10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

OR

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

For the transition period from to             

Commission file number: 0-13203

LNB Bancorp, Inc.

(Exact name of the registrant as specified in its charter)

Ohio	34-1406303
(State of Incorporation)	(I.R.S. Employer Identification No.)
457 Broadway, Lorain, Ohio	44052-1769
(Address of principal executive offices)	(Zip Code)

(440) 244-6000

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Shares, par value $1.00 per share Preferred Share Purchase Rights	The NASDAQ Stock Market The NASDAQ Stock Market

Securities Registered Pursuant to Section 12(g) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
None	None

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  þ        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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ        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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨        No  þ

The number of common shares of the registrant outstanding on October 30, 2013 was 9,303,702.

TABLE OF CONTENTS

	Page
PART I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December 31, 2012	3
Consolidated Statements of Income and Comprehensive Income (unaudited) for the three and nine months ended September 30, 2013 and September 30, 2012	4
Consolidated Statements of Shareholders’ Equity (unaudited) for the nine months ended September 30, 2013 and September 30, 2012	6
Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2013 and September 30, 2012	7
Notes to the Consolidated Financial Statements (unaudited)	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3. Quantitative and Qualitative Disclosures about Market Risk	53
Item 4. Controls and Procedures	55
Part II — Other Information	56
Item 1. Legal Proceedings	56
Item 1A. Risk Factors	56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 6. Exhibits	57

PART I - Financial Information

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

	September 30, 2013			December 31, 2012
	(unaudited)
	(Dollars in thousands except share amounts)
ASSETS
Cash and due from banks	$	25,816		$	24,139
Federal funds sold and interest bearing deposits in banks	21,274			6,520
Cash and cash equivalents (Note 3)	47,090			30,659
Securities available for sale, at fair value (Note 5)	215,290			203,763
Restricted stock	5,741			5,741
Loans held for sale	2,110			7,634
Loans:
Portfolio loans (Note 6)	891,300			882,548
Allowance for loan losses (Note 6)	(17,791		)	(17,637		)
Net loans	873,509			864,911
Bank premises and equipment, net	8,322			8,721
Other real estate owned	951			1,366
Bank owned life insurance	19,122			18,611
Goodwill, net (Note 4)	21,582			21,582
Intangible assets, net (Note 4)	492			594
Accrued interest receivable	3,750			3,726
Other assets	12,543			10,946
Total Assets	$	1,210,502		$	1,178,254
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits: (Note 7)
Demand and other noninterest-bearing	$	139,871		$	139,894
Savings, money market and interest-bearing demand	391,558			377,287
Time deposits	500,816			482,411
Total deposits	1,032,245			999,592
Short-term borrowings (Note 8)	1,643			1,115
Federal Home Loan Bank advances (Note 9)	46,658			46,508
Junior subordinated debentures (Note 10)	16,238			16,238
Accrued interest payable	804			882
Accrued expenses and other liabilities	4,953			3,775
Total Liabilities	1,102,541			1,068,110
Shareholders’ Equity
Preferred stock, Series A Voting, no par value, authorized 150,000 shares, none issued at September 30, 2013 and December 31, 2012.	—			—
Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, 9,147 shares authorized and issued at September 30, 2013 and 18,880 shares authorized and issued at December 31, 2012	9,147			18,880
Discount on Series B preferred stock	(25		)	(65		)
Common stock, par value $1 per share, authorized 15,000,000 shares, issued 9,631,896 shares at September 30, 2013 and 8,272,548 at December 31, 2012	9,632			8,273
Additional paid-in capital	47,740			39,141
Retained earnings	52,474			48,767
Accumulated other comprehensive income (loss)	(4,915		)	1,240
Treasury shares at cost, 328,194 shares at September 30, 2013 and at December 31, 2012	(6,092		)	(6,092		)
Total Shareholders’ Equity	107,961			110,144
Total Liabilities and Shareholders’ Equity	$	1,210,502		$	1,178,254

See accompanying notes to consolidated financial statements.

3

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Dollars in thousands except share and per share amounts)
Interest and Dividend Income
Loans	$	8,973		$	9,995	$	27,291		$	30,238
Securities:
U.S. Government agencies and corporations	908			1,145		2,616			3,686
State and political subdivisions	301			289		887			867
Other debt and equity securities	115			69		337			210
Federal funds sold and short-term investments	7			8		23			27
Total interest income	10,304			11,506		31,154			35,028
Interest Expense
Deposits	1,200			1,450		3,685			4,608
Federal Home Loan Bank advances	158			214		469			641
Short-term borrowings	—			—		1			—
Junior subordinated debentures	171			179		511			528
Total interest expense	1,529			1,843		4,666			5,777
Net Interest Income	8,775			9,663		26,488			29,251
Provision for Loan Losses (Note 6)	950			1,875		3,350			5,442
Net interest income after provision for loan losses	7,825			7,788		23,138			23,809
Noninterest Income
Investment and trust services	363			375		1,178			1,190
Deposit service charges	923			994		2,608			2,858
Other service charges and fees	820			762		2,459			2,314
Income from bank owned life insurance	174			167		512			501
Other income (loss)	(218		)	214		335			614
Total fees and other income	2,062			2,512		7,092			7,477
Securities gains, net (Note 5)	—			46		178			46
Gains on sale of loans	374			364		1,617			916
Gain (loss) on sale of other assets, net	30			31		(17		)	(68		)
Total noninterest income	2,466			2,953		8,870			8,371
Noninterest Expense
Salaries and employee benefits	4,200			4,228		13,451			12,233
Furniture and equipment	1,076			1,434		3,159			3,704
Net occupancy	564			531		1,701			1,664
Professional fees	337			414		1,413			1,473
Marketing and public relations	300			312		938			954
Supplies, postage and freight	228			275		809			783
Telecommunications	164			191		501			536
Ohio franchise tax	304			304		914			927
FDIC assessments	293			346		773			1,132
Other real estate owned	155			107		280			414
Loan and collection expense	268			394		1,030			1,051
Other expense	412			142		1,235			1,398
Total noninterest expense	8,301			8,678		26,204			26,269
Income before income tax expense	1,990			2,063		5,804			5,911
Income tax expense	471			538		1,349			1,443
Net Income	1,519			1,525		4,455			4,468
Other comprehensive income (loss), net of taxes:
Changes in unrealized securities' holding gain (loss) net of taxes of ($1,197) and $111 for the quarter ended and ($3,110) and $93 for the nine months ended, respectively	(2,324		)	215		(6,038		)	180
Minimum pension liability adjustment, net of taxes during the period	—			—		—			—
Less: reclassification adjustments for securities' gains realized in net income, net of taxes of $0 and $16 for the quarter ended and $60 and $16 for the nine months ended, respectively	—			31		117			31
Total other comprehensive income (loss), net of taxes	(2,324		)	184		(6,155		)	149
Comprehensive income (loss)	(805		)	1,709		(1,700		)	4,617
Dividends and accretion on preferred stock	109			319		483			956
Net Income Available to Common Shareholders	$	1,410		$	1,206	$	3,972		$	3,512

4

Net Income Per Common Share (Note 2)
Basic	$	0.15	$	0.15	$	0.44	$	0.44
Diluted	0.15		0.15		0.44		0.44
Dividends declared	0.01		0.01		0.03		0.03
Average Common Shares Outstanding
Basic	9,303,702		7,944,354		8,940,213		7,937,781
Diluted	9,323,657		7,949,118		8,957,180		7,941,990

See accompanying notes to consolidated financial statements

5

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

	Preferred Stock (net of discount)			Warrant to Purchase Common Stock			Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
	(Dollars in thousands except share and per share amounts)
Balance, December 31, 2011	$	25,122		$	146		$	8,210	$	39,607		$	44,080		$	2,201		$	(6,092	)	$	113,274
Net Income												4,468									4,468
Other comprehensive loss, net of tax:															149						149
Share-based compensation									229												229
Restricted shares granted (62,105 shares)							62		(62		)										—
Repurchase of warrants				(146		)			(714		)										(860		)
Preferred dividends and accretion of discount	11											(956		)							(945		)
Common dividends declared, $.03 per share												(237		)							(237		)
Balance, September 30, 2012	25,133			—			8,273		39,060			47,355			2,350			(6,092		)	116,079
Balance, December 31, 2012	$	18,815		$	—		$	8,273	$	39,141		$	48,767		$	1,240		$	(6,092	)	$	110,144
Net Income												4,455									4,455
Other comprehensive income, net of tax:															(6,155		)				(6,155		)
Share-based compensation									225												225
Issuance of common stock (1,359 shares)							1,359		8,374												9,733
Redemption of preferred stock (9,733 shares)	(9,701		)									8									(9,693		)
Preferred dividends and accretion of discount	8											(491		)							(483		)
Common dividends declared, $.03 per share												(265		)							(265		)
Balance, September 30, 2013	9,122			—			9,632		47,740			52,474			(4,915		)	(6,092		)	107,961

See accompanying notes to consolidated financial statements

6

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended
	September 30, 2013			September 30, 2012
	(Dollars in thousands)
Operating Activities
Net income	$	4,455		$	4,468
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses	3,350			5,442
Depreciation and amortization	771			860
Amortization of premiums and discounts	1,749			1,580
Amortization of intangibles	102			102
Amortization of loan servicing rights	144			193
Amortization of deferred loan fees	(129		)	(230		)
Federal deferred income tax expense (benefit)	665			(55		)
Securities gains, net	(178		)	(46		)
Share-based compensation expense	225			229
Loans originated for sale	(85,753		)	(56,444		)
Proceeds from sales of loan originations	92,895			57,428
Net gain from loan sales	(1,617		)	(916		)
Net loss on sale of other assets	17			68
Net increase (decrease) in accrued interest receivable and other assets	229			509
Net increase (decrease) in accrued interest payable, taxes and other liabilities	1,113			(834		)
Net cash provided by operating activities	18,038			12,354
Investing Activities
Proceeds from sales of available-for-sale securities	2,272			5,050
Proceeds from maturities of available-for-sale securities	57,553			98,185
Purchase of available-for-sale securities	(82,258		)	(113,866		)
Net increase in loans made to customers	(12,294		)	(48,103		)
Proceeds from the sale of other real estate owned	868			760
Purchase of bank premises and equipment	(382		)	(845		)
Proceeds from sale of bank premises and equipment	15			—
Net cash (used in) investing activities	(34,226		)	(58,819		)
Financing Activities
Net increase (decrease) in demand and other noninterest-bearing	(23		)	16,372
Net increase in savings, money market and interest-bearing demand	14,271			22,636
Net increase (decrease) in certificates of deposit	18,405			(8,379		)
Net increase in short-term borrowings	528			761
Proceeds from Federal Home Loan Bank advances	196			30,000
Payment of Federal Home Loan Bank advances	(10		)	(25,003		)
Purchase of Warrants	—			(860		)
Dividends paid	(748		)	(1,182		)
Net cash provided by financing activities	32,619			34,345
Net increase in cash and cash equivalents	16,431			(12,120		)
Cash and cash equivalents, January 1	30,659			40,647
Cash and cash equivalents, September 30	$	47,090		$	28,527
Supplemental cash flow information
Interest paid	$	4,744		$	5,937
Income taxes paid	1,825			1,291
Transfer of loans to other real estate owned	633			1,004

See accompanying notes to consolidated financial statements

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share amounts)

(1)    Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of LNB Bancorp, Inc. (the “Corporation”) and its wholly-owned subsidiary, The Lorain National Bank (the “Bank”). The consolidated financial statements also include the accounts of North Coast Community Development Corporation which is a wholly-owned subsidiary of the Bank. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnote disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Corporation included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012. However, all adjustments (consisting only of normal recurring accruals) which, in the opinion of the Corporation’s management (“Management”), are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the ninemonth period ended September 30, 2013, are not necessarily indicative of the results which may be expected for a full year.

Certain reclassifications of prior years' amounts have been made to conform to current year presentation. Such reclassifications had no effect on prior year net income or shareholders' equity.

Use of Estimates

The Corporation prepares its financial statements in conformity with generally accepted accounting principles (GAAP), which requires the Corporation’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas involving the use of management’s estimates and assumptions include the allowance for loan losses, the valuation of goodwill, the realization of deferred tax assets and fair values of financial instruments.

Segment Information

The Corporation’s activities are considered to be a single industry segment for financial reporting purposes. The Corporation is a financial holding company engaged in the business of commercial and retail banking, investment management and trust services, title insurance, and insurance with operations conducted through its main office and banking centers located throughout Lorain, Erie, Cuyahoga, Summit, and Franklin counties of Ohio. This market provides the source for substantially all of the Bank’s deposit and loan and trust activities. The majority of the Bank’s income is derived from a diverse base of commercial, mortgage and retail lending activities and investments.

Statement of Cash Flows

For purposes of reporting in the Consolidated Statements of Cash Flows, cash and cash equivalents include currency on hand, amounts due from banks, Federal funds sold, and securities purchased under resale agreements. Generally, Federal funds sold and securities purchased under resale agreements are for one day periods.

Securities

Securities that are bought and held for the sole purpose of being sold in the near term are deemed trading securities with any related unrealized gains and losses reported in earnings. As of September 30, 2013 and December 31, 2012, the Corporation did not hold any trading securities. Securities that the Corporation has a positive intent and ability to hold to maturity are classified as held to maturity. As of September 30, 2013 and December 31, 2012, the Corporation did not hold any securities classified as held to maturity. Securities that are not classified as trading or held to maturity are classified as available for sale. Securities classified as available for sale are carried at their fair value with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income. Interest and dividends on securities, including amortization of premiums and accretion of discounts using the effective interest method over the period to maturity or call, are included in interest income. Gains and losses on sales of securities are determined on the specific identification method.

8

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. When evaluating investment securities consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Corporation has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but the entity does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Restricted Stock

The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also a member of and owns stock in the Federal Reserve Bank. The Corporation owns stock in Bankers Bancshares Inc., an institution that provides correspondent banking services to community banks. Stock in these institutions is classified as restricted stock and is recorded at redemption value which approximates fair value. The Corporation periodically evaluates the restricted stock for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans Held For Sale

Held for sale loans 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. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in the noninterest income section of the Consolidated Statement of Income and Comprehensive Income.

Mortgage Banking

The Corporation sells originated mortgage loans into the secondary mortgage loan markets. During the period of loan origination and prior to the sale of the loans in the secondary market, the Corporation has exposure to movements in interest rates associated with mortgage loans that are in the “mortgage pipeline”. A pipeline loan is one that will be held for resale in which the Corporation has entered into a written mortgage loan commitment with a potential borrower. Written loan commitments that relate to the origination of mortgage loans that will be held for resale are considered free-standing derivatives and do not qualify for hedge accounting. Written loan commitments generally have a term of up to 60 days before the closing of the loan. The loan commitment does not bind the potential borrower to entering into the loan, nor does it guarantee that the Corporation will approve the potential borrower for the loan. Therefore, when determining fair value, the Corporation makes estimates of expected “fallout” (loan commitments not expected to close), using models, which consider cumulative historical fallout rates and other factors. Fallout can occur for a variety of reasons including falling interest rate environments where a borrower abandons an interest rate lock loan commitment, when a borrower is not approved as an acceptable credit by the lender or for a variety of other non-economic reasons.

Written loan commitments in which the borrower has locked in an interest rate results in market risk to the Corporation to the extent market interest rates change from the rate quoted to the borrower. The Corporation economically hedges the risk of changing interest rates associated with its interest rate lock commitments by entering into mandatory forward sales contracts.

The Corporation's mortgage loans held for sale are subject to changes in fair value, due to changes in interest rates from the loan's closing date through the date the mortgage loan is sold in the secondary market. The fair value of the mortgage loan declines in value when interest rates increase and conversely increases in value when interest rates decrease. To mitigate the risk of changes in interest rates, the Corporation enters into mandatory forward sales contracts on a portion of the mortgage loans held for sale to provide an economic hedge against those changes in fair value. The mandatory forward sales contracts are recorded at fair value with changes in value recorded in current earnings.

9

Derivative Instruments and Hedging Activities

The Corporation uses interest rate swaps, interest rate lock commitments and forward contracts sold to hedge interest rate risk for asset and liability management purposes. All derivatives are accounted for in accordance with ASC-815, Derivatives and Hedging, and are recorded as either other assets or other liabilities at fair value. The Corporation engages in Back-to-Back swaps to mitigate its exposure to rising interest rates. A Back-to-Back swap provides that a customer receives a fixed interest rate commercial loan and the Corporation subsequently converts that fixed rate loan to a variable rate instrument over the term of the loan by entering into an interest rate swap with a dealer counterparty based on a London Inter-Bank Offered Rate index. The Corporation then receives a fixed rate payment from the customer on the loan and pays the equivalent amount to the dealer counterparty on the swap in exchange for a variable rate payment stream. Based upon accounting guidance each swap is accounted for as a stand-alone derivative and designated as a fair value hedge with any changes in fair value presented in current earnings.

Loans

Loans are reported at the principal amount outstanding, net of unearned income and premiums and discounts. Loans acquired through business combinations are valued at fair market value on or near the date of acquisition. The difference between the principal amount outstanding and the fair market valuation is amortized over the aggregate average life of each class of loan. Unearned income includes deferred fees, net of deferred direct incremental loan origination costs. Unearned income is amortized to interest income, over the contractual life of the loan, using the interest method. Direct loan origination fees and costs are deferred and amortized as an adjustment to interest income over the contractual life of the loan, using the interest method.

Loans are generally placed on nonaccrual status when they are 90 days past due for interest or principal or when the full and timely collection of interest or principal becomes uncertain. When a loan has been placed on nonaccrual status, the accrued and unpaid interest receivable is reversed against interest income. Generally, a loan is returned to accrual status when all delinquent interest and principal becomes current under the terms of the loan agreement and when the collectability is no longer doubtful.

A loan is impaired when based on current information and events it is probable the Corporation will be unable to collect the scheduled payment of principal and interest when due under the contractual terms of the loan agreement. Impairment is evaluated in total for smaller-balance loans of similar nature such as real estate mortgages and installment loans, and on an individual loan basis for commercial loans that are graded substandard or below. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, using either the present value of estimated future cash flows discounted at the loans effective interest rate, the loan's observable market value or at the fair value of collateral if repayment is expected solely from the collateral.

Allowance for Loan Losses

The allowance for loan losses is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. Management’s determination of the allowance, and the resulting provision, is based on judgments and assumptions, including general economic conditions, loan portfolio composition, loan loss experience, management’s evaluation of credit risk relating to pools of loans and individual borrowers, sensitivity analysis and expected loss models, value of underlying collateral, and observations of internal loan review staff or banking regulators.

The provision for loan losses is determined based on Management’s evaluation of the loan portfolio and the adequacy of the allowance for loan losses under current economic conditions and such other factors which, in management’s judgment, deserve current recognition.

Servicing

Servicing assets are recognized as separate assets when rights are acquired through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment on a quarterly basis based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets

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with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.

Bank Premises and Equipment

Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed generally on the straight-line method over the estimated useful lives of the assets. Upon the sale or other disposition of assets, the cost and related accumulated depreciation are retired and the resulting gain or loss is recognized. Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized. Software costs related to externally developed systems are capitalized at cost less accumulated amortization. Amortization is computed on the straight-line method over the estimated useful life.

Fair Value Measurement

The Corporation uses fair value measurements to record certain assets and liabilities at fair value and determine fair value disclosures. Additional information regarding fair value measurement is included in Note 12 (Estimated Fair Value Financial Instruments) in the notes to the consolidated financial statements.

Goodwill and Core Deposit Intangibles

Intangible assets arise from acquisitions and include goodwill and core deposit intangibles. Goodwill is the excess of purchase price over the fair value of identified net assets in acquisitions. Core deposit intangibles represent the value of depositor relationships purchased. Goodwill is evaluated at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Corporation evaluates goodwill impairment annually as of November 30^th of each year. Core deposit intangible assets are amortized using the straight-line method over ten years and are subject to annual impairment testing.

To simplify the process of testing goodwill for impairment for both public and nonpublic entities, on September 15, 2011 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount (impairment). If the entity finds after the qualitative assessment that it is more likely than not (impairment indicators) that the fair value of a reporting unit is less than its carrying amount, the entity is then required to perform a full impairment test. Prior to the update, entities were required to test goodwill for impairment on at least an annual basis.

Other Real Estate Owned

Other real estate owned (OREO) is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure, and loans classified as in-substance foreclosure. Other real estate owned is recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value of the underlying property collateral, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are treated as period costs. Banking premises are transferred at the lower of carrying value or estimated fair value, less estimated selling costs.

Bank Owned Life Insurance

Bank owned life insurance policies are stated at the current cash surrender value of the policy, or the policy death proceeds less any obligation to provide a death benefit to an insured's beneficiaries if that value is less than the cash surrender value. Increases in the asset value are recorded as earnings in other income.

Split-Dollar Life Insurance

The Corporation recognizes a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to certain employees extending to postretirement periods. Based on the present value of expected future cash flows, the liability is recognized based on the substantive agreement with the employee.

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Share-Based Compensation

The Corporation’s stock based compensation plans are described in detail in Note 13 (Share-Based Compensation). Compensation expense is recognized for stock options and unvested (restricted) stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation’s common shares at the date of grant is used to estimate the fair value of unvested (restricted) stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the unvested period for nonvested (restricted) stock awards. Certain of the Corporation’s share-based awards contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period.

Investment and Trust Services Assets and Income

Property held by the Corporation in fiduciary or agency capacity for its customers is not included in the Corporation’s financial statements as such items are not assets of the Corporation. Income from the Investment and Trust Services Division is reported on an accrual basis.

Off Balance Sheet Instruments

In the ordinary course of business, the Corporation has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded. Additional information regarding Off Balance Sheet Instruments is included in Note 11 (Commitments and Contingencies) in the notes to the consolidated financial statements.

Income Taxes

The Corporation and its wholly-owned subsidiary file an annual consolidated Federal income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be removed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when necessary to reduce deferred tax assets to amounts which are deemed more likely than not to be realized.

Recent Financial Accounting Pronouncements

In January 2013, the FASB issued ASU No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU No. 2013-01 clarifies that ASU No. 2011-11 applies only to derivatives, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset or subject to an enforceable master netting arrangement or similar agreement. Entities with other types of financial assets and financial liabilities subject to a master netting arrangement or similar agreement are no longer subject to the disclosure requirements in ASU No. 2011-11. The amendments are effective for annual and interim reporting periods beginning on or after January 1, 2013. The adoption of this ASU did not have a material impact on the Corporation's consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. The ASU does not amend any existing requirements for reporting net income or other comprehensive income in the financial statements but requires an entity to disaggregate the total change of each component of other comprehensive income and separately present reclassification adjustments and current period other comprehensive income. The provisions of this ASU also requires that entities present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line item affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, entities would instead cross reference to the related note to the financial statements for additional information. The adoption of this ASU did not have a material impact on the Corporation's consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The ASU requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss

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carryforward, a similar tax loss, or a tax credit carryforward, except to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. No new recurring disclosures are required. The amendments are effective for annual and interim reporting periods beginning on or after December 15, 2013, and are to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this ASU is not expected to have a material impact on the Corporation's consolidated financial statements.

(2)    Earnings Per Common Share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the quarter and year-to-date. Diluted earnings per share is computed based on the weighted average number of shares outstanding plus the effects of dilutive stock options and warrants outstanding during quarter and year-to-date. Basic and diluted earnings per share are calculated as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Dollars in thousands except per share amounts)
Weighted average shares outstanding used in Basic Earnings per Common Share	9,303,702		7,944,354		8,940,213		7,937,781
Dilutive effect of stock options	19,955		4,764		16,967		4,209
Weighted average shares outstanding used in Diluted Earnings Per Common Share	9,323,657		7,949,118		8,957,180		7,941,990
Net Income	$	1,519	$	1,525	$	4,455	$	4,468
Preferred stock dividend and accretion	109		319		483		956
Income Available to Common Shareholders	$	1,410	$	1,206	$	3,972	$	3,512
Basic Earnings Per Common Share	$	0.15	$	0.15	$	0.44	$	0.44
Diluted Earnings Per Common Share	$	0.15	$	0.15	$	0.44	$	0.44

For the three and nine month periods ended September 30, 2013 and 2012, approximately 194,500 of options to purchase shares of common stock were not included in the computation of diluted earnings per share because the effect would be antidilutive.

(3)    Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Corporation considers cash and cash equivalents to include cash on hand, cash items in the process of collection, non-interest bearing amounts due from correspondent banks, federal funds sold and securities purchased under resale agreements with original maturities of three months or less.

(4)    Goodwill and Intangible Assets

The Corporation has goodwill of $21,582 primarily from an acquisition completed in 2007. The Corporation assesses goodwill for impairment annually and more frequently in certain circumstances. In September 2011, FASB issued an update on the testing of goodwill for impairment under ASC Topic 350, Intangibles – Goodwill and Other. ASC 350 requires a corporation to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount. The overall objective of the update is to simplify how entities, both public and private, test goodwill for impairment. Simplification has resulted in an entity having the option to first assess qualitative factors to determine whether the existence or circumstances lead to a determination that it is more likely than not (that is, a likelihood of more than fifty percent) that the fair value of a reporting unit is less than its carrying amount. For 2012, the Corporation determined the Bank was one reporting unit and assessed the following qualitative factors to determine if there is likelihood that goodwill is impaired: (a) industry and market considerations such as a deterioration in the environment in which the Corporation operates; (b) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; (c) events affecting a reporting unit such as a change in the

13

composition or carrying amount of the Corporation’s assets unit; (d) share price — considered in both absolute terms and relative to peers; (e) non-performing loans and allowance for loans losses; and (f) bank capital analysis. Based upon this assessment the Corporation determined that there is no likelihood of goodwill impairment therefore no impairment charge was recognized as of December 31, 2012.

The Corporation cannot predict the occurrences of certain future events that might adversely affect the reported value of goodwill. Such events include, but are not limited to, strategic decisions in response to economic and competitive conditions, the effect of the economic environment on the Corporation’s customer base or a material negative change in the relationship with significant customers. Core deposit intangibles are amortized over their estimated useful life of 10 years. A summary of core deposit intangible assets follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Core deposit intangibles	$	1,367	$	1,367
Less: accumulated amortization	875		773
Carrying value of core deposit intangibles	$	492	$	594

(5)    Securities

The amortized cost, gross unrealized gains and losses and fair values of securities at September 30, 2013 and December 31, 2012 follows:

	At September 30, 2013
	Amortized  Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	72,099	$	—	$	(5,220	)	$	66,879
Mortgage backed securities	95,625		1,494		(1,307		)	95,812
Collateralized mortgage obligations	14,592		256		(197		)	14,651
State and political subdivisions	32,624		1,254		(614		)	33,264
Preferred Securities	4,684		—		—			4,684
Total Securities	$	219,624	$	3,004	$	(7,338	)	$	215,290
	At December 31, 2012
	Amortized  Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	36,868	$	102	$	—		$	36,970
Mortgage backed securities	109,440		2,589		(328		)	111,701
Collateralized mortgage obligations	22,483		398		—			22,881
State and political subdivisions	29,980		2,241		(10		)	32,211
Total Securities	$	198,771	$	5,330	$	(338	)	$	203,763

U.S. Government agencies and corporations include callable and bullet agency issues and agency-backed mortgage backed securities. Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties. Periodic payments are received on mortgage-backed securities based upon payment patterns of the underlying collateral.

The amortized cost and fair value of available for sale debt securities by contractual maturity date at September 30, 2013 is provided in the following table. Mortgage backed securities and collaterlized mortgage obligations are not due at a single maturity date and are therefore shown separately.

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	At September 30, 2013
	Amortized Cost		Fair Value
	(Dollars in thousands)
Securities available for sale:
Due in one year or less	$	20,298	$	19,639
Due from one year to five years	57,534		54,482
Due from five years to ten years	25,488		24,649
Due after ten years	6,087		6,057
Mortgage backed securities and collateralized mortgage obligations	110,217		110,463
	$	219,624	$	215,290

The following table shows the proceeds from sales of available-for-sale securities for the nine months ended September 30, 2013 and 2012. The gross realized gains and losses on those sales that have been included in earnings. Gains or losses on the sales of available-for-sale securities are recognized upon sale and are determined using the specific identification method.

	September 30,
	2013		2012
	(Dollars in thousands)
Gross realized gains	$	178	$	46
Gross realized losses	—		—
Net Securities Gains	$	178	$	46
Proceeds from the sale of available for sale securities	$	2,272	$	5,050

The carrying value of securities pledged to secure trust deposits, public deposits, line of credit, and for other purposes required by law amounted to $158,485 and $150,197 at September 30, 2013 and December 31, 2012, respectively.

The following is a summary of securities that had unrealized losses at September 30, 2013 and December 31, 2012. The information is presented for securities that have been in an unrealized loss position for less than 12 months and for more than 12 months. At September 30, 2013, the Corporation held 52 securities with unrealized losses totaling $7,338. At December 31, 2012, there were 12 securities with unrealized losses totaling $338. Securities may temporarily be valued at less than amortized cost if the current levels of interest rates, as compared to the coupons on the securities held by the Corporation, are higher or if impairment is not due to credit deterioration. The Corporation has the intent and the ability to hold these securities until their value recovers, which may be until maturity.

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	At September 30, 2013
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	66,879	$	(5,220	)	$	—	$	—		$	66,879	(5,220		)
Mortgage backed securities	$	43,533	$	(1,020	)	$	12,979	$	(287	)	$	56,512	(1,307		)
Collateralized mortgage obligations	6,665		(197		)	—		—			6,665		(197		)
State and political subdivisions	9,727		(614		)	—		—			9,727		(614		)
Total	$	126,804	$	(7,051	)	$	12,979	$	(287	)	$	139,783	$	(7,338	)
	At December 31, 2012
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
Mortgage backed securities	$	44,491	$	(328	)	$	—	$	—		$	44,491	$	(328	)
State and political subdivisions	1,062		(10		)	—		—			1,062		(10		)
Total	$	45,553	$	(338	)	$	—	$	—		$	45,553	$	(338	)

On a quarterly basis, the Corporation performs a comprehensive security-level impairment assessment on all securities in an unrealized loss position to determine if other-than-temporary impairment ("OTTI") exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. For debt securities, an OTTI loss must be recognized for a debt security in an unrealized loss position if the Corporation intends to sell the security or it is more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis. In this situation, the amount of loss recognized in income is equal to the difference between the fair value and the amortized cost basis of the individual security. If the Corporation does not expect to sell the security, the Corporation must evaluate the expected cash flows to be received to determine if a credit loss has occurred. If a credit loss is present, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or changes in market interest rates, is recorded in other comprehensive income.

Equity securities are also evaluated to determine whether the unrealized loss is expected to be recoverable based on whether evidence exists to support a realizable value equal to or greater than the amortized cost basis. If it is probable that the Corporation will not recover the amortized cost basis, taking into consideration the estimated recovery period and its ability to hold the equity security until recovery, OTTI is recognized. The Corporation held no equity securities as of September 30, 2013.

The security-level assessment is performed on each security, regardless of the classification of the security as available for sale or held to maturity. The assessments are based on the nature of the securities, the financial condition of the issuer, the extent and duration of the securities, the extent and duration of the loss and the intent and whether Management intends to sell or it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis, which may be maturity. For those securities for which the assessment shows the Corporation will recover the entire cost basis, Management does not intend to sell these securities and it is not more likely than not that the Corporation will be required to sell them before the anticipated recovery of the amortized cost basis, the gross unrealized losses are recognized in other comprehensive income, net of tax.

Management does not believe that the investment securities that were in an unrealized loss position as of September 30, 2013 represent an other-than-temporary impairment. Total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. The Corporation does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Corporation will be required to sell the investment securities before recovery of their amortized cost bases, which may be at maturity.

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(6)    Loans and Allowance for Loan Losses

The allowance for loan losses is maintained by the Corporation at a level considered by Management to be adequate to cover probable credit losses inherent in the loan portfolio. The amount of the provision for loan losses charged to operating expenses is the amount necessary, in the estimation of Management, to maintain the allowance for loan losses at an adequate level. While management’s periodic analysis of the allowance for loan losses may dictate portions of the allowance be allocated to specific problem loans, the entire amount is available for any loan charge-offs that may occur. Loan losses are charged off against the allowance when management believes that the full collectability of the loan is unlikely. Recoveries of amounts previously charged-off are credited to the allowance.

The allowance is comprised of a general allowance and a specific allowance for identified problem loans. The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. For residential real estate, installment and other loans, loss factors are applied on a portfolio basis. Loss factors are based on the Corporation’s historical loss experience and are reviewed for appropriateness on a quarterly basis, along with other factors affecting the collectability of the loan portfolio. These other factors include but are not limited to: changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; changes in national and local economic and business conditions, including the condition of various market segments; changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and staff; changes in the volume and severity of past due and classified loans, the volume of nonaccrual loans, troubled debt restructurings and other loan modifications; the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and the effect of external factors, such as legal and regulatory requirements, on the level of estimated credit losses in the Corporation’s current portfolio. Specific allowances are established for all impaired loans when management has determined that, due to identified significant conditions, it is probable that a loss will be incurred.

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Activity in the allowance for loan losses by segment for the nine months ended September 30, 2013 and 2012 are summarized as follows:

Nine Months Ended September 30, 2013
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,386		$	835		$	1,559		$	2,357		$	1,230		$	270		$	17,637
Losses charged off	(1,475		)	(120		)	(679		)	(1,439		)	(555		)	(181		)	(4,449		)
Recoveries	584			7			277			60			276			49			1,253
Provision charged to expense	(33		)	(246		)	281			2,530			660			158			3,350
Balance, end of year	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
Three Months Ended September 30, 2013
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,424		$	438		$	1,606		$	3,508		$	1,581		$	258		$	17,815
Losses charged off	(630		)	—			(35		)	(410		)	(196		)	(83		)	(1,354		)
Recoveries	83			2			178			5			104			8			380
Provision charged to expense	585			36			(311		)	405			122			113			950
Balance, end of year	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
As of September 30, 2013
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,462		$	79		$	6		$	—		$	—		$	—		$	1,547
Collectively evaluated for impairment	9,000			397			1,432			3,508			1,611			296			16,244
Total ending allowance balance	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
Loans:
Individually evaluated for impairment	$	20,148		$	588		$	1,670		$	1,107		$	191		$	152		$	23,856
Collectively evaluated for impairment	383,883			79,225			63,727			121,178			206,158			13,273			867,444
Total ending loans balance	$	404,031		$	79,813		$	65,397		$	122,285		$	206,349		$	13,425		$	891,300

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Nine Months Ended September 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,714		$	1,409		$	1,331		$	2,289		$	891		$	429		$	17,063
Losses charged off	(2,057		)	(213		)	(1,267		)	(851		)	(738		)	(252		)	(5,378		)
Recoveries	39			24			86			31			244			36			460
Provision charged to expense	3,064			(466		)	1,551			661			615			17			5,442
Balance, end of year	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
Three Months Ended September 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Losses charged off	(738		)	(48		)	(292		)	(296		)	(161		)	(146		)	(1,681		)
Recoveries	9			4			3			16			54			7			93
Provision charged to expense	1,093			(42		)	274			264			134			152			1,875
Balance, end of year	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
As of September 30, 2012
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,525		$	69		$	2		$	—		$	—		$	—		$	2,596
Collectively evaluated for impairment	9,235			$	685		$	1,699		$	2,130		$	1,012		$	230		14,991
Total ending allowance balance	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
Loans:
Individually evaluated for impairment	$	25,310		$	340		$	1,179		$	—		$	—		$	—		$	26,829
Collectively evaluated for impairment	386,614			71,582			67,370			125,108			195,358			12,854			858,886
Total ending loans balance	$	411,924		$	71,922		$	68,549		$	125,108		$	195,358		$	12,854		$	885,715

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Delinquencies

Management monitors delinquency and potential problem loans. Bank-wide delinquency at September 30, 2013 was 2.05% of total loans. Total 30-59 day delinquency and 60-89 day delinquency was 0.39% and 0.13% of total loans at September 30, 2013, respectively. Bank-wide delinquency at December 31, 2012 was 2.89% of total loans. Total 30-59 day delinquency and 60-89 day delinquency was 0.61% and 0.32% of total loans at December 31, 2012, respectively. Information regarding delinquent loans as of September 30, 2013 and December 31, 2012 is as follows:

Age Analysis of Past Due Loans as of September 30, 2013

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	20	$	50	$	9,610	$	9,680	$	394,351	$	404,031	$	—
Commercial	1,567		109		234		1,910		77,903		79,813		—
Residential real estate	377		586		2,587		3,550		61,847		65,397		—
Home equity loans	1,094		362		1,065		2,521		119,764		122,285		—
Indirect	225		59		41		325		206,024		206,349
Consumer	191		—		109		300		13,125		13,425		—
Total	$	3,474	$	1,166	$	13,646	$	18,286	$	873,014	$	891,300	$	—

Age Analysis of Past Due Loans as of December 31, 2012

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	3,681	$	1,004	$	12,398	$	17,083	$	396,922	$	414,005	$	—
Commercial	—		—		376		376		68,329		68,705		—
Residential real estate	394		1,094		2,827		4,315		60,668		64,983		184
Home equity loans	630		494		1,510		2,634		120,196		122,830		—
Indirect	645		227		69		941		198,983		199,924
Consumer	26		40		123		189		11,912		12,101		—
Total	$	5,376	$	2,859	$	17,303	$	25,538	$	857,010	$	882,548	$	184

Impaired Loans

A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. Residential mortgage, installment and other consumer loans are evaluated collectively for impairment. Individual commercial loans are evaluated for impairment. Impaired loans are written down by the establishment of a specific allowance where necessary. Interest income recognized on impaired loans while the loan was considered impaired was immaterial for all periods.

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Impaired loans for the Period Ended September 30, 2013 and December 31, 2012 are as follows:

	At September 30, 2013						Three Months Ended September 30, 2013		Nine Months Ended September 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
	(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	14,625	$	19,617	$	—	$	16,127	$	16,667
Commercial	245		298		—		203		167
Residential real estate	1,613		1,801		—		1,802		1,800
Home equity loans	1,107		1,518		—		897		669
Indirect	191		293		—		208		129
Consumer	152		203		—		113		87
With allowance recorded:
Commercial real estate	5,523		8,842		1,462		5,139		5,781
Commercial	343		343		79		342		396
Residential real estate	57		154		6		29		60
Home equity loans	—		—		—		—		—
Indirect	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	23,856	$	33,069	$	1,547	$	24,860	$	25,756
	At December 31, 2012						Three Months Ended September 30, 2012		Nine Months Ended September 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
	(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	15,378	$	20,086	$	—	$	7,204	$	9,246
Commercial	138		138		—		164		269
Residential real estate	1,610		1,686		—		966		1,052
Home equity loans	398		398		—		—		—
Indirect	—		—		—		—		—
Consumer	61		61		—		—		—
With allowance recorded:
Commercial real estate	7,942		9,876		1,449		19,502		19,376
Commercial	459		459		209		159		216
Residential real estate	181		1,452		15		85		79
Home equity loans	—		—		—		—		—
Indirect	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	26,167	$	34,156	$	1,673	$	28,080	$	30,238

*impaired loans shown in the table above included loans that were classified as troubled debt restructurings ("TDRs"). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

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Troubled Debt Restructuring

A restructuring of debt constitutes a troubled debt restructuring (“TDR”) if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. That concession either stems from an agreement between the creditor and the debtor or is imposed by law or a court. The Corporation adheres to ASC 310-40, Troubled Debt Restructurings by Creditors, to determine whether a troubled debt restructuring applies in a particular instance. Prior to loans being modified and classified as a TDR, specific reserves are generally assessed, as most these loans have been specifically allocated for as part of the Corporation's normal loan loss provisioning methodology. The Corporation has allocated reserves of $386 for the TDR loans at September 30, 2013.

The following table summarizes the loans that were modified as a TDR during the period ended September 30, 2013 and 2012.

		Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
		Recorded Investment			Recorded Investment
	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2013	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2013
Commercial	—	$—	—	—	4	$110	$104	$104
Residential real estate	1	$46	$42	$42	3	$189	$174	$174
Home equity loans	5	$320	$277	$277	21	$1,006	$753	$753
Indirect Loans	3	$31	$31	$31	35	$380	$303	$303
Consumer Loans	2	$27	$27	$27	2	$27	$27	$27

		Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
		Recorded Investment			Recorded Investment
	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2012	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2012
Commercial real estate	—	$—	$—	$—	4	$2,861	$2,861	$2,861

There were no loans modified in a TDR that subsequently defaulted during the twelve months periods ended September 30, 2013 and 2012 respectively (i.e., 90 days or more past due following a modification).

A modification of a loan constitutes a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Corporation offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. 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 and changing the monthly payments from interest-only to principal and interest, while leaving the interest rate unchanged.

Loans modified in a TDR are typically already on nonaccrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR for the Corporation 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.

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The OCC regulatory guidance requires loans to be accounted for as collateral-dependent loans when borrowers have filed Chapter 7 bankruptcy, the debt has been discharged and the borrower has not reaffirmed the debt, regardless of the delinquency status of the loan. The filing of bankruptcy by the borrower is evidence of financial difficulty and the discharge of the obligation by the bankruptcy court is deemed to be a concession granted to the borrower.

The Corporation had approximately $638 of additional commitments to lend additional funds to the related debtors whose terms have been modified in a TDR.

Nonaccrual Loans

Nonaccrual loan balances at September 30, 2013 and December 31, 2012 are as follows:

Loans On Non-Accrual Status	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Commercial real estate	$	13,630	$	16,349
Commercial	355		472
Residential real estate	5,335		5,622
Home equity loans	4,798		4,293
Indirect	486		711
Consumer	372		349
Total Nonaccrual Loans	$	24,976	$	27,796

Credit Risk Grading

Sound credit systems, practices and procedures such as credit risk grading systems; effective credit review and examination processes; effective loan monitoring, problem identification, and resolution processes; and a conservative loss recognition process and charge-off policy are integral to management’s proper assessment of the adequacy of the allowance. Many factors are considered when grades are assigned to individual loans such as current and historic delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. Commercial, commercial real estate and residential construction loans are assigned internal credit risk grades. The loan’s internal credit risk grade is reviewed on at least an annual basis and more frequently if needed based on specific borrower circumstances. Credit quality indicators used in management’s periodic analysis of the adequacy of the allowance include the Corporation’s internal credit risk grades which are described below and are included in the table below for September 30, 2013 and December 31, 2012:

• Grades 1 -5: defined as “Pass” credits — loans which are protected by the borrower’s current net worth and paying capacity or by the value of the underlying collateral. Pass credits are current or have not displayed a significant past due history.

• Grade 6: defined as “Special Mention” credits — loans where a potential weakness or risk exists, which could cause a more serious problem if not monitored. Loans listed for special mention generally demonstrate a history of repeated delinquencies, which may indicate a deterioration of the repayment abilities of the borrower.

• Grade 7: defined as “Substandard” credits — loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

• Grade 8: defined as “Doubtful” credits — loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable.

• Grade 9: defined as “Loss” credits — loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

For the residential real estate segment, the Corporation monitors credit quality using a combination of the delinquency status of the loan and/or the Corporation’s internal credit risk grades as indicated above.

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The following table presents the recorded investment of commercial real estate, commercial and residential real estate loans by internal credit risk grade and the recorded investment of residential real estate, home equity, indirect and consumer loans based on delinquency status as of September 30, 2013 and December 31, 2012:

Commercial Credit Exposure	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
	September 30, 2013
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1 — Minimal	$	—	$	74	$	—	$	—	$	—	$	—	$	74
Grade 2 — Modest	—		37		—		—		—		—		37
Grade 3 — Better than average	866		—		—		—		—		—		866
Grade 4 — Average	27,181		866		616		—		—		—		28,663
Grade 5 — Acceptable	343,587		75,332		5,552		—		—		—		424,471
Total Pass Credits	371,634		76,309		6,168		—		—		—		454,111
Grade 6 — Special mention	10,671		3,149		37		—		—		—		13,857
Grade 7 — Substandard	21,726		355		568		—		—		—		22,649
Grade 8 — Doubtful	—		—		—		—		—		—		—
Grade 9 — Loss	—		—		—		—		—		—		—
Total loans internally credit risk graded	404,031		79,813		6,773		—		—		—		490,617
Loans not monitored by internal risk grade:
Current loans not internally risk graded	—		—		55,131		119,764		206,024		13,125		394,044
30-59 days past due loans not internally risk graded	—		—		377		1,094		225		191		1,887
60-89 days past due loans not internally risk graded	—		—		586		362		59		—		1,007
90+ days past due loans not internally risk graded	—		—		2,530		1,065		41		109		3,745
Total loans not internally credit risk graded	—		—		58,624		122,285		206,349		13,425		400,683
Total loans internally and not internally credit risk graded	$	404,031	$	79,813	$	65,397	$	122,285	$	206,349	$	13,425	$	891,300

* Residential loans with an internal commercial credit risk grade include loans that are secured by non owner occupied 1-4 family residential properties and conventional 1-4 family residential properties.

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Commercial Credit Exposure	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
	December 31, 2012
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1 — Minimal	$	—	$	114	$	—	$	—	$	—	$	—	$	114
Grade 2 — Modest	—		—		—		—		—		—		—
Grade 3 — Better than average	1,100		6		—		—		—		—		1,106
Grade 4 — Average	30,604		4,547		626		—		—		—		35,777
Grade 5 — Acceptable	342,067		60,023		5,584		—		—		—		407,674
Total Pass Credits	373,771		64,690		6,210		—		—		—		444,671
Grade 6 — Special mention	12,201		3,394		42		—		—		—		15,637
Grade 7 — Substandard	27,268		621		1,468		—		—		—		29,357
Grade 8 — Doubtful	765		—		—		—		—		—		765
Grade 9 — Loss	—		—		—		—		—		—		—
Total loans internally credit risk graded	414,005		68,705		7,720		—		—		—		490,430
Loans not monitored by internal risk grade:
Current loans not internally risk graded	—		—		54,416		120,196		198,983		11,912		385,507
30-59 days past due loans not internally risk graded	—		—		394		630		645		26		1,695
60-89 days past due loans not internally risk graded	—		—		1,094		494		227		40		1,855
90+ days past due loans not internally risk graded	—		—		1,359		1,510		69		123		3,061
Total loans not internally credit risk graded	—		—		57,263		122,830		199,924		12,101		392,118
Total loans internally and not internally credit risk graded	$	414,005	$	68,705	$	64,983	$	122,830	$	199,924	$	12,101	$	882,548

* Residential loans with an internal commercial credit risk grade include loans that are secured by non owner occupied 1-4 family residential properties and conventional 1-4 family residential properties.

The Corporation adheres to underwriting standards consistent with its Loan Policy for indirect and consumer loans. Final approval of a consumer credit depends on the repayment ability of the borrower. Repayment ability generally requires the determination of the borrower’s capacity to meet current and proposed debt service requirements. A borrower’s repayment ability is monitored based on delinquency, generally for time periods of 30 to 59 days past due, 60 to 89 days past due and greater than 90 days past due. This information is provided in the above past due loans table.

(7)    Deposits

Deposit balances are summarized as follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Demand and other noninterest-bearing	$	139,871	$	139,894
Interest checking	168,955		155,248
Savings	124,033		119,247
Money market accounts	98,570		102,792
Consumer time deposits	379,948		386,549
Public time deposits	120,868		95,862
Total deposits	$	1,032,245	$	999,592

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The aggregate amount of certificates of deposit in denominations of $100,000 or more amounted to $285,550 and $253,464 at September 30, 2013 and December 31, 2012, respectively.

The maturity distribution of certificates of deposit as of September 30, 2013 are as follows:

	September 30, 2013
	(Dollars in thousands)
0-12 months	$	343,084
12-24 months	113,109
24-36 months	26,745
36-48 months	13,599
48-60 months	4,279
Total	$	500,816

(8)    Short-Term Borrowings

The Bank has a line of credit for advances and discounts with the Federal Reserve Bank of Cleveland. The amount of this line of credit varies on a monthly basis. The line is equal to 50% of the balances of qualified home equity lines of credit that are pledged as collateral. At September 30, 2013, the Bank had pledged approximately $86,886 in qualifying home equity lines of credit, resulting in an available line of credit of approximately $43,443. No amounts were outstanding under the line of credit at September 30, 2013 or December 31, 2012. The Corporation also has a $6,000 line of credit with an unaffiliated financial institution. No amounts were outstanding under this line of credit at September 30, 2013 and December 31, 2012.

Short-term borrowings include securities sold under repurchase agreements and Federal funds purchased from correspondent banks. At September 30, 2013 and December 31, 2012, the outstanding balance of securities sold under repurchase agreements totaled $1,643 and $1,115, respectively. No Federal funds were purchased as of September 30, 2013 and December 31, 2012.

(9)    Federal Home Loan Bank Advances

Federal Home Loan Bank advances amounted to $46,658 and $46,508 at September 30, 2013 and December 31, 2012 respectively. All advances were bullet maturities with no call features. At September 30, 2013, collateral pledged for FHLB advances consisted of qualified multi-family and residential real estate mortgage loans and investment securities of $87,827 and $18,274, respectively. The maximum borrowing capacity of the Bank at September 30, 2013 was $75,227. The Bank maintains a $40,000 cash management line of credit (CMA) with the FHLB. No amounts were outstanding for the CMA line of credit at September 30, 2013 and December 31, 2012.

Maturities of FHLB advances outstanding at September 30, 2013 and December 31, 2012 are as follows:

	September 30, 2013			December 31, 2012
	(Dollars in thousands)
Maturity January 2014 with fixed rate 3.55%	$	8		$	15
Maturity January 2015 with fixed rate 0.80%	20,000			20,000
Maturity December 2016 with fixed rate 0.79%	10,000			10,000
Maturities June 2017 through December 2017, with fixed rates ranging from 0.89% to 0.99%	15,000			15,000
Maturity June 2018 fixed rate 1.24%	2,500			2,500
Restructuring prepayment penalty	(850		)	(1,007		)
Total FHLB advances	$	46,658		$	46,508

In 2012, the Corporation prepaid $27,500 of fixed rate FHLB advances with a contractual average interest rate of 2.47% and a remaining maturity of 12 to 31 months. The prepaid FHLB advances were replaced with $27,500 of fixed rate FHLB advances with a contractual average interest rate of 0.88% and terms of 49 to 67 months. In accordance with the restructure, the Corporation was required to pay a prepayment penalty of $1,017 to the FHLB. The present value of the cash flows under the terms of the new FHLB advances (including the prepayment penalties) were not more than 10% different from the present

26

value of the cash flows under the terms of the prepaid FHLB advances and therefore the new advances were not considered to be substantially different from the original advances in accordance with ASC 470-50, Debt – Modifications and Exchanges. As a result, the prepayment penalties have been treated as a discount on the new debt and are being amortized over the life of the new advances as an adjustment to rate. The prepayment penalty effectively increases the interest rate on the new advances over the lives of the new advances at the time of the transaction. The benefit of prepaying these advances was an immediate decrease in interest expense and a decrease in interest rate sensitivity as the maturity of each of the refinanced FHLB advances was extended at a lower rate.

At September 30, 2013, the advances were structured to contractually pay down as follows:

	Balance			Weighted Average Rate
2014	$	8		3.55%
2015	20,000			0.80
2016	10,000			0.79
2017	15,000			0.96
Thereafter	2,500			1.24
Total	$	47,508		0.87%
Restructuring prepayment penalty	(850		)
Total	$	46,658

(10)    Trust Preferred Securities

In May 2007, LNB Trust I (“Trust I”) and LNB Trust II (“Trust II”) each sold $10.0 million of preferred securities to outside investors and invested the proceeds in junior subordinated debentures issued by the Corporation. The Corporation’s obligations under the transaction documents, taken together, have the effect of providing a full guarantee by the Corporation, on a subordinated basis, of the payment obligation of the Trusts. The subordinated notes mature in 2037. Trust I bears a floating interest rate (current three-month LIBOR plus 148 basis points). Trust II bears a fixed rate of 6.64% through June 15, 2017, and then becomes a floating interest rate (current three-month LIBOR plus 148 basis points). Interest on the notes is payable quarterly. The interest rates in effect as of the last determination date in 2013 were 1.73% and 6.64% for Trust I and Trust II, respectively. At September 30, 2013 and December 31, 2012, accrued interest payable for Trust I was $5 and $19and for Trust II was $21 and $21, respectively.

The subordinated notes are redeemable in whole or in part, without penalty, at the Corporation’s option and mature on June 15, 2037. The notes are junior in right of payment to the prior payment in full of all senior indebtedness of the Corporation, whether outstanding at the date of the indenture governing the notes or thereafter incurred.

(11)    Commitments and Contingencies

In the normal course of business, the Bank enters into commitments with off-balance sheet risk to meet the financing needs of its customers. These instruments are currently limited to commitments to extend credit and standby letters of credit. Commitments to extend credit involve elements of credit risk and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the commitment is represented by the contractual amount of the commitment. The Bank uses the same credit policies in making commitments as it does for on-balance sheet instruments. Interest rate risk on commitments to extend credit results from the possibility that interest rates may have moved unfavorably from the position of the Bank since the time the commitment was made.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates of 30 to 120 days or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained by the Bank upon extension of credit is based on management’s credit evaluation of the applicant. Collateral held is generally single-family residential real estate and commercial real estate. Substantially all of the obligations to extend credit are variable rate. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

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A summary of the contractual amount of commitments at September 30, 2013 and December 31, 2012 follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Commitments to extend credit	$	115,615	$	74,206
Home equity lines of credit	87,652		81,041
Standby letters of credit	8,548		8,685
Total	$	211,815	$	163,932

The nature of the Corporation’s business may result in litigation. Management, after reviewing with counsel all actions and proceedings pending against or involving the Corporation and its subsidiaries, considers that the aggregate liability or loss, if any, resulting from them will not be material to the Corporation’s financial position, results of operation or liquidity.

(12)    Estimated Fair Value of Financial Instruments

The Corporation discloses estimated fair values for its financial instruments. Fair value estimates, methods and assumptions are set forth below for the Corporation’s financial instruments. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

• The carrying value of cash and due from banks, Federal funds sold, short-term investments, interest bearing deposits in other banks and accrued interest receivable and other financial assets is a reasonable estimate of fair value due to the short-term nature of the asset.

• The fair value of investment securities is based on the fair value hierarchy described below.

• For variable rate loans with interest rates that may be adjusted on a quarterly, or more frequent basis, the carrying amount is a reasonable estimate of fair value. The fair value of other types of loans is estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

• The carrying value approximates the fair value for bank owned life insurance.

• The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, money market, checking and interest-bearing checking, is equal to the amount payable on demand as of September 30, for each period presented. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. For variable rate certificates of deposit, the carrying amount is a reasonable estimate of fair value.

• Securities sold under repurchase agreements, other short-term borrowings, accrued interest payable and other financial liabilities approximate fair value due to the short-term nature of the liability.

• The fair value of Federal Home Loan Bank advances is estimated by discounting future cash flows using current FHLB rates for the remaining term to maturity.

• The fair value of junior subordinated debentures is based on the discounted value of contractual cash flows using rates currently offered for similar maturities.

• The fair value of commitments to extend credit approximates the fees charged to make these commitments since rates and fees of the commitment contracts approximates those currently charged to originate similar commitments. The carrying amount and fair value of off-balance sheet instruments is not significant as of September 30, 2013 and December 31, 2012.

Limitations

Estimates of fair value are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Estimates of fair value are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Bank has an Investment and Trust Services Division that contributes net fee income annually. The Investment and Trust Services Division is not considered a financial instrument and its value has not been incorporated

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into the fair value estimates. Other significant assets and liabilities that are not considered financial instruments include premises and equipment and deferred tax assets. The estimated fair values of the Corporation’s financial instruments at September 30, 2013 and December 31, 2012 are summarized as follows:

	September 30, 2013										December 31, 2012
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Carrying Value		Estimated Fair Value
	(Dollars in thousands)
Financial assets
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	$	47,090	$	47,090	$	47,090	$	—	$	—	$	30,659	$	30,659
Securities	215,290		215,290		—		210,606		4,684		203,763		203,763
Restricted stock	5,741		5,741		—		5,741		—		5,741		5,741
Portfolio loans, net	873,509		870,304		—		—		870,304		864,911		868,716
Loans held for sale	2,110		2,123		—		2,123		—		7,634		7,891
Accrued interest receivable	3,750		3,750		—		3,750		—		3,726		3,726
Financial liabilities
Deposits:
Demand, savings and money market	531,429		526,228		—		526,228		—		517,181		511,665
Certificates of deposit	500,816		502,660		—		502,660		—		482,411		485,394
Short-term borrowings	1,643		1,643		—		1,643		—		1,115		1,115
Federal Home Loan Bank advances	46,658		46,851		—		46,851		—		46,508		46,828
Junior subordinated debentures	16,238		15,375		—		15,375		—		16,238		17,197
Accrued interest payable	804		804		—		804		—		882		882

Fair Value Measurements

The fair value of financial assets and liabilities recorded at fair value is categorized in three levels. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. These levels are as follows:

• Level 1 — Valuations based on quoted prices in active markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

• Level 2 — Valuations of assets and liabilities traded in less active dealer or broker markets. Valuations include quoted prices for similar assets and liabilities traded in the same market; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

• Level 3 — Assets and liabilities with valuations that include methodologies and assumptions that may not be readily observable, including option pricing models, discounted cash flow models, yield curves and similar techniques. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities, but in all cases are corroborated by external data, which may include third-party pricing services.

The following table presents information about the Corporation’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, and the valuation techniques used by the Corporation to determine those fair values.

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Description	Fair Value as of September 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Securities available for sale:
U.S. Government agencies and corporations	$	66,879	$	—	$	66,879	$	—
Mortgage backed securities	95,812		—		95,812		—
Collateralized mortgage obligations	14,651		—		14,651		—
State and political subdivisions	33,264		—		33,264		—
Preferred Securities	4,684		—		—		4,684
Total	$	215,290	$	—	$	210,606	$	4,684
Description	Fair Value as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Securities available for sale:
U.S. Government agencies and corporations	$	36,970	$	—	$	36,970	$	—
Mortgage backed securities	111,701		—		111,701		—
Collateralized mortgage obligations	22,881		—		22,881		—
State and political subdivisions	32,211		—		32,211		—
Total	$	203,763	$	—	$	203,763	$	—

Fair value measurements of U.S. Government agencies and mortgage backed securities use pricing models that vary and may consider various assumptions, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Fair value of debt securities such as obligations of state and political may be determined by matrix pricing. Matrix pricing is a mathematical technique that is used to value debt securities without relying exclusively on quoted prices for specific securities, but rather by relying on the securities relationship to other benchmark quoted prices.

There were no transfers between Levels 1 and 2 of the fair value hierarchy during the periods ended September 30, 2013 and December 31, 2012. For the available for sale securities, the Corporation obtains fair value measurements from an independent third-party service or independent brokers.

The Corporation has assets that, under certain conditions, are subject to measurement at fair value on a nonrecurring basis. At September 30, 2013 and December 31, 2012, such assets consist primarily of impaired loans and other property. The Corporation has estimated the fair values of these assets using Level 3 inputs, specifically discounted cash flow projections.

The following table presents the balances of assets and liabilities measured at fair value on a nonrecurring basis:

30

September 30, 2013	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
	(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	24,976	$	24,976
Other real estate	—		—		951		951
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	25,927	$	25,927
December 31, 2012	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
	(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	27,796	$	27,796
Other real estate	—		—		1,366		1,366
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	29,162	$	29,162

Impaired and nonaccrual loans:    Fair value adjustments for these items typically occur when there is evidence of impairment. Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair market value of the collateral. The Corporation measures fair value based on the value of the collateral securing the loans. Collateral may be in the form of real estate or personal property including equipment and inventory. The vast majority of collateral is real estate. The value of the collateral is determined based on internal estimates as well as third party appraisals or non-binding broker quotes. These measurements were classified as Level 3.

Other Real Estate:    Other real estate includes foreclosed assets and properties securing residential and commercial loans. Foreclosed assets are adjusted to fair value less costs to sell upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at lower of carry value or fair value less costs to sell. Fair value is generally based upon internal estimates and third party appraisals or non-binding broker quotes and, accordingly, considered a Level 3 classification.

The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value (dollars in thousands).

Asset	Fair Value	Valuation Technique	Unobservable Input
Collateral dependent impaired loans	$24,976	Discounted cash flow Appraisal of collateral	Appraisal adjustments Risk premium rate Discount rate
Other real estate	951	Appraisal of collateral	Appraisal adjustments
Preferred Securities	4,684	Fair value measurements obtained from an independent pricing service - Income Approach	Market spreads, credit rating collateral type, and other relevant contractual features

Changes in Level 3 Fair Value Measurements

There were no assets measured at fair value on a recurring basis using significant unobservable inputs that were transferred to Level 3 as of or during the three and nine months ended September 30, 2013.

(13)    Share-Based Compensation

A broad-based stock incentive plan, the 2006 Stock Incentive Plan, was adopted by the Corporation’s shareholders on April 18, 2006 and was amended and restated on May 2, 2012. Awards granted under this Plan as of September 30, 2013 were stock options granted in 2007, 2008, 2009, 2012 and 2013 and long-term restricted shares issued in 2010, 2011, and 2012. In

31

addition, the Corporation has nonqualified stock option agreements outside of the 2006 Stock Incentive Plan. Grants under the nonqualified stock option agreements were made from 2005 to 2007.

Stock Options

During the nine months ended September 30, 2013, the Corporation granted 137,363 stock options to certain employees. All outstanding stock options were granted at an excercise price equal to the fair market value of the common stock on the date of grant. The maximum option term is ten years and the options generally vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years.

The Corporation recognizes compensation expense for awards with graded vesting schedule on a straight-line basis over the requisite service period for the entire award. The expense recorded for stock options was $52, and $9 for the nine months ended September 30, 2013 and 2012, respectively.

The following table summarizes the Corporation's stock options outstanding at September 30, 2013:

	Outstanding		Exercisable
	Number	Weighted Average Remaining Contractual Life (Years)	Number	Weighted Average Exercise Price
Range of Exercise Prices
$5.34-$5.39	37,500	8.16	14,167	$	5.38
$9.07-$9.56	137,363	9.66	—	—
$14.47	82,000	4.35	82,000	14.47
$15.35-$16.50	52,500	3.46	52,500	15.78
$19.10	30,000	2.34	30,000	19.10
$19.17	30,000	1.34	30,000	19.17
Outstanding at end of period	369,363	5.39	208,667	16.12

A summary of the status of stock options at September 30, 2013 and 2012 is presented in the table below:

	2013		2012
	Options	Weighted Average Exercise Price per Share	Options	Weighted Average Exercise Price per Share
Outstanding at beginning of period	232,000	14.50	197,000	16.12
Granted	137,363	9.18	35,000	$5.39
Forfeited or expired	—	—	—	—
Exercised	—	—	—	—
Stock dividend or split	—	—	—	—
Outstanding at end of period	369,363	12.52	232,000	14.50
Exercisable at end of period	208,667	15.52	197,000	16.12

There were no options exercised during the nine months of 2013 therefore the total intrinsic value of options exercised was $0. The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Corporation’s closing stock price on the last trading day of the third quarter of 2013 and the exercise price, multiplied by the number of in-the-money options). The Corporation’s closing stock price on September 30, 2013 was $9.40.

For the third quarter 2013, the per share weighted-average fair value of stock options granted was $2.35 compared to $0 for the third quarter 2012. The per share weighted-average fair value of stock options granted during the nine months of 2013 and 2012 was $2.15 and $1.22, respectively on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

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	Three Months Ended September 30,				Nine Months Ended September 30
	2013		2012		2013		2012
Dividend Yield	3.03	%	—	%	3.07	%	3.38	%
Expected volatility	32.54	%	—	%	32.60	%	33.00	%
Risk-free interest rate	1.98	%	—	%	1.37	%	1.27	%

Restricted Shares

The Corporation did not issue long term restricted shares during the nine months ended September 30, 2013. In 2012, the Corporation issued 62,105 shares of long-term restricted shares. The market price of the Corporation’s common shares on the date of grant of the long-term restricted stock was $5.39 per share. Shares of long-term restricted stock generally vest in two equal installments on the second and third anniversaries of the date of grant, or upon the earlier death or disability of the recipient or a qualified change of control of the Corporation. The expense recorded for long-term restricted stock for the nine months ended September 30, 2013 and 2012 was $173, and $220 respectively.

The market price of the Corporation’s common shares at the date of grant is used to estimate the fair value of restricted stock awards. A summary of the status of restricted shares at September 30, 2013 is presented in the table below:

	Nonvested Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2013	143,031		$	5.07
Granted	—		—
Vested	(52,499	)	4.68
Forfeited or expired	—		—
Nonvested at September 30, 2013	90,532		5.29

Stock Appreciation Rights (“SARS”)

In 2006, the Corporation issued an aggregate of 30,000 SARS at $19.00 per share, 15,500 of which have expired due to employee terminations. The SARS vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years. Any unexercised portion of the SARS shall expire at the end of the stated term which is specified at the date of grant and shall not exceed ten years. The SARS issued in 2006 will expire in January 2016. The expense recorded for SARS for the nine months ended September 30, 2013, was $10 and for 2012 was $2.

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

The following commentary presents a discussion and analysis of the Corporation’s financial condition and results of operations by its management (“Management”). This Management’s Discussion and Analysis (“MD&A”) section discusses the financial condition and results of operations of the Corporation for the nine months ended September 30, 2013. This MD&A should be read in conjunction with the financial information contained in the Corporation’s Form 10-K for the fiscal year ended December 31, 2012 and in the accompanying consolidated financial statements and notes contained in this Form 10-Q. The objective of this financial review is to enhance the reader’s understanding of the accompanying tables and charts, the consolidated financial statements, notes to the financial statements and financial statistics appearing elsewhere in the report. Where applicable, this discussion also reflects Management’s insights as to known events and trends that have or may reasonably be expected to have a material effect on the Corporation’s operations and financial condition.

Summary (Dollars in thousands, except per share data)

The Corporation is a bank holding company headquartered in Lorain, Ohio, deriving substantially all of its revenue from the Bank. The Corporation provides a range of products and services to commercial customers and the community, and currently operates 20 banking centers throughout Lorain, Erie, Cuyahoga, Franklin, and Summit counties in Ohio.

Net income for the third quarter 2013 was $1,519 compared to $1,525 for the same period one year ago. Net income available to common shareholders for the third quarter 2013 was $1,410, or $0.15 per diluted common share compared to $1,206, or $0.15 for the third quarter 2012.

Net income for the nine months ended September 30, 2013 was $4,455 compared to $4,468 for the nine months ended September 30, 2012. Net income available to common shareholders for the nine months ended September 30, 2013 was $3,972, or $0.44 per diluted common share compared to $3,512, or $0.44, for the nine months ended September 30, 2012.

Net interest income on a fully taxable equivalent (FTE) basis for the third quarter 2013 was $8,934, a decrease of 8.9%, compared to $9,808 for the third quarter 2012. The net interest margin FTE, determined by dividing tax equivalent net interest income by average assets, for the third quarter 2013 was 3.13% compared to 3.46% for the third quarter 2012.

The provision for loan losses was $950 for the quarter ended September 30, 2013 compared to $1,875 for the quarter ended September 30, 2012. See Note 6: Loans and Allowance for Loan Losses for further details.

Noninterest income was $2,466 for the third quarter 2013 compared to $2,953 for the prior-year third quarter. This 16.5% decrease was driven primarily by a decline in mortgage originations and refinances due largely to increasing interest rates. As mortgage originations and refinances declined, primarily due to interest rate volatility, the fair value of the interest rate lock decreased substantially resulting in a mark-to-market loss of $273. Noninterest income for the nine months ended September 30, 2013 was $8,870, up $499, or 6.0%, from the same nine month period in 2012. For the nine months ended September 30, 2013, the gain on the sale of loans was $1,617, an increase of 76.5%, or $701, compared to $916 for the nine months ended September 30, 2012.

Noninterest expense of $8,301 for the third quarter 2013 decreased $377, or 4.3%, compared to $8,678, for the same period one year ago. The decrease in noninterest expense was mainly attributable to a decrease of $358, or 25.0%, in furniture and equipment, as the Corporation has utilized its new technology to be more efficient in all aspects of the business.

During the third quarter 2013, loan demand increased slightly as total portfolio loans ended the quarter at $891,300, a 1.0% increase compared to $882,548 at December 31, 2012. Total assets for the third quarter 2013 ended at $1,210,502 compared to $1,178,254 at December 31, 2012, an increase of $32,248, or 2.7%. Total deposits grew to $1,032,245 at September 30, 2013, an increase of 3.3%, from $999,592 at December 31, 2012.

The Corporation continued its efforts to reduce the level of problem loans and their associated costs. The Corporation’s non-performing loans totaled $24,976 at September 30, 2013, or 2.80% of total loans, a decrease from $27,796, or 3.15% of total loans, at December 31, 2012, and a decrease from $32,584, or 3.68%, from the third quarter 2012.

The allowance for possible loan losses was $17,791 at September 30, 2013 compared to $17,637 at December 31, 2012, and 2.00% of total loans compared to 2.00% at December 31, 2012. Annualized net charge-offs to average loans at September 30, 2013 was 0.44% compared to 0.77% at December 31, 2012 and 0.72% at September 30, 2012.

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Results of Operations(Dollars in thousands except per share data)

Table 1: Condensed Consolidated Average Balance Sheets

Interest, Rate, and Rate/ Volume differentials are stated on a Fully-Tax Equivalent (FTE) Basis.

Table 1 presents the condensed consolidated average balance sheets for the three months ended September 30, 2013 and 2012.

	Three Months Ended September 30,
	2013								2012
	Average Balance			Interest			Rate		Average Balance			Interest			Rate
	(Dollars in thousands)
Assets:
U.S. Govt agencies and corporations	$	189,449		$	953		2.00	%	$	201,284		$	1,145		2.26	%
State and political subdivisions	32,780			432			5.23		31,869			414			5.17
Federal funds sold and short-term investments	14,673			7			0.19		9,170			8			0.36
Restricted stock	5,741			69			4.80		5,741			69			4.80
Commercial loans	484,063			5,395			4.42		483,226			5,946			4.89
Residential real estate loans	49,718			634			5.06		56,955			792			5.53
Home equity lines of credit	107,579			1,027			3.79		108,931			1,071			3.91
Installment loans	246,692			1,946			3.13		231,489			2,207			3.79
Total Earning Assets	$	1,130,695		$	10,463		3.67	%	$	1,128,665		$	11,652		4.11	%
Allowance for loan loss	(18,028		)						(17,436		)
Cash and due from banks	35,772								25,984
Bank owned life insurance	19,018								18,262
Other assets	46,045								46,950
Total Assets	$	1,213,502							$	1,202,425
Liabilities and Shareholders’ Equity:
Consumer time deposits	$	432,751		$	1,001		0.92	%	$	442,940		$	1,235		1.11	%
Public time deposits	69,847			123			0.70		48,484			107			0.88
Savings deposits	123,328			11			0.03		112,272			19			0.07
Money market accounts	104,443			45			0.17		105,211			49			0.18
Interest-bearing demand	166,568			20			0.05		163,404			41			0.10
Short-term borrowings	1,735			—			0.05		1,214			—			—
FHLB advances	46,636			158			1.35		49,442			214			1.72
Trust preferred securities	16,328			171			4.15		16,301			179			4.37
Total Interest-Bearing Liabilities	$	961,636		$	1,529		0.63	%	$	939,268		$	1,844		0.78	%
Noninterest-bearing deposits	139,212								143,719
Other liabilities	4,629								3,772
Shareholders’ Equity	108,025								115,666
Total Liabilities and Shareholders’ Equity	$	1,213,502							$	1,202,425
Net interest Income (FTE)				$	8,934		3.13	%				$	9,808		3.46	%
Taxable Equivalent Adjustment				(159		)	(0.05	)				(144		)	(0.05	)
Net Interest Income Per Financial Statements				$	8,775							$	9,664
Net Yield on Earning Assets							3.08	%							3.41	%

Note: Interest income on tax-exempt securities and loans has been adjusted to a fully-taxable equivalent basis. Nonaccrual loans have been included in the average balances

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Three Months Ended September 30, 2013 versus Three Months Ended September 30, 2012 Net Interest Income Comparison

Net interest income is the difference between interest income earned on interest-earning assets and the interest expense paid on interest-bearing liabilities. Net interest income is the Corporation’s principal source of revenue, accounting for 77% of the Corporation’s revenues for the three months ended September 30, 2013. The amount of net interest income is affected by changes in the volume and mix of earning assets and interest-bearing liabilities, the level of rates earned or paid on those assets and liabilities and the amount of loan fees earned. The Corporation reviews net interest income on a fully taxable equivalent (FTE) basis, which presents interest income with an adjustment for tax-exempt interest income on an equivalent pre-tax basis assuming a 34% statutory Federal tax rate. These rates may differ from the Corporation’s actual effective tax rate. The net interest margin is net interest income as a percentage of average earning assets.

Net interest income was $8,775 for the third quarter 2013 compared to $9,663 during the same quarter of 2012, a decrease of 9.2%, primarily due to the low interest rate environment. Adjusting for tax-exempt income, net interest income FTE for the third quarter of 2013 and 2012 was $8,934 and $9,808, respectively. The net interest margin FTE, determined by dividing tax equivalent net interest income by average earning assets, was 3.13% for the three months ended September 30, 2013 compared to 3.46% for the three months ended September 30, 2012.

Average earning assets for the third quarter of 2013 were $1,130,695, a slight increase of $2,030, compared to $1,128,665 for the third quarter of last year. The yield on average loans during the third quarter of 2013 was 4.02%, which was 50 basis points lower than the yield on average loans during the third quarter of 2012 of 4.52%. Interest income from securities was $1,385 (FTE) for the three months ended September 30, 2013, compared to $1,559 during the third quarter of 2012. The yield on average securities was 2.47% and 2.66% for these periods, respectively. An increase in pre-payments in the mortgage backed securities portfolio was the primary cause for the decrease noted in yield.

The cost of interest-bearing liabilities was 0.63% during the third quarter of 2013 compared to 0.78% during the same period in 2012. This decrease is primarily due to the sustained low interest rate environment. Noninterest-bearing accounts were $139,212, a decrease of 3.1%, compared to $143,719 for the same period a year ago. Total average interest-bearing liabilities of $961,636 for the quarter ended September 30, 2013 increased $22,368, or 2.4%, compared to the quarter ended September 30, 2012. The average cost of trust preferred securities was 4.15% for the third quarter of 2013, compared to 4.37% for the third quarter of 2012. One half of the Corporation’s outstanding trust preferred securities accrued dividends at a fixed rate of 6.64% and the other half accrued dividends at LIBOR plus 1.48% which was 1.73% as of September 30, 2013.

Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. Table 2 is an analysis of the changes in interest income and expense between the quarters ended September 30, 2013 and September 30, 2012. The table is presented on a fully tax-equivalent basis.

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Table 2: Rate/Volume Analysis of Net Interest Income (FTE)

	Three Months Ended September 30,
	Increase (Decrease) in Interest Income/Expense  in 2013 over 2012
	Volume			Rate			Total
	(Dollars in thousands)
U.S. Govt agencies and corporations	$	(60	)	$	(132	)	$	(192	)
State and political subdivisions	12			6			18
Federal funds sold and short-term investments	3			(4		)	(1		)
Restricted stock	—			—			—
Commercial loans	9			(560		)	(551		)
Residential real estate loans	(92		)	(66		)	(158		)
Home equity lines of credit	(12		)	(32		)	(44		)
Installment loans	120			(381		)	(261		)
Total Interest Income	(20		)	(1,169		)	(1,189		)
Consumer time deposits	(24		)	(210		)	(234		)
Public time deposits	(3		)	19			16
Savings deposits	1			(9		)	(8		)
Money market accounts	—			(4		)	(4		)
Interest-bearing demand	—			(21		)	(21		)
Short-term borrowings	—			—			—
FHLB advances	(10		)	(46		)	(56		)
Trust preferred securities	—			(8		)	(8		)
Total Interest Expense	(36		)	(279		)	(315		)
Net Interest Income (FTE)	$	16		$	(890	)	$	(874	)

Net interest income (FTE) for the third quarter 2013 and 2012 was $8,934 and $9,808, respectively. Interest income (FTE) for the third quarter of 2013 decreased $874 in comparison to the same period in 2012. This decrease is primarily attributable to a decrease of $890 due to rate, strong competition for new loan growth has driven down the pricing on both commercial and indirect loans. The decrease in rates was offset by a $16 increase due to volume. Interest income on securities of U.S. Government agencies and corporations decreased $192, of which $132 is attributable to rate and $60 is attributable to volume. Lower market interest rates have increased the number of agency securities being called. In addition, federal programs promoting the refinance of residential mortgages have increased paydowns on mortgage-backed securities, resulting in a decrease in yield and the reinvestment of funds at lower market interest rates.

Interest income on commercial loans decreased $551. This decrease is primarily attributable to the low interest rate environment, with a decrease in rate of $560, which was offset by an increase in volume of $9. Interest income on installment loans decreased $261, with a decrease in rate of $381, which was offset by an increase in volume of $120. The decrease was the result of the continued lower interest rate environment and the competitive nature of indirect lending.

The $234 decrease in consumer time deposits was due primarily to lower market interest rates as existing accounts continued to renew at favorable lower market interest rates. Total interest expense decreased $315, with the decrease being attributable to a $279 decrease due to rate and a decrease due to volume of $36.

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Table 3: Condensed Consolidated Average Balance Sheets

Interest, Rate, and Rate/ Volume differentials are stated on a Fully-Tax Equivalent (FTE) Basis.

Table 3 presents the condensed consolidated average balance sheets for the nine months ended September 30, 2013 and 2012.

	Nine Months Ended September 30,
	2013								2012
	Average Balance			Interest			Rate		Average Balance			Interest			Rate
	(Dollars in thousands)
Assets:
U.S. Govt agencies and corporations	$	186,145		$	2,745		1.97	%	$	195,682		$	3,686		2.52	%
State and political subdivisions	32,755			1,270			5.17		31,826			1,242			5.21
Federal funds sold and short-term investments	16,785			23			0.18		12,877			27			0.28
Restricted stock	5,741			208			4.83		5,741			210			4.89
Commercial loans	488,225			16,385			4.49		481,602			17,802			4.94
Residential real estate loans	52,015			1,997			5.13		55,169			2,234			5.41
Home equity lines of credit	107,316			3,067			3.82		108,108			3,229			3.99
Installment loans	241,700			5,935			3.28		224,111			7,058			4.21
Total Earning Assets	$	1,130,682		$	31,630		3.74	%	$	1,115,116		$	35,488		4.25	%
Allowance for loan loss	(17,909		)						(17,365		)
Cash and due from banks	36,180								31,542
Bank owned life insurance	18,850								18,094
Other assets	46,536								47,699
Total Assets	$	1,214,339							$	1,195,086
Liabilities and Shareholders’ Equity:
Consumer time deposits	$	436,761		$	3,079		0.94	%	$	429,675		$	3,929		1.22	%
Public time deposits	66,596			367			0.74		68,475			306			0.60
Savings deposits	122,541			38			0.04		109,216			81			0.10
Money market accounts	106,234			131			0.16		106,067			152			0.19
Interest-bearing demand	164,865			70			0.06		162,333			141			0.12
Short-term borrowings	1,650			1			0.10		889			—			0.07
FHLB advances	46,584			469			1.35		48,003			641			1.78
Trust preferred securities	16,323			511			4.18		16,318			527			4.32
Total Interest-Bearing Liabilities	$	961,554		$	4,666		0.66	%	$	940,976		$	5,777		0.82	%
Noninterest-bearing deposits	138,763								135,018
Other liabilities	4,344								4,056
Shareholders’ Equity	109,678								115,036
Total Liabilities and Shareholders’ Equity	$	1,214,339							$	1,195,086
Net interest Income (FTE)				$	26,964		3.19	%				$	29,711		3.56	%
Taxable Equivalent Adjustment				(476		)	(0.06	)				(460		)	(0.05	)
Net Interest Income Per Financial Statements				$	26,488							$	29,251
Net Yield on Earning Assets							3.13	%							3.51	%

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Nine Months Ended September 30, 2013 versus Nine Months Ended September 30, 2012 Net Interest Income Comparison

Net interest income accounted for 74% of the Corporation's revenues for the nine months ended September 30, 2013. The amount of net interest income is affected by changes in the volume and mix of earning assets and interest-bearing liabilities, the level of rates earned or paid on those assets and liabilities and the amount of loan fees earned. The Corporation reviews net interest income on a fully taxable equivalent (FTE) basis, which presents interest income with an adjustment for tax-exempt interest income on an equivalent pre-tax basis assuming a 34% statutory Federal tax rate. These rates may differ from the Corporation's actual effective tax rate. The net interest margin is net interest income as a percentage of average earning assets.

Net interest income was $26,488 for the nine months of 2013 compared to $29,251 during the same period of 2012. Adjusting for tax-exempt income, net interest income FTE, for the nine months of 2013 and 2012 was $26,964 and $29,711, respectively. The net interest margin FTE, determined by dividing tax equivalent net interest income by average earning assets, was 3.19% for the nine months ended September 30, 2013 compared to 3.56% for the nine months ended September 30, 2012. This decrease is mainly attributable to the lower interest rate environment which continued to apply downward pressure on the Corporation's yield on its investment portfolio and, as a result, negatively impacted the net interest margin.

Average earning assets for the nine months of 2013 were $1,130,682. This was an increase of $15,566, or 1.4%, compared to the same period last year. Due in part to the extended period of lower market interest rates that continued through the nine months of 2013, the yield on average earning assets was 3.74% in the nine months of 2013 compared to 4.25% for the same period last year. The yield on average loans during the nine months of 2013 was 4.12%. This was 54 basis points lower than that of the nine months of 2012 at 4.66%. Interest income from securities was $4,015 (FTE) for the nine months ended September 30, 2013, compared to $4,928 during the same period of 2012. The yield on average securities was 2.45% and 2.89% for these periods, respectively.

The cost of interest-bearing liabilities was 0.66% during the nine months of 2013 compared to 0.82% during the same period in 2012. Total average interest-bearing liabilities as of September 30, 2013 increased $20,578, or 2.2%. The average cost of trust preferred securities was 4.18% for the nine months of 2013, compared to 4.32% for the same period of 2012.

Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. Table 4 is an analysis of the changes in interest income and expense between the nine months ended September 30, 2013 and September 30, 2012. The table is presented on a fully tax-equivalent basis.

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Table 4: Rate/Volume Analysis of Net Interest Income (FTE)

	Nine Months Ended September 30,
	Increase (Decrease) in Interest Income/Expense  in 2013 over 2012
	Volume			Rate			Total
	(Dollars in thousands)
U.S. Govt agencies and corporations	$	(141	)	$	(800	)	$	(941	)
State and political subdivisions	36			(8		)	28
Federal funds sold and short-term investments	5			(9		)	(4		)
Restricted stock	—			(2		)	(2		)
Commercial loans	223			(1,640		)	(1,417		)
Residential real estate loans	(121		)	(116		)	(237		)
Home equity lines of credit	(22		)	(140		)	(162		)
Installment loans	432			(1,555		)	(1,123		)
Total Interest Income	412			(4,270		)	(3,858		)
Consumer time deposits	50			(900		)	(850		)
Public time deposits	(10		)	71			61
Savings deposits	5			(48		)	(43		)
Money market accounts	—			(21		)	(21		)
Interest-bearing demand	1			(72		)	(71		)
Short-term borrowings	—			1			1
FHLB advances	(15		)	(157		)	(172		)
Trust preferred securities	—			(16		)	(16		)
Total Interest Expense	31			(1,142		)	(1,111		)
Net Interest Income (FTE)	$	381		$	(3,128	)	$	(2,747	)

Net interest income (FTE) for the nine months ended 2013 and 2012 was $26,964 and $29,711, respectively. Interest income (FTE) for nine months ended September 30, 2013 decreased $3,858 in comparison to the same period in 2012. This decrease is attributable to a $4,270 decrease due to rate offset by an increase of $412 due to volume. For the same period, interest expense decreased $1,111, with the decrease being primarily attributable to a $1,142 decrease due to rate offset by an increase due to volume of $31. Overall, the total decrease in net interest income (FTE) of $2,747 was mainly attributable to a decrease in volume of $3,128 offset by an increase of $381 due to rate.

The prolonged low interest rate environment continued to put downward pressure on asset yields. Interest income on commercial loans decreased $1,417, which is attributable to a decrease of $1,640 due to rate, offset by an increase of $223 in volume. Installment loans interest income decreased $1,555 due to rate, offset by an increase of $432 due to volume for an overall decrease of $1,123. Year over year lower market interest rates have increased the number of U.S. Government agencies that are being called which has caused a decrease in interest income received from these securities of $941.

Interest expense on consumer time deposits decreased $850, primarily due to the low interest rate environment, as the decrease was attributable to a $900 decrease due to rate offset by a $50 increase in volume.

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Noninterest Income

Table 5: Details of Noninterest Income

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Dollars in thousands)					(Dollars in thousands)
Investment and trust services	$	363		$	375	$	1,178		$	1,190
Deposit service charges	923			994		2,608			2,858
Other service charges and fees	820			762		2,459			2,314
Income from bank owned life insurance	174			167		512			501
Other income	(218		)	214		335			614
Total fees and other income	2,062			2,512		7,092			7,477
Securities gains, net	—			46		178			46
Gain on sale of loans	374			364		1,617			916
Loss on sale of other assets, net	30			31		(17		)	(68		)
Total noninterest income	$	2,466		$	2,953	$	8,870		$	8,371

Three Months Ended September 30, 2013 versus Three Months Ended September 30, 2012 Noninterest Income Comparison

Total fees and other income for the three months ended September 30, 2013 was $2,062, a decrease of $450, or 17.9%, over $2,512 for the same period in 2012. The Corporation utilizes derivatives as part of its risk management strategy in conducting its mortgage activities. Consequently, changes in fair value, both gains and losses, of the instruments are recorded in the Consolidated Statements of Income in other income. During the quarter, the mortgage refinance market slowed as interest rates rose. Primarily due to fluctuating interest rates, mortgage originations declined, resulting in a market value adjustment loss of $273. Income earned on investment and trust services for the third quarter of 2013 decreased $12 compared to the third quarter of 2012. Deposit service charges in the quarter decreased $71, or 7.1%, compared to the third quarter of last year. Other income in the quarter decreased $432 over the same period of 2012. Additionally, during the quarter the Corporation opened a new loan office in Columbus, OH that will focus on business loan growth and increasing revenue through Small Business Administration (SBA) programs.

Gain on the sale of loans was $374 for the third quarter of 2013, compared to $364 for the third quarter of 2012, an increase of 2.7%. The Corporation began to see the demand for mortgage lending decline, in both refinancing and new purchase loans, primarily due to rising interest rates. Sales of bank owned property resulted in a gain of $30 for the three months ended September 30, 2013 compared to a gain of $31 for the same period one year ago.

Nine Months Ended September 30, 2013 versus Nine Months Ended September 30, 2012 Noninterest Income Comparison    

Total fees and other income for the nine months endedSeptember 30, 2013 was $7,092, a decrease of $385, or 5.1%, over the same period of 2012. Income earned on investment and trust services for the nine months endedSeptember 30, 2013 was $1,178 compared to $1,190 for the nine months endedSeptember 30, 2012. Deposit service charges decreased $250, or 8.7%, to $2,608 for the nine months ended September 30, 2013, from $2,858 for the same period in 2012. This was primarily a result of both the economic environment and the new regulations regarding overdraft fees. Fees from electronic banking were $2,459 for the nine months endedSeptember 30, 2013, compared to $2,314 for the same period last year, an increase of $145, or 6.3%.

Gain on the sale of securities was $178, for the nine months endedSeptember 30, 2013, compared to a gain of $46 during the same period one year ago. Due to growth in volume experienced in 2013, the gain on the sale of loans for the nine months ended September 30, 2013 was $1,617, an increase of $701, or 76.5%, from the nine months ended September 30, 2012.

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Noninterest Expense

Table 6: Details on Noninterest Expense

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Dollars in thousands)				(Dollars in thousands)
Salaries and employee benefits	$	4,200	$	4,228	$	13,451	$	12,233
Furniture and equipment	1,076		1,434		3,159		3,704
Net occupancy	564		531		1,701		1,664
Professional fees	337		414		1,413		1,473
Marketing and public relations	300		312		938		954
Supplies, postage and freight	228		275		809		783
Telecommunications	164		191		501		536
Ohio franchise tax	304		304		914		927
FDIC assessments	293		346		773		1,132
Other real estate owned	155		107		280		414
Loan and collection expense	268		394		1,030		1,051
Other expense	412		142		1,235		1,398
Total noninterest expense	$	8,301	$	8,678	$	26,204	$	26,269

Three Months Ended September 30, 2013 versus Three Months Ended September 30, 2012 Noninterest Expense Comparison

Noninterest expense for the third quarter of 2013 decreased $377, or 4.3%, compared to the same period of 2012. The decrease in noninterest expense was mainly attributable to a decrease of $358, or 25.0%, in furniture and equipment, as the Corporation leveraged its new technology and continued to focus on becoming more efficient in all aspects of its business. Additionally, FDIC assessments decreased $53, or 15.3%, and loan collection expense decreased $126, or 32.0%. Before the passage of the Dodd-Frank Act, FDIC insurance premiums were assessed as a percentage of insured deposits in each banking institution. Following the implementation of the Dodd-Frank Act, FDIC insurance premium assessments have been determined based upon the institution's average total assets minus tangible equity, which has resulted in lower assessment rates for the Corporation. Salary and Benefits decreased $28, or 0.7%. Other expense for the third quarter 2013 was $412, an increase of 190.1%, or $270, from $142 for third quarter 2012. During the quarter there was a $40 charge off for debit card fraud originating in China.

Nine Months Ended September 30, 2013 versus Nine Months Ended September 30, 2012 Noninterest Expense Comparison

Noninterest expense was $26,204 for the nine months ended September 30, 2013, a decrease of $65, or 0.2%, compared to $26,269 for the nine months ended September 30, 2012. Salaries and employee benefits increased $1,218, or 10.0%, which included a one-time Supplemental Executive Retirement Plan (SERP) expense of $690 during the first quarter of 2013. The increase in salary and employee benefits was offset by decreases in: other expenses of $163, or 11.7%, FDIC assessments of $359, or 31.7%, furniture and equipment of $545, or 14.7%, and other real estate owned of $134, or 32.4%. Other real estate owned expenses improved year over year as management continued to work diligently to control costs incurred on foreclosed assets.

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Income taxes

Three Months Ended September 30, 2013 versus Three Months Ended September 30, 2012 Income Taxes Comparison

The Corporation recognized income tax expense of $471 and $538 for the third quarter 2013 and 2012, respectively. The decrease in the Corporation’s effective tax rate to 23.7% for September 30, 2013 from 26.0% for September 30, 2012, compared to the Federal statutory tax rate of 34%, is due to lower pre-tax income year over year and the utilization of a new market tax credit that is based on a schedule of eligible qualified investments. Included in net income for the three months ended September 30, 2013 and September 30, 2012 was $499 and $482 of nontaxable income, respectively, comprised of $142 and $136, respectively, related to life insurance policies and $357 and $346, respectively, of tax-exempt investment and loan interest income.

Nine Months Ended September 30, 2013 versus Nine Months Ended September 30, 2012 Income Taxes Comparison

The Corporation recognized income tax expense of $1,349 and $1,443 during the nine months ended September 30, 2013 and 2012, respectively. Included in net income for the nine months ended September 30, 2013 and September 30, 2012 was $1,481 and $1,437, respectively, of nontaxable income, including $416 and $407, respectively, related to life insurance policies, and $1,064 and $1,029, respectively, of tax-exempt investment and loan interest income. The new market tax credit generated by North Coast Community Development Corporation, a wholly-owned subsidiary of the Bank, also had a significant impact on income tax expense and contributed to a lower effective tax rate for the Corporation to 23.2% for the nine months ended September 30, 2013 compared to 24.4% for the nine months ended September 30, 2012.

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Financial Condition

Overview

The Corporation’s total assets at September 30, 2013 were $1,210,502 compared to $1,178,254 at December 31, 2012, an increase of $32,248, or 2.7%. This increase is primarily due to increases in portfolio loans of $8,752, cash and cash equivalents of $16,431 and securities available for sale of $11,527, being offset by a decrease of $5,524 in loans held for sale. Total deposits at September 30, 2013 were $1,032,245 compared to $999,592 at December 31, 2012. The increase in total deposits of $32,653 was due to an increase in time deposits of $18,405 and in savings, money market and interest bearing demand accounts of $14,271.

Securities

The distribution of the Corporation’s securities portfolio at September 30, 2013 and December 31, 2012 is presented in Note 5 to the Consolidated Financial Statements contained within this Form 10-Q. The Corporation continued to employ the securities portfolio to manage the Corporation’s interest rate risk and liquidity needs. Total securities increased $11,527, or 5.7%, compared to December 31, 2012. As of September 30, 2013, the portfolio was comprised of 98% available for sale securities and 2% restricted stock. Available for sale securities were comprised of 31% U.S. Government agencies, 45% U.S. agency mortgage backed securities, 7% U.S. collateralized mortgage obligations, 15% municipal securities and 2% preferred securities at September 30, 2013. The available for sale securities had a net temporary unrealized loss of $4,334, representing 2.0% of the total amortized cost of the Corporation's available for sale securities.

As with any investment, the yield on an available for sale security depends on the purchase price in relation to the interest rate and the length of time the investor's principal remains outstanding. Mortgage-backed security yields are often quoted in relation to yields on treasury securities with maturities closest to the mortgage security's estimated average life. The estimated yield on a mortgage security reflects its estimated average life based on the assumed prepayment rates for the underlying mortgage loans. If actual prepayment rates are faster or slower than anticipated, the investor holding the mortgage security until maturity may realize a different yield. Due to the fluctuating interest rate environment and the flattening of the yield curve, the Corporation focused investment opportunities to short-term duration investments. Primarily due to the decrease in yield, the Corporation sold approximately $2.3 million in mortgage-backed securities in the first quarter 2013 with elevated prepayment risk, for a $178 gain, and re-invested the proceeds in higher earning investment securities.

At September 30, 2013, the available for sale securities portfolio had unrealized gains of $3,004 and unrealized losses of $7,338. The unrealized losses represented 2.0% of the total amortized cost of the Corporation’s available for sale securities at September 30, 2013. At September 30, 2013, the Corporation held four available for sale securities with an unrealized loss position for greater than twelve months totaling $287. Available for sale securities with an unrealized loss position for less than twelve months totaled $7,051 at September 30, 2013. The unrealized gains and losses at December 31, 2012 were $5,330 and $338, respectively. See Note 5 to the Consolidated Financial Statements for further detail.

Loans

The detail of loan balances is presented in Note 6 to the Consolidated Financial Statements contained within this Form 10-Q. Table 7 provides detail by loan segment.

Total portfolio loans at September 30, 2013 were $891,300. This was an increase of $8,752 over December 31, 2012. The Corporation believes that its loan portfolio was well-diversified at September 30, 2013. Commercial and commercial real estate loans represented 54.3%, indirect loans represented 23.2%, home equity loans represented 13.7%, residential real estate mortgage loans represented 7.3% and consumer loans represented 1.5% of total portfolio loans at September 30, 2013.

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Table 7: Loan Portfolio Distribution

	September 30, 2013			December 31, 2012			September 30, 2012
	(Dollars in thousands)
Commercial real estate	$	404,031		$	414,005		$	411,924
Commercial	79,813			68,705			71,922
Residential real estate	65,397			64,983			68,549
Home equity loans	122,285			122,830			125,108
Indirect	206,349			199,924			195,358
Consumer	13,425			12,101			12,854
Total Loans	891,300			882,548			885,715
Allowance for loan losses	(17,791		)	(17,637		)	(17,587		)
Net Loans	$	873,509		$	864,911		$	868,128
Loan Mix Percent
Commercial real estate	45.3		%	46.9		%	46.5		%
Commercial	9.0		%	7.8		%	8.1		%
Residential real estate	7.3		%	7.4		%	7.7		%
Home equity loans	13.7		%	13.9		%	14.1		%
Indirect	23.2		%	22.6		%	22.1		%
Consumer	1.5		%	1.4		%	1.5		%
Total Loans	100.0		%	100.0		%	100.0		%

Commercial loans and commercial real estate loans totaled $483,844 at September 30, 2013. This was an increase of $1,134, or 0.2%, over December 31, 2012 and a slight decrease of $2 from September 30, 2012. Commercial real estate loans are loans secured by commercial real estate properties. Commercial loans are primarily lines-of-credit as well as loans secured by property other than commercial real estate, generally equipment or other business assets.

Real estate mortgages are primarily adjustable 1-4 rate family mortgage loans and construction loans made to individuals. The Corporation generally requires a loan-to-value ratio of 80% or private mortgage insurance for loan-to-value ratios in excess of 80% for real estate mortgages. Construction loans comprised $190 of the $65,397 residential real estate mortgage loan portfolio at September 30, 2013. At September 30, 2013 residential real estate mortgage loans increased by $414, or 0.6%, in comparison to December 31, 2012 and decreased $3,152, or 4.6%, from September 30, 2012. As interest rates have risen year over year, the refinancing market has slowed, contributing to the decrease in loans year over year.

Indirect auto loans increased by $6,425, or 3.2%, compared to December 31, 2012 and increased $10,991, or 5.6%. compared to September 30, 2012. The increase is primarily attributable to loans generated by new dealer representatives in new markets within the states in which the Corporation originated loans. The Corporation currently originates high quality auto loans, defined as credit scores greater than 750, in Ohio, Kentucky, Indiana, Georgia, North Carolina, Pennsylvania, and Tennessee.

Home equity loans decreased $545, or 0.4%, when compared to December 31, 2012 and decreased $2,823, or 2.3%, compared to September 30, 2012. The decreases are primarily due to continued low valuations in the housing market within the Corporation's footprint. Consumer loans are made to borrowers, mainly on secured terms. Due to continued marketing efforts, consumer loans have increased $1,324, or 10.9%, in comparison to December 31, 2012 and increased $571, or 4.4%, compared to September 30, 2012.

Loans held for sale are not included in portfolio loans and as of September 30, 2013 total loans classified as held for sale were $2,110 compared to $3,380 as of September 30, 2012. Residential real estate mortgage loans represented $950, or 45.0%, and indirect loans represented $1,160, or 55.0%, of loans held for sale at September 30, 2013. At September 30, 2012, residential real estate mortgage loans represented $1,416, or 42.0%, and indirect loans represented $1,964, or 58.0%.

Table 8 shows the amount of portfolio loans outstanding as of September 30, 2013 based on the remaining scheduled principal payments or principal amounts repricing in the periods indicated. All loans that, by their terms, are due after one year, but which are subject to more frequent repricing have been classified as due in one year or less for purposes of the table.

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Table 8: Cash Flow and Interest Rate Information for Loans:

	September 30, 2013
Due in one year or less	$	185,633
Due after one year but within five years	452,249
Due after five years	253,418
Totals	$	891,300
Due after one year with a predetermined fixed interest rate	$	550,164
Due after one year with a floating interest rate	155,503
Totals	$	705,667

Provision and Allowance for Loan Losses

The allowance for loan losses is maintained by the Corporation at a level considered by management to be adequate to cover probable credit losses inherent in the loan portfolio. The amount of the provision for loan losses charged to operating expenses is the amount necessary, in the estimation of management, to maintain the allowance for loan losses at an adequate level. Management determines the adequacy of the allowance based upon past experience, changes in portfolio size and mix, relative quality of the loan portfolio and the rate of loan growth, assessments of current and future economic conditions and information about specific borrower situations, including their financial position and collateral values, and other factors, which are subject to change over time. While management’s periodic analysis of the allowance for loan losses may dictate portions of the allowance be allocated to specific problem loans, the entire amount is available for any loan charge-offs that may occur.

As the economy faced significant challenges over the past several years, the Corporation responded by adding additional internal resources at the end of 2009, continuing to utilize outside resources and implementing a process to improve asset quality going forward. This process, which includes executive management, finance, credit, lending and legal, is charged with monitoring problem loans on a regular basis to insure proper grading of the loans, identifying loans as “troubled debt restructured”, adequate allowances and timely resolution of problem credits. In addition, the Corporation's bank subsidiary has a Loan and Credit Review committee which provides board oversight in areas such as underwriting, concentrations, delinquencies, production goals and performance trends.

The Corporation uses a historical loss methodology in determining the level of allowances for various loan segments, it is supplemented by a migration analysis which estimates expected losses similar to the Basel formula for commercial loans based on a history of loans migrating through the various loan grades.

The effect of these initiatives has resulted in an improvement in asset quality as measured by the level of nonperforming loans as well as criticized loans. The use of a historical loss methodology tends to have a lag effect when estimating the adequacy of the allowance as specific reserves related to impaired loans are replaced with general reserves related to the various pools of loans.

While the local economy has shown signs of improvement, it has remained fragile, as has the local real estate market and valuations. With the Corporation's exposure to commercial real estate loans, including construction and development loans, and consumer real estate in the form of home equity loans, management continues to monitor loan performance in light of the past and recent volatility in real estate valuations.

Table 9 presents the Corporation's detailed activity in the allowance for loan losses and related charge-off activity for the three months ended September 30, 2013 and 2012 and the nine months ended September 30, 2013 and 2012.

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Table 9: Analysis of Allowance for Loan Losses

	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
	(Dollars in thousands)						(Dollars in thousands)
Balance at beginning of year	$	17,815		17,300			$	17,637		17,063
Charge-offs:
Commercial real estate	630			738			1,475			2,057
Commercial	—			48			120			213
Residential real estate	35			292			679			1,267
Home equity loans	410			296			1,439			851
Indirect	196			161			555			738
Consumer	83			146			181			252
Total charge-offs	1,354			1,681			4,449			5,378
Recoveries:
Commercial real estate	83			9			584			39
Commercial	2			4			7			24
Residential real estate	178			3			277			86
Home equity loans	5			16			60			31
Indirect	104			54			276			244
Consumer	8			7			49			36
Total Recoveries	380			93			1,253			460
Net Charge-offs	974			1,588			3,196			4,918
Provision for loan losses	950			1,875			3,350			5,442
Balance at end of year	$	17,791		$	17,587		$	17,791		$	17,587
Average Portfolio loans outstanding	$	883,321		$	876,818		$	883,565		$	865,462
Annualized ratio to average loans:
Net Charge-offs	0.44		%	0.72		%	0.48		%	0.76		%
Provision for loan losses	0.43		%	0.85		%	0.51		%	0.84		%
Loans outstanding	$	891,300		$	885,715		$	891,300		$	885,715
As a percent of outstanding loans	2.00		%	1.99		%	2.00		%	1.99		%

The allowance for loan losses at September 30, 2013 was $17,791, or 2.00%, of outstanding loans, compared to $17,587, or 1.99%, of outstanding loans at September 30, 2012. The allowance for loan losses was 71.23% and 53.97% of nonperforming loans at September 30, 2013 and 2012, respectively.

Net charge-offs for the three months ended September 30, 2013 were $974, compared to $1,588 for the three months ended September 30, 2012. Net charge-offs as a percent of average loans was 0.44% for the quarter of 2013 and 0.72% for the same period in 2012. Net charge-offs for the nine months ended September 30, 2013 were $3,196, compared to $4,918 for the nine months ended September 30, 2012. Net charge-offs as a percent of average loans was 0.48% for the nine months ended September 30, 2013 and 0.76% for the same period in 2012. Net charge-offs on commercial and commercial real estate loans were primarily a result of loans that are collateral dependent and deemed uncollectible. As a result, the loans are written down to their net realizable value, which is determined based upon current appraised value less costs to sell.

The provision for loan losses was $950 for the three months ended September 30, 2013, compared to $1,875 for the three months ended September 30, 2012. For the nine months ended September 30, 2013, the provision for loan losses was $3,350, compared to $5,442 for the same period one year ago. Real estate market conditions have resulted in a decline in the valuation of underlying collateral over the past several years, which has impacted the level of charged-off loans in the commercial portfolio. Consumer loans, while somewhat affected by the real estate market, have been largely influenced by the level of

47

unemployment, which has been relatively high over the past two years. Management continues to allocate a portion of the allowance to general reserves for loans having higher risk factors. As specific reserves have been charged-off, the composition of the allowance has continued to shift to a lesser allocation of specific reserves and an increase in general reserves.

The allowance for loan losses is, in the opinion of management, sufficient given its analysis of the information available about the portfolio at September 30, 2013. Management continues to work toward prompt resolution of nonperforming loan situations and to adjust underwriting standards as conditions warrant.

The following table sets forth the allocation of the allowance for loan losses by loan category as of September 30, 2013 and December 31, 2012, as well as the percentage of loans in each category to total loans.  This allocation is based on management's assessment, as of a given point in time, of the risk characteristics of each of the component parts of the total loan portfolio and is subject to changes when the risk factors of each component part change.  The allocation is not indicative of either the specific amounts of the loan categories in which future charge-offs may be taken, nor should it be taken as an indicator of future loss trends.  The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses in any category.

Allocation of the Allowance for Loan Losses by Loan Type

	September 30, 2013				December 31, 2012
	(Dollars in thousands)
	Allowance		Percent of loans in each category to total loans		Allowance		Percent of loans in each category to total loans
Commercial real estate	$	10,462	45.3	%	$	11,386	46.9	%
Commercial	476		9.0	%	835		7.8	%
Residential real estate	1,438		7.3	%	1,559		7.4	%
Home equity loans	3,508		13.7	%	2,357		13.9	%
Indirect	1,611		23.2	%	1,230		22.6	%
Consumer	296		1.5	%	270		1.4	%
Total	$	17,791	100.0	%	$	17,637	100.0	%

The balance in the allowance for loan losses is determined based on management's review and evaluation of the loan portfolio in relation to past loss experience, the size and composition of the portfolio, current economic events and conditions, and other pertinent factors, including management's assumptions as to future delinquencies, recoveries and losses. Increases to the allowance for loan and lease losses are made by charges to the provision for loan losses. Credit exposures deemed to be uncollectible are charged against the allowance for loan losses. Recoveries of previously charged-off amounts are credited to the allowance for loan losses.

Changes in the allowance for loan losses for all categories of the loan portfolio reflect the net effect of changes in historical net loss rates by risk grade for commercial real estate and commercial loans and for the total of other categories, changes in loan balances for each category or by risk grade, the level of nonperforming and other impaired loans, and management’s judgment with respect to economic and other relevant factors. Additional information regarding the allowance for loan losses is included in Note 6 (Loans and Allowance for Loan Losses) in the notes to the consolidated financial statements.

Funding Sources

  The primary source of funds continues to be the generation of deposit accounts within the Corporation's primary markets. In order to achieve deposit account growth, the Corporation offers retail and business customers a full line of deposit products that includes interest and noninterest-bearing checking accounts, savings accounts and time deposits. The Corporation also generates funds through local borrowings generated by a business sweep product. Wholesale funding sources include lines of credit with correspondent banks, advances through the Federal Home Loan Bank of Cincinnati and a secured line of credit with the Federal Reserve Bank of Cleveland. The Corporation from time to time will also utilize brokered time deposits to provide term funding at rates comparable to other wholesale funding sources. Table 10 highlights the average balances and the average rates paid on these sources of funds for the three months ended September 30, 2013 and December 31, 2012.

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The following table shows the various sources of funding for the Corporation.

Table 10: Funding Sources

	Average Balances Outstanding				Average Rates Paid
	For the three months ended
	September 30, 2013		December 31, 2012		September 30, 2013		December 31, 2012
	(Dollars in thousands)
Noninterest-bearing checking	$	139,212	$	137,077	—	%	—	%
Interest-bearing checking	166,568		162,431		0.05	%	0.11	%
Savings deposits	123,328		110,936		0.03	%	0.09	%
Money market accounts	104,443		105,951		0.17	%	0.19	%
Consumer time deposits	432,751		429,928		0.92	%	1.18	%
Public time deposits	69,847		65,188		0.70	%	0.64	%
Total Deposits	$	1,036,149	$	1,011,511	0.53	%	0.59	%
Short-term borrowings	1,735		942		0.05	%	0.07	%
FHLB borrowings	46,636		47,828		1.35	%	1.81	%
Junior subordinated debentures	16,328		16,315		4.15	%	4.28	%
Total borrowings	$	64,699	$	65,085	2.02	%	2.40	%
Total funding	$	1,100,848	$	1,076,596	0.63	%	0.80	%

Average deposit balances increased from $1,011,511 at December 31, 2012 to $1,036,149 at September 30, 2013. Deposit accounts and the generation of deposit accounts continued to be the primary source of funds for the Corporation. The Corporation offers various deposit products to both retail and business customers. The Corporation also has available its business sweep accounts to generate funds as well as the brokered CD market to provide funding comparable to other national market borrowings, which include the Federal Home Loan Bank of Cincinnati and the Federal Reserve Bank of Cleveland. At September 30, 2013 and December 31, 2012, the Corporation had no brokered time deposit balances.

Borrowings

The Corporation utilizes both short-term and long-term borrowings to assist in the growth of earning assets. For the Corporation, short-term borrowings include Federal funds purchased and repurchase agreements. Repurchase agreements increased 47.4%, to $1,643 at September 30, 2013 compared to $1,115 at December 31, 2012. The Corporation did not have any Federal funds purchased at September 30, 2013 or December 31, 2012.

Long-term borrowings by the Corporation consist of Federal Home Loan Bank (FHLB) advances and junior subordinated debentures. FHLB advances, were $46,658 at September 30, 2013 compared to $46,508 at December 31, 2012 while the junior subordinated debentures remained constant at $16,238. In the fourth quarter of 2012, the Corporation prepaid $27,500 of fixed rate FHLB advances with a contractual average interest rate of 2.47% and a weighted average remaining term to maturity of 1.63 years. The transaction was accomplished by extending the maturity date of the advances and rolling the net present value of the advances into the funding cost of the new structure. As a result of the restructure, the Corporation was required to pay a prepayment penalty of $1,017 to the FHLB. In accordance with ASC 470-50, Debt - Modification and Exchanges, the new advances were considered a minor modification. The prepayment penalty was deferred and will be recognized in interest expense over the life of the new advances. Additional information regarding the FHLB advances is included in Note 9 (Federal Home Loan Bank Advances) in the notes to the consolidated financial statements.

During 2007, the Corporation completed a private offering of trust preferred securities. The securities were issued in two $10 million tranches, one of which pays dividends at a fixed rate of 6.64% per annum and the other of which pays dividends at LIBOR plus 1.48% per annum. In August 2010, the Corporation entered into an agreement with certain holders of its non-pooled trust preferred securities and exchanged $2,125 in principal amount of the securities issued by Trust I and $2,125 in principal amount of the securities issued by Trust II for 462,234 newly issued common shares of the Corporation at a volume-weighted average price of $4.41 per share. At September 30, 2013, the balance of the subordinated notes payable to Trust I and Trust II was $8,119 each.

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Capital Management

The Bank is subject to various regulatory capital requirements administered by the Office of the Comptroller of the Currency (“OCC”), including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At September 30, 2013 and December 31, 2012, the Bank exceeded all of its regulatory capital requirements and was considered “well-capitalized” under regulatory guidelines.

	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
September 30, 2013 (Unaudited)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets)	$	118,724	12.65	%	$	75,059	8.0	%	$	93,824	10.0	%
Tier 1 Capital (to Risk Weighted Assets)	106,922		11.40		37,530		4.0		56,294		6.0
Tier 1 Leverage Capital (to Adjusted Total Assets)	106,922		8.95		47,772		4.0		59,715		5.0
	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
December 31, 2012	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk Weighted Assets)	$	114,425	12.47	%	$	73,423	8.0	%	$	91,779	10.0	%
Tier 1 Capital (to Risk Weighted Assets)	102,877		11.21		36,712		4.0		55,067		6.0
Tier 1 Leverage Capital (to Adjusted Total Assets)	102,877		8.79		46,820		4.0		58,525		5.0

Capital Resources

The Corporation continues to maintain a capital position that exceeds regulatory capital requirements. Total shareholders' equity was $107,961 at September 30, 2013 compared to $110,144 at December 31, 2012, a decrease of 2.0%, or $2,183.

On December 12, 2008, the Corporation issued 25,223 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B, $1,000 per share liquidation preference (“Series B Preferred Stock”) to the U.S. Treasury in the TARP Capital Purchase Program for a purchase price of approximately $25,223. In connection with that issuance, the Corporation also issued a warrant to the U.S. Treasury ("Treasury") to purchase 561,343 common shares of the Corporation at an exercise price of $6.74 per share (the “Warrant”).

On June 19, 2012, the Treasury completed the offer and sale of all 25,223 shares of the Series B Preferred Stock to the public in a modified Dutch auction. The Corporation did not bid nor receive any of the proceeds from the offering. On July 18, 2012, the Corporation repurchased the Warrant from the Treasury at a mutually agreed upon price of $860, of which $146 represented the value of the warrant on the Corporation's books and a decrease in equity of $714 was subsequently recognized by the Corporation. Following settlement of the Warrant repurchase, the Treasury had no remaining investment in the Corporation.

On December 24, 2012, the Corporation completed the repurchase of $6.3 million in par value, or approximately 25% of the outstanding shares, of its Series B Preferred Stock in exchange for cash at a price representing a discount to par value. The transaction was funded by cash from accumulated earnings and excess capital. As a result of the discount on the purchase price, the Corporation recognized a net increase to retained earnings of $141.

On March 15, 2013, the Corporation completed the exchange (the “Exchange”) of newly issued common shares, $1.00 par value per share, of the Company (“Common Shares”) for shares of the Company’s Series B Preferred Stock with certain institutional and private investors (the "Sellers"). In the Exchange, the Company issued an aggregate of 1,359,348 Common Shares at a price of $7.16 per share to the Sellers in exchange for an aggregate of 9,733 shares of Series B Preferred Stock at a price of 100% of the per share liquidation preference, or $1,000 per share. The Company also delivered cash to the Sellers in lieu of fractional Common Shares and cash in an amount equal to the accrued and unpaid dividends due on the shares of Series B Preferred Stock. Following the completion of the Exchange, an aggregate of 9,200 shares of the Series B Preferred Stock remain outstanding.

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Under the terms of the Series B Preferred Stock, among other things, for the first five years that the stock is outstanding, the Corporation is required to make quarterly dividend payments on the stock at a rate of 5% per annum, which amounts to approximately $457 annually following the above referenced repurchase of stock by the Corporation. If the Series B Preferred Stock remains outstanding after February 14, 2014 the dividend rate will increase to 9% per annum, or approximately $823 annually following the above referenced repurchase of stock by the Corporation.

The Board of Directors reviews the Corporation’s capital requirements on a regular basis and continues to assess potential alternatives for repurchasing the Corporation’s remaining Series B Preferred Stock. The Corporation intends to repurchase the Series B Preferred Stock at a time and in a manner that it believes is appropriate after considering, among other things, the Corporation’s anticipated capital requirements, projected dividend capacity from the Bank, the availability and relative attractiveness of alternative sources of capital, the Corporation’s risk profile, its earnings performance and asset quality trends, and input from its regulators.

On July 28, 2005, the Corporation announced a share repurchase program of up to 5 percent, or about 332,000, of its common shares outstanding. Repurchased shares can be used for a number of corporate purposes, including the Corporation’s stock option and employee benefit plans. The share repurchase program provides that share repurchases are to be made primarily on the open market from time-to-time until the 5 percent maximum is repurchased or the earlier termination of the repurchase program by the Board of Directors, at the discretion of management based upon market, business, legal and other factors. At September 30, 2013, the Corporation held 328,194 shares of common stock as treasury stock at a cost of $6,092. No shares were acquired under this program in the first nine months of 2013.

Off-Balance Sheet Arrangements

In the normal course of business, the Corporation enters into commitments with off-balance sheet risk to meet the financing needs of its customers. These arrangements include commitments to extend credit and standby letters of credit. Commitments to extend credit and standby letters of credit involve elements of credit risk and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Corporation uses the same credit policies in making commitments to extend credit and standby letters of credit as it does for on-balance sheet instruments.

The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the commitment is represented by the contractual amount of the commitment. Interest rate risk on commitments to extend credit results from the possibility that interest rates may have moved unfavorably from the position of the Corporation since the time the commitment was made.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates of 30 to 120 days or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Most of these arrangements mature within two years and are expected to expire without being drawn upon. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

The Corporation evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained by the Corporation upon extension of credit is based on management’s credit evaluation of the applicant. Collateral held is generally single-family residential real estate and commercial real estate. Substantially all of the obligations to extend credit are variable rate.

The Corporation does not believe that off-balance sheet arrangements will have a material impact on its liquidity or capital resources. See Note 11 to the Consolidated Financial Statements for further detail.

Critical Accounting Policies and Estimates

The Corporation’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The Corporation follows general practices within the banking industry and application of these principles requires management to make assumptions, estimates and judgments that affect the financial statements and accompanying notes. These assumptions, estimates and judgments are based on information available as of the date of the financial statements.

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The most significant accounting policies followed by the Corporation are presented in Note 1 to the Consolidated Financial Statements. These policies are fundamental to the understanding of results of operation and financial conditions.

The accounting policies considered to be critical by management are as follows:

• Allowance for loan losses

The allowance for loan losses is an amount that management believes will be adequate to absorb probable credit losses inherent in the loan portfolio taking into consideration such factors as past loss experience, changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific problem loans and current economic conditions that affect the borrower’s ability to pay. Determination of the allowance is subjective in nature. Loan losses are charged off against the allowance when management believes that the full collectability of the loan is unlikely. Recoveries of amounts previously charged-off are credited to the allowance.

A loan is impaired when based on current information and events it is probable the Corporation will be unable to collect the scheduled payment of principal and interest when due under the contractual terms of the loan agreement. Impairment is evaluated in total for smaller-balance loans of similar nature such as real estate mortgages and installment loans, and on an individual loan basis for commercial loans that are graded substandard or below. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, using either the present value of estimated future cash flows discounted at the loans effective interest rate, the loan's observable market value or at the fair value of collateral if repayment is expected solely from the collateral.

The Corporation maintains the allowance for loan losses at a level adequate to absorb management’s estimate of probable credit losses inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified problem loans and an unallocated allowance representing estimations pursuant to either Statement of Financial Accounting Standards ASC 450,”Accounting for Contingencies,” or ASC 310-10-45, “Accounting by Creditors for Impairment of a Loan.”

The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. For commercial and commercial real estate loans, the Corporation uses historical loss experience along with factors that are considered when loan grades are assigned to individual loans such as current and past delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. For residential real estate, installment and other loans, loss factors are applied on a portfolio basis. Loss factors are based on the Corporation’s historical loss experience and are reviewed for appropriateness on a quarterly basis, along with other factors affecting the collectability of the loan portfolio.

Specific allowances are established for all loans when management has determined that, due to identified significant conditions, it is probable that a loss has been incurred that exceeds the general allowance loss factor from these loans. These conditions are reviewed quarterly by management and include general economic conditions, credit quality trends and internal loan review and regulatory examination findings.

Management believes that it uses the best information available to determine the adequacy of the allowance for loan losses. However, future adjustments to the allowance may be necessary and the results of operations could be significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

• Income Taxes

The Corporation’s income tax expense and related current and deferred tax assets and liabilities are presented as prescribed in ASC 740, “Accounting for Income Taxes”. The accounting requires the periodic review and adjustment of tax assets and liabilities based on many assumptions. These assumptions include predictions as to the Corporation’s future profitability, as well as potential changes in tax laws that could impact the deductibility of certain income and expense items. Since financial results could be significantly different than these estimates, future adjustments may be necessary to tax expense and related balance sheet accounts.

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• Goodwill

During 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. This ASU gives an entity the option to first assess qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount (impairment). If the entity finds after the qualitative assessment that it is more likely than not (impairment indicators) that the fair value of a reporting unit is less than its carrying amount, the entity is then required to perform a full impairment test. The full impairment test is a two-step process that requires management to make judgments in determining what assumptions to use in the calculation. The first step in impairment testing is to estimate the fair value based on valuation techniques including a discounted cash flow model with revenue and profit forecasts and comparing those estimated fair values with the carrying values, which includes the allocated goodwill. If the carrying value exceeds its fair value, goodwill impairment may be indicated and a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of an “implied fair value” of goodwill requires the Corporation to allocate fair value to the assets and liabilities. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value. An impairment loss would be recognized as a charge to earnings to the extent the carrying amount of the goodwill exceeds the implied fair value of the goodwill. Based upon the qualitative assessment the Corporation determined that there is no likelihood of goodwill impairment therefore no impairment charge was recognized as of December 31, 2012. No significant changes since the previous assessment at December 31, 2012 have occurred, thus no additional information to indicate goodwill is impaired has been reviewed.

• New Accounting Pronouncements

Management is not aware of any proposed regulations or current recommendations by the Financial Accounting Standards Board or by regulatory authorities, which, if they were implemented, would have a material effect on the liquidity, capital resources, or operations of the Corporation.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

RISK ELEMENTS

Risk management is an essential aspect in operating a financial services company successfully and effectively. The most prominent risk exposures, for a financial services company, are credit, operational, interest rate, market and liquidity risk. Credit risk involves the risk of uncollectible interest and principal balance on a loan when it is due. Fraud, legal and compliance issues, processing errors, technology and the related disaster recovery and breaches in business continuation and internal controls are types of operational risks. Changes in interest rates affecting net interest income are considered interest rate risks. Market risk is the risk that a financial institution’s earnings and capital or its ability to meet its business objectives are adversely affected by movements in market rates or prices. Such movements include fluctuations in interest rates, foreign exchange rates, equity prices that affect the changes in value of available-for-sale securities, credit spreads and commodity prices. The inability to fund obligations due to investors, borrowers or depositors is liquidity risk. For the Corporation, the dominant risks are market, credit and liquidity risk.

Credit Risk Management

Uniform underwriting criteria, ongoing risk monitoring and review processes, and well-defined, centralized credit policies dictate the management of credit risk for the Corporation. As such, credit risk is managed through the Bank’s allowance for loan loss policy which requires the loan officer, lending officers and the loan review committee to manage loan quality. The Corporation’s credit policies are reviewed and modified on an ongoing basis in order to remain suitable for the management of credit risks within the loan portfolio as conditions change. The Corporation uses a loan rating system to properly classify and assess the credit quality of individual commercial loan transactions. The loan rating system is used to determine the adequacy of the allowance for loan losses for financial reporting purposes and to assist in the determination of the frequency of review for credit exposures.

Most of the Corporation’s business activity is with customers located within the Corporation’s defined market area. As of September 30, 2013 the Corporation had concentrations of credit risk in its loan portfolio for the following loan categories: non-farm, non-residential real estate loans, home equity loans and indirect consumer loans. A concentration is defined as greater than 10% of outstanding loans. The Corporation has no exposure to highly leveraged transactions and no foreign credits in its loan portfolio.

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Nonperforming Assets

Total nonperforming assets consist of nonperforming loans, loans which have been restructured and other foreclosed assets. As such, a loan is considered nonperforming if it is 90 days past due and/or in management’s estimation the collection of interest on the loan is doubtful. Nonperforming loans no longer accrue interest and are accounted for on a cash basis. The classification of restructured loans involves the deterioration of a borrower’s financial ability leading to original terms being favorably modified or either principal or interest being forgiven.

Table 11 sets forth nonperforming assets at September 30, 2013 and December 31, 2012.

Table 11: Nonperforming Assets

	September 30, 2013			December 31, 2012
	(Dollars in thousands)
Commercial real estate	$	13,630		$	16,349
Commercial	355			472
Residential real estate	5,335			5,622
Home equity loans	4,798			4,293
Indirect	486			711
Consumer	373			349
Total nonperforming loans	24,977			27,796
Other foreclosed assets	951			1,366
Total nonperforming assets	$	25,928		$	29,162
Loans 90 days past due accruing interest	$	—		$	184
Total nonperforming loans as a percent of total loans	2.80		%	3.15		%
Total nonperforming assets as a percent of total assets	2.14		%	2.48		%
Allowance for loan losses to nonperforming loans	71.23		%	63.45		%

The Corporation continues to actively manage credit quality and has made progress managing problem loans. Nonperforming loans at September 30, 2013 were $24,977 compared to $27,796 at December 31, 2012, a decrease of $2,820 or 10.1%. Nonperforming commercial real estate loans were $13,630 for September 30, 2013 compared to $16,349 at December 31, 2012. These loans are primarily secured by real estate and, in some cases, by SBA guarantees, and have either been charged-down to their realizable value or a specific reserve has been established for any collateral short-fall. All nonperforming loans are being actively managed and monitored.

Management continues to monitor delinquency and potential problem loans. Bank-wide delinquency at September 30, 2013 was 2.05% of total loans down from 2.89% at December 31, 2012. Additionally, total 30-59 day and 60-89 day delinquencies were 0.39% and 0.13% of total loans at September 30, 2013, compared to 0.61% and 0.32% of total loans at December 31, 2012, respectively.

Other foreclosed assets were $951 as of September 30, 2013, compared to $1,366 at December 31, 2012. The $951 is comprised of three commercial properties totaling $359 and ten residential properties, totaling $592. This compares to six commercial properties totaling $398 and thirteen residential properties, totaling $968 as of December 31, 2012 .

Liquidity

Management of liquidity is a continual process in the banking industry. The liquidity of the Bank reflects its ability to meet loan demand, the possible outflow of deposits and its ability to take advantage of market opportunities made possible by potential rate environments. Assuring adequate liquidity requires the management of the cash flow characteristics of the assets the Bank originates and the availability of alternative funding sources. The Bank monitors liquidity according to limits established in its liquidity policy. The policy establishes minimums for the ratio of cash and cash equivalents to total assets and the loan to deposit ratio. At September 30, 2013, the Bank’s liquidity was within its policy limits.

The Bank maintains borrowing capacity at the Federal Home Loan Bank of Cincinnati, the Federal Reserve Bank of Cleveland and Federal Fund lines with correspondent banks. The Corporation has a $6,000 line of credit through an unaffiliated

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financial institution. The term of the line is one year, with principal due at maturity and is subject to renewal on an annual basis. The interest rate on the line of credit is the unaffiliated financial institution’s prime rate. Liquidity is also provided by unencumbered, or unpledged investment securities that totaled $52,121 at September 30, 2013.

The Corporation is the bank holding company of the Bank and conducts no operations. The Corporation’s primary ongoing needs for liquidity are the payment of the quarterly shareholder dividend if declared and miscellaneous expenses related to the regulatory and reporting requirements of a publicly traded corporation. The holding company’s main source of operating liquidity are the dividends that it receives from the Bank. Dividends from the Bank are subject to restrictions by banking regulators. The holding company from time-to-time has access to additional sources of liquidity through correspondent lines of credit as of September 30, 2013.

Market Risk Management

The Corporation manages market risk through its Asset/Liability Management Committee (“ALCO”) at the Bank level governed by policies set forth and established by the Board of Directors. This committee assesses interest rate risk exposure through two primary measures: rate sensitive assets divided by rate sensitive liabilities and earnings-at-risk simulation of net interest income over the one year planning cycle and the longer term strategic horizon in order to provide a stable and steadily increasing flow of net interest income.

The difference between a financial institution’s interest rate sensitive assets and interest rate sensitive liabilities is referred to as the interest rate gap. An institution that has more interest rate sensitive assets than interest rate sensitive liabilities in a given period is said to be asset sensitive or has a positive gap. This means that if interest rates rise a corporation’s net interest income may rise and if interest rates fall its net interest income may decline. If interest sensitive liabilities exceed interest sensitive assets then the opposite impact on net interest income may occur. The usefulness of the gap measure is limited. It is important to know the gross dollars of assets and liabilities that may re-price in various time horizons, but without knowing the frequency and basis of the potential rate changes the predictive power of the gap measure is limited.

Two more useful tools in managing market risk are earnings-at-risk simulation and economic value of equity simulation. An earnings-at-risk analysis is a modeling approach that combines the repricing information from gap analysis, with forecasts of balance sheet growth and changes in future interest rates. The result of this simulation provides management with a range of possible net interest margin outcomes. Trends that are identified in earnings-at-risk simulation can help identify product and pricing decisions that can be made currently to assure stable net interest income performance in the future. At September 30, 2013, a “shock” treatment of the balance sheet, in which a parallel shift in the yield curve occurs and all rates increase immediately, indicates that in a +200 basis point shock, net interest income would decrease $115 or 0.3%, and in a -200 basis point shock, net interest income would decrease $2,260, or 5.9%. The reason for the lack of symmetry in these results is the implied floors in many of the Corporation’s core funding which limits their downward adjustment from current offering rates. This analysis is done to describe a best or worst case scenario. Factors such as non-parallel yield curve shifts, management pricing changes, customer preferences and other factors are likely to produce different results.

The economic value of equity approach measures the change in the value of the Corporation’s equity as the value of assets and liabilities on the balance sheet change with interest rates. At September 30, 2013, this analysis indicated that a +200 basis point change in rates would reduce the value of the Corporation’s equity by 20.5% while a -200 basis point change in rates would increase the value of the Corporation’s equity by 14.9%.

Item 4. Controls and Procedures

The Corporation’s Management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of September 30, 2013, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Securities Exchange Act of 1934.

Based upon that evaluation, the Chief Executive Officer along with the Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures as of September 30, 2013 were: (1) designed to ensure that material information relating to the Corporation and its subsidiaries is made known to the Chief Executive Officer and Chief Financial Officer by others within the entities, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by the Corporation in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. No change in the Corporation’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

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Part II Other Information

Item 1. Legal Proceedings

On April 18, 2008, the Corporation and Richard M. Osborne and certain other parties entered into a settlement agreement (the “Settlement Agreement”) to settle certain contested matters relating to the Corporation's 2008 annual meeting of shareholders. Under the Settlement Agreement, among other things, Mr. Osborne agreed not to seek representation on the Corporation's Board of Directors or to solicit proxies with respect to the voting of the Corporation's common shares for a period of at least 18 months after April 18, 2008. In proxy materials filed with the SEC on March 20, 2009, Mr. Osborne indicated his intent to solicit proxies in favor of the election of two nominees for election as directors at the Corporation's 2009 annual meeting of shareholders. On March 24, 2009, the Corporation filed a complaint against Mr. Osborne for a declaratory judgment and preliminary and permanent injunctive relief in the United States District Court for the Northern District of Ohio, Eastern Division, to enforce the “standstill” provisions of the Settlement Agreement and restrain Mr. Osborne from (a) engaging in any solicitation of proxies or consents, (b) seeking to advise, encourage or influence any person or entity with respect to the voting of any voting securities of the Corporation, (c) initiating, proposing or otherwise soliciting shareholders of the Corporation for the approval of shareholder proposals, (d) entering into any discussions, negotiations, agreements, arrangements or understanding with any third party with respect to any of the foregoing and (e) disseminating his proposed proxy materials to shareholders of the Corporation. The Corporation also sought an order from the Court temporarily restraining Mr. Osborne from engaging in any of the foregoing activities. On March 28, 2009, the Court issued an order granting the Corporation's motion for a temporary restraining order. On April 3, 2009, the Court issued an order granting the Corporation's motion for a preliminary injunction restraining Mr. Osborne from engaging in any of the foregoing activities. On February 15, 2010, Mr. Osborne filed a motion to dissolve the preliminary injunction, which the Corporation opposed. On March 23, 2010, the Court denied Mr. Osborne's motion to dissolve the preliminary injunction. Prior to the Court's decision, on March 19, 2010, Mr. Osborne filed a motion for summary judgment and the Corporation filed a motion for partial summary judgment. On April 14, 2010, Mr. Osborne filed an interlocutory appeal of the denial of his motion to dissolve the preliminary injunction with the Sixth Circuit Court of Appeals. Proceedings in the District Court were stayed pending resolution of Mr. Osborne's appeal by the Sixth Circuit Court of Appeals. On July 25, 2011, the Sixth Circuit affirmed the decision of the District Court. The case was remanded to the District Court, and, on November 30, 2011, the Court granted the Corporation's motion for partial summary judgment, ruling that Mr. Osborne must refrain from engaging in any of the conduct specified in the “standstill” provisions of the Settlement Agreement until such time as both of the directors designated by Mr. Osborne pursuant to the Settlement Agreement no longer serve on the Corporation's Board of Directors. With respect to the remaining claims, the Court scheduled the commencement of a trial on the merits for March 13, 2012. In the meantime, Osborne appealed the District Court's decision granting a permanent injunction to the Sixth Circuit. On May 21, 2013, the Sixth Circuit affirmed the District's decision. On August 28, 2013, the Corporation and Mr. Osborne entered into a settlement agreement pursuant to which they agreed to settle and release the remaining claims pending before the District Court. Under the agreement, the parties acknowledged that the agreement does not affect the District Court’s order of permanent injunctive relief in favor of the Corporation and agreed that the original Settlement Agreement remains in full force and effect. Furthermore, Mr. Osborne agreed that he will not undertake any efforts to challenge the validity or duration of the “standstill” obligations in the original Settlement Agreement for so long as Daniel Merkel or Thomas Perciak continue to serve on the Corporation’s Board of Directors, and agreed to a general release of claims in favor of the Corporation. The District Court approved the agreement and ordered the case dismissed on September 3, 2013.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

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

On July 28, 2005, the Corporation announced a share repurchase program of up to 5 percent, or about 332,000, of its common shares outstanding. Repurchased shares can be used for a number of corporate purposes, including the Corporation’s stock option and employee benefit plans. The share repurchase program provides that share repurchases are to be made primarily on the open market from time-to-time until the 5 percent maximum is repurchased or the earlier termination of the repurchase program by the Board of Directors, at the discretion of Management based upon market, business, legal and other factors. Under the terms of the Series B Preferred Stock issued by the Corporation in December 2008, as long as the Series B Preferred Stock is outstanding, repurchases or redemptions relating to certain equity securities, including the Corporation’s common shares, are prohibited to the extent that there are any accrued and unpaid dividends on such preferred stock, subject to certain limited exceptions. As of June 30, 2013, the Corporation had repurchased an aggregate of 202,500 shares under this program. The Corporation did not repurchase any shares under this program during the third quarter 2013.

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Item 6. Exhibits

(a) The exhibits to this Form 10-Q are referenced in the Exhibit Index attached hereto.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	LNB BANCORP, INC.
	(Registrant)
Date: October 30, 2013	By:	/s/ Gary J. Elek
		Gary J. Elek
		Executive Vice President and Chief Financial Officer
		(Duly Authorized Officer, and Principal Accounting and Financial Officer)

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Exhibit Index

Exhibit No.	Exhibit
10.1	Form of Change in Control Supplemental Executive Compensation Agreement.
31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a)/15-d-14(a).
31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a)/15-d-14(a).
32.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Enacted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Enacted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Financial statements from the quarterly report on Form 10-Q of LNB Bancorp, Inc. for the quarter ended September 30, 2013, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at September 30, 2013 (unaudited) and December 31, 2012; (ii) Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2013 and 2012; (iii) Consolidated Statements of Shareholders' Equity (unaudited) for the nine months ended September 30, 2013 and 2012; (iv) Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2013 and 2012; and (v) Notes to the Unaudited Consolidated Financial Statements.

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EX-10.1

CHANGE IN CONTROL

SUPPLEMENTAL EXECUTIVE COMPENSATION AGREEMENT

This Agreement, effective as of the ____ day of ________, 2013, by and between LNB Bancorp, Inc., an Ohio corporation (the "Company"), and _____ ("Executive"), is to EVIDENCE THAT:

WHEREAS the Company considers the establishment and maintenance of a sound and vital management team for the Company and its Subsidiaries (as defined in Section 1) to be essential to protecting and enhancing the best interests of the Company and its shareholders; and

WHEREAS the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders; and

WHEREAS the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to secure Executive's continued services for the Company and/or its Subsidiaries and to ensure Executive's continued and undivided dedication to Executive's duties in the event of any occurrence of a Change in Control (as defined in Section 1) involving the Company; and

WHEREAS Executive and the Company acknowledge that the terms and conditions of this Agreement shall apply only if a Change in Control occurs, except for the covenants contained in Section 11 which shall apply in all circumstances; and

WHEREAS Executive further acknowledges and agrees that this Agreement does not alter Executive's status as an "employee at will" with the Company;

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company and Executive (collectively, the "Parties" and, individually, a "Party") hereby agree as follows:

1.    Definitions. As used in this Agreement, the following terms shall have the respective meanings set forth below:

(a) "Bonus Amount" means the highest annual incentive bonus earned by Executive from the Company (or its Subsidiaries) during the last three (3) completed fiscal years of the Company immediately preceding Executive’s Date of Termination.

(b) "Cause" means any one or more of the following: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company or its Subsidiaries (other than any such failure resulting from Executive's Disability or any such failure subsequent to Executive being delivered a Notice of Termination without Cause by the Company or its Subsidiaries or after Executive delivering a Notice of Termination for Good Reason to the Company or its Subsidiaries) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive's duties and provides Executive with ten (10) business days to correct such failure; or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is injurious to the Company or its

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Subsidiaries; or (iii) the conviction of Executive of, or a plea by Executive of nolo contendere to, a felony; or (iv) Executive's breach of or failure to perform any of the non-competition and non-disclosure covenants contained in Section 11 of this Agreement or contained in any other document signed by Executive and by the Company (or any Subsidiary). For purposes of this paragraph (b), no act or failure to act by Executive shall be considered "willful" unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive's action or omission was in the best interests of the Company and its Subsidiaries. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company, or based upon the instructions of the Company's chief executive officer or another senior officer of the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company and its Subsidiaries.

(c) "Change in Control" means the occurrence of any one of the following events:

(i) if individuals who, on the date of this Agreement, constitute the Board (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board; provided, however, that: (A) any person becoming a director subsequent to the date of this Agreement, whose election or nomination for election was approved by a vote of at least two-thirds (2/3) of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection by such Incumbent Directors to such nomination), shall be deemed to be an Incumbent Director; and (B) no individual elected or nominated as a director of the Company initially as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

(ii) if any "person" (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the combined voting power of the Company's then-outstanding securities eligible to vote for the election of the Board (the "Company Voting Securities"); provided, however, that the events described in this clause (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary; (B) by any employee benefit plan sponsored or maintained by the Company or any Subsidiary or by any employee stock benefit trust created by the Company or any Subsidiary; (C) by any underwriter temporarily holding securities pursuant to an offering of such securities; (D) pursuant to a Non-Qualifying Transaction (as defined in clause (iii) of this paragraph (c), below); (E) pursuant to any acquisition by Executive or by any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive); or (F) a transaction

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(other than one described in clause (iii) of this paragraph (c), below) in which Company Voting Securities are acquired from the Company, if a majority of the Incumbent Directors approves a resolution providing expressly that the acquisition pursuant to this subparagraph (F) does not constitute a Change in Control under this clause (ii);

(iii) upon the consummation of a merger, consolidation, share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company's shareholders, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination: (A) more than fifty percent (50%) of the total voting power of either (1) the corporation resulting from the consummation of such Business Combination (the "Surviving Corporation") or, if applicable, (2) the ultimate parent corporation that directly or indirectly has beneficial ownership of one hundred percent (100%) of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation") is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination; (B) no person (other than any employee benefit plan sponsored or maintained by the Surviving Corporation or the Parent Corporation or any employee stock benefit trust created by the Surviving Corporation or the Parent Corporation) is or becomes the beneficial owner, directly or indirectly, of thirty percent (30%) or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation); and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were Incumbent Directors at the time of the Board's approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or

(iv) upon liquidation or dissolution of the Company or consummation of the sale of all or substantially all of the Company's assets but only if, pursuant to such liquidation or sale, the assets of the Company are transferred to an entity not owned (directly or indirectly) by the Company's shareholders.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than thirty percent (30%) of Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided, however, that if (after such acquisition by the Company) such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities

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beneficially owned by such person, a Change in Control shall then occur. Notwithstanding anything in this Agreement to the contrary, if (A) Executive's employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control, (B) Executive reasonably demonstrates that such termination (or event constituting Good Reason) was at the request of a third party who had indicated an intention or taken steps reasonably calculated to effect a Change in Control, and (C) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then (for purposes of this Agreement) the date immediately prior to the date of such termination of employment (or event constituting Good Reason) shall be treated as a Change in Control.

(d) "Date of Termination" means (1) the effective date on which Executive's employment by the Company and its Subsidiaries terminates as specified in a prior written notice by the Company, a Subsidiary or Executive (as the case may be) to the other, delivered pursuant to Section 9, or (2) if Executive's employment by the Company terminates by reason of death, the date of death of Executive, or (3) if the Executive incurs a Disability, the date of such Disability as determined by a physician chosen by the Company. For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive's Date of Termination.

(e) "Disability" means Executive's inability to perform Executive's then-existing duties with the Company or its Subsidiaries on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive's incapacity due to physical or mental illness.

(f) "Good Reason" means, without Executive's express written consent, the occurrence of any of the following events after a Change in Control:

(i) (A) any change in the duties or responsibilities (including reporting responsibilities) of Executive that is inconsistent in any material and adverse respect with Executive's positions, duties, responsibilities or status with the Company or its Subsidiaries immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities), or (B) a material and adverse change in Executive's titles or offices (including, if applicable, membership on the Board) with the Company or its Subsidiaries as existing immediately prior to such Change in Control;

(ii) (A) a reduction by the Company or its Subsidiaries in Executive's rate of annual base salary as in effect immediately prior to such Change in Control (or as such annual base salary may be increased from time to time thereafter), or (B) the failure by the Company or its Subsidiaries to pay Executive an annual bonus (if any) in respect of the year in which such Change in Control occurs;

(iii) any requirement of the Company or its Subsidiaries that Executive: (A) be based anywhere more than fifty (50) miles from the Executive's residence at the time of the Change in Control, or (B) travel on Company or Subsidiary

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business to an extent substantially greater than the travel obligations of Executive immediately prior to such Change in Control;

(iv) the failure of the Company or its Subsidiaries to continue in effect any material employee benefit plan, compensation plan, welfare benefit plan or other material fringe benefit plan in which Executive is participating immediately prior to such Change in Control or the taking of any action by the Company or its Subsidiaries which would materially and adversely affect Executive's participation in or reduce Executive's benefits under any such plan, unless Executive is permitted to participate in other plans providing Executive with substantially equivalent benefits in the aggregate; or

(v) the failure of the Company to obtain the assumption (and, if applicable, guarantee) agreement from any successor (and Parent Corporation) as contemplated in Section 8(b).

Notwithstanding any contrary provision in this Agreement: (A) an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason; and (B) Executive's right to terminate employment for Good Reason shall not be affected by Executive's Disability; and (C) Executive's continued employment shall not constitute a consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason (provided, however, that Executive must provide notice of termination of employment within thirty (30) days following Executive's knowledge of an event constituting Good Reason or such event shall not constitute Good Reason under this Agreement).

(g) “Highest Base Salary” means Executive’s highest annual base salary (excluding any bonuses) paid to Executive by the Company and by any Subsidiary during the Company’s last three (3) fiscal years completed immediately prior to the Date of Termination.

(h) "Qualifying Termination" means a termination of Executive's employment after a Change in Control and during the Termination Period (as defined herein) (i) by the Company or its Subsidiaries other than for Cause, or (ii) by Executive for Good Reason. Termination of Executive's employment on account of death or Disability shall not constitute a Qualifying Termination.

(i) "Retirement" means the termination of Executive's employment with the Company and its Subsidiaries: (A) on or after the first of the month coincident with or next following Executive's attainment of age sixty-five (65), or (B) on such later date as may be provided in a written agreement between the Company or its Subsidiaries and Executive.

(j) "Subsidiary" means any corporation or other entity in which the Company: (A) has a direct or indirect ownership interest of fifty percent (50%) or more of the total combined voting power of the then-outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors, or

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(B) has the right to receive fifty percent (50%) or more of the distribution of profits or fifty percent (50%) of the assets upon liquidation or dissolution.

(k) "Termination Period" means the two (2) year period beginning with a Change in Control and ending two (2) years following such Change in Control.

2.    Obligation of Executive. In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees (as a condition to receiving any payments and benefits hereunder) not to voluntarily leave the employ of the Company (other than as a result of Disability, Retirement or an event which would constitute Good Reason if a Change in Control had occurred) until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.

3.    Term of Agreement. The term of this Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given two (2) years' written notice of cancellation; provided, however, that (notwithstanding the delivery of any such notice) the term of this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement. Notwithstanding anything in this Agreement to the contrary, the term of this Agreement shall terminate if Executive or the Company terminates Executive's employment prior to a Change in Control.

4.    Benefits Upon Qualifying Termination of Employment.

(a) Qualifying Termination — Cash Payment. If, during the Termination Period, Executive's employment with the Company and its Subsidiaries terminates pursuant to a Qualifying Termination, then the Company shall pay to Executive, within twenty (20) days following the Date of Termination, a lump sum cash amount equal to the sum of (i) one hundred twenty-five percent (125%) of Executive's Highest Base Salary, as defined in Section 1(g), through the Date of Termination and any base salary and bonuses which have been earned and are payable, to the extent not theretofore paid or deferred, plus (ii) one hundred twenty-five percent (125%) of Executive's Bonus Amount.

(b) Qualifying Termination ― Continued Coverage. If, during the Termination Period, Executive's employment with the Company and its Subsidiaries terminates pursuant to a Qualifying Termination, the Company shall continue to provide, for a period of fifteen (15) months following the Date of Termination, Executive (and Executive's dependents, if applicable) with the same level of medical insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive's Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); provided, however, that if Executive is not eligible to continue to participate in the Company plan providing such benefits, the Company shall otherwise provide such benefits on the same after-tax basis as if continued participation had been permitted. Notwithstanding the foregoing, in the event Executive becomes re-employed with another employer and becomes eligible to receive medical insurance benefits from such employer, the medical insurance benefits described herein shall be secondary to such benefits during the period of such eligibility but only if (and to the extent

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that) the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder. Executive's accrued benefits as of the Date of Termination under the Company's medical insurance plan shall be payable in accordance with the terms of such plan.

Notwithstanding any contrary provision set forth in this Agreement, Company's payments to Executive shall be reduced to the extent that such payments (together with all other payments by Company to Executive under all other written or verbal agreements between Company and Executive) constitute an "excess parachute payment" under Section 280G of the Internal Revenue Code (as may be periodically amended).

5.    Withholding Taxes. The Company shall withhold from all payments due to Executive hereunder all taxes which, by applicable Federal, State, local or other law, the Company is required to withhold therefrom.

6.    Reimbursement of Expenses. If any contest or dispute shall arise under this Agreement involving the alleged failure or refusal of the Company or any of its Subsidiaries to perform fully in accordance with the terms hereof, the Company shall reimburse Executive for all reasonable legal fees and expenses, if any, incurred by Executive with respect to such contest or dispute, together with interest in an amount equal to the prime rate of Lorain National Bank from time to time in effect (but in no event higher than the legal rate permissible under applicable law), such interest to accrue from the date the Company becomes obligated to pay such fees and expenses through the date of payment thereof; provided, however, that this Section 6 shall apply only if (and to the extent that) the Company is held to have breached or violated its duties and obligations hereunder to Executive.

7.    Scope of Agreement. Executive acknowledges that Executive is employed by the Company as an "employee at will" and that nothing in this Agreement shall be deemed to change Executive's status as an employee at will or to entitle Executive to continued employment with the Company or its Subsidiaries. If Executive's employment with the Company and its Subsidiaries terminates prior to a Change in Control or the term of this Agreement expires, Executive shall have no further rights under this Agreement (except as otherwise expressly provided hereunder).

8.    Successors; Binding Agreement.

(a) This Agreement shall not be terminated by any Business Combination. In the event of any Business Combination, the provisions of this Agreement shall be binding upon the Surviving Corporation, and such Surviving Corporation shall be treated as the Company hereunder.

(b) The Company agrees that, in connection with any Business Combination, Company will cause any successor entity to the Company unconditionally to assume (and, for any Parent Corporation in such Business Combination, to guarantee), by written instrument delivered to Executive (or Executive's beneficiaries or estate), all of the obligations of the Company hereunder. Failure of the Company to obtain such assumption or guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control shall be a breach of this Agreement and shall constitute Good Reason hereunder and, further, shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled hereunder as if Executive's employment were

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terminated following a Change in Control by reason of a Qualifying Termination. For purposes of implementing this Section 8(b), the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs and shall be the Date of Termination, if so requested by Executive.

(c) This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive dies while any amounts would be payable to Executive hereunder if Executive had continued to live, all such amounts (unless otherwise provided herein) shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive's estate.

9.    Notice.

(a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been properly given when delivered or three (3) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows (or to such other address as either Party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt):

― If to the Executive, at the address set forth below in the signatory provision below; and

― If to the Company:

LNB Bancorp, Inc.

457 Broadway

Lorain, OH 44052

Attn: President

(b) A written notice of Executive's Date of Termination by the Company or Executive, as the case may be, to the other Party shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated, and (iii) specify the Date of Termination, which date shall be not less than fifteen (15) days (thirty (30) days, if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice. The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of either Party or preclude either Party from asserting such fact or circumstance in enforcing such Party's rights hereunder.

10.    Full Settlement; Resolution of Disputes. The Company's obligation to make payment under this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to Executive (payable because of a Change in Control) under any other

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severance or employment agreement between Executive and the Company and its Subsidiaries (if any) and under any severance plan of the Company and its Subsidiaries (if any). In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and, except as provided in Section 4, such amounts shall not be reduced whether or not Executive obtains other employment. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Lorain County, Ohio, by three arbitrators in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators' award in any State court having jurisdiction in Lorain County, Ohio. Except as otherwise provided in Section 6, each Party shall pay such Party's costs and expenses incurred in connection with any arbitration proceeding pursuant to this Section and the Parties shall each pay fifty percent (50%) of the costs of the arbitration proceedings.

11.    Executive's Non-Disclosure and Non-Solicitation Promises.

11.1    Definitions. For purposes of this Section 11, the Parties agree to and understand the following definitions:

(a) "Competitive Activity" means the performance or rendering of any banking services; trust services and investment services; portfolio management; retirement planning; administration of employee benefit plans; administration of decedents' estates and court-supervised accounts, guardianships, and custodial arrangements; personal tax and estate tax planning; financial consulting services; investment advising services; and any other business activity, service or product which competes with any existing or future business activity, service or product of the Company.

(b) "Confidential Information" means all of the following (whether written or verbal) pertaining to the Company: (i) trade secrets (as defined by Ohio law); customer lists, records and other information regarding the Company's customers (whether or not evidenced in writing); customer fee or price schedules and fee or price policies; financial books, plans, records, ledgers and information; business development plans; sales and marketing plans; research and development plans; employment and personnel manuals, records, data and policies; business manuals, methods and operations; business forms, correspondence, memoranda and other records; computer records and related data; and any other confidential or proprietary data and information of the Company or its customers which Executive encounters during the Employment Term; and (ii) all products, technology, ideas, inventions, discoveries, developments, devices, processes, business notes, forms and documents, business products, computer programs, and other creations (and improvements of any of the foregoing), whether patentable or copyrightable, which Executive has acquired, developed, conceived or made (whether directly or indirectly, whether solicited or unsolicited, or whether during normal work hours or during off-time) during the Employment Term and which relate to any business activity of the Company or are derived from the Confidential Information designated in Subitem (i) of this Section 11.1(b).

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(c) "Customer" means a person, sole proprietorship, partnership, association, organization, corporation, limited liability company, or other entity (governmental or otherwise), wherever located: (i) to or for which the Company sells any products or renders or performs services either during the 180-day period immediately preceding commencement of the Restricted Period or during the Restricted Period, or (ii) which the Company solicits or (as demonstrated by plans, strategies or other tangible preparation) intends to solicit to purchase products or services from the Company either during the 180-day period immediately preceding commencement of the Restricted Period or during the Restricted Period.

(d) "Employment Term" means, for purposes of this Section 11, the period of time starting on the date Executive's employment with the Company commenced and terminating at the close of business on the date Executive's employment with the Company terminates.

(e) "Restricted Period" means a period of two (2) years (or, if shorter, the duration of the Employment Term) commencing on the date the Employment Term is terminated by either Party (for any reason, with or without cause); provided, however, that such period shall be extended to include any period of time during which Executive engages in any activity constituting a breach of this Agreement and any period of time during which litigation transpires wherein Executive is held to have breached this Agreement.

(f) "Company" means, for purposes of this Section 11, LNB Bancorp, Inc. and The Lorain National Bank (a national bank association), all direct and indirect parent and subsidiary entities thereof, and all entities related to LNB Bancorp, Inc., The Lorain National Bank or to such parent and subsidiary entities by common ownership.

11.2    Executive's Promises. Expressly in consideration for the Company's promises made in this Agreement, Executive promises and agrees that:

(a) Confidentiality. The Confidential Information is and, at all times, shall remain the exclusive property of the Company, and Executive (i) shall hold the Confidential Information in strictest confidence and in a position of trust for the Company, and (ii) except as may be necessary to perform Executive's employment duties with the Company, shall not (directly or indirectly) use for any purpose, copy, duplicate, disclose, convey to any third-party or convert any Confidential Information, either during the Employment Term or at any time following termination of the Employment Term (by either Party, for any reason, with or without cause), and (iii) upon the request of the Company at any time during or after the Employment Term, shall immediately deliver to the Company all the Confidential Information in Executive's possession and shall neither convey to any third-party nor retain any copies or duplicates thereof.

- 10 -    

(b) Customers. During the Restricted Period, Executive (or any entity owned or controlled by Executive) shall not directly or indirectly (i) solicit from or perform for any Customer a Competitive Activity, wherever such Customer is located, or (ii) influence (or attempt to influence) any Customer to transfer such Customer's patronage or business from the Company, or (iii) otherwise interfere with any business relationship of the Company with any Customer.

(c) Employees. During the Restricted Period, Executive (or any entity owned or controlled by Executive) shall not directly or indirectly (i) employ, engage, contract for the services of, or solicit or otherwise induce the services of any person who, during the one hundred eighty (180) day period immediately preceding commencement of the Restricted Period or during the Restricted Period, is or was an employee of the Company, or (ii) otherwise interfere with (or attempt to interfere with) any employment relationship of the Company with any employee of the Company.

(d) Other Employment. During the Employment Term, Executive shall not perform services (whether or not for compensation) as an employee, independent contractor, consultant, representative or agent of any person, sole proprietorship, partnership, limited liability company, corporation, association (other than the Company), organization, or other entity (governmental or otherwise) without the prior written consent of the President of the Company (or any person expressly designated by the President).

(e) Costs of Enforcement. Executive shall pay all reasonable legal fees, court costs, expert fees, investigation costs, and other expenses incurred by the Company in the enforcement of this Section 11.

11.3    Importance of Executive's Promises. Executive understands and agrees that:

(a) during the Employment Term, Executive will materially assist the Company in the generation, development or enhancement of certain Confidential Information and certain other business assets and activities for Company; and

(b) Executive's promises in this Section 11: (1) were negotiated at arm's-length and with ample time for Executive to seek the advice of legal counsel, (2) are required for the fair and reasonable protection of the Company and the Confidential Information, and (3) do not constitute an unreasonable hardship to Executive in working for the Company or in subsequently earning a livelihood in Executive's field of expertise; and

(c) if Executive breaches (or threatens to breach) any or all of the promises in this Section 11: the secrecy and thereby the value of the Confidential Information will be significantly jeopardized; the Company will be subject to the immediate risk of material, immeasurable, and irreparable damage and harm; the remedies at law for Executive's breach shall be inadequate;

- 11 -    

the Company shall therefore be entitled to injunctive relief against Executive in addition to any and all other legal or equitable remedies; and

(d) if Executive had not agreed to the restrictive promises in this Agreement, the Company would not have signed this Agreement.

11.4    Extent and Continuation of Executive's Promises. Executive's promises, duties and obligations made in this Section 11 shall apply to Executive irrespective of whether a Change in Control occurs and shall survive the voluntary or involuntary cessation or termination of the Employment Term by either Party (for any reason, with or without cause). If any of the restrictions contained in this Section 11 are ever judicially held to exceed the limitations permitted by law, then such restrictions shall be deemed to be reformed to comply with the maximum limitations permitted by law. The existence of any claim or cause of action by Executive against the Company (whether or not derived from or based upon Executive's employment with the Company) shall not constitute a defense to the Company's enforcement of any covenant, duty or obligation of Executive in this Section 11.

12.    Employment with Subsidiaries. For purposes of this Agreement, any and all references to Executive's employment with the Company shall be deemed to include Executive's employment by any Subsidiary and, with respect to such employment by a Subsidiary, the term "Company" as used in this Agreement shall be deemed to include any Subsidiary which employs Executive.

13.    Survival. The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of the termination of employment that occurs during the Termination Period), 5, 6, 8, 10 and 11 shall survive the termination of this Agreement and the term of this Agreement.

14.Governing Law; Validity. The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Ohio without regard to the principle of conflicts of laws. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which other provisions shall remain in full force and effect. The Parties hereby agree that exclusive venue for all litigation arising hereunder lies solely with the State Courts of Lorain County, Ohio and each Party hereby submits and agrees to the personal jurisdiction of such Lorain County State Courts.

15.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

16.    Miscellaneous. No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company. No waiver by either Party (at any time) of any breach by the other Party of, or compliance with, any condition or provision of this Agreement to be performed by such other Party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. Except as otherwise expressly set forth in this Agreement, the failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

- 12 -    

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.

LNB Bancorp, Inc.
By:
	Daniel E. Klimas, President
	~ Company ~
	[Name]
	Address
	City, State
	~ Executive ~

- 13 -    

Schedule of Executives Entering Into Change in Control Agreements

Mary E. Miles

Frank A. Soltis

Robert F. Heinrich

Peter R. Catanese

John D. Simacek

Kevin W. Nelson

- 14 -    

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A)/15D-14(A)

I, Daniel E. Klimas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 of LNB Bancorp, Inc.;

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

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

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

Date: October 30, 2013	/s/ Daniel E. Klimas
	Daniel E. Klimas
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13A-14(A)/15D-14(A)

I, Gary J. Elek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 of LNB Bancorp, Inc.;

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

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

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

Date: October 30, 2013	/s/ Gary J. Elek
	Gary J. Elek
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

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 on Form 10-Q of LNB Bancorp, Inc. (the “Corporation”) for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel E. Klimas, President and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

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

(ii)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation as of, and for, the periods presented in the report.

/s/ Daniel E. Klimas    

Daniel E. Klimas

President and Chief Executive Officer

October 30, 2013

EX-32.2

Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

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 on Form 10-Q of LNB Bancorp, Inc. (the “Corporation”) for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary J. Elek, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

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

(ii)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation as of, and for, the periods presented in the report.

/s/ Gary J. Elek    

Gary J. Elek

Executive Vice President and Chief Financial Officer

October 30, 2013

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Trust Preferred Securities

9 Months Ended

Sep. 30, 2013

Disclosure Trust Preferred Securities Additional Information [Abstract]

Trust Preferred Securities

Trust Preferred Securities

In May 2007, LNB Trust I (“Trust I”) and LNB Trust II (“Trust II”) each sold $10.0 million of preferred securities to outside investors and invested the proceeds in junior subordinated debentures issued by the Corporation. The Corporation’s obligations under the transaction documents, taken together, have the effect of providing a full guarantee by the Corporation, on a subordinated basis, of the payment obligation of the Trusts. The subordinated notes mature in 2037. Trust I bears a floating interest rate (current three-month LIBOR plus 148 basis points). Trust II bears a fixed rate of 6.64% through June 15, 2017, and then becomes a floating interest rate (current three-month LIBOR plus 148 basis points). Interest on the notes is payable quarterly. The interest rates in effect as of the last determination date in 2013 were 1.73% and 6.64% for Trust I and Trust II, respectively. At September 30, 2013 and December 31, 2012, accrued interest payable for Trust I was $5 and $19and for Trust II was $21 and $21, respectively.

The subordinated notes are redeemable in whole or in part, without penalty, at the Corporation’s option and mature on June 15, 2037. The notes are junior in right of payment to the prior payment in full of all senior indebtedness of the Corporation, whether outstanding at the date of the indenture governing the notes or thereafter incurred.

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Federal Home Loan Bank Advances - Schedule of Maturities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Balance
2014	$ 8
2015	20,000
2016	10,000
2017	15,000
Thereafter	2,500
Total	47,508
Restructuring prepayment penalty	(850)	(1,007)
Federal Home Loan Bank advances amount	$ 46,658	$ 46,508
Weighted Average Rate
2014	3.55%
2015	0.80%
2016	0.79%
2017	0.96%
Thereafter	1.24%
Total	0.87%

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Interest and Dividend Income
Loans	$ 8,973	$ 9,995	$ 27,291	$ 30,238
Securities:
U.S. Government agencies and corporations	908	1,145	2,616	3,686
State and political subdivisions	301	289	887	867
Other debt and equity securities	115	69	337	210
Federal funds sold and short-term investments	7	8	23	27
Total interest income	10,304	11,506	31,154	35,028
Interest Expense
Deposits	1,200	1,450	3,685	4,608
Federal Home Loan Bank advances	158	214	469	641
Short-term borrowings	0	0	1	0
Junior subordinated debentures	171	179	511	528
Total interest expense	1,529	1,843	4,666	5,777
Net Interest Income	8,775	9,663	26,488	29,251
Provision for Loan Losses (Note 6)	950	1,875	3,350	5,442
Net interest income after provision for loan losses	7,825	7,788	23,138	23,809
Noninterest Income
Investment and trust services	363	375	1,178	1,190
Deposit service charges	923	994	2,608	2,858
Other service charges and fees	820	762	2,459	2,314
Income from bank owned life insurance	174	167	512	501
Other income (loss)	(218)	214	335	614
Total fees and other income	2,062	2,512	7,092	7,477
Securities gains, net (Note 5)	0	46	178	46
Gains on sale of loans	374	364	1,617	916
Gain (loss) on sale of other assets, net	30	31	(17)	(68)
Total noninterest income	2,466	2,953	8,870	8,371
Noninterest Expense
Salaries and employee benefits	4,200	4,228	13,451	12,233
Furniture and equipment	1,076	1,434	3,159	3,704
Net occupancy	564	531	1,701	1,664
Professional fees	337	414	1,413	1,473
Marketing and public relations	300	312	938	954
Supplies, postage and freight	228	275	809	783
Telecommunications	164	191	501	536
Ohio franchise tax	304	304	914	927
FDIC assessments	293	346	773	1,132
Other real estate owned	155	107	280	414
Loan and collection expense	268	394	1,030	1,051
Other expense	412	142	1,235	1,398
Total noninterest expense	8,301	8,678	26,204	26,269
Income before income tax expense	1,990	2,063	5,804	5,911
Income tax expense	471	538	1,349	1,443
Net Income	1,519	1,525	4,455	4,468
Other comprehensive income (loss), net of taxes:
Changes in unrealized securities' holding gain (loss) net of taxes of ($1,197) and $111 for the quarter ended and ($3,110) and $93 for the nine months ended, respectively	(2,324)	215	(6,038)	180
Minimum pension liability adjustment, net of taxes during the period	0	0	0	0
Less: reclassification adjustments for securities' gains realized in net income, net of taxes of $0 and $16 for the quarter ended and $60 and $16 for the nine months ended, respectively	0	31	117	31
Total other comprehensive income (loss), net of taxes	(2,324)	184	(6,155)	149
Comprehensive income (loss)	(805)	1,709	(1,700)	4,617
Dividends and accretion on preferred stock	109	319	483	956
Net Income Available to Common Shareholders	$ 1,410	$ 1,206	$ 3,972	$ 3,512
Net Income Per Common Share (Note 2)
Basic (in dollars per share)	$ 0.15	$ 0.15	$ 0.44	$ 0.44
Diluted (in dollars per share)	$ 0.15	$ 0.15	$ 0.44	$ 0.44
Dividends declared (in dollars per share)	$ 0.01	$ 0.01	$ 0.03	$ 0.03
Average Common Shares Outstanding
Basic (in shares)	9,303,702	7,944,354	8,940,213	7,937,781
Diluted (in shares)	9,323,657	7,949,118	8,957,180	7,941,990

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Cash and Due from Banks

9 Months Ended

Sep. 30, 2013

Cash and Cash Equivalents [Abstract]

Cash and Due from Banks

Cash and Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, the Corporation considers cash and cash equivalents to include cash on hand, cash items in the process of collection, non-interest bearing amounts due from correspondent banks, federal funds sold and securities purchased under resale agreements with original maturities of three months or less.

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Securities (Tables)

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Amortized Cost, Gross Unrealized Gains and Losses and Fair Values of Securities Available for Sale

The amortized cost, gross unrealized gains and losses and fair values of securities at September 30, 2013 and December 31, 2012 follows:

	At September 30, 2013
	Amortized  Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	72,099	$	—	$	(5,220	)	$	66,879
Mortgage backed securities	95,625		1,494		(1,307		)	95,812
Collateralized mortgage obligations	14,592		256		(197		)	14,651
State and political subdivisions	32,624		1,254		(614		)	33,264
Preferred Securities	4,684		—		—			4,684
Total Securities	$	219,624	$	3,004	$	(7,338	)	$	215,290
	At December 31, 2012
	Amortized  Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	36,868	$	102	$	—		$	36,970
Mortgage backed securities	109,440		2,589		(328		)	111,701
Collateralized mortgage obligations	22,483		398		—			22,881
State and political subdivisions	29,980		2,241		(10		)	32,211
Total Securities	$	198,771	$	5,330	$	(338	)	$	203,763

Amortized Cost and Fair Value of the Debt Securities Portfolio are Shown by Expected Maturity

Mortgage backed securities and collaterlized mortgage obligations are not due at a single maturity date and are therefore shown separately.

	At September 30, 2013
	Amortized Cost		Fair Value
	(Dollars in thousands)
Securities available for sale:
Due in one year or less	$	20,298	$	19,639
Due from one year to five years	57,534		54,482
Due from five years to ten years	25,488		24,649
Due after ten years	6,087		6,057
Mortgage backed securities and collateralized mortgage obligations	110,217		110,463
	$	219,624	$	215,290

Realized Gains and Losses Related to Securities Available-for-Sale

Gains or losses on the sales of available-for-sale securities are recognized upon sale and are determined using the specific identification method.

	September 30,
	2013		2012
	(Dollars in thousands)
Gross realized gains	$	178	$	46
Gross realized losses	—		—
Net Securities Gains	$	178	$	46
Proceeds from the sale of available for sale securities	$	2,272	$	5,050

Summary of Securities that had Unrealized Losses

The Corporation has the intent and the ability to hold these securities until their value recovers, which may be until maturity.

	At September 30, 2013
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	66,879	$	(5,220	)	$	—	$	—		$	66,879	(5,220		)
Mortgage backed securities	$	43,533	$	(1,020	)	$	12,979	$	(287	)	$	56,512	(1,307		)
Collateralized mortgage obligations	6,665		(197		)	—		—			6,665		(197		)
State and political subdivisions	9,727		(614		)	—		—			9,727		(614		)
Total	$	126,804	$	(7,051	)	$	12,979	$	(287	)	$	139,783	$	(7,338	)
	At December 31, 2012
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
Mortgage backed securities	$	44,491	$	(328	)	$	—	$	—		$	44,491	$	(328	)
State and political subdivisions	1,062		(10		)	—		—			1,062		(10		)
Total	$	45,553	$	(338	)	$	—	$	—		$	45,553	$	(338	)

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Commitments and Contingencies - Summary of The Contractual Amount of Commitments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Loss Contingencies [Line Items]
Contractual amount of commitments, total	$ 211,815	$ 163,932
Commitments to extend credit [Member]
Loss Contingencies [Line Items]
Contractual amount of commitments, total	115,615	74,206
Home Equity Loans
Loss Contingencies [Line Items]
Contractual amount of commitments, total	87,652	81,041
Standby letters of credit [Member]
Loss Contingencies [Line Items]
Contractual amount of commitments, total	$ 8,548	$ 8,685

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

In the normal course of business, the Bank enters into commitments with off-balance sheet risk to meet the financing needs of its customers. These instruments are currently limited to commitments to extend credit and standby letters of credit. Commitments to extend credit involve elements of credit risk and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the commitment is represented by the contractual amount of the commitment. The Bank uses the same credit policies in making commitments as it does for on-balance sheet instruments. Interest rate risk on commitments to extend credit results from the possibility that interest rates may have moved unfavorably from the position of the Bank since the time the commitment was made.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates of 30 to 120 days or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained by the Bank upon extension of credit is based on management’s credit evaluation of the applicant. Collateral held is generally single-family residential real estate and commercial real estate. Substantially all of the obligations to extend credit are variable rate. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

A summary of the contractual amount of commitments at September 30, 2013 and December 31, 2012 follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Commitments to extend credit	$	115,615	$	74,206
Home equity lines of credit	87,652		81,041
Standby letters of credit	8,548		8,685
Total	$	211,815	$	163,932

The nature of the Corporation’s business may result in litigation. Management, after reviewing with counsel all actions and proceedings pending against or involving the Corporation and its subsidiaries, considers that the aggregate liability or loss, if any, resulting from them will not be material to the Corporation’s financial position, results of operation or liquidity.

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Deposits - Additional Information (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Banking and Thrift [Abstract]
Certificates of deposit denominations	$ 100,000
Aggregate amount of certificates of deposit in denominations of $100,000 or more	$ 285,550,000	$ 253,464,000

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Estimated Fair Value of Financial Instruments - Summary of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Accrued interest payable	$ 804	$ 882
Carrying Value [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	47,090	30,659
Securities	215,290	203,763
Restricted stock	5,741	5,741
Portfolio loans, net	873,509	864,911
Loans held for sale	2,110	7,634
Accrued interest receivable	3,750	3,726
Demand, savings and money market	531,429	517,181
Certificates of deposit	500,816	482,411
Short-term borrowings	1,643	1,115
Federal Home Loan Bank advances	46,658	46,508
Junior subordinated debentures	16,238	16,238
Accrued interest payable	804	882
Estimated Fair Value [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	47,090	30,659
Securities	215,290	203,763
Restricted stock	5,741	5,741
Portfolio loans, net	870,304	868,716
Loans held for sale	2,123	7,891
Accrued interest receivable	3,750	3,726
Demand, savings and money market	526,228	511,665
Certificates of deposit	502,660	485,394
Short-term borrowings	1,643	1,115
Federal Home Loan Bank advances	46,851	46,828
Junior subordinated debentures	15,375	17,197
Accrued interest payable	804	882
Level 1 [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	47,090
Securities	0	0
Restricted stock
Portfolio loans, net
Loans held for sale
Accrued interest receivable
Demand, savings and money market
Certificates of deposit
Short-term borrowings
Federal Home Loan Bank advances
Junior subordinated debentures
Accrued interest payable
Level 2 [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks
Securities	210,606	203,763
Restricted stock	5,741
Portfolio loans, net
Loans held for sale	2,123
Accrued interest receivable	3,750
Demand, savings and money market	526,228
Certificates of deposit	502,660
Short-term borrowings	1,643
Federal Home Loan Bank advances	46,851
Junior subordinated debentures	15,375
Accrued interest payable	804
Level 3 [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks
Securities	4,684	0
Restricted stock
Portfolio loans, net	870,304
Loans held for sale	0
Accrued interest receivable	0
Demand, savings and money market
Certificates of deposit
Short-term borrowings
Federal Home Loan Bank advances
Junior subordinated debentures
Accrued interest payable

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Securities - Summary of Securities that had Unrealized Losses (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Less than Twelve Months, Fair Value	$ 126,804	$ 45,553
Less than 12 Months, Aggregate Losses	(7,051)	(338)
Twelve Months or Longer, Fair Value	12,979	0
Twelve Months or Longer, Unrealized Losses	(287)	0
Total, Fair Value	139,783	45,553
Total, Unrealized Losses	(7,338)	(338)
U.S. Government agencies and corporations
Schedule of Available-for-sale Securities [Line Items]
Less than Twelve Months, Fair Value	66,879
Less than 12 Months, Aggregate Losses	(5,220)
Twelve Months or Longer, Fair Value	0
Twelve Months or Longer, Unrealized Losses	0
Total, Fair Value	66,879
Total, Unrealized Losses	(5,220)
Mortgage backed securities
Schedule of Available-for-sale Securities [Line Items]
Less than Twelve Months, Fair Value	43,533	44,491
Less than 12 Months, Aggregate Losses	(1,020)	(328)
Twelve Months or Longer, Fair Value	12,979	0
Twelve Months or Longer, Unrealized Losses	(287)	0
Total, Fair Value	56,512	44,491
Total, Unrealized Losses	(1,307)	(328)
Collateralized mortgage obligations
Schedule of Available-for-sale Securities [Line Items]
Less than Twelve Months, Fair Value	6,665
Less than 12 Months, Aggregate Losses	197
Twelve Months or Longer, Fair Value	0
Twelve Months or Longer, Unrealized Losses	0
Total, Fair Value	6,665
Total, Unrealized Losses	197
State and political subdivisions
Schedule of Available-for-sale Securities [Line Items]
Less than Twelve Months, Fair Value	9,727	1,062
Less than 12 Months, Aggregate Losses	(614)	(10)
Twelve Months or Longer, Fair Value	0	0
Twelve Months or Longer, Unrealized Losses	0	0
Total, Fair Value	9,727	1,062
Total, Unrealized Losses	$ (614)	$ (10)

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Federal Home Loan Bank Advances (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Federal Home Loan Bank Advances Additional Information [Abstract]

Maturities of FHLB Advances Outstanding

Maturities of FHLB advances outstanding at September 30, 2013 and December 31, 2012 are as follows:

	September 30, 2013			December 31, 2012
	(Dollars in thousands)
Maturity January 2014 with fixed rate 3.55%	$	8		$	15
Maturity January 2015 with fixed rate 0.80%	20,000			20,000
Maturity December 2016 with fixed rate 0.79%	10,000			10,000
Maturities June 2017 through December 2017, with fixed rates ranging from 0.89% to 0.99%	15,000			15,000
Maturity June 2018 fixed rate 1.24%	2,500			2,500
Restructuring prepayment penalty	(850		)	(1,007		)
Total FHLB advances	$	46,658		$	46,508

Federal Home Loan Bank Advances Future Maturities

At September 30, 2013, the advances were structured to contractually pay down as follows:

	Balance			Weighted Average Rate
2014	$	8		3.55%
2015	20,000			0.80
2016	10,000			0.79
2017	15,000			0.96
Thereafter	2,500			1.24
Total	$	47,508		0.87%
Restructuring prepayment penalty	(850		)
Total	$	46,658

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Deposits (Tables)

9 Months Ended

Sep. 30, 2013

Banking and Thrift [Abstract]

Deposit Balances

Deposit balances are summarized as follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Demand and other noninterest-bearing	$	139,871	$	139,894
Interest checking	168,955		155,248
Savings	124,033		119,247
Money market accounts	98,570		102,792
Consumer time deposits	379,948		386,549
Public time deposits	120,868		95,862
Total deposits	$	1,032,245	$	999,592

Contractual Maturities of Certificates of Deposits

The maturity distribution of certificates of deposit as of September 30, 2013 are as follows:

	September 30, 2013
	(Dollars in thousands)
0-12 months	$	343,084
12-24 months	113,109
24-36 months	26,745
36-48 months	13,599
48-60 months	4,279
Total	$	500,816

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Loans and Allowance for Loan Losses - Additional Information (Details) (USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Maximum [Member]	Sep. 30, 2013 Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Bank wide delinquency of loans in percentage	2.05%	2.89%
Bank wide delinquency of loans, 30 to 59 days delinquent, percentage	0.39%	0.61%
Bank wide delinquency of loans, 60 to 89 days delinquent, percentage	0.13%	0.32%
Allocated reserves of nonaccrual TDR loans	$ 386
Additional commitments to lend	$ 638
Time period of repayment based on delinquency period one			59 days	30 days
Time period of repayment based on delinquency period two			89 days	60 days
Time period of repayment based on delinquency period three				90 days

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended		9 Months Ended
	Dec. 31, 2012	Sep. 30, 2013	Sep. 30, 2013 Core Deposit Intangibles	Dec. 31, 2012 Core Deposit Intangibles
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 21,582	$ 21,582
Goodwill impairment charge	0
Acquired Finite-Lived Intangible Assets [Line Items]
Estimated useful life			10 years
Core deposit intangibles			1,367	1,367
Less: accumulated amortization			875	773
Carrying value of core deposit intangibles	$ 594	$ 492	$ 492	$ 594

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- Summary of Activity in the Loan Balances and the Allowance for Loan Losses by Segment (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance, beginning of period	$ 17,815	$ 17,300	$ 17,637	$ 17,063
Losses charged off	(1,354)	(1,681)	(4,449)	(5,378)
Recoveries	380	93	1,253	460
Provision charged to expense	950	1,875	3,350	5,442
Balance, end of period	17,791	17,587	17,791	17,587
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1,547	2,596	1,547	2,596
Collectively evaluated for impairment	16,244	14,991	16,244	14,991
Total ending allowance balance	17,791	17,587	17,791	17,587
Loans:
Individually evaluated for impairment	23,856	26,829	23,856	26,829
Collectively evaluated for impairment	867,444	858,886	867,444	858,886
Total ending loans balance	891,300	885,715	891,300	885,715	882,548
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance, beginning of period	10,424	11,396	11,386	10,714
Losses charged off	(630)	(738)	(1,475)	(2,057)
Recoveries	83	9	584	39
Provision charged to expense	585	1,093	(33)	3,064
Balance, end of period	10,462	11,760	10,462	11,760
Ending allowance balance attributable to loans:
Individually evaluated for impairment	1,462	2,525	1,462	2,525
Collectively evaluated for impairment	9,000	9,235	9,000	9,235
Total ending allowance balance	10,462	11,760	10,462	11,760
Loans:
Individually evaluated for impairment	20,148	25,310	20,148	25,310
Collectively evaluated for impairment	383,883	386,614	383,883	386,614
Total ending loans balance	404,031	411,924	404,031	411,924	414,005
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance, beginning of period	438	840	835	1,409
Losses charged off	0	(48)	(120)	(213)
Recoveries	2	4	7	24
Provision charged to expense	36	(42)	(246)	(466)
Balance, end of period	476	754	476	754
Ending allowance balance attributable to loans:
Individually evaluated for impairment	79	69	79	69
Collectively evaluated for impairment	397	685	397	685
Total ending allowance balance	476	754	476	754
Loans:
Individually evaluated for impairment	588	340	588	340
Collectively evaluated for impairment	79,225	71,582	79,225	71,582
Total ending loans balance	79,813	71,922	79,813	71,922	68,705
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance, beginning of period	1,606	1,716	1,559	1,331
Losses charged off	(35)	(292)	(679)	(1,267)
Recoveries	178	3	277	86
Provision charged to expense	(311)	274	281	1,551
Balance, end of period	1,438	1,701	1,438	1,701
Ending allowance balance attributable to loans:
Individually evaluated for impairment	6	2	6	2
Collectively evaluated for impairment	1,432	1,699	1,432	1,699
Total ending allowance balance	1,438	1,701	1,438	1,701
Loans:
Individually evaluated for impairment	1,670	1,179	1,670	1,179
Collectively evaluated for impairment	63,727	67,370	63,727	67,370
Total ending loans balance	65,397	68,549	65,397	68,549	64,983
Home Equity Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance, beginning of period	3,508	2,146	2,357	2,289
Losses charged off	(410)	(296)	(1,439)	(851)
Recoveries	5	16	60	31
Provision charged to expense	405	264	2,530	661
Balance, end of period	3,508	2,130	3,508	2,130
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0	0	0
Collectively evaluated for impairment	3,508	2,130	3,508	2,130
Total ending allowance balance	3,508	2,130	3,508	2,130
Loans:
Individually evaluated for impairment	1,107	0	1,107	0
Collectively evaluated for impairment	121,178	125,108	121,178	125,108
Total ending loans balance	122,285	125,108	122,285	125,108	122,830
Indirect
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance, beginning of period	1,581	985	1,230	891
Losses charged off	(196)	(161)	(555)	(738)
Recoveries	104	54	276	244
Provision charged to expense	122	134	660	615
Balance, end of period	1,611	1,012	1,611	1,012
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0	0	0
Collectively evaluated for impairment	1,611	1,012	1,611	1,012
Total ending allowance balance	1,611	1,012	1,611	1,012
Loans:
Individually evaluated for impairment	191	0	191	0
Collectively evaluated for impairment	206,158	195,358	206,158	195,358
Total ending loans balance	206,349	195,358	206,349	195,358	199,924
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Balance, beginning of period	258	217	270	429
Losses charged off	(83)	(146)	(181)	(252)
Recoveries	8	7	49	36
Provision charged to expense	113	152	158	17
Balance, end of period	296	230	296	230
Ending allowance balance attributable to loans:
Individually evaluated for impairment	0	0	0	0
Collectively evaluated for impairment	296	230	296	230
Total ending allowance balance	296	230	296	230
Loans:
Individually evaluated for impairment	152	0	152	0
Collectively evaluated for impairment	13,273	12,854	13,273	12,854
Total ending loans balance	$ 13,425	$ 12,854	$ 13,425	$ 12,854	$ 12,101

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Deposits - Contractual Maturities of Certificates of Deposits (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Time Deposits, Fiscal Year Maturity [Abstract]
2013	$ 343,084
2014	113,109
2015	26,745
2016	13,599
2017	4,279
Total	$ 500,816	$ 482,411

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Summary of Significant Accounting Policies - Additional Information (Details)	12 Months Ended	9 Months Ended
	Dec. 31, 2012	Sep. 30, 2013 Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Written loan commitment period before closing		60 days
Amortization of intangible assets	10 years

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Share-Based Compensation - Fair Value of Options - Weighted Average Assumptions (Details) (Stock options [Member])	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk free interest rate	1.98%	0.00%	1.37%	1.27%
Dividend yield	3.03%	0.00%	3.07%	3.38%
Volatility	32.54%	0.00%	32.60%	33.00%

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Share-Based Compensation - Summary of Stock Options (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding at beginning of period, shares	232,000	197,000
Granted, shares	137,363	35,000
Forfeited or expired, shares	0	0
Exercised, shares	0	0
Stock dividend or split, shares	0	0
Outstanding at end of period, shares	369,363	232,000
Exercisable at end of period, shares	208,667	197,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning of period, Weighted Average Exercise Price Per Share	$ 14.50	$ 16.12
Granted, Weighted Average Exercise Price Per Share	$ 9.18	$ 5.39
Forfeited or expired, Weighted Average Exercise Price per Share	$ 0.00	$ 0.00
Exercised, Weighted Average Exercise Price per Share	$ 0.00	$ 0.00
Stock dividend or split, Weighted Average Exercise Price per Share	$ 0.00	$ 0.00
Outstanding at end of period, Weighted Average Exercise Price per Share	$ 12.52	$ 14.50
Weighted Average Exercise Price per Share, Exercisable	$ 15.52	$ 16.12

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Loans and Allowance for Loan Losses - Troubled Debt Restructuring Loan Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2013 Commercial contracts	Sep. 30, 2013 Commercial contracts	Sep. 30, 2013 Residential real estate contracts	Sep. 30, 2013 Residential real estate contracts	Sep. 30, 2013 Home equity loans contracts	Sep. 30, 2013 Home equity loans contracts	Sep. 30, 2013 Indirect contracts	Sep. 30, 2013 Indirect contracts	Sep. 30, 2013 Consumer Loans contracts	Sep. 30, 2013 Consumer Loans contracts	Sep. 30, 2012 Commercial real estate contracts	Sep. 30, 2012 Commercial real estate contracts
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loans	0	4	1	3	5	21	3	35	2	2	0	4
Recorded Investment - Pre-Modification Outstanding	$ 0	$ 110	$ 46	$ 189	$ 320	$ 1,006	$ 31	$ 380	$ 27	$ 27	$ 0	$ 2,861
Recorded Investment - Post-Modification Outstanding	0	104	42	174	277	753	31	303	27	27	0
Recorded Investment	$ 0	$ 104	$ 42	$ 174	$ 277	$ 753	$ 31	$ 303	$ 27	$ 27	$ 0	$ 2,861

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Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Summary of Activity in the Loan Balances and the Allowance for Loan Losses by Segment

Activity in the allowance for loan losses by segment for the nine months ended September 30, 2013 and 2012 are summarized as follows:

Nine Months Ended September 30, 2013
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,386		$	835		$	1,559		$	2,357		$	1,230		$	270		$	17,637
Losses charged off	(1,475		)	(120		)	(679		)	(1,439		)	(555		)	(181		)	(4,449		)
Recoveries	584			7			277			60			276			49			1,253
Provision charged to expense	(33		)	(246		)	281			2,530			660			158			3,350
Balance, end of year	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
Three Months Ended September 30, 2013
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,424		$	438		$	1,606		$	3,508		$	1,581		$	258		$	17,815
Losses charged off	(630		)	—			(35		)	(410		)	(196		)	(83		)	(1,354		)
Recoveries	83			2			178			5			104			8			380
Provision charged to expense	585			36			(311		)	405			122			113			950
Balance, end of year	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
As of September 30, 2013
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,462		$	79		$	6		$	—		$	—		$	—		$	1,547
Collectively evaluated for impairment	9,000			397			1,432			3,508			1,611			296			16,244
Total ending allowance balance	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
Loans:
Individually evaluated for impairment	$	20,148		$	588		$	1,670		$	1,107		$	191		$	152		$	23,856
Collectively evaluated for impairment	383,883			79,225			63,727			121,178			206,158			13,273			867,444
Total ending loans balance	$	404,031		$	79,813		$	65,397		$	122,285		$	206,349		$	13,425		$	891,300

Nine Months Ended September 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,714		$	1,409		$	1,331		$	2,289		$	891		$	429		$	17,063
Losses charged off	(2,057		)	(213		)	(1,267		)	(851		)	(738		)	(252		)	(5,378		)
Recoveries	39			24			86			31			244			36			460
Provision charged to expense	3,064			(466		)	1,551			661			615			17			5,442
Balance, end of year	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
Three Months Ended September 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Losses charged off	(738		)	(48		)	(292		)	(296		)	(161		)	(146		)	(1,681		)
Recoveries	9			4			3			16			54			7			93
Provision charged to expense	1,093			(42		)	274			264			134			152			1,875
Balance, end of year	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
As of September 30, 2012
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,525		$	69		$	2		$	—		$	—		$	—		$	2,596
Collectively evaluated for impairment	9,235			$	685		$	1,699		$	2,130		$	1,012		$	230		14,991
Total ending allowance balance	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
Loans:
Individually evaluated for impairment	$	25,310		$	340		$	1,179		$	—		$	—		$	—		$	26,829
Collectively evaluated for impairment	386,614			71,582			67,370			125,108			195,358			12,854			858,886
Total ending loans balance	$	411,924		$	71,922		$	68,549		$	125,108		$	195,358		$	12,854		$	885,715

Age Analysis of Past Due Loans

ely. Information regarding delinquent loans as of September 30, 2013 and December 31, 2012 is as follows:

Age Analysis of Past Due Loans as of September 30, 2013

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	20	$	50	$	9,610	$	9,680	$	394,351	$	404,031	$	—
Commercial	1,567		109		234		1,910		77,903		79,813		—
Residential real estate	377		586		2,587		3,550		61,847		65,397		—
Home equity loans	1,094		362		1,065		2,521		119,764		122,285		—
Indirect	225		59		41		325		206,024		206,349
Consumer	191		—		109		300		13,125		13,425		—
Total	$	3,474	$	1,166	$	13,646	$	18,286	$	873,014	$	891,300	$	—

Age Analysis of Past Due Loans as of December 31, 2012

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	3,681	$	1,004	$	12,398	$	17,083	$	396,922	$	414,005	$	—
Commercial	—		—		376		376		68,329		68,705		—
Residential real estate	394		1,094		2,827		4,315		60,668		64,983		184
Home equity loans	630		494		1,510		2,634		120,196		122,830		—
Indirect	645		227		69		941		198,983		199,924
Consumer	26		40		123		189		11,912		12,101		—
Total	$	5,376	$	2,859	$	17,303	$	25,538	$	857,010	$	882,548	$	184

Impaired Loans

Impaired loans for the Period Ended September 30, 2013 and December 31, 2012 are as follows:

	At September 30, 2013						Three Months Ended September 30, 2013		Nine Months Ended September 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
	(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	14,625	$	19,617	$	—	$	16,127	$	16,667
Commercial	245		298		—		203		167
Residential real estate	1,613		1,801		—		1,802		1,800
Home equity loans	1,107		1,518		—		897		669
Indirect	191		293		—		208		129
Consumer	152		203		—		113		87
With allowance recorded:
Commercial real estate	5,523		8,842		1,462		5,139		5,781
Commercial	343		343		79		342		396
Residential real estate	57		154		6		29		60
Home equity loans	—		—		—		—		—
Indirect	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	23,856	$	33,069	$	1,547	$	24,860	$	25,756
	At December 31, 2012						Three Months Ended September 30, 2012		Nine Months Ended September 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
	(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	15,378	$	20,086	$	—	$	7,204	$	9,246
Commercial	138		138		—		164		269
Residential real estate	1,610		1,686		—		966		1,052
Home equity loans	398		398		—		—		—
Indirect	—		—		—		—		—
Consumer	61		61		—		—		—
With allowance recorded:
Commercial real estate	7,942		9,876		1,449		19,502		19,376
Commercial	459		459		209		159		216
Residential real estate	181		1,452		15		85		79
Home equity loans	—		—		—		—		—
Indirect	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	26,167	$	34,156	$	1,673	$	28,080	$	30,238

*impaired loans shown in the table above included loans that were classified as troubled debt restructurings ("TDRs"). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

Troubled Debt Restructuring Loan Information

The following table summarizes the loans that were modified as a TDR during the period ended September 30, 2013 and 2012.

		Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
		Recorded Investment			Recorded Investment
	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2013	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2013
Commercial	—	$—	—	—	4	$110	$104	$104
Residential real estate	1	$46	$42	$42	3	$189	$174	$174
Home equity loans	5	$320	$277	$277	21	$1,006	$753	$753
Indirect Loans	3	$31	$31	$31	35	$380	$303	$303
Consumer Loans	2	$27	$27	$27	2	$27	$27	$27

		Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
		Recorded Investment			Recorded Investment
	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2012	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2012
Commercial real estate	—	$—	$—	$—	4	$2,861	$2,861	$2,861

Loans on Nonaccrual Status

Nonaccrual loan balances at September 30, 2013 and December 31, 2012 are as follows:

Loans On Non-Accrual Status	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Commercial real estate	$	13,630	$	16,349
Commercial	355		472
Residential real estate	5,335		5,622
Home equity loans	4,798		4,293
Indirect	486		711
Consumer	372		349
Total Nonaccrual Loans	$	24,976	$	27,796

Summary of Recorded Investment Based on Delinquency Status

The following table presents the recorded investment of commercial real estate, commercial and residential real estate loans by internal credit risk grade and the recorded investment of residential real estate, home equity, indirect and consumer loans based on delinquency status as of September 30, 2013 and December 31, 2012:

Commercial Credit Exposure	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
	September 30, 2013
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1 — Minimal	$	—	$	74	$	—	$	—	$	—	$	—	$	74
Grade 2 — Modest	—		37		—		—		—		—		37
Grade 3 — Better than average	866		—		—		—		—		—		866
Grade 4 — Average	27,181		866		616		—		—		—		28,663
Grade 5 — Acceptable	343,587		75,332		5,552		—		—		—		424,471
Total Pass Credits	371,634		76,309		6,168		—		—		—		454,111
Grade 6 — Special mention	10,671		3,149		37		—		—		—		13,857
Grade 7 — Substandard	21,726		355		568		—		—		—		22,649
Grade 8 — Doubtful	—		—		—		—		—		—		—
Grade 9 — Loss	—		—		—		—		—		—		—
Total loans internally credit risk graded	404,031		79,813		6,773		—		—		—		490,617
Loans not monitored by internal risk grade:
Current loans not internally risk graded	—		—		55,131		119,764		206,024		13,125		394,044
30-59 days past due loans not internally risk graded	—		—		377		1,094		225		191		1,887
60-89 days past due loans not internally risk graded	—		—		586		362		59		—		1,007
90+ days past due loans not internally risk graded	—		—		2,530		1,065		41		109		3,745
Total loans not internally credit risk graded	—		—		58,624		122,285		206,349		13,425		400,683
Total loans internally and not internally credit risk graded	$	404,031	$	79,813	$	65,397	$	122,285	$	206,349	$	13,425	$	891,300

* Residential loans with an internal commercial credit risk grade include loans that are secured by non owner occupied 1-4 family residential properties and conventional 1-4 family residential properties.

Commercial Credit Exposure	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
	December 31, 2012
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1 — Minimal	$	—	$	114	$	—	$	—	$	—	$	—	$	114
Grade 2 — Modest	—		—		—		—		—		—		—
Grade 3 — Better than average	1,100		6		—		—		—		—		1,106
Grade 4 — Average	30,604		4,547		626		—		—		—		35,777
Grade 5 — Acceptable	342,067		60,023		5,584		—		—		—		407,674
Total Pass Credits	373,771		64,690		6,210		—		—		—		444,671
Grade 6 — Special mention	12,201		3,394		42		—		—		—		15,637
Grade 7 — Substandard	27,268		621		1,468		—		—		—		29,357
Grade 8 — Doubtful	765		—		—		—		—		—		765
Grade 9 — Loss	—		—		—		—		—		—		—
Total loans internally credit risk graded	414,005		68,705		7,720		—		—		—		490,430
Loans not monitored by internal risk grade:
Current loans not internally risk graded	—		—		54,416		120,196		198,983		11,912		385,507
30-59 days past due loans not internally risk graded	—		—		394		630		645		26		1,695
60-89 days past due loans not internally risk graded	—		—		1,094		494		227		40		1,855
90+ days past due loans not internally risk graded	—		—		1,359		1,510		69		123		3,061
Total loans not internally credit risk graded	—		—		57,263		122,830		199,924		12,101		392,118
Total loans internally and not internally credit risk graded	$	414,005	$	68,705	$	64,983	$	122,830	$	199,924	$	12,101	$	882,548

* Residential loans with an internal commercial credit risk grade include loans that are secured by non owner occupied 1-4 family residential properties and conventional 1-4 family residential properties.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Statement of Stockholders' Equity [Abstract]
Dividends declared (in dollars per share)	$ 0.03	$ 0.03
Restricted shares granted (in shares)		62,105
Redemption of preferred stock (in shares)	9,733
Issuance of common stock (in shares)	1,359

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of LNB Bancorp, Inc. (the “Corporation”) and its wholly-owned subsidiary, The Lorain National Bank (the “Bank”). The consolidated financial statements also include the accounts of North Coast Community Development Corporation which is a wholly-owned subsidiary of the Bank. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnote disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Corporation included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2012. However, all adjustments (consisting only of normal recurring accruals) which, in the opinion of the Corporation’s management (“Management”), are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the ninemonth period ended September 30, 2013, are not necessarily indicative of the results which may be expected for a full year.

Certain reclassifications of prior years' amounts have been made to conform to current year presentation. Such reclassifications had no effect on prior year net income or shareholders' equity.

Use of Estimates

The Corporation prepares its financial statements in conformity with generally accepted accounting principles (GAAP), which requires the Corporation’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas involving the use of management’s estimates and assumptions include the allowance for loan losses, the valuation of goodwill, the realization of deferred tax assets and fair values of financial instruments.

Segment Information

The Corporation’s activities are considered to be a single industry segment for financial reporting purposes. The Corporation is a financial holding company engaged in the business of commercial and retail banking, investment management and trust services, title insurance, and insurance with operations conducted through its main office and banking centers located throughout Lorain, Erie, Cuyahoga, Summit, and Franklin counties of Ohio. This market provides the source for substantially all of the Bank’s deposit and loan and trust activities. The majority of the Bank’s income is derived from a diverse base of commercial, mortgage and retail lending activities and investments.

Statement of Cash Flows

For purposes of reporting in the Consolidated Statements of Cash Flows, cash and cash equivalents include currency on hand, amounts due from banks, Federal funds sold, and securities purchased under resale agreements. Generally, Federal funds sold and securities purchased under resale agreements are for one day periods.

Securities

Securities that are bought and held for the sole purpose of being sold in the near term are deemed trading securities with any related unrealized gains and losses reported in earnings. As of September 30, 2013 and December 31, 2012, the Corporation did not hold any trading securities. Securities that the Corporation has a positive intent and ability to hold to maturity are classified as held to maturity. As of September 30, 2013 and December 31, 2012, the Corporation did not hold any securities classified as held to maturity. Securities that are not classified as trading or held to maturity are classified as available for sale. Securities classified as available for sale are carried at their fair value with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income. Interest and dividends on securities, including amortization of premiums and accretion of discounts using the effective interest method over the period to maturity or call, are included in interest income. Gains and losses on sales of securities are determined on the specific identification method.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. When evaluating investment securities consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Corporation has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but the entity does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Restricted Stock

The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also a member of and owns stock in the Federal Reserve Bank. The Corporation owns stock in Bankers Bancshares Inc., an institution that provides correspondent banking services to community banks. Stock in these institutions is classified as restricted stock and is recorded at redemption value which approximates fair value. The Corporation periodically evaluates the restricted stock for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans Held For Sale

Held for sale loans 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. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in the noninterest income section of the Consolidated Statement of Income and Comprehensive Income.

Mortgage Banking

The Corporation sells originated mortgage loans into the secondary mortgage loan markets. During the period of loan origination and prior to the sale of the loans in the secondary market, the Corporation has exposure to movements in interest rates associated with mortgage loans that are in the “mortgage pipeline”. A pipeline loan is one that will be held for resale in which the Corporation has entered into a written mortgage loan commitment with a potential borrower. Written loan commitments that relate to the origination of mortgage loans that will be held for resale are considered free-standing derivatives and do not qualify for hedge accounting. Written loan commitments generally have a term of up to 60 days before the closing of the loan. The loan commitment does not bind the potential borrower to entering into the loan, nor does it guarantee that the Corporation will approve the potential borrower for the loan. Therefore, when determining fair value, the Corporation makes estimates of expected “fallout” (loan commitments not expected to close), using models, which consider cumulative historical fallout rates and other factors. Fallout can occur for a variety of reasons including falling interest rate environments where a borrower abandons an interest rate lock loan commitment, when a borrower is not approved as an acceptable credit by the lender or for a variety of other non-economic reasons.

Written loan commitments in which the borrower has locked in an interest rate results in market risk to the Corporation to the extent market interest rates change from the rate quoted to the borrower. The Corporation economically hedges the risk of changing interest rates associated with its interest rate lock commitments by entering into mandatory forward sales contracts.

The Corporation's mortgage loans held for sale are subject to changes in fair value, due to changes in interest rates from the loan's closing date through the date the mortgage loan is sold in the secondary market. The fair value of the mortgage loan declines in value when interest rates increase and conversely increases in value when interest rates decrease. To mitigate the risk of changes in interest rates, the Corporation enters into mandatory forward sales contracts on a portion of the mortgage loans held for sale to provide an economic hedge against those changes in fair value. The mandatory forward sales contracts are recorded at fair value with changes in value recorded in current earnings.

Derivative Instruments and Hedging Activities

The Corporation uses interest rate swaps, interest rate lock commitments and forward contracts sold to hedge interest rate risk for asset and liability management purposes. All derivatives are accounted for in accordance with ASC-815, Derivatives and Hedging, and are recorded as either other assets or other liabilities at fair value. The Corporation engages in Back-to-Back swaps to mitigate its exposure to rising interest rates. A Back-to-Back swap provides that a customer receives a fixed interest rate commercial loan and the Corporation subsequently converts that fixed rate loan to a variable rate instrument over the term of the loan by entering into an interest rate swap with a dealer counterparty based on a London Inter-Bank Offered Rate index. The Corporation then receives a fixed rate payment from the customer on the loan and pays the equivalent amount to the dealer counterparty on the swap in exchange for a variable rate payment stream. Based upon accounting guidance each swap is accounted for as a stand-alone derivative and designated as a fair value hedge with any changes in fair value presented in current earnings.

Loans

Loans are reported at the principal amount outstanding, net of unearned income and premiums and discounts. Loans acquired through business combinations are valued at fair market value on or near the date of acquisition. The difference between the principal amount outstanding and the fair market valuation is amortized over the aggregate average life of each class of loan. Unearned income includes deferred fees, net of deferred direct incremental loan origination costs. Unearned income is amortized to interest income, over the contractual life of the loan, using the interest method. Direct loan origination fees and costs are deferred and amortized as an adjustment to interest income over the contractual life of the loan, using the interest method.

Loans are generally placed on nonaccrual status when they are 90 days past due for interest or principal or when the full and timely collection of interest or principal becomes uncertain. When a loan has been placed on nonaccrual status, the accrued and unpaid interest receivable is reversed against interest income. Generally, a loan is returned to accrual status when all delinquent interest and principal becomes current under the terms of the loan agreement and when the collectability is no longer doubtful.

A loan is impaired when based on current information and events it is probable the Corporation will be unable to collect the scheduled payment of principal and interest when due under the contractual terms of the loan agreement. Impairment is evaluated in total for smaller-balance loans of similar nature such as real estate mortgages and installment loans, and on an individual loan basis for commercial loans that are graded substandard or below. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, using either the present value of estimated future cash flows discounted at the loans effective interest rate, the loan's observable market value or at the fair value of collateral if repayment is expected solely from the collateral.

Allowance for Loan Losses

The allowance for loan losses is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. Management’s determination of the allowance, and the resulting provision, is based on judgments and assumptions, including general economic conditions, loan portfolio composition, loan loss experience, management’s evaluation of credit risk relating to pools of loans and individual borrowers, sensitivity analysis and expected loss models, value of underlying collateral, and observations of internal loan review staff or banking regulators.

The provision for loan losses is determined based on Management’s evaluation of the loan portfolio and the adequacy of the allowance for loan losses under current economic conditions and such other factors which, in management’s judgment, deserve current recognition.

Servicing

Servicing assets are recognized as separate assets when rights are acquired through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment on a quarterly basis based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.

Bank Premises and Equipment

Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed generally on the straight-line method over the estimated useful lives of the assets. Upon the sale or other disposition of assets, the cost and related accumulated depreciation are retired and the resulting gain or loss is recognized. Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized. Software costs related to externally developed systems are capitalized at cost less accumulated amortization. Amortization is computed on the straight-line method over the estimated useful life.

Fair Value Measurement

The Corporation uses fair value measurements to record certain assets and liabilities at fair value and determine fair value disclosures. Additional information regarding fair value measurement is included in Note 12 (Estimated Fair Value Financial Instruments) in the notes to the consolidated financial statements.

Goodwill and Core Deposit Intangibles

Intangible assets arise from acquisitions and include goodwill and core deposit intangibles. Goodwill is the excess of purchase price over the fair value of identified net assets in acquisitions. Core deposit intangibles represent the value of depositor relationships purchased. Goodwill is evaluated at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Corporation evaluates goodwill impairment annually as of November 30^th of each year. Core deposit intangible assets are amortized using the straight-line method over ten years and are subject to annual impairment testing.

To simplify the process of testing goodwill for impairment for both public and nonpublic entities, on September 15, 2011 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount (impairment). If the entity finds after the qualitative assessment that it is more likely than not (impairment indicators) that the fair value of a reporting unit is less than its carrying amount, the entity is then required to perform a full impairment test. Prior to the update, entities were required to test goodwill for impairment on at least an annual basis.

Other Real Estate Owned

Other real estate owned (OREO) is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure, and loans classified as in-substance foreclosure. Other real estate owned is recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value of the underlying property collateral, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are treated as period costs. Banking premises are transferred at the lower of carrying value or estimated fair value, less estimated selling costs.

Bank Owned Life Insurance

Bank owned life insurance policies are stated at the current cash surrender value of the policy, or the policy death proceeds less any obligation to provide a death benefit to an insured's beneficiaries if that value is less than the cash surrender value. Increases in the asset value are recorded as earnings in other income.

Split-Dollar Life Insurance

The Corporation recognizes a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to certain employees extending to postretirement periods. Based on the present value of expected future cash flows, the liability is recognized based on the substantive agreement with the employee.

Share-Based Compensation

The Corporation’s stock based compensation plans are described in detail in Note 13 (Share-Based Compensation). Compensation expense is recognized for stock options and unvested (restricted) stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation’s common shares at the date of grant is used to estimate the fair value of unvested (restricted) stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the unvested period for nonvested (restricted) stock awards. Certain of the Corporation’s share-based awards contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period.

Investment and Trust Services Assets and Income

Property held by the Corporation in fiduciary or agency capacity for its customers is not included in the Corporation’s financial statements as such items are not assets of the Corporation. Income from the Investment and Trust Services Division is reported on an accrual basis.

Off Balance Sheet Instruments

In the ordinary course of business, the Corporation has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded when they are funded. Additional information regarding Off Balance Sheet Instruments is included in Note 11 (Commitments and Contingencies) in the notes to the consolidated financial statements.

Income Taxes

The Corporation and its wholly-owned subsidiary file an annual consolidated Federal income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be removed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when necessary to reduce deferred tax assets to amounts which are deemed more likely than not to be realized.

Recent Financial Accounting Pronouncements

In January 2013, the FASB issued ASU No. 2013-01, Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU No. 2013-01 clarifies that ASU No. 2011-11 applies only to derivatives, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset or subject to an enforceable master netting arrangement or similar agreement. Entities with other types of financial assets and financial liabilities subject to a master netting arrangement or similar agreement are no longer subject to the disclosure requirements in ASU No. 2011-11. The amendments are effective for annual and interim reporting periods beginning on or after January 1, 2013. The adoption of this ASU did not have a material impact on the Corporation's consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. The ASU does not amend any existing requirements for reporting net income or other comprehensive income in the financial statements but requires an entity to disaggregate the total change of each component of other comprehensive income and separately present reclassification adjustments and current period other comprehensive income. The provisions of this ASU also requires that entities present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line item affected by the reclassification. If a component is not required to be reclassified to net income in its entirety, entities would instead cross reference to the related note to the financial statements for additional information. The adoption of this ASU did not have a material impact on the Corporation's consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The ASU requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. No new recurring disclosures are required. The amendments are effective for annual and interim reporting periods beginning on or after December 15, 2013, and are to be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The adoption of this ASU is not expected to have a material impact on the Corporation's consolidated financial statements.

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

 Goodwill and Intangible Assets

The Corporation has goodwill of $21,582 primarily from an acquisition completed in 2007. The Corporation assesses goodwill for impairment annually and more frequently in certain circumstances. In September 2011, FASB issued an update on the testing of goodwill for impairment under ASC Topic 350, Intangibles – Goodwill and Other. ASC 350 requires a corporation to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount. The overall objective of the update is to simplify how entities, both public and private, test goodwill for impairment. Simplification has resulted in an entity having the option to first assess qualitative factors to determine whether the existence or circumstances lead to a determination that it is more likely than not (that is, a likelihood of more than fifty percent) that the fair value of a reporting unit is less than its carrying amount. For 2012, the Corporation determined the Bank was one reporting unit and assessed the following qualitative factors to determine if there is likelihood that goodwill is impaired: (a) industry and market considerations such as a deterioration in the environment in which the Corporation operates; (b) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; (c) events affecting a reporting unit such as a change in the composition or carrying amount of the Corporation’s assets unit; (d) share price — considered in both absolute terms and relative to peers; (e) non-performing loans and allowance for loans losses; and (f) bank capital analysis. Based upon this assessment the Corporation determined that there is no likelihood of goodwill impairment therefore no impairment charge was recognized as of December 31, 2012.

The Corporation cannot predict the occurrences of certain future events that might adversely affect the reported value of goodwill. Such events include, but are not limited to, strategic decisions in response to economic and competitive conditions, the effect of the economic environment on the Corporation’s customer base or a material negative change in the relationship with significant customers. Core deposit intangibles are amortized over their estimated useful life of 10 years. A summary of core deposit intangible assets follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Core deposit intangibles	$	1,367	$	1,367
Less: accumulated amortization	875		773
Carrying value of core deposit intangibles	$	492	$	594

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Earnings Per Common Share

9 Months Ended

Sep. 30, 2013

Disclosure Earning Per Share Additional Information [Abstract]

Earnings Per Common Share

Earnings Per Common Share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the quarter and year-to-date. Diluted earnings per share is computed based on the weighted average number of shares outstanding plus the effects of dilutive stock options and warrants outstanding during quarter and year-to-date. Basic and diluted earnings per share are calculated as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Dollars in thousands except per share amounts)
Weighted average shares outstanding used in Basic Earnings per Common Share	9,303,702		7,944,354		8,940,213		7,937,781
Dilutive effect of stock options	19,955		4,764		16,967		4,209
Weighted average shares outstanding used in Diluted Earnings Per Common Share	9,323,657		7,949,118		8,957,180		7,941,990
Net Income	$	1,519	$	1,525	$	4,455	$	4,468
Preferred stock dividend and accretion	109		319		483		956
Income Available to Common Shareholders	$	1,410	$	1,206	$	3,972	$	3,512
Basic Earnings Per Common Share	$	0.15	$	0.15	$	0.44	$	0.44
Diluted Earnings Per Common Share	$	0.15	$	0.15	$	0.44	$	0.44

For the three and nine month periods ended September 30, 2013 and 2012, approximately 194,500 of options to purchase shares of common stock were not included in the computation of diluted earnings per share because the effect would be antidilutive.

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Loans and Allowance for Loan Losses - Age Analysis of Past Due Loans (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	$ 3,474	$ 5,376
60-89 Days Past Due	1,166	2,859
Greater than 90 Days	13,646	17,303
Total Past Due	18,286	25,538
Current	873,014	857,010
Total ending loans balance	891,300	882,548	885,715
Recorded Investment greater than 90 Days and Accruing	0	184
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	20	3,681
60-89 Days Past Due	50	1,004
Greater than 90 Days	9,610	12,398
Total Past Due	9,680	17,083
Current	394,351	396,922
Total ending loans balance	404,031	414,005	411,924
Recorded Investment greater than 90 Days and Accruing	0	0
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	1,567	0
60-89 Days Past Due	109	0
Greater than 90 Days	234	376
Total Past Due	1,910	376
Current	77,903	68,329
Total ending loans balance	79,813	68,705	71,922
Recorded Investment greater than 90 Days and Accruing	0	0
Residential real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	377	394
60-89 Days Past Due	586	1,094
Greater than 90 Days	2,587	2,827
Total Past Due	3,550	4,315
Current	61,847	60,668
Total ending loans balance	65,397	64,983	68,549
Recorded Investment greater than 90 Days and Accruing	0	184
Home equity loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	1,094	630
60-89 Days Past Due	362	494
Greater than 90 Days	1,065	1,510
Total Past Due	2,521	2,634
Current	119,764	120,196
Total ending loans balance	122,285	122,830	125,108
Recorded Investment greater than 90 Days and Accruing	0	0
Indirect
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	225	645
60-89 Days Past Due	59	227
Greater than 90 Days	41	69
Total Past Due	325	941
Current	206,024	198,983
Total ending loans balance	206,349	199,924	195,358
Recorded Investment greater than 90 Days and Accruing
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
30-59 Days Past Due	191	26
60-89 Days Past Due	0	40
Greater than 90 Days	109	123
Total Past Due	300	189
Current	13,125	11,912
Total ending loans balance	13,425	12,101	12,854
Recorded Investment greater than 90 Days and Accruing	$ 0	$ 0

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Summary of The Contractual Amount of Commitments

A summary of the contractual amount of commitments at September 30, 2013 and December 31, 2012 follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Commitments to extend credit	$	115,615	$	74,206
Home equity lines of credit	87,652		81,041
Standby letters of credit	8,548		8,685
Total	$	211,815	$	163,932

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Earnings Per Common Share - Basic and Diluted Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Disclosure Earning Per Share Additional Information [Abstract]
Weighted average shares outstanding used in Basic Earnings per Common Share	9,303,702	7,944,354	8,940,213	7,937,781
Dilutive effect of stock options	19,955	4,764	16,967	4,209
Weighted average shares outstanding used in Diluted Earnings Per Common Share	9,323,657	7,949,118	8,957,180	7,941,990
Net income	$ 1,519	$ 1,525	$ 4,455	$ 4,468
Preferred Stock Dividends and Other Adjustments	109	319	483	956
Income Available to Common Shareholders	$ 1,410	$ 1,206	$ 3,972	$ 3,512
Basic Earnings Per Common Share	$ 0.15	$ 0.15	$ 0.44	$ 0.44
Diluted Earnings Per Common Share	$ 0.15	$ 0.15	$ 0.44	$ 0.44

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Securities - Realized Gains and Losses Related to Securities Available-for-Sale (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Available-for-sale Securities, Gross Realized Gain (Loss), Disclosures [Abstract]
Gross realized gains	$ 178	$ 46
Gross realized losses	0	0
Net Securities Gains	178	46
Proceeds from sales of available-for-sale securities	$ 2,272	$ 5,050

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Commitments and Contingencies - Additional Information (Details)	9 Months Ended
	Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
Commitment expiration date, minimum	30 days
Commitment expiration date, maximum	120 days

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Short-Term Borrowings - Additional Information (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Disclosure Short Term Borrowings Additional Information [Abstract]
Line of credit	50.00%
Home equity lines of credit	$ 86,886
Available line of credit	43,443
Line of credit with an unaffiliated financial institution	6,000
Securities sold under repurchase agreements	$ 1,643	$ 1,115

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Loans and Allowance for Loan Losses - Summary of Recorded Investment Based on Delinquency Status (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013		Dec. 31, 2012		Sep. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total ending loans balance	$ 891,300		$ 882,548		$ 885,715
Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total ending loans balance	404,031		414,005		411,924
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total ending loans balance	79,813		68,705		71,922
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total ending loans balance	65,397		64,983		68,549
Home Equity Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total ending loans balance	122,285		122,830		125,108
Indirect
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total ending loans balance	206,349		199,924		195,358
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total ending loans balance	13,425		12,101		12,854
Commercial Credit Exposure
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	454,111		444,671
Total loans internally credit risk graded	490,617		490,430
Total loans not internally credit risk graded	400,683		392,118
Total ending loans balance	891,300		882,548
Commercial Credit Exposure | Grade 1-Minimal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	74		114
Commercial Credit Exposure | Grade 2-Modest
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	37		0
Commercial Credit Exposure | Grade 3-Better than average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	866		1,106
Commercial Credit Exposure | Grade 4-Average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	28,663		35,777
Commercial Credit Exposure | Grade 5-Acceptable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	424,471		407,674
Commercial Credit Exposure | Grade 6-Special mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	13,857		15,637
Commercial Credit Exposure | Grade 7-Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	22,649		29,357
Commercial Credit Exposure | Grade 8-Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		765
Commercial Credit Exposure | Grade 9-Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Current loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	394,044		385,507
Commercial Credit Exposure | 30-59 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	1,887		1,695
Commercial Credit Exposure | 60-89 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	1,007		1,855
Commercial Credit Exposure | 90 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	3,745		3,061
Commercial Credit Exposure | Commercial Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	371,634		373,771
Total loans internally credit risk graded	404,031		414,005
Total loans not internally credit risk graded	0		0
Total ending loans balance	404,031		414,005
Commercial Credit Exposure | Commercial Real Estate | Grade 1-Minimal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Commercial Real Estate | Grade 2-Modest
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Commercial Real Estate | Grade 3-Better than average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	866		1,100
Commercial Credit Exposure | Commercial Real Estate | Grade 4-Average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	27,181		30,604
Commercial Credit Exposure | Commercial Real Estate | Grade 5-Acceptable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	343,587		342,067
Commercial Credit Exposure | Commercial Real Estate | Grade 6-Special mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	10,671		12,201
Commercial Credit Exposure | Commercial Real Estate | Grade 7-Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	21,726		27,268
Commercial Credit Exposure | Commercial Real Estate | Grade 8-Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		765
Commercial Credit Exposure | Commercial Real Estate | Grade 9-Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Commercial Real Estate | Current loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		0
Commercial Credit Exposure | Commercial Real Estate | 30-59 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		0
Commercial Credit Exposure | Commercial Real Estate | 60-89 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		0
Commercial Credit Exposure | Commercial Real Estate | 90 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		0
Commercial Credit Exposure | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	76,309		64,690
Total loans internally credit risk graded	79,813		68,705
Total loans not internally credit risk graded	0		0
Total ending loans balance	79,813		68,705
Commercial Credit Exposure | Commercial | Grade 1-Minimal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	74		114
Commercial Credit Exposure | Commercial | Grade 2-Modest
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	37		0
Commercial Credit Exposure | Commercial | Grade 3-Better than average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		6
Commercial Credit Exposure | Commercial | Grade 4-Average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	866		4,547
Commercial Credit Exposure | Commercial | Grade 5-Acceptable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	75,332		60,023
Commercial Credit Exposure | Commercial | Grade 6-Special mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	3,149		3,394
Commercial Credit Exposure | Commercial | Grade 7-Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	355		621
Commercial Credit Exposure | Commercial | Grade 8-Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Commercial | Grade 9-Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Commercial | Current loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		0
Commercial Credit Exposure | Commercial | 30-59 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		0
Commercial Credit Exposure | Commercial | 60-89 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		0
Commercial Credit Exposure | Commercial | 90 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		0
Commercial Credit Exposure | Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	6,168	[1]	6,210	[1]
Total loans internally credit risk graded	6,773	[1]	7,720	[1]
Total loans not internally credit risk graded	58,624	[1]	57,263	[1]
Total ending loans balance	65,397	[1]	64,983	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 1-Minimal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0	[1]	0	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 2-Modest
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0	[1]	0	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 3-Better than average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0	[1]	0	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 4-Average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	616	[1]	626	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 5-Acceptable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	5,552	[1]	5,584	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 6-Special mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	37	[1]	42	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 7-Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	568	[1]	1,468	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 8-Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0	[1]	0	[1]
Commercial Credit Exposure | Residential Real Estate | Grade 9-Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0	[1]	0	[1]
Commercial Credit Exposure | Residential Real Estate | Current loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	55,131	[1]	54,416	[1]
Commercial Credit Exposure | Residential Real Estate | 30-59 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	377	[1]	394	[1]
Commercial Credit Exposure | Residential Real Estate | 60-89 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	586	[1]	1,094	[1]
Commercial Credit Exposure | Residential Real Estate | 90 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	2,530	[1]	1,359	[1]
Commercial Credit Exposure | Home Equity Loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Total loans internally credit risk graded	0		0
Total loans not internally credit risk graded	122,285		122,830
Total ending loans balance	122,285		122,830
Commercial Credit Exposure | Home Equity Loans | Grade 1-Minimal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Home Equity Loans | Grade 2-Modest
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Home Equity Loans | Grade 3-Better than average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Home Equity Loans | Grade 4-Average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Home Equity Loans | Grade 5-Acceptable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Home Equity Loans | Grade 6-Special mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Home Equity Loans | Grade 7-Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Home Equity Loans | Grade 8-Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Home Equity Loans | Grade 9-Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Home Equity Loans | Current loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	119,764		120,196
Commercial Credit Exposure | Home Equity Loans | 30-59 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	1,094		630
Commercial Credit Exposure | Home Equity Loans | 60-89 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	362		494
Commercial Credit Exposure | Home Equity Loans | 90 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	1,065		1,510
Commercial Credit Exposure | Indirect
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Total loans internally credit risk graded	0		0
Total loans not internally credit risk graded	206,349		199,924
Total ending loans balance	206,349		199,924
Commercial Credit Exposure | Indirect | Grade 1-Minimal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Indirect | Grade 2-Modest
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Indirect | Grade 3-Better than average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Indirect | Grade 4-Average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Indirect | Grade 5-Acceptable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Indirect | Grade 6-Special mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Indirect | Grade 7-Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Indirect | Grade 8-Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Indirect | Grade 9-Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Indirect | Current loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	206,024		198,983
Commercial Credit Exposure | Indirect | 30-59 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	225		645
Commercial Credit Exposure | Indirect | 60-89 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	59		227
Commercial Credit Exposure | Indirect | 90 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	41		69
Commercial Credit Exposure | Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Total loans internally credit risk graded	0		0
Total loans not internally credit risk graded	13,425		12,101
Total ending loans balance	13,425		12,101
Commercial Credit Exposure | Consumer | Grade 1-Minimal
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Consumer | Grade 2-Modest
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Consumer | Grade 3-Better than average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Consumer | Grade 4-Average
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Consumer | Grade 5-Acceptable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Pass Credits	0		0
Commercial Credit Exposure | Consumer | Grade 6-Special mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Consumer | Grade 7-Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Consumer | Grade 8-Doubtful
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Consumer | Grade 9-Loss
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans internally credit risk graded	0		0
Commercial Credit Exposure | Consumer | Current loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	13,125		11,912
Commercial Credit Exposure | Consumer | 30-59 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	191		26
Commercial Credit Exposure | Consumer | 60-89 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	0		40
Commercial Credit Exposure | Consumer | 90 days past due loans not internally risk graded
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans not internally credit risk graded	$ 109		$ 123

[1] Residential loans with an internal commercial credit risk grade include loans that are secured by non owner occupied 1-4 family residential properties and conventional 1-4 family residential properties.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Common stock, par value	$ 1	$ 1
Common stock, authorized	15,000,000	15,000,000
Common stock, issued	9,631,896	8,272,548
Treasury stock, shares	328,194	328,194
Preferred stock, Series A Voting, no par value, authorized 150,000 shares, none issued at September 30, 2013 and December 31, 2012.
Preferred stock, shares authorized	150,000	150,000
Preferred stock, shares issued	0	0
Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, 9,147 shares authorized and issued at September 30, 2013 and 18,880 shares authorized and issued at December 31, 2012
Preferred stock, Series B, liquidation value	$ 1,000	$ 1,000
Preferred stock, shares authorized	9,147	18,880
Preferred stock, shares issued	9,147	18,880

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Deposits

9 Months Ended

Sep. 30, 2013

Banking and Thrift [Abstract]

Deposits

Deposits

Deposit balances are summarized as follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Demand and other noninterest-bearing	$	139,871	$	139,894
Interest checking	168,955		155,248
Savings	124,033		119,247
Money market accounts	98,570		102,792
Consumer time deposits	379,948		386,549
Public time deposits	120,868		95,862
Total deposits	$	1,032,245	$	999,592

The aggregate amount of certificates of deposit in denominations of $100,000 or more amounted to $285,550 and $253,464 at September 30, 2013 and December 31, 2012, respectively.

The maturity distribution of certificates of deposit as of September 30, 2013 are as follows:

	September 30, 2013
	(Dollars in thousands)
0-12 months	$	343,084
12-24 months	113,109
24-36 months	26,745
36-48 months	13,599
48-60 months	4,279
Total	$	500,816

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Total	Preferred Stock (net of discount)	Warrant to Purchase Common Stock	Common Stock [Member]	Additional Paid-In-Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock
Beginning balance at Dec. 31, 2011	$ 113,274	$ 25,122	$ 146	$ 8,210	$ 39,607	$ 44,080	$ 2,201	$ (6,092)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	4,468					4,468
Other comprehensive income, net of tax	149						149
Share-based compensation	229				229
Restricted shares granted (62,105 shares)	0			62	(62)
Repurchase of Warrants	(860)		(146)		(714)
Preferred dividends and accretion of discount	(945)	11				(956)
Common dividends declared ($.03 and $.03 per share during the nine months ended September 30, 2013 and 2012, respectively)	(237)					(237)
Ending balance at Sep. 30, 2012	116,079	25,133	0	8,273	39,060	47,355	2,350	(6,092)
Beginning balance at Dec. 31, 2012	110,144	18,815	0	8,273	39,141	48,767	1,240	(6,092)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	4,455					4,455
Other comprehensive income, net of tax	(6,155)						(6,155)
Share-based compensation	225				225
Issuance of common stock (1,359 shares)	9,733			1,359	8,374
Redemption of preferred stock (9,733 shares)	(9,693)	(9,701)				8
Preferred dividends and accretion of discount	(483)	8				(491)
Common dividends declared ($.03 and $.03 per share during the nine months ended September 30, 2013 and 2012, respectively)	(265)					(265)
Ending balance at Sep. 30, 2013	$ 107,961	$ 9,122	$ 0	$ 9,632	$ 47,740	$ 52,474	$ (4,915)	$ (6,092)

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Estimated Fair Value of Financial Instruments - Assets Measured by Fair Value on a Recurring Basis (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value Of Other Financial Instrument [Line Items]
Securities	$ 0	$ 0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Government agencies and corporations
Fair Value Of Other Financial Instrument [Line Items]
Securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage backed securities
Fair Value Of Other Financial Instrument [Line Items]
Securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Collateralized mortgage obligations
Fair Value Of Other Financial Instrument [Line Items]
Securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | State and political subdivisions
Fair Value Of Other Financial Instrument [Line Items]
Securities	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Preferred securities
Fair Value Of Other Financial Instrument [Line Items]
Securities	0
Significant Other Observable Inputs (Level 2) [Member]
Fair Value Of Other Financial Instrument [Line Items]
Securities	210,606	203,763
Significant Other Observable Inputs (Level 2) [Member] | U.S. Government agencies and corporations
Fair Value Of Other Financial Instrument [Line Items]
Securities	66,879	36,970
Significant Other Observable Inputs (Level 2) [Member] | Mortgage backed securities
Fair Value Of Other Financial Instrument [Line Items]
Securities	95,812	111,701
Significant Other Observable Inputs (Level 2) [Member] | Collateralized mortgage obligations
Fair Value Of Other Financial Instrument [Line Items]
Securities	14,651	22,881
Significant Other Observable Inputs (Level 2) [Member] | State and political subdivisions
Fair Value Of Other Financial Instrument [Line Items]
Securities	33,264	32,211
Significant Other Observable Inputs (Level 2) [Member] | Preferred securities
Fair Value Of Other Financial Instrument [Line Items]
Securities	0
Significant Unobservable Inputs (Level 3) [Member]
Fair Value Of Other Financial Instrument [Line Items]
Securities	4,684	0
Significant Unobservable Inputs (Level 3) [Member] | U.S. Government agencies and corporations
Fair Value Of Other Financial Instrument [Line Items]
Securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Mortgage backed securities
Fair Value Of Other Financial Instrument [Line Items]
Securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Collateralized mortgage obligations
Fair Value Of Other Financial Instrument [Line Items]
Securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | State and political subdivisions
Fair Value Of Other Financial Instrument [Line Items]
Securities	0	0
Significant Unobservable Inputs (Level 3) [Member] | Preferred securities
Fair Value Of Other Financial Instrument [Line Items]
Securities	4,684
Fair Value [Member]
Fair Value Of Other Financial Instrument [Line Items]
Securities	215,290	203,763
Fair Value [Member] | U.S. Government agencies and corporations
Fair Value Of Other Financial Instrument [Line Items]
Securities	66,879	36,970
Fair Value [Member] | Mortgage backed securities
Fair Value Of Other Financial Instrument [Line Items]
Securities	95,812	111,701
Fair Value [Member] | Collateralized mortgage obligations
Fair Value Of Other Financial Instrument [Line Items]
Securities	14,651	22,881
Fair Value [Member] | State and political subdivisions
Fair Value Of Other Financial Instrument [Line Items]
Securities	33,264	32,211
Fair Value [Member] | Preferred securities
Fair Value Of Other Financial Instrument [Line Items]
Securities	$ 4,684

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
ASSETS
Cash and due from banks	$ 25,816	$ 24,139
Federal funds sold and interest bearing deposits in banks	21,274	6,520
Cash and cash equivalents (Note 3)	47,090	30,659
Securities available for sale, at fair value (Note 5)	215,290	203,763
Restricted stock	5,741	5,741
Loans held for sale	2,110	7,634
Loans:
Portfolio loans (Note 6)	891,300	882,548
Allowance for loan losses (Note 6)	(17,791)	(17,637)
Net loans	873,509	864,911
Bank premises and equipment, net	8,322	8,721
Other real estate owned	951	1,366
Bank owned life insurance	19,122	18,611
Goodwill, net (Note 4)	21,582	21,582
Intangible assets, net (Note 4)	492	594
Accrued interest receivable	3,750	3,726
Other assets	12,543	10,946
Total Assets	1,210,502	1,178,254
Deposits: (Note 7)
Demand and other noninterest-bearing	139,871	139,894
Savings, money market and interest-bearing demand	391,558	377,287
Time deposits	500,816	482,411
Total deposits	1,032,245	999,592
Short-term borrowings (Note 8)	1,643	1,115
Federal Home Loan Bank advances (Note 9)	46,658	46,508
Junior subordinated debentures (Note 10)	16,238	16,238
Accrued interest payable	804	882
Accrued expenses and other liabilities	4,953	3,775
Total Liabilities	1,102,541	1,068,110
Shareholders’ Equity
Discount on Series B preferred stock	(25)	(65)
Common stock, par value $1 per share, authorized 15,000,000 shares, issued 9,631,896 shares at September 30, 2013 and 8,272,548 at December 31, 2012	9,632	8,273
Additional paid-in capital	47,740	39,141
Retained earnings	52,474	48,767
Accumulated other comprehensive income (loss)	(4,915)	1,240
Treasury shares at cost, 328,194 shares at September 30, 2013 and at December 31, 2012	(6,092)	(6,092)
Total Shareholders’ Equity	107,961	110,144
Total Liabilities and Shareholders’ Equity	1,210,502	1,178,254
Preferred stock, Series A Voting, no par value, authorized 150,000 shares, none issued at September 30, 2013 and December 31, 2012.
Shareholders’ Equity
Preferred stock	0	0
Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, 9,147 shares authorized and issued at September 30, 2013 and 18,880 shares authorized and issued at December 31, 2012
Shareholders’ Equity
Preferred stock	$ 9,147	$ 18,880

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Federal Home Loan Bank Advances - Additional Information (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Sep. 30, 2013
Securities Pledged As Collateral [Line Items]
Long-term Federal Home Loan Bank Advances	$ 46,508	$ 46,658
Maximum borrowing capacity of the Bank		75,227
Cash management line of credit		40,000
Prepayments For Federal Home Loan Bank Advances	27,500
Federal Home Loan Bank advances, average interest rate	2.47%
Federal Home Loan Bank advances contractual average interest rate	0.88%
Deferred FHLB prepayment penalty	1,017
Cash Management Line Of Credit Outstanding	0	0
Multi-family mortgage loans [Member]
Securities Pledged As Collateral [Line Items]
Investment securities		87,827
Residential real estate mortgage loans [Member]
Securities Pledged As Collateral [Line Items]
Investment securities		$ 18,274
Minimum [Member]
Securities Pledged As Collateral [Line Items]
Federal Home Loan Bank advances remaining maturity	12 months
Federal Home Loan Bank advances, fixed rate, remaining maturity	49 months
Maximum [Member]
Securities Pledged As Collateral [Line Items]
Federal Home Loan Bank advances remaining maturity	31 months
Federal Home Loan Bank advances, fixed rate, remaining maturity	67 months

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Estimated Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Summary of Financial Instruments

The estimated fair values of the Corporation’s financial instruments at September 30, 2013 and December 31, 2012 are summarized as follows:

	September 30, 2013										December 31, 2012
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Carrying Value		Estimated Fair Value
	(Dollars in thousands)
Financial assets
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	$	47,090	$	47,090	$	47,090	$	—	$	—	$	30,659	$	30,659
Securities	215,290		215,290		—		210,606		4,684		203,763		203,763
Restricted stock	5,741		5,741		—		5,741		—		5,741		5,741
Portfolio loans, net	873,509		870,304		—		—		870,304		864,911		868,716
Loans held for sale	2,110		2,123		—		2,123		—		7,634		7,891
Accrued interest receivable	3,750		3,750		—		3,750		—		3,726		3,726
Financial liabilities
Deposits:
Demand, savings and money market	531,429		526,228		—		526,228		—		517,181		511,665
Certificates of deposit	500,816		502,660		—		502,660		—		482,411		485,394
Short-term borrowings	1,643		1,643		—		1,643		—		1,115		1,115
Federal Home Loan Bank advances	46,658		46,851		—		46,851		—		46,508		46,828
Junior subordinated debentures	16,238		15,375		—		15,375		—		16,238		17,197
Accrued interest payable	804		804		—		804		—		882		882

Assets Measured by Fair Value on a Recurring Basis

The following table presents information about the Corporation’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, and the valuation techniques used by the Corporation to determine those fair values.

Description	Fair Value as of September 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Securities available for sale:
U.S. Government agencies and corporations	$	66,879	$	—	$	66,879	$	—
Mortgage backed securities	95,812		—		95,812		—
Collateralized mortgage obligations	14,651		—		14,651		—
State and political subdivisions	33,264		—		33,264		—
Preferred Securities	4,684		—		—		4,684
Total	$	215,290	$	—	$	210,606	$	4,684
Description	Fair Value as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Securities available for sale:
U.S. Government agencies and corporations	$	36,970	$	—	$	36,970	$	—
Mortgage backed securities	111,701		—		111,701		—
Collateralized mortgage obligations	22,881		—		22,881		—
State and political subdivisions	32,211		—		32,211		—
Total	$	203,763	$	—	$	203,763	$	—

Balances of Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following table presents the balances of assets and liabilities measured at fair value on a nonrecurring basis:

September 30, 2013	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
	(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	24,976	$	24,976
Other real estate	—		—		951		951
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	25,927	$	25,927
December 31, 2012	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
	(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	27,796	$	27,796
Other real estate	—		—		1,366		1,366
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	29,162	$	29,162

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value (dollars in thousands).

Asset	Fair Value	Valuation Technique	Unobservable Input
Collateral dependent impaired loans	$24,976	Discounted cash flow Appraisal of collateral	Appraisal adjustments Risk premium rate Discount rate
Other real estate	951	Appraisal of collateral	Appraisal adjustments
Preferred Securities	4,684	Fair value measurements obtained from an independent pricing service - Income Approach	Market spreads, credit rating collateral type, and other relevant contractual features

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Core Deposit Intangible Assets, Gross and Net

A summary of core deposit intangible assets follows:

	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Core deposit intangibles	$	1,367	$	1,367
Less: accumulated amortization	875		773
Carrying value of core deposit intangibles	$	492	$	594

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Loans and Allowance for Loan Losses - Loans on Nonaccrual Status (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Nonaccrual Loans	$ 24,976	$ 27,796
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Nonaccrual Loans	13,630	16,349
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Nonaccrual Loans	355	472
Residential real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Nonaccrual Loans	5,335	5,622
Home equity loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Nonaccrual Loans	4,798	4,293
Indirect
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Nonaccrual Loans	486	711
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Nonaccrual Loans	$ 372	$ 349

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Trust Preferred Securities - Additional Information (Details) (USD $)	1 Months Ended	9 Months Ended
	May 31, 2007	Sep. 30, 2013	Dec. 31, 2012
Trust Preferred Securities [Line Items]
Accrued interest payable		$ 804,000	$ 882,000
Maturity date of subordinate notes		Jun. 15, 2037
Trust I [Member]
Trust Preferred Securities [Line Items]
Preferred securities sold to outside investors	10,000,000.0
Floating interest rate period	three-month LIBOR
LIBOR basis points	1.48%
Effective interest rate		1.73%
Accrued interest payable		5,000	19,000
Trust II [Member]
Trust Preferred Securities [Line Items]
Preferred securities sold to outside investors	10,000,000.0
Floating interest rate period	three-month LIBOR
LIBOR basis points	1.48%
Fixed interest rate of Trust II	6.64%
Effective interest rate		6.64%
Accrued interest payable		$ 21,000	$ 21,000

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Share-Based Compensation - Summary of the Status of Restricted Shares (Details) (Restricted stock [Member], USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Restricted stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Nonvested Shares, beginning balance (in shares)	143,031
Nonvested Shares, Granted (in shares)	0	62,105
Nonvested Shares, Vested (in shares)	(52,499)
Nonvested Shares, Forfeited or expired (in shares)	0
Nonvested Shares, ending balance (in shares)	90,532	143,031
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward]
Weighted Average Exercise Price per Share, Beginning balance	$ 5.07
Weighted Average Exercise Price per Share, Granted	$ 0.00	$ 5.39
Weighted Average Exercise Price per Share, Vested	$ 4.68
Weighted Average Exercise Price per Share, Forfeited or expired	$ 0.00
Weighted Average Exercise Price per Share, Ending balance	$ 5.29	$ 5.07

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Securities - Additional Information (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013 securities	Dec. 31, 2012 securities
Investments, Debt and Equity Securities [Abstract]
Carrying value of securities	$ 158,485	$ 150,197
Number of securities	52	12
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses	7,338	338
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	$ 7,051	$ 338

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Securities - Amortized Cost, Gross Unrealized Gains and Losses and Fair Values of Securities Available for Sale (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Debt securities - Amortized Cost	$ 219,624	$ 198,771
Total securities - Amortized Cost	219,624
Unrealized Gains	3,004	5,330
Unrealized Losses	(7,338)	(338)
Fair Value	215,290	203,763
U.S. Government agencies and corporations
Schedule of Available-for-sale Securities [Line Items]
Debt securities - Amortized Cost	72,099	36,868
Unrealized Gains	0	102
Unrealized Losses	(5,220)	0
Fair Value	66,879	36,970
Mortgage backed securities
Schedule of Available-for-sale Securities [Line Items]
Debt securities - Amortized Cost	95,625	109,440
Unrealized Gains	1,494	2,589
Unrealized Losses	(1,307)	(328)
Fair Value	95,812	111,701
Collateralized mortgage obligations
Schedule of Available-for-sale Securities [Line Items]
Debt securities - Amortized Cost	14,592	22,483
Unrealized Gains	256	398
Unrealized Losses	(197)	0
Fair Value	14,651	22,881
State and political subdivisions
Schedule of Available-for-sale Securities [Line Items]
Debt securities - Amortized Cost	32,624	29,980
Unrealized Gains	1,254	2,241
Unrealized Losses	(614)	(10)
Fair Value	33,264	32,211
Preferred securities
Schedule of Available-for-sale Securities [Line Items]
Equity securities - Amortized Cost	4,684
Unrealized Gains	0
Unrealized Losses	0
Fair Value	$ 4,684

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Securities - Amortized Cost and Fair Value of the Debt Securities Portfolio are Shown by Expected Maturity (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Available-for-sale Securities, Debt Maturities [Abstract]
Due in one year or less - Amortized Cost	$ 20,298
Due from one year to five years - Amortized Cost	57,534
Due from five years to ten years - Amortized Cost	25,488
Due after ten years - Amortized Cost	6,087
Mortgage backed securities and collateralized mortgage obligations, Amortized cost	110,217
Amortized Cost	219,624	198,771
Due in one year or less - Fair Value	19,639
Due from one year to five years - Fair Value	54,482
Due from five years to ten years - Fair Value	24,649
Due after ten years - Fair Value	6,057
Mortgage backed securities and collateralized mortgage obligations, Fair value	110,463
Fair Value	$ 215,290	$ 203,763

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Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2013

Receivables [Abstract]

Loans and Allowance for Loan Losses

 Loans and Allowance for Loan Losses

The allowance for loan losses is maintained by the Corporation at a level considered by Management to be adequate to cover probable credit losses inherent in the loan portfolio. The amount of the provision for loan losses charged to operating expenses is the amount necessary, in the estimation of Management, to maintain the allowance for loan losses at an adequate level. While management’s periodic analysis of the allowance for loan losses may dictate portions of the allowance be allocated to specific problem loans, the entire amount is available for any loan charge-offs that may occur. Loan losses are charged off against the allowance when management believes that the full collectability of the loan is unlikely. Recoveries of amounts previously charged-off are credited to the allowance.

The allowance is comprised of a general allowance and a specific allowance for identified problem loans. The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. For residential real estate, installment and other loans, loss factors are applied on a portfolio basis. Loss factors are based on the Corporation’s historical loss experience and are reviewed for appropriateness on a quarterly basis, along with other factors affecting the collectability of the loan portfolio. These other factors include but are not limited to: changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; changes in national and local economic and business conditions, including the condition of various market segments; changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and staff; changes in the volume and severity of past due and classified loans, the volume of nonaccrual loans, troubled debt restructurings and other loan modifications; the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and the effect of external factors, such as legal and regulatory requirements, on the level of estimated credit losses in the Corporation’s current portfolio. Specific allowances are established for all impaired loans when management has determined that, due to identified significant conditions, it is probable that a loss will be incurred.

Activity in the allowance for loan losses by segment for the nine months ended September 30, 2013 and 2012 are summarized as follows:

Nine Months Ended September 30, 2013
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,386		$	835		$	1,559		$	2,357		$	1,230		$	270		$	17,637
Losses charged off	(1,475		)	(120		)	(679		)	(1,439		)	(555		)	(181		)	(4,449		)
Recoveries	584			7			277			60			276			49			1,253
Provision charged to expense	(33		)	(246		)	281			2,530			660			158			3,350
Balance, end of year	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
Three Months Ended September 30, 2013
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,424		$	438		$	1,606		$	3,508		$	1,581		$	258		$	17,815
Losses charged off	(630		)	—			(35		)	(410		)	(196		)	(83		)	(1,354		)
Recoveries	83			2			178			5			104			8			380
Provision charged to expense	585			36			(311		)	405			122			113			950
Balance, end of year	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
As of September 30, 2013
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	1,462		$	79		$	6		$	—		$	—		$	—		$	1,547
Collectively evaluated for impairment	9,000			397			1,432			3,508			1,611			296			16,244
Total ending allowance balance	$	10,462		$	476		$	1,438		$	3,508		$	1,611		$	296		$	17,791
Loans:
Individually evaluated for impairment	$	20,148		$	588		$	1,670		$	1,107		$	191		$	152		$	23,856
Collectively evaluated for impairment	383,883			79,225			63,727			121,178			206,158			13,273			867,444
Total ending loans balance	$	404,031		$	79,813		$	65,397		$	122,285		$	206,349		$	13,425		$	891,300

Nine Months Ended September 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,714		$	1,409		$	1,331		$	2,289		$	891		$	429		$	17,063
Losses charged off	(2,057		)	(213		)	(1,267		)	(851		)	(738		)	(252		)	(5,378		)
Recoveries	39			24			86			31			244			36			460
Provision charged to expense	3,064			(466		)	1,551			661			615			17			5,442
Balance, end of year	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
Three Months Ended September 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
	(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Losses charged off	(738		)	(48		)	(292		)	(296		)	(161		)	(146		)	(1,681		)
Recoveries	9			4			3			16			54			7			93
Provision charged to expense	1,093			(42		)	274			264			134			152			1,875
Balance, end of year	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
As of September 30, 2012
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	2,525		$	69		$	2		$	—		$	—		$	—		$	2,596
Collectively evaluated for impairment	9,235			$	685		$	1,699		$	2,130		$	1,012		$	230		14,991
Total ending allowance balance	$	11,760		$	754		$	1,701		$	2,130		$	1,012		$	230		$	17,587
Loans:
Individually evaluated for impairment	$	25,310		$	340		$	1,179		$	—		$	—		$	—		$	26,829
Collectively evaluated for impairment	386,614			71,582			67,370			125,108			195,358			12,854			858,886
Total ending loans balance	$	411,924		$	71,922		$	68,549		$	125,108		$	195,358		$	12,854		$	885,715

Delinquencies

Management monitors delinquency and potential problem loans. Bank-wide delinquency at September 30, 2013 was 2.05% of total loans. Total 30-59 day delinquency and 60-89 day delinquency was 0.39% and 0.13% of total loans at September 30, 2013, respectively. Bank-wide delinquency at December 31, 2012 was 2.89% of total loans. Total 30-59 day delinquency and 60-89 day delinquency was 0.61% and 0.32% of total loans at December 31, 2012, respectively. Information regarding delinquent loans as of September 30, 2013 and December 31, 2012 is as follows:

Age Analysis of Past Due Loans as of September 30, 2013

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	20	$	50	$	9,610	$	9,680	$	394,351	$	404,031	$	—
Commercial	1,567		109		234		1,910		77,903		79,813		—
Residential real estate	377		586		2,587		3,550		61,847		65,397		—
Home equity loans	1,094		362		1,065		2,521		119,764		122,285		—
Indirect	225		59		41		325		206,024		206,349
Consumer	191		—		109		300		13,125		13,425		—
Total	$	3,474	$	1,166	$	13,646	$	18,286	$	873,014	$	891,300	$	—

Age Analysis of Past Due Loans as of December 31, 2012

(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	3,681	$	1,004	$	12,398	$	17,083	$	396,922	$	414,005	$	—
Commercial	—		—		376		376		68,329		68,705		—
Residential real estate	394		1,094		2,827		4,315		60,668		64,983		184
Home equity loans	630		494		1,510		2,634		120,196		122,830		—
Indirect	645		227		69		941		198,983		199,924
Consumer	26		40		123		189		11,912		12,101		—
Total	$	5,376	$	2,859	$	17,303	$	25,538	$	857,010	$	882,548	$	184

Impaired Loans

A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. Residential mortgage, installment and other consumer loans are evaluated collectively for impairment. Individual commercial loans are evaluated for impairment. Impaired loans are written down by the establishment of a specific allowance where necessary. Interest income recognized on impaired loans while the loan was considered impaired was immaterial for all periods.

Impaired loans for the Period Ended September 30, 2013 and December 31, 2012 are as follows:

	At September 30, 2013						Three Months Ended September 30, 2013		Nine Months Ended September 30, 2013
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
	(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	14,625	$	19,617	$	—	$	16,127	$	16,667
Commercial	245		298		—		203		167
Residential real estate	1,613		1,801		—		1,802		1,800
Home equity loans	1,107		1,518		—		897		669
Indirect	191		293		—		208		129
Consumer	152		203		—		113		87
With allowance recorded:
Commercial real estate	5,523		8,842		1,462		5,139		5,781
Commercial	343		343		79		342		396
Residential real estate	57		154		6		29		60
Home equity loans	—		—		—		—		—
Indirect	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	23,856	$	33,069	$	1,547	$	24,860	$	25,756
	At December 31, 2012						Three Months Ended September 30, 2012		Nine Months Ended September 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
	(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	15,378	$	20,086	$	—	$	7,204	$	9,246
Commercial	138		138		—		164		269
Residential real estate	1,610		1,686		—		966		1,052
Home equity loans	398		398		—		—		—
Indirect	—		—		—		—		—
Consumer	61		61		—		—		—
With allowance recorded:
Commercial real estate	7,942		9,876		1,449		19,502		19,376
Commercial	459		459		209		159		216
Residential real estate	181		1,452		15		85		79
Home equity loans	—		—		—		—		—
Indirect	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	26,167	$	34,156	$	1,673	$	28,080	$	30,238

*impaired loans shown in the table above included loans that were classified as troubled debt restructurings ("TDRs"). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

Troubled Debt Restructuring

A restructuring of debt constitutes a troubled debt restructuring (“TDR”) if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. That concession either stems from an agreement between the creditor and the debtor or is imposed by law or a court. The Corporation adheres to ASC 310-40, Troubled Debt Restructurings by Creditors, to determine whether a troubled debt restructuring applies in a particular instance. Prior to loans being modified and classified as a TDR, specific reserves are generally assessed, as most these loans have been specifically allocated for as part of the Corporation's normal loan loss provisioning methodology. The Corporation has allocated reserves of $386 for the TDR loans at September 30, 2013.

The following table summarizes the loans that were modified as a TDR during the period ended September 30, 2013 and 2012.

		Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
		Recorded Investment			Recorded Investment
	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2013	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2013
Commercial	—	$—	—	—	4	$110	$104	$104
Residential real estate	1	$46	$42	$42	3	$189	$174	$174
Home equity loans	5	$320	$277	$277	21	$1,006	$753	$753
Indirect Loans	3	$31	$31	$31	35	$380	$303	$303
Consumer Loans	2	$27	$27	$27	2	$27	$27	$27

		Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
		Recorded Investment			Recorded Investment
	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2012	Number of Contracts	Pre-Modification Outstanding	Post-Modification Outstanding	At September 30, 2012
Commercial real estate	—	$—	$—	$—	4	$2,861	$2,861	$2,861

There were no loans modified in a TDR that subsequently defaulted during the twelve months periods ended September 30, 2013 and 2012 respectively (i.e., 90 days or more past due following a modification).

A modification of a loan constitutes a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Corporation offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. 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 and changing the monthly payments from interest-only to principal and interest, while leaving the interest rate unchanged.

Loans modified in a TDR are typically already on nonaccrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR for the Corporation 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.

The OCC regulatory guidance requires loans to be accounted for as collateral-dependent loans when borrowers have filed Chapter 7 bankruptcy, the debt has been discharged and the borrower has not reaffirmed the debt, regardless of the delinquency status of the loan. The filing of bankruptcy by the borrower is evidence of financial difficulty and the discharge of the obligation by the bankruptcy court is deemed to be a concession granted to the borrower.

The Corporation had approximately $638 of additional commitments to lend additional funds to the related debtors whose terms have been modified in a TDR.

Nonaccrual Loans

Nonaccrual loan balances at September 30, 2013 and December 31, 2012 are as follows:

Loans On Non-Accrual Status	September 30, 2013		December 31, 2012
	(Dollars in thousands)
Commercial real estate	$	13,630	$	16,349
Commercial	355		472
Residential real estate	5,335		5,622
Home equity loans	4,798		4,293
Indirect	486		711
Consumer	372		349
Total Nonaccrual Loans	$	24,976	$	27,796

Credit Risk Grading

Sound credit systems, practices and procedures such as credit risk grading systems; effective credit review and examination processes; effective loan monitoring, problem identification, and resolution processes; and a conservative loss recognition process and charge-off policy are integral to management’s proper assessment of the adequacy of the allowance. Many factors are considered when grades are assigned to individual loans such as current and historic delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. Commercial, commercial real estate and residential construction loans are assigned internal credit risk grades. The loan’s internal credit risk grade is reviewed on at least an annual basis and more frequently if needed based on specific borrower circumstances. Credit quality indicators used in management’s periodic analysis of the adequacy of the allowance include the Corporation’s internal credit risk grades which are described below and are included in the table below for September 30, 2013 and December 31, 2012:

• Grades 1 -5: defined as “Pass” credits — loans which are protected by the borrower’s current net worth and paying capacity or by the value of the underlying collateral. Pass credits are current or have not displayed a significant past due history.

• Grade 6: defined as “Special Mention” credits — loans where a potential weakness or risk exists, which could cause a more serious problem if not monitored. Loans listed for special mention generally demonstrate a history of repeated delinquencies, which may indicate a deterioration of the repayment abilities of the borrower.

• Grade 7: defined as “Substandard” credits — loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

• Grade 8: defined as “Doubtful” credits — loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable.

• Grade 9: defined as “Loss” credits — loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

For the residential real estate segment, the Corporation monitors credit quality using a combination of the delinquency status of the loan and/or the Corporation’s internal credit risk grades as indicated above.

The following table presents the recorded investment of commercial real estate, commercial and residential real estate loans by internal credit risk grade and the recorded investment of residential real estate, home equity, indirect and consumer loans based on delinquency status as of September 30, 2013 and December 31, 2012:

Commercial Credit Exposure	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
	September 30, 2013
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1 — Minimal	$	—	$	74	$	—	$	—	$	—	$	—	$	74
Grade 2 — Modest	—		37		—		—		—		—		37
Grade 3 — Better than average	866		—		—		—		—		—		866
Grade 4 — Average	27,181		866		616		—		—		—		28,663
Grade 5 — Acceptable	343,587		75,332		5,552		—		—		—		424,471
Total Pass Credits	371,634		76,309		6,168		—		—		—		454,111
Grade 6 — Special mention	10,671		3,149		37		—		—		—		13,857
Grade 7 — Substandard	21,726		355		568		—		—		—		22,649
Grade 8 — Doubtful	—		—		—		—		—		—		—
Grade 9 — Loss	—		—		—		—		—		—		—
Total loans internally credit risk graded	404,031		79,813		6,773		—		—		—		490,617
Loans not monitored by internal risk grade:
Current loans not internally risk graded	—		—		55,131		119,764		206,024		13,125		394,044
30-59 days past due loans not internally risk graded	—		—		377		1,094		225		191		1,887
60-89 days past due loans not internally risk graded	—		—		586		362		59		—		1,007
90+ days past due loans not internally risk graded	—		—		2,530		1,065		41		109		3,745
Total loans not internally credit risk graded	—		—		58,624		122,285		206,349		13,425		400,683
Total loans internally and not internally credit risk graded	$	404,031	$	79,813	$	65,397	$	122,285	$	206,349	$	13,425	$	891,300

* Residential loans with an internal commercial credit risk grade include loans that are secured by non owner occupied 1-4 family residential properties and conventional 1-4 family residential properties.

Commercial Credit Exposure	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
	December 31, 2012
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1 — Minimal	$	—	$	114	$	—	$	—	$	—	$	—	$	114
Grade 2 — Modest	—		—		—		—		—		—		—
Grade 3 — Better than average	1,100		6		—		—		—		—		1,106
Grade 4 — Average	30,604		4,547		626		—		—		—		35,777
Grade 5 — Acceptable	342,067		60,023		5,584		—		—		—		407,674
Total Pass Credits	373,771		64,690		6,210		—		—		—		444,671
Grade 6 — Special mention	12,201		3,394		42		—		—		—		15,637
Grade 7 — Substandard	27,268		621		1,468		—		—		—		29,357
Grade 8 — Doubtful	765		—		—		—		—		—		765
Grade 9 — Loss	—		—		—		—		—		—		—
Total loans internally credit risk graded	414,005		68,705		7,720		—		—		—		490,430
Loans not monitored by internal risk grade:
Current loans not internally risk graded	—		—		54,416		120,196		198,983		11,912		385,507
30-59 days past due loans not internally risk graded	—		—		394		630		645		26		1,695
60-89 days past due loans not internally risk graded	—		—		1,094		494		227		40		1,855
90+ days past due loans not internally risk graded	—		—		1,359		1,510		69		123		3,061
Total loans not internally credit risk graded	—		—		57,263		122,830		199,924		12,101		392,118
Total loans internally and not internally credit risk graded	$	414,005	$	68,705	$	64,983	$	122,830	$	199,924	$	12,101	$	882,548

* Residential loans with an internal commercial credit risk grade include loans that are secured by non owner occupied 1-4 family residential properties and conventional 1-4 family residential properties.

The Corporation adheres to underwriting standards consistent with its Loan Policy for indirect and consumer loans. Final approval of a consumer credit depends on the repayment ability of the borrower. Repayment ability generally requires the determination of the borrower’s capacity to meet current and proposed debt service requirements. A borrower’s repayment ability is monitored based on delinquency, generally for time periods of 30 to 59 days past due, 60 to 89 days past due and greater than 90 days past due. This information is provided in the above past due loans table.

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Share-Based Compensation - Summary of Options Outstanding (Details) (USD $)	9 Months Ended
	Sep. 30, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding, Number (in shares)	369,363
Weighted Average Remaining Contractual Life	5 years 4 months 21 days
Exercisable, Number (in shares)	208,667
Weighted Average Exercise Price (in usd per share)	$ 16.12
$5.34-$5.39 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, minimum (in usd per share)	$ 5.34
Range of exercise prices, maximum (in usd per share)	$ 5.39
Outstanding, Number (in shares)	37,500
Weighted Average Remaining Contractual Life	8 years 1 month 28 days
Exercisable, Number (in shares)	14,167
Weighted Average Exercise Price (in usd per share)	$ 5.38
$9.07-$9.56 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, minimum (in usd per share)	$ 9.07
Range of exercise prices, maximum (in usd per share)	$ 9.56
Outstanding, Number (in shares)	137,363
Weighted Average Remaining Contractual Life	9 years 7 months 28 days
Exercisable, Number (in shares)	0
Weighted Average Exercise Price (in usd per share)	$ 0.00
$14.47 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price (in usd per share)	$ 14.47
Outstanding, Number (in shares)	82,000
Weighted Average Remaining Contractual Life	4 years 4 months 6 days
Exercisable, Number (in shares)	82,000
Weighted Average Exercise Price (in usd per share)	$ 14.47
$15.35-$16.50 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of exercise prices, minimum (in usd per share)	$ 15.35
Range of exercise prices, maximum (in usd per share)	$ 16.50
Outstanding, Number (in shares)	52,500
Weighted Average Remaining Contractual Life	3 years 5 months 16 days
Exercisable, Number (in shares)	52,500
Weighted Average Exercise Price (in usd per share)	$ 15.78
$19.10 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price (in usd per share)	$ 19.10
Outstanding, Number (in shares)	30,000
Weighted Average Remaining Contractual Life	2 years 4 months 2 days
Exercisable, Number (in shares)	30,000
Weighted Average Exercise Price (in usd per share)	$ 19.10
$19.17 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Exercise price (in usd per share)	$ 19.17
Outstanding, Number (in shares)	30,000
Weighted Average Remaining Contractual Life	1 year 4 months 2 days
Exercisable, Number (in shares)	30,000
Weighted Average Exercise Price (in usd per share)	$ 19.17

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Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2013

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

Summary of Options Outstanding

	Outstanding		Exercisable
	Number	Weighted Average Remaining Contractual Life (Years)	Number	Weighted Average Exercise Price
Range of Exercise Prices
$5.34-$5.39	37,500	8.16	14,167	$	5.38
$9.07-$9.56	137,363	9.66	—	—
$14.47	82,000	4.35	82,000	14.47
$15.35-$16.50	52,500	3.46	52,500	15.78
$19.10	30,000	2.34	30,000	19.10
$19.17	30,000	1.34	30,000	19.17
Outstanding at end of period	369,363	5.39	208,667	16.12

Summary of Stock Options

A summary of the status of stock options at September 30, 2013 and 2012 is presented in the table below:

	2013		2012
	Options	Weighted Average Exercise Price per Share	Options	Weighted Average Exercise Price per Share
Outstanding at beginning of period	232,000	14.50	197,000	16.12
Granted	137,363	9.18	35,000	$5.39
Forfeited or expired	—	—	—	—
Exercised	—	—	—	—
Stock dividend or split	—	—	—	—
Outstanding at end of period	369,363	12.52	232,000	14.50
Exercisable at end of period	208,667	15.52	197,000	16.12

Schedule of Weighted Average Valuation Assumptions for Stock Options

The per share weighted-average fair value of stock options granted during the nine months of 2013 and 2012 was $2.15 and $1.22, respectively on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Three Months Ended September 30,				Nine Months Ended September 30
	2013		2012		2013		2012
Dividend Yield	3.03	%	—	%	3.07	%	3.38	%
Expected volatility	32.54	%	—	%	32.60	%	33.00	%
Risk-free interest rate	1.98	%	—	%	1.37	%	1.27	%

Summary of the Status of Restricted Shares

A summary of the status of restricted shares at September 30, 2013 is presented in the table below:

	Nonvested Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2013	143,031		$	5.07
Granted	—		—
Vested	(52,499	)	4.68
Forfeited or expired	—		—
Nonvested at September 30, 2013	90,532		5.29

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Loans and Allowance for Loan Losses - Impaired Loans (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment, Total	$ 23,856		$ 23,856		$ 26,167
Unpaid Principal Balance, Total	33,069		33,069		34,156
Related Allowance, Total	1,547		1,547		1,673
Average Recorded Balance, Total	24,860	28,080	25,756	30,238
Commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	14,625		14,625		15,378
Unpaid Principal Balance	19,617		19,617		20,086
Related Allowance	0		0		0
Average Recorded Balance	16,127	7,204	16,667	9,246
Recorded Investment	5,523		5,523		7,942
Unpaid Principal Balance	8,842		8,842		9,876
Related Allowance	1,462		1,462		1,449
Average Recorded Balance	5,139	19,502	5,781	19,376
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	245		245		138
Unpaid Principal Balance	298		298		138
Related Allowance	0		0		0
Average Recorded Balance	203	164	167	269
Recorded Investment	343		343		459
Unpaid Principal Balance	343		343		459
Related Allowance	79		79		209
Average Recorded Balance	342	159	396	216
Residential real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	1,613		1,613		1,610
Unpaid Principal Balance	1,801		1,801		1,686
Related Allowance	0		0		0
Average Recorded Balance	1,802	966	1,800	1,052
Recorded Investment	57		57		181
Unpaid Principal Balance	154		154		1,452
Related Allowance	6		6		15
Average Recorded Balance	29	85	60	79
Home equity loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	1,107		1,107		398
Unpaid Principal Balance	1,518		1,518		398
Related Allowance	0		0		0
Average Recorded Balance	897	0	669	0
Recorded Investment	0		0		0
Unpaid Principal Balance	0		0		0
Related Allowance	0		0		0
Average Recorded Balance			0	0
Indirect
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	191		191		0
Unpaid Principal Balance	293		293		0
Related Allowance	0		0		0
Average Recorded Balance	208	0	129	0
Recorded Investment	0		0		0
Unpaid Principal Balance	0		0		0
Related Allowance	0		0		0
Average Recorded Balance	0	0	0	0
Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Recorded Investment	152		152		61
Unpaid Principal Balance	203		203		61
Related Allowance	0		0		0
Average Recorded Balance	113	0	87	0
Recorded Investment	0		0		0
Unpaid Principal Balance	0		0		0
Related Allowance	0		0		0
Average Recorded Balance	$ 0	$ 0	$ 0	$ 0

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Federal Home Loan Bank Advances

9 Months Ended

Sep. 30, 2013

Disclosure Federal Home Loan Bank Advances Additional Information [Abstract]

Federal Home Loan Bank Advances

 Federal Home Loan Bank Advances

Federal Home Loan Bank advances amounted to $46,658 and $46,508 at September 30, 2013 and December 31, 2012 respectively. All advances were bullet maturities with no call features. At September 30, 2013, collateral pledged for FHLB advances consisted of qualified multi-family and residential real estate mortgage loans and investment securities of $87,827 and $18,274, respectively. The maximum borrowing capacity of the Bank at September 30, 2013 was $75,227. The Bank maintains a $40,000 cash management line of credit (CMA) with the FHLB. No amounts were outstanding for the CMA line of credit at September 30, 2013 and December 31, 2012.

Maturities of FHLB advances outstanding at September 30, 2013 and December 31, 2012 are as follows:

	September 30, 2013			December 31, 2012
	(Dollars in thousands)
Maturity January 2014 with fixed rate 3.55%	$	8		$	15
Maturity January 2015 with fixed rate 0.80%	20,000			20,000
Maturity December 2016 with fixed rate 0.79%	10,000			10,000
Maturities June 2017 through December 2017, with fixed rates ranging from 0.89% to 0.99%	15,000			15,000
Maturity June 2018 fixed rate 1.24%	2,500			2,500
Restructuring prepayment penalty	(850		)	(1,007		)
Total FHLB advances	$	46,658		$	46,508

In 2012, the Corporation prepaid $27,500 of fixed rate FHLB advances with a contractual average interest rate of 2.47% and a remaining maturity of 12 to 31 months. The prepaid FHLB advances were replaced with $27,500 of fixed rate FHLB advances with a contractual average interest rate of 0.88% and terms of 49 to 67 months. In accordance with the restructure, the Corporation was required to pay a prepayment penalty of $1,017 to the FHLB. The present value of the cash flows under the terms of the new FHLB advances (including the prepayment penalties) were not more than 10% different from the present value of the cash flows under the terms of the prepaid FHLB advances and therefore the new advances were not considered to be substantially different from the original advances in accordance with ASC 470-50, Debt – Modifications and Exchanges. As a result, the prepayment penalties have been treated as a discount on the new debt and are being amortized over the life of the new advances as an adjustment to rate. The prepayment penalty effectively increases the interest rate on the new advances over the lives of the new advances at the time of the transaction. The benefit of prepaying these advances was an immediate decrease in interest expense and a decrease in interest rate sensitivity as the maturity of each of the refinanced FHLB advances was extended at a lower rate.

At September 30, 2013, the advances were structured to contractually pay down as follows:

	Balance			Weighted Average Rate
2014	$	8		3.55%
2015	20,000			0.80
2016	10,000			0.79
2017	15,000			0.96
Thereafter	2,500			1.24
Total	$	47,508		0.87%
Restructuring prepayment penalty	(850		)
Total	$	46,658

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Securities

9 Months Ended

Sep. 30, 2013

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

The amortized cost, gross unrealized gains and losses and fair values of securities at September 30, 2013 and December 31, 2012 follows:

	At September 30, 2013
	Amortized  Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	72,099	$	—	$	(5,220	)	$	66,879
Mortgage backed securities	95,625		1,494		(1,307		)	95,812
Collateralized mortgage obligations	14,592		256		(197		)	14,651
State and political subdivisions	32,624		1,254		(614		)	33,264
Preferred Securities	4,684		—		—			4,684
Total Securities	$	219,624	$	3,004	$	(7,338	)	$	215,290
	At December 31, 2012
	Amortized  Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	36,868	$	102	$	—		$	36,970
Mortgage backed securities	109,440		2,589		(328		)	111,701
Collateralized mortgage obligations	22,483		398		—			22,881
State and political subdivisions	29,980		2,241		(10		)	32,211
Total Securities	$	198,771	$	5,330	$	(338	)	$	203,763

U.S. Government agencies and corporations include callable and bullet agency issues and agency-backed mortgage backed securities. Maturities may differ from contractual terms because borrowers may have the right to call or prepay obligations with or without penalties. Periodic payments are received on mortgage-backed securities based upon payment patterns of the underlying collateral.

The amortized cost and fair value of available for sale debt securities by contractual maturity date at September 30, 2013 is provided in the following table. Mortgage backed securities and collaterlized mortgage obligations are not due at a single maturity date and are therefore shown separately.

	At September 30, 2013
	Amortized Cost		Fair Value
	(Dollars in thousands)
Securities available for sale:
Due in one year or less	$	20,298	$	19,639
Due from one year to five years	57,534		54,482
Due from five years to ten years	25,488		24,649
Due after ten years	6,087		6,057
Mortgage backed securities and collateralized mortgage obligations	110,217		110,463
	$	219,624	$	215,290

The following table shows the proceeds from sales of available-for-sale securities for the nine months ended September 30, 2013 and 2012. The gross realized gains and losses on those sales that have been included in earnings. Gains or losses on the sales of available-for-sale securities are recognized upon sale and are determined using the specific identification method.

	September 30,
	2013		2012
	(Dollars in thousands)
Gross realized gains	$	178	$	46
Gross realized losses	—		—
Net Securities Gains	$	178	$	46
Proceeds from the sale of available for sale securities	$	2,272	$	5,050

The carrying value of securities pledged to secure trust deposits, public deposits, line of credit, and for other purposes required by law amounted to $158,485 and $150,197 at September 30, 2013 and December 31, 2012, respectively.

The following is a summary of securities that had unrealized losses at September 30, 2013 and December 31, 2012. The information is presented for securities that have been in an unrealized loss position for less than 12 months and for more than 12 months. At September 30, 2013, the Corporation held 52 securities with unrealized losses totaling $7,338. At December 31, 2012, there were 12 securities with unrealized losses totaling $338. Securities may temporarily be valued at less than amortized cost if the current levels of interest rates, as compared to the coupons on the securities held by the Corporation, are higher or if impairment is not due to credit deterioration. The Corporation has the intent and the ability to hold these securities until their value recovers, which may be until maturity.

	At September 30, 2013
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	66,879	$	(5,220	)	$	—	$	—		$	66,879	(5,220		)
Mortgage backed securities	$	43,533	$	(1,020	)	$	12,979	$	(287	)	$	56,512	(1,307		)
Collateralized mortgage obligations	6,665		(197		)	—		—			6,665		(197		)
State and political subdivisions	9,727		(614		)	—		—			9,727		(614		)
Total	$	126,804	$	(7,051	)	$	12,979	$	(287	)	$	139,783	$	(7,338	)
	At December 31, 2012
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in thousands)
Mortgage backed securities	$	44,491	$	(328	)	$	—	$	—		$	44,491	$	(328	)
State and political subdivisions	1,062		(10		)	—		—			1,062		(10		)
Total	$	45,553	$	(338	)	$	—	$	—		$	45,553	$	(338	)

On a quarterly basis, the Corporation performs a comprehensive security-level impairment assessment on all securities in an unrealized loss position to determine if other-than-temporary impairment ("OTTI") exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. For debt securities, an OTTI loss must be recognized for a debt security in an unrealized loss position if the Corporation intends to sell the security or it is more likely than not that the Corporation will be required to sell the security before recovery of its amortized cost basis. In this situation, the amount of loss recognized in income is equal to the difference between the fair value and the amortized cost basis of the individual security. If the Corporation does not expect to sell the security, the Corporation must evaluate the expected cash flows to be received to determine if a credit loss has occurred. If a credit loss is present, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or changes in market interest rates, is recorded in other comprehensive income.

Equity securities are also evaluated to determine whether the unrealized loss is expected to be recoverable based on whether evidence exists to support a realizable value equal to or greater than the amortized cost basis. If it is probable that the Corporation will not recover the amortized cost basis, taking into consideration the estimated recovery period and its ability to hold the equity security until recovery, OTTI is recognized. The Corporation held no equity securities as of September 30, 2013.

The security-level assessment is performed on each security, regardless of the classification of the security as available for sale or held to maturity. The assessments are based on the nature of the securities, the financial condition of the issuer, the extent and duration of the securities, the extent and duration of the loss and the intent and whether Management intends to sell or it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis, which may be maturity. For those securities for which the assessment shows the Corporation will recover the entire cost basis, Management does not intend to sell these securities and it is not more likely than not that the Corporation will be required to sell them before the anticipated recovery of the amortized cost basis, the gross unrealized losses are recognized in other comprehensive income, net of tax.

Management does not believe that the investment securities that were in an unrealized loss position as of September 30, 2013 represent an other-than-temporary impairment. Total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. The Corporation does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Corporation will be required to sell the investment securities before recovery of their amortized cost bases, which may be at maturity.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Operating Activities
Net income	$ 4,455	$ 4,468
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	3,350	5,442
Depreciation and amortization	771	860
Amortization (accretion) of premiums and discounts	1,749	1,580
Amortization of intangibles	102	102
Amortization of loan servicing rights	144	193
Amortization of deferred loan fees	(129)	(230)
Federal deferred income tax expense (benefit)	665	(55)
Securities gains, net	(178)	(46)
Share-based compensation expense	225	229
Loans originated for sale	(85,753)	(56,444)
Proceeds from sales of loan originations	92,895	57,428
Net gain from loan sales	(1,617)	(916)
Net loss on sale of other assets	17	68
Net decrease (increase) in accrued interest receivable and other assets	229	509
Net increase (decrease) in accrued interest payable, taxes and other liabilities	1,113	(834)
Net cash provided by operating activities	18,038	12,354
Investing Activities
Proceeds from sales of available-for-sale securities	2,272	5,050
Proceeds from maturities of available-for-sale securities	57,553	98,185
Purchase of available-for-sale securities	(82,258)	(113,866)
Net increase in loans made to customers	(12,294)	(48,103)
Proceeds from the sale of other real estate owned	868	760
Purchase of bank premises and equipment	(382)	(845)
Proceeds from sale of bank premises and equipment	15	0
Net cash provided by (used in) investing activities	(34,226)	(58,819)
Financing Activities
Net increase (decrease) in demand and other noninterest-bearing	(23)	16,372
Net increase in savings, money market and interest-bearing demand	14,271	22,636
Net decrease in certificates of deposit	18,405	(8,379)
Net increase (decrease) in short-term borrowings	528	761
Proceeds from Federal Home Loan Bank advances	196	30,000
Payment of Federal Home Loan Bank advances	(10)	(25,003)
Repurchase of Warrants	0	(860)
Dividends paid	(748)	(1,182)
Net cash provided by financing activities	32,619	34,345
Net increase (decrease) in cash and cash equivalents	16,431	(12,120)
Cash and cash equivalents, January 1	30,659	40,647
Cash and cash equivalents, September 30	47,090	28,527
Supplemental cash flow information
Interest paid	4,744	5,937
Income taxes paid	1,825	1,291
Transfer of loans to other real estate owned	$ 633	$ 1,004

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Federal Home Loan Bank Advances - Maturities of FHLB Advances Outstanding (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]
Cash Management Line Of Credit Outstanding	$ 0	$ 0
Maturities of FHLB advances outstanding
Federal Home Loan Bank advances amount	46,658	46,508
Restructuring prepayment penalty	(850)	(1,007)
Maturities January 2014 with fixed rate 3.55% [Member]
Maturities of FHLB advances outstanding
Interest rates on Federal Home Loan Bank Advances	3.55%
Federal Home Loan Bank advances amount	8	15
Maturities January 2015 with fixed rate 0.80% [Member]
Maturities of FHLB advances outstanding
Interest rates on Federal Home Loan Bank Advances	0.80%
Federal Home Loan Bank advances amount	20,000	20,000
Maturity December 2016 with fixed rate 0.79% [Member]
Maturities of FHLB advances outstanding
Interest rates on Federal Home Loan Bank Advances	0.79%
Federal Home Loan Bank advances amount	10,000	10,000
Maturity June 2017 through December 2017, with fixed rates ranging from 0.89% to 0.99% [Member]
Maturities of FHLB advances outstanding
Federal Home Loan Bank advances amount	15,000	15,000
Maturity June 2017 through December 2017, with fixed rates ranging from 0.89% to 0.99% [Member] | Minimum [Member]
Maturities of FHLB advances outstanding
Interest rates on Federal Home Loan Bank Advances	0.89%
Maturity June 2017 through December 2017, with fixed rates ranging from 0.89% to 0.99% [Member] | Maximum [Member]
Maturities of FHLB advances outstanding
Interest rates on Federal Home Loan Bank Advances	0.99%
Maturity June 2018 fixed rate 1.24% [Member]
Maturities of FHLB advances outstanding
Interest rates on Federal Home Loan Bank Advances	1.24%
Federal Home Loan Bank advances amount	$ 2,500	$ 2,500

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Deposits - Deposit Balances (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Deposits
Demand and other noninterest-bearing	$ 139,871	$ 139,894
Interest checking	168,955	155,248
Savings	124,033	119,247
Money market accounts	98,570	102,792
Consumer time deposits	379,948	386,549
Public time deposits	120,868	95,862
Total deposits	$ 1,032,245	$ 999,592

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Earnings Per Common Share - Additional Information (Details) (Stock options [Member])	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities not included in the computation of diluted earnings per share because the effect would be antidilutive	194,500	194,500	194,500	194,500

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Estimated Fair Value of Financial Instruments - Balances of Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Fair Value Of Other Financial Instrument [Line Items]
Impaired and nonaccrual loans	$ 24,976	$ 27,796
Other real estate	951	1,366
Total assets at fair value on a nonrecurring basis	25,927	29,162
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair Value Of Other Financial Instrument [Line Items]
Impaired and nonaccrual loans	0	0
Other real estate	0	0
Total assets at fair value on a nonrecurring basis	0	0
Significant Other Observable Inputs (Level 2) [Member]
Fair Value Of Other Financial Instrument [Line Items]
Impaired and nonaccrual loans	0	0
Other real estate	0	0
Total assets at fair value on a nonrecurring basis	0	0
Significant Unobservable Inputs (Level 3) [Member]
Fair Value Of Other Financial Instrument [Line Items]
Impaired and nonaccrual loans	24,976	27,796
Other real estate	951	1,366
Total assets at fair value on a nonrecurring basis	$ 25,927	$ 29,162

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Estimated Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Estimated Fair Value of Financial Instruments

Estimated Fair Value of Financial Instruments

The Corporation discloses estimated fair values for its financial instruments. Fair value estimates, methods and assumptions are set forth below for the Corporation’s financial instruments. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

• The carrying value of cash and due from banks, Federal funds sold, short-term investments, interest bearing deposits in other banks and accrued interest receivable and other financial assets is a reasonable estimate of fair value due to the short-term nature of the asset.

• The fair value of investment securities is based on the fair value hierarchy described below.

• For variable rate loans with interest rates that may be adjusted on a quarterly, or more frequent basis, the carrying amount is a reasonable estimate of fair value. The fair value of other types of loans is estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

• The carrying value approximates the fair value for bank owned life insurance.

• The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, money market, checking and interest-bearing checking, is equal to the amount payable on demand as of September 30, for each period presented. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. For variable rate certificates of deposit, the carrying amount is a reasonable estimate of fair value.

• Securities sold under repurchase agreements, other short-term borrowings, accrued interest payable and other financial liabilities approximate fair value due to the short-term nature of the liability.

• The fair value of Federal Home Loan Bank advances is estimated by discounting future cash flows using current FHLB rates for the remaining term to maturity.

• The fair value of junior subordinated debentures is based on the discounted value of contractual cash flows using rates currently offered for similar maturities.

• The fair value of commitments to extend credit approximates the fees charged to make these commitments since rates and fees of the commitment contracts approximates those currently charged to originate similar commitments. The carrying amount and fair value of off-balance sheet instruments is not significant as of September 30, 2013 and December 31, 2012.

Limitations

Estimates of fair value are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Estimates of fair value are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Bank has an Investment and Trust Services Division that contributes net fee income annually. The Investment and Trust Services Division is not considered a financial instrument and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities that are not considered financial instruments include premises and equipment and deferred tax assets. The estimated fair values of the Corporation’s financial instruments at September 30, 2013 and December 31, 2012 are summarized as follows:

	September 30, 2013										December 31, 2012
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Carrying Value		Estimated Fair Value
	(Dollars in thousands)
Financial assets
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	$	47,090	$	47,090	$	47,090	$	—	$	—	$	30,659	$	30,659
Securities	215,290		215,290		—		210,606		4,684		203,763		203,763
Restricted stock	5,741		5,741		—		5,741		—		5,741		5,741
Portfolio loans, net	873,509		870,304		—		—		870,304		864,911		868,716
Loans held for sale	2,110		2,123		—		2,123		—		7,634		7,891
Accrued interest receivable	3,750		3,750		—		3,750		—		3,726		3,726
Financial liabilities
Deposits:
Demand, savings and money market	531,429		526,228		—		526,228		—		517,181		511,665
Certificates of deposit	500,816		502,660		—		502,660		—		482,411		485,394
Short-term borrowings	1,643		1,643		—		1,643		—		1,115		1,115
Federal Home Loan Bank advances	46,658		46,851		—		46,851		—		46,508		46,828
Junior subordinated debentures	16,238		15,375		—		15,375		—		16,238		17,197
Accrued interest payable	804		804		—		804		—		882		882

Fair Value Measurements

The fair value of financial assets and liabilities recorded at fair value is categorized in three levels. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. These levels are as follows:

• Level 1 — Valuations based on quoted prices in active markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

• Level 2 — Valuations of assets and liabilities traded in less active dealer or broker markets. Valuations include quoted prices for similar assets and liabilities traded in the same market; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

• Level 3 — Assets and liabilities with valuations that include methodologies and assumptions that may not be readily observable, including option pricing models, discounted cash flow models, yield curves and similar techniques. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities, but in all cases are corroborated by external data, which may include third-party pricing services.

The following table presents information about the Corporation’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012, and the valuation techniques used by the Corporation to determine those fair values.

Description	Fair Value as of September 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Securities available for sale:
U.S. Government agencies and corporations	$	66,879	$	—	$	66,879	$	—
Mortgage backed securities	95,812		—		95,812		—
Collateralized mortgage obligations	14,651		—		14,651		—
State and political subdivisions	33,264		—		33,264		—
Preferred Securities	4,684		—		—		4,684
Total	$	215,290	$	—	$	210,606	$	4,684
Description	Fair Value as of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Securities available for sale:
U.S. Government agencies and corporations	$	36,970	$	—	$	36,970	$	—
Mortgage backed securities	111,701		—		111,701		—
Collateralized mortgage obligations	22,881		—		22,881		—
State and political subdivisions	32,211		—		32,211		—
Total	$	203,763	$	—	$	203,763	$	—

Fair value measurements of U.S. Government agencies and mortgage backed securities use pricing models that vary and may consider various assumptions, including time value, yield curves, volatility factors, prepayment speeds, default rates, loss severity, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Fair value of debt securities such as obligations of state and political may be determined by matrix pricing. Matrix pricing is a mathematical technique that is used to value debt securities without relying exclusively on quoted prices for specific securities, but rather by relying on the securities relationship to other benchmark quoted prices.

There were no transfers between Levels 1 and 2 of the fair value hierarchy during the periods ended September 30, 2013 and December 31, 2012. For the available for sale securities, the Corporation obtains fair value measurements from an independent third-party service or independent brokers.

The Corporation has assets that, under certain conditions, are subject to measurement at fair value on a nonrecurring basis. At September 30, 2013 and December 31, 2012, such assets consist primarily of impaired loans and other property. The Corporation has estimated the fair values of these assets using Level 3 inputs, specifically discounted cash flow projections.

The following table presents the balances of assets and liabilities measured at fair value on a nonrecurring basis:

September 30, 2013	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
	(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	24,976	$	24,976
Other real estate	—		—		951		951
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	25,927	$	25,927
December 31, 2012	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
	(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	27,796	$	27,796
Other real estate	—		—		1,366		1,366
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	29,162	$	29,162

Impaired and nonaccrual loans:    Fair value adjustments for these items typically occur when there is evidence of impairment. Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair market value of the collateral. The Corporation measures fair value based on the value of the collateral securing the loans. Collateral may be in the form of real estate or personal property including equipment and inventory. The vast majority of collateral is real estate. The value of the collateral is determined based on internal estimates as well as third party appraisals or non-binding broker quotes. These measurements were classified as Level 3.

Other Real Estate:    Other real estate includes foreclosed assets and properties securing residential and commercial loans. Foreclosed assets are adjusted to fair value less costs to sell upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at lower of carry value or fair value less costs to sell. Fair value is generally based upon internal estimates and third party appraisals or non-binding broker quotes and, accordingly, considered a Level 3 classification.

The following table presents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value (dollars in thousands).

Asset	Fair Value	Valuation Technique	Unobservable Input
Collateral dependent impaired loans	$24,976	Discounted cash flow Appraisal of collateral	Appraisal adjustments Risk premium rate Discount rate
Other real estate	951	Appraisal of collateral	Appraisal adjustments
Preferred Securities	4,684	Fair value measurements obtained from an independent pricing service - Income Approach	Market spreads, credit rating collateral type, and other relevant contractual features

Changes in Level 3 Fair Value Measurements

There were no assets measured at fair value on a recurring basis using significant unobservable inputs that were transferred to Level 3 as of or during the three and nine months ended September 30, 2013.

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Short-Term Borrowings

9 Months Ended

Sep. 30, 2013

Disclosure Short Term Borrowings Additional Information [Abstract]

Short-Term Borrowings

Short-Term Borrowings

The Bank has a line of credit for advances and discounts with the Federal Reserve Bank of Cleveland. The amount of this line of credit varies on a monthly basis. The line is equal to 50% of the balances of qualified home equity lines of credit that are pledged as collateral. At September 30, 2013, the Bank had pledged approximately $86,886 in qualifying home equity lines of credit, resulting in an available line of credit of approximately $43,443. No amounts were outstanding under the line of credit at September 30, 2013 or December 31, 2012. The Corporation also has a $6,000 line of credit with an unaffiliated financial institution. No amounts were outstanding under this line of credit at September 30, 2013 and December 31, 2012.

Short-term borrowings include securities sold under repurchase agreements and Federal funds purchased from correspondent banks. At September 30, 2013 and December 31, 2012, the outstanding balance of securities sold under repurchase agreements totaled $1,643 and $1,115, respectively. No Federal funds were purchased as of September 30, 2013 and December 31, 2012.

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Earnings Per Common Share (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Earning Per Share Additional Information [Abstract]

Basic and Diluted Earnings Per Share

Basic and diluted earnings per share are calculated as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Dollars in thousands except per share amounts)
Weighted average shares outstanding used in Basic Earnings per Common Share	9,303,702		7,944,354		8,940,213		7,937,781
Dilutive effect of stock options	19,955		4,764		16,967		4,209
Weighted average shares outstanding used in Diluted Earnings Per Common Share	9,323,657		7,949,118		8,957,180		7,941,990
Net Income	$	1,519	$	1,525	$	4,455	$	4,468
Preferred stock dividend and accretion	109		319		483		956
Income Available to Common Shareholders	$	1,410	$	1,206	$	3,972	$	3,512
Basic Earnings Per Common Share	$	0.15	$	0.15	$	0.44	$	0.44
Diluted Earnings Per Common Share	$	0.15	$	0.15	$	0.44	$	0.44

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Share-Based Compensation

9 Months Ended

Sep. 30, 2013

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

Share-Based Compensation

 Share-Based Compensation

A broad-based stock incentive plan, the 2006 Stock Incentive Plan, was adopted by the Corporation’s shareholders on April 18, 2006 and was amended and restated on May 2, 2012. Awards granted under this Plan as of September 30, 2013 were stock options granted in 2007, 2008, 2009, 2012 and 2013 and long-term restricted shares issued in 2010, 2011, and 2012. In addition, the Corporation has nonqualified stock option agreements outside of the 2006 Stock Incentive Plan. Grants under the nonqualified stock option agreements were made from 2005 to 2007.

Stock Options

During the nine months ended September 30, 2013, the Corporation granted 137,363 stock options to certain employees. All outstanding stock options were granted at an excercise price equal to the fair market value of the common stock on the date of grant. The maximum option term is ten years and the options generally vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years.

The Corporation recognizes compensation expense for awards with graded vesting schedule on a straight-line basis over the requisite service period for the entire award. The expense recorded for stock options was $52, and $9 for the nine months ended September 30, 2013 and 2012, respectively.

The following table summarizes the Corporation's stock options outstanding at September 30, 2013:

	Outstanding		Exercisable
	Number	Weighted Average Remaining Contractual Life (Years)	Number	Weighted Average Exercise Price
Range of Exercise Prices
$5.34-$5.39	37,500	8.16	14,167	$	5.38
$9.07-$9.56	137,363	9.66	—	—
$14.47	82,000	4.35	82,000	14.47
$15.35-$16.50	52,500	3.46	52,500	15.78
$19.10	30,000	2.34	30,000	19.10
$19.17	30,000	1.34	30,000	19.17
Outstanding at end of period	369,363	5.39	208,667	16.12

A summary of the status of stock options at September 30, 2013 and 2012 is presented in the table below:

	2013		2012
	Options	Weighted Average Exercise Price per Share	Options	Weighted Average Exercise Price per Share
Outstanding at beginning of period	232,000	14.50	197,000	16.12
Granted	137,363	9.18	35,000	$5.39
Forfeited or expired	—	—	—	—
Exercised	—	—	—	—
Stock dividend or split	—	—	—	—
Outstanding at end of period	369,363	12.52	232,000	14.50
Exercisable at end of period	208,667	15.52	197,000	16.12

There were no options exercised during the nine months of 2013 therefore the total intrinsic value of options exercised was $0. The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Corporation’s closing stock price on the last trading day of the third quarter of 2013 and the exercise price, multiplied by the number of in-the-money options). The Corporation’s closing stock price on September 30, 2013 was $9.40.

For the third quarter 2013, the per share weighted-average fair value of stock options granted was $2.35 compared to $0 for the third quarter 2012. The per share weighted-average fair value of stock options granted during the nine months of 2013 and 2012 was $2.15 and $1.22, respectively on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Three Months Ended September 30,				Nine Months Ended September 30
	2013		2012		2013		2012
Dividend Yield	3.03	%	—	%	3.07	%	3.38	%
Expected volatility	32.54	%	—	%	32.60	%	33.00	%
Risk-free interest rate	1.98	%	—	%	1.37	%	1.27	%

Restricted Shares

The Corporation did not issue long term restricted shares during the nine months ended September 30, 2013. In 2012, the Corporation issued 62,105 shares of long-term restricted shares. The market price of the Corporation’s common shares on the date of grant of the long-term restricted stock was $5.39 per share. Shares of long-term restricted stock generally vest in two equal installments on the second and third anniversaries of the date of grant, or upon the earlier death or disability of the recipient or a qualified change of control of the Corporation. The expense recorded for long-term restricted stock for the nine months ended September 30, 2013 and 2012 was $173, and $220 respectively.

The market price of the Corporation’s common shares at the date of grant is used to estimate the fair value of restricted stock awards. A summary of the status of restricted shares at September 30, 2013 is presented in the table below:

	Nonvested Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2013	143,031		$	5.07
Granted	—		—
Vested	(52,499	)	4.68
Forfeited or expired	—		—
Nonvested at September 30, 2013	90,532		5.29

Stock Appreciation Rights (“SARS”)

In 2006, the Corporation issued an aggregate of 30,000 SARS at $19.00 per share, 15,500 of which have expired due to employee terminations. The SARS vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years. Any unexercised portion of the SARS shall expire at the end of the stated term which is specified at the date of grant and shall not exceed ten years. The SARS issued in 2006 will expire in January 2016. The expense recorded for SARS for the nine months ended September 30, 2013, was $10 and for 2012 was $2.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	LNB BANCORP INC
Entity Central Index Key	0000737210
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Amendment Flag	false
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		9,303,702

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated financial statements include the accounts of LNB Bancorp, Inc. (the “Corporation”) and its wholly-owned subsidiary, The Lorain National Bank (the “Bank”). The consolidated financial statements also include the accounts of North Coast Community Development Corporation which is a wholly-owned subsidiary of the Bank. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The Corporation prepares its financial statements in conformity with generally accepted accounting principles (GAAP), which requires the Corporation’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas involving the use of management’s estimates and assumptions include the allowance for loan losses, the valuation of goodwill, the realization of deferred tax assets and fair values of financial instruments.

Segment Information

Segment Information

The Corporation’s activities are considered to be a single industry segment for financial reporting purposes. The Corporation is a financial holding company engaged in the business of commercial and retail banking, investment management and trust services, title insurance, and insurance with operations conducted through its main office and banking centers located throughout Lorain, Erie, Cuyahoga, Summit, and Franklin counties of Ohio. This market provides the source for substantially all of the Bank’s deposit and loan and trust activities. The majority of the Bank’s income is derived from a diverse base of commercial, mortgage and retail lending activities and investments.

Statement of Cash Flows

Statement of Cash Flows

For purposes of reporting in the Consolidated Statements of Cash Flows, cash and cash equivalents include currency on hand, amounts due from banks, Federal funds sold, and securities purchased under resale agreements. Generally, Federal funds sold and securities purchased under resale agreements are for one day periods.

Securities

Securities

Securities that are bought and held for the sole purpose of being sold in the near term are deemed trading securities with any related unrealized gains and losses reported in earnings. As of September 30, 2013 and December 31, 2012, the Corporation did not hold any trading securities. Securities that the Corporation has a positive intent and ability to hold to maturity are classified as held to maturity. As of September 30, 2013 and December 31, 2012, the Corporation did not hold any securities classified as held to maturity. Securities that are not classified as trading or held to maturity are classified as available for sale. Securities classified as available for sale are carried at their fair value with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income. Interest and dividends on securities, including amortization of premiums and accretion of discounts using the effective interest method over the period to maturity or call, are included in interest income. Gains and losses on sales of securities are determined on the specific identification method.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. When evaluating investment securities consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Corporation has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether an entity intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If an entity intends to sell or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis, the OTTI shall be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but the entity does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Restricted Stock

Restricted Stock

The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also a member of and owns stock in the Federal Reserve Bank. The Corporation owns stock in Bankers Bancshares Inc., an institution that provides correspondent banking services to community banks. Stock in these institutions is classified as restricted stock and is recorded at redemption value which approximates fair value. The Corporation periodically evaluates the restricted stock for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans Held For Sale

Loans Held For Sale

Held for sale loans 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. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in the noninterest income section of the Consolidated Statement of Income and Comprehensive Income.

Mortgage banking

Mortgage Banking

The Corporation sells originated mortgage loans into the secondary mortgage loan markets. During the period of loan origination and prior to the sale of the loans in the secondary market, the Corporation has exposure to movements in interest rates associated with mortgage loans that are in the “mortgage pipeline”. A pipeline loan is one that will be held for resale in which the Corporation has entered into a written mortgage loan commitment with a potential borrower. Written loan commitments that relate to the origination of mortgage loans that will be held for resale are considered free-standing derivatives and do not qualify for hedge accounting. Written loan commitments generally have a term of up to 60 days before the closing of the loan. The loan commitment does not bind the potential borrower to entering into the loan, nor does it guarantee that the Corporation will approve the potential borrower for the loan. Therefore, when determining fair value, the Corporation makes estimates of expected “fallout” (loan commitments not expected to close), using models, which consider cumulative historical fallout rates and other factors. Fallout can occur for a variety of reasons including falling interest rate environments where a borrower abandons an interest rate lock loan commitment, when a borrower is not approved as an acceptable credit by the lender or for a variety of other non-economic reasons.

Written loan commitments in which the borrower has locked in an interest rate results in market risk to the Corporation to the extent market interest rates change from the rate quoted to the borrower. The Corporation economically hedges the risk of changing interest rates associated with its interest rate lock commitments by entering into mandatory forward sales contracts.

The Corporation's mortgage loans held for sale are subject to changes in fair value, due to changes in interest rates from the loan's closing date through the date the mortgage loan is sold in the secondary market. The fair value of the mortgage loan declines in value when interest rates increase and conversely increases in value when interest rates decrease. To mitigate the risk of changes in interest rates, the Corporation enters into mandatory forward sales contracts on a portion of the mortgage loans held for sale to provide an economic hedge against those changes in fair value. The mandatory forward sales contracts are recorded at fair value with changes in value recorded in current earnings.

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

The Corporation uses interest rate swaps, interest rate lock commitments and forward contracts sold to hedge interest rate risk for asset and liability management purposes. All derivatives are accounted for in accordance with ASC-815, Derivatives and Hedging, and are recorded as either other assets or other liabilities at fair value. The Corporation engages in Back-to-Back swaps to mitigate its exposure to rising interest rates. A Back-to-Back swap provides that a customer receives a fixed interest rate commercial loan and the Corporation subsequently converts that fixed rate loan to a variable rate instrument over the term of the loan by entering into an interest rate swap with a dealer counterparty based on a London Inter-Bank Offered Rate index. The Corporation then receives a fixed rate payment from the customer on the loan and pays the equivalent amount to the dealer counterparty on the swap in exchange for a variable rate payment stream. Based upon accounting guidance each swap is accounted for as a stand-alone derivative and designated as a fair value hedge with any changes in fair value presented in current earnings.

Loans

Loans

Loans are reported at the principal amount outstanding, net of unearned income and premiums and discounts. Loans acquired through business combinations are valued at fair market value on or near the date of acquisition. The difference between the principal amount outstanding and the fair market valuation is amortized over the aggregate average life of each class of loan. Unearned income includes deferred fees, net of deferred direct incremental loan origination costs. Unearned income is amortized to interest income, over the contractual life of the loan, using the interest method. Direct loan origination fees and costs are deferred and amortized as an adjustment to interest income over the contractual life of the loan, using the interest method.

Loans are generally placed on nonaccrual status when they are 90 days past due for interest or principal or when the full and timely collection of interest or principal becomes uncertain. When a loan has been placed on nonaccrual status, the accrued and unpaid interest receivable is reversed against interest income. Generally, a loan is returned to accrual status when all delinquent interest and principal becomes current under the terms of the loan agreement and when the collectability is no longer doubtful.

A loan is impaired when based on current information and events it is probable the Corporation will be unable to collect the scheduled payment of principal and interest when due under the contractual terms of the loan agreement. Impairment is evaluated in total for smaller-balance loans of similar nature such as real estate mortgages and installment loans, and on an individual loan basis for commercial loans that are graded substandard or below. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, using either the present value of estimated future cash flows discounted at the loans effective interest rate, the loan's observable market value or at the fair value of collateral if repayment is expected solely from the collateral.

Allowance for Loan Losses

Allowance for Loan Losses

The allowance for loan losses is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. Management’s determination of the allowance, and the resulting provision, is based on judgments and assumptions, including general economic conditions, loan portfolio composition, loan loss experience, management’s evaluation of credit risk relating to pools of loans and individual borrowers, sensitivity analysis and expected loss models, value of underlying collateral, and observations of internal loan review staff or banking regulators.

The provision for loan losses is determined based on Management’s evaluation of the loan portfolio and the adequacy of the allowance for loan losses under current economic conditions and such other factors which, in management’s judgment, deserve current recognition.

Servicing

Servicing

Servicing assets are recognized as separate assets when rights are acquired through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment on a quarterly basis based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.

Bank Premises and Equipment

Bank Premises and Equipment

Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed generally on the straight-line method over the estimated useful lives of the assets. Upon the sale or other disposition of assets, the cost and related accumulated depreciation are retired and the resulting gain or loss is recognized. Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized. Software costs related to externally developed systems are capitalized at cost less accumulated amortization. Amortization is computed on the straight-line method over the estimated useful life.

Fair Value Measurement

Fair Value Measurement

The Corporation uses fair value measurements to record certain assets and liabilities at fair value and determine fair value disclosures. Additional information regarding fair value measurement is included in Note 12 (Estimated Fair Value Financial Instruments) in the notes to the consolidated financial statements.

Goodwill and Core Deposit Intangibles

Goodwill and Core Deposit Intangibles

Intangible assets arise from acquisitions and include goodwill and core deposit intangibles. Goodwill is the excess of purchase price over the fair value of identified net assets in acquisitions. Core deposit intangibles represent the value of depositor relationships purchased. Goodwill is evaluated at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Corporation evaluates goodwill impairment annually as of November 30^th of each year. Core deposit intangible assets are amortized using the straight-line method over ten years and are subject to annual impairment testing.

To simplify the process of testing goodwill for impairment for both public and nonpublic entities, on September 15, 2011 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-08, Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 gives an entity the option to first assess qualitative factors to determine whether it is more likely than not (a likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount (impairment). If the entity finds after the qualitative assessment that it is more likely than not (impairment indicators) that the fair value of a reporting unit is less than its carrying amount, the entity is then required to perform a full impairment test. Prior to the update, entities were required to test goodwill for impairment on at least an annual basis.

Other Real Estate Owned

Other Real Estate Owned

Other real estate owned (OREO) is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure, and loans classified as in-substance foreclosure. Other real estate owned is recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value of the underlying property collateral, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are treated as period costs. Banking premises are transferred at the lower of carrying value or estimated fair value, less estimated selling costs.

Bank Owned Life Insurance

Bank Owned Life Insurance

Bank owned life insurance policies are stated at the current cash surrender value of the policy, or the policy death proceeds less any obligation to provide a death benefit to an insured's beneficiaries if that value is less than the cash surrender value. Increases in the asset value are recorded as earnings in other income.

Split-Dollar Life Insurance

Split-Dollar Life Insurance

The Corporation recognizes a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to certain employees extending to postretirement periods. Based on the present value of expected future cash flows, the liability is recognized based on the substantive agreement with the employee.

Share-Based Compensation

Share-Based Compensation

The Corporation’s stock based compensation plans are described in detail in Note 13 (Share-Based Compensation). Compensation expense is recognized for stock options and unvested (restricted) stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation’s common shares at the date of grant is used to estimate the fair value of unvested (restricted) stock awards.

Compensation cost is recognized over the required service period, generally defined as the vesting period for stock option awards and as the unvested period for nonvested (restricted) stock awards. Certain of the Corporation’s share-based awards contain terms that provide for a graded vesting schedule whereby portions of the award vest in increments over the requisite service period.

Investment and Trust Services Assets and Income

Investment and Trust Services Assets and Income

Property held by the Corporation in fiduciary or agency capacity for its customers is not included in the Corporation’s financial statements as such items are not assets of the Corporation. Income from the Investment and Trust Services Division is reported on an accrual basis.

Income Taxes

Income Taxes

The Corporation and its wholly-owned subsidiary file an annual consolidated Federal income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be removed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when necessary to reduce deferred tax assets to amounts which are deemed more likely than not to be realized.

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Share-Based Compensation - Additional Information (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended						12 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Stock options [Member]	Sep. 30, 2012 Stock options [Member]	Sep. 30, 2013 Restricted stock [Member] Installment	Sep. 30, 2012 Restricted stock [Member]	Dec. 31, 2012 Restricted stock [Member]	Sep. 30, 2013 Stock appreciation rights (SARs) [Member]	Sep. 30, 2012 Stock appreciation rights (SARs) [Member]	Dec. 31, 2006 Stock appreciation rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock options granted			137,363	35,000
Maximum option term					10 years					10 years
General vesting period					3 years					3 years
Annual vesting percentage					33.33%
Expense recorded for share based compensation					$ 52	$ 9	$ 173	$ 220		$ 10	$ 2
Total intrinsic value of options exercised					$ 0
Closing stock price	$ 9.40		$ 9.40
Fair value of stock options granted (in dollars per share)	$ 2.35	$ 0	$ 2.15	$ 1.22
Shares issued							0		62,105
Purchase price of long term restricted share							$ 0.00		$ 5.39
Number of installments							2
Stock appreciation rights shares issued												30,000
Stock appreciation rights price of long term restricted share												$ 19.00
Shares expired due to employee terminations												15,500

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Estimated Fair Value of Financial Instruments - Level 3 Valuation Inputs and Technique (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	$ 24,976	$ 27,796
Other real estate	951	1,366
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Collateral dependent impaired loans	24,976	27,796
Other real estate	951	1,366
Securities	4,684	0
Level 3 [Member] | Preferred securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities	$ 4,684