$	36,158	$	149,546	$	40,587	$	136,975
Non-performing		-		816		-		670
Total	$	36,158	$	150,362	$	40,587	$	137,645

Age Analysis of Past Due Loans

The following tables present past due loans aged as of the dates indicated (in thousands).

	September 30, 2016
			60-89
			Days		90 Days or				Loans
	30-59 Days		Past		more Past		Total		Not Past
	Past Due		Due		Due		Past Due		Due		Total Loans
Consumer and credit card	$	103	$	34	$	-	$	137	$	36,021	$	36,158
Residential real estate and home equity		72		89		434		595		149,767		150,362
Commercial and industrial		99		-		168		267		103,841		104,108
Commercial real estate		-		-		2,315		2,315		97,190		99,505
Total	$	274	$	123	$	2,917	$	3,314	$	386,819	$	390,133

	December 31, 2015
			60-89
			Days		90 Days or				Loans
	30-59 Days		Past		more Past		Total		Not Past
	Past Due		Due		Due		Past Due		Due		Total Loans
Consumer and credit card	$	48	$	13	$	-	$	61	$	40,526	$	40,587
Residential real estate and home equity		160		98		401		659		136,986		137,645
Commercial and industrial		236		-		-		236		98,977		99,213
Commercial real estate		-		-		-		-		100,743		100,743
Total	$	444	$	111	$	401	$	956	$	377,232	$	378,188

Troubled Debt Restructurings

The following table summarizes troubled debt restructurings that occurred during the periods indicated (dollars in thousands):

	For the three months ended September 30,
	2016				2015
	Number of		Recorded Investment		Number of		Recorded Investment
	Contracts		(as of period end)		Contracts		(as of period end)
Consumer and credit card		-	$	-		1	$	188
Total		-	$	-		1	$	188

	For the nine months ended September 30,
	2016				2015
	Number of		Recorded Investment		Number of		Recorded Investment
	Contracts		(as of period end)		Contracts		(as of period end)
Consumer and credit card		-	$	-		7	$	279
Commercial real estate		4		392		-		-
Total		4	$	392		7	$	279

There were no 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 and nine months ended September 30, 2016 and 2015.

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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Fair Value Measurements

9 Months Ended

Sep. 30, 2016

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 Held for Sale: The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in Level 2 classification.

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 September 30, 2016 and December 31, 2015, 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 the dates indicated (in thousands):

	September 30, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	31,282	$	31,282	$	31,282	$	-	$	-
Securities available-for-sale		95,676		95,676		-		95,179		497
Loans held for sale		755		755		-		755		-
Loans (net of allowance)		386,158		382,919		-		-		382,919
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,383		1,383		-		-		1,383
Financial liabilities
Non-interest-bearing deposits	$	123,353	$	123,353	$	-	$	123,353	$	-
Interest-bearing deposits		366,195		366,187		-		366,187		-
Borrowings		4,293		4,293		-		4,293		-
Accrued interest payable		65		65		-		-		65

	December 31, 2015
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	31,892	$	31,892	$	31,892	$	-	$	-
Securities available-for-sale		87,797		87,797		-		87,797		-
Loans (net of allowance)		374,180		371,930		-		-		371,930
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,307		1,307		-		-		1,307
Financial liabilities
Non-interest-bearing deposits	$	124,023	$	124,023	$	-	$	124,023	$	-
Interest-bearing deposits		350,514		350,957		-		350,957		-
Borrowings		4,520		4,520		-		4,520		-
Accrued interest payable		74		74		-		-		74

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 the dates indicated (in thousands):

	September 30, 2016
			Fair Value Measurements Using
			Quoted Prices in Active Markets for
			Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agency obligations	$	27,297	$	-	$	27,297	$	-
Corporate bonds		2,866		-		2,866		-
State and municipal obligations		21,226		-		21,226		-
Collateralized mortgage obligations		27,710		-		27,710		-
Mortgage-backed securities		16,080		-		16,080		-
Other equity securities		497		-		-		497
Total	$	95,676	$	-	$	95,179	$	497

	December 31, 2015
			Fair Value Measurements Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agency obligations	$	20,842	$	-	$	20,842	$	-
Corporate bonds		3,727		-		3,727		-
State and municipal obligations		22,261		-		22,261		-
Collateralized mortgage obligations		22,801		-		22,801		-
Mortgage-backed securities		18,166		-		18,166		-
Total	$	87,797	$	-	$	87,797	$	-

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 September 30, 2016 and December 31, 2015, impaired loans consisted primarily of loans secured by 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 non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at the dates indicated (in thousands).

	September 30, 2016
	Fair Value Measurements Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2 )		(Level 3)
Impaired loans	$	10,182	$	-	$	-	$	10,182
Real estate owned		68		-		-		68

	December 31, 2015
	Fair Value Measurements Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2 )		(Level 3)
Impaired loans	$	7,791	$	-	$	-	$	7,791
Real estate owned		68		-		-		68

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Sale-Leaseback and Capital Lease Obligation

9 Months Ended

Sep. 30, 2016

Leases [Abstract]

Leases of Lessee Disclosure [Text Block]

Note 6 – Sale-Leaseback and Capital Lease Obligation

In January 2016, the Company entered into a sale-leaseback of its corporate headquarters building. Under the arrangement, the Company sold and leased the building back for a period of fifteen years, with options to extend the term of the lease for two additional periods of ten years each. The gain of $3.1 million realized in the transaction has been netted against the right of use asset and will result in a reduction of depreciation expense over the term of the lease.

The lease has been accounted for as a capital lease, and the building is included in property and equipment. The present value of the net minimum lease payments has been capitalized and is being amortized over the life of the lease. Under the terms of the lease agreements, minimum payments of $54,000 are due monthly, increasing 2% annually thereafter, through January 2031. The lease has been imputed with interest at an annual rate of 3.91%.

At September 30, 2016, property under capital leases consists of the corporate headquarters with a cost, net of the deferred gain, of $5.0 million. Accumulated depreciation on the property under capital leases was $274,000 at September 30, 2016.

Depreciation expense on property under capital leases was $51,000 and $136,000 for the three and nine months ended September 30, 2016, respectively.

The future minimum lease payments under capital leases are as follows (in thousands):

2016	$	161
2017		655
2018		668
2019		682
2020		695
Thereafter		7,798
Total minimum lease payments		10,659
Less amounts representing interest		2,643
Present value of net minimum lease payments	$	8,016

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Federal Income Taxes

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 7 – Federal Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and franchise tax returns in Ohio. Income tax benefit for the dates indicated include the following components (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2016		2015		2016		2015
Current	$	(11)	$	-	$	73	$	-
Deferred		(179)		96		(306)		96
Valuation allowance		-		(10,784)		-		(10,784)
Total	$	(190)	$	(10,688)	$	(233)	$	(10,688)

The difference between the financial statement tax provision and amounts computed by applying the statutory federal income tax rate to income before income taxes was as follows (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2016		2015		2016		2015
Federal income taxes calculated at the expected statutory rate	$	(209)	$	136	$	(72)	$	266
Increase (decrease) in taxes resulting from:
Nontaxable dividend and interest income		(30)		(29)		(71)		(70)
Increase in cash surrender value of life insurance - net		(55)		(56)		(193)		(194)
Nondeductible acquisition costs		98		-		98		-
Other		6		45		5		94
Valuation allowance		-		(10,784)		-		(10,784)
Income tax benefit per financial statements	$	(190)	$	(10,688)	$	(233)	$	(10,688)

Deferred tax assets and liabilities were comprised of the following at the dates indicated (in thousands):

	September 30, 2016		December 31, 2015
Deferred tax assets:
Allowance for loan losses	$	1,561	$	1,473
Deferred compensation		308		300
Alternative minimum tax carry forward		212		155
Expenses on foreclosed property		-		14
Deferred gain on sale of building		1,009		-
NOL carry forward		8,258		9,020
Other		307		98
Subtotal		11,655		11,060
Deferred tax liabilities:
FHLB stock dividends		(307)		(307)
Unrealized gains on available-for-sale securities		(512)		(225)
Depreciation		(55)		(55)
Other		(314)		(33)
Subtotal		(1,188)		(620)
Net deferred tax asset		10,467		10,440
Less: valuation allowance		-		-
Total	$	10,467	$	10,440

At September 30, 2016, the Company had a $24.3 million net operating loss carryforward that begins to expire in 2030.

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Earnings per Common Share

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 8 - Earnings per Common Share

The Company issued restricted stock awards with non-forfeitable dividend rights, which are considered participating securities. As such, earnings per share is computed using the two-class method as required by Accounting Standard Codification (“ASC”) 206-10-45. Basic earnings per common share is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period which excludes the participating securities. Diluted earnings per common share includes the dilutive effect of additional potential common shares from stock compensation awards and warrants, but excludes awards considered participating securities.

Basic and diluted net income per common share calculations for the three and nine months ended September 30 are as follows (in thousands, except share and per share amounts):

follows (in thousands, except share and per share amounts):

	Three months ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
Basic
Net income (loss)	$	(426)	$	11,088	$	21	$	11,471
Less: undistributed earnings allocated to unvested restricted shares		(8)		137		-		121
Net earnings (losses) allocated to common shareholders	$	(418)	$	10,951	$	21	$	11,350
Weighted average common shares outstanding including shares considered participating securities		7,339,710		7,282,365		7,332,482		7,269,222
Less: average participating securities		(140,205)		(90,015)		(132,977)		(76,872)
Weighted average shares		7,199,505		7,192,350		7,199,505		7,192,350
Basic earnings (loss) per common share	$	(0.06)	$	1.52	$	0.00	$	1.58
Diluted
Net earnings (losses) allocated to common shareholders	$	(418)	$	10,951	$	21	$	11,350
Weighted average common shares outstanding for basic earnings per common share		7,199,505		7,192,350		7,199,505		7,192,350
Dilutive effect of assumed exercise of average participating securities		-		19,809		23,227		19,015
Average participating securities		140,205		90,015		132,977		76,872
Average common shares outstanding – diluted		7,339,710		7,302,174		7,355,709		7,288,237
Diluted earnings (loss) per common share	$	(0.06)	$	1.52	$	0.00	$	1.58

At September 30, 2016, 51,578 stock options were excluded from the diluted weighted average common share calculation for the three months ended September 30, 2016, due to the net loss for the quarter.

There were 14,985 of anti-dilutive stock options excluded from the diluted weighted average common share calculation for the three months ended September 30, 2016. At September 30, 2015, 19,324 of anti-dilutive stock options were excluded from the diluted weighted average common share calculations.

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Stock Based Compensation

9 Months Ended

Sep. 30, 2016

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

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

Note 9 – 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 shares 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.

Awards for 78,036 and 53,640 restricted shares were granted under the Company’s 2014 Restricted Stock Plan during the nine months ended September 30, 2016 and 2015, respectively. The awards vest ratably over a five-year period. There were 1,429 shares and 3,434 restricted shares forfeited in the three months and nine months ended September 30, 2016, respectively. There were 9,290 restricted shares forfeited in the three months and nine months ended September 30, 2015. There were 146,411 and 81,732 unvested restricted shares at September 30, 2016 and December 31, 2015, respectively. Compensation expense associated with amortization of restricted stock was $22,000 and $25,000 for the three months ended September 30, 2016 and 2015, respectively. Compensation expense associated with the amortization of restricted stock was $83,000 and $59,000 in the nine months ended September 30, 2016 and 2015, 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.

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Subsequent Event

9 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 10 – Subsequent Event

On October 3, 2016, First Commonwealth Financial Corporation (“First Commonwealth”) and the Company announced that they had entered into a definitive merger agreement which provides for the merger of the Company with and into First Commonwealth following the satisfaction of certain closing conditions, including approval by the Company’s shareholders and approval by appropriate bank regulatory authorities (the “Merger”). Under the terms of the definitive merger agreement, which has been unanimously approved by the board of directors of both companies, the Company’s shareholders will be entitled to receive either 1.427 shares of First Commonwealth common stock or $14.50 in cash for each common share of the Company, subject to proration provisions set forth in the definitive merger agreement. Aggregate cash consideration to Company shareholders is fixed at $21,283,773, which is approximately 20% of the Merger consideration, and the remaining Merger consideration will be in the form of stock consideration. The Merger is expected to be completed in the second quarter of 2017.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Earnings Per Share, Policy [Policy Text Block]

Earnings per Common Share

Earnings per common share is computed using the two-class method. Basic earnings per common share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period which excludes the participating securities. All outstanding unvested restricted stock awards containing rights to non-forfeitable dividends are considered participating securities for this calculation. Diluted earnings per common share includes the dilutive effect of additional potential common shares from stock compensation awards, but excludes awards considered participating securities.

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 shares 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.

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 Operations.

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 the Company’s evaluation of credit risk after careful consideration of all information available to the Company. 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 Held For Sale [Policy Text Block]

Loans

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 non-accrual 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 non-accrual 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.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred tax assets are reduced by a valuation allowance, if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment. The Company recognizes interest and penalties on income taxes, if applicable, as a component of income tax expense. The Company files consolidated income tax returns with its subsidiaries.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was issued to provide financial statement users with information about expected credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. For public business entities, the new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Among other things, in the amendments in ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date:

- A lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and

- A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in ASU 2016-01 supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures, and limited liability companies) to be measured at fair value with changes in the fair value recognized through net income. The amendments allow equity investments that do not have readily determinable fair values to be re-measured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. The amendments improve financial reporting by providing relevant information about an entity’s equity investments and reducing the number of items that are recognized in other comprehensive income. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this guidance is not expected to have a material effect on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This new guidance supersedes the revenue recognition requirements in ASC 605, Revenue Recognition, and is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects consideration to which the entity expects to be entitled in exchange for those goods and services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In April 2015, the FASB approved deferral of the effective date of this guidance, which is now effective prospectively for the Company for annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the effect the guidance will have on the Company’s consolidated financial statements.

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Securities (Tables)

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

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

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

	September 30, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. Government and agency obligations	$	27,282	$	34	$	19	$	27,297
Corporate bonds		2,800		68		2		2,866
States and municipal obligations		20,501		738		13		21,226
Collateralized mortgage obligations		27,577		161		28		27,710
Mortgage-backed securities		15,510		570		-		16,080
Other equity securities		500		-		3		497
Total	$	94,170	$	1,571	$	65	$	95,676

	December 31, 2015
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
U.S. Government and agency obligations	$	20,904	$	26	$	88	$	20,842
Corporate bonds		3,714		26		13		3,727
States and municipal obligations		21,954		388		81		22,261
Collateralized mortgage obligations		22,862		46		107		22,801
Mortgage-backed securities		17,702		505		41		18,166
Total	$	87,136	$	991	$	330	$	87,797

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

Securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at the dates indicated are as follows (dollars in thousands):

	September 30, 2016
	(Less than 12 months)						(12 months or longer)						Total
	Number of		Fair		Unrealized		Number of		Fair		Unrealized		Number of		Fair		Unrealized
Description of securities	investments		value		losses		investments		value		losses		investments		value		losses
U.S. Government and agency obligations		11	$	15,225	$	19		-	$	-	$	-		11	$	15,225	$	19
Corporate bonds		-		-		-		1		499		2		1		499		2
State and municipal obligations		3		1,158		13		-		-		-		3		1,158		13
Collateralized mortgage obligations		10		7,654		14		6		2,323		14		16		9,977		28
Mortgage-backed  securities		1		1,234		-		-		-		-		1		1,234		-
Other equity securities		1		497		3		-		-		-		1		497		3
Total temporarily impaired securities		26	$	25,768	$	49		7	$	2,822	$	16		33	$	28,590	$	65

	December 31, 2015
	(Less than 12 months)						(12 months or longer)						Total
	Number of		Fair		Unrealized		Number of		Fair		Unrealized		Number of		Fair		Unrealized
Description of securities	investments		value		losses		investments		value		losses		investments		value		losses
U.S. Government and agency obligations		14	$	15,333	$	55		2	$	1,964	$	33		16	$	17,297	$	88
Corporate bonds		2		759		5		3		1,400		8		5		2,159		13
State and municipal obligations		9		3,902		48		4		1,355		33		13		5,257		81
Collateralized mortgage obligations		13		11,298		63		6		2,551		44		19		13,849		107
Mortgage-backed securities		5		5,176		41		-		-		-		5		5,176		41
Total temporarily impaired securities		43	$	36,468	$	212		15	$	7,270	$	118		58	$	43,738	$	330

Investments Classified by Contractual Maturity Date [Table Text Block]

Mortgage-backed securities are shown separately since they are not due at a single maturity date.

	Amortized Cost		Fair Value
Due in one year or less	$	3,726	$	3,730
Due after one to five years		32,422		32,674
Due after five to ten years		10,835		11,214
Due after ten years		3,600		3,771
Mortgage-backed and related securities		43,587		44,287
Total	$	94,170	$	95,676

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Loans (Tables)

9 Months Ended

Sep. 30, 2016

Receivables [Abstract]

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

Loans were comprised of the following at the dates indicated (in thousands):

	September 30,			December 31,
	2016			2015
Consumer and credit card	$	36,158		$	40,587
Residential real estate and home equity		150,362			137,645
Commercial and industrial		104,108			99,213
Commercial real estate		99,505			100,743
		390,133			378,188
Net deferred loan costs		617			325
Loans	$	390,750		$	378,513
Allowance for loan losses		(4,592	)		(4,333	)
Net loans	$	386,158		$	374,180

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Credit Quality (Tables)

9 Months Ended

Sep. 30, 2016

Credit Quality [Abstract]

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

The tables below summarize activity in the allowance for loan losses for the periods indicated (in thousands).

	Three months ended September 30, 2016
	Consumer		Residential
	and		Real Estate		Commercial
	Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Unallocated		Total
Beginning balance	$	122	$	544	$	1,521	$	2,140	$	263	$	4,590
Charge-offs		(63)		(3)		(2)		-		-		(68)
Recoveries		23		12		23		12		-		70
Net (charge-offs) recoveries		(40)		9		21		12		-		2
Provision		38		(24)		(26)		(71)		83		-
Ending balance	$	120	$	529	$	1,516	$	2,081	$	346	$	4,592

	Nine months ended September 30, 2016
	Consumer		Residential
	and		Real Estate		Commercial
	Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Unallocated		Total
Beginning balance	$	144	$	561	$	1,321	$	1,999	$	308	$	4,333
Charge-offs		(142)		(12)		(2)		-		-		(156)
Recoveries		56		35		240		84		-		415
Net (charge-offs) recoveries		(86)		23		238		84		-		259
Provision		62		(55)		(43)		(2)		38		-
Ending balance	$	120	$	529	$	1,516	$	2,081	$	346	$	4,592

	Three months ended September 30, 2015
	Consumer		Residential
	and		Real Estate		Commercial
	Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Unallocated		Total
Beginning balance	$	172	$	315	$	1,035	$	2,195	$	447	$	4,164
Charge-offs		(63)		-		-		-		-		(63)
Recoveries		50		30		157		18		-		255
Net (charge-offs) recoveries		(13)		30		157		18		-		192
Provision		-		156		(63)		(217)		(26)		(150)
Ending balance	$	159	$	501	$	1,129	$	1,996	$	421	$	4,206

	Nine months ended September 30, 2015
	Consumer and Credit Card		Residential Real Estate and Home Equity		Commercial and Industrial		Commercial Real Estate		Unallocated		Total
Beginning balance	$	190	$	268	$	1,132	$	2,376	$	270	$	4,236
Charge-offs		(122)		(73)		(311)		(64)		-		(570)
Recoveries		109		97		297		37		-		540
Net charge-offs		(13)		24		(14)		(27)		-		(30)
Provision		(18)		209		11		(353)		151		-
Ending balance	$	159	$	501	$	1,129	$	1,996	$	421	$	4,206

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 the dates indicated (in thousands).

	At September 30, 2016						Period ended September 30, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Three months Average Recorded Investment		Three months Interest Income Recognized		Nine months Average Recorded Investment		Nine months Interest Income Recognized
With no related allowance recorded:
Consumer and credit card	$	282	$	282		-	$	283	$	5	$	376	$	14
Residential real estate and home equity		668		668		-		672		-		660		1
Commercial and industrial		572		572		-		579		5		862		16
Commercial real estate		2,284		2,284		-		2,292		19		842		19
		3,806		3,806		-		3,826		29		2,740		50
With an allowance recorded:
Commercial and industrial	$	1,545	$	1,623	$	344	$	1,407	$	17	$	1,263	$	46
Commercial real estate		4,831		4,831		581		4,841		56		4,751		168
		6,376		6,454		925		6,248		73		6,014		214
Total:
Consumer and credit card	$	282	$	282	$	-	$	283	$	5	$	376	$	14
Residential real estate and home equity		668		668		-		672		-		660		1
Commercial and industrial		2,117		2,195		344		1,986		22		2,125		62
Commercial real estate		7,115		7,115		581		7,133		75		5,593		187
Total	$	10,182	$	10,260	$	925	$	10,074	$	102	$	8,754	$	264

	At December 31, 2015						Period ended September 30, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Three months Average Recorded Investment		Three months Interest Income Recognized		Nine months Average Recorded Investment		Nine months Interest Income Recognized
With no related allowance recorded:
Consumer and credit card	$	548	$	548		-	$	469	$	7	$	469	$	19
Residential real estate and home equity		668		668		-		733		-		552		8
Commercial and industrial		926		926		-		914		5		1,106		21
Commercial real estate		126		126		-		451		2		468		2
		2,268		2,268		-		2,567		14		2,595		50
With an allowance recorded:
Commercial and industrial	$	944	$	1,021	$	144	$	1,134	$	13	$	1,016	$	43
Commercial real estate		4,579		4,579		435		6,706		53		7,727		163
		5,523		5,600		579		7,840		66		8,743		206
Total:
Consumer and credit card	$	548	$	548	$	-	$	469	$	7	$	469	$	19
Residential real estate and home equity		668		668		-		733		-		552		8
Commercial and industrial		1,870		1,947		144		2,048		18		2,122		64
Commercial real estate		4,705		4,705		435		7,157		55		8,195		165
Total	$	7,791	$	7,868	$	579	$	10,407	$	80	$	11,338	$	256

Allowance For Loan Losses On The Basis Of The Impairment Methodology [Table Text Block]

The allocation of the allowance for loan losses summarized on the basis of the Company’s impairment methodology was as follows at the dates indicated (in thousands):

			Residential
	Consumer		Real Estate		Commercial
	and Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Total
September 30, 2016
Individually evaluated for impairment	$	-	$	-	$	344	$	581	$	925
Collectively evaluated for impairment		120		529		1,172		1,500		3,321
Allocated	$	120	$	529	$	1,516	$	2,081		4,246
Unallocated										346
									$	4,592
December 31, 2015
Individually evaluated for impairment	$	-	$	-	$	144	$	435	$	579
Collectively evaluated for impairment		144		561		1,177		1,564		3,446
Allocated	$	144	$	561	$	1,321	$	1,999		4,025
Unallocated										308
									$	4,333

Recorded Investment In Loans On The Basis Of The Impairment Methodology [Table Text Block]

The recorded investment in loans summarized on the basis of the Company’s impairment methodology at the dates indicated was as follows (in thousands):

			Residential
	Consumer		Real Estate		Commercial
	and Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Total
September 30, 2016
Individually evaluated for impairment	$	282	$	668	$	2,117	$	7,115	$	10,182
Collectively evaluated for impairment		35,876		149,694		101,991		92,390		379,951
Ending balance	$	36,158	$	150,362	$	104,108	$	99,505	$	390,133

			Residential
	Consumer		Real Estate		Commercial
	and Credit		and Home		and		Commercial
	Card		Equity		Industrial		Real Estate		Total
December 31, 2015
Individually evaluated for impairment	$	548	$	668	$	1,870	$	4,705	$	7,791
Collectively evaluated for impairment		40,039		136,977		97,343		96,038		370,397
Ending balance	$	40,587	$	137,645	$	99,213	$	100,743	$	378,188

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

Loans on non-accrual status were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2016		2015
Consumer and credit card	$	-	$	-
Residential real estate and home equity		816		668
Commercial and industrial		236		554
Commercial real estate		2,315		-
Total	$	3,367	$	1,222

Financing Receivable Credit Quality Indicators [Table Text Block]

As of the dates indicated and based on the most recent analysis performed, the recorded investment by risk category and class of loans is as of the dates indicated (in thousands):

	September 30, 2016				December 31, 2015
	Commercial		Commercial		Commercial		Commercial
	and Industrial		Real Estate		and Industrial		Real Estate
Pass	$	101,331	$	92,499	$	96,225	$	91,132
Special mention		1,200		4,374		925		4,592
Substandard		1,577		2,632		2,063		5,019
Total	$	104,108	$	99,505	$	99,213	$	100,743

Consumer Risk [Table Text Block]

The following table presents the recorded investment in residential real estate and consumer loans based on payment activity as of the dates indicated (in thousands):

	September 30, 2016				December 31, 2015
			Residential				Residential
	Consumer and		Real Estate and		Consumer and		Real Estate and
	Credit Card		Home Equity		Credit Card		Home Equity
Performing	$	36,158	$	149,546	$	40,587	$	136,975
Non-performing		-		816		-		670
Total	$	36,158	$	150,362	$	40,587	$	137,645

Past Due Financing Receivables [Table Text Block]

The following tables present past due loans aged as of the dates indicated (in thousands).

	September 30, 2016
			60-89
			Days		90 Days or				Loans
	30-59 Days		Past		more Past		Total		Not Past
	Past Due		Due		Due		Past Due		Due		Total Loans
Consumer and credit card	$	103	$	34	$	-	$	137	$	36,021	$	36,158
Residential real estate and home equity		72		89		434		595		149,767		150,362
Commercial and industrial		99		-		168		267		103,841		104,108
Commercial real estate		-		-		2,315		2,315		97,190		99,505
Total	$	274	$	123	$	2,917	$	3,314	$	386,819	$	390,133

	December 31, 2015
			60-89
			Days		90 Days or				Loans
	30-59 Days		Past		more Past		Total		Not Past
	Past Due		Due		Due		Past Due		Due		Total Loans
Consumer and credit card	$	48	$	13	$	-	$	61	$	40,526	$	40,587
Residential real estate and home equity		160		98		401		659		136,986		137,645
Commercial and industrial		236		-		-		236		98,977		99,213
Commercial real estate		-		-		-		-		100,743		100,743
Total	$	444	$	111	$	401	$	956	$	377,232	$	378,188

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

The following table summarizes troubled debt restructurings that occurred during the periods indicated (dollars in thousands):

	For the three months ended September 30,
	2016				2015
	Number of		Recorded Investment		Number of		Recorded Investment
	Contracts		(as of period end)		Contracts		(as of period end)
Consumer and credit card		-	$	-		1	$	188
Total		-	$	-		1	$	188

	For the nine months ended September 30,
	2016				2015
	Number of		Recorded Investment		Number of		Recorded Investment
	Contracts		(as of period end)		Contracts		(as of period end)
Consumer and credit card		-	$	-		7	$	279
Commercial real estate		4		392		-		-
Total		4	$	392		7	$	279

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

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 the dates indicated (in thousands):

	September 30, 2016
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	31,282	$	31,282	$	31,282	$	-	$	-
Securities available-for-sale		95,676		95,676		-		95,179		497
Loans held for sale		755		755		-		755		-
Loans (net of allowance)		386,158		382,919		-		-		382,919
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,383		1,383		-		-		1,383
Financial liabilities
Non-interest-bearing deposits	$	123,353	$	123,353	$	-	$	123,353	$	-
Interest-bearing deposits		366,195		366,187		-		366,187		-
Borrowings		4,293		4,293		-		4,293		-
Accrued interest payable		65		65		-		-		65

	December 31, 2015
	Carrying		Fair
	Amount		Value		Level 1		Level 2		Level 3
Financial assets
Cash and cash equivalents	$	31,892	$	31,892	$	31,892	$	-	$	-
Securities available-for-sale		87,797		87,797		-		87,797		-
Loans (net of allowance)		374,180		371,930		-		-		371,930
FHLB stock		3,250		3,250		-		3,250		-
Accrued interest receivable		1,307		1,307		-		-		1,307
Financial liabilities
Non-interest-bearing deposits	$	124,023	$	124,023	$	-	$	124,023	$	-
Interest-bearing deposits		350,514		350,957		-		350,957		-
Borrowings		4,520		4,520		-		4,520		-
Accrued interest payable		74		74		-		-		74

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 the dates indicated (in thousands):

	September 30, 2016
			Fair Value Measurements Using
			Quoted Prices in Active Markets for
			Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agency obligations	$	27,297	$	-	$	27,297	$	-
Corporate bonds		2,866		-		2,866		-
State and municipal obligations		21,226		-		21,226		-
Collateralized mortgage obligations		27,710		-		27,710		-
Mortgage-backed securities		16,080		-		16,080		-
Other equity securities		497		-		-		497
Total	$	95,676	$	-	$	95,179	$	497

	December 31, 2015
			Fair Value Measurements Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2)		(Level 3)
U.S. Government and agency obligations	$	20,842	$	-	$	20,842	$	-
Corporate bonds		3,727		-		3,727		-
State and municipal obligations		22,261		-		22,261		-
Collateralized mortgage obligations		22,801		-		22,801		-
Mortgage-backed securities		18,166		-		18,166		-
Total	$	87,797	$	-	$	87,797	$	-

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 non-recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at the dates indicated (in thousands).

	September 30, 2016
	Fair Value Measurements Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2 )		(Level 3)
Impaired loans	$	10,182	$	-	$	-	$	10,182
Real estate owned		68		-		-		68

	December 31, 2015
	Fair Value Measurements Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
	Fair Value		(Level 1)		(Level 2 )		(Level 3)
Impaired loans	$	7,791	$	-	$	-	$	7,791
Real estate owned		68		-		-		68

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Sale-Leaseback and Capital Lease Obligation (Tables)

9 Months Ended

Sep. 30, 2016

Leases [Abstract]

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

The future minimum lease payments under capital leases are as follows (in thousands):

2016	$	161
2017		655
2018		668
2019		682
2020		695
Thereafter		7,798
Total minimum lease payments		10,659
Less amounts representing interest		2,643
Present value of net minimum lease payments	$	8,016

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Federal Income Taxes (Tables)

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

The Company files income tax returns in the U.S. federal jurisdiction and franchise tax returns in Ohio. Income tax benefit for the dates indicated include the following components (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2016		2015		2016		2015
Current	$	(11)	$	-	$	73	$	-
Deferred		(179)		96		(306)		96
Valuation allowance		-		(10,784)		-		(10,784)
Total	$	(190)	$	(10,688)	$	(233)	$	(10,688)

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

The difference between the financial statement tax provision and amounts computed by applying the statutory federal income tax rate to income before income taxes was as follows (in thousands):

	Three months ended				Nine months ended
	September 30,				September 30,
	2016		2015		2016		2015
Federal income taxes calculated at the expected statutory rate	$	(209)	$	136	$	(72)	$	266
Increase (decrease) in taxes resulting from:
Nontaxable dividend and interest income		(30)		(29)		(71)		(70)
Increase in cash surrender value of life insurance - net		(55)		(56)		(193)		(194)
Nondeductible acquisition costs		98		-		98		-
Other		6		45		5		94
Valuation allowance		-		(10,784)		-		(10,784)
Income tax benefit per financial statements	$	(190)	$	(10,688)	$	(233)	$	(10,688)

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

Deferred tax assets and liabilities were comprised of the following at the dates indicated (in thousands):

	September 30, 2016		December 31, 2015
Deferred tax assets:
Allowance for loan losses	$	1,561	$	1,473
Deferred compensation		308		300
Alternative minimum tax carry forward		212		155
Expenses on foreclosed property		-		14
Deferred gain on sale of building		1,009		-
NOL carry forward		8,258		9,020
Other		307		98
Subtotal		11,655		11,060
Deferred tax liabilities:
FHLB stock dividends		(307)		(307)
Unrealized gains on available-for-sale securities		(512)		(225)
Depreciation		(55)		(55)
Other		(314)		(33)
Subtotal		(1,188)		(620)
Net deferred tax asset		10,467		10,440
Less: valuation allowance		-		-
Total	$	10,467	$	10,440

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Earnings per Common Share (Tables)

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Basic and diluted net income per common share calculations for the three and nine months ended September 30 are as follows (in thousands, except share and per share amounts):

follows (in thousands, except share and per share amounts):

	Three months ended September 30,				Nine months ended September 30,
	2016		2015		2016		2015
Basic
Net income (loss)	$	(426)	$	11,088	$	21	$	11,471
Less: undistributed earnings allocated to unvested restricted shares		(8)		137		-		121
Net earnings (losses) allocated to common shareholders	$	(418)	$	10,951	$	21	$	11,350
Weighted average common shares outstanding including shares considered participating securities		7,339,710		7,282,365		7,332,482		7,269,222
Less: average participating securities		(140,205)		(90,015)		(132,977)		(76,872)
Weighted average shares		7,199,505		7,192,350		7,199,505		7,192,350
Basic earnings (loss) per common share	$	(0.06)	$	1.52	$	0.00	$	1.58
Diluted
Net earnings (losses) allocated to common shareholders	$	(418)	$	10,951	$	21	$	11,350
Weighted average common shares outstanding for basic earnings per common share		7,199,505		7,192,350		7,199,505		7,192,350
Dilutive effect of assumed exercise of average participating securities		-		19,809		23,227		19,015
Average participating securities		140,205		90,015		132,977		76,872
Average common shares outstanding – diluted		7,339,710		7,302,174		7,355,709		7,288,237
Diluted earnings (loss) per common share	$	(0.06)	$	1.52	$	0.00	$	1.58

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Summary of Significant Accounting Policies (Details Textual)	9 Months Ended
	Sep. 30, 2016
Summary of Significant Accounting Policies
Consumer Loans Charged Off Delinquency Period	120 days
Mortgage Loans Charge Off Delinquency Period	180 days

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Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Fair values of securities available-for-sale
Amortized Cost	$ 94,170	$ 87,136
Gross Unrealized Gains	1,571	991
Gross Unrealized Losses	65	330
Fair Value	95,676	87,797
Collateralized mortgage obligations [Member]
Fair values of securities available-for-sale
Amortized Cost	27,577	22,862
Gross Unrealized Gains	161	46
Gross Unrealized Losses	28	107
Fair Value	27,710	22,801
Other Equity Securities [Member]
Fair values of securities available-for-sale
Amortized Cost	500
Gross Unrealized Gains	0
Gross Unrealized Losses	3
Fair Value	497
U.S. Government and agency obligations [Member]
Fair values of securities available-for-sale
Amortized Cost	27,282	20,904
Gross Unrealized Gains	34	26
Gross Unrealized Losses	19	88
Fair Value	27,297	20,842
Corporate bonds [Member]
Fair values of securities available-for-sale
Amortized Cost	2,800	3,714
Gross Unrealized Gains	68	26
Gross Unrealized Losses	2	13
Fair Value	2,866	3,727
States and municipal obligations [Member]
Fair values of securities available-for-sale
Amortized Cost	20,501	21,954
Gross Unrealized Gains	738	388
Gross Unrealized Losses	13	81
Fair Value	21,226	22,261
Mortgage-backed securities [Member]
Fair values of securities available-for-sale
Amortized Cost	15,510	17,702
Gross Unrealized Gains	570	505
Gross Unrealized Losses	0	41
Fair Value	$ 16,080	$ 18,166

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Securities (Details 1) $ in Thousands	Sep. 30, 2016 USD ($)	Dec. 31, 2015 USD ($)
Unrealized loss
Number of investments	33	58
Fair Value	$ 28,590	$ 43,738
Unrealized Losses	$ 65	$ 330
Collateralized mortgage obligations [Member]
Unrealized loss
Number of investments	16	19
Fair Value	$ 9,977	$ 13,849
Unrealized Losses	$ 28	$ 107
Less than 12 months [Member]
Unrealized loss
Number of investments	26	43
Fair Value	$ 25,768	$ 36,468
Unrealized Losses	$ 49	$ 212
Less than 12 months [Member] | Collateralized mortgage obligations [Member]
Unrealized loss
Number of investments	10	13
Fair Value	$ 7,654	$ 11,298
Unrealized Losses	$ 14	$ 63
12 months or longer [Member]
Unrealized loss
Number of investments	7	15
Fair value	$ 2,822	$ 7,270
Unrealized Losses	$ 16	$ 118
12 months or longer [Member] | Collateralized mortgage obligations [Member]
Unrealized loss
Number of investments	6	6
Fair value	$ 2,323	$ 2,551
Unrealized Losses	$ 14	$ 44
U.S. Government and agency obligations [Member]
Unrealized loss
Number of investments	11	16
Fair Value	$ 15,225	$ 17,297
Unrealized Losses	$ 19	$ 88
U.S. Government and agency obligations [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	11	14
Fair Value	$ 15,225	$ 15,333
Unrealized Losses	$ 19	$ 55
U.S. Government and agency obligations [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	0	2
Fair value	$ 0	$ 1,964
Unrealized Losses	$ 0	$ 33
Corporate bonds [Member]
Unrealized loss
Number of investments	1	5
Fair Value	$ 499	$ 2,159
Unrealized Losses	$ 2	$ 13
Corporate bonds [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	0	2
Fair Value	$ 0	$ 759
Unrealized Losses	$ 0	$ 5
Corporate bonds [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	1	3
Fair value	$ 499	$ 1,400
Unrealized Losses	$ 2	$ 8
State and municipal obligations [Member]
Unrealized loss
Number of investments	3	13
Fair Value	$ 1,158	$ 5,257
Unrealized Losses	$ 13	$ 81
State and municipal obligations [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	3	9
Fair Value	$ 1,158	$ 3,902
Unrealized Losses	$ 13	$ 48
State and municipal obligations [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	0	4
Fair value	$ 0	$ 1,355
Unrealized Losses	$ 0	$ 33
Mortgage-backed securities and other [Member]
Unrealized loss
Number of investments	1	5
Fair Value	$ 1,234	$ 5,176
Unrealized Losses	$ 0	$ 41
Mortgage-backed securities and other [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	1	5
Fair Value	$ 1,234	$ 5,176
Unrealized Losses	$ 0	$ 41
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
Other Equity Securities [Member]
Unrealized loss
Number of investments	1
Fair Value	$ 497
Unrealized Losses	$ 3
Other Equity Securities [Member] | Less than 12 months [Member]
Unrealized loss
Number of investments	1
Fair Value	$ 497
Unrealized Losses	$ 3
Other Equity Securities [Member] | 12 months or longer [Member]
Unrealized loss
Number of investments	0
Fair value	$ 0
Unrealized Losses	$ 0

XML

Securities (Details 2) $ in Thousands	Sep. 30, 2016 USD ($)
Amortized cost and estimated fair value of all debt securities
Available-for-sale, Amortized Cost, Due in one year or less	$ 3,726
Available-for-sale, Amortized Cost, Due after one to five years	32,422
Available-for-sale, Amortized Cost, Due after five to ten years	10,835
Available-for-sale, Amortized Cost, Due after ten years	3,600
Available-for-sale, Amortized Cost, Mortgage-backed and related securities	43,587
Available-for-sale, Amortized Cost, Total	94,170
Available-for-sale, Fair Value, Due in one year or less	3,730
Available-for-sale, Fair Value, Due after one to five years	32,674
Available-for-sale, Fair Value, Due after five to ten years	11,214
Available-for-sale, Fair Value, Fair value, Due after ten years	3,771
Available-for-sale, Fair Value, Mortgage-backed and related securities	44,287
Available-for-sale, Fair Value, Total	$ 95,676

XML

Securities (Details Textual) $ in Millions	9 Months Ended
	Sep. 30, 2016 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Investment From Same Issuer As Percentage Of Equity Maximum	10.00%
Pledged Assets Separately Reported, Securities Pledged as Collateral, at Fair Value, Total	$ 75.6

XML

Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Loans
Consumer and credit card	$ 36,158		$ 40,587
Residential real estate and home equity	150,362		137,645
Commercial and industrial	104,108		99,213
Commercial real estate	99,505		100,743
Subtotal	390,133		378,188
Net deferred loan costs	617		325
Loans	390,750		378,513
Allowance for loan losses	(4,592)	$ (4,590)	(4,333)	$ (4,206)	$ (4,164)	$ (4,236)
Net loans	$ 386,158		$ 374,180

XML

Credit Quality (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Allowance allocated to:
Beginning balance	$ 4,590	$ 4,164	$ 4,333	$ 4,236
Charge-offs	(68)	(63)	(156)	(570)
Recoveries	70	255	415	540
Net (charge-offs) recoveries	2	192	259	(30)
Provision	0	(150)	0	0
Ending balance	4,592	4,206	4,592	4,206
Consumer and Credit Card [Member]
Allowance allocated to:
Beginning balance	122	172	144	190
Charge-offs	(63)	(63)	(142)	(122)
Recoveries	23	50	56	109
Net (charge-offs) recoveries	(40)	(13)	(86)	(13)
Provision	38	0	62	(18)
Ending balance	120	159	120	159
Residential Real Estate and Home Equity [Member]
Allowance allocated to:
Beginning balance	544	315	561	268
Charge-offs	(3)	0	(12)	(73)
Recoveries	12	30	35	97
Net (charge-offs) recoveries	9	30	23	24
Provision	(24)	156	(55)	209
Ending balance	529	501	529	501
Commercial and Industrial [Member]
Allowance allocated to:
Beginning balance	1,521	1,035	1,321	1,132
Charge-offs	(2)	0	(2)	(311)
Recoveries	23	157	240	297
Net (charge-offs) recoveries	21	157	238	(14)
Provision	(26)	(63)	(43)	11
Ending balance	1,516	1,129	1,516	1,129
Commercial Real Estate [Member]
Allowance allocated to:
Beginning balance	2,140	2,195	1,999	2,376
Charge-offs	0	0	0	(64)
Recoveries	12	18	84	37
Net (charge-offs) recoveries	12	18	84	(27)
Provision	(71)	(217)	(2)	(353)
Ending balance	2,081	1,996	2,081	1,996
Unallocated Financing Receivables [Member]
Allowance allocated to:
Beginning balance	263	447	308	270
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Net (charge-offs) recoveries	0	0	0	0
Provision	83	(26)	38	151
Ending balance	$ 346	$ 421	$ 346	$ 421

XML

Credit Quality (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Impaired Loans
Recorded Investment	$ 10,182		$ 10,182		$ 7,791
Unpaid Principal Balance	10,260		10,260		7,868
Related Allowance	925		925		579
Average Recorded Investment	10,074	$ 10,407	8,754	$ 11,338
Interest Income Recognized	102	80	264	256
Consumer and credit card [Member]
Impaired Loans
Recorded Investment	282		282		548
Unpaid Principal Balance	282		282		548
Related Allowance	0		0		0
Average Recorded Investment	283	469	376	469
Interest Income Recognized	5	7	14	19
Residential Real Estate and Home Equity [Member]
Impaired Loans
Recorded Investment	668		668		668
Unpaid Principal Balance	668		668		668
Related Allowance	0		0		0
Average Recorded Investment	672	733	660	552
Interest Income Recognized	0	0	1	8
Commercial and industrial [Member]
Impaired Loans
Recorded Investment	2,117		2,117		1,870
Unpaid Principal Balance	2,195		2,195		1,947
Related Allowance	344		344		144
Average Recorded Investment	1,986	2,048	2,125	2,122
Interest Income Recognized	22	18	62	64
Commercial real estate [Member]
Impaired Loans
Recorded Investment	7,115		7,115		4,705
Unpaid Principal Balance	7,115		7,115		4,705
Related Allowance	581		581		435
Average Recorded Investment	7,133	7,157	5,593	8,195
Interest Income Recognized	75	55	187	165
With no related allowance recorded [Member]
Impaired Loans
Recorded Investment	3,806		3,806		2,268
Unpaid Principal Balance	3,806		3,806		2,268
Average Recorded Investment	3,826	2,567	2,740	2,595
Interest Income Recognized	29	14	50	50
With no related allowance recorded [Member] | Consumer and credit card [Member]
Impaired Loans
Recorded Investment	282		282		548
Unpaid Principal Balance	282		282		548
Average Recorded Investment	283	469	376	469
Interest Income Recognized	5	7	14	19
With no related allowance recorded [Member] | Residential Real Estate and Home Equity [Member]
Impaired Loans
Recorded Investment	668		668		668
Unpaid Principal Balance	668		668		668
Average Recorded Investment	672	733	660	552
Interest Income Recognized	0	0	1	8
With no related allowance recorded [Member] | Commercial and industrial [Member]
Impaired Loans
Recorded Investment	572		572		926
Unpaid Principal Balance	572		572		926
Average Recorded Investment	579	914	862	1,106
Interest Income Recognized	5	5	16	21
With no related allowance recorded [Member] | Commercial real estate [Member]
Impaired Loans
Recorded Investment	2,284		2,284		126
Unpaid Principal Balance	2,284		2,284		126
Average Recorded Investment	2,292	451	842	468
Interest Income Recognized	19	2	19	2
With allowance recorded [Member]
Impaired Loans
Recorded Investment	6,376		6,376		5,523
Unpaid Principal Balance	6,454		6,454		5,600
Related Allowance	925		925		579
Average Recorded Investment	6,248	7,840	6,014	8,743
Interest Income Recognized	73	66	214	206
With allowance recorded [Member] | Commercial and industrial [Member]
Impaired Loans
Recorded Investment	1,545		1,545		944
Unpaid Principal Balance	1,623		1,623		1,021
Related Allowance	344		344		144
Average Recorded Investment	1,407	1,134	1,263	1,016
Interest Income Recognized	17	13	46	43
With allowance recorded [Member] | Commercial real estate [Member]
Impaired Loans
Recorded Investment	4,831		4,831		4,579
Unpaid Principal Balance	4,831		4,831		4,579
Related Allowance	581		581		$ 435
Average Recorded Investment	4,841	6,706	4,751	7,727
Interest Income Recognized	$ 56	$ 53	$ 168	$ 163

XML

Credit Quality (Details 2) - USD ($) $ in Thousands	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Allocation Of The Allowance For Loan Losses
Loans and Leases Receivable, Allowance	$ 4,592	$ 4,590	$ 4,333	$ 4,206	$ 4,164	$ 4,236
Recorded Investment In Loans
Individually evaluated for impairment	10,182		7,791
Collectively evaluated for impairment	379,951		370,397
Ending balance	390,133		378,188
Allocated Financing Receivables [Member]
Allocation Of The Allowance For Loan Losses
Individually evaluated for impairment	925		579
Collectively evaluated for impairment	3,321		3,446
Loans and Leases Receivable, Allowance	4,246		4,025
Unallocated Financing Receivables [Member]
Allocation Of The Allowance For Loan Losses
Loans and Leases Receivable, Allowance	346		308
Consumer and Credit Card [Member]
Allocation Of The Allowance For Loan Losses
Loans and Leases Receivable, Allowance	120	122	144	159	172	190
Recorded Investment In Loans
Individually evaluated for impairment	282		548
Collectively evaluated for impairment	35,876		40,039
Ending balance	36,158		40,587
Consumer and Credit Card [Member] | Allocated Financing Receivables [Member]
Allocation Of The Allowance For Loan Losses
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	120		144
Loans and Leases Receivable, Allowance	120		144
Residential Portfolio Segment [Member]
Allocation Of The Allowance For Loan Losses
Loans and Leases Receivable, Allowance	529	544	561	501	315	268
Recorded Investment In Loans
Individually evaluated for impairment	668		668
Collectively evaluated for impairment	149,694		136,977
Ending balance	150,362		137,645
Residential Portfolio Segment [Member] | Allocated Financing Receivables [Member]
Allocation Of The Allowance For Loan Losses
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	529		561
Loans and Leases Receivable, Allowance	529		561
Commercial and Industrial [Member]
Allocation Of The Allowance For Loan Losses
Loans and Leases Receivable, Allowance	1,516	1,521	1,321	1,129	1,035	1,132
Recorded Investment In Loans
Individually evaluated for impairment	2,117		1,870
Collectively evaluated for impairment	101,991		97,343
Ending balance	104,108		99,213
Commercial and Industrial [Member] | Allocated Financing Receivables [Member]
Allocation Of The Allowance For Loan Losses
Individually evaluated for impairment	344		144
Collectively evaluated for impairment	1,172		1,177
Loans and Leases Receivable, Allowance	1,516		1,321
Commercial Real Estate Portfolio Segment [Member]
Allocation Of The Allowance For Loan Losses
Loans and Leases Receivable, Allowance	2,081	$ 2,140	1,999	$ 1,996	$ 2,195	$ 2,376
Recorded Investment In Loans
Individually evaluated for impairment	7,115		4,705
Collectively evaluated for impairment	92,390		96,038
Ending balance	99,505		100,743
Commercial Real Estate Portfolio Segment [Member] | Allocated Financing Receivables [Member]
Allocation Of The Allowance For Loan Losses
Individually evaluated for impairment	581		435
Collectively evaluated for impairment	1,500		1,564
Loans and Leases Receivable, Allowance	$ 2,081		$ 1,999

XML

Credit Quality (Details 3) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	$ 3,367	$ 1,222
Consumer and credit card [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	0	0
Residential real estate and home equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	816	668
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	236	554
Commercial real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loans on nonaccrual status	$ 2,315	$ 0

XML

Credit Quality (Details 4) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Credit Quality Indicators
Loans	$ 390,750	$ 378,513
Commercial and Industrial [Member]
Credit Quality Indicators
Loans	104,108	99,213
Commercial and Industrial [Member] | Pass [Member]
Credit Quality Indicators
Loans	101,331	96,225
Commercial and Industrial [Member] | Special Mention [Member]
Credit Quality Indicators
Loans	1,200	925
Commercial and Industrial [Member] | Substandard [Member]
Credit Quality Indicators
Loans	1,577	2,063
Commercial Real Estate [Member]
Credit Quality Indicators
Loans	99,505	100,743
Commercial Real Estate [Member] | Pass [Member]
Credit Quality Indicators
Loans	92,499	91,132
Commercial Real Estate [Member] | Special Mention [Member]
Credit Quality Indicators
Loans	4,374	4,592
Commercial Real Estate [Member] | Substandard [Member]
Credit Quality Indicators
Loans	$ 2,632	$ 5,019

XML

Credit Quality (Details 5) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Credit Quality Indicators
Consumer risk based on payment activity	$ 390,750	$ 378,513
Consumer and Credit Card [Member]
Credit Quality Indicators
Consumer risk based on payment activity	36,158	40,587
Consumer and Credit Card [Member] | Performing [Member]
Credit Quality Indicators
Consumer risk based on payment activity	36,158	40,587
Consumer and Credit Card [Member] | Non-Performing [Member]
Credit Quality Indicators
Consumer risk based on payment activity	0	0
Residential Real Estate and Home Equity [Member]
Credit Quality Indicators
Consumer risk based on payment activity	150,362	137,645
Residential Real Estate and Home Equity [Member] | Performing [Member]
Credit Quality Indicators
Consumer risk based on payment activity	149,546	136,975
Residential Real Estate and Home Equity [Member] | Non-Performing [Member]
Credit Quality Indicators
Consumer risk based on payment activity	$ 816	$ 670

XML

Credit Quality (Details 6) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	$ 3,314	$ 956
Financing Receivable, Recorded Investment, Current	386,819	377,232
Financing Receivable, Recorded Investment, Subtotal	390,133	378,188
Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	274	444
Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	123	111
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	2,917	401
Consumer and credit card [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	137	61
Financing Receivable, Recorded Investment, Current	36,021	40,526
Financing Receivable, Recorded Investment, Subtotal	36,158	40,587
Consumer and credit card [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	103	48
Consumer and credit card [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	34	13
Consumer and credit card [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	0	0
Residential Real Estate and Home Equity [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	595	659
Financing Receivable, Recorded Investment, Current	149,767	136,986
Financing Receivable, Recorded Investment, Subtotal	150,362	137,645
Residential Real Estate and Home Equity [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	72	160
Residential Real Estate and Home Equity [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	89	98
Residential Real Estate and Home Equity [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	434	401
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	267	236
Financing Receivable, Recorded Investment, Current	103,841	98,977
Financing Receivable, Recorded Investment, Subtotal	104,108	99,213
Commercial and industrial [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	99	236
Commercial and industrial [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	0	0
Commercial and industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	168	0
Commercial real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	2,315	0
Financing Receivable, Recorded Investment, Current	97,190	100,743
Financing Receivable, Recorded Investment, Subtotal	99,505	100,743
Commercial real estate [Member] | Financing Receivables, 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	0	0
Commercial real estate [Member] | Financing Receivables, 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	0	0
Commercial real estate [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Past Due	$ 2,315	$ 0

XML

Credit Quality (Details 7) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($) contracts Contracts	Sep. 30, 2015 USD ($) contracts Contracts	Sep. 30, 2016 USD ($) contracts Contracts	Sep. 30, 2015 USD ($) contracts Contracts
Financing Receivable, Modifications [Line Items]
Number of Contracts | contracts	0	1	4	7
Recorded Investment	$ 0	$ 188	$ 392	$ 279
Consumer and credit card [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | Contracts	0	1	0	7
Recorded Investment	$ 0	$ 188	$ 0	$ 279
Commercial real estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Contracts | contracts			4	0
Recorded Investment			$ 392	$ 0

XML

Credit Quality (Details Textual)	Sep. 30, 2016 USD ($)
Financing Receivable, Modifications [Line Items]
Commercial And Commercial Real Estate Loan Relationships Internal Risk Grade Based Limit	$ 250,000

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Financial assets
Cash and cash equivalents	$ 31,282	$ 31,892	$ 35,031	$ 21,274
Securities available-for-sale	95,676	87,797
Loans held for sale	755	0
Loans (net of allowance)	386,158	374,180
FHLB stock	3,250	3,250
Financial liabilities
Non-interest-bearing deposits	123,353	124,023
Interest bearing	366,195	350,514
Level 1 [Member]
Financial assets
Securities available-for-sale	0	0
Loans held for sale	0
Cash and cash equivalents, Fair value	31,282	31,892
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
Borrowings, Fair value	0	0
Accrued interest payable, Fair value	0	0
Level 2 [Member]
Financial assets
Securities available-for-sale	95,179	87,797
Loans held for sale	755
Cash and cash equivalents, Fair value	0	0
Securities available-for-sale, Fair value	95,179	87,797
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	123,353	124,023
Interest-bearing deposits, Fair value	366,187	350,957
Borrowings, Fair value	4,293	4,520
Accrued interest payable, Fair value	0	0
Level 3 [Member]
Financial assets
Securities available-for-sale	497	0
Loans held for sale	0
Cash and cash equivalents, Fair value	0	0
Securities available-for-sale, Fair value	497	0
Loans (net of allowance), Fair value	382,919	371,930
FHLB stock, Fair value	0	0
Accrued interest receivable, Fair value	1,383	1,307
Financial liabilities
Noninterest-bearing deposits, Fair value	0	0
Interest-bearing deposits, Fair value	0	0
Borrowings, Fair value	0	0
Accrued interest payable, Fair value	65	74
Carrying amount [Member]
Financial assets
Cash and cash equivalents	31,282	31,892
Securities available-for-sale	95,676	87,797
Loans held for sale	755
Loans (net of allowance)	386,158	374,180
FHLB stock	3,250	3,250
Accrued interest receivable	1,383	1,307
Financial liabilities
Non-interest-bearing deposits	123,353	124,023
Interest bearing	366,195	350,514
Borrowings	4,293	4,520
Accrued interest payable	65	74
Fair value [Member]
Financial assets
Loans held for sale	755
Cash and cash equivalents, Fair value	31,282	31,892
Securities available-for-sale, Fair value	95,676	87,797
Loans (net of allowance), Fair value	382,919	371,930
FHLB stock, Fair value	3,250	3,250
Accrued interest receivable, Fair value	1,383	1,307
Financial liabilities
Noninterest-bearing deposits, Fair value	123,353	124,023
Interest-bearing deposits, Fair value	366,187	350,957
Borrowings, Fair value	4,293	4,520
Accrued interest payable, Fair value	$ 65	$ 74

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Fair Value Measurements (Details 1) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Fair value measurements of assets recurring basis
Securities available-for-sale	$ 95,676	$ 87,797
U.S. Government and agency obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	27,297	20,842
Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	2,866	3,727
State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	21,226	22,261
Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	16,080	18,166
Other Equity Securities [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	497
Collateralized Debt Obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	27,710	22,801
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | U.S. Government and agency obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | 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] | 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] | Mortgage-backed securities and other [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] | Other Equity Securities [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0
Quoted Prices in Active Markets for Identical Assets, Level 1 [Member] | Collateralized Debt Obligations [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	95,179	87,797
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	27,297	20,842
Significant Other Observable Inputs, Level 2 [Member] | Corporate bonds [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	2,866	3,727
Significant Other Observable Inputs, Level 2 [Member] | State and municipal obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	21,226	22,261
Significant Other Observable Inputs, Level 2 [Member] | Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	16,080	18,166
Significant Other Observable Inputs, Level 2 [Member] | Other Equity Securities [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0
Significant Other Observable Inputs, Level 2 [Member] | Collateralized Debt Obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	27,710	22,801
Significant Unobservable Inputs, Level 3 [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	497	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] | Corporate bonds [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] | Mortgage-backed securities and other [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	0	0
Significant Unobservable Inputs, Level 3 [Member] | Other Equity Securities [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	497
Significant Unobservable Inputs, Level 3 [Member] | Collateralized Debt Obligations [Member]
Fair value measurements of assets recurring basis
Securities available-for-sale	$ 0	$ 0

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Fair Value Measurements (Details 2) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Impaired loans [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	$ 10,182	$ 7,791
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	10,182	7,791
Real estate owned [Member]
Fair value measurements of assets nonrecurring basis
Securities held-to-maturity, Fair Value	68	68
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	$ 68	$ 68

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Sale-Leaseback and Capital Lease Obligation (Details) $ in Thousands	Sep. 30, 2016 USD ($)
2016	$ 161
2017	655
2018	668
2019	682
2020	695
Thereafter	7,798
Total minimum lease payments	10,659
Less amounts representing interest	2,643
Present value of net minimum lease payments	$ 8,016

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Sale-Leaseback and Capital Lease Obligation (Details Textual) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2016	Jan. 31, 2016
Sale Leaseback Transaction, Cumulative Gain Recognized			$ 3,100,000
Sale Leaseback Transaction, Monthly Rental Payments		$ 54,000
Annual Increase In Sale Lease back Transaction Monthly Rental Payments		2.00%
Sale Leaseback Transaction, Imputed Interest Rate		3.91%
Capital Leased Assets, Gross	$ 5,000,000	$ 5,000,000
Capital Leases, Lessee Balance Sheet, Assets by Major Class, Accumulated Depreciation	274,000	274,000
Capital Leases, Income Statement, Amortization Expense	$ 51,000	$ 136,000

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Federal Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Investments, Owned, Federal Income Tax Note [Line Items]
Current	$ (11)	$ 0	$ 73	$ 0
Deferred	(179)	96	(306)	96
Valuation allowance	0	(10,784)	0	(10,784)
Total	$ (190)	$ (10,688)	$ (233)	$ (10,688)

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Federal Income Taxes (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income taxes (credits) computed at the statutory federal
Federal income taxes calculated at the expected statutory rate	$ (209)	$ 136	$ (72)	$ 266
Increase (decrease) in taxes resulting from:
Nontaxable dividend and interest income	(30)	(29)	(71)	(70)
Increase in cash surrender value of life insurance - net	(55)	(56)	(193)	(194)
Nondeductible acquisition costs	98	0	98	0
Other	6	45	5	94
Valuation allowance	0	(10,784)	0	(10,784)
Income tax benefit per financial statements	$ (190)	$ (10,688)	$ (233)	$ (10,688)

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Federal Income Taxes (Details 2) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Deferred tax assets:
Allowance for loan losses	$ 1,561	$ 1,473
Deferred compensation	308	300
Alternative minimum tax carry forward	212	155
Expenses on foreclosed property	0	14
Deferred gain on sale of building	1,009	0
NOL carry forward	8,258	9,020
Other	307	98
Subtotal	11,655	11,060
Deferred tax liabilities:
FHLB stock dividends	(307)	(307)
Unrealized gains on available-for-sale securities	(512)	(225)
Depreciation	(55)	(55)
Other	(314)	(33)
Subtotal	(1,188)	(620)
Net deferred tax asset	10,467	10,440
Less: valuation allowance	0	0
Total	$ 10,467	$ 10,440

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Federal Income Taxes (Details Textual) $ in Millions	9 Months Ended
	Sep. 30, 2016 USD ($)
Investments, Owned, Federal Income Tax Note [Line Items]
Net operating loss carry forward	$ 24.3
Net operating loss carry forward, expiration starting period	2030

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Earnings per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Basic
Net income (loss)	$ (426)	$ 11,088	$ 21	$ 11,471
Less: undistributed earnings allocated to unvested restricted shares	(8)	137	0	121
Net earnings (losses) allocated to common shareholders	$ (418)	$ 10,951	$ 21	$ 11,350
Weighted average common shares outstanding including shares considered participating securities	7,339,710	7,282,365	7,332,482	7,269,222
Less: average participating securities	(140,205)	(90,015)	(132,977)	(76,872)
Weighted average shares	7,199,505	7,192,350	7,199,505	7,192,350
Basic earnings (loss) per common share	$ (0.06)	$ 1.52	$ 0.00	$ 1.58
Diluted
Net earnings (losses) allocated to common shareholders	$ (418)	$ 10,951	$ 21	$ 11,350
Weighted average common shares outstanding for basic earnings per common share	7,199,505	7,192,350	7,199,505	7,192,350
Dilutive effect of assumed exercise of average participating securities	0	19,809	23,227	19,015
Average participating securities	140,205	90,015	132,977	76,872
Average common shares outstanding - diluted	7,339,710	7,302,174	7,355,709	7,288,237
Diluted earnings (loss) per common share	$ (0.06)	$ 1.52	$ 0.00	$ 1.58

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Earnings per Common Share (Details Textual) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	14,985			19,324
Weighted Average Number of Shares Outstanding, Basic, Total	7,339,710	7,282,365	7,332,482	7,269,222
Employee Stock Option [Member]
Weighted Average Number of Shares Outstanding, Basic, Total			51,578

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Stock Based Compensation (Details Textual) - Restricted Stock [Member] - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Issued During Period, Shares, Restricted Stock Award, Gross			78,036	53,640
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Beginning Balance	146,411	9,290	146,411	9,290	81,732
Share-based Compensation, Total	$ 22,000	$ 25,000	$ 83,000	$ 59,000
Stock Issued During Period, Shares, Restricted Stock Award, Forfeited	1,429		3,434
Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			5 years

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Subsequent Event (Details Textual) - Subsequent Event [Member] - First Commonwealth Financial Corporation [Member]	Oct. 03, 2016 USD ($) $ / shares
Subsequent Event [Line Items]
Cash Consideration, Percentage	20.00%
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable	$ 1.427
Business Acquisition, Share Price | $ / shares	$ 14.50
Payments to Acquire Businesses, Gross	$ 21,283,773
Business Acquisition, Effective Date of Acquisition	Jun. 30, 2017