Note 4 - Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

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

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are comprised of the following:	September 30,		December 31,
	2015		2014
Residential real estate	$	224,492	$	223,628
Commercial real estate:
Owner-occupied		73,961		78,848
Nonowner-occupied		67,909		71,229
Construction		24,670		27,535
Commercial and industrial		84,402		83,998
Consumer:
Automobile		44,473		42,849
Home equity		20,501		18,291
Other		44,760		48,390
		585,168		594,768
Less: Allowance for loan losses		6,902		8,334
Loans, net	$	578,266	$	586,434

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2015 and 2014:

September 30, 2015	Residential Real Estate			Commercial Real Estate			Commercial and Industrial		Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,230		$	2,795		$	2,287	$	1,132		$	7,444
Provision for loan losses		(166	)		(214	)		205		164			(11	)
Loans charged off		(40	)		(596	)		----		(309	)		(945	)
Recoveries		219			15			11		169			414
Total ending allowance balance	$	1,243		$	2,000		$	2,503	$	1,156		$	6,902

September 30, 2014	Residential Real Estate			Commercial Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,878		$	3,276		$	1,625		$	1,149		$	7,928
Provision for loan losses		(240	)		(551	)		(90	)		199			(682	)
Loans charged off		(157	)		(78	)		(37	)		(363	)		(635	)
Recoveries		99			3			114			137			353
Total ending allowance balance	$	1,580		$	2,650		$	1,612		$	1,122		$	6,964

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2015 and 2014:

September 30, 2015	Residential Real Estate			Commercial Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334
Provision for loan losses		(256	)		(272	)		697			541			710
Loans charged off		(263	)		(1,970	)		(24	)		(1,016	)		(3,273	)
Recoveries		336			47			228			520			1,131
Total ending allowance balance	$	1,243		$	2,000		$	2,503		$	1,156		$	6,902

September 30, 2014	Residential Real Estate			Commercial Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,169		$	2,914		$	1,279		$	793		$	6,155
Provision for loan losses		513			(111	)		92			704			1,198
Loans charged off		(350	)		(235	)		(41	)		(815	)		(1,441	)
Recoveries		248			82			282			440			1,052
Total ending allowance balance	$	1,580		$	2,650		$	1,612		$	1,122		$	6,964

The following table presents the balance in the allowance for loan losses and the recorded investment of loans by portfolio segment and based on impairment method as of September 30, 2015 and December 31, 2014:

September 30, 2015	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	66	$	313	$	1,711	$	3	$	2,093
Collectively evaluated for impairment		1,177		1,687		792		1,153		4,809
Total ending allowance balance	$	1,243	$	2,000	$	2,503	$	1,156	$	6,902
Loans:
Loans individually evaluated for impairment	$	1,898	$	7,496	$	7,267	$	218	$	16,879
Loans collectively evaluated for impairment		222,594		159,044		77,135		109,516		568,289
Total ending loans balance	$	224,492	$	166,540	$	84,402	$	109,734	$	585,168

December 31, 2014	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	2,506	$	900	$	6	$	3,412
Collectively evaluated for impairment		1,426		1,689		702		1,105		4,922
Total ending allowance balance	$	1,426	$	4,195	$	1,602	$	1,111	$	8,334
Loans:
Loans individually evaluated for impairment	$	1,415	$	11,711	$	6,824	$	219	$	20,169
Loans collectively evaluated for impairment		222,213		165,901		77,174		109,311		574,599
Total ending loans balance	$	223,628	$	177,612	$	83,998	$	109,530	$	594,768

The following tables present information related to loans individually evaluated for impairment by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Residential real estate	$	895	$	895	$	66
Commercial real estate:
Owner-occupied		204		204		204
Nonowner-occupied		399		399		109
Commercial and industrial		3,460		3,460		1,711
Consumer:
Home equity		218		218		3
With no related allowance recorded:
Residential real estate		1,003		1,003		----
Commercial real estate:
Owner-occupied		3,911		3,364		----
Nonowner-occupied		5,258		2,849		----
Construction		680		680		----
Commercial and industrial		3,807		3,807		----
Total	$	19,835	$	16,879	$	2,093

December 31, 2014	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	1,177	$	1,177	$	414
Nonowner-occupied		7,656		7,656		2,092
Commercial and industrial		2,356		2,356		900
Consumer:
Home equity		219		219		6
With no related allowance recorded:
Residential real estate		1,415		1,415		----
Commercial real estate:
Owner-occupied		3,125		2,578		----
Nonowner-occupied		1,298		300		----
Commercial and industrial		4,703		4,468		----
Total	$	21,949	$	20,169	$	3,412

The following tables present information related to loans individually evaluated for impairment by class of loans for the three and nine months ended September 30, 2015 and 2014:

	Three months ended September 30, 2015						Nine months ended September 30, 2015
	Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate	$	895	$	----	$	----	$	895	$	----	$	----
Commercial real estate:
Owner-occupied		204		11		11		204		11		11
Nonowner-occupied		401		5		5		404		70		70
Commercial and industrial		3,589		52		52		3,343		117		117
Consumer:
Home equity		218		2		2		219		6		6
With no related allowance recorded:
Residential real estate		1,005		11		11		761		36		36
Commercial real estate:
Owner-occupied		2,873		74		74		2,617		135		135
Nonowner-occupied		2,910		12		12		3,605		37		37
Construction		680		----		----		510		----		----
Commercial and industrial		3,800		26		26		3,897		133		133
Total	$	16,575	$	193	$	193	$	16,455	$	545	$	545

	Three months ended September 30, 2014						Nine months ended September 30, 2014
	Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate	$	552	$	17	$	17	$	487	$	25	$	25
Commercial real estate:
Owner-occupied		145		----		----		73		----		----
Nonowner-occupied		3,422		41		41		3,439		94		94
Commercial and industrial		3,259		39		39		1,629		107		107
Consumer:
Home equity		109		8		8		54		8		8
With no related allowance recorded:
Residential real estate		611		12		12		544		25		25
Commercial real estate:
Owner-occupied		1,479		9		9		6,513		31		31
Nonowner-occupied		5,974		81		81		6,513		267		267
Consumer:
Home equity		----		----		----		----		3		3
Total	$	15,551	$	207	$	207	$	14,130	$	560	$	560

The recorded investment of a loan is its carrying value excluding accrued interest and deferred loan fees.

Nonaccrual loans and loans past due 90 days or more and still accruing include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified as impaired loans.

The following table presents the recorded investment of nonaccrual loans and loans past due 90 days or more and still accruing by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	169	$	3,298
Commercial real estate:
Owner-occupied		----		233
Nonowner-occupied		----		2,549
Construction		----		769
Commercial and industrial		----		1,050
Consumer:
Automobile		117		7
Home equity		----		111
Other		34		2
Total	$	320	$	8,019

December 31, 2014	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	----	$	3,768
Commercial real estate:
Owner-occupied		----		1,484
Nonowner-occupied		----		4,013
Commercial and industrial		----		95
Consumer:
Automobile		15		18
Home equity		----		103
Other		58		68
Total	$	73	$	9,549

The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of September 30, 2015 and December 31, 2014, other real estate owned secured by residential real estate totaled $383 and $368, respectively. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $1,920 and $1,692 as of September 30, 2015 and December 31, 2014, respectively.

The following table presents the aging of the recorded investment of past due loans by class of loans as of September 30, 2015 and December 31, 2014:

September 30, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	2,648	$	483	$	3,184	$	6,315	$	218,177	$	224,492
Commercial real estate:
Owner-occupied		283		145		233		661		73,300		73,961
Nonowner-occupied		378		232		2,549		3,159		64,750		67,909
Construction		58		----		769		827		23,843		24,670
Commercial and industrial		289		89		980		1,358		83,044		84,402
Consumer:
Automobile		613		100		117		830		43,643		44,473
Home equity		----		----		90		90		20,411		20,501
Other		400		98		34		532		44,228		44,760
Total	$	4,669	$	1,147	$	7,956	$	13,772	$	571,396	$	585,168

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	3,337	$	612	$	3,489	$	7,438	$	216,190	$	223,628
Commercial real estate:
Owner-occupied		74		62		1,422		1,558		77,290		78,848
Nonowner-occupied		----		----		----		----		71,229		71,229
Construction		932		----		----		932		26,603		27,535
Commercial and industrial		----		10		24		34		83,964		83,998
Consumer:
Automobile		616		149		33		798		42,051		42,849
Home equity		----		----		103		103		18,188		18,291
Other		655		20		126		801		47,589		48,390
Total	$	5,614	$	853	$	5,197	$	11,664	$	583,104	$	594,768

Troubled Debt Restructurings:

A troubled debt restructuring (“TDR”) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. All TDR's are considered to be impaired. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; a reduction in the contractual principal and interest payments of the loan; or short-term interest-only payment terms.

The Company has allocated reserves for a portion of its TDR's to reflect the fair values of the underlying collateral or the present value of the concessionary terms granted to the customer.

The following table presents the types of TDR loan modifications by class of loans as of September 30, 2015 and December 31, 2014:

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
September 30, 2015
Residential real estate
Interest only payments	$	1,003	$	----	$	1,003
Commercial real estate:
Owner-occupied
Interest only payments		498		----		498
Rate reduction		----		233		233
Reduction of principal and interest payments		610		----		610
Maturity extension at lower stated rate than market rate		2,023		----		2,023
Credit extension at lower stated rate than market rate		204		----		204
Nonowner-occupied
Interest only payments		300		2,549		2,849
Rate reduction		399		----		399
Commercial and industrial
Interest only payments		6,381		----		6,381
Credit extension at lower stated rate than market rate		----		392		392
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		218		----		218
Total TDR’s	$	11,636	$	3,174	$	14,810

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2014
Residential real estate
Interest only payments	$	520	$	----	$	520
Commercial real estate:
Owner-occupied
Interest only payments		457		----		457
Rate reduction		----		244		244
Reduction of principal and interest payments		627		----		627
Maturity extension at lower stated rate than market rate		1,046		----		1,046
Credit extension at lower stated rate than market rate		204		----		204
Nonowner-occupied
Interest only payments		3,535		4,013		7,548
Rate reduction		408		----		408
Commercial and industrial
Interest only payments		6,429		----		6,429
Credit extension at lower stated rate than market rate		395		----		395
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		219		----		219
Total TDR’s	$	13,840	$	4,257	$	18,097

During the nine months ended September 30, 2015, the TDR's described above decreased the allowance for loan losses and provision expense by $44 with corresponding charge-offs of $1,422. This is compared to a $687 decrease in the provision expense and the allowance for loan losses during the nine months ended September 30, 2014 with no corresponding charge-offs. The charge-offs of $1,422 during 2015 included $1,304 that were related to specific reserves that had already been provided for during 2014, and, as a result, did not impact provision expense during 2015. During the year ended December 31, 2014, the TDR's described above increased the allowance for loan losses and provision expense by $623 with no corresponding charge-offs.

At September 30, 2015, the balance in TDR loans decreased $3,287, or 18.2%, from year-end 2014. The decrease was largely due to a $1,304 charge-off of an existing specific allocation on a collateral-dependent commercial real estate loan. Further decreasing TDR loans was a $3,156 payoff of a commercial real estate loan during the third quarter of 2015. The effects from this specific allocation charge-off and large loan payoff were partially offset by a $1,025 commercial real estate loan classified as a TDR during the third quarter of 2015. The Company had 79% of its TDR's performing according to their modified terms at September 30, 2015, as compared to 77% at December 31, 2014. TDR loans not performing to modified terms were largely impacted by one commercial real estate loan totaling $4,013 that was converted to nonaccrual status during the fourth quarter of 2014 after it was determined that full loan repayment was in significant doubt. A further review of the collateral values of this commercial real estate loan during the fourth quarter of 2014 identified additional impairment, resulting in a specific allocation of $1,340 at December 31, 2014. During the second quarter of 2015, the specific allocation related to this impaired loan was charged off, as previously mentioned. As a result, the Company's specific allocations in reserves to customers whose loan terms have been modified in TDR’s totaled $1,532 at September 30, 2015, as compared to $2,998 in reserves at December 31, 2014. At September 30, 2015, the Company had $1,919 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s, as compared to $1,871 at December 31, 2014.

The following table presents the pre- and post-modification balances of TDR loan modifications by class of loans that occurred during the nine months ended September 30, 2015 and 2014:

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
Nine months ended September 30, 2015	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Residential real estate:
Interest only payments	$	495	$	495	$	----	$	----
Commercial real estate:
Owner-occupied
Maturity extension at lower stated rate than market rate		1,025		1,025		----		----
Total TDR’s	$	1,520	$	1,520	$	----	$	----

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
Nine months ended September 30, 2014	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial real estate:
Owner-occupied
Maturity extension at lower stated rate than market rate	$	762	$	762	$	----	$	----
Commercial and industrial
Interest only payments		2,908		2,908		----		----
Credit extension at lower stated rate than market rate		395		395		----		----
Total TDR’s	$	4,065	$	4,065	$	----	$	----

All of the Company’s loans that were restructured during the nine months ended September 30, 2015 and 2014 were performing in accordance with their modified terms. Furthermore, there were no TDR’s described above at September 30, 2015 and 2014 that experienced any payment defaults within twelve months following their loan modification. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. TDR loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The loans modified during the nine months ended September 30, 2015 and 2014 had no impact on the provision expense or the allowance for loan losses. As of September 30, 2015 and 2014, the Company had no allocation of reserves to customers whose loan terms were modified during the first nine months of 2015 and 2014.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. These risk categories are represented by a loan grading scale from 1 through 10. The Company analyzes loans individually with a higher credit risk rating and groups these loans into categories called “criticized” and “classified" assets. The Company considers its criticized assets to be loans that are graded 8 and its classified assets to be loans that are graded 9 or 10. The Company's risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed $500.

The Company uses the following definitions for its criticized loan risk ratings:

Special Mention (Loan Grade 8). Loans classified as special mention indicate considerable risk due to deterioration of repayment (in the earliest stages) due to potential weak primary repayment source, or payment delinquency. These loans will be under constant supervision, are not classified and do not expose the institution to sufficient risks to warrant classification. These deficiencies should be correctable within the normal course of business, although significant changes in company structure or policy may be necessary to correct the deficiencies. These loans are considered bankable assets with no apparent loss of principal or interest envisioned. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. Credits that are defined as a troubled debt restructuring should be graded no higher than special mention until they have been reported as performing over one year after restructuring.

The Company uses the following definitions for its classified loan risk ratings:

Substandard (Loan Grade 9). Loans classified as substandard represent very high risk, serious delinquency, nonaccrual, or unacceptable credit. Repayment through the primary source of repayment is in jeopardy due to the existence of one or more well defined weaknesses, and the collateral pledged may inadequately protect collection of the loans. Loss of principal is not likely if weaknesses are corrected, although financial statements normally reveal significant weakness. Loans are still considered collectible, although loss of principal is more likely than with special mention loan grade 8 loans. Collateral liquidation is considered likely to satisfy debt.

Doubtful (Loan Grade 10). Loans classified as doubtful display a high probability of loss, although the amount of actual loss at the time of classification is undetermined. This should be a temporary category until such time that actual loss can be identified, or improvements made to reduce the seriousness of the classification. These loans exhibit all substandard characteristics with the addition that weaknesses make collection or liquidation in full highly questionable and improbable. This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonable specific pending factors which may strengthen the credit can be more accurately determined. These factors may include proposed acquisitions, liquidation procedures, capital injection, receipt of additional collateral, mergers, or refinancing plans. A doubtful classification for an entire credit should be avoided when collection of a specific portion appears highly probable with the adequately secured portion graded substandard.

Criticized and classified loans will mostly consist of commercial and industrial and commercial real estate loans. The Company considers its loans that do not meet the criteria for a criticized and classified asset rating as pass rated loans, which will include loans graded from 1 (Prime) to 7 (Watch). All commercial loans are categorized into a risk category either at the time of origination or reevaluation date. As of September 30, 2015 and December 31, 2014, and based on the most recent analysis performed, the risk category of commercial loans by class of loans was as follows:

September 30, 2015	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	62,542	$	7,580	$	3,839	$	73,961
Nonowner-occupied		57,196		6,498		4,215		67,909
Construction		23,742		----		928		24,670
Commercial and industrial		72,878		6,209		5,315		84,402
Total	$	216,358	$	20,287	$	14,297	$	250,942

December 31, 2014	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	72,232	$	2,102	$	4,514	$	78,848
Nonowner-occupied		60,491		2,127		8,611		71,229
Construction		27,364		----		171		27,535
Commercial and industrial		76,395		495		7,108		83,998
Total	$	236,482	$	4,724	$	20,404	$	261,610

The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau), but the scores are not updated. The Company focuses mostly on the performance and repayment ability of the borrower as an indicator of credit risk and does not consider a borrower's credit score to be a significant influence in the determination of a loan's credit risk grading.

For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment of residential and consumer loans by class of loans based on repayment activity as of September 30, 2015 and December 31, 2014:

September 30, 2015	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	44,349	$	20,390	$	44,724	$	221,025	$	330,488
Nonperforming		124		111		36		3,467		3,738
Total	$	44,473	$	20,501	$	44,760	$	224,492	$	334,226

December 31, 2014	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	42,816	$	18,188	$	48,264	$	219,860	$	329,128
Nonperforming		33		103		126		3,768		4,030
Total	$	42,849	$	18,291	$	48,390	$	223,628	$	333,158

The Company, through its subsidiaries, originates residential, consumer, and commercial loans to customers located primarily in the southeastern areas of Ohio as well as the western counties of West Virginia. Approximately 6.04% of total loans were unsecured at September 30, 2015, up from 5.66% at December 31, 2014.