10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2019

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 001-36613

Middlefield Banc Corp.

(Exact Name of Registrant as Specified in its Charter)

Ohio	34-1585111
State or Other Jurisdiction of	I.R.S. Employer Identification No.
Incorporation or Organization
15985 East High Street, Middlefield, Ohio	44062-0035
Address of Principal Executive Offices	Zip Code

		440-632-1666
	Registrant’s Telephone Number, Including Area Code
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
	Securities Registered Pursuant to Section 12(b) of The Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, Without Par Value	MBCN	The NASDAQ Stock Market, LLC (NASDAQ Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes X     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes X    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer X
Non-accelerated filer ☐	Smaller reporting company X
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Outstanding at August 6, 2019: 3,242,842

MIDDLEFIELD BANC CORP.

INDEX

Part I – Financial Information
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheet as of June 30, 2019 and December 31, 2018	3
	Consolidated Statement of Income for the Three and Six Months ended June 30, 2019 and 2018	4
	Consolidated Statement of Comprehensive Income for the Three and Six Months ended June 30, 2019 and 2018	5
	Consolidated Statement of Changes in Stockholders' Equity for the Three and Six Months ended June 30, 2019 and 2018	6
	Consolidated Statement of Cash Flows for the Six Months ended June 30, 2019 and 2018	8
	Notes to Unaudited Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41
Item 4.	Controls and Procedures	42
Part II – Other Information
Item 1.	Legal Proceedings	42
Item 1a.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults by the Company on its Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits and Reports on Form 8-K	43
Signatures		48
Exhibit 31.1
Exhibit 31.2
Exhibit 32

2

MIDDLEFIELD BANC CORP.

CONSOLIDATED BALANCE SHEET

(Dollar amounts in thousands, except share data)

(Unaudited)

	June 30,			December 31,
	2019			2018
ASSETS
Cash and due from banks	$	133,372		$	107,933
Federal funds sold		2,010			-
Cash and cash equivalents		135,382			107,933
Equity securities, at fair value		660			616
Investment securities available for sale, at fair value		98,809			98,322
Loans held for sale		431			597
Loans		998,232			992,109
Less allowance for loan and lease losses		7,304			7,428
Net loans		990,928			984,681
Premises and equipment, net		16,788			13,003
Goodwill		15,071			15,071
Core deposit intangibles		2,227			2,397
Bank-owned life insurance		16,294			16,080
Accrued interest receivable and other assets		11,832			9,698
TOTAL ASSETS	$	1,288,422		$	1,248,398
LIABILITIES
Deposits:
Noninterest-bearing demand	$	198,817		$	203,410
Interest-bearing demand		94,266			92,104
Money market		152,885			196,685
Savings		194,505			222,954
Time		411,034			300,914
Total deposits		1,051,507			1,016,067
Short-term borrowings:
Federal funds purchased		-			398
Federal Home Loan Bank advances		85,000			90,000
Total short-term borrowings		85,000			90,398
Other borrowings		12,449			8,803
Accrued interest payable and other liabilities		5,206			4,840
TOTAL LIABILITIES		1,154,162			1,120,108
STOCKHOLDERS' EQUITY
Common stock, no par value; 10,000,000 shares authorized, 3,646,497 and 3,630,497 shares issued; 3,242,585 and 3,244,332 shares outstanding		86,590			85,925
Retained earnings		60,517			56,037
Accumulated other comprehensive income (loss)		1,377			(154	)
Treasury stock, at cost; 403,912 and 386,165 shares		(14,224	)		(13,518	)
TOTAL STOCKHOLDERS' EQUITY		134,260			128,290
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	1,288,422		$	1,248,398

See accompanying notes to unaudited consolidated financial statements.

3

MIDDLEFIELD BANC CORP.

CONSOLIDATED STATEMENT OF INCOME  

(Dollar amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	12,706		$	11,197	$	25,194	$	22,251
Interest-earning deposits in other institutions		169			115		356		234
Federal funds sold		25			7		32		21
Investment securities:
Taxable interest		214			170		393		339
Tax-exempt interest		553			550		1,118		1,075
Dividends on stock		53			53		111		112
Total interest and dividend income		13,720			12,092		27,204		24,032
INTEREST EXPENSE
Deposits		3,277			1,979		6,222		3,619
Short-term borrowings		79			192		292		468
Other borrowings		95			118		191		240
Total interest expense		3,451			2,289		6,705		4,327
NET INTEREST INCOME		10,269			9,803		20,499		19,705
Provision for loan losses		110			210		350		420
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		10,159			9,593		20,149		19,285
NONINTEREST INCOME
Service charges on deposit accounts		530			472		1,038		925
Investment securities gains on sale, net		190			-		190		-
(Loss) gain on equity securities		(14	)		13		44		31
Earnings on bank-owned life insurance		109			98		214		210
Gain on sale of loans		98			154		157		158
Other income		386			311		788		510
Total noninterest income		1,299			1,048		2,431		1,834
NONINTEREST EXPENSE
Salaries and employee benefits		4,078			3,866		8,202		7,845
Occupancy expense		496			472		1,049		1,008
Equipment expense		291			201		526		434
Data processing costs		549			402		1,014		879
Ohio state franchise tax		261			244		520		359
Federal deposit insurance expense		100			150		230		300
Professional fees		403			327		834		772
Advertising expense		200			230		403		458
Software amortization expense		152			155		297		305
Core deposit intangible amortization		85			87		170		178
Other expense		867			929		1,737		1,870
Total noninterest expense		7,482			7,063		14,982		14,408
Income before income taxes		3,976			3,578		7,598		6,711
Income taxes		686			481		1,297		1,009
NET INCOME	$	3,290		$	3,097	$	6,301	$	5,702
EARNINGS PER SHARE
Basic	$	1.01		$	0.96	$	1.94	$	1.77
Diluted	$	1.01		$	0.96	$	1.93	$	1.76

See accompanying notes to unaudited consolidated financial statements.

4

MIDDLEFIELD BANC CORP.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Dollar amounts in thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income	$	3,290		$	3,097		$	6,301		$	5,702
Other comprehensive income (loss):
Net unrealized holding gain (loss) on available-for-sale investment securities		1,122			(73	)		2,128			(1,985	)
Tax effect		(236	)		15			(447	)		417
Reclassification adjustment for investment securities gains included in net income		(190	)		-			(190	)		-
Tax effect		40			-			40			-
Total other comprehensive income (loss)		736			(58	)		1,531			(1,568	)
Comprehensive income	$	4,026		$	3,039		$	7,832		$	4,134

See accompanying notes to unaudited consolidated financial statements.

5

MIDDLEFIELD BANC CORP.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollar amounts in thousands, except share and per share data)

(Unaudited)

								Accumulated
								Other					Total
	Common Stock				Retained			Comprehensive		Treasury			Stockholders'
	Shares		Amount		Earnings			Income		Stock			Equity
Balance, March 31, 2019		3,642,535	$	86,437	$	58,139		$	641	$	(13,518	)	$	131,699
Net income						3,290								3,290
Other comprehensive income									736					736
Dividend reinvestment and purchase plan		3,762		149										149
Stock options exercised		200		4										4
Treasury shares acquired (17,747)											(706	)		(706	)
Cash dividends ($0.28 per share)						(912	)							(912	)
Balance, June 30, 2019		3,646,497	$	86,590	$	60,517		$	1,377	$	(14,224	)	$	134,260

								Accumulated
								Other						Total
	Common Stock				Retained			Comprehensive			Treasury			Stockholders'
	Shares		Amount		Earnings			Loss			Stock			Equity
Balance, March 31, 2018		3,609,149	$	85,116	$	48,927		$	(373	)	$	(13,518	)	$	120,152
Net income						3,097									3,097
Other comprehensive loss									(58	)					(58	)
Dividend reinvestment and purchase plan		2,624		141											141
Stock options exercised		4500		104											104
Stock-based compensation, net		3,570		183											183
Cash dividends ($0.28 per share)						(903	)								(903	)
Balance, June 30, 2018		3,619,843	$	85,544	$	51,121		$	(431	)	$	(13,518	)	$	122,716

(continued on following page)

See accompanying notes to unaudited consolidated financial statements.

6

MIDDLEFIELD BANC CORP.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollar amounts in thousands, except share and per share data)

(Unaudited, continued from previous page)

								Accumulated
								Other						Total
	Common Stock				Retained			Comprehensive			Treasury			Stockholders'
	Shares		Amount		Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2018		3,630,497	$	85,925	$	56,037		$	(154	)	$	(13,518	)	$	128,290
Net income						6,301									6,301
Other comprehensive income									1,531						1,531
Dividend reinvestment and purchase plan		8,284		345											345
Stock options exercised		200		4											4
Stock-based compensation, net		7,516		316											316
Treasury shares acquired (17,747)												(706	)		(706	)
Cash dividends ($0.56 per share)						(1,821	)								(1,821	)
Balance, June 30, 2019		3,646,497	$	86,590	$	60,517		$	1,377		$	(14,224	)	$	134,260

								Accumulated
								Other						Total
	Common Stock				Retained			Comprehensive			Treasury			Stockholders'
	Shares		Amount		Earnings			Income (Loss)			Stock			Equity
Balance, December 31, 2017		3,603,881	$	84,859	$	47,431		$	1,091		$	(13,518	)	$	119,863
Change in accounting principle for adoption of ASU 2016-01						141			(141	)					-
Change in accounting principle for adoption of ASU 2018-02						(187	)		187						-
Net income						5,702									5,702
Other comprehensive loss									(1,568	)					(1,568	)
Dividend reinvestment and purchase plan		5,902		301											301
Stock options exercised		4,500		104											104
Stock-based compensation, net		5,560		280											280
Cash dividends ($0.61 per share)						(1,966	)								(1,966	)
Balance, June 30, 2018		3,619,843	$	85,544	$	51,121		$	(431	)	$	(13,518	)	$	122,716

See accompanying notes to unaudited consolidated financial statements.

7

MIDDLEFIELD BANC CORP.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollar amounts in thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2019			2018
OPERATING ACTIVITIES
Net income	$	6,301		$	5,702
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		350			420
Investment securities gains on sale, net		(190	)		-
Gain on equity securities		(44	)		(31	)
Depreciation and amortization of premises and equipment, net		524			457
Software amortization expense		297			305
Financing lease amortization expense		173			-
Amortization of premium and
discount on investment securities, net		176			208
Accretion of deferred loan fees, net		(429	)		(564	)
Amortization of core deposit intangibles		170			178
Stock-based compensation expense		186			280
Origination of loans held for sale		(6,781	)		(6,694	)
Proceeds from sale of loans		7,104			6,146
Gain on sale of loans		(157	)		(121	)
Earnings on bank-owned life insurance		(214	)		(210	)
Deferred income tax		183			132
Net gain on other real estate owned		(106	)		5
Decrease (increase) in accrued interest receivable		66			(7	)
Increase in accrued interest payable		292			83
Other, net		(2,991	)		(1,268	)
Net cash provided by operating activities		4,910			5,021
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from repayments and maturities		6,851			2,304
Proceeds from sale of securities		11,807			-
Purchases		(17,193	)		(9,862	)
Increase in loans, net		(6,206	)		(20,005	)
Proceeds from the sale of other real estate owned		325			26
Purchase of premises and equipment		(681	)		(1,582	)
Purchase of restricted stock		(29	)		(90	)
Net cash used in investing activities		(5,126	)		(29,209	)
FINANCING ACTIVITIES
Net increase in deposits		35,440			54,052
Increase (decrease) in short-term borrowings, net		(5,398	)		13,126
Repayment of other borrowings		(155	)		(10,069	)
Restricted stock cash portion		(44	)		-
Stock options exercised		4			104
Proceeds from dividend reinvestment and purchase plan		345			301
Repurchase of treasury shares		(706	)		-
Cash dividends		(1,821	)		(1,966	)
Net cash provided by financing activities		27,665			55,548
Increase in cash and cash equivalents		27,449			31,360
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		107,933			39,886
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	135,382		$	71,246

See accompanying notes to unaudited consolidated financial statements.

8

	Six Months Ended
	June 30,
	2019			2018
SUPPLEMENTAL INFORMATION
Cash paid during the year for:
Interest on deposits and borrowings	$	6,413		$	4,238
Income taxes		1,330			1,075
Noncash operating transactions:
Operating lease assets added to other, net	$	(1,071	)	$	-
Operating lease liabilities added to other, net		1,071			-
Noncash investing transactions:
Transfers from loans to other real estate owned	$	38		$	-
Transfer of equity securities from investment securities available for sale, at fair value		-			(625	)
Finance lease assets added to premises and equipment		(3,801	)		-
Noncash financing transactions:
Finance lease liabilities added to borrowed funds	$	3,801		$	-

See accompanying notes to unaudited consolidated financial statements.

9

MIDDLEFIELD BANC CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The consolidated financial statements of Middlefield Banc Corp. ("Company") include its bank subsidiary, The Middlefield Banking Company (“MBC” or “Middlefield Bank”), and a nonbank asset resolution subsidiary EMORECO, Inc. The consolidated financial statements also include the accounts of MBC’s subsidiary, Middlefield Investments, Inc. (MII), established March 13, 2019. All significant inter-company items have been eliminated.

The unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements.  The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2018.  The interim consolidated financial statements include all adjustments (consisting of only normal recurring items) that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented.  The results of operations for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year.  

Recently Adopted Accounting Pronouncements –

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which (a) the lease term is 12 months or less and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. On January 1, 2019, the Company adopted ASU 2016-02 which resulted in the recording of finance lease assets and liabilities of $3.8 million and operating lease assets and liabilities of $1.1 million on the Consolidated Balance Sheet. See Note 9 to the financial statements.

Recently Issued Accounting Pronouncements –

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (“CECL”), which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The CECL model has been completed and runs concurrently with the existing incurred loss model each month.  Management continues monitoring model output, with final assumption changes expected to be made in the third quarter.

Reclassification of Comparative Amounts –

Certain comparative amounts from prior years have been reclassified to conform to current-year presentations. Such reclassifications did not affect net income or retained earnings.

10

NOTE 2 – REVENUE RECOGNITION

In accordance with ASC Topic 606, management determined that the primary sources of revenue, which emanate from interest income on loans and investments, along with noninterest revenue resulting from investment security gains, gains on the sale of loans, and BOLI income, are not within the scope of ASC 606. These revenue sources cumulatively comprise 92.2% of the total revenue of the Company.

The main types of noninterest income within the scope of the standard are as follows:

Service charges on deposit accounts – The Company has contracts with its deposit customers where fees are charged if the account balance falls below predetermined levels defined as compensating balances. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific customer requests or activities that include overdraft fees, online banking fees, and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time, which is completion of the requested service/transaction.

Gains (losses) on sale of other real estate owned(“OREO”) – Gains and losses are recognized at the completion of the property sale when the buyer obtains control of the real estate and all of the performance obligations of the Company have been satisfied. Evidence of the buyer obtaining control of the asset include transfer of the property title, physical possession of the asset, and the buyer obtaining control of the risks and rewards related to the asset. In situations where the Company agrees to provide financing to facilitate the sale, additional analysis is performed to ensure that the contract for sale identifies the buyer and seller, the asset to be transferred and the payment terms, that the contract has a true commercial substance and that amounts due from the buyer are reasonable. In situations where financing terms are not reflective of current market terms, the transaction price is discounted, impacting the gain/loss and the carrying value of the asset.

The following table depicts the disaggregation of revenue derived from contracts with customers to depict the nature, amount, timing, and uncertainty of revenue and cash flows:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
Noninterest Income	2019			2018		2019		2018
(Dollar amounts in thousands)
Service charges on deposit accounts:
Overdraft fees	$	190		$	197	$	438	$	390
ATM banking fees		241			214		435		415
Service charges and other fees		99			61		165		120
Investment securities gains on sale, net (a)		190			-		190		-
(Loss) gain on equity securities (a)		(14	)		13		44		31
Earnings on bank-owned life insurance (a)		109			98		214		210
Gain on sale of loans (a)		98			154		157		158
Other income		386			311		788		510
Total noninterest income	$	1,299		$	1,048	$	2,431	$	1,834

(a) Not within scope of ASC 606

11

NOTE 3 - STOCK-BASED COMPENSATION

The Company had no unvested stock options outstanding as of June 30, 2019 and 2018.

Stock option activity during the six months ended June 30, 2019 is as follows:

				Weighted-
				average
				Exercise Price
	Shares			Per Share
Outstanding, January 1, 2019		7,450		$	17.55
Exercised		(200	)		17.55
Outstanding, June 30, 2019		7,250		$	17.55
Exercisable, June 30, 2019		7,250		$	17.55

The following table presents the activity during the six months ended June 30, 2019 related to awards of restricted stock:

				Weighted-
				average
				Grant Date Fair
	Units			Value Per Unit
Nonvested at January 1, 2019		21,072		$	41.96
Granted		14,565			41.90
Vested		(4,970	)		32.40
Nonvested at June 30, 2019		30,667		$	43.48
Expected to vest at June 30, 2019		750		$	46.03

The Company recognizes restricted stock forfeitures in the period they occur.

Share-based compensation expense of $0 and $91,000 was recognized for the three-month periods ended June 30, 2019 and 2018, respectively. Share-based compensation expense of $90,000 and $136,000 was recognized for the six-month periods ended June 30, 2019 and 2018, respectively. Since the shares of restricted stock are historically paid out at the vesting date in a combination of shares and cash, the Company has recorded a liability related to this plan which totals $236,000 and $261,000 at June 30, 2019 and 2018, respectively.

Total unrecognized stock compensation cost related to nonvested share-based compensation on restricted stock as of June 30, 2019 totals $517,000, of which $123,000 is estimated for the rest of 2019, $201,000 for 2020, $168,000 for 2021, and $25,000 for 2022.

12

NOTE 4 - EARNINGS PER SHARE

The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income by the average shares outstanding. Diluted earnings per share adds the dilutive effects of stock options and restricted stock to average shares outstanding.

The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings-per-share computation.

	For the Three						For the Six
	Months Ended						Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Weighted-average common shares issued		3,643,271			3,611,891			3,639,310			3,609,174
Average treasury stock shares		(392,017	)		(386,165	)		(389,107	)		(386,165	)
Weighted-average common shares and common stock equivalents used to calculate basic earnings per share		3,251,254			3,225,726			3,250,203			3,223,009
Additional common stock equivalents (stock options and restricted stock) used to calculate diluted earnings per share		6,219			14,603			6,322			15,227
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share		3,257,473			3,240,329			3,256,525			3,238,236

Options to purchase 7,250 shares of common stock at $17.55 per share, were outstanding during the three and six months ended June 30, 2019. Also outstanding were 30,667 shares of restricted stock. None of the outstanding options or restricted stock were anti-dilutive.

Options to purchase 13,750 shares of common stock, at prices ranging from $17.55 to $23.00, were outstanding during the three and six months ended June 30, 2018. Also outstanding were 20,425 shares of restricted stock. None of the outstanding options or restricted stock were anti-dilutive.

When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is presented within the share premium. The reserve for the Company’s treasury shares comprises the cost of the Company’s shares held by the Company. As of June 30, 2019, the Company held 403,912 of the Company’s shares, which is an increase of 17,747 from the 386,165 shares held as of December 31, 2018.

13

NOTE 5 - FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following levels:

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

This hierarchy requires the use of observable market data when available.

The following tables present the assets measured on a recurring basis on the Consolidated Balance Sheet at their fair value by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			June 30, 2019
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
U.S. government agency securities	$	-	$	1,995	$	-	$	1,995
Subordinated debt		-		4,086		-		4,086
Obligations of states and political subdivisions		-		72,911		-		72,911
Mortgage-backed securities in government-sponsored entities		-		19,817		-		19,817
Total debt securities		-		98,809		-		98,809
Equity securities in financial institutions		660		-		-		660
Total	$	660	$	98,809	$	-	$	99,469

			December 31, 2018
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
U.S. government agency securities	$	-	$	7,471	$	-	$	7,471
Obligations of states and political subdivisions		-		73,093		-		73,093
Mortgage-backed securities in government-sponsored entities		-		17,758		-		17,758
Total debt securities		-		98,322		-		98,322
Equity securities in financial institutions		616		-		-		616
Total	$	616	$	98,322	$	-	$	98,938

Investment Securities Available for Sale - The Company obtains fair values from an independent pricing service which represent quoted prices for similar assets, fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems (Level II).

Equity Securities - Equity securities that are traded on a national securities exchange are valued at their last reported sales price as of the measurement date. Equity securities traded in the over-the-counter (“OTC”) markets and listed securities for which no sale was reported on that date are generally valued at their last reported “bid” price if held long, and last reported “ask” price if sold short. To the extent equity securities are actively traded and valuation adjustments are not applied, they are categorized in Level I of the fair value hierarchy. Equity securities traded on inactive markets or valued by reference to similar instruments are generally categorized in Level II of the fair value hierarchy.

14

The following tables present the assets measured on a nonrecurring basis on the Consolidated Balance Sheet at their fair value by level within the fair value hierarchy. Collateral-dependent impaired loans are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. A new cost basis is established at the time a property is initially recorded in OREO. OREO properties are carried at fair value if a devaluation has been taken to the property’s value subsequent to the initial measurement. No such devaluation occurred in the three months ended June 30, 2019.

			June 30, 2019
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	-	$	-	$	5,025	$	5,025

			December 31, 2018
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	-	$	-	$	1,075	$	1,075

Impaired Loans – The Company has measured impairment on collateral-dependent impaired loans generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral-dependent loan is less than the carrying amount of the loan, a specific reserve for the loan is made in the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the above table as a Level III measurement. If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the above table as it is not currently being carried at its fair value. The fair values in the above table exclude estimated selling costs of $1.8 million and $492,000 as of June 30, 2019 and December 31, 2018, respectively.

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company uses Level III inputs to determine fair value:

	Quantitative Information about Level III Fair Value Measurements
(Dollar amounts in thousands)
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
June 30, 2019
Impaired loans	$	5,025	Appraisal of collateral (1)	Appraisal adjustments (2)	0%	to	56.6%	(0.9%)

	Quantitative Information about Level III Fair Value Measurements
(Dollar amounts in thousands)
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2018
Impaired loans	$	1,075	Appraisal of collateral (1)	Appraisal adjustments (2)	0%	to	100.0%	(40.6%)

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level III inputs which are not identifiable, less any associated allowance.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

15

The estimated fair value of the Company’s financial instruments not recorded at fair value on a recurring basis is as follows:

	June 30, 2019
	Carrying								Total
	Value		Level I		Level II		Level III		Fair Value
	(Dollar amounts in thousands)
Financial assets:
Cash and cash equivalents	$	135,382	$	135,382	$	-	$	-	$	135,382
Loans held for sale		431		-		431		-		431
Net loans		990,928		-		-		987,542		987,542
Bank-owned life insurance		16,294		16,294		-		-		16,294
Federal Home Loan Bank stock		3,708		3,708		-		-		3,708
Accrued interest receivable		3,567		3,567		-		-		3,567
Financial liabilities:
Deposits	$	1,051,507	$	640,473	$	-	$	412,944	$	1,053,417
Short-term borrowings		85,000		85,000		-		-		85,000
Other borrowings		12,449		-		-		12,490		12,490
Accrued interest payable		1,036		1,036		-		-		1,036

	December 31, 2018
	Carrying								Total
	Value		Level I		Level II		Level III		Fair Value
	(Dollar amounts in thousands)
Financial assets:
Cash and cash equivalents	$	107,933	$	107,933	$	-	$	-	$	107,933
Loans held for sale		597		-		597		-		597
Net loans		984,681		-		-		973,124		973,124
Bank-owned life insurance		16,080		16,080		-		-		16,080
Federal Home Loan Bank stock		3,679		3,679		-		-		3,679
Accrued interest receivable		3,633		3,633		-		-		3,633
Financial liabilities:
Deposits	$	1,016,067	$	715,153	$	-	$	298,891	$	1,014,044
Short-term borrowings		90,398		90,398		-		-		90,398
Other borrowings		8,803		-		-		8,827		8,827
Accrued interest payable		744		744		-		-		744

All financial instruments included in the above tables, with the exception of net loans, deposits, and other borrowings, are carried at cost, which approximates the fair value of the instrument.

16

NOTE 6 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents the changes in accumulated other comprehensive income (loss) (“AOCI”) by component net of tax for the three and six months ended June 30, 2019 and 2018, respectively:

(Dollars in thousands)	Unrealized gains on available-for-sale securities (a)
Balance as of March 31, 2019	$	641
Other comprehensive income		886
Amount reclassified from accumulated other comprehensive income		(150	)
Balance at June 30, 2019	$	1,377
Balance as of December 31, 2018	$	(154	)
Other comprehensive income		1,681
Amount reclassified from accumulated other comprehensive income		(150	)
Balance at June 30, 2019	$	1,377

(Dollars in thousands)	Unrealized gains on available-for-sale securities (a)
Balance as of March 31, 2018	$	(373	)
Other comprehensive loss before reclassification		(58	)
Balance at June 30, 2018	$	(431	)
Balance as of December 31, 2017	$	1,091
Other comprehensive loss before reclassification		(1,568	)
Change in accounting principle, ASC 2016-01 (b)		(141	)
Change in accounting principle, ASC 2018-02 (b)		187
Period change		(1,522	)
Balance at June 30, 2018	$	(431	)

(a) All amounts are net of tax. Amounts in parentheses indicate debits to AOCI.

(b) Reclassifications are the result of the adoption of ASUs 2016-01 and 2018-02 effective for the Company beginning January 1, 2018. The reclassifications are presented within the Consolidated Statement of Changes in Stockholders’ Equity for the affected transitional periods.

The following tables present significant amounts reclassified from or to each component of AOCI:

	Amounts Reclassified from Accumulated Other Comprehensive Income					Affected Line Item in the Statement Where
(Dollars in thousands)	For the Three and Six Months Ended					Net Income is
Details about other comprehensive income	June 30, 2019			June 30, 2018		Presented
Unrealized gains on available-for-sale securities (a)	$	190		$	-	Investment securities gains on sale, net
		(40	)		-	Income taxes
	$	150		$	-

(a) For unrealized gains on available-for-sale securities, amounts in parentheses indicate expenses and other amounts indicate income.

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NOTE 7 – INVESTMENT AND EQUITY SECURITIES

The amortized cost and fair values of investment securities available for sale are as follows:

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. government agency securities	$	2,000	$	-	$	(5	)	$	1,995
Subordinated debt		4,000		86		-			4,086
Obligations of states and political subdivisions:
Taxable		501		7		-			508
Tax-exempt		70,818		1,585		-			72,403
Mortgage-backed securities in government-sponsored entities		19,746		223		(152	)		19,817
Total	$	97,065	$	1,901	$	(157	)	$	98,809

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. government agency securities	$	7,442	$	90	$	(61	)	$	7,471
Obligations of states and political subdivisions:
Taxable		502		10		-			512
Tax-exempt		72,387		667		(473	)		72,581
Mortgage-backed securities in government-sponsored entities		18,185		88		(515	)		17,758
Total	$	98,516	$	855	$	(1,049	)	$	98,322

The Company recognized net (loss) gains on equity investments of ($14,000) and $44,000, respectively, for the three and six months ended June 30, 2019. The Company recognized net gains on equity investments of $13,000 and $31,000, respectively, for the three and six months ended June 30, 2018. No net gains on sold equity securities were realized during this period.

The amortized cost and fair value of debt securities at June 30, 2019, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
(Dollar amounts in thousands)	Cost		Value
Due in one year or less	$	5,094	$	5,122
Due after one year through five years		1,790		1,820
Due after five years through ten years		13,446		13,658
Due after ten years		76,735		78,209
Total	$	97,065	$	98,809

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Proceeds from the sales of investment securities and the gross realized gains and losses are as follows:

(Dollar amounts in thousands)	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019			2018
Proceeds from sales	$	11,807		$	-	$	11,807		$	-
Gross realized gains		223			-		223			-
Gross realized losses		(33	)		-		(33	)		-

Investment securities with an approximate carrying value of $51.1 million and $63.5 million at June 30, 2019 and December 31, 2018, respectively, were pledged to secure deposits and for other purposes as required by law.

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

	June 30, 2019
	Less than Twelve Months				Twelve Months or Greater					Total
			Gross				Gross					Gross
	Fair		Unrealized		Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses		Value		Losses			Value		Losses
U.S. government agency securities	$	-	$	-	$	1,995	$	(5	)	$	1,995	$	(5	)
Mortgage-backed securities in government-sponsored entities		-		-		10,945		(152	)		10,945		(152	)
Total	$	-	$	-	$	12,940	$	(157	)	$	12,940	$	(157	)

	December 31, 2018
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government agency securities	$	-	$	-		$	4,105	$	(61	)	$	4,105	$	(61	)
Obligations of states and political subdivisions:
Tax-exempt		20,451		(286	)		11,053		(187	)		31,504		(473	)
Mortgage-backed securities in government-sponsored entities		2,068		(9	)		12,257		(506	)		14,325		(515	)
Total	$	22,519	$	(295	)	$	27,415	$	(754	)	$	49,934	$	(1,049	)

There were 16 securities considered temporarily impaired at June 30, 2019.

On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The Company assesses whether the unrealized loss is other than temporary.

OTTI losses are recognized in earnings when the Company has the intent to sell the debt security or it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. However, even if the Company does not expect to sell a debt security, it must evaluate expected cash flows to be received and determine if a credit loss has occurred.

An unrealized loss is generally deemed to be other than temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the credit loss of an OTTI is recorded as a component of investment securities gains (losses) in the accompanying Consolidated Statement of Income, while the remaining portion of the impairment loss is recognized in other comprehensive income, provided the Company does not intend to sell the underlying debt security and it is “more likely than not” that the Company will not have to sell the debt security prior to recovery.

19

Debt securities issued by U.S. government agencies, U.S. government-sponsored enterprises, and state and political subdivisions accounted for 96% of the total available-for-sale portfolio as of June 30, 2019 and no credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of prolonged unrealized loss positions within the obligations of the state and political subdivisions security portfolio. The Company considers the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:

• The length of time and the extent to which the fair value has been less than the amortized cost basis.

• Changes in the near-term prospects of the underlying collateral of a security such as changes in default rates, loss severity given default and significant changes in prepayment assumptions;

• The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and

• Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.

For the six months ended June 30, 2019 and 2018, there were no available-for-sale debt securities with an unrealized loss that suffered OTTI. Management does not believe any individual unrealized loss as of June 30, 2019 or December 31, 2018 represented an other-than-temporary impairment. The unrealized losses on debt securities are primarily the result of interest rate changes. These conditions will not prohibit the Company from receiving its contractual principal and interest payments on these debt securities. The fair value of these debt securities is expected to recover as payments are received on these securities and they approach maturity. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

20

NOTE 8 - LOANS AND RELATED ALLOWANCE FOR LOAN AND LEASE LOSSES

Major classifications of loans are summarized as follows (in thousands):

	June 30,			December 31,
	2019			2018
Commercial and industrial	$	85,520		$	83,857
Real estate - construction		54,619			56,731
Real estate - mortgage:
Residential		345,830			336,487
Commercial		496,300			498,247
Consumer installment		15,963			16,787
		998,232			992,109
Less: Allowance for loan and lease losses		(7,304	)		(7,428	)
Net loans	$	990,928		$	984,681

The amounts above include deferred loan origination costs of $1.4 million and $1.6 million at June 30, 2019 and December 31, 2018.

The Company’s primary business activity is with customers located within its local Northeastern Ohio trade area, eastern Geauga County, and contiguous counties. The Company also serves the central Ohio market with offices in Dublin, Sunbury, Westerville, and Powell, Ohio. Commercial, residential, consumer, and agricultural loans are granted. Although the Company has a diversified loan portfolio, loans outstanding to individuals and businesses are dependent upon the local economic conditions in the Company’s immediate trade area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances net of the allowance for loan and lease losses. Interest income is recognized on the accrual method. The accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of interest is doubtful. Interest payments received on nonaccrual loans are applied against the unpaid principal balance until accrual status is restored.

Loan origination fees and certain direct loan origination costs are deferred with the net amount amortized over the contractual life of the loan as an adjustment of the related loan’s yield.

The following tables summarize the primary segments of the loan portfolio and allowance for loan and lease losses (in thousands):

					Real Estate - Mortgage
June 30, 2019	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Loans:
Individually evaluated for impairment	$	2,115	$	-	$	1,783	$	11,426	$	2	$	15,326
Collectively evaluated for impairment		83,405		54,619		344,047		484,874		15,961		982,906
Total loans	$	85,520	$	54,619	$	345,830	$	496,300	$	15,963	$	998,232

					Real Estate - Mortgage
December 31, 2018	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Loans:
Individually evaluated for impairment	$	2,570	$	-	$	1,970	$	9,533	$	2	$	14,075
Collectively evaluated for impairment		81,287		56,731		334,517		488,714		16,785		978,034
Total loans	$	83,857	$	56,731	$	336,487	$	498,247	$	16,787	$	992,109

21

					Real Estate - Mortgage
June 30, 2019	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Allowance for loan and lease losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	140	$	-	$	51	$	672	$	-	$	863
Collectively evaluated for impairment		399		90		1,630		4,203		119		6,441
Total ending allowance balance	$	539	$	90	$	1,681	$	4,875	$	119	$	7,304

					Real Estate - Mortgage
December 31, 2018	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Allowance for loan and lease losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	667	$	-	$	43	$	643	$	1	$	1,354
Collectively evaluated for impairment		302		100		1,538		4,008		126		6,074
Total ending allowance balance	$	969	$	100	$	1,581	$	4,651	$	127	$	7,428

The Company’s loan portfolio is segmented to a level that allows management to monitor risk and performance. The portfolio is segmented into Commercial and Industrial (“C&I”), Real Estate Construction, Real Estate - Mortgage which is further segmented into Residential and Commercial Real Estate (“CRE”), and Consumer Installment Loans. The C&I loan segment consists of loans made for the purpose of financing the activities of commercial customers. The residential mortgage loan segment consists of loans made for the purpose of financing the activities of residential homeowners. The commercial mortgage loan segment consists of loans made for the purpose of financing the activities of commercial real estate owners and operators. The consumer loan segment consists primarily of installment loans and overdraft lines of credit connected with customer deposit accounts. The increases in the allowance for loan loss for the Residential and CRE portfolios were offset by decreases in the allowance for the C&I, Real Estate Construction, and Consumer Installment portfolios.

Management evaluates individual loans in all of the commercial segments for possible impairment based on guidance established by the Board of Directors. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired, or the loan was modified in a troubled debt restructuring.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of the following methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

22

The following tables present impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary (in thousands):

June 30, 2019
Impaired Loans
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	1,012	$	1,523	$	-
Real estate - mortgage:
Residential		1,360		1,481		-
Commercial		3,245		3,333		-
Consumer installment		2		2		-
Total	$	5,619	$	6,339	$	-
With an allowance recorded:
Commercial and industrial	$	1,103	$	1,322	$	140
Real estate - mortgage:
Residential		423		521		51
Commercial		8,181		8,191		672
Total	$	9,707	$	10,034	$	863
Total:
Commercial and industrial	$	2,115	$	2,845	$	140
Real estate - mortgage:
Residential		1,783		2,002		51
Commercial		11,426		11,524		672
Consumer installment		2		2		-
Total	$	15,326	$	16,373	$	863

23

December 31, 2018
Impaired Loans
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	207	$	413	$	-
Real estate - mortgage:
Residential		1,306		1,462		-
Commercial		1,867		2,186		-
Total	$	3,380	$	4,061	$	-
With an allowance recorded:
Commercial and industrial	$	2,363	$	3,013	$	667
Real estate - mortgage:
Residential		664		715		43
Commercial		7,666		7,676		643
Consumer installment		2		2		1
Total	$	10,695	$	11,406	$	1,354
Total:
Commercial and industrial	$	2,570	$	3,426	$	667
Real estate - mortgage:
Residential		1,970		2,177		43
Commercial		9,533		9,862		643
Consumer installment		2		2		1
Total	$	14,075	$	15,467	$	1,354

The tables above include troubled debt restructuring totaling $3.6 million as of June 30, 2019 and $4.4 million as of December 31, 2018.

The following tables present the average balance and interest income by class, recognized on impaired loans (in thousands):

	For the Three Months Ended June 30, 2019				For the Six Months Ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial and industrial	$	1,970	$	23	$	2,170	$	45
Real estate - construction		1,620		-		1,080		-
Real estate - mortgage:
Residential		1,820		15		1,870		27
Commercial		10,238		85		10,003		172
Consumer installment		2		-		2		-
Total	$	15,650	$	123	$	15,125	$	244

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	For the Three Months Ended June 30, 2018				For the Six Months Ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial and industrial	$	4,277	$	23	$	3,644	$	47
Real estate - construction		142		-		283		-
Real estate - mortgage:
Residential		2,772		13		2,871		27
Commercial		6,464		51		6,583		102
Consumer installment		4		-		4		-
Total	$	13,659	$	87	$	13,385	$	176

Management uses a nine-point internal risk-rating system to monitor the credit quality of the overall loan portfolio. The first five categories are considered not criticized and are aggregated as Pass rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but have potential weaknesses, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification.  Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected.  All loans greater than 90 days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.  

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan-rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as payment delinquency, bankruptcy, repossession, or death, occurs to raise awareness of a possible credit event.  The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis.  The Credit Department performs an annual review of all commercial relationships with loan balances of $500,000 or greater.  Confirmation of the appropriate risk grade is included in the review on an ongoing basis.  The Company engages an external consultant to conduct loan reviews on a semiannual basis. Generally, the external consultant reviews commercial relationships greater than $250,000 and criticized relationships greater than $150,000.  Detailed reviews, including plans for resolution, are performed on criticized loans on at least a quarterly basis.  Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The primary risk of commercial and industrial loans is related to deterioration in the cash flow of the business that may result in the liquidation of the business assets securing the loan. C&I loans are, by nature, secured by less substantial collateral than real estate-secured loans. The primary risk of real estate construction loans is potential delays and disputes during the completion process. The primary risk of residential real estate loans is current economic uncertainties along with the slow recovery in the housing market. The primary risk of commercial real estate loans is loss of income of the owner or occupier of the property and the inability of the market to sustain rent levels. Consumer installment loans historically have experienced higher delinquency rates. Consumer installments are typically secured by less substantial collateral than other types of credits.

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The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk-rating system (in thousands):

			Special						Total
June 30, 2019	Pass		Mention		Substandard		Doubtful		Loans
Commercial and industrial	$	78,051	$	4,846	$	2,623	$	-	$	85,520
Real estate - construction		54,619		-		-		-		54,619
Real estate - mortgage:
Residential		340,320		999		4,511		-		345,830
Commercial		480,275		4,834		11,191		-		496,300
Consumer installment		15,953		-		10		-		15,963
Total	$	969,218	$	10,679	$	18,335	$	-	$	998,232

			Special						Total
December 31, 2018	Pass		Mention		Substandard		Doubtful		Loans
Commercial and industrial	$	77,002	$	4,572	$	2,283	$	-	$	83,857
Real estate - construction		55,397		1,334		-		-		56,731
Real estate - mortgage:
Residential		332,475		553		3,459		-		336,487
Commercial		483,516		6,617		8,114		-		498,247
Consumer installment		16,776		-		11		-		16,787
Total	$	965,166	$	13,076	$	13,867	$	-	$	992,109

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.

Nonperforming assets are nonaccrual loans including nonaccrual troubled debt restructurings (“TDR”), loans 90 days or more past due, EMORECO assets, other real estate owned, and repossessed assets. A loan is classified as nonaccrual when, in the opinion of management, there are serious doubts about collectability of interest and principal. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of principal and interest is doubtful.  Payments received on nonaccrual loans are applied against the principal balance.

The following tables present the aging of the recorded investment in past-due loans by class of loans (in thousands):

			30-59 Days		60-89 Days		90 Days+		Total		Total
June 30, 2019	Current		Past Due		Past Due		Past Due		Past Due		Loans
Commercial and industrial	$	84,803	$	298	$	58	$	361	$	717	$	85,520
Real estate - construction		54,458		161		-		-		161		54,619
Real estate - mortgage:
Residential		340,884		2,182		446		2,318		4,946		345,830
Commercial		491,843		81		86		4,290		4,457		496,300
Consumer installment		15,941		22		-		-		22		15,963
Total	$	987,929	$	2,744	$	590	$	6,969	$	10,303	$	998,232

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			30-59 Days		60-89 Days		90 Days+		Total		Total
December 31, 2018	Current		Past Due		Past Due		Past Due		Past Due		Loans
Commercial and industrial	$	82,770	$	288	$	213	$	586	$	1,087	$	83,857
Real estate - construction		56,731		-		-		-		-		56,731
Real estate - mortgage:
Residential		331,379		2,612		1,083		1,413		5,108		336,487
Commercial		496,597		664		-		986		1,650		498,247
Consumer installment		16,768		19		-		-		19		16,787
Total	$	984,245	$	3,583	$	1,296	$	2,985	$	7,864	$	992,109

The following tables present the recorded investment in non-accrual loans and loans past due over 89 days still on accrual by class of loans (in thousands):

			90+ Days Past
June 30, 2019	Nonaccrual		Due and Accruing
Commercial and industrial	$	1,082	$	-
Real estate - construction		-		-
Real estate - mortgage:
Residential		4,196		58
Commercial		5,389		-
Consumer installment		4		-
Total	$	10,671	$	58

			90+ Days Past
December 31, 2018	Nonaccrual		Due and Accruing
Commercial and industrial	$	996	$	91
Real estate - construction		-		-
Real estate - mortgage:
Residential		2,731		754
Commercial		2,864		100
Consumer installment		4		-
Total	$	6,595	$	945

Interest income that would have been recorded had these loans not been placed on nonaccrual status was $211,000 for the six months ended June 30, 2019 and $456,000 for the year ended December 31, 2018.

An allowance for loan and lease losses (“ALLL”) is maintained to absorb losses from the loan portfolio.  The ALLL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of nonperforming loans.

The Company’s methodology for determining the ALLL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Company’s ALLL. Management also performs impairment analyses on TDRs, which may result in specific reserves.

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Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate.  For general allowances, historical loss trends are used in the estimation of losses in the current portfolio.  These historical loss amounts are modified by other qualitative factors.

The classes described above, which are based on the purpose code assigned to each loan, provide the starting point for the ALLL analysis.  Management tracks the historical net charge-off activity at the call code level. The historical charge-off factor was calculated using the last twelve consecutive historical quarters.

Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; levels of and trends in delinquency rates and nonaccrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and geographic standpoint.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALLL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALLL.

The following tables summarize the primary segments of the loan portfolio and the activity within those segments (in thousands):

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at December 31, 2018	$	969		$	100		$	1,581		$	4,651		$	127		$	7,428
Charge-offs		(355	)		-			(138	)		(32	)		(88	)		(613	)
Recoveries		40			45			46			2			6			139
Provision		(115	)		(55	)		192			254			74			350
ALLL balance at June 30, 2019	$	539		$	90		$	1,681		$	4,875		$	119		$	7,304

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at December 31, 2017	$	999		$	313		$	1,760		$	4,036		$	82		$	7,190
Charge-offs		(9	)		-			(74	)		(111	)		(135	)		(329	)
Recoveries		140			17			29			-			35			221
Provision		50			(241	)		28			436			147			420
ALLL balance at June 30, 2018	$	1,180		$	89		$	1,743		$	4,361		$	129		$	7,502

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage		Consumer installment			Total
ALLL balance at March 31, 2019	$	586		$	748		$	1,623		$	4,161	$	88		$	7,206
Charge-offs		(9	)		-			(48	)		-		(41	)		(98	)
Recoveries		24			23			33			1		5			86
Provision		(62	)		(681	)		73			713		67			110
ALLL balance at June 30, 2019	$	539		$	90		$	1,681		$	4,875	$	119		$	7,304

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at March 31, 2018	$	1,256		$	92		$	1,782		$	4,323		$	98		$	7,551
Charge-offs		-			-			(74	)		(111	)		(130	)		(315	)
Recoveries		29			-			10			-			17			56
Provision		(105	)		(3	)		25			149			144			210
ALLL balance at June 30, 2018	$	1,180		$	89		$	1,743		$	4,361		$	129		$	7,502

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The provision fluctuations during the six-month period ended June 30, 2019 allocated to:

● commercial and industrial loans are due to the charge-off of a large relationship of $336,000 from a previous reserve of $358,000 in the first quarter.

● residential portfolio are due to charge-offs and portfolio growth.

● commercial real estate loans are due to the reclassification of a large construction loan, with a first quarter reserve of $661,000, to commercial real estate.

The provision fluctuations during the three-month period ended June 30, 2019 allocated to:

● commercial real estate loans are due to the reclassification of a large construction loan, with a first quarter reserve of $661,000, to commercial real estate.

The following tables summarize troubled debt restructurings (in thousands):

	For the Three and Six Months Ended
	June 30, 2019
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		-		1		1	$	85	$	140

	For the Three Months Ended
	June 30, 2018
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		1		-		1	$	113	$	113

	For the Six Months Ended
	June 30, 2018
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		2		-		2	$	160	$	160

The following table summarizes TDR modifications within the previous 12 months for which there was a payment default during the six-month period ended June 30, 2018 (in thousands):

	For the Six Months Ended
	June 30, 2018
Troubled Debt Restructurings	Number of		Recorded
subsequently defaulted	Contracts		Investment
Residential real estate		2	$	215

There were no subsequent defaults of troubled debt restructurings for the three-month periods ended June 30, 2019 and June 30, 2018, or for the six-month period ended June 30, 2019.

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NOTE 9 – LEASE COMMITMENTS

The Company utilizes leases for six of its branch locations. As of June 30, 2019, net assets recorded under leases amounted to $4.6 million and have remaining lease terms of 1 year to 6 years. As of June 30, 2019, finance lease assets included in premises and equipment, net totaled $3.6 million and operating lease assets included in accrued interest receivable and other assets on the Consolidated Balance Sheet totaled $983,000. As of June 30, 2019, finance lease obligations included in other borrowings totaled $3.7 million and operating lease obligations included in accrued interest payable and other liabilities on the Consolidated Balance Sheet totaled $984,000.

On April 17, 2019, the Company purchased a building to relocate the Mantua branch which is and has been at a leased location as of June 30, 2019. The relocation is planned for 2020, and the Company entered into an amended lease agreement with the Mantua lessor which does not exceed 12 months. As such, the lease for the Mantua location is not considered a capitalized lease as of June 30, 2019.

Lease costs incurred are as follows:

	For the Three Months Ended June 30, 2019		For the Six Months Ended June 30, 2019
Lease Costs:
Finance lease cost:
Amortization of right-of-use asset	$	104	$	173
Interest Expense		30		69
Other		13		15
Operating lease cost		43		126
Total lease cost	$	190	$	383

The following table displays the weighted-average term and discount rates for both operating and finance leases outstanding as of June 30, 2019:

	Operating			Finance
Weighted-average term (years)		2.1			4.9
Weighted-average discount rate		2.9	%		3.4	%

The following table displays the undiscounted cash flows due related to operating and finance leases as of June 30, 2019, along with a reconciliation to the discounted amount recorded on the June 30, 2019 balance sheet:

	Operating			Finance
Undiscounted cash flows due within:
2019	$	112		$	199
2020		226			411
2021		210			424
2022		211			431
2023		211			431
2024 and thereafter		339			2,792
Total undiscounted cash flows		1,309			4,688
Impact of present value discount		(326	)		(1,061	)
Amount reported on balance sheet	$	983		$	3,627

The Company has no other purchase obligations for leases executed but not yet recorded.

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

The following management’s discussion and analysis (MD&A) provide further detail to the financial condition and results of operations of the Company. The MD&A should be read in conjunction with the notes and financial statements presented in this report.

The information contained or incorporated by reference in this report on Form 10-Q contains forward-looking statements, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including: changes in economic conditions; movements in interest rates; competitive pressures on product pricing and services; success and timing of business strategies; the nature, extent, and timing of government actions and reforms; and extended disruption of vital infrastructure. All forward-looking statements included in this report on Form 10-Q are based on information available at the time of the report. Middlefield Banc Corp. assumes no obligation to update any forward-looking statement.

CHANGES IN FINANCIAL CONDITION

General. The Company’s total assets ended the June 30, 2019 quarter at $1.29 billion, an increase of $40.0 million from December 31, 2018. For the same time period, cash and cash equivalents increased $27.4 million, or 25.4%, while net loans increased $6.2 million, or 0.6%. Total liabilities increased $34.1 million or 3.0%, while stockholders’ equity increased $6.0 million, or 4.7%.

Cash and cash equivalents. Cash and cash equivalents increased $27.4 million, or 25.4%, to $135.4 million at June 30, 2019 from $107.9 million at December 31, 2018. Deposits from customers into savings and checking accounts, loan and securities repayments, and proceeds from borrowed funds typically increase these accounts. Decreases result from customer withdrawals, new loan originations, purchases of investment securities and repayments of borrowed funds.       

Investment securities. Investment securities available for sale on June 30, 2019 totaled $98.8 million, an increase of $487,000, or 0.5%, from $98.3 million at December 31, 2018. During this period the Company recorded repayments, calls, and maturities of $6.9 million. Securities purchased were $17.2 million, and sales of securities were $11.8 million. The Company recorded $190,000 in gains on sales of investment securities and $44,000 in gains on equity securities as of June 30, 2019 on the Company’s Consolidated Statement of Income and Consolidated Statement of Cash Flows. The gain on equity securities is the result of remeasurements of fair value of the equity securities held during this six-month period. Included in the Company’s available-for-sale investment securities as of June 30, 2019 is an investment in the subordinated debt of an Ohio-based community bank in the amount of $4.0 million at an annual interest rate of 6%.

Loans receivable. The loans receivable category consists primarily of single-family mortgage loans used to purchase or refinance personal residences located within the Company’s market area, commercial and industrial loans, and commercial real estate loans used to finance properties that are used in the borrowers’ businesses or to finance investor-owned rental properties, and to a lesser extent, construction and consumer loans. The portfolio is well disbursed, geographically, with the four branches in the central Ohio market comprising 23.8% of the Company’s total loans. Since December 31, 2017, however, 79.7% of all loan growth has come from the central Ohio footprint. Net loans receivable increased $6.2 million, or 0.6%, to $990.9 million as of June 30, 2019 from $984.7 million at December 31, 2018 due to loan growth targeted in the mid-single digits. Included in the total increase for loans receivable were increases in the residential real estate and commercial and industrial portfolios of $9.3 million, or 2.8%, and $1.7 million, or 2.0%, respectively. This increase is net of decreases in the consumer installment, commercial real estate, and real estate-construction portfolios of $824,000, or 4.9%, $1.9 million, or 0.4%, and $2.1 million, or 3.7%, respectively.

The Company’s Mortgage Banking operation generates loans for sale to the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Loans held for sale on June 30, 2019 totaled $431,000, a decrease of $166,000, or 27.8%, from December 31, 2018. This decrease is the result of fewer saleable loans being funded at quarter end.

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The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutions which have (1) total reported loans for construction, land development, and other land acquisitions which represent 100% or more of an institution’s total risk-based capital; or (2) total commercial real estate loans representing 300% or more of the institution’s total risk-based capital and the institution’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk. Institutions which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management with respect to their commercial real estate portfolios, and may be required to hold higher levels of capital. The Company, like many community banks, has a concentration in commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years. At June 30, 2019 non-owner-occupied commercial real estate loans (including construction, land and land development loans) represent 356.0% of total risk-based capital. Construction, land and land development loans represent 44.0% of total risk-based capital. Management has extensive experience in commercial real estate lending, and has implemented and continues to maintain heightened risk management procedures, and strong underwriting criteria with respect to its commercial real estate portfolio. Loan monitoring practices include but are not limited to periodic stress testing analysis to evaluate changes to cash flows, owing to interest rate increases and declines in net operating income. Nevertheless, we may be required to maintain higher levels of capital as a result of our commercial real estate concentrations, which could require us to obtain additional capital, and may adversely affect shareholder returns. The Company has an extensive capital planning policy, which includes pro-forma projections including stress testing within which the Board of Directors has established internal minimum targets for regulatory capital ratios that are in excess of well-capitalized ratios.

Allowance for Loan and Lease Losses and Asset Quality. The allowance for loan and lease losses decreased $124,000, or 1.7%, to $7.3 million at June 30, 2019 from $7.4 million at December 31, 2018. For the three months ended June 30, 2019, net loan charge-offs totaled $12,000, compared to net charge-offs of $259,000, or 0.11% of average loans, for the same period in 2018. To maintain the allowance for loan and lease losses, the Company recorded a provision for loan loss of $110,000 in the three-month period ended June 30, 2019. For the six months ended June 30, 2019, net loan charge-offs totaled $474,000, or 0.10% of average loans, compared to net charge-offs of $108,000, or 0.02%, for the same period in 2018. To maintain the allowance for loan and lease losses, the Company recorded a provision for loan loss of $350,000 in the six-month period ended June 30, 2019. During the six months ended June 30, 2019, one central Ohio loan of $3.2 million negatively affected nonperforming loans.  The reserve for this credit is $656,000. The issue is isolated to this particular borrower and it is not indicative of a trend in the market, portfolio, or an issue in underwriting. Offsetting this amount is a reserve reduction of $358,000 due to a charge off of $336,000, as well as a reserve reduction of $435,000 from the payoff of one commercial real estate loan.

Management analyzes the adequacy of the allowance for loan and lease losses regularly through reviews of the performance of the loan portfolio considering economic conditions, changes in interest rates and the effect of such changes on real estate values, and changes in the amount and composition of the loan portfolio. The allowance for loan and lease losses is a significant estimate that is particularly susceptible to changes in the near term. Management’s analysis includes a review of all loans designated as impaired, historical loan loss experience, the estimated fair value of the underlying collateral, economic conditions, current interest rates, trends in the borrower’s industry and other factors that management believes warrant recognition in providing for an appropriate allowance for loan and lease losses. Future additions or reductions to the allowance for loan and lease losses will be dependent on these factors. Additionally, the Company uses an outside party to conduct an independent review of commercial and commercial real estate loans that is designed to validate management conclusions of risk ratings and the appropriateness of the allowance allocated to these loans. The Company uses the results of this review to help determine the effectiveness of policies and procedures and to assess the adequacy of the allowance for loan and lease losses allocated to these types of loans. Management believes the allowance for loan and lease losses is appropriately stated at June 30, 2019. Based on the variables involved and management’s judgments about uncertain outcomes, the determination of the allowance for loan and lease losses is considered a critical accounting policy.

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Nonperforming assets. Nonperforming assets include nonaccrual loans, loans 90 days or more past due, other real estate, and repossessed assets. Real estate owned is written down to fair value at its initial recording and continually monitored for changes in fair value. A loan is classified as nonaccrual when, in the opinion of management, there are serious doubts about collectability of interest and principal. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of principal and interest is doubtful. Payments received on nonaccrual loans are applied against principal until doubt about collectability ceases.

	Asset Quality History
(Dollar amounts in thousands)	June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Nonperforming loans	$	10,729		$	10,472		$	7,540		$	7,288		$	8,372
Other real estate owned		89			126			270			257			181
Nonperforming assets	$	10,818		$	10,598		$	7,810		$	7,545		$	8,553
Allowance for loan and lease losses		7,304			7,206			7,428			7,494			7,502
Ratios:
Nonperforming loans to total loans		1.07	%		1.04	%		0.76	%		0.75	%		0.89	%
Nonperforming assets to total assets		0.84	%		0.83	%		0.63	%		0.63	%		0.73	%
Allowance for loan and lease losses to total loans		0.73	%		0.72	%		0.75	%		0.77	%		0.79	%
Allowance for loan and lease losses to nonperforming loans		68.08	%		68.81	%		98.51	%		102.83	%		89.61	%

Nonperforming loans exclude TDRs that are performing in accordance with their terms over a prescribed period of time. TDRs are those loans which the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider. The Company has 26 TDRs accruing interest with a balance of $2.9 million as of June 30, 2019. A TDR that yields a market interest rate at the time of restructuring and is in compliance with its modified terms is no longer reported as a TDR in calendar years after the year in which the restructuring took place. To be in compliance with its modified terms, a loan that is a TDR must not be in nonaccrual status and must be current or less than 30 days past due on its contractual principal and interest payments under the modified repayment terms. Nonperforming loans secured by real estate totaled $9.6 million as of June 30, 2019, an increase of $4.0 million from $5.6 million at December 31, 2018.

A major factor in determining the appropriateness of the allowance for loan and lease losses is the type of collateral which secures the loans. Of the total nonperforming loans at June 30, 2019, 90.9% were secured by real estate. Although this does not insure against all losses, real estate typically provides for at least partial recovery, even in a distressed-sale and declining-value environment. The Company’s objective is to minimize the future loss exposure of the Company.

The allowance for loan and lease losses to total loans ratio decreased from 0.75% as of December 31, 2018 to 0.73% as of June 30, 2019.

Deposits. The Company considers various sources when evaluating funding needs, including but not limited to deposits, which are a significant source of funds, totaling $1.05 billion or 98.5% of the Company’s total average funding sources at June 30, 2019. Total deposits increased $35.4 million, or 3.5%, at June 30, 2019 from $1.02 billion at December 31, 2018. The total increase in deposits is the net of increases in time and interest-bearing demand deposits of $110.1 million, or 36.6%, and $2.2 million, or 2.3%, respectively, and decreases in noninterest-bearing demand deposits, savings, and money market deposits of $4.6 million, or 2.3%, $28.4 million, or 12.8%, and $43.8 million, or 22.3%, respectively, at June 30, 2019.

Borrowed funds. The Company uses short-term and long-term borrowings as another source of funding for asset growth and liquidity needs. These borrowings primarily include FHLB advances, junior subordinated debt, short-term borrowings from other banks, and federal funds purchased. Short-term borrowings decreased $5.4 million, or 6.0%, to $85.0 million as of June 30, 2019. Other borrowings increased $3.6 million, or 41.4%, to $12.4 million as of June 30, 2019 from $8.8 million as of December 31, 2018. This increase is mainly due to the adoption of ASU 2016-02, “Leases (Topic 842)” effective January 1, 2019, which resulted in the recording of financial lease liabilities in the amount of $2.7 million (see Note 9). This quarter, the Company tested its ability to shift off balance sheet liquidity to the balance sheet by borrowing an advance of $80.0 million for one day.

33

Stockholders’ equity. Stockholders’ equity increased $6.0 million, or 4.7%, to $134.3 million at June 30, 2019 from $128.3 million at December 31, 2018. This growth was the result of increases in retained earnings, AOCI, and common stock of $4.5 million, $1.5 million, and $665,000, respectively. This increase is net of an increase in treasury stock of $706,000, or 5.2% to $14.2 million as of June 30, 2019, from $13.5 million as of December 31, 2018. The change in retained earnings is due to the year-to-date net income offset by dividends paid, the change in AOCI is due to fair value adjustments of available-for-sale securities, the change in common stock is due to regular stock grants and dividend reinvestment and purchase plan distributions, and the change in treasury stock is due to the Company repurchasing 17,747 of its outstanding shares during the six months ended June 30, 2019.

RESULTS OF OPERATIONS

General. Net income for the three months ended June 30, 2019, was $3.3 million, a $193,000, or 6.2%, increase from the amount earned during the same period in 2018. Diluted earnings per share for the quarter increased to $1.01, compared to $0.96 from the same period in 2018. Net income for the six months ended June 30, 2019, was $6.3 million, a $599,000, or 10.5%, increase from the amount earned during the same period in 2018. Diluted earnings per share for this six-month period increased to $1.93, compared to $1.76 for the same period in 2018.

The Company’s annualized return on average assets (“ROA”) and return on average equity (“ROE”) for the quarter were 1.09% and 9.79%, respectively, compared with 1.11% and 10.08% for the same period in 2018. The Company’s ROA and ROE for the six-month period were 1.05% and 9.58%, respectively, compared with 1.03% and 9.42% for the same period in 2018.

Net interest income. Net interest income, the primary source of revenue for the Company, is determined by the interest rate spread, which is defined as the difference between income on earning assets and the cost of funds supporting those assets, and the relative amounts of interest-earning assets and interest-bearing liabilities. Management periodically adjusts the mix of assets and liabilities, as well as the rates earned or paid on those assets and liabilities, in order to manage and improve net interest income. The level of interest rates and changes in the amount and composition of interest-earning assets and liabilities affect the Company’s net interest income. Management’s goal is to maintain a balance between steady net interest income growth and the risks associated with interest rate fluctuations.

Net interest income for the three months ended June 30, 2019 totaled $10.3 million, an increase of 4.8% from that reported in the comparable period of 2018. The net interest margin was 3.65% for the second quarter of 2019, down from the 3.74% reported for the same quarter of 2018. The decline in the net interest margin is attributable to a 43 basis points increase in total interest bearing liabilities partially offset by an increase of 26 basis points in the yield on total interest earning assets for the three-month period ended June 30, 2019. Net interest income for the six months ended June 30, 2019 totaled $20.5 million, an increase of 4.0% from that reported in the comparable period of 2018. The net interest margin was 3.67% for the six-month period ended June 30, 2019, down from the 3.78% reported for the comparable period of 2018. The decline in the net interest margin is attributable to a 46 basis points increase in total interest bearing liabilities partially offset by an increase of 25 basis points in the yield on total interest earning assets for the six-month period ended June 30, 2019. Beta, the change in bank product yield/cost divided by the change in the average effective federal funds rate, is used to measure the impact of FOMC interest rate changes to the income statement. Although deposit betas outpaced those of assets during the three and six months ended June 30, 2019, the net interest margin continues to compare favorably against peer banks.

Interest and dividend income. Interest and dividend income increased $1.6 million, or 13.5%, for the three months ended June 30, 2019, compared to the same period in the prior year. This is attributable to an increase in interest and fees on loans of $1.5 million. Interest and dividend income increased $3.2 million, or 13.2%, for the six months ended June 30, 2019, compared to the same period in the prior year. This is attributable to an increase in interest and fees on loans of $2.9 million.

Interest and fees earned on loans receivable increased $1.5 million, or 13.5%, for the three months ended June 30, 2019, compared to the same period in the prior year. This is attributable to an increase in average loan balances of $70.8 million, accompanied by a 26 basis point increase in the average yield to 5.08%. Interest and fees earned on loans receivable increased $2.9 million, or 13.2%, for the six months ended June 30, 2019, compared to the same period in the prior year. This is attributable to an increase in average loan balances of $70.4 million, accompanied by a 25 basis point increase in the average yield to 5.07%.

Net interest earned on securities increased by $47,000 for the three months ended June 30, 2019 when compared to the same period in the prior year. The average balance of investment securities increased $4.6 million, or 4.8%, while the 3.79% yield on the investment portfolio increased by 11 basis points, from 3.68%, for the same period in the prior year. Net interest earned on securities increased by $97,000 for the six months ended June 30, 2019 when compared to the same period in the prior year. The average balance of investment securities increased $4.2 million, or 4.4%, while the 3.80% yield on the investment portfolio increased by 16 basis points, from 3.64%, for the same period in the prior year.

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Interest expense. Interest expense increased $1.2 million, or 50.8%, for the three months ended June 30, 2019, compared to the same period in the prior year. The increase is attributable to increases in the average balances of certificates of deposit, money market deposits, and interest-bearing demand deposits of $102.7 million, or 35.6%, $18.5 million, or 13.1%, and $372,000, or 0.4%, respectively. This increase was accompanied by increases in costs of 56, 56, 52, 11, and 6 basis points for the average balances of other borrowings, certificates of deposit, money market deposits, savings deposits, and interest-bearing demand deposits, respectively. The overall increase in deposits was utilized to pay down short-term borrowings and other borrowings, the average balance of which decreased by $15.6 million, or 53.8%, and $6.5 million, or 34.3%, respectively. Interest expense increased $2.4 million, or 55.0%, for the six months ended June 30, 2019, compared to the same period in the prior year. The increase is attributable to increases in the average balances of certificates of deposit, money market deposits, and interest-bearing demand deposits of $85.5 million, or 31.7%, $31.2 million, or 21.4%, and $3.2 million, or 3.41%, respectively. This increase was accompanied by increases in costs of 65, 57, 57, 55, 22, and 5 basis points for the average balances of money market deposits, short-term borrowings, other borrowings, certificates of deposit, savings deposits, and interest-bearing demand deposits, respectively. The overall increase in deposits was utilized to pay down short-term borrowings and other borrowings, the average balance of which decreased by $26.8 million, or 52.4%, and $7.7 million, or 36.4%, respectively.   

Provision for loan losses. The provision for loan losses represents the charge to income necessary to adjust the allowance for loan and lease losses to an amount that represents management’s assessment of the estimated probable incurred credit losses inherent in the loan portfolio. Each quarter, management performs a review of estimated probable incurred credit losses in the loan portfolio. Based on this review, a provision for loan losses of $110,000 was recorded for the quarter ended June 30, 2019, a decrease of $100,000, or 47.6%, from the quarter ended June 30, 2018. A provision for loan losses of $350,000 was recorded for the six-month period ended June 30, 2019, a decrease of $70,000, or 16.7%, from the same period in 2018. Nonperforming loans were $10.7 million, or 1.07%, of total loans at June 30, 2019 compared with $8.4 million, or 0.89%, at June 30, 2018. For the three months ended June 30, 2019, net loan charge-offs totaled $12,000, compared to net charge-offs of $259,000, or 0.11% of average loans, for the second quarter of 2018. For the six months ended June 30, 2019, net loan charge-offs totaled $474,000, or 0.10% of average loans, compared to net charge-offs of $108,000, or 0.02%, for the same period in 2018.

Noninterest income. Noninterest income increased $251,000, or 24.0%, for the three months ended June 30, 2019 over the comparable 2018 period. This increase was the result of an increase in investment securities gains on sale and other income of $190,000, and $75,000, or 24.1%, respectively. The increase in other income is due to increases in revenue from investment services and income received from recoveries on acquired student loans. Noninterest income increased $597,000, or 32.6%, for the six months ended June 30, 2019 over the comparable 2018 period. This increase was the result of an increase in investment securities gains on sale and other income of $190,000, and $278,000, or 54.5%. respectively. The increase in other income is due to increases in revenue from investment services and income received from recoveries on acquired student loans.

Noninterest expense. Noninterest expense of $7.5 million for the second quarter 2019 was 5.9%, or $419,000, higher than the second quarter of 2018. Salaries and employee benefits and data processing costs increased $212,000, or 5.5%, and $147,000, or 36.6%, respectively. These increases were offset by decreases in other expense and federal deposit insurance expense of $62,000, or 6.7%, and $50,000, or 33.3%, respectively. The salary increase is mostly due to annual pay adjustments and an increase in employees. The increase in data processing costs is due to new and increased costs of processing agreements. Noninterest expense of $15.0 million for the six-month period ended June 30, 2019 was 4.0%, or $574,000, higher than the same period in 2018. Salaries and employee benefits, Ohio state franchise tax, and data processing costs increased $357,000, or 4.6%, $161,000, or 44.8%, and $135,000, or 15.4%, respectively. These increases were offset by decreases in other expense and federal deposit insurance expense of $133,000, or 7.1%, and $70,000, or 23.3%, respectively. The salary increase is mostly due to annual pay adjustments and an increase in employees. The increase in Ohio state franchise tax is due to the increase in the Company’s franchise value, and the increase in data processing costs is due new and increased costs of processing agreements.   

Provision for income taxes. The Company recognized $686,000 in income tax expense, which reflected an effective tax rate of 17.3% for the three months ended June 30, 2019, as compared to $481,000 with an effective tax rate of 13.4% for the comparable 2018 period. The Company recognized $1.3 million in income tax expense, which reflected an effective tax rate of 17.1% for the six months ended June 30, 2019, as compared to $1.0 million with an effective tax rate of 15.0% for the comparable 2018 period.

35

Average Balance Sheet and Yield/Rate Analysis. The following table sets forth, for the periods indicated, information concerning the total dollar amounts of interest income from interest-earning assets and the resultant average yields, the total dollar amounts of interest expense on interest-bearing liabilities and the resultant average costs, net interest income, interest rate spread and the net interest margin earned on average interest-earning assets. For purposes of this table, average balances are calculated using monthly averages and the average loan balances include nonaccrual loans and exclude the allowance for loan and lease losses, and interest income includes accretion of net deferred loan fees. Yields on tax-exempt securities and loans (tax exempt for federal income tax purposes) are shown on a fully tax-equivalent basis utilizing a federal tax rate of 21%. Yields and rates have been calculated on an annualized basis utilizing monthly interest amounts.

	For the Three Months Ended June 30,
	2019							2018
	Average				Average			Average				Average
(Dollars in thousands)	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:
Loans receivable (3)	$	1,002,346	$	12,706		5.08	%	$	931,504	$	11,197		4.82	%
Investment securities (3)		99,022		767		3.79	%		94,460		720		3.68	%
Interest-earning deposits with other banks (4)		44,747		247		2.21	%		40,904		175		1.72	%
Total interest-earning assets		1,146,115		13,720		4.86	%		1,066,868		12,092		4.60	%
Noninterest-earning assets		61,267							53,653
Total assets	$	1,207,382						$	1,120,521
Interest-bearing liabilities:
Interest-bearing demand deposits	$	98,929	$	88		0.36	%	$	98,557	$	73		0.30	%
Money market deposits		159,705		558		1.40	%		141,238		309		0.88	%
Savings deposits		195,451		336		0.69	%		215,639		309		0.57	%
Certificates of deposit		390,997		2,295		2.35	%		288,283		1,288		1.79	%
Short-term borrowings		13,354		79		2.37	%		28,929		192		2.66	%
Other borrowings		12,489		95		3.05	%		19,006		118		2.49	%
Total interest-bearing liabilities		870,925		3,451		1.59	%		791,652		2,289		1.16	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		198,234							203,266
Other liabilities		3,387							2,375
Stockholders' equity		134,836							123,228
Total liabilities and stockholders' equity	$	1,207,382						$	1,120,521
Net interest income			$	10,269						$	9,803
Interest rate spread (1)						3.27	%						3.44	%
Net interest margin (2)						3.65	%						3.74	%
Ratio of average interest-earning assets to average interest-bearing liabilities						131.60	%						134.76	%

(1) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(2) Net interest margin represents net interest income as a percentage of average interest-earning assets.

(3) Tax-equivalent adjustments to calculate the yield on tax-exempt securities and loans were $168 and $146 for the three months ended June 30, 2019 and 2018, respectively.

(4) Includes dividends received on restricted stock.

36

Analysis of Changes in Net Interest Income. The following table analyzes the changes in interest income and interest expense, between the three-month periods ended June 30, 2019 and 2018, in terms of: (1) changes in volume of interest-earning assets and interest-bearing liabilities and (2) changes in yields and rates. The table reflects the extent to which changes in the Company’s interest income and interest expense are attributable to changes in rate (change in rate multiplied by prior period volume), changes in volume (changes in volume multiplied by prior period rate) and changes attributable to the combined impact of volume/rate (change in rate multiplied by change in volume). The changes attributable to the combined impact of volume/rate are allocated on a consistent basis between the volume and rate variances.

	2019 versus 2018
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Loans receivable	$	852		$	657		$	1,509
Investment securities		42			5			47
Interest-earning deposits with other banks		16			56			72
Total interest-earning assets		910			718			1,628
Interest-bearing liabilities:
Interest-bearing demand deposits		-			15			15
Money market deposits		40			209			249
Savings deposits		(29	)		56			27
Certificates of deposit		459			548			1,007
Short-term borrowings		(103	)		(10	)		(113	)
Other borrowings		(40	)		17			(23	)
Total interest-bearing liabilities		327			835			1,162
Net interest income	$	583		$	(117	)	$	466

37

Average Balance Sheet and Yield/Rate Analysis. The following table sets forth, for the periods indicated, information concerning the total dollar amounts of interest income from interest-earning assets and the resultant average yields, the total dollar amounts of interest expense on interest-bearing liabilities and the resultant average costs, net interest income, interest rate spread and the net interest margin earned on average interest-earning assets. For purposes of this table, average balances are calculated using monthly averages and the average loan balances include nonaccrual loans and exclude the allowance for loan and lease losses, and interest income includes accretion of net deferred loan fees. Yields on tax-exempt securities and loans (tax exempt for federal income tax purposes) are shown on a fully tax-equivalent basis utilizing a federal tax rate of 21%. Yields and rates have been calculated on an annualized basis utilizing monthly interest amounts.

	For the Six Months Ended June 30,
	2019							2018
	Average				Average			Average				Average
(Dollars in thousands)	Balance		Interest		Yield/Cost			Balance		Interest		Yield/Cost
Interest-earning assets:
Loans receivable (3)	$	1,001,344	$	25,194		5.07	%	$	930,915	$	22,251		4.82	%
Investment securities (3)		98,253		1,511		3.80	%		94,074		1,414		3.64	%
Interest-earning deposits with other banks (4)		45,015		499		2.24	%		41,552		367		1.78	%
Total interest-earning assets		1,144,612		27,204		4.85	%		1,066,541		24,032		4.60	%
Noninterest-earning assets		60,912							53,463
Total assets	$	1,205,524						$	1,120,004
Interest-bearing liabilities:
Interest-bearing demand deposits	$	96,594	$	160		0.33	%	$	93,410	$	131		0.28	%
Money market deposits		176,970		1,313		1.50	%		145,779		614		0.85	%
Savings deposits		201,650		753		0.75	%		215,597		575		0.54	%
Certificates of deposit		355,620		3,996		2.27	%		270,093		2,299		1.72	%
Short-term borrowings		24,372		292		2.42	%		51,166		468		1.84	%
Other borrowings		13,473		191		2.86	%		21,166		240		2.29	%
Total interest-bearing liabilities		868,679		6,705		1.56	%		797,211		4,327		1.09	%
Noninterest-bearing liabilities:
Noninterest-bearing demand deposits		199,332							197,581
Other liabilities		4,870							3,097
Stockholders' equity		132,643							122,115
Total liabilities and stockholders' equity	$	1,205,524						$	1,120,004
Net interest income			$	20,499						$	19,705
Interest rate spread (1)						3.29	%						3.51	%
Net interest margin (2)						3.67	%						3.78	%
Ratio of average interest-earning assets to average interest-bearing liabilities						131.76	%						133.78	%

(1) Interest rate spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(2) Net interest margin represents net interest income as a percentage of average interest-earning assets.

(3) Tax-equivalent adjustments to calculate the yield on tax-exempt securities and loans were $338 and $286 for the six months ended June 30, 2019 and 2018, respectively.

(4) Includes dividends received on restricted stock.

38

Analysis of Changes in Net Interest Income. The following table analyzes the changes in interest income and interest expense, between the six-month periods ended June 30, 2019 and 2018, in terms of: (1) changes in volume of interest-earning assets and interest-bearing liabilities and (2) changes in yields and rates. The table reflects the extent to which changes in the Company’s interest income and interest expense are attributable to changes in rate (change in rate multiplied by prior period volume), changes in volume (changes in volume multiplied by prior period rate) and changes attributable to the combined impact of volume/rate (change in rate multiplied by change in volume). The changes attributable to the combined impact of volume/rate are allocated on a consistent basis between the volume and rate variances.

	2019 versus 2018
	Increase (decrease) due to
(Dollars in thousands)	Volume			Rate			Total
Interest-earning assets:
Loans receivable	$	1,683		$	1,260		$	2,943
Investment securities		76			21			97
Interest-earning deposits with other banks		31			101			132
Total interest-earning assets		1,790			1,382			3,172
Interest-bearing liabilities:
Interest-bearing demand deposits		4			25			29
Money market deposits		131			568			699
Savings deposits		(37	)		215			178
Certificates of deposit		728			969			1,697
Short-term borrowings		(245	)		69			(176	)
Other borrowings		(87	)		38			(49	)
Total interest-bearing liabilities		494			1,884			2,378
Net interest income	$	1,296		$	(502	)	$	794

LIQUIDITY

Management's objective in managing liquidity is maintaining the ability to continue meeting the cash flow needs of banking customers, such as borrowings or deposit withdrawals, as well as the Company’s own financial commitments. The principal sources of liquidity are net income, loan payments, maturing and principal reductions on securities and sales of securities available for sale, federal funds sold and cash and deposits with banks. The Company introduced a new line of retail deposit products during the second quarter of 2019. These products were created to more closely align with customer expectations while expanding the Company’s core funding base. Along with its liquid assets, the Company has additional sources of liquidity available to ensure that adequate funds are available as needed. These include, but are not limited to, the purchase of federal funds, the ability to borrow funds under line of credit agreements with correspondent banks and a borrowing agreement with the Federal Home Loan Bank of Cincinnati, and the adjustment of interest rates to obtain depositors. Management believes the Company has the capital adequacy, profitability and reputation to meet the current and projected needs of its customers.

For the six months ended June 30, 2019, the adjustments to reconcile net income to net cash from operating activities consisted mainly of depreciation and amortization of premises and equipment, the provision for loan losses, net amortization of securities and net changes in other assets and liabilities. For a more detailed illustration of sources and uses of cash, refer to the Condensed Consolidated Statements of Cash Flows.

39

INFLATION

Substantially all of the Company's assets and liabilities relate to banking activities and are monetary in nature. The consolidated financial statements and related financial data are presented in accordance with GAAP. GAAP currently requires the Company to measure the financial position and results of operations in terms of historical dollars, with the exception of securities available for sale, impaired loans and other real estate loans that are measured at fair value. Changes in the value of money due to rising inflation can cause purchasing power loss.

Management's opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. It should be noted that interest rates and inflation do affect each other, but do not always move in correlation with each other. The Company's ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company's performance.

REGULATORY MATTERS

The Company is subject to the regulatory requirements of the Federal Reserve System as a bank holding company. The bank subsidiary is subject to regulations of the Federal Deposit Insurance Corporation (“FDIC”) and the Ohio Division of Financial Institutions.

The Federal Reserve Board and the FDIC have extensive authority to prevent and to remedy unsafe and unsound practices and violations of applicable laws and regulations by institutions and holding companies. The agencies may assess civil money penalties, issue cease-and-desist or removal orders, seek injunctions, and publicly disclose those actions. In addition, the Ohio Division of Financial Institutions possesses enforcement powers to address violations of Ohio banking law by Ohio-chartered banks.

REGULATORY CAPITAL REQUIREMENTS

Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts and bank and thrift holding companies. The net unrealized gain or loss on available-for-sale securities is generally not included in computing regulatory capital. In order to avoid limitations on capital distributions, including dividend payments, Middlefield Bank and the Company must each hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The implementation of the capital ratio buffer began January 1, 2016 at the 0.625% level and has been fully phased in over a four-year period (increasing by that amount on each subsequent January 1, until it reached 2.5% on January 1, 2019). Within the tabular presentation that follows is the adequately capitalized ratio plus capital conservation buffer that includes the fully phased-in 2.50% buffer.

Middlefield Bank and the Company met each of the well-capitalized ratio guidelines at June 30, 2019. The following table indicates the capital ratios for Middlefield Bank and Company at June 30, 2019 and December 31, 2018.

	As of June 30, 2019
	Leverage			Tier 1 Risk Based			Common Equity Tier 1			Total Risk Based
The Middlefield Banking Company		9.76	%		11.43	%		11.43	%		12.15	%
Middlefield Banc Corp.		10.38	%		12.14	%		11.36	%		12.86	%
Adequately capitalized ratio		4.00	%		6.00	%		4.50	%		8.00	%
Adequately capitalized ratio plus fully phased-in capital conservation buffer		4.00	%		8.50	%		7.00	%		10.50	%
Well-capitalized ratio (Bank only)		5.00	%		8.00	%		6.50	%		10.00	%

40

	As of December 31, 2018
	Leverage			Tier 1 Risk Based			Common Equity Tier 1			Total Risk Based
The Middlefield Banking Company		9.60	%		11.09	%		11.09	%		11.83	%
Middlefield Banc Corp.		10.26	%		11.83	%		11.03	%		12.57	%
Adequately capitalized ratio		4.00	%		6.00	%		4.50	%		8.00	%
Adequately capitalized ratio plus fully phased-in capital conservation buffer		4.00	%		8.50	%		7.00	%		10.50	%
Well-capitalized ratio (Bank only)		5.00	%		8.00	%		6.50	%		10.00	%

Item 3. Quantitative and Qualitative Disclosures about Market Risk

ASSET AND LIABILITY MANAGEMENT

The primary objective of the Company’s asset and liability management function is to maximize the Company’s net interest income while simultaneously maintaining an acceptable level of interest rate risk given the Company’s operating environment, capital and liquidity requirements, performance objectives and overall business focus. The principal determinant of the exposure of the Company’s earnings to interest rate risk is the timing difference between the re-pricing or maturity of interest-earning assets and the re-pricing or maturity of interest-bearing liabilities. The Company’s asset and liability management policies are designed to decrease interest rate sensitivity primarily by shortening the maturities of interest-earning assets while at the same time extending the maturities of interest-bearing liabilities. The Board of Directors of the Company continues to believe in a strong asset/liability management process in order to insulate the Company from material and prolonged increases in interest rates.

The Company’s Board of Directors has established an Asset and Liability Management Committee consisting of outside directors and senior management. This committee, which meets quarterly, generally monitors various asset and liability management policies and strategies.

Interest Rate Sensitivity Simulation Analysis

The Company engages an external consultant to facilitate income simulation modeling on a quarterly basis. This modeling measures interest rate risk and sensitivity. The Asset and Liability Management Committee of the Company believes the various rate scenarios of the simulation modeling enable the Company to more accurately evaluate and manage the exposure of interest rate fluctuations on net interest income, the yield curve, various loan and mortgage-backed security prepayments, and deposit decay assumptions.

Earnings simulation modeling and assumptions about the timing and volatility of cash flows are critical in net portfolio equity valuation analysis. Particularly important are the assumptions driving mortgage prepayments and expected attrition of the core deposit portfolios. These assumptions are based on the Company’s historical experience and industry standards and are applied consistently across all rate risk measures.

The Company has established the following guidelines for assessing interest rate risk:

Net interest income simulation (“NII”) - Projected net interest income over the next twelve months will not be reduced by more than 10% given a gradual shift (i.e., over 12 months) in interest rates of up to 200 basis points (+ or -) and assuming no balance sheet growth.

Portfolio equity simulation - Portfolio equity is the net present value of the Company’s existing assets and liabilities. The Company uses an Economic Value of Equity (“EVE”) analysis which shows the estimated changes in portfolio equity taking certain long-term shock rates into consideration. Given a 200 basis point immediate and permanent increase in market interest rates, portfolio equity may not correspondingly decrease or increase by more than 20% of stockholders’ equity. Given a 200 basis point immediate and permanent decrease in market interest rates, portfolio equity may not correspondingly decrease or increase by more than 10% of stockholders’ equity.

41

The following table presents the simulated impact of a 200 basis point upward or 200 basis point downward shift of market interest rates on net interest income, and the change in portfolio equity. This analysis was done assuming the interest-earning asset and interest-bearing liability levels at June 30, 2019 and December 31, 2018 remained constant. The impact of the market rate movements was developed by simulating the effects of rates changing gradually over a one-year period from the June 30, 2019 and December 31, 2018 levels for net interest income and portfolio equity. The impact of market rate movements was developed by simulating the effects of an immediate and permanent change in rates at June 30, 2019 and December 31, 2018 for portfolio equity:  

	June 30, 2019						December 31, 2018
Change in Rates	% Change in NII			% Change in EVE			% Change in NII			% Change in EVE
+200bp		0.10	%		15.00	%		(0.12	)%		12.40	%
-200bp		(3.30	)%		(49.20	)%		(3.33	)%		(40.90	)%

CRITICAL ACCOUNTING ESTIMATES

The Company’s critical accounting estimates involving the more significant judgments and assumptions used in the preparation of the consolidated financial statements as of June 30, 2019, have remained unchanged from December 31, 2018.

Item 4. Controls and Procedures

Controls and Procedures Disclosure

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are, to the best of their knowledge, effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that there were no significant changes in internal control or in other factors that could significantly affect the Company’s internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

A material weakness is a significant deficiency (as defined in Public Company Accounting Oversight Board Auditing Standard No. 2), or a combination of significant deficiencies, that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by management or employees in the normal course of performing their assigned functions.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company and MBC may be involved in litigation relating to claims arising out of their normal course of business. Currently, the Company and MBC are not involved in any legal proceedings the outcome of which, in management’s opinion, would be material to their financial condition or results of operations.

42

Item 1a. There are no material changes to the risk factors set forth in Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Please refer to that section for disclosures regarding the risks and uncertainties related to the Company’s business.

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

None

Item 3. Defaults by the Company on its Senior Securities

None

Item 4. Mine Safety Disclosures

N/A

Item 5. Other information

None

Item 6. Exhibits

Exhibit list for Middlefield Banc Corp.’s Form 10-Q Quarterly Report for the Period Ended June 30, 2019

Exhibit Number	Description	Location
3.1	Second Amended and Restated Articles of Incorporation of Middlefield Banc Corp., as amended	Incorporated by reference to Exhibit 3.1 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2005, filed on March 29, 2006
3.2	Regulations of Middlefield Banc Corp.	Incorporated by reference to Exhibit 3.2 of Middlefield Banc Corp.’s registration statement on Form 10 filed on April 17, 2001
4	Specimen stock certificate	Incorporated by reference to Exhibit 4 of Middlefield Banc Corp.’s registration statement on Form 10 filed on April 17, 2001
4.1	Amended and Restated Trust Agreement, dated as of December 21, 2006, between Middlefield Banc Corp., as Depositor, Wilmington Trust Company, as Property trustee, Wilmington Trust Company, as Delaware Trustee, and Administrative Trustees	Incorporated by reference to Exhibit 4.1 of Middlefield Banc Corp.’s Form 8-K Current Report filed on December 27, 2006
4.2	Junior Subordinated Indenture, dated as of December 21, 2006, between Middlefield Banc Corp. and Wilmington Trust Company	Incorporated by reference to Exhibit 4.2 of Middlefield Banc Corp.’s Form 8-K Current Report filed on December 27, 2006

43

4.3	Guarantee Agreement, dated as of December 21, 2006, between Middlefield Banc Corp. and Wilmington Trust Company	Incorporated by reference to Exhibit 4.3 of Middlefield Banc Corp.’s Form 8-K Current Report filed on December 27, 2006
10.1.0*	2017 Omnibus Equity Plan	Incorporated by reference to Middlefield Banc Corp.’s definitive proxy statement for the 2017 Annual Meeting of Shareholders, Appendix A, filed on April 4, 2017
10.1.1*	2007 Omnibus Equity Plan	Incorporated by reference to Middlefield Banc Corp.’s definitive proxy statement for the 2008 Annual Meeting of Shareholders, Appendix A, filed on April 7, 2008
10.2*	Change in Control Agreement between Middlefield Banc Corp. and Thomas G. Caldwell	Incorporated by reference to Exhibit 10.2 of Middlefield Banc Corp.’s Form 8-K Current Report filed on March 12, 2019
10.3*	Change in Control Agreement between Middlefield Banc Corp. and James R. Heslop, II	Incorporated by reference to Exhibit 10.3 of Middlefield Banc Corp.’s Form 8-K Current Report filed on March 12, 2019
10.4	Federal Home Loan Bank of Cincinnati Agreement for Advances and Security Agreement dated September 14, 2000	Incorporated by reference to Exhibit 10.4 of Middlefield Banc Corp.’s registration statement on Form 10 filed on April 17, 2001
10.4.1*	Severance Agreement between Middlefield Banc Corp. and Teresa M. Hetrick, dated January 7, 2008	Incorporated by reference to Exhibit 10.4.1 of Middlefield Banc Corp.’s Form 8-K Current Report filed on January 9, 2008
10.4.2*	Change in Control Agreement between Middlefield Banc Corp. and Charles O. Moore	Incorporated by reference to Exhibit 10.4.2 of Middlefield Banc Corp.’s Form 8-K Current Report filed on March 12, 2019
10.4.3*	Change in Control Agreement between Middlefield Banc Corp. and Donald L. Stacy	Incorporated by reference to Exhibit 10.4.3 of Middlefield Banc Corp.’s Form 8-K Current Report filed on March 12, 2019
10.4.4*	Severance Agreement between Middlefield Banc Corp. and Alfred F. Thompson Jr., dated January 7, 2008	Incorporated by reference to Exhibit 10.4.4 of Middlefield Banc Corp.’s Form 8-K Current Report filed on January 9, 2008
10.5	[reserved]
10.6*	Amended Director Retirement Agreement with Richard T. Coyne	Incorporated by reference to Exhibit 10.6 of Middlefield Banc Corp.’s Form 8-K Current Report filed on January 9, 2008

44

10.7*	Amended Director Retirement Agreement with Frances H. Frank	Incorporated by reference to Exhibit 10.7 of Middlefield Banc Corp.’s Form 8-K Current Report filed on January 9, 2008
10.8*	[reserved]
10.9*	[reserved]
10.10*	Director Retirement Agreement with Donald D. Hunter	Incorporated by reference to Exhibit 10.10 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2001, filed on March 28, 2002
10.11*	Director Retirement Agreement with Martin S. Paul	Incorporated by reference to Exhibit 10.11 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2001, filed on March 28, 2002
10.12*	[reserved]
10.13*	[reserved]
10.14*	Executive Survivor Income Agreement (aka DBO agreement [death benefit only]) with Donald L. Stacy	Incorporated by reference to Exhibit 10.14 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 30, 2004
10.15*	DBO Agreement with Jay P. Giles	Incorporated by reference to Exhibit 10.15 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 30, 2004
10.16*	DBO Agreement with Alfred F. Thompson Jr.	Incorporated by reference to Exhibit 10.16 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 30, 2004
10.17*	DBO Agreement with Teresa M. Hetrick	Incorporated by reference to Exhibit 10.18 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 30, 2004
10.18 *	Executive Deferred Compensation Agreement with Jay P. Giles	Incorporated by reference to Exhibit 10.18 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2011, filed on March 20, 2012
10.19	[reserved]

45

10.20*	DBO Agreement with James R. Heslop, II	Incorporated by reference to Exhibit 10.20 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 30, 2004
10.21*	DBO Agreement with Thomas G. Caldwell	Incorporated by reference to Exhibit 10.21 of Middlefield Banc Corp.’s Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 30, 2004
10.22*	Annual Incentive Plan	Incorporated by reference to Exhibit 10.22 of Middlefield Banc Corp.’s Form 8-K Current Report filed on March 12, 2019
10.22.1*	[reserved]
10.23*	Amended Executive Deferred Compensation Agreement with Thomas G. Caldwell	Incorporated by reference to Exhibit 10.23 of Middlefield Banc Corp.’s Form 8-K Current Report filed on May 9, 2008
10.24*	Amended Executive Deferred Compensation Agreement with James R. Heslop, II	Incorporated by reference to Exhibit 10.24 of Middlefield Banc Corp.’s Form 8-K Current Report filed on May 9, 2008
10.25*	Amended Executive Deferred Compensation Agreement with Donald L. Stacy	Incorporated by reference to Exhibit 10.25 of Middlefield Banc Corp.’s Form 8-K Current Report filed on May 9, 2008
10.26*	Executive Variable Benefit Deferred Compensation Agreement with James R. Heslop, II	Incorporated by reference to Exhibit 10.26 of Middlefield Banc Corp.’s Form 8-K Current Report filed on July 11, 2018
10.27*	Executive Variable Benefit Deferred Compensation Agreement with Donald L. Stacy	Incorporated by reference to Exhibit 10.27 of Middlefield Banc Corp.’s Form 8-K Current Report filed on July 11, 2018
10.28*	Executive Deferred Compensation Agreement with Charles O. Moore	Incorporated by reference to Exhibit 10.28 of Middlefield Banc Corp.’s Form 10-Q Current Report filed on August 7, 2018
10.29*	Form of conditional stock award under the 2007 Omnibus Equity Plan	Incorporated by reference to Exhibit 10.29 of Middlefield Banc Corp.’s Form 8-K Current Report filed on March 4, 2016
10.29.1	Form of conditional stock award under the 2017 Omnibus Equity Plan	Incorporated by reference to Exhibit 10.29 of Middlefield Banc Corp.’s Form 8-K Current Report filed on July 24, 2017

46

10.30**	Executive Deferred Compensation Agreement with Michael L. Allen	Incorporated by reference to Exhibit 10.30 of Middlefield Banc Corp.’s Form 10-Q Current Report filed on May 7, 2019
10.31**	Executive Deferred Compensation Agreement with John D. Lane	Incorporated by reference to Exhibit 10.31 of Middlefield Banc Corp.’s Form 10-Q Current Report filed on May 7, 2019
31.1	Rule 13a-14(a) certification of Chief Executive Officer	filed herewith
31.2	Rule 13a-14(a) certification of Chief Financial Officer	filed herewith
32	Rule 13a-14(b) certification	filed herewith
99.1	Form of Indemnification Agreement with directors of Middlefield Banc Corp. and with executive officers of Middlefield Banc Corp. and The Middlefield Banking Company	Incorporated by reference to Exhibit 99.1 of Middlefield Banc Corp.’s registration statement on Form 10, Amendment No. 1, filed on June 14, 2001
101.INS***	XBRL Instance	furnished herewith
101.SCH***	XBRL Taxonomy Extension Schema	furnished herewith
101.CAL***	XBRL Taxonomy Extension Calculation	furnished herewith
101.DEF***	XBRL Taxonomy Extension Definition	furnished herewith
101.LAB***	XBRL Taxonomy Extension Labels	furnished herewith
101.PRE***	XBRL Taxonomy Extension Presentation	furnished herewith

* management contract or compensatory plan or arrangement

** management contract or compensatory plan or arrangement, a schedule has been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be provided on a supplemental basis to the Securities and Exchange Commission upon request

*** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

47

SIGNATURES

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

	MIDDLEFIELD BANC CORP.
Date: August 6, 2019	By: /s/Thomas G. Caldwell
	Thomas G. Caldwell
	President and Chief Executive Officer
Date: August 6, 2019	By: /s/Donald L. Stacy
	Donald L. Stacy
	Principal Financial and Accounting Officer

48

EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Securities Exchange Act of 1934

I, Thomas G. Caldwell, certify that:

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

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

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

4.  The registrant’s other certifying officer(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: August 6, 2019	/s/ Thomas G. Caldwell
	Thomas G. Caldwell
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Principal Executive Officer

Pursuant to Section 302 of the Securities Exchange Act of 1934

I, Donald L. Stacy, certify that:

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

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

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

4.  The registrant’s other certifying officer(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: August 6, 2019	/s/ Donald L. Stacy
	Donald L. Stacy
	Principal Financial and Accounting Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Middlefield Banc Corp. (the “Company”) on Form 10-Q for the period ending June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Thomas G. Caldwell, President, and Donald L. Stacy, Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

By: /s/Thomas G. Caldwell	By: /s/Donald L. Stacy
Thomas G. Caldwell	Donald L. Stacy
President and Chief Executive Officer	Principal Financial and Accounting Officer

August 6, 2019

A signed original of this written statement required by Section 906 has been provided to Middlefield Banc Corp. and will be retained by Middlefield Banc Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 06, 2019
Document Information [Line Items]
Entity Registrant Name	Middlefield Banc Corp.
Entity Central Index Key	0000836147
Trading Symbol	mbcn
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		3,242,842
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Consolidated Balance Sheet (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
ASSETS
Cash and due from banks	$ 133,372	$ 107,933
Federal funds sold	2,010
Cash and cash equivalents	135,382	107,933
Equity securities, at fair value	660	616
Investment securities available for sale, at fair value	98,809	98,322
Loans held for sale	431	597
Loans	998,232	992,109
Less allowance for loan and lease losses	7,304	7,428
Net loans	990,928	984,681
Premises and equipment, net	16,788	13,003
Goodwill	15,071	15,071
Core deposit intangibles	2,227	2,397
Bank-owned life insurance	16,294	16,080
Accrued interest receivable and other assets	11,832	9,698
TOTAL ASSETS	1,288,422	1,248,398
LIABILITIES
Noninterest-bearing demand	198,817	203,410
Interest-bearing demand	94,266	92,104
Money market	152,885	196,685
Savings	194,505	222,954
Time	411,034	300,914
Total deposits	1,051,507	1,016,067
Short-term borrowings:
Federal funds purchased		398
Federal Home Loan Bank advances	85,000	90,000
Total short-term borrowings	85,000	90,398
Other borrowings	12,449	8,803
Accrued interest payable and other liabilities	5,206	4,840
TOTAL LIABILITIES	1,154,162	1,120,108
STOCKHOLDERS' EQUITY
Common stock, no par value; 10,000,000 shares authorized, 3,646,497 and 3,630,497 shares issued; 3,242,585 and 3,244,332 shares outstanding	86,590	85,925
Retained earnings	60,517	56,037
Accumulated other comprehensive income (loss)	1,377	(154)
Treasury stock, at cost; 403,912 and 386,165 shares	(14,224)	(13,518)
TOTAL STOCKHOLDERS' EQUITY	134,260	128,290
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 1,288,422	$ 1,248,398

XML

Consolidated Balance Sheet (Current Period Unaudited) (Parentheticals) - $ / shares $ / shares in Thousands	Jun. 30, 2019	Dec. 31, 2018
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares issued (in shares)	3,646,497	3,630,497
Common stock, shares outstanding (in shares)	3,242,585	3,244,332
Treasury stock, shares (in shares)	403,912	386,165

XML

Consolidated Statement of Income (Unaudited) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
INTEREST AND DIVIDEND INCOME
Interest and fees on loans		$ 12,706,000	$ 11,197,000	$ 25,194,000	$ 22,251,000
Interest-earning deposits in other institutions		169,000	115,000	356,000	234,000
Federal funds sold		25,000	7,000	32,000	21,000
Investment securities:
Taxable interest		214,000	170,000	393,000	339,000
Tax-exempt interest		553,000	550,000	1,118,000	1,075,000
Dividends on stock		53,000	53,000	111,000	112,000
Total interest and dividend income		13,720,000	12,092,000	27,204,000	24,032,000
INTEREST EXPENSE
Deposits		3,277,000	1,979,000	6,222,000	3,619,000
Short-term borrowings		79,000	192,000	292,000	468,000
Other borrowings		95,000	118,000	191,000	240,000
Total interest expense		3,451,000	2,289,000	6,705,000	4,327,000
NET INTEREST INCOME		10,269,000	9,803,000	20,499,000	19,705,000
Provision for loan losses		110,000	210,000	350,000	420,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		10,159,000	9,593,000	20,149,000	19,285,000
NONINTEREST INCOME
Investment securities gains on sale, net	[1]	190,000		190,000
(Loss) gain on equity securities	[1]	(14,000)	13,000	44,000	31,000
Earnings on bank-owned life insurance	[1]	109,000	98,000	214,000	210,000
Gain on sale of loans	[1]	98,000	154,000	157,000	158,000
Total noninterest income		1,299,000	1,048,000	2,431,000	1,834,000
NONINTEREST EXPENSE
Salaries and employee benefits		4,078,000	3,866,000	8,202,000	7,845,000
Occupancy expense		496,000	472,000	1,049,000	1,008,000
Equipment expense		291,000	201,000	526,000	434,000
Data processing costs		549,000	402,000	1,014,000	879,000
Ohio state franchise tax		261,000	244,000	520,000	359,000
Federal deposit insurance expense		100,000	150,000	230,000	300,000
Professional fees		403,000	327,000	834,000	772,000
Advertising expense		200,000	230,000	403,000	458,000
Software amortization expense		152,000	155,000	297,000	305,000
Core deposit intangible amortization		85,000	87,000	170,000	178,000
Other expense		867,000	929,000	1,737,000	1,870,000
Total noninterest expense		7,482,000	7,063,000	14,982,000	14,408,000
Income before income taxes		3,976,000	3,578,000	7,598,000	6,711,000
Income taxes		686,000	481,000	1,297,000	1,009,000
NET INCOME		$ 3,290,000	$ 3,097,000	$ 6,301,000	$ 5,702,000
EARNINGS PER SHARE
Basic (in dollars per share)		$ 1.01	$ 0.96	$ 1.94	$ 1.77
Diluted (in dollars per share)		$ 1.01	$ 0.96	$ 1.93	$ 1.76
Deposit Account [Member]
NONINTEREST INCOME
Noninterest income revenue		$ 530,000	$ 472,000	$ 1,038,000	$ 925,000
Financial Service, Other [Member]
NONINTEREST INCOME
Noninterest income revenue		$ 386,000	$ 311,000	$ 788,000	$ 510,000

[1] Not within scope of ASC 606

XML

Consolidated Statement of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net income	$ 3,290	$ 3,097	$ 6,301	$ 5,702
Net unrealized holding gain (loss) on available-for-sale investment securities	1,122	(73)	2,128	(1,985)
Tax effect	(236)	15	(447)	417
Reclassification adjustment for investment securities gains included in net income	(190)		(190)
Tax effect	40		40
Total other comprehensive income (loss)	736	(58)	1,531	(1,568)
Comprehensive income	$ 4,026	$ 3,039	$ 7,832	$ 4,134

XML

Consolidated Statement of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Treasury Stock [Member]	Total
Balance (in shares) at Dec. 31, 2017	3,603,881
Balance at Dec. 31, 2017	$ 84,859	$ 47,431	$ 1,091	$ (13,518)	$ 119,863
Net income		5,702			5,702
Other comprehensive income (loss)			(1,568)		(1,568)
Dividend reinvestment and purchase plan (in shares)	5,902
Dividend reinvestment and purchase plan	$ 301				301
Stock options exercised (in shares)	4,500
Stock options exercised	$ 104				104
Cash dividends		(1,966)			(1,966)
Stock-based compensation, net (in shares)	5,560
Stock-based compensation, net	$ 280				280
Change in accounting principle for adoption of ASU 2016-01		141	(141)
Change in accounting principle for adoption of ASU 2018-02		(187)	187
Balance (in shares) at Jun. 30, 2018	3,619,843
Balance at Jun. 30, 2018	$ 85,544	51,121	(431)	(13,518)	122,716
Balance (in shares) at Mar. 31, 2018	3,609,149
Balance at Mar. 31, 2018	$ 85,116	48,927	(373)	(13,518)	120,152
Net income		3,097			3,097
Other comprehensive income (loss)			(58)		(58)
Dividend reinvestment and purchase plan (in shares)	2,624
Dividend reinvestment and purchase plan	$ 141				141
Stock options exercised (in shares)	4,500
Stock options exercised	$ 104				104
Cash dividends		(903)			(903)
Stock-based compensation, net (in shares)	3,570
Stock-based compensation, net	$ 183				183
Balance (in shares) at Jun. 30, 2018	3,619,843
Balance at Jun. 30, 2018	$ 85,544	51,121	(431)	(13,518)	$ 122,716
Balance (in shares) at Dec. 31, 2018	3,630,497				3,244,332
Balance at Dec. 31, 2018	$ 85,925	56,037	(154)	(13,518)	$ 128,290
Net income		6,301			6,301
Other comprehensive income (loss)			1,531		1,531
Dividend reinvestment and purchase plan (in shares)	8,284
Dividend reinvestment and purchase plan	$ 345				345
Stock options exercised (in shares)	200
Stock options exercised	$ 4				4
Treasury shares acquired (17,747)				(706)	(706)
Cash dividends		(1,821)			(1,821)
Stock-based compensation, net (in shares)	7,516
Stock-based compensation, net	$ 316				$ 316
Balance (in shares) at Jun. 30, 2019	3,646,497				3,242,585
Balance at Jun. 30, 2019	$ 86,590	60,517	1,377	(14,224)	$ 134,260
Balance (in shares) at Mar. 31, 2019	3,642,535
Balance at Mar. 31, 2019	$ 86,437	58,139	641	(13,518)	131,699
Net income		3,290			3,290
Other comprehensive income (loss)			736		736
Dividend reinvestment and purchase plan (in shares)	3,762
Dividend reinvestment and purchase plan	$ 149				149
Stock options exercised (in shares)	200
Stock options exercised	$ 4				4
Treasury shares acquired (17,747)				(706)	(706)
Cash dividends		(912)			$ (912)
Balance (in shares) at Jun. 30, 2019	3,646,497				3,242,585
Balance at Jun. 30, 2019	$ 86,590	$ 60,517	$ 1,377	$ (14,224)	$ 134,260

XML

Consolidated Statement of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Retained Earnings [Member]
Cash dividends per share (in dollars per share)	$ 0.28	$ 0.28	$ 0.56	$ 0.61
Treasury acquired, shares (in shares)	17,747		17,747

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Consolidated Statement of Cash Flows (Unaudited) - USD ($)		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
OPERATING ACTIVITIES
Net income		$ 6,301,000	$ 5,702,000
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		350,000	420,000
Investment securities gains on sale, net	[1]	(190,000)
Gain on equity securities	[1]	(44,000)	(31,000)
Depreciation and amortization of premises and equipment, net		524,000	457,000
Software amortization expense		297,000	305,000
Financing lease amortization expense		173,000
Amortization of premium and discount on investment securities, net		176,000	208,000
Accretion of deferred loan fees, net		(429,000)	(564,000)
Amortization of core deposit intangibles		170,000	178,000
Stock-based compensation expense		186,000	280,000
Origination of loans held for sale		(6,781,000)	(6,694,000)
Proceeds from sale of loans		7,104,000	6,146,000
Gain on sale of loans		(157,000)	(121,000)
Earnings on bank-owned life insurance	[1]	(214,000)	(210,000)
Deferred income tax		183,000	132,000
Net gain on other real estate owned		(106,000)	5,000
Decrease (increase) in accrued interest receivable		66,000	(7,000)
Increase in accrued interest payable		292,000	83,000
Other, net		(2,991,000)	(1,268,000)
Net cash provided by operating activities		4,910,000	5,021,000
INVESTING ACTIVITIES
Proceeds from repayments and maturities		6,851,000	2,304,000
Proceeds from sale of securities		11,807,000
Purchases		(17,193,000)	(9,862,000)
Increase in loans, net		(6,206,000)	(20,005,000)
Proceeds from the sale of other real estate owned		325,000	26,000
Purchase of premises and equipment		(681,000)	(1,582,000)
Purchase of restricted stock		(29,000)	(90,000)
Net cash used in investing activities		(5,126,000)	(29,209,000)
FINANCING ACTIVITIES
Net increase in deposits		35,440,000	54,052,000
Increase (decrease) in short-term borrowings, net		(5,398,000)	13,126,000
Repayment of other borrowings		(155,000)	(10,069,000)
Restricted stock cash portion		(44,000)
Stock options exercised		4,000	104,000
Proceeds from dividend reinvestment and purchase plan		345,000	301,000
Repurchase of treasury shares		(706,000)
Cash dividends		(1,821,000)	(1,966,000)
Net cash provided by financing activities		27,665,000	55,548,000
Increase in cash and cash equivalents		27,449,000	31,360,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		107,933,000	39,886,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD		135,382,000	71,246,000
Cash paid during the year for:
Interest on deposits and borrowings		6,413,000	4,238,000
Income taxes		1,330,000	1,075,000
Noncash operating transactions:
Operating lease assets added to other, net		(1,071,000)
Operating lease liabilities added to other, net		1,071,000
Noncash investing transactions:
Transfers from loans to other real estate owned		38,000
Transfer of equity securities from investment securities available for sale, at fair value			(625,000)
Finance lease assets added to premises and equipment		(3,801,000)
Noncash financing transactions:
Finance lease liabilities added to borrowed funds		$ 3,801,000

[1] Not within scope of ASC 606

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Note 1 - Basis of Presentation

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE

1

- BASIS OF PRESENTATION

The consolidated financial statements of Middlefield Banc Corp. ("Company") include its bank subsidiary, The Middlefield Banking Company (“MBC” or “Middlefield Bank”), and a nonbank asset resolution subsidiary EMORECO, Inc. The consolidated financial statements also include the accounts of MBC’s subsidiary, Middlefield Investments, Inc. (MII), established

March 13, 2019.

All significant inter-company items have been eliminated.

The unaudited condensed consolidated financial statements have been prepared in conformity with the instructions to Form

10

-Q and Article

10

of Regulation S-

X.

  Accordingly, they do

not

include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements.  The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form

10

-K for the year ended

December 

31,

2018.

  The interim consolidated financial statements include all adjustments (consisting of only normal recurring items) that, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the periods presented.  The results of operations for the interim periods disclosed herein are

not

necessarily indicative of the results that

may

be expected for a full year.  

Recently Adopted Accounting Pronouncements –

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases

(Topic

842

)

. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as

one

in which (a) the lease term is

12

months or less and (b) there is

not

an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees

may

elect to recognize lease payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after

December 15, 2018,

and interim periods within those years. For all other entities, the amendments in this Update are effective for fiscal years beginning after

December 15, 2019,

and for interim periods within fiscal years beginning after

December 15, 2020.

The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. On

January 1, 2019,

the Company adopted ASU

2016

-

02

which resulted in the recording of finance lease assets and liabilities of

$3.8

million and operating lease assets and liabilities of

$1.1

million on the Consolidated Balance Sheet. See Note

9

to the financial statements.

Recently Issued Accounting Pronouncements –

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (“CECL”)

, which changes the impairment model for most financial assets. This Update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of the Update is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. ASU

2016

-

13

is effective for annual and interim periods beginning after

December 15, 2019,

and early adoption is permitted for annual and interim periods beginning after

December 15, 2018.

With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the

first

reporting period in which the guidance is adopted. The CECL model has been completed and runs concurrently with the existing incurred loss model each month.  Management continues monitoring model output, with final assumption changes expected to be made in the

third

quarter.

Reclassification of Comparative Amounts –

Certain comparative amounts from prior years have been reclassified to conform to current-year presentations. Such reclassifications did

not

affect net income or retained earnings.

XML

Note 2 - Revenue Recognition

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

NOTE

2

–

REVENUE RECOGNITION

In accordance with ASC Topic

606,

management determined that the primary sources of revenue, which emanate from interest income on loans and investments, along with noninterest revenue resulting from investment security gains, gains on the sale of loans, and BOLI income, are

not

within the scope of ASC

606.

These revenue sources cumulatively comprise

92.2%

of the total revenue of the Company.

The main types of noninterest income within the scope of the standard are as follows:

Service charges on deposit accounts

– The Company has contracts with its deposit customers where fees are charged if the account balance falls below predetermined levels defined as compensating balances. These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on a monthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specific customer requests or activities that include overdraft fees, online banking fees, and other transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time, which is completion of the requested service/transaction.

Gains (losses) on sale of other real estate owned(“OREO”)

– Gains and losses are recognized at the completion of the property sale when the buyer obtains control of the real estate and all of the performance obligations of the Company have been satisfied. Evidence of the buyer obtaining control of the asset include transfer of the property title, physical possession of the asset, and the buyer obtaining control of the risks and rewards related to the asset. In situations where the Company agrees to provide financing to facilitate the sale, additional analysis is performed to ensure that the contract for sale identifies the buyer and seller, the asset to be transferred and the payment terms, that the contract has a true commercial substance and that amounts due from the buyer are reasonable. In situations where financing terms are

not

reflective of current market terms, the transaction price is discounted, impacting the gain/loss and the carrying value of the asset.

The following table depicts the disaggregation of revenue derived from contracts with customers to depict the nature, amount, timing, and uncertainty of revenue and cash flows:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
Noninterest Income	2019			2018		2019		2018
(Dollar amounts in thousands)
Service charges on deposit accounts:
Overdraft fees	$	190		$	197	$	438	$	390
ATM banking fees		241			214		435		415
Service charges and other fees		99			61		165		120
Investment securities gains on sale, net (a)		190			-		190		-
(Loss) gain on equity securities (a)		(14	)		13		44		31
Earnings on bank-owned life insurance (a)		109			98		214		210
Gain on sale of loans (a)		98			154		157		158
Other income		386			311		788		510
Total noninterest income	$	1,299		$	1,048	$	2,431	$	1,834

(a)

Not

within scope of ASC

606

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Note 3 - Stock-based Compensation

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

NOTE

3

- STOCK-BASED COMPENSATION

The Company had

no

unvested stock options outstanding as of

June 30, 2019

and

2018.

Stock option activity during the

six

months ended

June 30, 2019

is as follows:

				Weighted-
				average
				Exercise Price
	Shares			Per Share
Outstanding, January 1, 2019		7,450		$	17.55
Exercised		(200	)		17.55
Outstanding, June 30, 2019		7,250		$	17.55
Exercisable, June 30, 2019		7,250		$	17.55

The following table presents the activity during the

six

months ended

June 30, 2019

related to awards of restricted stock:

				Weighted-
				average
				Grant Date Fair
	Units			Value Per Unit
Nonvested at January 1, 2019		21,072		$	41.96
Granted		14,565			41.90
Vested		(4,970	)		32.40
Nonvested at June 30, 2019		30,667		$	43.48
Expected to vest at June 30, 2019		750		$	46.03

The Company recognizes restricted stock forfeitures in the period they occur.

Share-based compensation expense of

$0

and

$91,000

was recognized for the

three

-month periods ended

June 30, 2019

and

2018,

respectively. Share-based compensation expense of

$90,000

and

$136,000

was recognized for the

six

-month periods ended

June 30, 2019

and

2018,

respectively. Since the shares of restricted stock are historically paid out at the vesting date in a combination of shares and cash, the Company has recorded a liability related to this plan which totals

$236,000

and

$261,000

at

June 30, 2019

and

2018,

respectively.

Total unrecognized stock compensation cost related to nonvested share-based compensation on restricted stock as of

June 30, 2019

totals

$517,000,

of which

$123,000

is estimated for the rest of

2019,

$201,000

for

2020,

$168,000

for

2021,

and

$25,000

for

2022.

XML

Note 4 - Earnings Per Share

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE

4

- EARNINGS PER SHARE

The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share is calculated by dividing net income by the average shares outstanding. Diluted earnings per share adds the dilutive effects of stock options and restricted stock to average shares outstanding.

The following table sets forth the composition of the weighted-average common shares (denominator) used in the basic and diluted earnings-per-share computation.

	For the Three						For the Six
	Months Ended						Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Weighted-average common shares issued		3,643,271			3,611,891			3,639,310			3,609,174
Average treasury stock shares		(392,017	)		(386,165	)		(389,107	)		(386,165	)
Weighted-average common shares and common stock equivalents used to calculate basic earnings per share		3,251,254			3,225,726			3,250,203			3,223,009
Additional common stock equivalents (stock options and restricted stock) used to calculate diluted earnings per share		6,219			14,603			6,322			15,227
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share		3,257,473			3,240,329			3,256,525			3,238,236

Options to purchase

7,250

shares of common stock at

$17.55

per share, were outstanding during the

three

and

six

months ended

June 30, 2019.

Also outstanding were

30,667

shares of restricted stock.

None

of the outstanding options or restricted stock were anti-dilutive.

Options to purchase

13,750

shares of common stock, at prices ranging from

$17.55

to

$23.00,

were outstanding during the

three

and

six

months ended

June 30, 2018.

Also outstanding were

20,425

shares of restricted stock.

None

of the outstanding options or restricted stock were anti-dilutive.

When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is presented within the share premium. The reserve for the Company’s treasury shares comprises the cost of the Company’s shares held by the Company. As of

June 30, 2019,

the Company held

403,912

of the Company’s shares, which is an increase of

17,747

from the

386,165

shares held as of

December 31, 2018.

XML

Note 5 - Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE

5

- F

AIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following levels:

Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.

Level II: Pricing inputs are other than the quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities includes items for which quoted prices are available but traded less frequently and items that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two -way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

This hierarchy requires the use of observable market data when available.

The following tables present the assets measured on a recurring basis on the Consolidated Balance Sheet at their fair value by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

			June 30, 2019
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
U.S. government agency securities	$	-	$	1,995	$	-	$	1,995
Subordinated debt		-		4,086		-		4,086
Obligations of states and political subdivisions		-		72,911		-		72,911
Mortgage-backed securities in government-sponsored entities		-		19,817		-		19,817
Total debt securities		-		98,809		-		98,809
Equity securities in financial institutions		660		-		-		660
Total	$	660	$	98,809	$	-	$	99,469

			December 31, 2018
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
U.S. government agency securities	$	-	$	7,471	$	-	$	7,471
Obligations of states and political subdivisions		-		73,093		-		73,093
Mortgage-backed securities in government-sponsored entities		-		17,758		-		17,758
Total debt securities		-		98,322		-		98,322
Equity securities in financial institutions		616		-		-		616
Total	$	616	$	98,322	$	-	$	98,938

Investment

Securities Available for S

ale

- The Company obtains fair values from an independent pricing service which represent quoted prices for similar assets, fair values determined by pricing models using a market approach that considers observable market data, such as interest rate volatilities, LIBOR yield curve, credit spreads and prices from market makers and live trading systems (Level II).

Equity Securities

- Equity securities that are traded on a national securities exchange are valued at their last reported sales price as of the measurement date. Equity securities traded in the over-the-counter (“OTC”) markets and listed securities for which

no

sale was reported on that date are generally valued at their last reported “bid” price if held long, and last reported “ask” price if sold short. To the extent equity securities are actively traded and valuation adjustments are

not

applied, they are categorized in Level I of the fair value hierarchy. Equity securities traded on inactive markets or valued by reference to similar instruments are generally categorized in Level II of the fair value hierarchy.

The following tables present the assets measured on a nonrecurring basis on the Consolidated Balance Sheet at their fair value by level within the fair value hierarchy. Collateral-dependent impaired loans are carried at fair value if they have been charged down to fair value or if a specific valuation allowance has been established. A new cost basis is established at the time a property is initially recorded in OREO. OREO properties are carried at fair value if a devaluation has been taken to the property’s value subsequent to the initial measurement.

No

such devaluation occurred in the

three

months ended

June 30, 2019.

			June 30, 2019
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	-	$	-	$	5,025	$	5,025

			December 31, 2018
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	-	$	-	$	1,075	$	1,075

Impaired Loans

– The Company has measured impairment on collateral-dependent impaired loans generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent

third

-party appraisals of the properties. In some cases, management

may

adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral-dependent loan is less than the carrying amount of the loan, a specific reserve for the loan is made in the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included in the above table as a Level III measurement. If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is

not

included in the above table as it is

not

currently being carried at its fair value. The fair values in the above table exclude estimated selling costs of

$1.8

million and

$492,000

as of

June 30, 2019

and

December 31, 2018,

respectively.

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company uses Level III inputs to determine fair value:

	Quantitative Information about Level III Fair Value Measurements
(Dollar amounts in thousands)
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
June 30, 2019
Impaired loans	$	5,025	Appraisal of collateral (1)	Appraisal adjustments (2)	0%	to	56.6%	(0.9%)

	Quantitative Information about Level III Fair Value Measurements
(Dollar amounts in thousands)
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2018
Impaired loans	$	1,075	Appraisal of collateral (1)	Appraisal adjustments (2)	0%	to	100.0%	(40.6%)

( 1 ) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level III inputs which are not identifiable, less any associated allowance.

( 2 ) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

The estimated fair value of the Company’s financial instruments

not

recorded at fair value on a recurring basis is as follows:

	June 30, 2019
	Carrying								Total
	Value		Level I		Level II		Level III		Fair Value
	(Dollar amounts in thousands)
Financial assets:
Cash and cash equivalents	$	135,382	$	135,382	$	-	$	-	$	135,382
Loans held for sale		431		-		431		-		431
Net loans		990,928		-		-		987,542		987,542
Bank-owned life insurance		16,294		16,294		-		-		16,294
Federal Home Loan Bank stock		3,708		3,708		-		-		3,708
Accrued interest receivable		3,567		3,567		-		-		3,567
Financial liabilities:
Deposits	$	1,051,507	$	640,473	$	-	$	412,944	$	1,053,417
Short-term borrowings		85,000		85,000		-		-		85,000
Other borrowings		12,449		-		-		12,490		12,490
Accrued interest payable		1,036		1,036		-		-		1,036

	December 31, 2018
	Carrying								Total
	Value		Level I		Level II		Level III		Fair Value
	(Dollar amounts in thousands)
Financial assets:
Cash and cash equivalents	$	107,933	$	107,933	$	-	$	-	$	107,933
Loans held for sale		597		-		597		-		597
Net loans		984,681		-		-		973,124		973,124
Bank-owned life insurance		16,080		16,080		-		-		16,080
Federal Home Loan Bank stock		3,679		3,679		-		-		3,679
Accrued interest receivable		3,633		3,633		-		-		3,633
Financial liabilities:
Deposits	$	1,016,067	$	715,153	$	-	$	298,891	$	1,014,044
Short-term borrowings		90,398		90,398		-		-		90,398
Other borrowings		8,803		-		-		8,827		8,827
Accrued interest payable		744		744		-		-		744

All financial instruments included in the above tables, with the exception of net loans, deposits, and other borrowings, are carried at cost, which approximates the fair value of the instrument.

XML

Note 6 - Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

NOTE

6

– ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents the changes in accumulated other comprehensive income (loss) (“AOCI”) by component net of tax for the

three

and

six

months ended

June 30, 2019

and

2018,

respectively:

(Dollars in thousands)	Unrealized gains on available-for-sale securities (a)
Balance as of March 31, 2019	$	641
Other comprehensive income		886
Amount reclassified from accumulated other comprehensive income		(150	)
Balance at June 30, 2019	$	1,377
Balance as of December 31, 2018	$	(154	)
Other comprehensive income		1,681
Amount reclassified from accumulated other comprehensive income		(150	)
Balance at June 30, 2019	$	1,377

(Dollars in thousands)	Unrealized gains on available-for-sale securities (a)
Balance as of March 31, 2018	$	(373	)
Other comprehensive loss before reclassification		(58	)
Balance at June 30, 2018	$	(431	)
Balance as of December 31, 2017	$	1,091
Other comprehensive loss before reclassification		(1,568	)
Change in accounting principle, ASC 2016-01 (b)		(141	)
Change in accounting principle, ASC 2018-02 (b)		187
Period change		(1,522	)
Balance at June 30, 2018	$	(431	)

(a) All amounts are net of tax. Amounts in parentheses indicate debits to AOCI.

(b) Reclassifications are the result of the adoption of ASUs 2016 - 01 and 2018 - 02 effective for the Company beginning January 1, 2018. The reclassifications are presented within the Consolidated Statement of Changes in Stockholders’ Equity for the affected transitional periods.

The following tables present significant amounts reclassified from or to each component of AOCI:

	Amounts Reclassified from Accumulated Other Comprehensive Income					Affected Line Item in the Statement Where
(Dollars in thousands)	For the Three and Six Months Ended					Net Income is
Details about other comprehensive income	June 30, 2019			June 30, 2018		Presented
Unrealized gains on available-for-sale securities (a)	$	190		$	-	Investment securities gains on sale, net
		(40	)		-	Income taxes
	$	150		$	-

(a) For unrealized gains on available-for-sale securities, amounts in parentheses indicate expenses and other amounts indicate income.

XML

Note 7 - Investment and Equity Securities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

NOTE

7

–

INVESTMENT

AND EQUITY

SECURITIES

The amortized cost and fair values of investment securities available for sale are as follows:

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. government agency securities	$	2,000	$	-	$	(5	)	$	1,995
Subordinated debt		4,000		86		-			4,086
Obligations of states and political subdivisions:
Taxable		501		7		-			508
Tax-exempt		70,818		1,585		-			72,403
Mortgage-backed securities in government-sponsored entities		19,746		223		(152	)		19,817
Total	$	97,065	$	1,901	$	(157	)	$	98,809

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. government agency securities	$	7,442	$	90	$	(61	)	$	7,471
Obligations of states and political subdivisions:
Taxable		502		10		-			512
Tax-exempt		72,387		667		(473	)		72,581
Mortgage-backed securities in government-sponsored entities		18,185		88		(515	)		17,758
Total	$	98,516	$	855	$	(1,049	)	$	98,322

The Company recognized net (loss) gains on equity investments of (

$14,000

) and

$44,000,

respectively, for the

three

and

six

months ended

June 30, 2019.

The Company recognized net gains on equity investments of

$13,000

and

$31,000,

respectively, for the

three

and

six

months ended

June 30, 2018.

No

net gains on sold equity securities were realized during this period.

The amortized cost and fair value of debt securities at

June 30, 2019,

by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers

may

have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
(Dollar amounts in thousands)	Cost		Value
Due in one year or less	$	5,094	$	5,122
Due after one year through five years		1,790		1,820
Due after five years through ten years		13,446		13,658
Due after ten years		76,735		78,209
Total	$	97,065	$	98,809

Proceeds from the sales of investment securities and the gross realized gains and losses are as follows:

(Dollar amounts in thousands)	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019			2018
Proceeds from sales	$	11,807		$	-	$	11,807		$	-
Gross realized gains		223			-		223			-
Gross realized losses		(33	)		-		(33	)		-

Investment securities with an approximate carrying value of

$51.1

million and

$63.5

million at

June 30, 2019

and

December 31, 2018,

respectively, were pledged to secure deposits and for other purposes as required by law.

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.

	June 30, 2019
	Less than Twelve Months				Twelve Months or Greater					Total
			Gross				Gross					Gross
	Fair		Unrealized		Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses		Value		Losses			Value		Losses
U.S. government agency securities	$	-	$	-	$	1,995	$	(5	)	$	1,995	$	(5	)
Mortgage-backed securities in government-sponsored entities		-		-		10,945		(152	)		10,945		(152	)
Total	$	-	$	-	$	12,940	$	(157	)	$	12,940	$	(157	)

	December 31, 2018
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government agency securities	$	-	$	-		$	4,105	$	(61	)	$	4,105	$	(61	)
Obligations of states and political subdivisions:
Tax-exempt		20,451		(286	)		11,053		(187	)		31,504		(473	)
Mortgage-backed securities in government-sponsored entities		2,068		(9	)		12,257		(506	)		14,325		(515	)
Total	$	22,519	$	(295	)	$	27,415	$	(754	)	$	49,934	$	(1,049	)

There were

16

securities considered temporarily impaired at

June 30, 2019.

On a quarterly basis, the Company performs an assessment to determine whether there have been any events or economic circumstances indicating that a security with an unrealized loss has suffered other-than-temporary impairment (“OTTI”). A debt security is considered impaired if the fair value is less than its amortized cost basis at the reporting date. The Company assesses whether the unrealized loss is other than temporary.

OTTI losses are recognized in earnings when the Company has the intent to sell the debt security or it is more likely than

not

that it will be required to sell the debt security before recovery of its amortized cost basis. However, even if the Company does

not

expect to sell a debt security, it must evaluate expected cash flows to be received and determine if a credit loss has occurred.

An unrealized loss is generally deemed to be other than temporary and a credit loss is deemed to exist if the present value of the expected future cash flows is less than the amortized cost basis of the debt security. As a result, the credit loss of an OTTI is recorded as a component of investment securities gains (losses) in the accompanying Consolidated Statement of Income, while the remaining portion of the impairment loss is recognized in other comprehensive income, provided the Company does

not

intend to sell the underlying debt security and it is “more likely than

not”

that the Company will

not

have to sell the debt security prior to recovery.

Debt securities issued by U.S. government agencies, U.S. government-sponsored enterprises, and state and political subdivisions accounted for

96%

of the total available-for-sale portfolio as of

June 30, 2019

and

no

credit losses are expected, given the explicit and implicit guarantees provided by the U.S. federal government and the lack of prolonged unrealized loss positions within the obligations of the state and political subdivisions security portfolio. The Company considers the following factors in determining whether a credit loss exists and the period over which the debt security is expected to recover:

• The length of time and the extent to which the fair value has been less than the amortized cost basis.

• Changes in the near-term prospects of the underlying collateral of a security such as changes in default rates, loss severity given default and significant changes in prepayment assumptions;

• The level of cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and

• Any adverse change to the credit conditions and liquidity of the issuer, taking into consideration the latest information available about the overall financial condition of the issuer, credit ratings, recent legislation and government actions affecting the issuer’s industry and actions taken by the issuer to deal with the present economic climate.

For the

six

months ended

June 30, 2019

and

2018,

there were

no

available-for-sale debt securities with an unrealized loss that suffered OTTI. Management does

not

believe any individual unrealized loss as of

June 30, 2019

or

December 31, 2018

represented an other-than-temporary impairment. The unrealized losses on debt securities are primarily the result of interest rate changes. These conditions will

not

prohibit the Company from receiving its contractual principal and interest payments on these debt securities. The fair value of these debt securities is expected to recover as payments are received on these securities and they approach maturity. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

XML

Note 8 - Loans and Related Allowance for Loan and Lease Losses

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

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

N

OTE

8

-

LOANS AND RELATED

ALLOWANCE FOR LOAN AND LEASE LOSSES

Major classifications of loans are summarized as follows (in thousands):

	June 30,			December 31,
	2019			2018
Commercial and industrial	$	85,520		$	83,857
Real estate - construction		54,619			56,731
Real estate - mortgage:
Residential		345,830			336,487
Commercial		496,300			498,247
Consumer installment		15,963			16,787
		998,232			992,109
Less: Allowance for loan and lease losses		(7,304	)		(7,428	)
Net loans	$	990,928		$	984,681

The amounts above include deferred loan origination costs of

$1.4

million and

$1.6

million at

June 30, 2019

and

December 31, 2018.

The Company’s primary business activity is with customers located within its local Northeastern Ohio trade area, eastern Geauga County, and contiguous counties. The Company also serves the central Ohio market with offices in Dublin, Sunbury, Westerville, and Powell, Ohio. Commercial, residential, consumer, and agricultural loans are granted. Although the Company has a diversified loan portfolio, loans outstanding to individuals and businesses are dependent upon the local economic conditions in the Company’s immediate trade area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances net of the allowance for loan and lease losses. Interest income is recognized on the accrual method. The accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of interest is doubtful. Interest payments received on nonaccrual loans are applied against the unpaid principal balance until accrual status is restored.

Loan origination fees and certain direct loan origination costs are deferred with the net amount amortized over the contractual life of the loan as an adjustment of the related loan’s yield.

The following tables summarize the primary segments of the loan portfolio and allowance for loan and lease losses (in thousands):

					Real Estate - Mortgage
June 30, 2019	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Loans:
Individually evaluated for impairment	$	2,115	$	-	$	1,783	$	11,426	$	2	$	15,326
Collectively evaluated for impairment		83,405		54,619		344,047		484,874		15,961		982,906
Total loans	$	85,520	$	54,619	$	345,830	$	496,300	$	15,963	$	998,232

					Real Estate - Mortgage
December 31, 2018	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Loans:
Individually evaluated for impairment	$	2,570	$	-	$	1,970	$	9,533	$	2	$	14,075
Collectively evaluated for impairment		81,287		56,731		334,517		488,714		16,785		978,034
Total loans	$	83,857	$	56,731	$	336,487	$	498,247	$	16,787	$	992,109

					Real Estate - Mortgage
June 30, 2019	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Allowance for loan and lease losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	140	$	-	$	51	$	672	$	-	$	863
Collectively evaluated for impairment		399		90		1,630		4,203		119		6,441
Total ending allowance balance	$	539	$	90	$	1,681	$	4,875	$	119	$	7,304

					Real Estate - Mortgage
December 31, 2018	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Allowance for loan and lease losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	667	$	-	$	43	$	643	$	1	$	1,354
Collectively evaluated for impairment		302		100		1,538		4,008		126		6,074
Total ending allowance balance	$	969	$	100	$	1,581	$	4,651	$	127	$	7,428

The Company’s loan portfolio is segmented to a level that allows management to monitor risk and performance. The portfolio is segmented into Commercial and Industrial (“C&I”), Real Estate Construction, Real Estate - Mortgage which is further segmented into Residential and Commercial Real Estate (“CRE”), and Consumer Installment Loans. The C&I loan segment consists of loans made for the purpose of financing the activities of commercial customers. The residential mortgage loan segment consists of loans made for the purpose of financing the activities of residential homeowners. The commercial mortgage loan segment consists of loans made for the purpose of financing the activities of commercial real estate owners and operators. The consumer loan segment consists primarily of installment loans and overdraft lines of credit connected with customer deposit accounts. The increases in the allowance for loan loss for the Residential and CRE portfolios were offset by decreases in the allowance for the C&I, Real Estate Construction, and Consumer Installment portfolios.

Management evaluates individual loans in all of the commercial segments for possible impairment based on guidance established by the Board of Directors. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement.  Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does

not

separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired, or the loan was modified in a troubled debt restructuring.

Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using

one

of the following methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis. The Company’s policy for recognizing interest income on impaired loans does

not

differ from its overall policy for interest recognition.

The following tables present impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was

not

necessary (in thousands):

June 30, 2019
Impaired Loans
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	1,012	$	1,523	$	-
Real estate - mortgage:
Residential		1,360		1,481		-
Commercial		3,245		3,333		-
Consumer installment		2		2		-
Total	$	5,619	$	6,339	$	-
With an allowance recorded:
Commercial and industrial	$	1,103	$	1,322	$	140
Real estate - mortgage:
Residential		423		521		51
Commercial		8,181		8,191		672
Total	$	9,707	$	10,034	$	863
Total:
Commercial and industrial	$	2,115	$	2,845	$	140
Real estate - mortgage:
Residential		1,783		2,002		51
Commercial		11,426		11,524		672
Consumer installment		2		2		-
Total	$	15,326	$	16,373	$	863

December 31, 2018
Impaired Loans
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	207	$	413	$	-
Real estate - mortgage:
Residential		1,306		1,462		-
Commercial		1,867		2,186		-
Total	$	3,380	$	4,061	$	-
With an allowance recorded:
Commercial and industrial	$	2,363	$	3,013	$	667
Real estate - mortgage:
Residential		664		715		43
Commercial		7,666		7,676		643
Consumer installment		2		2		1
Total	$	10,695	$	11,406	$	1,354
Total:
Commercial and industrial	$	2,570	$	3,426	$	667
Real estate - mortgage:
Residential		1,970		2,177		43
Commercial		9,533		9,862		643
Consumer installment		2		2		1
Total	$	14,075	$	15,467	$	1,354

The tables above include troubled debt restructuring totaling

$3.6

million as of

June 30, 2019

and

$4.4

million as of

December 31, 2018.

The following tables present the average balance and interest income by class, recognized on impaired loans (in thousands):

	For the Three Months Ended June 30, 2019				For the Six Months Ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial and industrial	$	1,970	$	23	$	2,170	$	45
Real estate - construction		1,620		-		1,080		-
Real estate - mortgage:
Residential		1,820		15		1,870		27
Commercial		10,238		85		10,003		172
Consumer installment		2		-		2		-
Total	$	15,650	$	123	$	15,125	$	244

	For the Three Months Ended June 30, 2018				For the Six Months Ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial and industrial	$	4,277	$	23	$	3,644	$	47
Real estate - construction		142		-		283		-
Real estate - mortgage:
Residential		2,772		13		2,871		27
Commercial		6,464		51		6,583		102
Consumer installment		4		-		4		-
Total	$	13,659	$	87	$	13,385	$	176

Management uses a

nine

-point internal risk-rating system to monitor the credit quality of the overall loan portfolio. The

first

five

categories are considered

not

criticized and are aggregated as Pass rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but have potential weaknesses, resulting in an undue and unwarranted credit risk, but

not

to the point of justifying a Substandard classification.  Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are

not

corrected.  All loans greater than

90

days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category.  

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan-rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as payment delinquency, bankruptcy, repossession, or death, occurs to raise awareness of a possible credit event.  The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis.  The Credit Department performs an annual review of all commercial relationships with loan balances of

$500,000

or greater.  Confirmation of the appropriate risk grade is included in the review on an ongoing basis.  The Company engages an external consultant to conduct loan reviews on a semiannual basis. Generally, the external consultant reviews commercial relationships greater than

$250,000

and criticized relationships greater than

$150,000.

  Detailed reviews, including plans for resolution, are performed on criticized loans on at least a quarterly basis.  Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The primary risk of commercial and industrial loans is related to deterioration in the cash flow of the business that

may

result in the liquidation of the business assets securing the loan. C&I loans are, by nature, secured by less substantial collateral than real estate-secured loans. The primary risk of real estate construction loans is potential delays and disputes during the completion process. The primary risk of residential real estate loans is current economic uncertainties along with the slow recovery in the housing market. The primary risk of commercial real estate loans is loss of income of the owner or occupier of the property and the inability of the market to sustain rent levels. Consumer installment loans historically have experienced higher delinquency rates. Consumer installments are typically secured by less substantial collateral than other types of credits.

The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk-rating system (in thousands):

			Special						Total
June 30, 2019	Pass		Mention		Substandard		Doubtful		Loans
Commercial and industrial	$	78,051	$	4,846	$	2,623	$	-	$	85,520
Real estate - construction		54,619		-		-		-		54,619
Real estate - mortgage:
Residential		340,320		999		4,511		-		345,830
Commercial		480,275		4,834		11,191		-		496,300
Consumer installment		15,953		-		10		-		15,963
Total	$	969,218	$	10,679	$	18,335	$	-	$	998,232

			Special						Total
December 31, 2018	Pass		Mention		Substandard		Doubtful		Loans
Commercial and industrial	$	77,002	$	4,572	$	2,283	$	-	$	83,857
Real estate - construction		55,397		1,334		-		-		56,731
Real estate - mortgage:
Residential		332,475		553		3,459		-		336,487
Commercial		483,516		6,617		8,114		-		498,247
Consumer installment		16,776		-		11		-		16,787
Total	$	965,166	$	13,076	$	13,867	$	-	$	992,109

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.

Nonperforming assets are nonaccrual loans including nonaccrual troubled debt restructurings (“TDR”), loans

90

days or more past due, EMORECO assets, other real estate owned, and repossessed assets. A loan is classified as nonaccrual when, in the opinion of management, there are serious doubts about collectability of interest and principal. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of principal and interest is doubtful.  Payments received on nonaccrual loans are applied against the principal balance.

The following tables present the aging of the recorded investment in past-due loans by class of loans (in thousands):

			30-59 Days		60-89 Days		90 Days+		Total		Total
June 30, 2019	Current		Past Due		Past Due		Past Due		Past Due		Loans
Commercial and industrial	$	84,803	$	298	$	58	$	361	$	717	$	85,520
Real estate - construction		54,458		161		-		-		161		54,619
Real estate - mortgage:
Residential		340,884		2,182		446		2,318		4,946		345,830
Commercial		491,843		81		86		4,290		4,457		496,300
Consumer installment		15,941		22		-		-		22		15,963
Total	$	987,929	$	2,744	$	590	$	6,969	$	10,303	$	998,232

			30-59 Days		60-89 Days		90 Days+		Total		Total
December 31, 2018	Current		Past Due		Past Due		Past Due		Past Due		Loans
Commercial and industrial	$	82,770	$	288	$	213	$	586	$	1,087	$	83,857
Real estate - construction		56,731		-		-		-		-		56,731
Real estate - mortgage:
Residential		331,379		2,612		1,083		1,413		5,108		336,487
Commercial		496,597		664		-		986		1,650		498,247
Consumer installment		16,768		19		-		-		19		16,787
Total	$	984,245	$	3,583	$	1,296	$	2,985	$	7,864	$	992,109

The following tables present the recorded investment in non-accrual loans and loans past due over

89

days still on accrual by class of loans (in thousands):

			90+ Days Past
June 30, 2019	Nonaccrual		Due and Accruing
Commercial and industrial	$	1,082	$	-
Real estate - construction		-		-
Real estate - mortgage:
Residential		4,196		58
Commercial		5,389		-
Consumer installment		4		-
Total	$	10,671	$	58

			90+ Days Past
December 31, 2018	Nonaccrual		Due and Accruing
Commercial and industrial	$	996	$	91
Real estate - construction		-		-
Real estate - mortgage:
Residential		2,731		754
Commercial		2,864		100
Consumer installment		4		-
Total	$	6,595	$	945

Interest income that would have been recorded had these loans

not

been placed on nonaccrual status was

$211,000

for the

six

months ended

June 30, 2019

and

$456,000

for the year ended

December 31, 2018.

An allowance for loan and lease losses (“ALLL”) is maintained to absorb losses from the loan portfolio.  The ALLL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of nonperforming loans.

The Company’s methodology for determining the ALLL is based on the requirements of ASC Section

310

-

10

-

35

for loans individually evaluated for impairment (discussed above) and ASC Subtopic

450

-

20

for loans collectively evaluated for impairment, as well as the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the

two

components represents the Company’s ALLL. Management also performs impairment analyses on TDRs, which

may

result in specific reserves.

Loans that are collectively evaluated for impairment are analyzed with general allowances being made as appropriate.  For general allowances, historical loss trends are used in the estimation of losses in the current portfolio.  These historical loss amounts are modified by other qualitative factors.

The classes described above, which are based on the purpose code assigned to each loan, provide the starting point for the ALLL analysis.  Management tracks the historical net charge-off activity at the call code level. The historical charge-off factor was calculated using the last

twelve

consecutive historical quarters.

Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; levels of and trends in delinquency rates and nonaccrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and geographic standpoint.

Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALLL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALLL.

The following tables summarize the primary segments of the loan portfolio and the activity within those segments (in thousands):

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at December 31, 2018	$	969		$	100		$	1,581		$	4,651		$	127		$	7,428
Charge-offs		(355	)		-			(138	)		(32	)		(88	)		(613	)
Recoveries		40			45			46			2			6			139
Provision		(115	)		(55	)		192			254			74			350
ALLL balance at June 30, 2019	$	539		$	90		$	1,681		$	4,875		$	119		$	7,304

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at December 31, 2017	$	999		$	313		$	1,760		$	4,036		$	82		$	7,190
Charge-offs		(9	)		-			(74	)		(111	)		(135	)		(329	)
Recoveries		140			17			29			-			35			221
Provision		50			(241	)		28			436			147			420
ALLL balance at June 30, 2018	$	1,180		$	89		$	1,743		$	4,361		$	129		$	7,502

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage		Consumer installment			Total
ALLL balance at March 31, 2019	$	586		$	748		$	1,623		$	4,161	$	88		$	7,206
Charge-offs		(9	)		-			(48	)		-		(41	)		(98	)
Recoveries		24			23			33			1		5			86
Provision		(62	)		(681	)		73			713		67			110
ALLL balance at June 30, 2019	$	539		$	90		$	1,681		$	4,875	$	119		$	7,304

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at March 31, 2018	$	1,256		$	92		$	1,782		$	4,323		$	98		$	7,551
Charge-offs		-			-			(74	)		(111	)		(130	)		(315	)
Recoveries		29			-			10			-			17			56
Provision		(105	)		(3	)		25			149			144			210
ALLL balance at June 30, 2018	$	1,180		$	89		$	1,743		$	4,361		$	129		$	7,502

The provision fluctuations during the

six

-month period ended

June 30, 2019

allocated to:

● commercial and industrial loans are due to the charge-off of a large relationship of $336,000 from a previous reserve of $358,000 in the first quarter.

● residential portfolio are due to charge-offs and portfolio growth.

● commercial real estate loans are due to the reclassification of a large construction loan, with a first quarter reserve of $661,000, to commercial real estate.

The provision fluctuations during the

three

-month period ended

June 30, 2019

allocated to:

● commercial real estate loans are due to the reclassification of a large construction loan, with a first quarter reserve of $661,000, to commercial real estate.

The following tables summarize troubled debt restructurings (in thousands):

	For the Three and Six Months Ended
	June 30, 2019
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		-		1		1	$	85	$	140

	For the Three Months Ended
	June 30, 2018
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		1		-		1	$	113	$	113

	For the Six Months Ended
	June 30, 2018
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		2		-		2	$	160	$	160

The following table summarizes TDR modifications within the previous

12

months for which there was a payment default during the

six

-month period ended

June 30, 2018 (

in thousands):

	For the Six Months Ended
	June 30, 2018
Troubled Debt Restructurings	Number of		Recorded
subsequently defaulted	Contracts		Investment
Residential real estate		2	$	215

There were

no

subsequent defaults of troubled debt restructurings for the

three

-month periods ended

June 30, 2019

and

June 30, 2018,

or for the

six

-month period ended

June 30, 2019.

XML

Note 9 - Lease Commitments

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Lease Disclosure [Text Block]

NOTE

9

–

LEASE

COMMITMENTS

The Company utilizes leases for

six

of its branch locations. As of

June 30, 2019,

net assets recorded under leases amounted to

$4.6

million and have remaining lease terms of

1

year to

6

years. As of

June 30, 2019,

finance lease assets included in premises and equipment, net totaled

$3.6

million and operating lease assets included in accrued interest receivable and other assets on the Consolidated Balance Sheet totaled

$983,000.

As of

June 30, 2019,

finance lease obligations included in other borrowings totaled

$3.7

million and operating lease obligations included in accrued interest payable and other liabilities on the Consolidated Balance Sheet totaled

$984,000.

On

April 17, 2019,

the Company purchased a building to relocate the Mantua branch which is and has been at a leased location as of

June 30, 2019.

The relocation is planned for

2020,

and the Company entered into an amended lease agreement with the Mantua lessor which does

not

exceed

12

months. As such, the lease for the Mantua location is

not

considered a capitalized lease as of

June 30, 2019.

Lease costs incurred are as follows:

	For the Three Months Ended June 30, 2019		For the Six Months Ended June 30, 2019
Lease Costs:
Finance lease cost:
Amortization of right-of-use asset	$	104	$	173
Interest Expense		30		69
Other		13		15
Operating lease cost		43		126
Total lease cost	$	190	$	383

The following table displays the weighted-average term and discount rates for both operating and finance leases outstanding as of

June 30, 2019:

	Operating			Finance
Weighted-average term (years)		2.1			4.9
Weighted-average discount rate		2.9	%		3.4	%

The following table displays the undiscounted cash flows due related to operating and finance leases as of

June 30, 2019,

along with a reconciliation to the discounted amount recorded on the

June 30, 2019

balance sheet:

	Operating			Finance
Undiscounted cash flows due within:
2019	$	112		$	199
2020		226			411
2021		210			424
2022		211			431
2023		211			431
2024 and thereafter		339			2,792
Total undiscounted cash flows		1,309			4,688
Impact of present value discount		(326	)		(1,061	)
Amount reported on balance sheet	$	983		$	3,627

The Company has

no

other purchase obligations for leases executed but

not

yet recorded.

XML

Note 2 - Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Disaggregation of Revenue [Table Text Block]

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
Noninterest Income	2019			2018		2019		2018
(Dollar amounts in thousands)
Service charges on deposit accounts:
Overdraft fees	$	190		$	197	$	438	$	390
ATM banking fees		241			214		435		415
Service charges and other fees		99			61		165		120
Investment securities gains on sale, net (a)		190			-		190		-
(Loss) gain on equity securities (a)		(14	)		13		44		31
Earnings on bank-owned life insurance (a)		109			98		214		210
Gain on sale of loans (a)		98			154		157		158
Other income		386			311		788		510
Total noninterest income	$	1,299		$	1,048	$	2,431	$	1,834

XML

Note 3 - Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Share-based Payment Arrangement, Option, Activity [Table Text Block]

				Weighted-
				average
				Exercise Price
	Shares			Per Share
Outstanding, January 1, 2019		7,450		$	17.55
Exercised		(200	)		17.55
Outstanding, June 30, 2019		7,250		$	17.55
Exercisable, June 30, 2019		7,250		$	17.55

Share-based Payment Arrangement, Restricted Stock Unit, Activity [Table Text Block]

				Weighted-
				average
				Grant Date Fair
	Units			Value Per Unit
Nonvested at January 1, 2019		21,072		$	41.96
Granted		14,565			41.90
Vested		(4,970	)		32.40
Nonvested at June 30, 2019		30,667		$	43.48
Expected to vest at June 30, 2019		750		$	46.03

XML

Note 4 - Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Weighted Average Number of Shares [Table Text Block]

	For the Three						For the Six
	Months Ended						Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Weighted-average common shares issued		3,643,271			3,611,891			3,639,310			3,609,174
Average treasury stock shares		(392,017	)		(386,165	)		(389,107	)		(386,165	)
Weighted-average common shares and common stock equivalents used to calculate basic earnings per share		3,251,254			3,225,726			3,250,203			3,223,009
Additional common stock equivalents (stock options and restricted stock) used to calculate diluted earnings per share		6,219			14,603			6,322			15,227
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share		3,257,473			3,240,329			3,256,525			3,238,236

XML

Note 5 - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

			June 30, 2019
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
U.S. government agency securities	$	-	$	1,995	$	-	$	1,995
Subordinated debt		-		4,086		-		4,086
Obligations of states and political subdivisions		-		72,911		-		72,911
Mortgage-backed securities in government-sponsored entities		-		19,817		-		19,817
Total debt securities		-		98,809		-		98,809
Equity securities in financial institutions		660		-		-		660
Total	$	660	$	98,809	$	-	$	99,469

			December 31, 2018
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a recurring basis:
U.S. government agency securities	$	-	$	7,471	$	-	$	7,471
Obligations of states and political subdivisions		-		73,093		-		73,093
Mortgage-backed securities in government-sponsored entities		-		17,758		-		17,758
Total debt securities		-		98,322		-		98,322
Equity securities in financial institutions		616		-		-		616
Total	$	616	$	98,322	$	-	$	98,938

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques [Table Text Block]

			June 30, 2019
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	-	$	-	$	5,025	$	5,025

			December 31, 2018
(Dollar amounts in thousands)	Level I		Level II		Level III		Total
Assets measured on a non-recurring basis:
Impaired loans	$	-	$	-	$	1,075	$	1,075

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

	Quantitative Information about Level III Fair Value Measurements
(Dollar amounts in thousands)
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
June 30, 2019
Impaired loans	$	5,025	Appraisal of collateral (1)	Appraisal adjustments (2)	0%	to	56.6%	(0.9%)

	Quantitative Information about Level III Fair Value Measurements
(Dollar amounts in thousands)
	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
December 31, 2018
Impaired loans	$	1,075	Appraisal of collateral (1)	Appraisal adjustments (2)	0%	to	100.0%	(40.6%)

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

	June 30, 2019
	Carrying								Total
	Value		Level I		Level II		Level III		Fair Value
	(Dollar amounts in thousands)
Financial assets:
Cash and cash equivalents	$	135,382	$	135,382	$	-	$	-	$	135,382
Loans held for sale		431		-		431		-		431
Net loans		990,928		-		-		987,542		987,542
Bank-owned life insurance		16,294		16,294		-		-		16,294
Federal Home Loan Bank stock		3,708		3,708		-		-		3,708
Accrued interest receivable		3,567		3,567		-		-		3,567
Financial liabilities:
Deposits	$	1,051,507	$	640,473	$	-	$	412,944	$	1,053,417
Short-term borrowings		85,000		85,000		-		-		85,000
Other borrowings		12,449		-		-		12,490		12,490
Accrued interest payable		1,036		1,036		-		-		1,036

	December 31, 2018
	Carrying								Total
	Value		Level I		Level II		Level III		Fair Value
	(Dollar amounts in thousands)
Financial assets:
Cash and cash equivalents	$	107,933	$	107,933	$	-	$	-	$	107,933
Loans held for sale		597		-		597		-		597
Net loans		984,681		-		-		973,124		973,124
Bank-owned life insurance		16,080		16,080		-		-		16,080
Federal Home Loan Bank stock		3,679		3,679		-		-		3,679
Accrued interest receivable		3,633		3,633		-		-		3,633
Financial liabilities:
Deposits	$	1,016,067	$	715,153	$	-	$	298,891	$	1,014,044
Short-term borrowings		90,398		90,398		-		-		90,398
Other borrowings		8,803		-		-		8,827		8,827
Accrued interest payable		744		744		-		-		744

XML

Note 6 - Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

(Dollars in thousands)	Unrealized gains on available-for-sale securities (a)
Balance as of March 31, 2019	$	641
Other comprehensive income		886
Amount reclassified from accumulated other comprehensive income		(150	)
Balance at June 30, 2019	$	1,377
Balance as of December 31, 2018	$	(154	)
Other comprehensive income		1,681
Amount reclassified from accumulated other comprehensive income		(150	)
Balance at June 30, 2019	$	1,377

(Dollars in thousands)	Unrealized gains on available-for-sale securities (a)
Balance as of March 31, 2018	$	(373	)
Other comprehensive loss before reclassification		(58	)
Balance at June 30, 2018	$	(431	)
Balance as of December 31, 2017	$	1,091
Other comprehensive loss before reclassification		(1,568	)
Change in accounting principle, ASC 2016-01 (b)		(141	)
Change in accounting principle, ASC 2018-02 (b)		187
Period change		(1,522	)
Balance at June 30, 2018	$	(431	)

Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]

	Amounts Reclassified from Accumulated Other Comprehensive Income					Affected Line Item in the Statement Where
(Dollars in thousands)	For the Three and Six Months Ended					Net Income is
Details about other comprehensive income	June 30, 2019			June 30, 2018		Presented
Unrealized gains on available-for-sale securities (a)	$	190		$	-	Investment securities gains on sale, net
		(40	)		-	Income taxes
	$	150		$	-

XML

Note 7 - Investment and Equity Securities (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	June 30, 2019
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. government agency securities	$	2,000	$	-	$	(5	)	$	1,995
Subordinated debt		4,000		86		-			4,086
Obligations of states and political subdivisions:
Taxable		501		7		-			508
Tax-exempt		70,818		1,585		-			72,403
Mortgage-backed securities in government-sponsored entities		19,746		223		(152	)		19,817
Total	$	97,065	$	1,901	$	(157	)	$	98,809

	December 31, 2018
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollar amounts in thousands)	Cost		Gains		Losses			Value
U.S. government agency securities	$	7,442	$	90	$	(61	)	$	7,471
Obligations of states and political subdivisions:
Taxable		502		10		-			512
Tax-exempt		72,387		667		(473	)		72,581
Mortgage-backed securities in government-sponsored entities		18,185		88		(515	)		17,758
Total	$	98,516	$	855	$	(1,049	)	$	98,322

Investments Classified by Contractual Maturity Date [Table Text Block]

	Amortized		Fair
(Dollar amounts in thousands)	Cost		Value
Due in one year or less	$	5,094	$	5,122
Due after one year through five years		1,790		1,820
Due after five years through ten years		13,446		13,658
Due after ten years		76,735		78,209
Total	$	97,065	$	98,809

Realized Gain (Loss) on Investments [Table Text Block]

(Dollar amounts in thousands)	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019			2018
Proceeds from sales	$	11,807		$	-	$	11,807		$	-
Gross realized gains		223			-		223			-
Gross realized losses		(33	)		-		(33	)		-

Schedule of Unrealized Loss on Investments [Table Text Block]

	June 30, 2019
	Less than Twelve Months				Twelve Months or Greater					Total
			Gross				Gross					Gross
	Fair		Unrealized		Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses		Value		Losses			Value		Losses
U.S. government agency securities	$	-	$	-	$	1,995	$	(5	)	$	1,995	$	(5	)
Mortgage-backed securities in government-sponsored entities		-		-		10,945		(152	)		10,945		(152	)
Total	$	-	$	-	$	12,940	$	(157	)	$	12,940	$	(157	)

	December 31, 2018
	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollar amounts in thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. government agency securities	$	-	$	-		$	4,105	$	(61	)	$	4,105	$	(61	)
Obligations of states and political subdivisions:
Tax-exempt		20,451		(286	)		11,053		(187	)		31,504		(473	)
Mortgage-backed securities in government-sponsored entities		2,068		(9	)		12,257		(506	)		14,325		(515	)
Total	$	22,519	$	(295	)	$	27,415	$	(754	)	$	49,934	$	(1,049	)

XML

Note 8 - Loans and Related Allowance for Loan and Lease Losses (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

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

	June 30,			December 31,
	2019			2018
Commercial and industrial	$	85,520		$	83,857
Real estate - construction		54,619			56,731
Real estate - mortgage:
Residential		345,830			336,487
Commercial		496,300			498,247
Consumer installment		15,963			16,787
		998,232			992,109
Less: Allowance for loan and lease losses		(7,304	)		(7,428	)
Net loans	$	990,928		$	984,681

Schedule Of Financing Receivable By Segment [Table Text Block]

					Real Estate - Mortgage
June 30, 2019	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Loans:
Individually evaluated for impairment	$	2,115	$	-	$	1,783	$	11,426	$	2	$	15,326
Collectively evaluated for impairment		83,405		54,619		344,047		484,874		15,961		982,906
Total loans	$	85,520	$	54,619	$	345,830	$	496,300	$	15,963	$	998,232

					Real Estate - Mortgage
December 31, 2018	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Loans:
Individually evaluated for impairment	$	2,570	$	-	$	1,970	$	9,533	$	2	$	14,075
Collectively evaluated for impairment		81,287		56,731		334,517		488,714		16,785		978,034
Total loans	$	83,857	$	56,731	$	336,487	$	498,247	$	16,787	$	992,109

Financing Receivable, Current, Allowance for Credit Loss [Table Text Block]

					Real Estate - Mortgage
June 30, 2019	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Allowance for loan and lease losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	140	$	-	$	51	$	672	$	-	$	863
Collectively evaluated for impairment		399		90		1,630		4,203		119		6,441
Total ending allowance balance	$	539	$	90	$	1,681	$	4,875	$	119	$	7,304

					Real Estate - Mortgage
December 31, 2018	Commercial and industrial		Real estate- construction		Residential		Commercial		Consumer installment		Total
Allowance for loan and lease losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	667	$	-	$	43	$	643	$	1	$	1,354
Collectively evaluated for impairment		302		100		1,538		4,008		126		6,074
Total ending allowance balance	$	969	$	100	$	1,581	$	4,651	$	127	$	7,428

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at December 31, 2018	$	969		$	100		$	1,581		$	4,651		$	127		$	7,428
Charge-offs		(355	)		-			(138	)		(32	)		(88	)		(613	)
Recoveries		40			45			46			2			6			139
Provision		(115	)		(55	)		192			254			74			350
ALLL balance at June 30, 2019	$	539		$	90		$	1,681		$	4,875		$	119		$	7,304

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at December 31, 2017	$	999		$	313		$	1,760		$	4,036		$	82		$	7,190
Charge-offs		(9	)		-			(74	)		(111	)		(135	)		(329	)
Recoveries		140			17			29			-			35			221
Provision		50			(241	)		28			436			147			420
ALLL balance at June 30, 2018	$	1,180		$	89		$	1,743		$	4,361		$	129		$	7,502

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage		Consumer installment			Total
ALLL balance at March 31, 2019	$	586		$	748		$	1,623		$	4,161	$	88		$	7,206
Charge-offs		(9	)		-			(48	)		-		(41	)		(98	)
Recoveries		24			23			33			1		5			86
Provision		(62	)		(681	)		73			713		67			110
ALLL balance at June 30, 2019	$	539		$	90		$	1,681		$	4,875	$	119		$	7,304

	Commercial and industrial			Real estate- construction			Real estate- residential mortgage			Real estate- commercial mortgage			Consumer installment			Total
ALLL balance at March 31, 2018	$	1,256		$	92		$	1,782		$	4,323		$	98		$	7,551
Charge-offs		-			-			(74	)		(111	)		(130	)		(315	)
Recoveries		29			-			10			-			17			56
Provision		(105	)		(3	)		25			149			144			210
ALLL balance at June 30, 2018	$	1,180		$	89		$	1,743		$	4,361		$	129		$	7,502

Impaired Financing Receivables [Table Text Block]

June 30, 2019
Impaired Loans
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	1,012	$	1,523	$	-
Real estate - mortgage:
Residential		1,360		1,481		-
Commercial		3,245		3,333		-
Consumer installment		2		2		-
Total	$	5,619	$	6,339	$	-
With an allowance recorded:
Commercial and industrial	$	1,103	$	1,322	$	140
Real estate - mortgage:
Residential		423		521		51
Commercial		8,181		8,191		672
Total	$	9,707	$	10,034	$	863
Total:
Commercial and industrial	$	2,115	$	2,845	$	140
Real estate - mortgage:
Residential		1,783		2,002		51
Commercial		11,426		11,524		672
Consumer installment		2		2		-
Total	$	15,326	$	16,373	$	863

December 31, 2018
Impaired Loans
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
With no related allowance recorded:
Commercial and industrial	$	207	$	413	$	-
Real estate - mortgage:
Residential		1,306		1,462		-
Commercial		1,867		2,186		-
Total	$	3,380	$	4,061	$	-
With an allowance recorded:
Commercial and industrial	$	2,363	$	3,013	$	667
Real estate - mortgage:
Residential		664		715		43
Commercial		7,666		7,676		643
Consumer installment		2		2		1
Total	$	10,695	$	11,406	$	1,354
Total:
Commercial and industrial	$	2,570	$	3,426	$	667
Real estate - mortgage:
Residential		1,970		2,177		43
Commercial		9,533		9,862		643
Consumer installment		2		2		1
Total	$	14,075	$	15,467	$	1,354

Schedule of Additional Information Related to Impaired Loans [Table Text Block]

	For the Three Months Ended June 30, 2019				For the Six Months Ended June 30, 2019
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial and industrial	$	1,970	$	23	$	2,170	$	45
Real estate - construction		1,620		-		1,080		-
Real estate - mortgage:
Residential		1,820		15		1,870		27
Commercial		10,238		85		10,003		172
Consumer installment		2		-		2		-
Total	$	15,650	$	123	$	15,125	$	244

	For the Three Months Ended June 30, 2018				For the Six Months Ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial and industrial	$	4,277	$	23	$	3,644	$	47
Real estate - construction		142		-		283		-
Real estate - mortgage:
Residential		2,772		13		2,871		27
Commercial		6,464		51		6,583		102
Consumer installment		4		-		4		-
Total	$	13,659	$	87	$	13,385	$	176

Financing Receivable Credit Quality Indicators [Table Text Block]

			Special						Total
June 30, 2019	Pass		Mention		Substandard		Doubtful		Loans
Commercial and industrial	$	78,051	$	4,846	$	2,623	$	-	$	85,520
Real estate - construction		54,619		-		-		-		54,619
Real estate - mortgage:
Residential		340,320		999		4,511		-		345,830
Commercial		480,275		4,834		11,191		-		496,300
Consumer installment		15,953		-		10		-		15,963
Total	$	969,218	$	10,679	$	18,335	$	-	$	998,232

			Special						Total
December 31, 2018	Pass		Mention		Substandard		Doubtful		Loans
Commercial and industrial	$	77,002	$	4,572	$	2,283	$	-	$	83,857
Real estate - construction		55,397		1,334		-		-		56,731
Real estate - mortgage:
Residential		332,475		553		3,459		-		336,487
Commercial		483,516		6,617		8,114		-		498,247
Consumer installment		16,776		-		11		-		16,787
Total	$	965,166	$	13,076	$	13,867	$	-	$	992,109

Financing Receivable, Past Due [Table Text Block]

			30-59 Days		60-89 Days		90 Days+		Total		Total
June 30, 2019	Current		Past Due		Past Due		Past Due		Past Due		Loans
Commercial and industrial	$	84,803	$	298	$	58	$	361	$	717	$	85,520
Real estate - construction		54,458		161		-		-		161		54,619
Real estate - mortgage:
Residential		340,884		2,182		446		2,318		4,946		345,830
Commercial		491,843		81		86		4,290		4,457		496,300
Consumer installment		15,941		22		-		-		22		15,963
Total	$	987,929	$	2,744	$	590	$	6,969	$	10,303	$	998,232

			30-59 Days		60-89 Days		90 Days+		Total		Total
December 31, 2018	Current		Past Due		Past Due		Past Due		Past Due		Loans
Commercial and industrial	$	82,770	$	288	$	213	$	586	$	1,087	$	83,857
Real estate - construction		56,731		-		-		-		-		56,731
Real estate - mortgage:
Residential		331,379		2,612		1,083		1,413		5,108		336,487
Commercial		496,597		664		-		986		1,650		498,247
Consumer installment		16,768		19		-		-		19		16,787
Total	$	984,245	$	3,583	$	1,296	$	2,985	$	7,864	$	992,109

Financing Receivable, Nonaccrual [Table Text Block]

			90+ Days Past
June 30, 2019	Nonaccrual		Due and Accruing
Commercial and industrial	$	1,082	$	-
Real estate - construction		-		-
Real estate - mortgage:
Residential		4,196		58
Commercial		5,389		-
Consumer installment		4		-
Total	$	10,671	$	58

			90+ Days Past
December 31, 2018	Nonaccrual		Due and Accruing
Commercial and industrial	$	996	$	91
Real estate - construction		-		-
Real estate - mortgage:
Residential		2,731		754
Commercial		2,864		100
Consumer installment		4		-
Total	$	6,595	$	945

Financing Receivable, Troubled Debt Restructuring [Table Text Block]

	For the Three and Six Months Ended
	June 30, 2019
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		-		1		1	$	85	$	140

	For the Three Months Ended
	June 30, 2018
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		1		-		1	$	113	$	113

	For the Six Months Ended
	June 30, 2018
	Number of Contracts						Pre-Modification		Post-Modification
	Term						Outstanding Recorded		Outstanding Recorded
Troubled Debt Restructurings	Modification		Other		Total		Investment		Investment
Residential real estate		2		-		2	$	160	$	160

Subsequently Defaulted [Member]

Notes Tables

Financing Receivable, Troubled Debt Restructuring [Table Text Block]

	For the Six Months Ended
	June 30, 2018
Troubled Debt Restructurings	Number of		Recorded
subsequently defaulted	Contracts		Investment
Residential real estate		2	$	215

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Note 9 - Lease Commitments (Tables)

6 Months Ended

Jun. 30, 2019

Notes Tables

Lease, Cost [Table Text Block]

	For the Three Months Ended June 30, 2019		For the Six Months Ended June 30, 2019
Lease Costs:
Finance lease cost:
Amortization of right-of-use asset	$	104	$	173
Interest Expense		30		69
Other		13		15
Operating lease cost		43		126
Total lease cost	$	190	$	383

Lease, Term and Discount Rate [Table Text Block]

	Operating			Finance
Weighted-average term (years)		2.1			4.9
Weighted-average discount rate		2.9	%		3.4	%

Operating and Finance Lease, Liability, Maturity [Table Text Block]

	Operating			Finance
Undiscounted cash flows due within:
2019	$	112		$	199
2020		226			411
2021		210			424
2022		211			431
2023		211			431
2024 and thereafter		339			2,792
Total undiscounted cash flows		1,309			4,688
Impact of present value discount		(326	)		(1,061	)
Amount reported on balance sheet	$	983		$	3,627

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Note 1 - Basis of Presentation (Details Textual) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019
Finance Lease, Liability, Total	$ 3,627
Operating Lease, Liability, Total	$ 983
Accounting Standards Update 2016-02 [Member]
Finance Lease, Right-of-Use Asset		$ 3,800
Finance Lease, Liability, Total		3,800
Operating Lease, Right-of-Use Asset		1,100
Operating Lease, Liability, Total		$ 1,100

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Note 2 - Revenue Recognition (Details Textual)	6 Months Ended
	Jun. 30, 2019
Revenue from Interest Income and Noninterest Income, Percent	92.20%

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Note 2 - Revenue Recognition - Disaggregation of Revenue (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Investment securities gains on sale, net	[1]	$ 190,000		$ 190,000
Gain on equity securities	[1]	(14,000)	13,000	44,000	31,000
Earnings on bank-owned life insurance	[1]	109,000	98,000	214,000	210,000
Gain on sale of loans	[1]	98,000	154,000	157,000	158,000
Total noninterest income		1,299,000	1,048,000	2,431,000	1,834,000
Overdraft Fees [Member]
Noninterest income revenue		190,000	197,000	438,000	390,000
ATM Banking Fees [Member]
Noninterest income revenue		241,000	214,000	435,000	415,000
Service Charge and Other Fees [Member]
Noninterest income revenue		99,000	61,000	165,000	120,000
Financial Service, Other [Member]
Noninterest income revenue		$ 386,000	$ 311,000	$ 788,000	$ 510,000

[1] Not within scope of ASC 606

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Note 3 - Stock-based Compensation (Details Textual) - USD ($) shares in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares, Ending Balance	0	0	0	0
Share-based Payment Arrangement, Expense	$ 0	$ 91,000	$ 90,000	$ 136,000
Restricted Stock [Member]
Share-based Payment Arrangement, Expense			236,000	$ 261,000
Share-based Payment Arrangement, Nonvested Award, Excluding Option, Cost Not yet Recognized, Amount	$ 517,000		$ 517,000
Restricted Stock [Member] | Forecast [Member]
Share-based Payment Arrangement, Expense					$ 25,000	$ 168,000	$ 201,000	$ 123,000

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Note 3 - Stock-based Compensation - Stock Option Activity (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Outstanding (in shares) | shares	7,450
Outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 17.55
Exercised (in shares) | shares	(200)
Exercised, weighted average exercise price (in dollars per share) | $ / shares	$ 17.55
Outstanding (in shares) | shares	7,250
Outstanding, weighted average exercise price (in dollars per share) | $ / shares	$ 17.55
Exercisable (in shares) | shares	7,250
Exercisable, weighted average exercise price (in dollars per share) | $ / shares	$ 17.55

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Note 3 - Stock-based Compensation - Activity Related to Restricted Stock Units Awarded (Details) - Restricted Stock [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Nonvested (in shares) | shares	21,072
Nonvested, weighted average grant date fair value per share (in dollars per share) | $ / shares	$ 41.96
Granted (in shares) | shares	14,565
Granted, weighted average grant date fair value per share (in dollars per share) | $ / shares	$ 41.90
Vested (in shares) | shares	(4,970)
Vested, weighted average grant date fair value per share (in dollars per share) | $ / shares	$ 32.40
Nonvested (in shares) | shares	30,667
Nonvested, weighted average grant date fair value per share (in dollars per share) | $ / shares	$ 43.48
Expected to vest (in shares) | shares	750
Expected to vest, weighted average grant date fair value per share (in dollars per share) | $ / shares	$ 46.03

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Note 4 - Earnings Per Share (Details Textual) - $ / shares	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance	7,250	7,250	13,750	7,450
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance	$ 17.55	$ 17.55		$ 17.55
Share-based Payment Arrangement, Option, Exercise Price Range, Lower Range Limit			$ 17.55
Share-based Payment Arrangement, Option, Exercise Price Range, Upper Range Limit			$ 23
Treasury Stock, Shares, Ending Balance	403,912	403,912		386,165
Treasury Stock, Shares, Acquired	17,747	17,747
Employee Stock Option and Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		0	0
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Ending Balance	30,667	30,667	20,425	21,072

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Note 4 - Earnings Per Share - Shares Used in Calculation of Earnings Per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Weighted-average common shares issued (in shares)	3,643,271	3,611,891	3,639,310	3,609,174
Average treasury stock shares (in shares)	(392,017)	(386,165)	(389,107)	(386,165)
Weighted-average common shares and common stock equivalents used to calculate basic earnings per share (in shares)	3,251,254	3,225,726	3,250,203	3,223,009
Additional common stock equivalents (stock options and restricted stock) used to calculate diluted earnings per share (in shares)	6,219	14,603	6,322	15,227
Weighted-average common shares and common stock equivalents used to calculate diluted earnings per share (in shares)	3,257,473	3,240,329	3,256,525	3,238,236

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Note 5 - Fair Value Measurements (Details Textual) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Estimated Selling Costs of Impaired Loans	$ 1,800,000	$ 492,000

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Note 5 - Fair Value Measurements - Assets Measured on a Recurring Basis (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets measured on a recurring basis	$ 99,469	$ 98,938
US Government Agencies Debt Securities [Member]
Assets measured on a recurring basis	1,995	7,471
Subordinated Debt Securities [Member]
Assets measured on a recurring basis	4,086
US States and Political Subdivisions Debt Securities [Member]
Assets measured on a recurring basis	72,911	73,093
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Assets measured on a recurring basis	19,817	17,758
Debt Securities [Member]
Assets measured on a recurring basis	98,809	98,322
Equity Securities [Member]
Assets measured on a recurring basis	660	616
Fair Value, Inputs, Level 1 [Member]
Assets measured on a recurring basis	660	616
Fair Value, Inputs, Level 1 [Member] | US Government Agencies Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 1 [Member] | Subordinated Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 1 [Member] | US States and Political Subdivisions Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 1 [Member] | Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Assets measured on a recurring basis	660	616
Fair Value, Inputs, Level 2 [Member]
Assets measured on a recurring basis	98,809	98,322
Fair Value, Inputs, Level 2 [Member] | US Government Agencies Debt Securities [Member]
Assets measured on a recurring basis	1,995	7,471
Fair Value, Inputs, Level 2 [Member] | Subordinated Debt Securities [Member]
Assets measured on a recurring basis	4,086
Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Assets measured on a recurring basis	72,911	73,093
Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Assets measured on a recurring basis	19,817	17,758
Fair Value, Inputs, Level 2 [Member] | Debt Securities [Member]
Assets measured on a recurring basis	98,809	98,322
Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member] | US Government Agencies Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member] | Subordinated Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member] | US States and Political Subdivisions Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member] | Debt Securities [Member]
Assets measured on a recurring basis
Fair Value, Inputs, Level 3 [Member] | Equity Securities [Member]
Assets measured on a recurring basis

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Note 5 - Fair Value Measurements - Assets Measured on a Nonrecurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Impaired loans	$ 15,326	$ 14,075
Fair Value, Nonrecurring [Member]
Impaired loans	5,025	1,075
Fair Value, Inputs, Level 1 [Member] | Fair Value, Nonrecurring [Member]
Impaired loans
Fair Value, Inputs, Level 2 [Member] | Fair Value, Nonrecurring [Member]
Impaired loans
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member]
Impaired loans	$ 5,025	$ 1,075

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Note 5 - Fair Value Measurements - Additional Quantitative Information About Assets Measured at Fair Value on Non-recurring Basis (Details) - Fair Value, Nonrecurring [Member] - Fair Value, Inputs, Level 3 [Member] - Appraisal of Collateral [Member] $ in Thousands		Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Impaired loans, fair value estimate	[1]	$ 5,025	$ 1,075
Impaired loans, fair value estimate			2.00%
Minimum [Member] | Measurement Input, Discount Rate [Member]
Impaired loans, discount rate	[2]	0	0
Impaired loans, discount rate	[2]	0	0
Maximum [Member] | Measurement Input, Discount Rate [Member]
Impaired loans, discount rate	[2]	0.566	1
Impaired loans, discount rate	[2]	0.566	1
Weighted Average [Member] | Measurement Input, Discount Rate [Member]
Impaired loans, discount rate	[2]	(0.009)	(0.406)
Impaired loans, discount rate	[2]	(0.009)	(0.406)

[1] Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various level III inputs which are not identifiable, less any associated allowance.

[2] Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

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Note 5 - Fair Value Measurements - Estimated Fair Value of the Company's Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Reported Value Measurement [Member]
Financial assets:
Cash and cash equivalents	$ 135,382	$ 107,933
Loans held for sale	431	597
Net loans	990,928	984,681
Bank-owned life insurance	16,294	16,080
Federal Home Loan Bank stock	3,708	3,679
Accrued interest receivable	3,567	3,633
Financial liabilities:
Deposits	1,051,507	1,016,067
Short-term borrowings	85,000	90,398
Other borrowings	12,449	8,803
Accrued interest payable	1,036	744
Estimate of Fair Value Measurement [Member]
Financial assets:
Cash and cash equivalents	135,382	107,933
Loans held for sale	431	597
Net loans	987,542	973,124
Bank-owned life insurance	16,294	16,080
Federal Home Loan Bank stock	3,708	3,679
Accrued interest receivable	3,567	3,633
Financial liabilities:
Deposits	1,053,417	1,014,044
Short-term borrowings	85,000	90,398
Other borrowings	12,490	8,827
Accrued interest payable	1,036	744
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and cash equivalents	135,382	107,933
Loans held for sale
Net loans
Bank-owned life insurance	16,294	16,080
Federal Home Loan Bank stock	3,708	3,679
Accrued interest receivable	3,567	3,633
Financial liabilities:
Deposits	640,473	715,153
Short-term borrowings	85,000	90,398
Other borrowings
Accrued interest payable	1,036	744
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets:
Cash and cash equivalents
Loans held for sale	431	597
Net loans
Bank-owned life insurance
Federal Home Loan Bank stock
Accrued interest receivable
Financial liabilities:
Deposits
Short-term borrowings
Other borrowings
Accrued interest payable
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets:
Cash and cash equivalents
Loans held for sale
Net loans	987,542	973,124
Bank-owned life insurance
Federal Home Loan Bank stock
Accrued interest receivable
Financial liabilities:
Deposits	412,944	298,891
Short-term borrowings
Other borrowings	12,490	8,827
Accrued interest payable

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Note 6 - Accumulated Other Comprehensive Income - Changes in Accumulated Other Comprehensive Income (Loss) by Component, Net of Tax (Details) - USD ($) $ in Thousands		3 Months Ended			6 Months Ended
		Jun. 30, 2019		Jun. 30, 2018	Jun. 30, 2019		Jun. 30, 2018
Balance		$ 131,699		$ 120,152	$ 128,290		$ 119,863
Balance		134,260		122,716	134,260		122,716
Change in accounting principle, ASC 2016-01
Change in accounting principle, ASC 2018-02
Total other comprehensive income (loss)		736		(58)	1,531		(1,568)
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Balance	[1]	641		(373)	(154)		1,091
Other comprehensive loss before reclassification		886	[1]	(58)	1,681	[1]	(1,568)
Amount reclassified from accumulated other comprehensive income	[1]	(150)			(150)
Balance	[1]	$ 1,377		$ (431)	$ 1,377		(431)
Change in accounting principle, ASC 2016-01	[1],[2]						(141)
Change in accounting principle, ASC 2018-02	[1],[2]						187
Total other comprehensive income (loss)	[1]						$ (1,522)

[1] All amounts are net of tax. Amounts in parentheses indicate debits to AOCI.

[2] Reclassifications are the result of the adoption of ASUs 2016-01 and 2018-02 effective for the Company beginning January 1, 2018. The reclassifications are presented within the Consolidated Statement of Changes in Stockholders' Equity for the affected transitional periods.

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Note 6 - Accumulated Other Comprehensive Income - Significant Amounts Reclassified Out of Each Component of Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
Unrealized gains on available-for-sale securities		$ 190
Income taxes	[1]	(40)
Net of tax		$ 150

[1] For unrealized gains on available-for-sale securities, amounts in parentheses indicate expenses and other amounts indicate income.

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Note 7 - Investment and Equity Securities (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	[1]	$ (14,000)	$ 13,000	$ 44,000	$ 31,000
Equity Securities, FV-NI, Realized Gain (Loss), Total		0	$ 0	0	0
Security Owned and Pledged as Collateral, Fair Value, Total		$ 51,100,000		$ 51,100,000		$ 63,500,000
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Total		16		16
Available-for-sale Securities, Percentage of Portfolio		96.00%		96.00%
Other than Temporary Impairment, Credit Losses Recognized in Earnings, Credit Losses on Debt Securities Held, Ending Balance		$ 0		$ 0
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale, Total				$ 0	$ 0

[1] Not within scope of ASC 606

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Note 7 - Investment and Equity Securities - Amortized Cost and Fair Values of Securities Available for Sale (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Amortized cost	$ 97,065	$ 98,516
Gross unrealized gains	1,901	855
Gross unrealized losses	(157)	(1,049)
Investment securities available for sale, at fair value	98,809	98,322
Amortized cost	97,065	98,516
Gross unrealized gains	1,901	855
Gross unrealized losses	(157)	(1,049)
US Government Agencies Debt Securities [Member]
Amortized cost	2,000	7,442
Gross unrealized gains		90
Gross unrealized losses	(5)	(61)
Investment securities available for sale, at fair value	1,995	7,471
Amortized cost	2,000	7,442
Gross unrealized gains		90
Gross unrealized losses	(5)	(61)
Subordinated Debt Securities [Member]
Amortized cost	4,000
Gross unrealized gains	86
Gross unrealized losses
Investment securities available for sale, at fair value	4,086
Amortized cost	4,000
Gross unrealized gains	86
Gross unrealized losses
Taxable Municipal Bonds [Member]
Amortized cost	501	502
Gross unrealized gains	7	10
Gross unrealized losses
Investment securities available for sale, at fair value	508	512
Amortized cost	501	502
Gross unrealized gains	7	10
Gross unrealized losses
Nontaxable Municipal Bonds [Member]
Amortized cost	70,818	72,387
Gross unrealized gains	1,585	667
Gross unrealized losses		(473)
Investment securities available for sale, at fair value	72,403	72,581
Amortized cost	70,818	72,387
Gross unrealized gains	1,585	667
Gross unrealized losses		(473)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Amortized cost	19,746	18,185
Gross unrealized gains	223	88
Gross unrealized losses	(152)	(515)
Investment securities available for sale, at fair value	19,817	17,758
Amortized cost	19,746	18,185
Gross unrealized gains	223	88
Gross unrealized losses	$ (152)	$ (515)

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Note 7 - Investment and Equity Securities - Amortized Cost and Fair Value of Debt Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Due in one year or less, amortized costs	$ 5,094
Due in one year or less, fair value	5,122
Due after one year through five years, amortized costs	1,790
Due after one year through five years, fair value	1,820
Due after five years through ten years, amortized costs	13,446
Due after five years through ten years, fair value	13,658
Due after ten years, amortized costs	76,735
Due after ten years, fair value	78,209
Amortized costs	97,065	$ 98,516
Fair Value	$ 98,809	$ 98,322

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Note 7 - Investment and Equity Securities - Sales of Available for Sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Proceeds from sales	$ 11,807		$ 11,807
Gross realized gains	223		223
Gross realized losses	$ (33)		$ (33)

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Note 7 - Investment and Equity Securities - Gross Unrealized Losses and Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Less than Twelve Months, Fair Value		$ 22,519
Less than Twelve Months, Gross Unrealized Losses		(295)
Twelve Months or Greater, Fair Value	12,940	27,415
Twelve Months or Greater, Gross Unrealized Losses	(157)	(754)
Total, Fair Value	12,940	49,934
Total, Gross Unrealized Losses	(157)	(1,049)
US Government Agencies Debt Securities [Member]
Less than Twelve Months, Fair Value
Less than Twelve Months, Gross Unrealized Losses
Twelve Months or Greater, Fair Value	1,995	4,105
Twelve Months or Greater, Gross Unrealized Losses	(5)	(61)
Total, Fair Value	1,995	4,105
Total, Gross Unrealized Losses	(5)	(61)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Less than Twelve Months, Fair Value		2,068
Less than Twelve Months, Gross Unrealized Losses		(9)
Twelve Months or Greater, Fair Value	10,945	12,257
Twelve Months or Greater, Gross Unrealized Losses	(152)	(506)
Total, Fair Value	10,945	14,325
Total, Gross Unrealized Losses	$ (152)	(515)
Nontaxable Municipal Bonds [Member]
Less than Twelve Months, Fair Value		20,451
Less than Twelve Months, Gross Unrealized Losses		(286)
Twelve Months or Greater, Fair Value		11,053
Twelve Months or Greater, Gross Unrealized Losses		(187)
Total, Fair Value		31,504
Total, Gross Unrealized Losses		$ (473)

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Note 8 - Loans and Related Allowance for Loan and Lease Losses (Details Textual) xbrli-pure in Thousands	3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Loans and Leases Receivable, Deferred Income, Total	$ 1,400,000			$ 1,400,000		$ 1,600,000
Financing Receivable, Troubled Debt Restructuring	3,600,000			$ 3,600,000		4,400,000
Number of Days Past Due				90 days
Loans and Leases Receivable, Impaired, Interest Lost on Nonaccrual Loans				$ 211,000		456,000
Allowance for Loan and Lease Losses, Write-offs	98,000		$ 315,000	613,000	$ 329,000
Loans and Leases Receivable, Allowance, Ending Balance	$ 7,304,000	$ 7,206,000	$ 7,502,000	$ 7,304,000	$ 7,502,000	7,428,000	$ 7,551,000	$ 7,190,000
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	0		0	0	0
Commercial And Industrial [Member]
Allowance for Loan and Lease Losses, Write-offs	$ 9,000			$ 355,000	$ 9,000
Loans and Leases Receivable, Allowance, Ending Balance	539,000	586,000	1,180,000	539,000	1,180,000	969,000	1,256,000	999,000
Real Estate Construction Porfolio Segment [Member]
Allowance for Loan and Lease Losses, Write-offs
Loans and Leases Receivable, Allowance, Ending Balance	90,000	748,000	$ 89,000	90,000	$ 89,000	$ 100,000	$ 92,000	$ 313,000
Threshold For Loans Evaluated For Impairment [Member]
Loans and Leases Receivable, before Fees, Gross	500,000			500,000
Threshold For Loans Evaluated For Impairment [Member] | Outside Consultant [Member]
Loans and Leases Receivable, before Fees, Gross	250,000			250,000
Threshold For Loans Evaluated For Impairment [Member] | Criticized Relationships [Member]
Financing Receivable, before Allowance for Credit Loss, Total	150,000			150,000
Provision Fluctuation [Member] | Commercial And Industrial [Member]
Allowance for Loan and Lease Losses, Write-offs		336,000
Loans and Leases Receivable, Allowance, Ending Balance		$ 358,000
Provision Fluctuation [Member] | Real Estate Construction Porfolio Segment [Member]
Allowance for Loan and Lease Losses, Adjustments, Other	$ 661,000			$ 661,000

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Major Classifications of Net Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Loans	$ 998,232		$ 992,109
Less: Allowance for loan and lease losses	(7,304)	$ (7,206)	(7,428)	$ (7,502)	$ (7,551)	$ (7,190)
Net loans	990,928		984,681
Commercial And Industrial [Member]
Loans	85,520		83,857
Less: Allowance for loan and lease losses	(539)	(586)	(969)	(1,180)	(1,256)	(999)
Real Estate Construction Porfolio Segment [Member]
Loans	54,619		56,731
Less: Allowance for loan and lease losses	(90)	(748)	(100)	(89)	(92)	(313)
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	345,830		336,487
Less: Allowance for loan and lease losses	(1,681)	(1,623)	(1,581)	(1,743)	(1,782)	(1,760)
Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Loans	496,300		498,247
Less: Allowance for loan and lease losses	(4,875)	(4,161)	(4,651)	(4,361)	(4,323)	(4,036)
Consumer Portfolio Segment [Member]
Loans	15,963		16,787
Less: Allowance for loan and lease losses	$ (119)	$ (88)	$ (127)	$ (129)	$ (98)	$ (82)

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Primary Segments of the Loan Portfolio (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Individually evaluated for impairment	$ 15,326	$ 14,075
Collectively evaluated for impairment	982,906	978,034
Total loans	998,232	992,109
Commercial And Industrial [Member]
Individually evaluated for impairment	2,115	2,570
Collectively evaluated for impairment	83,405	81,287
Total loans	85,520	83,857
Real Estate Construction Porfolio Segment [Member]
Individually evaluated for impairment
Collectively evaluated for impairment	54,619	56,731
Total loans	54,619	56,731
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Individually evaluated for impairment	1,783	1,970
Collectively evaluated for impairment	344,047	334,517
Total loans	345,830	336,487
Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Individually evaluated for impairment	11,426	9,533
Collectively evaluated for impairment	484,874	488,714
Total loans	496,300	498,247
Consumer Portfolio Segment [Member]
Individually evaluated for impairment	2	2
Collectively evaluated for impairment	15,961	16,785
Total loans	$ 15,963	$ 16,787

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Individually evaluated for impairment						$ 863	$ 1,354
Collectively evaluated for impairment						6,441	6,074
Less allowance for loan and lease losses	$ 7,304	$ 7,428	$ 7,502	$ 7,304	$ 7,190	7,304	7,428
ALLL balance, period start	7,206	7,428	7,551	7,428	7,190
Charge-offs	(98)		(315)	(613)	(329)
Recoveries	86		56	139	221
Provision	110		210	350	420
ALLL balance, period end	7,304	7,206	7,502	7,304	7,502
Commercial And Industrial [Member]
Individually evaluated for impairment						140	667
Collectively evaluated for impairment						399	302
Less allowance for loan and lease losses	539	969	1,180	539	999	539	969
ALLL balance, period start	586	969	1,256	969	999
Charge-offs	(9)			(355)	(9)
Recoveries	24		29	40	140
Provision	(62)		(105)	(115)	50
ALLL balance, period end	539	586	1,180	539	1,180
Real Estate Construction Porfolio Segment [Member]
Individually evaluated for impairment
Collectively evaluated for impairment						90	100
Less allowance for loan and lease losses	90	100	89	90	313	90	100
ALLL balance, period start	748	100	92	100	313
Charge-offs
Recoveries	23			45	17
Provision	(681)		(3)	(55)	(241)
ALLL balance, period end	90	748	89	90	89
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Individually evaluated for impairment						51	43
Collectively evaluated for impairment						1,630	1,538
Less allowance for loan and lease losses	1,681	1,581	1,743	1,681	1,760	1,681	1,581
ALLL balance, period start	1,623	1,581	1,782	1,581	1,760
Charge-offs	(48)		(74)	(138)	(74)
Recoveries	33		10	46	29
Provision	73		25	192	28
ALLL balance, period end	1,681	1,623	1,743	1,681	1,743
Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Individually evaluated for impairment						672	643
Collectively evaluated for impairment						4,203	4,008
Less allowance for loan and lease losses	4,875	4,651	4,361	4,875	4,036	4,875	4,651
ALLL balance, period start	4,161	4,651	4,323	4,651	4,036
Charge-offs			(111)	(32)	(111)
Recoveries	1			2
Provision	713		149	254	436
ALLL balance, period end	4,875	4,161	4,361	4,875	4,361
Consumer Portfolio Segment [Member]
Individually evaluated for impairment							1
Collectively evaluated for impairment						119	126
Less allowance for loan and lease losses	119	127	129	119	82	$ 119	$ 127
ALLL balance, period start	88	127	98	127	82
Charge-offs	(41)		(130)	(88)	(135)
Recoveries	5		17	6	35
Provision	67		144	74	147
ALLL balance, period end	$ 119	$ 88	$ 129	$ 119	$ 129

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Impaired Loans by Class (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Recorded investment, with no related allowance	$ 5,619	$ 3,380
Unpaid principal balance, with no related allowance	6,339	4,061
Recorded investment, with related allowance	9,707	10,695
Unpaid principal balance, with related allowance	10,034	11,406
Related allowance	863	1,354
Recorded investment	15,326	14,075
Unpaid principal balance	16,373	15,467
Commercial Loans [Member]
Recorded investment, with related allowance	8,181
Unpaid principal balance, with related allowance	8,191
Related allowance	672
Commercial And Industrial [Member]
Recorded investment, with no related allowance	1,012	207
Unpaid principal balance, with no related allowance	1,523	413
Recorded investment, with related allowance	1,103	2,363
Unpaid principal balance, with related allowance	1,322	3,013
Related allowance	140	667
Recorded investment	2,115	2,570
Unpaid principal balance	2,845	3,426
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Recorded investment, with no related allowance	1,360	1,306
Unpaid principal balance, with no related allowance	1,481	1,462
Recorded investment, with related allowance		664
Unpaid principal balance, with related allowance		715
Related allowance	51	43
Recorded investment	1,783	1,970
Unpaid principal balance	2,002	2,177
Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Recorded investment, with no related allowance	3,245	1,867
Unpaid principal balance, with no related allowance	3,333	2,186
Recorded investment, with related allowance		7,666
Unpaid principal balance, with related allowance		7,676
Related allowance	672	643
Recorded investment	11,426	9,533
Unpaid principal balance	11,524	9,862
Consumer Portfolio Segment [Member]
Recorded investment, with no related allowance		2
Unpaid principal balance, with no related allowance		2
Recorded investment, with related allowance	2
Unpaid principal balance, with related allowance	2
Related allowance		1
Recorded investment	2	2
Unpaid principal balance	2	$ 2
Real Estate Construction Porfolio Segment [Member] | Residential Loan [Member]
Recorded investment, with related allowance	423
Unpaid principal balance, with related allowance	521
Related allowance	$ 51

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Additional Information on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Average recorded investment	$ 15,650	$ 13,659	$ 15,125	$ 13,385
Interest income recognized	123	87	244	176
Commercial And Industrial [Member]
Average recorded investment	1,970	4,277	2,170	3,644
Interest income recognized	23	23	45	47
Real Estate Construction Porfolio Segment [Member]
Average recorded investment	1,620	142	1,080	283
Interest income recognized
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Average recorded investment	1,820	2,772	1,870	2,871
Interest income recognized	15	13	27	27
Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Average recorded investment	10,238	6,464	10,003	6,583
Interest income recognized	85	51	172	102
Consumer Portfolio Segment [Member]
Average recorded investment	2	4	2	4
Interest income recognized

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Classes of the Loan Portfolio Summarized by Credit Quality (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Loans	$ 998,232	$ 992,109
Commercial And Industrial [Member]
Loans	85,520	83,857
Real Estate Construction Porfolio Segment [Member]
Loans	54,619	56,731
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	345,830	336,487
Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Loans	496,300	498,247
Consumer Portfolio Segment [Member]
Loans	15,963	16,787
Pass [Member]
Loans	969,218	965,166
Pass [Member] | Commercial And Industrial [Member]
Loans	78,051	77,002
Pass [Member] | Real Estate Construction Porfolio Segment [Member]
Loans	54,619	55,397
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	340,320	332,475
Pass [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Loans	480,275	483,516
Pass [Member] | Consumer Portfolio Segment [Member]
Loans	15,953	16,776
Special Mention [Member]
Loans	10,679	13,076
Special Mention [Member] | Commercial And Industrial [Member]
Loans	4,846	4,572
Special Mention [Member] | Real Estate Construction Porfolio Segment [Member]
Loans		1,334
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	999	553
Special Mention [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Loans	4,834	6,617
Substandard [Member]
Loans	18,335	13,867
Substandard [Member] | Commercial And Industrial [Member]
Loans	2,623	2,283
Substandard [Member] | Real Estate Construction Porfolio Segment [Member]
Loans
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans	4,511	3,459
Substandard [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Loans	11,191	8,114
Substandard [Member] | Consumer Portfolio Segment [Member]
Loans	10	11
Doubtful [Member]
Loans
Doubtful [Member] | Commercial And Industrial [Member]
Loans
Doubtful [Member] | Real Estate Construction Porfolio Segment [Member]
Loans
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans
Doubtful [Member] | Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Loans

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Past Due Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Loans, current balance	$ 987,929	$ 984,245
Loans, past due	10,303	7,864
Loans	998,232	992,109
Financial Asset, 30 to 59 Days Past Due [Member]
Loans, past due	2,744	3,583
Financial Asset, 60 to 89 Days Past Due [Member]
Loans, past due	590	1,296
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans, past due	6,969	2,985
Commercial And Industrial [Member]
Loans, current balance	84,803	82,770
Loans, past due	717	1,087
Loans	85,520	83,857
Commercial And Industrial [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Loans, past due	298	288
Commercial And Industrial [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Loans, past due	58	213
Commercial And Industrial [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans, past due	361	586
Real Estate Construction Porfolio Segment [Member]
Loans, current balance	54,458	56,731
Loans, past due	161
Loans	54,619	56,731
Real Estate Construction Porfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Loans, past due	161
Real Estate Construction Porfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Loans, past due
Real Estate Construction Porfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans, past due	0	0
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans, current balance	340,884	331,379
Loans, past due	4,946	5,108
Loans	345,830	336,487
Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Loans, current balance	491,843	496,597
Loans, past due	4,457	1,650
Loans	496,300	498,247
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Residential Loan [Member]
Loans, past due	2,182	2,612
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Loans [Member]
Loans, past due	81	664
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Residential Loan [Member]
Loans, past due	446	1,083
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Loans [Member]
Loans, past due	86
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Residential Loan [Member]
Loans, past due	2,318	1,413
Real Estate Mortgage Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Loans [Member]
Loans, past due	4,290	986
Consumer Portfolio Segment [Member]
Loans, current balance	15,941	16,768
Loans, past due	22	19
Loans	15,963	16,787
Consumer Portfolio Segment [Member] | Financial Asset, 30 to 59 Days Past Due [Member]
Loans, past due	22	19
Consumer Portfolio Segment [Member] | Financial Asset, 60 to 89 Days Past Due [Member]
Loans, past due
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans, past due	$ 0	$ 0

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Nonaccrual Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Loans, nonacrrual status	$ 10,671	$ 6,595
Loans, 90+ days past due and accruing	58	945
Commercial And Industrial [Member]
Loans, nonacrrual status	1,082	996
Loans, 90+ days past due and accruing		91
Real Estate Construction Porfolio Segment [Member]
Loans, nonacrrual status		0
Loans, 90+ days past due and accruing	0	0
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Loans, nonacrrual status	4,196	2,731
Loans, 90+ days past due and accruing	58	754
Real Estate Mortgage Portfolio Segment [Member] | Commercial Loans [Member]
Loans, nonacrrual status	5,389	2,864
Loans, 90+ days past due and accruing		100
Consumer Portfolio Segment [Member]
Loans, nonacrrual status	4	4
Loans, 90+ days past due and accruing	$ 0	$ 0

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Troubled Debt Restructurings (Details) - Real Estate Mortgage Portfolio Segment [Member] - Residential Loan [Member] $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)
Number of contracts		1	1	2
Pre-modification outstanding recorded investment		$ 113	$ 85	$ 160
Post-modification outstanding recorded investment	$ 140	$ 113		$ 160
Extended Maturity [Member]
Number of contracts		1		2
Other Restructurings [Member]
Number of contracts			1

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Note 8 - Loans and Related Allowance for Loan and Lease Losses - Troubled Debt Restructurings Subsequently Defaulted (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018 USD ($)
Number of contracts, subsequently defaulted	0	0	0	0
Real Estate Mortgage Portfolio Segment [Member] | Residential Loan [Member]
Number of contracts, subsequently defaulted				2
Recorded investment, subsequently defaulted				$ 215

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Note 9 - Lease Commitments (Details Textual)	6 Months Ended
	Jun. 30, 2019 USD ($)
Number of Branch Locations by Utilized Leases	6
Lease, Right-of-Use Asset, Net	$ 4,600,000
Finance Lease, Liability, Total	3,627,000
Operating Lease, Liability, Total	983,000
Premises and Equipment, Net [Member]
Finance Lease, Right-of-Use Asset	3,600,000
Accrued Interest Receivable and Other Assets [Member]
Operating Lease, Right-of-Use Asset	983,000
Other Borrowings [Member]
Finance Lease, Liability, Total	3,700,000
Interest Payable and Other Liabilities [Member]
Operating Lease, Liability, Total	$ 984,000
Minimum [Member]
Lessee, Operating Lease, Remaining Term	1 year
Maximum [Member]
Lessee, Operating Lease, Remaining Term	6 years

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Note 9 - Lease Commitments - Leases Costs (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Amortization of right-of-use asset	$ 104	$ 173
Interest Expense	30	69
Other	13	15
Operating lease cost	43	126
Total lease cost	$ 190	$ 383

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Note 9 - Lease Commitments - Weighted Average Remaining Lease Term and Discount Rate Information (Details)	Jun. 30, 2019
Weighted-average term (years), Operating Lease (Year)	2 years 36 days
Weighted-average term (years), Fiance Lease (Year)	4 years 328 days
Weighted-average discount rate), Operating Lease	2.90%
Weighted-average discount rate, Fiance Lease	3.40%

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Note 9 - Lease Commitments - Maturities of Lease liabilities (Details) $ in Thousands	Jun. 30, 2019 USD ($)
2019	$ 112
2019	199
2020	226
2020	411
2021	210
2021	424
2022	211
2022	431
2023	211
2023	431
2024 and thereafter	339
2024 and thereafter	2,792
Total undiscounted cash flows	1,309
Total undiscounted cash flows	4,688
Impact of present value discount	(326)
Impact of present value discount	(1,061)
Operating Lease, Liability, Total	983
Finance Lease, Liability, Total	$ 3,627