10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2015
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________________ to ________________

Commission file number: 0-21765

RIVER VALLEY BANCORP

(Exact name of registrant as specified in its charter)

Indiana	35-1984567
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
430 Clifty Drive Madison, Indiana	47250
(Address of principal executive offices)	(Zip Code)

(812) 273-4949

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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  ☒          No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒          No  ☐

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

Large Accelerated Filer ☐	Accelerated Filer ☐
Non-Accelerated Filer ☐ (Do not check if a smaller reporting company)	Smaller Reporting Company ☒

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

Yes  ☐          No  ☒

The number of shares of the Registrant’s common stock, without par value, outstanding as of November 9, 2015, was 2,513,696.

RIVER VALLEY BANCORP

FORM 10-Q

INDEX

		Page No.
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (unaudited)	3
	Consolidated Condensed Balance Sheets	3
	Consolidated Condensed Statements of Income	4
	Consolidated Condensed Statements of Comprehensive Income	5
	Consolidated Condensed Statements of Cash Flows	6
	Notes to Consolidated Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	51
Item 4.	Controls and Procedures	51
PART II. OTHER INFORMATION		51
Item 1.	Legal Proceedings	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	52
SIGNATURES		53
EXHIBIT INDEX		54

2

PART I  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

RIVER VALLEY BANCORP

Consolidated Condensed Balance Sheets

	September 30, 2015			December 31, 2014
	(Unaudited)
	(In Thousands, Except Share Amounts)
Assets
Cash and due from banks	$	3,862		$	5,971
Interest-bearing demand deposits		10,507			598
Federal funds sold		808			6,695
Cash and cash equivalents		15,177			13,264
Interest-bearing deposits		2,964			1,984
Investment securities available-for-sale		134,978			128,885
Loans held for sale		-			423
Loans		333,397			336,000
Allowance for loan losses		(3,727	)		(4,005	)
Net loans		329,670			331,995
Premises and equipment, net		9,514			9,707
Real estate, held for sale		492			983
Federal Home Loan Bank stock		3,127			3,796
Interest receivable		2,563			2,391
Cash value of life insurance		12,710			12,477
Goodwill		200			200
Core deposit intangibles		282			334
Other assets		2,025			3,036
Total assets	$	513,702		$	509,475
Liabilities
Deposits
Noninterest-bearing	$	52,139		$	51,986
Interest-bearing		348,519			345,097
Total deposits		400,658			397,083
Borrowings		50,967			54,872
Interest payable		199			209
Other liabilities		6,233			4,569
Total liabilities		458,057			456,733
Commitments and Contingencies
Stockholders’ Equity
Common stock, no par value
Authorized – 5,000,000 shares
Issued and outstanding – 2,513,696 and 2,513,696 shares		26,064			25,935
Retained earnings		28,611			26,056
Accumulated other comprehensive income		970			751
Total stockholders’ equity		55,645			52,742
Total liabilities and stockholders’ equity	$	513,702		$	509,475

See Notes to Consolidated Condensed Financial Statements.

3

RIVER VALLEY BANCORP

Consolidated Condensed Statements of Income

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(In Thousands, Except Share Amounts)
Interest Income
Loans receivable	$	4,103		$	4,077		$	12,756		$	12,067
Investment securities		811			777			2,379			2,259
Interest-earning deposits and other		51			55			157			182
Total interest income		4,965			4,909			15,292			14,508
Interest Expense
Deposits		447			481			1,341			1,498
Borrowings		384			358			1,167			1,101
Total interest expense		831			839			2,508			2,599
Net Interest Income		4,134			4,070			12,784			11,909
Provision for loan losses		99			149			297			347
Net Interest Income After Provision for Loan Losses		4,035			3,921			12,487			11,562
Other Income
Service fees and charges		684			644			1,828			1,836
Net realized gains on sale of available-for-sale securities (includes $5, $0, $123 and $245,  respectively, related to accumulated other comprehensive earnings reclassifications)		5			-			123			245
Net gains on loan sales		122			102			374			244
Interchange fee income		164			160			490			468
Increase in cash value of life insurance		78			61			233			185
Loss on premises held for sale		-			-			-			(111	)
Loss on real estate held for sale		(113	)		(35	)		(57	)		(194	)
Other income		160			105			434			341
Total other income		1,100			1,037			3,425			3,014
Other Expenses
Salaries and employee benefits		1,967			1,953			5,763			5,641
Net occupancy and equipment expenses		509			504			1,508			1,525
Data processing fees		172			138			469			434
Advertising		123			165			376			404
Mortgage servicing rights		59			48			157			142
Office supplies		36			31			117			80
Professional fees		199			47			462			279
Federal Deposit Insurance Corporation assessment		84			105			263			315
Loan related expenses		99			138			296			381
Other expenses		434			388			1,288			1,124
Total other expenses		3,682			3,517			10,699			10,325
Income Before Income Tax		1,453			1,441			5,213			4,251
Income tax expense (includes $2, $0, $42 and $83, respectively, related to income tax expense from reclassification items)		166			322			924			926
Net Income		1,287			1,119			4,289			3,325
Preferred stock dividends		-			(91	)		-			(272	)
Net Income Available to Common Stockholders	$	1,287		$	1,028		$	4,289		$	3,053
Basic earnings per common share	$	.51		$	.42		$	1.71		$	1.66
Diluted earnings per common share		.51			.42			1.70			1.66
Dividends per share		.23			.23			.69			.67

See Notes to Consolidated Condensed Financial Statements.

4

RIVER VALLEY BANCORPConsolidated Condensed Statements of Comprehensive Income (Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
	(In Thousands)
Net income	$	1,287	$	1,119	$	4,289	$	3,325
Other comprehensive income, net of tax
Unrealized gains (losses) on securities available-for-sale
Unrealized holding gains arising during the period, net of tax expense of $542, $154, $194 and $1,140		1,002		300		300		2,131
Less: Reclassification adjustment for gains included in net income, net of tax expense of $2, $0, $42 and $83		3		-		81		162
		999		300		219		1,969
Comprehensive income	$	2,286	$	1,419	$	4,508	$	5,294

See Notes to Consolidated Condensed Financial Statements.

5

RIVER VALLEY BANCORP

Consolidated Condensed Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	2015			2014
	(In Thousands)
Operating Activities
Net income	$	4,289		$	3,325
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		297			347
Depreciation and amortization		572			616
Investment securities gains		(123	)		(245	)
Loans originated for sale in the secondary market		(11,253	)		(7,304	)
Proceeds from sale of loans in the secondary market		11,931			7,802
Gain on sale of loans		(374	)		(244	)
Amortization of net loan origination cost		4			109
Net accretion relative to purchased loans		(308	)		(135	)
Loss on premises held for sale		-			111
Loss (gain) on real estate held for sale		57			194
Stock compensation expense		129			169
Net change in
Interest receivable		(172	)		(114	)
Interest payable		(10	)		(56	)
Other adjustments		2,500			986
Net cash provided by operating activities		7,539			5,561
Investing Activities
Purchase of interest-bearing deposits		(980	)		-
Purchases of securities available-for-sale		(22,292	)		(36,353	)
Proceeds from maturities and paydowns of securities available for sale		10,492			11,877
Proceeds from sales of securities available-for-sale		5,897			10,156
Net change in loans		806			(8,189	)
Purchases of premises and equipment		(391	)		(1,079	)
Proceeds from sale of real estate acquired through foreclosure		1,960			736
Proceeds from sale of FHLB of Indianapolis stock		669			-
Proceeds from Bank owned life insurance		-			256
Other investing activity		16			8
Net cash used in investing activities		(3,823	)		(22,588	)
Financing Activities
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits		9,647			21,915
Certificates of deposit		(6,072	)		(19,828	)
Short-term borrowings		(4,155	)		4,164
Proceeds from borrowings		20,000			18,000
Repayment of borrowings		(19,750	)		(25,000	)
Cash dividends		(1,734	)		(1,270	)
Common shares issued		-			17,776
Proceeds from exercise of stock options		-			111
Advances by borrowers for taxes and insurance		261			216
Net cash provided by (used in) financing activities		(1,803	)		16,084
Net Change in Cash and Cash Equivalents		1,913			(943	)
Cash and Cash Equivalents, Beginning of Period		13,264			10,244
Cash and Cash Equivalents, End of Period	$	15,177		$	9,301
Additional Cash Flows and Supplementary Information
Interest paid	$	2,518		$	2,655
Income tax paid, net of refund		220			80
Transfers to real estate held for sale		1,526			1,929
Dividends declared not paid		578			578

See Notes to Consolidated Condensed Financial Statements.

6

RIVER VALLEY BANCORP

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

River Valley Bancorp (the “Corporation” or the “Company”) is a bank holding company whose activities are primarily limited to holding the stock of River Valley Financial Bank (“River Valley” or the “Bank”), an Indiana commercial bank. With the creation of an insurance subsidiary in 2014, the Corporation also qualified and registered with the Federal Reserve as a financial holding company. The Bank conducts a general banking business in southeastern and south central Indiana and in northern Kentucky which consists of attracting deposits from the general public and applying those funds to the origination of loans for consumer, residential and commercial purposes. River Valley’s profitability is significantly dependent on net interest income, which is the difference between interest income generated from interest-earning assets (i.e., loans and investments) and the interest expense paid on interest-bearing liabilities (i.e., customer deposits and borrowed funds). Net interest income is affected by the relative amount of interest-earning assets and interest-bearing liabilities and the interest received or paid on these balances. The level of interest rates paid or received by the Bank can be significantly influenced by a number of factors, such as governmental monetary policy, that are outside of management’s control.

NOTE 1: BASIS OF PRESENTATION

The accompanying consolidated condensed financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Corporation included in the Annual Report on Form 10-K for the year ended December 31, 2014. However, in the opinion of management, all adjustments (consisting of only normal recurring accruals) which are necessary for a fair presentation of the financial statements have been included. The results of operations for the three-month and nine-month periods ended September 30, 2015, are not necessarily indicative of the results which may be expected for the entire year. The consolidated condensed balance sheet of the Corporation as of December 31, 2014 has been derived from the audited consolidated balance sheet of the Corporation as of that date.

NOTE 2: PRINCIPLES OF CONSOLIDATION

The consolidated condensed financial statements include the accounts of the Corporation and its subsidiaries, the Bank and River Valley Risk Management, Inc., a Nevada corporation formed in December 2014 as a captive insurance company. The Bank currently owns four subsidiaries. Madison 1st Service Corporation, which was incorporated under the laws of the State of Indiana on July 3, 1973, currently holds land but does not otherwise engage in significant business activities. RVFB Investments, Inc., RVFB Holdings, Inc., and RVFB Portfolio, LLC were established in Nevada the latter part of 2005. They hold and manage a significant portion of the Bank’s investment portfolio. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated condensed financial statements.

7

NOTE 3: EARNINGS PER SHARE

The Corporation has granted stock compensation awards with non-forfeitable dividend rights, which are considered participating securities. Accordingly, earnings per share (“EPS”) is computed using the two-class method as required by ASC 260-10-45. Basic EPS is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period, which excludes the participating securities. ESOP shares are not considered outstanding for EPS computation purposes until they are earned. The following table presents the computation of basic and diluted EPS for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	(Unaudited; Dollar Amounts in Thousands)
Net income	$	1,287		$	1,119		$	4,289		$	3,325
Allocated to preferred stock		-			(91	)		-			(272	)
Allocated to participating securities		(9	)		(5	)		(38	)		(7	)
Net income allocated to common shareholders	$	1,278		$	1,023		$	4,251		$	3,046
Weighted average common shares outstanding, gross		2,513,696			2,427,984			2,513,696			1,836,126
Less:  Average participating securities		(18,913	)		(12,782	)		(22,304	)		(4,261	)
Weighted average common shares outstanding, net		2,494,783			2,415,202			2,491,392			1,831,865
Effect of diluted based awards		3,246			2,938			3,143			3,816
Weighted average shares and common stock equivalents		2,498,029			2,418,140			2,494,535			1,835,681
Basic	$	0.51		$	0.42		$	1.71		$	1.66
Diluted	$	0.51		$	0.42		$	1.70		$	1.66
Options excluded from the calculation due to their anti-dilutive effect on earnings per share		30,000			30,000			30,000			30,000

NOTE 4: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The Corporation recognizes fair values in accordance with Financial Accounting Standards Codification (ASC) Topic 820. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

8

Recurring Measurements

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated condensed balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. The Corporation does not currently hold any Level 1 securities. If quoted market prices are not available, then fair values are estimated by using pricing models which utilize certain market information or quoted prices of securities with similar characteristics (Level 2). For securities where quoted prices, market prices of similar securities or pricing models which utilize observable inputs are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. Rating agency industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into calculations. Level 2 securities include residential mortgage-backed agency securities, federal agency securities, municipal securities and corporate bonds. Securities classified within Level 3 of the hierarchy include pooled trust preferred securities which are less liquid securities.

Fair value determinations for Level 3 measurements of securities are the responsibility of the Vice President of Finance (“VP of Finance”). The VP of Finance contracts with a third party pricing specialist who generates fair value estimates on a quarterly basis. The VP of Finance’s office challenges the reasonableness of the assumptions used and reviews the methodology to ensure the estimated fair value complies with accounting standards generally accepted in the United States.

9

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying consolidated condensed balance sheets measured at fair value on a recurring basis and the level within the ASC Topic 820 fair value hierarchy in which the fair value measurements fall at September 30, 2015 and December 31, 2014, respectively.

			September 30, 2015 Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	(Unaudited; In Thousands)
Federal agencies	$	31,911	$	-	$	31,911	$	-
State and municipal		48,274		-		48,274		-
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,498		-		51,498		-
Corporate		3,295		-		2,001		1,294
Total	$	134,978	$	-	$	133,684	$	1,294

			December 31, 2014 Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	(In Thousands)
Federal agencies	$	31,622	$	-	$	31,622	$	-
State and municipal		42,200		-		42,200		-
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,741		-		51,741		-
Corporate		3,322		-		2,000		1,322
Total	$	128,885	$	-	$	127,563	$	1,322

10

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying consolidated condensed balance sheets using significant unobservable (Level 3) inputs for the three-month and nine-month periods ended September 30, 2015 and September 30, 2014:

	Available-for-Sale Securities
	Three Months Ended September 30, 2015			Three Months Ended September 30, 2014
	(Unaudited; In Thousands)
Beginning balance	$	1,317		$	1,384
Accretion		2			2
Total realized and unrealized gains and losses
Unrealized losses included in other comprehensive income		(17	)		(101	)
Settlements, including pay downs		(8	)		(6	)
Ending balance	$	1,294		$	1,279
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	-		$	-

	Available-for-Sale Securities
	Nine Months Ended September 30, 2015			Nine Months Ended September 30, 2014
	(Unaudited; In Thousands)
Beginning balance	$	1,322		$	1,268
Accretion		7			7
Total realized and unrealized gains and losses
Unrealized gains (losses) included in other comprehensive income		(10	)		29
Settlements, including pay downs		(25	)		(25	)
Ending balance	$	1,294		$	1,279
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	-		$	-

There were no realized or unrealized gains or losses of Level 3 securities included in net income for the three-month and nine-month periods ended September 30, 2015 and September 30, 2014.

At September 30, 2015, Level 3 securities included two pooled trust preferred securities. The fair value on these securities is calculated using a combination of observable and unobservable assumptions as a quoted market price is not readily available. Both securities remain in Level 3 at September 30, 2015. For the past two fiscal years, trading of these types of securities has only been conducted on a distress sale or forced liquidation basis, although some trading activity has occurred for instruments similar to the instruments held by the Corporation. As a result, the Corporation continues to measure the fair values using discounted cash flow projections and has included the securities in Level 3.

11

Nonrecurring Measurements

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying consolidated condensed balance sheets measured at fair value on a nonrecurring basis and the level within the ASC Topic 820 fair value hierarchy in which the fair value measurements fall at September 30, 2015 and December 31, 2014.

			Fair Value Measurements Using
As of September 30, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Unaudited; In Thousands)
Impaired loans	$	12	$	-	$	-	$	12
Real estate held for sale	$	283	$	-	$	-	$	283

			Fair Value Measurements Using
As of December 31, 2014	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Impaired loans	$	3,357	$	-	$	-	$	3,357

Following is a description of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated condensed balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired Loans (Collateral Dependent)

Loans for which it is probable that the Corporation will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

The Corporation considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by policy. Appraisals are reviewed for accuracy and consistency by loan review personnel and reported to management. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated costs to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by loan review personnel by comparison to historical results.

12

Real Estate Held for Sale

Real estate held for sale is carried at the fair value less cost to sell and is periodically evaluated for impairment. Real estate held for sale recorded during the current accounting period is recorded at fair value less cost to sell. Appraisals of real estate held for sale are obtained when the real estate is acquired and subsequently as deemed necessary by policy. Appraisals are reviewed for accuracy and consistency by loan review personnel and reported to management. Appraisers are selected from the list of approved appraisers maintained by management. Real estate held for sale is classified within Level 3 of the fair value hierarchy.

Sensitivity of Significant Unobservable Inputs

The following tables represent quantitative information about unobservable Level 3 fair value measurements at September 30, 2015 and December 31, 2014:

	Fair Value at September 30, 2015		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	(Unaudited; In Thousands)
Impaired loans	$	12	Comparative sales based on independent appraisal	Marketability Discount		70	%
Real estate held for sale	$	283	Comparative sales based on independent appraisal	Marketability Discount		10%-20	%
Securities available-for-sale
Corporate	$	1,294	Discounted cash flows	*Default probability		1.80%-75	%
				*Loss, given default		85%-100	%
				*Discount rate		3.03%-4.75	%
				*Recovery rate		10%-75	%
				*Prepayment rate		1%-2	%

	Fair Value at December 31, 2014		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	(In Thousands)
Impaired loans	$	3,357	Comparative sales based on independent appraisal	Marketability Discount		10%-20	%
Securities available-for-sale
Corporate	$	1,322	Discounted cash flows	*Default probability		1.80%-75	%
				*Loss, given default		85%-100	%
				*Discount rate		3.03%-4.75	%
				*Recovery rate		10%-75	%
				*Prepayment rate		1%-2	%

13

Following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring and nonrecurring fair value measurement and of how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

Securities Available-for-sale – Pooled Trust Preferred Securities

Pooled trust preferred securities are collateralized debt obligations backed by a pool of debt securities issued by financial institutions. The collateral generally consists of trust preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. A full discounted cash flow analysis is used to estimate fair values and assess impairment for each security within this portfolio. A third party specialist with direct industry experience in pooled trust preferred security evaluations is engaged to provide assistance estimating the fair value and expected cash flows on this portfolio. The full cash flow analysis is completed by evaluating the relevant credit and structural aspects of each pooled trust preferred security in the portfolio, including collateral performance projections for each piece of collateral in the security, and terms of the security’s structure. The credit review includes an analysis of profitability, credit quality, operating efficiency, leverage, and liquidity using available financial and regulatory information for each underlying collateral issuer. The analysis also includes a review of historical industry default data, current/near term operating conditions, prepayment projections, credit loss assumptions, and the impact of macroeconomic and regulatory changes. Where available, actual trades of securities with similar characteristics are used to further support the value.

The significant unobservable inputs used in the fair value measurement of the Corporation’s pooled trust preferred securities are probability of default, estimated loss given default, discount rate, and recovery and prepayment rates. Significant increases or decreases in any of those inputs in isolation could result in a significant change in the fair value measurement.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and Cash Equivalents and Interest-bearing Deposits – The fair value approximates carrying value.

Loans Held for Sale – Fair values are based on quoted market prices.

Loans – The fair value for loans is estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

FHLB Stock – Fair value of Federal Home Loan Bank (“FHLB”) stock is based on the price at which it may be resold to the FHLB.

Interest Receivable/Payable – The fair values of interest receivable/payable approximate carrying values.

Deposits – The fair values of noninterest-bearing, interest-bearing demand and savings accounts are equal to the amount payable on demand at the balance sheet date. The carrying amounts for variable rate, fixed-term certificates of deposit approximate their fair values at the balance sheet date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on such time deposits.

Borrowings – The fair value of these borrowings are estimated using a discounted cash flow calculation, based on current rates for similar debt or, as applicable, based on quoted market prices for the identical liability when traded as an asset.

Off-balance sheet Commitments – Commitments include commitments to originate mortgage and consumer loans and standby letters of credit and are generally of a short-term nature. The fair value of such commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The carrying amounts of these commitments, which are immaterial, are reasonable estimates of the fair value of these financial instruments.

14

The following tables present estimated fair values of the Corporation’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2015 and December 31, 2014.

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Unaudited; In Thousands)
September 30, 2015:
Assets
Cash and cash equivalents	$	15,177	$	15,177	$	-	$	-
Interest-bearing deposits		2,964		2,964		-		-
Loans, net of allowance for losses		329,670		-		327,172		-
Stock in Federal Home Loan Bank		3,127		-		3,127		-
Interest receivable		2,563		-		2,563		-
Liabilities
Deposits		400,658		-		400,685		-
Borrowings		50,967		-		44,992		7,179
Interest payable		199		-		199		-

			Fair Value Measurements Using
	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
December 31, 2014:
Assets
Cash and cash equivalents	$	13,264	$	13,264	$	-	$	-
Interest-bearing deposits		1,984		1,984		-		-
Loans, held for sale		423		-		423		-
Loans, net of allowance for losses		331,995		-		340,790		-
Stock in Federal Home Loan Bank		3,796		-		3,796		-
Interest receivable		2,391		-		2,391		-
Liabilities
Deposits		397,083		-		397,388		-
Borrowings		54,872		4,155		44,920		7,218
Interest payable		209		-		209		-

15

NOTE 5: INVESTMENT SECURITIES

The amortized cost and approximate fair values of securities as of September 30, 2015 and December 31, 2014 are as follows:

	September 30, 2015
	Amortized Cost		GrossUnrealized Gains		GrossUnrealized Losses			Fair Value
	(Unaudited; In Thousands)
Available-for-sale securities
Federal agencies	$	31,716	$	223	$	(28	)	$	31,911
State and municipal		47,138		1,266		(130	)		48,274
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,016		620		(138	)		51,498
Corporate		3,624		3		(332	)		3,295
Totals	$	133,494	$	2,112	$	(628	)	$	134,978
	December 31, 2014
	Amortized Cost		GrossUnrealized Gains		GrossUnrealized Losses			Fair Value
	(In Thousands)
Available-for-sale securities
Federal agencies	$	31,894	$	147	$	(419	)	$	31,622
State and municipal		40,710		1,537		(47	)		42,200
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,533		558		(350	)		51,741
Corporate		3,636		2		(316	)		3,322
Totals	$	127,773	$	2,244	$	(1,132	)	$	128,885

The amortized cost and fair value of available-for-sale securities at September 30, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale
	Amortized Cost		Fair Value
	(Unaudited; In Thousands)
Within one year	$	3,002	$	3,025
One to five years		30,454		30,639
Five to ten years		12,367		12,719
After ten years		36,655		37,097
		82,478		83,480
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,016		51,498
Totals	$	133,494	$	134,978

16

No securities were pledged at September 30, 2015 or at December 31, 2014 to secure FHLB advances. Securities with a carrying value of $24,152,000 and $28,071,000 were pledged at September 30, 2015 and December 31, 2014, respectively, to secure public deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available-for-sale during the three-month period ended September 30, 2015 were $504,000. There were no proceeds from sales of securities available-for-sale during the three-month period ended September 30, 2014. Gross gains of $5,000 resulting from sales and calls of available-for-sale securities were realized for the three-month period ended September 30, 2015. There were no gross losses for the three-month period ended September 30, 2015. Because there were no sales of securities available-for-sale during the three-month period ended September 30, 2014, there were no gross gains or losses realized for that period.

Proceeds from sales of securities available-for-sale during the nine-month periods ended September 30, 2015 and 2014 were $5,897,000 and $10,156,000. Gross gains of $128,000 and $437,000 resulting from sales and calls of available-for-sale securities were realized for the nine-month periods ended September 30, 2015 and 2014, respectively. Gross losses of $5,000 were realized for the nine-month period ended September 30, 2015, and gross losses of $192,000 were realized for the nine-month period ended September 30, 2014.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2015 was $33,139,000, which is approximately 24.6% of the Corporation’s investment portfolio. The fair value of these investments at December 31, 2014 was $44,161,000, which represented approximately 34.3% of the Corporation’s investment portfolio. Management has the ability and intent to hold securities with unrealized losses to recovery, which may be maturity. Based on evaluation of available evidence, including recent changes in market interest rates, management believes that any declines in fair values for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting credit portion of the loss recognized in net income. The noncredit portion of the loss would be recognized in accumulated other comprehensive income in the period the other-than-temporary impairment is identified.

17

The following tables show the Corporation’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2015 and December 31, 2014:

	September 30, 2015
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Unaudited; In Thousands)
Federal agencies	$	7,986	$	(10	)	$	2,982	$	(18	)	$	10,968	$	(28	)
State and municipal		10,189		(119	)		531		(11	)		10,720		(130	)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		4,771		(16	)		4,894		(122	)		9,665		(138	)
Corporate		1,182		(23	)		604		(309	)		1,786		(332	)
Total temporarily impaired securities	$	24,128	$	(168	)	$	9,011	$	(460	)	$	33,139	$	(628	)
	December 31, 2014
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In Thousands)
Federal agencies	$	12,302	$	(178	)	$	8,756	$	(241	)	$	21,058	$	(419	)
State and municipal		1,651		(14	)		2,706		(33	)		4,357		(47	)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		6,230		(74	)		10,697		(276	)		16,927		(350	)
Corporate		724		(1	)		1,095		(315	)		1,819		(316	)
Total temporarily impaired securities	$	20,907	$	(267	)	$	23,254	$	(865	)	$	44,161	$	(1,132	)

Federal Agencies

The unrealized losses on the Corporation’s investments in direct obligations of U.S. government agencies were primarily caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

State and Municipal

The unrealized losses on the Corporation’s investments in securities of state and political subdivisions were primarily caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

18

Government-Sponsored Enterprise (GSE) Residential Mortgage-Backed and Other Asset-Backed Agency Securities

The unrealized losses on the Corporation’s investment in residential mortgage-backed agency securities were primarily caused by interest rate changes. The Corporation expects to recover the amortized cost bases over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

Corporate Securities

The unrealized losses on the Corporation’s investment in corporate securities were due primarily to losses on two pooled trust preferred issues held by the Corporation. The ALESCO 9A issue had an unrealized loss at September 30, 2015 of $309,000. The PRETSL XXVII issue was also at an unrealized loss of $15,000 at September 30, 2015. This compares to December 31, 2014, which showed unrealized losses on both ALESCO 9A and PRETSL XXVII of $313,000 and $1,000, respectively. These two securities are both “A” tranche investments (A2A and A-1 respectively) and have performed as agreed since purchase. The two are rated A2 and A1, respectively, by Moody’s indicating these securities are considered upper medium-grade quality and subject to low credit risk. Both provide good collateral coverage at those tranche levels, providing protection for the Corporation. The Corporation has reviewed the pricing reports for these investments and has determined that the decline in the market price is not other than temporary and indicates thin trading activity rather than a true decline in the value of the investment. Factors considered in reaching this determination included the class or “tranche” held by the Corporation, the collateral coverage position of the tranches, the number of deferrals and defaults on the issues, projected and actual cash flows and the credit ratings. These two investments represent 1.21% of the book value of the Corporation’s investment portfolio and approximately 0.96% of market value at September 30, 2015. The Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, and the Corporation expects to receive all contractual cash flows related to these investments. Based upon these factors, the Corporation has determined these securities are not other-than-temporarily impaired at September 30, 2015.

NOTE 6: ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER

The Corporation acquired loans in the acquisition of Dupont State Bank during the year ended December 31, 2012. Certain of the transferred loans had evidence of deterioration of credit quality since origination and it was probable that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration, for which it is probable that all contractually required payments will not be collected, are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include deterioration of collateral value, past due status and/or nonaccrual status, and borrower credit scores. Purchased credit-impaired loans are accounted for under accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and are initially measured at fair value, which includes estimated future losses that may be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over at the acquisition date. Management utilized cash flows prepared by a third party in arriving at the discount for credit-impaired loans acquired in the transaction. Those cash flows included estimation of current key assumptions, such as default rates, severity, and prepayment speeds.

19

The carrying amount of those loans included in the consolidated condensed balance sheet as loans receivable at September 30, 2015 and December 31, 2014 were (in thousands):

	September 30, 2015			December 31, 2014
	(Unaudited)
Construction/Land	$	131		$	682
One-to-four family residential		1,209			1,400
Multi-family residential		-			-
Nonresidential real estate and agricultural land		538			568
Commercial		22			24
Consumer and other		20			29
Outstanding balance of acquired credit-impaired loans		1,920			2,703
Fair value adjustment for credit-impaired loans		(533	)		(830	)
Carrying balance of acquired credit-impaired loans	$	1,387		$	1,873

Accretable yield, or income expected to be collected is as follows:

	Three Months Ended September 30, 2015			Nine Months Ended September 30, 2015
	(Unaudited; In Thousands)
Balance at the beginning of the period	$	1,029		$	1,262
Additions		-			-
Accretion		(50	)		(350	)
Reclassification from non-accretable difference		12			79
Disposals		-			-
Balance September 30, 2015	$	991		$	991

	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
	(Unaudited; In Thousands)
Balance at the beginning of the period	$	1,311		$	1,345
Additions		-			-
Accretion		(86	)		(296	)
Reclassification from non-accretable difference		39			215
Disposals		-			-
Balance September 30, 2014	$	1,264		$	1,264

Loans acquired during 2012 for which it was probable at acquisition that all contractually required payments would not be collected were as follows (in thousands):

Contractually required payments receivable at acquisition
Construction / Land	$	750
One-to-four family residential		2,193
Multi-family residential		687
Nonresidential and agricultural land		1,530
Commercial		73
Consumer		52
Total required payments receivable at acquisition	$	5,285
Cash flows expected to be collected at acquisition	$	3,838
Basis in acquired loans at acquisition	$	3,088

20

During the three months and nine months ended September30, 2015, increases and decreases to the allowance for loan losses for loans acquired with deteriorated credit quality were immaterial to financial reporting.

NOTE 7: LOANS AND ALLOWANCE

The Corporation’s loan and allowance policies are as follows:

Loans

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances, adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term.

Discounts and premiums on purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Discounts and premiums on purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method.

Generally, loans are placed on nonaccrual status at 90 days past due and interest is considered a loss, unless the loan is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date. For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Corporation’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except one-to-four family residential properties and consumer, the Corporation promptly charges off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Corporation charges off one-to-four family residential and consumer loans, or portions thereof, when the Corporation reasonably determines the amount of the loss. The Corporation adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of one-to-four family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge-down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Corporation can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

21

For all loan classes, when loans are placed on nonaccrual, or charged off, interest accrued but not collected is reversed against interest income. Subsequent payments on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. In general, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. However, for impaired loans and troubled debt restructured, which is included in impaired loans, the Corporation requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

Interest income on credit-impaired loans purchased in an acquisition is allocated to income as accretion on those loans, over the life of the loan.

When cash payments are received on impaired loans in each loan class, the Corporation records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on at least a quarterly basis by management and is based upon management’s periodic review of the collectability of the loans in light of several factors, including historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience by segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Corporation over the prior five years. Previously, management utilized a three-year historical loss experience methodology. Given the loss experiences of financial institutions over the last five years, management believes it is appropriate to utilize a five-year look-back period for loss history and made this change effective in 2013. Other adjustments (qualitative or environmental considerations) for each segment may be added to the allowance for each loan segment after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

22

A loan is considered impaired when, based on current information and events, it is probable that the Corporation 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 determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, 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. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Corporation utilizes the discounted cash flows to determine the level of impairment, the Corporation includes the entire change in the present value of cash flows as provision expense.

Segments of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment measurements.

The following table presents the breakdown of loans as of September 30, 2015 and December 31, 2014.

	September 30, 2015			December 31, 2014
	(Unaudited)
	(In Thousands)
Construction/Land	$	21,192		$	26,055
One-to-four family residential		129,730			133,904
Multi-family residential		25,326			20,936
Nonresidential		125,873			122,894
Commercial		28,128			27,861
Consumer		4,278			3,894
		334,527			335,544
Unamortized deferred loan costs		517			513
Undisbursed loans in process		(1,647	)		(57	)
Allowance for loan losses		(3,727	)		(4,005	)
Total loans	$	329,670		$	331,995

The risk characteristics of each loan portfolio segment are as follows:

Construction, Land and Land Development

The Construction, Land and Land Development segments include loans for raw land, loans to develop raw land preparatory to building construction, and construction loans of all types. Construction and development loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction and development loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Corporation until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest-rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

23

Land loans are secured by raw land held as an investment, for future development, or as collateral for other use. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. These loans are underwritten based on the underlying purpose of the loan with repayment primarily from the sale or use of the underlying collateral.

One-to-Four Family Residential and Consumer

With respect to residential loans that are secured by one-to-four family residences and are usually owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. This segment also includes residential loans secured by non-owner occupied one-to-four family residences. Management tracks the level of owner-occupied residential loans versus non-owner-occupied residential loans as a portion of our recent loss history relates to these loans. Home equity loans are typically secured by a subordinate interest in one-to-four family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Nonresidential (including agricultural land) and Multi-family Residential

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Nonresidential and multi-family residential real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Nonresidential and multi-family residential real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Corporation’s nonresidential and multi-family residential real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. As a general rule, the Corporation avoids financing single-purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied residential real estate loans versus non-owner-occupied residential loans.

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

24

The following tables present the activity in the allowance for loan losses for the three and nine-month periods ended September 30, 2015 and 2014, and information regarding the breakdown of the balance in the allowance for loan losses and the recorded investment in loans, both presented by portfolio class and impairment method, as of September 30, 2015 and December 31, 2014.

	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(Unaudited; In Thousands)
Three Months Ended September 30, 2015
Balances at beginning of period:	$	922		$	1,387		$	27		$	1,240		$	87		$	12		$	3,675
Provision for losses		(253	)		150			19			94			49			40			99
Loans charged off		-			(11	)		-			(13	)		-			(34	)		(58	)
Recoveries on loans		-			2			-			1			-			8			11
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
Nine Months Ended September 30, 2015
Balances at beginning of period:	$	740		$	1,977		$	28		$	1,107		$	151		$	2		$	4,005
Provision for losses		(138	)		210			(2	)		136			3			88			297
Loans charged off		-			(665	)		-			(13	)		(18	)		(91	)		(787	)
Recoveries on loans		67			6			20			92			-			27			212
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
As of September 30, 2015
Allowance for losses:
Individually evaluated for impairment:	$	391		$	181		$	-		$	310		$	-		$	8		$	890
Collectively evaluated for impairment:		278			1,237			46			912			136			18			2,627
Loans acquired with a deteriorated credit quality:		-			110			-			100			-			-			210
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
Loans:
Individually evaluated for impairment:	$	3,318		$	4,609		$	-		$	4,367		$	251		$	-		$	12,545
Collectively evaluated for impairment:		17,818			124,203			25,326			121,108			27,864			4,276			320,595
Loans acquired with a deteriorated credit quality:		56			918			-			398			13			2			1,387
Balances at end of period	$	21,192		$	129,730		$	25,326		$	125,873		$	28,128		$	4,278		$	334,527

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	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(Unaudited; In Thousands)
Three Months Ended September 30, 2014
Balances at beginning of period:	$	676		$	1,391		$	303		$	1,232		$	152		$	8		$	3,762
Provision for losses		(90	)		290			(18	)		(36	)		(26	)		29			149
Loans charged off		-			(9	)		-			(20	)		-			(46	)		(75	)
Recoveries on loans		77			2			-			1			5			19			104
Balances at end of period	$	663		$	1,674		$	285		$	1,177		$	131		$	10		$	3,940
Nine Months Ended September 30, 2014
Balances at beginning of period:	$	676		$	1,749		$	404		$	1,470		$	189		$	22		$	4,510
Provision for losses		(90	)		513			392			(439	)		(77	)		48			347
Loans charged off		-			(629	)		(511	)		(94	)		-			(118	)		(1,352	)
Recoveries on loans		77			41			-			240			19			58			435
Balances at end of period	$	663		$	1,674		$	285		$	1,177		$	131		$	10		$	3,940
	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(In Thousands)
As of December 31, 2014
Allowance for losses:
Individually evaluated for impairment:	$	391		$	816		$	-		$	310		$	76		$	-		$	1,593
Collectively evaluated for impairment:		349			1,023			28			745			75			2			2,222
Loans acquired with a deteriorated credit quality:		-			138			-			52			-			-			190
Balances at end of period	$	740		$	1,977		$	28		$	1,107		$	151		$	2		$	4,005
Loans:
Individually evaluated for impairment:	$	4,047		$	4,448		$	1,013		$	3,315		$	379		$	8		$	13,210
Collectively evaluated for impairment:		21,597			128,421			19,923			119,176			27,468			3,876			320,461
Loans acquired with a deteriorated credit quality:		411			1,035			-			403			14			10			1,873
Balances at end of period	$	26,055		$	133,904		$	20,936		$	122,894		$	27,861		$	3,894		$	335,544

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The following tables present the credit risk profile of the Corporation’s loan portfolio based on rating category as of September 30, 2015 and December 31, 2014. Loans acquired from Dupont State Bank in the November 2012 acquisition have been adjusted to fair value for these periods.

September 30, 2015	Total Portfolio		Pass		Special Mention		Substandard		Doubtful
	(Unaudited; In Thousands)
Construction/Land	$	21,192	$	17,818	$	-	$	3,374	$	-
1-4 family residential		129,730		123,318		1,197		5,135		80
Multi-family residential		25,326		25,285		41		-		-
Nonresidential		125,873		120,345		1,337		4,188		3
Commercial		28,128		27,859		26		243		-
Consumer		4,278		4,278		-		-		-
Total loans	$	334,527	$	318,904	$	2,601	$	12,940	$	83

December 31, 2014	Total Portfolio		Pass		Special Mention		Substandard		Doubtful
	(In Thousands)
Construction/Land	$	26,055	$	21,907	$	31	$	4,117	$	-
1-4 family residential		133,904		124,969		2,817		6,013		105
Multi-family residential		20,936		19,881		42		1,013		-
Nonresidential		122,894		117,336		2,486		2,923		149
Commercial		27,861		27,432		9		355		65
Consumer		3,894		3,875		-		19		-
Total loans	$	335,544	$	315,400	$	5,385	$	14,440	$	319

Credit Quality Indicators

The Corporation categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually on an ongoing basis by classifying the loans as to credit risk and assigning grade classifications. Loan grade classifications of special mention, substandard, doubtful, or loss are reported to the Corporation’s board of directors monthly. The Corporation uses the following definitions for credit risk grade classifications:

Pass: Loans not meeting the criteria below are considered to be pass rated loans.

Special Mention: These assets are currently protected, but potentially weak. They have credit deficiencies deserving a higher degree of attention by management. These assets do not presently exhibit a sufficient degree of risk to warrant adverse classification. Concerns may lie with cash flow, liquidity, leverage, collateral, or industry conditions. These are graded special mention so that the appropriate level of attention is administered.

Substandard: By regulatory definition, “substandard” loans are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged. These types of loans have well defined weaknesses that jeopardize the liquidation of the debt. A distinct possibility exists that the institution will sustain some loss if the deficiencies are not corrected. These loans are considered workout credits. They exhibit at least one of the following characteristics.

· An expected loan payment is in excess of 90 days past due (non-performing), or non-earning.

· The financial condition of the borrower has deteriorated to such a point that close monitoring is necessary. Payments do not necessarily have to be past due.

· Repayment from the primary source of repayment is gone or impaired.

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· The borrower has filed for bankruptcy protection.

· The loans are inadequately protected by the net worth and cash flow of the borrower.

· The guarantors have been called upon to make payments.

· The borrower has exhibited a continued inability to reduce principal (although interest payment may be current).

· The Corporation is considering a legal action against the borrower.

· The collateral position has deteriorated to a point where there is a possibility the Corporation may sustain some loss. This may be due to the financial condition or to a reduction in the value of the collateral.

· Although loss may not seem likely, the Corporationhas gone to extraordinary lengths (restructuring with extraordinary lengths) to protect its position in order to maintain a high probability of repayment.

Doubtful: These loans exhibit the same characteristics as those rated “substandard,” plus weaknesses that make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. This would include inadequately secured loans that are being liquidated, and inadequately protected loans for which the likelihood of liquidation is high. This classification is temporary. Pending events are expected to materially reduce the amount of the loss. This means that the “doubtful” classification will result in either a partial or complete loss on the loan (write-down or specific reserve), with reclassification of the asset as “substandard,” or removal of the asset from the classified list, as in foreclosure or full loss.

The Corporation evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during the quarter or fiscal year.

The following tables present the Corporation’s loan portfolio aging analysis as of September 30, 2015 and December 31, 2014:

September 30, 2015	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans Receivables
	(Unaudited; In Thousands)
Construction/Land	$	-	$	4	$	-	$	4	$	21,132	$	56	$	21,192
1-4 family residential		561		542		1,011		2,114		126,698		918		129,730
Multi-family residential		-		-		-		-		25,326		-		25,326
Nonresidential		171		371		1,998		2,540		122,935		398		125,873
Commercial		88		-		-		88		28,027		13		28,128
Consumer		13		2		-		15		4,261		2		4,278
	$	833	$	919	$	3,009	$	4,761	$	328,379	$	1,387	$	334,527

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans Receivables
	(In Thousands)
Construction/Land	$	-	$	-	$	187	$	187	$	25,457	$	411	$	26,055
1-4 family residential		418		760		2,855		4,033		128,836		1,035		133,904
Multi-family residential		-		-		-		-		20,936		-		20,936
Nonresidential		458		-		1,745		2,203		120,288		403		122,894
Commercial		-		-		116		116		27,731		14		27,861
Consumer		25		10		10		45		3,839		10		3,894
	$	901	$	770	$	4,913	$	6,584	$	327,087	$	1,873	$	335,544

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At September 30, 2015, there was one one-to-four family residential loan of $67,000 that was past due 90 days or more and accruing. At December 31, 2014, there were four loans, totaling $28,000, that were past due 90 days or more and accruing. Of those, there was one commercial loan of $25,000, a one-to-four family residential loan in the amount of $1,000, and the remaining $2,000 was for two consumer loans.

At September 30, 2015, the Corporation held residential real estate held for sale as a result of foreclosure (REO) totaling $82,000 and residential real estate in the process of foreclosure of $271,000.  This compares to $452,000 and $2,611,000, respectively, as of September 30, 2014.

The following table presents the Corporation’s nonaccrual loans as of September 30, 2015 and December 31, 2014, which includes both non-performing troubled debt restructured and loans contractually delinquent 90 days or more (in thousands):

	September 30, 2015		December 31, 2014
	(Unaudited)
Construction/Land	$	1,819	$	2,148
One-to-four family residential		1,861		4,214
Multi-family residential		-		1,013
Nonresidential and agricultural land		3,203		3,132
Commercial		111		230
Consumer and other		-		8
Total nonaccrual loans	$	6,994	$	10,745

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include non-performing commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

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The following tables present information pertaining to the principal balances and specific valuation allocations for impaired loans, as of September 30, 2015 (unaudited; in thousands):

Impaired loans without a specific allowance:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction/Land	$	1,648	$	1,649	$	-
1-4 family residential		4,047		4,631		-
Multi-family residential		-		-		-
Nonresidential		3,437		3,462		-
Commercial		238		239		-
Consumer		-		-		-
	$	9,370	$	9,981	$	-

Impaired loans with a specific allowance:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction/Land	$	1,670	$	1,684	$	391
1-4 family residential		562		575		181
Multi-family residential		-		-		-
Nonresidential		930		930		310
Commercial		13		13		8
Consumer		-		-		-
	$	3,175	$	3,202	$	890

Total impaired loans:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction Land	$	3,318	$	3,333	$	391
1-4 family residential		4,609		5,206		181
Multi-family residential		-		-		-
Nonresidential		4,367		4,392		310
Commercial		251		252		8
Consumer		-		-		-
	$	12,545	$	13,183	$	890

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The following is a summary by class of information related to the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2015 and 2014.

	Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
	Average Investment		Interest Income Recognized		Average Investment		Interest Income Recognized
	(Unaudited; In Thousands)
Construction/Land	$	3,287	$	25	$	3,953	$	26
1-4 family residential		3,257		46		4,630		40
Multi-family residential		-		-		1,000		4
Nonresidential		3,188		26		3,975		21
Commercial		218		3		304		2
Consumer		-		-		-		-
	$	9,950	$	100	$	13,862	$	93

	Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
	Average Investment		Interest Income Recognized		Average Investment		Interest Income Recognized
	(Unaudited; In Thousands)
Construction/Land	$	3,592	$	98	$	4,078	$	105
1-4 family residential		3,487		139		5,081		133
Multi-family residential		-		-		1,014		16
Nonresidential		3,232		80		3,977		85
Commercial		280		18		332		13
Consumer		3		-		-		-
	$	10,594	$	335	$	14,482	$	352

For the three and nine months ended September 30, 2015, interest income recognized on a cash basis included above was $49,000 and $206,000, respectively. For the three and nine months ended September 30, 2014, interest income recognized on a cash basis included above was $59,000 and $243,000, respectively.

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The following tables present information pertaining to the principal balances and specific valuation allocations for impaired loans as of December 31, 2014 (in thousands):

Impaired loans without a specific allowance:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction/Land	$	2,300	$	2,342	$	-
1-4 family residential		1,952		1,962		-
Multi-family residential		1,013		1,013		-
Nonresidential		2,360		2,614		-
Commercial		250		251		-
Consumer		8		9		-
	$	7,883	$	8,191	$	-

Impaired loans with a specific allowance:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction/Land	$	1,747	$	1,761	$	391
1-4 family residential		2,496		2,512		816
Multi-family residential		-		-		-
Nonresidential		955		955		310
Commercial		129		268		76
Consumer		-		-		-
	$	5,327	$	5,496	$	1,593

Total impaired loans:	Recorded Investment		Unpaid Principal Balance		Specific Allowance
Construction/Land	$	4,047	$	4,103	$	391
1-4 family residential		4,448		4,474		816
Multi-family residential		1,013		1,013		-
Nonresidential		3,315		3,569		310
Commercial		379		519		76
Consumer		8		9		-
	$	13,210	$	13,687	$	1,593

Troubled Debt Restructurings

In the course of working with borrowers, the Corporation may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Corporation attempts to work out an alternative payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified, whether through a new agreement replacing the old or via changes to an existing loan agreement, are reviewed by the Corporation to identify if a troubled debt restructuring (“TDR”) has occurred. A troubled debt restructuring occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Corporation grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Corporation do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Corporation may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan.

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Nonaccrual loans, including TDRs that have not met the six month minimum performance criterion, are reported in this report as non-performing loans. On at least a quarterly basis, the Corporation reviews all TDR loans to determine if the loan meets this criterion. A loan is generally classified as nonaccrual when the Corporation believes that receipt of principal and interest is questionable under the terms of the loan agreement. Most generally, this is at 90 or more days past due.

For all loan classes, it is the Corporation’s policy to have any restructured loans which are on nonaccrual status prior to being restructured, remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider their return to accrual status.

Loans reported as TDR as of September 30, 2015 totaled $5.1 million. TDR loans reported as nonaccrual (non-performing) loans, and included in total nonaccrual (non-performing) loans, were $3.3 million at September 30, 2015. The remaining TDR loans, totaling $1.8 million, were accruing at September 30, 2015 and reported as performing loans.

All TDRs are considered impaired by the Corporation for the life of the loan and reflected so in the Corporation’s analysis of the allowance for credit losses. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously above.

At September 30, 2015, the Corporation had 21 loans that were modified in troubled debt restructurings and impaired. The modification of terms of such loans included one or a combination of the following:  an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

The following tables present information regarding troubled debt restructurings by class as of the three-month and nine-month periods ended September 30, 2015 and 2014, and new troubled debt restructuring for the three-month and nine-month periods ended September 30, 2015 and 2014:

	For the Three Months Ended September 30, 2015
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		1	$	149	$	149
One-to-four family residential		-		-		-
Multi-family residential		-		-		-
Nonresidential and agricultural land		-		-		-
Commercial		-		-		-
		1	$	149	$	149

	For the Three Months Ended September 30, 2014
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		3	$	1,830	$	1,985
One-to-four family residential		1		485		485
Multi-family residential		1		1,019		1,019
Nonresidential and agricultural land		1		43		46
Commercial		1		130		153
		7	$	3,507	$	3,688

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	For the Nine Months Ended September 30, 2015
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		7	$	3,473	$	3,473
One-to-four family residential		-		-		-
Multi-family residential		-		-		-
Nonresidential and agricultural land		-		-		-
Commercial		2		76		66
		9	$	3,549	$	3,539

	For the Nine Months Ended September 30, 2014
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
Construction/Land		5	$	4,278	$	4,473
One-to-four family residential		7		2,606		2,876
Multi-family residential		2		2,087		2,102
Nonresidential and agricultural land		2		243		209
Commercial		5		201		240
		21	$	9,415	$	9,900

The following tables present information regarding post-modification balances of newly restructured troubled debt by type of modification for the three months ended September 30, 2015 and 2014.

September 30, 2015	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	149	$	-	$	-	$	149
One-to-four family residential		-		-		-		-
Multi-family residential		-		-		-		-
Nonresidential		-		-		-		-
Commercial		-		-		-		-
	$	149	$	-	$	-	$	149

September 30, 2014	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	155	$	1,830	$	-	$	1,985
One-to-four family residential		-		485		-		485
Multi-family residential		-		1,019		-		1,019
Nonresidential		-		-		46		46
Commercial		-		-		153		153
	$	155	$	3,334	$	199	$	3,688

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The following tables present information regarding post-modification balances of newly restructured troubled debt by type of modification for the nine months ended September 30, 2015 and 2014.

September 30, 2015	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	149	$	3,324	$	-	$	3,473
One-to-four family residential		-		-		-		-
Multi-family residential		-		-		-		-
Nonresidential		-		-		66		66
Commercial		-		-		-		-
	$	149	$	3,324	$	66	$	3,539

September 30, 2014	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	155	$	2,048	$	2,270	$	4,473
One-to-four family residential		-		595		2,281		2,876
Multi-family residential		-		1,019		1,083		2,102
Nonresidential		-		-		209		209
Commercial		-		-		240		240
	$	155	$	3,662	$	6,083	$	9,900

No loans classified and reported as troubled debt restructured within the twelve months prior to September 30, 2015, defaulted during the three-month or nine-month periods ended September 30, 2015. The Corporation defines default in this instance as being either past due 90 days or more at the end of the quarter or in the legal process of foreclosure.

Financial impact of these restructurings was immaterial to the financials of the Corporation at September 30, 2015 and 2014.

NOTE 8: PUBLIC STOCK OFFERING

On July 7, 2014, the Corporation issued 825,000 shares of its common stock in an underwritten public offering at an offering price of $20.50 per share. On July 15, 2014, as a result of the underwriter’s exercise of an over-allotment option, the Corporation issued an additional 121,390 shares of its common stock at the public offering price of $20.50 per share, bringing the total number of shares of common stock sold by the Corporation in the public offering to 946,390 shares. Gross proceeds to the Corporation from the public offering, including proceeds from the exercise of the over-allotment option, were approximately $19.4 million, and net proceeds after offering expenses were approximately $17.8 million.

The Corporation used a portion of the net proceeds from the offering to redeem all 5,000 of its issued and outstanding Fixed Rate Cumulative Perpetual Preferred Stock, Series A on December 15, 2014, when the preferred stock became redeemable. The Corporation intends to use the remaining net proceeds for general corporate purposes, including the contribution of a portion of the proceeds to the Bank as additional capital. The net proceeds will also support future growth, which may include organic growth in existing markets and opportunistic acquisitions of all or part of other financial institutions.

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NOTE 9: STOCK BASED COMPENSATION

The Corporation’s shareholders approved the 2014 Stock Option and Incentive Plan (the “2014 Plan”) at the April 16, 2014 Annual Meeting of the Corporation. Under the terms of the 2014 Plan, the Corporation may issue or deliver to participants up to 150,000 shares of the Corporation’s common stock pursuant to grants of incentive and non-qualified stock options, restricted and unrestricted stock awards, performance shares and units, and stock appreciation rights. On July 15, 2014, the Corporation granted 30,000 stock options and 30,000 shares of restricted stock to its directors and officers pursuant to the terms of the 2014 Plan. The stock options and restricted stock awards vest over a period of four to nine years with certain stock options and awards vesting immediately. Stock based compensation expense, including expense related to stock options and awards issued in prior periods, was $54,000 and $33,000 for the three months ended September 30, 2015 and 2014, respectively, and was $129,000 and 169,000 for the nine months ended September 30, 2015 and 2014, respectively.

NOTE 10: RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, FASB, in joint cooperation with the International Accounting Standards Board, issued ASU 2014-09, “Revenue from Contracts with Customers.” The topic of revenue recognition had become broad, with several other regulatory agencies issuing standards which lacked cohesion. The new guidance establishes a common framework and reduces the number of requirements which an entity must consider in recognizing revenue and yet provides improved disclosures to assist stakeholders reviewing financial statements. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2016. With the issuance of ASU 2015-14 in July 2015, FASB approved the deferral of the effective date of ASU 2014-09 for one year, giving companies the option to early adopt using the original effective dates. The Corporation will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In June 2014, FASB issued ASU 2014-12, “Compensation – Stock Compensation.” This Update defines the accounting treatment for share-based payments and “resolves the diverse accounting treatment of those awards in practice.” The new requirement mandates that “a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.” Compensation cost will now be recognized in the period in which it becomes likely that the performance target will be met. The amendments in this Update are effective for annual and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. The Corporation will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In August 2014, FASB issued ASU 2014-14, “Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure.” The objective of this Update is to reduce diversity in practice by addressing the classification of foreclosed mortgage loans that are fully or partially guaranteed under government programs. Currently, some creditors reclassify those loans to real estate as with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables. The amendments affect creditors that hold government-guaranteed mortgage loans, including those guaranteed by the FHA and the VA. The amendments in this Update are effective for annual reporting periods ending after December 15, 2015 and interim periods beginning after December 15, 2015. An entity should adopt the amendments in this Update using either a prospective transition method or a modified retrospective transition method. For prospective transition, an entity should apply the amendments in this Update to foreclosures that occur after the date of adoption. For the modified retrospective transition, an entity should apply the amendments in the Update by means of a cumulative-effect adjustment (through a reclassification to a separate other receivable) as of the beginning of the annual period of adoption. Prior periods should not be adjusted. However, a reporting entity must apply the same method of transition as elected under ASU No. 2014-04. Early adoption, including adoption in an interim period, is permitted if the entity already has adopted update 2014-04. The Corporation will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on the Corporation’s consolidated financial statements.

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In August 2014, FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a Corporation’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a Corporation’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter.  Early adoption is permitted. Adoption of the ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

In November 2014, FASB issued ASU No. 2014-16, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.” For hybrid financial instruments issued in the form of a share, an entity (an issuer or an investor) should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. That is, an entity should determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract.

In evaluating the stated and implied substantive terms and features, the existence or omission of any single term or feature does not necessarily determine the economic characteristics and risks of the host contract. Although an individual term or feature may weigh more heavily in the evaluation on the basis of facts and circumstances, an entity should use judgment based on an evaluation of all the relevant terms and features. For example, the presence of a fixed-price, noncontingent redemption option held by the investor in a convertible preferred stock contract is not, in and of itself, determinative in the evaluation of whether the nature of the host contract is more akin to a debt instrument or more akin to an equity instrument. Rather, the nature of the host contract depends on the economic characteristics and risks of the entire hybrid financial instrument.

The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.

The amendments in this Update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments shall be reflected as of the beginning of the fiscal year that includes that interim period. Adoption of the ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

In November 2014, FASB issued ASU 2014-17, “Pushdown Accounting.” The amendments in this Update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.

An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. An acquired entity should determine whether to elect to apply pushdown accounting for each individual change-in-control event in which an acquirer obtains control of the acquired entity. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent change-in-control event. An election to apply pushdown accounting in a reporting period after the reporting period in which the change-in-control event occurred should be considered a change in accounting principle in accordance with Topic 250, Accounting Changes and Error Corrections. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable.

If an acquired entity elects the option to apply pushdown accounting in its separate financial statements, it should disclose information in the current reporting period that enables users of financial statements to evaluate the effect of pushdown accounting.

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The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event.  However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle.  Adoption of the ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

In January 2015, FASB issued ASU, 2015-1, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” FASB issued this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements.

This Update eliminates from GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement—Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. Paragraph 225-20-45-2 contains the following criteria that must both be met for extraordinary classification:

1. Unusual nature. The underlying event or transaction should possess a high degree of abnormality and be of a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the entity, taking into account the environment in which the entity operates.

2. Infrequency of occurrence. The underlying event or transaction should be of a type that would not reasonably be expected to recur in the foreseeable future, taking into account the environment in which the entity operates.

If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item.

The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities.

For an entity that prospectively applies the guidance, the only required transition disclosure will be to disclose, if applicable, both the nature and the amount of an item included in income from continuing operations after adoption that adjusts an extraordinary item previously classified and presented before the date of adoption. An entity retrospectively applying the guidance should provide the disclosures in paragraphs 250-10-50-1 through 50-2. Adoption of the ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

NOTE 11: SUBSEQUENT EVENTS

On October 26, 2015, the Corporation and German American Bancorp, Inc. (“GABC”) jointly announced the signing of a definitive agreement on October 26, 2015 (the “Merger Agreement”) pursuant to which the Corporation will be merged with and into GABC (the “Merger”). Simultaneously with the Merger, the Bank will merge with and into German American Bancorp, an Indiana bank and wholly owned subsidiary of GABC.

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Under the terms of the Merger Agreement, which was approved by the boards of directors of both companies, the Corporation’s shareholders will receive 0.770 shares of GABC common stock and $9.90 in cash for each share of the Corporation’s common stock. This cash component of the merger consideration is subject to certain adjustments, calculated prior to closing, in the event shareholders’ equity of the Corporation (as defined and calculated in accordance with the Merger Agreement) is below a specified amount.

At the Effective Time (as defined in the Merger Agreement) of the Merger, each outstanding option to purchase a share of common stock of the Corporation will vest fully and be converted into the right to receive, in cash, an amount equal to $9.90 plus the product obtained by multiplying the 0.770 exchange ratio by the Average GABC Closing Price (as defined in the Merger Agreement), less the option exercise price per share and applicable withholding taxes. This amount is also subject to certain adjustments, calculated prior to closing, in the event shareholders’ equity of the Corporation (as defined and calculated in accordance with the Merger Agreement) is below a specified amount. Also at the Effective Time, all shares of restricted stock shall be released from the transfer restrictions to which the shares are subject.

Three employees of the Corporation will be employed by GABC, but will terminate their existing employment agreements with the Corporation and receive at the closing the change of control payments to which each was entitled under his existing employment agreement with the Corporation.

As a condition to the closing of the Merger, the Corporation will submit both the Merger Agreement and Articles of Amendment to its Articles of Incorporation to the shareholders for approval. The Articles of Amendment will repeal Article 11, which prohibits the acquisition of beneficial ownership of more than 10% of any class of equity security of the Corporation. Subject to certain terms and conditions, the board of directors will recommend that the shareholders vote in favor of the Merger Agreement, the Merger and the Articles of Amendment at a special meeting to be called for that purpose, and will solicit proxies voting in favor of the Merger Agreement, the Merger and the Articles of Amendment from the Corporation’s shareholders.

The Corporation has agreed to pay GABC a termination fee of $3,236,000 upon termination of the Agreement if (1) the Corporation breaches its obligations with respect to inquiries from other interested acquirors; or (2) the Corporation’s board of directors fails to recommend the Merger Agreement, the Merger and the Articles of Amendment to its shareholders, or withdraws its recommendation after receipt of a competing acquisition proposal.

The Merger is expected to close in the first quarter of 2016. The closing of the Merger is subject to other conditions, including the approval of the Merger by the shareholders of the Corporation, the receipt of regulatory approvals, the effectiveness of a registration statement to be filed by GABC with the Securities and Exchange Commission with respect to the common stock of GABC to be issued in the Merger, and other customary closing conditions prescribed in the Merger Agreement.

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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief, outlook, estimate or expectations of the Corporation (as defined in the notes to the consolidated condensed financial statements), its directors or its officers primarily with respect to future events and the future financial performance of the Corporation. Readers of this Form 10-Q are cautioned that any such forward looking statements are not guarantees of future events or performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward looking statements as a result of various factors. The accompanying information contained in this Form 10-Q identifies important factors that could cause or contribute to such differences. Some of these factors are discussed herein, but also include, but are not limited to, changes in the economy and interest rates in the nation and the Bank’s general market area; loss of deposits and loan demand to other financial institutions; substantial changes in financial markets; changes in real estate values and the real estate market; regulatory changes; or turmoil and governmental intervention in the financial services industry. The forward looking statements contained herein include those with respect to the effect future changes in interest rates may have on financial condition and results of operations, and management’s opinion as to the effect on the Corporation’s consolidated financial position and results of operations of recent accounting pronouncements not yet in effect.

EFFECT OF CURRENT EVENTS

The Current Economic Environment.We continue to operate in a challenging and uncertain economic environment, including generally uncertain national conditions and local conditions in our markets. Overall economic growth continues to be slow and national and regional unemployment rates remain at elevated levels. The risks associated with our business become more acute in periods of slow economic growth and high unemployment. Many financial institutions continue to be affected by an uncertain real estate market. While we take steps to decrease and limit our exposure to problem loans, we nonetheless retain direct exposure to the residential and commercial real estate markets, and we are affected by these events.

Our loan portfolio includes commercial real estate loans, residential mortgage loans, and construction and land development loans. Declines in real estate values and home sales volumes and increased levels of financial stress on borrowers as a result of the uncertain economic environment, including job losses, could have an adverse effect on our borrowers or their customers, which could adversely affect our financial condition and results of operations. In addition, the current level of low economic growth on a national scale, the occurrence of another national recession, or a deterioration in local economic conditions in our markets could drive losses beyond that which is provided for in our allowance for loan losses and result in the following other consequences: increases in loan delinquencies, problem assets and foreclosures; demand for our products and services may decline; deposits may decrease, which would adversely impact our liquidity position; and collateral for our loans, especially real estate, may decline in value, in turn reducing customers’ borrowing power, and reducing the value of assets and collateral associated with our existing loans.

Impact of Recent and Future Legislation. During the last six years, the U.S. Congress and the Treasury Department have adopted legislation and taken actions to address the disruptions in the financial system, declines in the housing market and the overall regulation of financial institutions and the financial system. See Part I, Item 1 - Regulation and Supervision - Financial System Reform - The Dodd-Frank Act and the CFPB, in our Annual Report on Form 10-K for the year ended December 31, 2014, for a description of recent significant legislation and regulatory actions affecting the financial industry. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), is expected to increase our cost of doing business, it may limit or expand our permissible activities, and it may affect the competitive balance within our industry and market areas. The Corporation’s management continues to actively monitor the implementation of the Dodd-Frank Act and the regulations of the Consumer Financial Protection Bureau (the “CFPB”), an independent federal agency created under the Dodd-Frank Act with broad authority over consumer financial protection laws, to assess their probable impact on the business, financial condition, and results of operations of the Corporation. However, the ultimate effect of the Dodd-Frank Act and the CFPB on the financial services industry in general, and the Corporation in particular, continues to be uncertain.

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New Capital Rules. On July 2, 2013, the Board of Governors of the Federal Reserve System (“Federal Reserve”) approved final rules that substantially amended the regulatory risk-based capital rules applicable to the Corporation and the Bank. The Federal Deposit Insurance Corporation (“FDIC”) and the Office of the Comptroller of the Currency subsequently approved these final rules. The final rules implement the “Basel III” regulatory capital reforms and changes required by the Dodd-Frank Act. “Basel III” refers to two consultative documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in December 2010, and loss absorbency rules issued in January 2011, which include significant changes to bank capital, leverage and liquidity requirements.

The final rules include new risk-based capital and leverage ratios, which will be phased in from 2015 to 2019, and will refine the definition of what constitutes “capital” for purposes of calculating those ratios. In general, bank holding companies and savings and loan holding companies with less than $1 billion in total consolidated assets will not be subject to the new regulatory capital requirements described above (but these requirements will apply to their depository institution subsidiaries), due to action taken by the U.S. Congress in December 2014 and action taken by the Federal Reserve in 2015 to implement the Congressional action.

The new minimum capital level requirements applicable to the Bank under the final rules are: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions. The final rules also establish a “capital conservation buffer” above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital. The capital conservation buffer will be phased-in over four years beginning on January 1, 2016, as follows: the maximum buffer will be 0.625% of risk-weighted assets for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter. This will result in the following minimum ratios beginning in 2019: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. Under the final rules, institutions are subject to limitations on paying dividends, engaging in share repurchases, and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Basel III provided discretion for regulators to impose an additional buffer, the “countercyclical buffer,” of up to 2.5% of common equity Tier 1 capital to take into account the macro-financial environment and periods of excessive credit growth. However, the final rules permit the countercyclical buffer to be applied only to “advanced approach banks” (i.e., banks with $250 billion or more in total assets or $10 billion or more in total foreign exposures), which currently excludes the Bank. The final rules also implement revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses, as well as certain instruments that will no longer qualify as Tier 1 capital, some of which would be phased out over time. However, the final rules provide that small depository institution holding companies with less than $15 billion in total assets as of December 31, 2009 (which includes the Corporation) will be able to permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 in additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature.

The final rules also contain revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including the Bank, if their capital levels begin to show signs of weakness. These revisions took effect January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions will be required to meet the following increased capital level requirements in order to qualify as “well capitalized”: (i) a new common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5% (increased from 4%).

The final rules set forth certain changes for the calculation of risk-weighted assets, which we are required to utilize beginning January 1, 2015. The standardized approach final rule utilizes an increased number of credit risk exposure categories and risk weights, and also addresses: (i) an alternative standard of creditworthiness consistent with Section 939A of the Dodd-Frank Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in total assets that are not subject to the “advanced approach rules” that apply to banks with greater than $250 billion in consolidated assets.

As of September 30, 2015, the Bank met all requirements as a “well capitalized” depository institution.

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Changes in Insurance Premiums. The FDIC insures the Bank’s deposits up to certain limits. The FDIC takes control of failed banks and ensures payment of deposits up to insured limits using the resources of the Deposit Insurance Fund. The FDIC charges us premiums to maintain the Deposit Insurance Fund. The FDIC has set the Deposit Insurance Fund long-term target reserve ratio at 2% of insured deposits. Due to bank failures as a result of the economic turmoil of the past six years, the FDIC insurance fund reserve ratio fell below the statutory minimum. The FDIC implemented a restoration plan beginning January 1, 2009, that was intended to return the reserve ratio to an acceptable level. Further increases in premium assessments are also possible and would increase the Corporation’s expenses. Effective with the June 2011 reporting period, the FDIC changed the assessment from a deposit-based assessment to an asset-based assessment, and reevaluated the base rate assessed to financial institutions. As a result of these changes, the Corporation experienced a decrease in premiums. However, increased assessment rates and special assessments could have a material impact on the Corporation’s results of operations.

The Soundness of Other Financial Institutions Could Adversely Affect Us. Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. We have exposure to many different industries and counterparties, and we routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks, mutual and hedge funds, and other institutional clients. Many of these transactions expose us to credit risk in the event of default by our counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due us. There is no assurance that any such losses would not materially and adversely affect our results of operations or earnings.

Difficult Market Conditions Have Adversely Affected Our Industry. We are particularly exposed to downturns in the U.S. housing market. Dramatic declines in the housing market over the past five years, with falling home prices and increasing foreclosures, unemployment and under-employment, have negatively impacted the credit performance of mortgage loans and securities and resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities, major commercial and investment banks, and regional financial institutions. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have continued to observe tight lending standards, including with respect to other financial institutions, although there have been signs that lending is increasing. These market conditions have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence and increased market volatility. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on the Corporation and others in the financial institutions industry. In particular, the Corporation may face the following risks in connection with these events:

· We are experiencing, and expect to continue experiencing increased regulation of our industry, particularly as a result of the Dodd-Frank Act and the CFPB. Compliance with such regulation is expected to increase our costs and may limit our ability to pursue business opportunities.

· Our ability to assess the creditworthiness of our customers may be impaired if the models and approach we use to select, manage and underwrite our customers become less predictive of future behaviors.

· The process we use to estimate losses inherent in our credit exposure requires difficult, subjective and complex judgments, including forecasts of economic conditions and how these economic predictions might impair the ability of our borrowers to repay their loans, which may no longer be capable of accurate estimation which may, in turn, impact the reliability of the process.

· Competition in our industry could intensify as a result of the increasing consolidation of financial services companies in connection with current market conditions.

· We may be required to pay significantly higher deposit insurance premiums because market developments have significantly depleted the insurance fund of the FDIC and reduced the ratio of reserves to insured deposits.

In addition, the Federal Reserve has attempted to stimulate economic conditions through multiple tactics, including keeping the Fed Funds Target Rate at historically low levels for an extended period of time. Changes in the Federal Reserve’s activities, including change in the Fed Funds Target Rate, could impact the Corporation’s earnings and liquidity.

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Concentrations of Real Estate Loans Could Subject the Corporation to Increased Risks in the Event of a Real Estate Recession or Natural Disaster. A significant portion of the Corporation’s loan portfolio is secured by real estate. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. A weakening of the real estate market in our primary market area could result in an increase in the number of borrowers who default on their loans and a reduction in the value of the collateral securing their loans, which in turn could have an adverse effect on our profitability and asset quality. If we are required to liquidate the collateral securing a loan to satisfy the debt during a period of reduced real estate values, our earnings and capital could be adversely affected. Historically, Indiana and Kentucky have experienced, on occasion, significant natural disasters, including tornadoes and floods. The availability of insurance for losses for such catastrophes is limited. Our operations could also be interrupted by such natural disasters. Acts of nature, including tornadoes and floods, which may cause uninsured damage and other loss of value to real estate that secures our loans or interruption in our business operations, may also negatively impact our operating results or financial condition.

We are Subject to Cybersecurity Risks and May Incur Increasing Costs in an Effort to Minimize Those Risks.Our business employs systems and a Web site that allow for the secure storage and transmission of customers’ proprietary information. Security breaches could expose us to a risk of loss or misuse of this information, litigation and potential liability. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber attacks. Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

CRITICAL ACCOUNTING POLICIES

Note 1 to the consolidated financial statements presented on pages 56 through 60 of the Annual Report on Form 10-K for the year ended December 31, 2014 contains a summary of the Corporation’s significant accounting policies. Certain of these policies are important to the portrayal of the Corporation’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Management believes that its critical accounting policies include determining the allowance for loan losses, analysis of other-than-temporary impairment on available-for-sale investments, and the valuation of mortgage servicing rights. Following the 2012 acquisition of Dupont State Bank, the treatment of acquired impaired loans is also important.

Allowance For Loan Losses

The allowance for loan losses is a significant estimate that can and does change based on management’s assumptions about specific borrowers and current economic and business conditions, among other factors. Management reviews the adequacy of the allowance for loan losses on at least a quarterly basis. The evaluation by management includes consideration of past loss experience, changes in the composition of the loan portfolio, the current economic condition, the amount of loans outstanding, identified problem loans, and the probability of collecting all amounts due.

The allowance for loan losses represents management’s estimate of probable losses inherent in the Corporation’s loan portfolios. In determining the appropriate amount of the allowance for loan losses, management makes numerous assumptions, estimates and assessments.

The Corporation’s strategy for credit risk management includes conservative, centralized credit policies, and uniform underwriting criteria for all loans as well as an overall credit limit for each customer significantly below legal lending limits. The strategy also emphasizes diversification on a geographic, industry and customer level, regular credit quality reviews and quarterly management reviews of large credit exposures and loans experiencing deterioration of credit quality.

The Corporation’s allowance consists of three components: probable losses estimated from individual reviews of specific loans, probable losses estimated from historical loss rates, and probable losses resulting from economic or other deterioration above and beyond what is reflected in the first two components of the allowance.

Larger commercial loans that exhibit probable or observed credit weaknesses are subject to individual review. Where appropriate, reserves are allocated to individual loans based on management’s estimate of the borrower’s ability to repay the loan given the availability of collateral, other sources of cash flow and legal options available to

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the Corporation. Included in the review of individual loans are those that are considered impaired. A loan is considered impaired when, based on current information and events, it is probable that the Corporation 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 determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, 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.

Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Any allowances for impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or fair value of the underlying collateral. The Corporation evaluates the collectability of both principal and interest when assessing the need for a loss accrual. Historical loss rates are applied to other commercial loans not subject to specific reserve allocations.

Homogenous loans, such as consumer installment and residential mortgage loans are not individually risk graded. Rather, standard credit scoring systems are used to assess credit risks. Loss rates are based on the average net charge-off history by loan category.

Historical loss rates for loans may be adjusted for significant factors that, in management’s judgment, reflect the impact of any current conditions on loss recognition. Factors which management considers in the analysis include the effects of the national and local economies, trends in the nature and volume of loans (delinquencies, charge-offs and nonaccrual loans), changes in mix, asset quality trends, risk management and loan administration, changes in the internal lending policies and credit standards, collection practices and examination results from bank regulatory agencies and the Corporation’s internal loan review. The portion of the allowance that is related to certain qualitative factors not specifically related to any one loan type is considered the unallocated portion of the reserve.

Allowances on individual loans and historical loss rates are reviewed quarterly and adjusted as necessary based on changing borrower and/or collateral conditions and actual collection and charge-off experience.

The Corporation’s primary market area for lending has been comprised of Clark, Floyd and Jefferson Counties in southeastern Indiana and portions of northeastern Kentucky adjacent to that market. With the 2012 acquisition of DuPont State Bank and the 2013 acquisition of the Osgood, Indiana branch, the Corporation’s market area now includes Jackson, Jennings and Ripley Counties in Indiana. When evaluating the adequacy of the allowance, consideration is given to this regional geographic concentration and the closely associated effect changing economic conditions have on the Corporation’s customers.

Other-Than-Temporary Impairment

The Corporation evaluates all securities on a quarterly basis, and more frequently when economic conditions warrant additional evaluations, for determining if an other-than-temporary impairment (“OTTI”) exists pursuant to guidelines established by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), in ASC 320. In evaluating the possible impairment of securities, consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial conditions and near-term prospects of the issuer, and the ability and intent of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies or government-sponsored agencies, whether downgrades by bond rating agencies have occurred, and the results of review of the issuer’s financial condition.

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If management determines that an investment experienced an OTTI, management must then determine the amount of the OTTI to be recognized in earnings. The Corporation’s consolidated statement of income would reflect the full impairment (that is, the difference between the security’s amortized cost basis and fair value) on debt securities that the Corporation intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For securities that management has no intent to sell, and it is not more likely than not that the Corporation will be required to sell prior to recovery, only the credit loss component of the impairment would be recognized in earnings, while the noncredit loss would be recognized in accumulated other comprehensive income. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections. The Corporation did not record any other-than-temporary impairment during the three-month period ended September 30, 2015.

Valuation of Mortgage Servicing Rights

The Corporation recognizes the rights to service mortgage loans as separate assets in the consolidated balance sheet. Under the servicing assets and liabilities accounting guidance, ASC 860-50, servicing rights resulting from the sale or securitization of loans originated by the Corporation are initially measured at fair value at the date of transfer. Mortgage servicing rights are subsequently carried at the lower of the initial carrying value, adjusted for amortization, or fair value. Mortgage servicing rights are evaluated for impairment based on the fair value of those rights. Factors included in the calculation of fair value of the mortgage servicing rights include estimating the present value of future net cash flows, market loan prepayment speeds for similar loans, discount rates, servicing costs, and other economic factors. Servicing rights are amortized over the estimated period of net servicing revenue. It is likely that these economic factors will change over the life of the mortgage servicing rights, resulting in different valuations of the mortgage servicing rights. The differing valuations will affect the carrying value of the mortgage servicing rights on the consolidated balance sheet as well as the income recorded from loan servicing in the consolidated income statement. As of September 30, 2015, mortgage servicing rights had a carrying value of $551,000.

Acquired Impaired Loans

Loans acquired with evidence of credit deterioration since inception and for which it is probable that all contractual payments will not be received are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). These loans are recorded at fair value at the time of acquisition, with no carryover of the related allowance for loan losses. Fair value of acquired loans is determined using a discounted cash flow methodology based on assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, and current market rates. In recording the acquisition date fair values of acquired impaired loans, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans).

Over the life of the acquired loans, the Corporation continues to estimate cash flows expected to be collected on pools of loans sharing common risk characteristics, which are treated in the aggregate when applying various valuation techniques. The Corporation evaluates at each balance sheet date whether the present value of its pools of loans determined using the effective interest rates has decreased significantly and, if so, recognizes a provision for loan loss in its consolidated statement of income. For any significant increases in cash flows expected to be collected, the Corporation adjusts the amount of accretable yield recognized on a prospective basis over the pool’s remaining life.

These cash flow evaluations are inherently subjective as they require management to make estimates about expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Changes in these factors, as well as changing economic conditions, will likely impact the carrying value of these acquired loans.

FINANCIAL CONDITION 

At September 30, 2015, the Corporation’s consolidated assets totaled $513.7 million, an increase of $4.2 million, or 0.83%, from the December 31, 2014 total. The change was primarily the result of a $1.9 million, or 14.42%, increase in cash and cash equivalents and a $6.1 million, or 4.73%, increase in investments available for sale, partially offset by a $2.3 million, or 0.70% decrease in loans receivable, net of allowance for loan losses.

Cash and cash equivalents increased from $13.3 million as of December 31, 2014 to $15.2 million as of September 30, 2015, primarily due to public fund deposits during the period.

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Available-for-sale securities increased $6.1 million, or 4.73%, over the period, from $128.9 million as of December 31, 2014 to $135.0 million as of September 30, 2015. The change was primarily the result of purchases of long term, higher yielding municipal investments made at the Nevada subsidiary level, utilizing excess cash.  The increase also included the impact of a $372,000 increase in market value, period to period, as the net unrealized gain on the portfolio of $1.5 million at September 30, 2015, compared to an unrealized gain of $1.1 million at December 31, 2014.

Net loans, excluding loans held for sale, decreased $2.3 million, or 0.70%, from $332.0 million at December 31, 2014 to $329.7 million at September 30, 2015. Over the same period, $1.5 million in non-performing loans moved from the portfolio into real estate held for sale. Sales of conventional mortgages into the secondary market increased from the levels a year earlier with proceeds from sales to the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and to Federal Home Loan Bank of Indianapolis (“FHLBI”) for the nine months ended September 30, 2015 at $11.9 million compared to $7.8 million in sales proceeds for the nine months ended September 30, 2014, an increase of approximately 52.92%. Sales into the secondary market, primarily to Freddie Mac, are a significant source of noninterest income for the Corporation.

The Corporation’s consolidated allowance for loan losses totaled $3.7 million, or 1.1% of gross loans, at September 30, 2015, a decrease of $278,000, or 6.94%, from $4.0 million, or 1.2% of gross loans, at December 31, 2014. The decrease was primarily due to the overall decline in loan balances, the decline in specific reserves needed on impaired loans, improvements in the local and economic conditions, and the stabilization of loan performance trends. Specific valuation allowances established for impaired loans declined to $890,000 at September 30, 2015 from $1.6 million at December 31, 2014, as certain loans with specific reserves at December 31, 2014 were charged off during the nine months ended September 30, 2015. For the nine-month period ended September 30, 2015, $297,000 was expensed and placed in the reserve, compared to $347,000 for the same period in 2014. Charge offs for the nine-month period ended September 30, 2015 of $787,000, primarily one-to-four family residential mortgage loans, were partially offset by recoveries of $212,000. Charge offs for the 2015 period were largely comprised of loans to one borrower which totaled $572,000 and were partially reserved for at December 31, 2014. This compares to charge offs and recoveries for the nine-month period ended September 30, 2014 of $1.4 million and $435,000, respectively.

Loans past due 30 days or more as of September 30, 2015, excluding purchased credit-impaired loans, were $4.8 million, or 1.44% of net loans, as compared to $6.6 million, or 1.98%, at December 31, 2014.

Non-performing loans (defined as loans delinquent greater than 90 days and loans on nonaccrual status, excluding purchased credit-impaired loans) as of September 30, 2015 were $7.1 million, as compared to $10.7 million at December 31, 2014.  Troubled debt restructured loans that were less than 90 days past due included in total non-performing loans were $2.4 million as of September 30, 2015, as compared to $3.6 million as of December 31, 2014. Non-performing loans as a percent of net loans were 2.14% and 3.24%, respectively, for those periods.

Although management believes that its allowance for loan losses at September 30, 2015 was adequate based upon the available facts and circumstances, there can be no assurance that additions to such allowance will not be necessary in future periods, which could negatively affect the Corporation’s results of operations. Management is diligent in monitoring delinquent loans and in the analysis of the factors affecting the allowance.

Deposits totaled $400.7 million at September 30, 2015, an increase of $3.6 million, or 0.90%, from total deposits of $397.1 million at December 31, 2014. During the nine-month period, noninterest-bearing deposit accounts increased by 0.29%, or $153,000, while interest-bearing deposits increased approximately 0.99%, or $3.4 million. The fluctuations, period to period, were primarily distributed across three deposit types, with the greatest increases being in interest-bearing checking accounts ($4.3 million) and savings accounts ($4.9 million). The largest decrease, period to period, was in certificate of deposit accounts, which decreased $6.1 million.  Money market deposit accounts changed only slightly, increasing $341,000, period to period. Depositors appear to still be trading minimal differences in interest rates for accessibility to their funds in selecting the transactional accounts over the non-transactional.

Borrowings by the Corporation decreased $3.9 million, or 7.12%, period to period from $54.9 million as of December 31, 2014 to $51.0 million as of September 30, 2015, as the Corporation replaced borrowings with deposits.

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Other liabilities totaled $6.2 million at September 30, 2015, an increase of $1.7 million from $4.6 million at December 31, 2014, primarily due to net tax liabilities, slightly higher escrowed amounts, and increases in accrued expenses at September 30, 2015, as compared to December 31, 2014.

Stockholders’ equity totaled $55.6 million at September 30, 2015, an increase of $2.9 million, or 5.50%, from $52.7 million at December 31, 2014. The increase was primarily due to net income of $4.3 million and stock based compensation earned of $129,000, partially offset by dividends to common shareholders of $1.7 million and a $219,000 increase in unrealized gains and losses on available-for-sale securities, net of tax. The Corporation reported unrealized gains on available-for-sale securities, net of tax, of $970,000 at September 30, 2015 compared to $751,000unrealized gains on available-for-sale securities, net of tax, at December 31, 2014.  Dividends to common shareholders for the nine-month period were $.69 per share, as compared to $.67 per share for the same period in 2014.

The Bank is required to maintain minimum regulatory capital pursuant to federal regulations. At September 30, 2015, the Bank’s regulatory capital exceeded all applicable minimum regulatory capital requirements.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

General

The Corporation’s net income for the three months ended September 30, 2015 totaled $1.3 million, compared to the net income reported for the period ended September 30, 2014 of $1.1 million. Net interest income, after provision for loan losses, increased $114,000, or 2.91%, from $3.9 million for the period ended September 30, 2014 to $4.0 million for the same period in 2015, a result of higher average balances in loans and investments and decreased provision expense. Provision expense decreased $50,000, period to period, from $149,000 for the three months ended September 30, 2014 to $99,000 for the three months ended September 30, 2015, with the 2015 expense reflecting the consistent improving trends in the factors of the allowance for loan loss. Other income increased $63,000, primarily the result of declining losses, period to period, on other real estate held for sale. Other expenses increased $165,000, from $3.5 million for the quarter ended September 30, 2014 to $3.7 million for the quarter ended September 30, 2015, primarily due to professional fees expensed during the 2015 period.

Net Interest Income

Total interest income for the three months ended September 30, 2015 increased $56,000, or 1.14%, from $4.9 million for the three months ended September 30, 2014 to $5.0 million for the same period in 2015.

Total interest expense for the same period decreased by $8,000, or 0.95%, from the $839,000 reported for the three months ended September 30, 2014 to $831,000 for the three months ended September 30, 2015. For the three months ended September 30, 2015, interest expense from deposits totaled $447,000, as compared to $481,000 for the same period in 2014. The decrease was primarily attributable to interest expense on fixed-maturity deposits, as repricing of these deposits was done at constantly lowering rates, but also due somewhat to the changes in the composition of the deposit base as depositors selected transactional and noninterest-bearing accounts over maturity and interest-bearing accounts. The cost of borrowings increased $26,000, period to period, primarily as the result of the increase in the average balance of borrowings. Total borrowings as of September 30, 2015 were $51.0 million, as compared to $46.9 million as of September 30, 2014. The Corporation borrows primarily from the FHLBI.

Net interest income was $4.1 million at both periods as changes in interest-bearing items, both average balance and rate, nearly offset each other.

Provision for Losses on Loans

A provision for losses on loans is charged to income to bring the total allowance for loan losses to a level considered appropriate by management based upon historical experience, the volume and type of lending conducted by the Corporation, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Corporation’s market area, and other factors related to the collectability of the Corporation’s loan portfolio. As a result of such analysis, management recorded a $99,000 provision for losses on loans for the three months ended September 30, 2015, $50,000 lower than the amount expensed for the same period in 2014. The

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decrease in provision expense for the three-month period ended September 30, 2015 as compared to the three-month period ended September 30, 2014 was primarily due to improvements in the economy overall and stabilization in loan performance trends in general.

While management believes that the allowance for losses is adequate at September 30, 2015, based upon the available facts and circumstances, there can be no assurance that the loan loss allowance will be adequate to cover losses on non-performing assets in the future.

Other Income

Other income increased by $63,000, or 6.08%, during the three months ended September 30, 2015 to $1.1 million, as compared to the $1.0 million reported for the same period in 2014. The change was due largely to an increase in service fees and charges on deposit accounts and other income offset by an increase in losses associated with the holding and disposal of  real estate held for sale as a result of foreclosure. Unlike interest income, “other income” is not always readily predictable and is subject to variations depending on outside influences.

Other Expenses

Total other expenses increased, period to period, with a net increase of $165,000, or 4.69%, from September 30, 2014 to September 30, 2015. The most significant financial statement changes were:

· Data processing fees increased $34,000, or 24.64%, period to period, primarily due to the addition of new software for fraud and loan operations.

· Professional fees increased $152,000, or 323.40%, period to period, primarily due to legal fees associated with proposed acquisition activities.

· Advertising expense decreased $42,000, or 25.45%, period to period, because 2014 totals included the impact of two new branches in 2014 and the advertising associated with that activity.

· Loan-related expenses, primarily expenses paid on behalf of delinquent borrowers, decreased $39,000, or 28.26%, period to period.

Income Taxes

Tax expense of $166,000 was recorded for the three-month period ended September 30, 2015, as compared to $322,000 for the comparable period in 2014. For the 2015 period, the Corporation had pre-tax income of $1.5 million, as compared to $1.4 million for the 2014 period. The effective tax rate was 11.42% for the three-month period ended September 30, 2015, as compared to 22.3% for the same period in 2014, with the change primarily due to the increase in bank owed life insurance and the captive insurance subsidiary. The tax calculations for both periods include the benefit of tax-exempt income from loans and municipal investments and cash surrender life insurance, partially offset by the effect of nondeductible expenses.

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COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

General

The Corporation’s net income for the nine months ended September 30, 2015 and September 30, 2014 increased by $964,000 to $4.3 million, or 28.99%, period to period. The change in net income for the 2015 period as compared to 2014 was attributable to a combination of factors. Net interest income increased $875,000, or 7.35%, from $11.9 million for the period ended September 30, 2014 to $12.8 million for the same period in 2015, a result of both changing interest rates and increased loan balances. Provision expense decreased $50,000, period to period, or 14.41%, from $347,000 for the nine months ended September 30, 2014 to $297,000 for the nine months ended September 30, 2015, based on the results of our allowance for loan losses analysis at each period end. Other income increased $411,000, primarily the result of increased loan sales into the secondary market, lower losses on the sale of premises and other real estate owned. Other expenses increased $374,000, from $10.3 million for the period ended September 30, 2014 to $10.7 million for the period ended September 30, 2015, primarily due to increases in salaries, benefits, and professional expenses, and costs associated with the captive insurance company.

Net Interest Income

Total interest income for the nine months ended September 30, 2015 increased $784,000, or 5.40%, from $14.5 million at September 30, 2014 to $15.3 million at September 30, 2015. The increase was due primarily to the collection of previously charged off interest, additional accretion income from the payoff of a large loan acquired with credit impairment from Dupont State Bank, and a combination of increased average balances in loans and investment securities, offset by decreased yields period to period.

Total interest expense for the same period decreased by $91,000, or 3.50%, from the $2.6 million reported for the nine months ended September 30, 2014 to $2.5 million for the nine months ended September 30, 2015. For the nine months ended September 30, 2015, interest expense from deposits totaled $1.3 million, as compared to $1.5 million for the same period in 2014. The decrease was primarily attributable to interest expense on fixed-maturity deposits, as repricing of these deposits was done at constantly lowering rates, but also due somewhat to the changes in the composition of the deposit base as mentioned above, as depositors moved from maturity and interest-bearing accounts to transactional and noninterest-bearing accounts. The cost of borrowings increased $66,000, period to period, primarily as the result of the increase in the average balance of borrowings. Total borrowings as of September 30, 2015 were $51.0 million, as compared to $46.9 million at September 30, 2014. The Corporation borrows primarily from the FHLBI.

Net interest income was $12.8 million for the nine-month period ended September 30, 2015, compared to $11.9 million for the same period in 2014, an increase of $875,000, or 7.35%, period to period, as increases in interest income were supplemented by reduced interest expense period to period.

Provision for Losses on Loans

A provision for losses on loans is charged to income to bring the total allowance for loan losses to a level considered appropriate by management based upon historical experience, the volume and type of lending conducted by the Corporation, the status of past due principal and interest payments, general economic conditions, particularly as such conditions relate to the Corporation’s market area, and other factors related to the collectability of the Corporation’s loan portfolio. As a result of such analysis, management recorded a $297,000 provision for losses on loans for the nine months ended September 30, 2015, $50,000 lower than the amount expensed for the same period in 2014. The level of the provision expense, period to period, was reflective of improvements in the economy overall, stabilization in loan performance trends in general, and increasing confidence in the credit quality of the loan portfolio.

While management believes that the allowance for losses is adequate at September 30, 2015, based upon the available facts and circumstances, there can be no assurance that the loan loss allowance will be adequate to cover losses on non-performing assets in the future.

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Other Income

Other income increased by $411,000, or 13.64%, during the nine months ended September 30, 2015 to $3.4 million, as compared to the $3.0 million reported for the same period in 2014. The increase was due primarily to an increase in gains on the sale of loans into the secondary market, with $374,000 in gains for the nine-month period ended September 30, 2015, compared to $244,000 for the same period in 2014, the result of increased sales volume and gains on those sales. Benefiting other income for the nine-month period were reduced losses for disposal and fair value adjustments on real estate owned as a result of foreclosure, $57,000 for the nine-month period ending September 30, 2015 as compared to $194,000 for the same period in 2014. The Corporation also recorded a write-down of premises held for sale of $111,000 during the 2014 period. Unlike interest income, “other income” is not always readily predictable and is subject to variations depending on outside influences.

Other Expenses

Total other expenses increased, period to period, with a net increase of $374,000, or 3.62%, from September 30, 2014 to September 30, 2015. The most significant financial statement changes were:

· Salaries and employee benefits increased 2.16%, period to period, reflecting increased salary costs and increased costs associated with group insurance.

· Data processing fees increased 35,000, or 8.06%, period to period, primarily due to the addition of fraud and loan software programs.

· Professional fees increased $183,000, or 65.59%, period to period, primarily due to increased legal costs in connection with pending acquisition activity.

· Advertising, net occupancy, and loan-related expenses all decreased, period to period, offsetting the increases.

Income Taxes

Tax expense of $924,000 was recorded for the nine-month period ended September 30, 2015, as compared to $926,000 for the comparable period in 2014. For the 2015 period, the Corporation had pre-tax income of $5.2 million, as compared to $4.3 million for the 2014 period. The effective tax rate was 17.72% for the nine-month period ended September 30, 2015, as compared to 21.78% for the same period in 2014. The tax calculations for both periods include the benefit of tax-exempt income from loans and municipal investments and cash surrender life insurance, partially offset by the effect of nondeductible expenses. The decrease, period to period, was primarily attributable to increased bank owned life insurance income 2015 over 2014 and expenses relative to the captive insurance company formed in December 2014.

Other

The Securities and Exchange Commission maintains a Web site that contains reports, proxy information statements, and other information regarding registrants that file electronically with the Commission, including the Corporation. The address is http://www.sec.gov.

Liquidity Resources

Historically, the Corporation has maintained its liquid assets at a level believed adequate to meet requirements of normal daily activities, repayment of maturing debt and potential deposit outflows. Cash flow projections are regularly reviewed and updated to assure that adequate liquidity is maintained. Cash for these purposes is generated through loan sales and repayments, increases in deposits, and through the sale or maturity of investment securities. Loan payments are a relatively stable source of funds, while deposit flows are influenced significantly by the level of interest rates and general money market conditions. Borrowings may be used to compensate for reductions in other sources of funds such as deposits. As a member of the FHLB system, the Bank may borrow from the FHLBI. At September 30, 2015, the Bank had $43.8 million in such borrowings outstanding, with a $10.0 million overdraft line of credit immediately available. An additional $48.3 million in borrowing capacity, beyond the current fixed rate advances and line of credit was available, previously approved by the Bank’s board of directors. Based on collateral, an additional $77.1 million could be available, if the board of directors determines the need. The FHLB is the Bank’s primary source of wholesale funding. During the first half of 2011, the Bank entered into an agreement with Promontory Inter-financial Network to participate in the Certificate of Deposit Account Registry Service

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(“CDARS”) as a customer service product (reciprocal deposits) and as a supplemental source of wholesale liquidity using the CDARS one-way buy program. The Bank also has the ability to borrow from the Federal Reserve Bank Discount Window, an additional source of wholesale funding. At September 30, 2015, the Bank had commitments to fund loan originations and loans in process of $16.5 million, unused home equity lines of credit of $26.0 million and unused commercial lines of credit of $20.5 million. Commitments to sell loans as of that date were $876,000. Generally, a significant portion of amounts available in lines of credit will not be drawn.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for Smaller Reporting Companies.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. The Corporation’s chief executive officer and chief financial officer, after evaluating the effectiveness of the Corporation’s disclosure controls and procedures (as defined in regulations Sections 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this quarterly report (the “Evaluation Date”), have concluded that as of the Evaluation Date, the Corporation’s disclosure controls and procedures were effective in ensuring that information required to be disclosed by the Corporation in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting. There were no changes in the Corporation’s internal control over financial reporting during the quarter ended September30, 2015, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Neither the Corporation nor the Bank is a party to any pending legal proceedings, other than routine litigation incidental to the business.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.  OTHER INFORMATION

None.

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ITEM 6.  EXHIBITS

2(1)	Agreement and Plan of Reorganization by and among River Valley Bancorp, River Valley Financial Bank, German American Bancorp, Inc. and German American Bancorp, dated October 26, 2015 (incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed on October 26, 2015)
10(1)	Voting Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October 26, 2015)
10(2)*	First Amendment to Amended and Restated Employment Agreement between River Valley Financial Bank and Matthew P. Forrester (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October 29, 2015)
10(3)*	First Amendment to Amended and Restated Employment Agreement between River Valley Financial Bank and Anthony D. Brandon (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on October 29, 2015)
10(4)*	Second Amendment to Amended and Restated Employment Agreement between River Valley Financial Bank and John Muessel (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on October 29, 2015)
10(5)*	First Amendment to the River Valley Financial Bank Salary Continuation Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed on October 29, 2015)
31(1)	CEO Certification required by 17 C.F.R. Section 240.13a-14(a)
31(2)	CFO Certification required by 17 C.F.R. Section 240.13a-14(a)
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	XBRL Interactive Data Files, including the following materials from the Corporation’s Report on Form 10-Q for the quarter ended September30, 2015: (i) Consolidated Condensed Balance Sheets; (ii) Consolidated Condensed Statements of Income; (iii) Consolidated Condensed Statements of Comprehensive Income; (iv) Consolidated Condensed Statements of Cash Flows; and (v) Notes to Consolidated Condensed Financial Statements, with detailed tagging of notes and financial statement schedules.

__________________

*Indicates exhibits that describe or evidence management contracts and plans required to be filed as exhibits.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RIVER VALLEY BANCORP
Date: November 10, 2015	By:	/s/ Matthew P. Forrester
		Matthew P. Forrester
		President and Chief Executive Officer
Date: November 10, 2015	By:	/s/ Vickie L. Grimes
		Vickie L. Grimes
		Treasurer

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EXHIBIT INDEX

No.	Description	Location
2(1)	Agreement and Plan of Reorganization by and among River Valley Bancorp, River Valley Financial Bank, German American Bancorp, Inc. and German American Bancorp, dated October 26, 2015	Incorporated by reference to Exhibit 2.1 to the Registrant’s Form 8-K filed on October 26, 2015
10(1)	Voting Agreement	Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October 26, 2015
10(2)*	First Amendment to Amended and Restated Employment Agreement between River Valley Financial Bank and Matthew P. Forrester	Incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on October 29, 2015
10(3)*	First Amendment to Amended and Restated Employment Agreement between River Valley Financial Bank and Anthony D. Brandon	Incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on October 29, 2015
10(4)*	Second Amendment to Amended and Restated Employment Agreement between River Valley Financial Bank and John Muessel	Incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on October 29, 2015
10(5)*	First Amendment to the River Valley Financial Bank Salary Continuation Agreement	Incorporated by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed on October 29, 2015
31(1)	CEO Certification required by 17 C.F.R. Section 240.13a-14(a)	Attached
31(2)	CFO Certification required by 17 C.F.R. Section 240.13a-14(a)	Attached
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Attached
101	XBRL Interactive Data Files, including the following materials from the Corporation’s Report on Form 10-Q for the quarter ended September 30, 2015: (i) Consolidated Condensed Balance Sheets; (ii) Consolidated Condensed Statements of Income; (iii) Consolidated Condensed Statements of Comprehensive Income; (iv) Consolidated Condensed Statements of Cash Flows; and (v) Notes to Consolidated Condensed Financial Statements, with detailed tagging of notes and financial statement schedules.	Attached

_____________

*Indicates exhibits that describe or evidence management contracts and plans required to be filed as exhibits.

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EX-31.1

Exhibit 31(1)

CERTIFICATION

I, Matthew P. Forrester, certify that:

1. I have reviewed this quarterly report on Form 10-Q of River Valley Bancorp;

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

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

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date: November 10, 2015	/s/ Matthew P. Forrester
	Matthew P. Forrester
	President and Chief Executive Officer

EX-31.2

Exhibit 31(2)

CERTIFICATION

I, Vickie L. Grimes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of River Valley Bancorp;

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

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

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

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

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

Date November 10, 2015	/s/ Vickie L. Grimes
	Vickie L. Grimes
	Treasurer

EX-32

Exhibit 32

CERTIFICATION

By signing below, each of the undersigned officers hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his or her knowledge, (i) this report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of River Valley Bancorp.

Signed this 10th day of November, 2015.

/s/ Matthew P. Forrester	/s/ Vickie L. Grimes
Matthew P. Forrester	Vickie L. Grimes
President and Chief Executive Officer	Treasurer

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LOANS AND ALLOWANCE - Breakdown of loans (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	$ 333,397		$ 336,000
Allowance for loan losses	(3,727)		(4,005)
Net loans	329,670		331,995
Loans Receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	334,527		335,544
Unamortized deferred loan costs	517		513
Undisbursed loans in process	(1,647)		(57)
Allowance for loan losses	(3,727)	$ (3,675)	(4,005)	$ (3,940)	$ (3,762)	$ (4,510)
Net loans	329,670		331,995
Loans Receivable | Construction/Land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	21,192		26,055
Allowance for loan losses	(669)	(922)	(740)	(663)	(676)	(676)
Loans Receivable | One-to-four family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	129,730		133,904
Allowance for loan losses	(1,528)	(1,387)	(1,977)	(1,674)	(1,391)	(1,749)
Loans Receivable | Multi-family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	25,326		20,936
Allowance for loan losses	(46)	(27)	(28)	(285)	(303)	(404)
Loans Receivable | Nonresidential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	125,873		122,894
Allowance for loan losses	(1,322)	(1,240)	(1,107)	(1,177)	(1,232)	(1,470)
Loans Receivable | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	28,128		27,861
Allowance for loan losses	(136)	(87)	(151)	(131)	(152)	(189)
Loans Receivable | Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	4,278		3,894
Allowance for loan losses	$ (26)	$ (12)	$ (2)	$ (10)	$ (8)	$ (22)

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LOANS AND ALLOWANCE - Information regarding newly restructured troubled debt by type of modification (Details 9) - Loans Receivable - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only	$ 149	$ 155	$ 149	$ 155
Term		3,334	3,324	3,662
Combination		199	66	6,083
Total Modifications	$ 149	3,688	3,539	9,900
Construction/Land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only	$ 149	155	149	155
Term		$ 1,830	$ 3,324	2,048
Combination				2,270
Total Modifications	$ 149	$ 1,985	$ 3,473	$ 4,473
One-to-four family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only
Term		$ 485		$ 595
Combination				2,281
Total Modifications		$ 485		$ 2,876
Multi-family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only
Term		$ 1,019		$ 1,019
Combination				1,083
Total Modifications		$ 1,019		$ 2,102
Nonresidential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only
Term
Combination		$ 46	$ 66	$ 209
Total Modifications		$ 46	$ 66	$ 209
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Only
Term
Combination		$ 153		$ 240
Total Modifications		$ 153	$ 66	$ 240

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LOANS AND ALLOWANCE - Information related to average recorded investment and interest income recognized on impaired loans (Details 7) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Interest Income Recognized	$ 49	$ 59	$ 206	$ 243
Loans Receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Investment	9,950	13,862	10,594	14,482
Interest Income Recognized	100	93	335	352
Loans Receivable | Construction/Land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Investment	3,287	3,953	3,592	4,078
Interest Income Recognized	25	26	98	105
Loans Receivable | 1-4 family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Investment	3,257	4,630	3,487	5,081
Interest Income Recognized	$ 46	40	$ 139	133
Loans Receivable | Multi-family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Investment		1,000		1,014
Interest Income Recognized		4		16
Loans Receivable | Nonresidential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Investment	$ 3,188	3,975	$ 3,232	3,977
Interest Income Recognized	26	21	80	85
Loans Receivable | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Investment	218	304	280	332
Interest Income Recognized	$ 3	$ 2	18	$ 13
Loans Receivable | Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Average Investment			$ 3
Interest Income Recognized

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INVESTMENT SECURITIES - Unrealized Loss on Investments (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 24,128	$ 20,907
Less than 12 Months, Unrealized Losses	(168)	(267)
12 Months or More, Fair Value	9,011	23,254
12 Months or More, Unrealized Losses	(460)	(865)
Total, Fair Value	33,139	44,161
Total, Unrealized Losses	(628)	(1,132)
Federal agencies
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	7,986	12,302
Less than 12 Months, Unrealized Losses	(10)	(178)
12 Months or More, Fair Value	2,982	8,756
12 Months or More, Unrealized Losses	(18)	(241)
Total, Fair Value	10,968	21,058
Total, Unrealized Losses	(28)	(419)
State and municipal
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	10,189	1,651
Less than 12 Months, Unrealized Losses	(119)	(14)
12 Months or More, Fair Value	531	2,706
12 Months or More, Unrealized Losses	(11)	(33)
Total, Fair Value	10,720	4,357
Total, Unrealized Losses	(130)	(47)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	4,771	6,230
Less than 12 Months, Unrealized Losses	(16)	(74)
12 Months or More, Fair Value	4,894	10,697
12 Months or More, Unrealized Losses	(122)	(276)
Total, Fair Value	9,665	16,927
Total, Unrealized Losses	(138)	(350)
Corporate
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	1,182	724
Less than 12 Months, Unrealized Losses	(23)	(1)
12 Months or More, Fair Value	604	1,095
12 Months or More, Unrealized Losses	(309)	(315)
Total, Fair Value	1,786	1,819
Total, Unrealized Losses	$ (332)	$ (316)

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EARNINGS PER SHARE - Computation of basic and diluted EPS (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Earnings Per Share [Abstract]
Net income	$ 1,287	$ 1,119	$ 4,289	$ 3,325
Allocated to preferred stock		(91)		(272)
Allocated to participating securities	$ (9)	(5)	$ (38)	(7)
Net income allocated to common shareholders	$ 1,278	$ 1,023	$ 4,251	$ 3,046
Weighted average common shares outstanding, gross	2,513,696	2,427,984	2,513,696	1,836,126
Less: Average participating securities	(18,913)	(12,782)	(22,304)	(4,261)
Weighted average common shares outstanding, net	2,494,783	2,415,202	2,491,392	1,831,865
Effect of diluted based awards	3,246	2,938	3,143	3,816
Weighted average shares and common stock equivalents	2,498,029	2,418,140	2,494,535	1,835,681
Basic (in dollars per share)	$ 0.51	$ 0.42	$ 1.71	$ 1.66
Diluted (in dollars per share)	$ 0.51	$ 0.42	$ 1.70	$ 1.66
Options excluded from the calculation due to their anti-dilutive effect on earnings per share	30,000	30,000	30,000	30,000

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PUBLIC STOCK OFFERING (Detail Textuals) - USD ($) $ / shares in Units, $ in Millions	Jul. 15, 2014	Jul. 07, 2014
Fixed Rate Cumulative Perpetual Preferred Stock, Series A
Public Stock Offering [Line Items]
Number of shares redeemed	5,000
Underwritten Public Offering
Public Stock Offering [Line Items]
Number of shares issued under public offering (in shares)	946,390	825,000
Offering price per share (in dollars per share)		$ 20.50
Proceeds from issuance of common stock, gross	$ 19.4
Proceeds from issuance of common stock, net of offering expenses	$ 17.8
Over-allotment Option
Public Stock Offering [Line Items]
Number of shares issued under public offering (in shares)	121,390
Offering price per share (in dollars per share)	$ 20.50

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LOANS AND ALLOWANCE - Credit risk profile of Corporation's loan portfolio based on rating category (Details 3) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 333,397	$ 336,000
Loans Receivable
Financing Receivable, Recorded Investment [Line Items]
Total loans	334,527	335,544
Loans Receivable | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	318,904	315,400
Loans Receivable | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	2,601	5,385
Loans Receivable | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	12,940	14,440
Loans Receivable | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	83	319
Loans Receivable | Construction/Land
Financing Receivable, Recorded Investment [Line Items]
Total loans	21,192	26,055
Loans Receivable | Construction/Land | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 17,818	21,907
Loans Receivable | Construction/Land | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans		31
Loans Receivable | Construction/Land | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 3,374	$ 4,117
Loans Receivable | Construction/Land | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans
Loans Receivable | 1-4 family residential
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 129,730	$ 133,904
Loans Receivable | 1-4 family residential | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	123,318	124,969
Loans Receivable | 1-4 family residential | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,197	2,817
Loans Receivable | 1-4 family residential | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	5,135	6,013
Loans Receivable | 1-4 family residential | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	80	105
Loans Receivable | Multi-family residential
Financing Receivable, Recorded Investment [Line Items]
Total loans	25,326	20,936
Loans Receivable | Multi-family residential | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	25,285	19,881
Loans Receivable | Multi-family residential | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 41	42
Loans Receivable | Multi-family residential | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans		$ 1,013
Loans Receivable | Multi-family residential | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans
Loans Receivable | Nonresidential
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 125,873	$ 122,894
Loans Receivable | Nonresidential | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	120,345	117,336
Loans Receivable | Nonresidential | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,337	2,486
Loans Receivable | Nonresidential | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	4,188	2,923
Loans Receivable | Nonresidential | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans	3	149
Loans Receivable | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	28,128	27,861
Loans Receivable | Commercial | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	27,859	27,432
Loans Receivable | Commercial | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	26	9
Loans Receivable | Commercial | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 243	355
Loans Receivable | Commercial | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans		65
Loans Receivable | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 4,278	3,894
Loans Receivable | Consumer | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 4,278	$ 3,875
Loans Receivable | Consumer | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans
Loans Receivable | Consumer | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans		$ 19
Loans Receivable | Consumer | Doubtful
Financing Receivable, Recorded Investment [Line Items]
Total loans

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ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER - Summary of accretable yield or income expected to be collected (Details 1) - Dupont State Bank - Loans Receivable - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Balance at the beginning of the period	$ 1,029	$ 1,311	$ 1,262	$ 1,345
Additions
Accretion	$ (50)	$ (86)	$ (350)	$ (296)
Reclassification from non-accretable difference	$ 12	$ 39	$ 79	$ 215
Disposals
Balance at ending of the period	$ 991	$ 1,264	$ 991	$ 1,264

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SUBSEQUENT EVENTS (Detail Textuals) - Subsequent event - German American Bancorp, Inc. - Merger Agreement	1 Months Ended
	Oct. 26, 2015 USD ($) shares
Subsequent Event [Line Items]
Common stock shares received during the merger | shares	0.770
Cash received during the merger	$ 9.90
Termination fee of agreement	$ 3,236,000

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LOANS AND ALLOWANCE - Information regarding troubled debt restructurings by class and new troubled debt restructuring (Details 8) - Loans Receivable $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) Loan	Sep. 30, 2014 USD ($) Loan	Sep. 30, 2015 USD ($) Loan	Sep. 30, 2014 USD ($) Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Loans | Loan	1	7	9	21
Pre-Modification Recorded Balance	$ 149	$ 3,507	$ 3,549	$ 9,415
Post-Modification Recorded Balance	$ 149	$ 3,688	$ 3,539	$ 9,900
Construction/Land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Loans | Loan	1	3	7	5
Pre-Modification Recorded Balance	$ 149	$ 1,830	$ 3,473	$ 4,278
Post-Modification Recorded Balance	$ 149	$ 1,985	$ 3,473	$ 4,473
One-to-four family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Loans | Loan		1		7
Pre-Modification Recorded Balance		$ 485		$ 2,606
Post-Modification Recorded Balance		$ 485		$ 2,876
Multi-family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Loans | Loan		1		2
Pre-Modification Recorded Balance		$ 1,019		$ 2,087
Post-Modification Recorded Balance		$ 1,019		$ 2,102
Nonresidential and agricultural land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Loans | Loan		1		2
Pre-Modification Recorded Balance		$ 43		$ 243
Post-Modification Recorded Balance		$ 46		$ 209
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of Loans | Loan		1	2	5
Pre-Modification Recorded Balance		$ 130	$ 76	$ 201
Post-Modification Recorded Balance		$ 153	$ 66	$ 240

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

NOTE 1: BASIS OF PRESENTATION

The accompanying consolidated condensed financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Corporation included in the Annual Report on Form 10-K for the year ended December 31, 2014. However, in the opinion of management, all adjustments (consisting of only normal recurring accruals) which are necessary for a fair presentation of the financial statements have been included. The results of operations for the three-month and nine-month periods ended September 30, 2015, are not necessarily indicative of the results which may be expected for the entire year. The consolidated condensed balance sheet of the Corporation as of December 31, 2014 has been derived from the audited consolidated balance sheet of the Corporation as of that date.

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LOANS AND ALLOWANCE - Corporation's loan portfolio aging analysis (Details 4) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans receivables, gross	$ 333,397	$ 336,000
Loans Receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	4,761	6,584
Current	328,379	327,087
Purchased Credit Impaired Loans	1,387	1,873
Total loans receivables, gross	334,527	335,544
Loans Receivable | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	833	901
Loans Receivable | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	919	770
Loans Receivable | Greater than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	3,009	4,913
Loans Receivable | Construction/Land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	4	187
Current	21,132	25,457
Purchased Credit Impaired Loans	56	411
Total loans receivables, gross	$ 21,192	$ 26,055
Loans Receivable | Construction/Land | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Loans Receivable | Construction/Land | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 4
Loans Receivable | Construction/Land | Greater than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due		$ 187
Loans Receivable | 1-4 family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 2,114	4,033
Current	126,698	128,836
Purchased Credit Impaired Loans	918	1,035
Total loans receivables, gross	129,730	133,904
Loans Receivable | 1-4 family residential | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	561	418
Loans Receivable | 1-4 family residential | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	542	760
Loans Receivable | 1-4 family residential | Greater than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 1,011	$ 2,855
Loans Receivable | Multi-family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Current	$ 25,326	$ 20,936
Purchased Credit Impaired Loans
Total loans receivables, gross	$ 25,326	$ 20,936
Loans Receivable | Multi-family residential | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Loans Receivable | Multi-family residential | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Loans Receivable | Multi-family residential | Greater than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Loans Receivable | Nonresidential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 2,540	$ 2,203
Current	122,935	120,288
Purchased Credit Impaired Loans	398	403
Total loans receivables, gross	125,873	122,894
Loans Receivable | Nonresidential | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	171	$ 458
Loans Receivable | Nonresidential | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	371
Loans Receivable | Nonresidential | Greater than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,998	$ 1,745
Loans Receivable | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	88	116
Current	28,027	27,731
Purchased Credit Impaired Loans	13	14
Total loans receivables, gross	28,128	$ 27,861
Loans Receivable | Commercial | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 88
Loans Receivable | Commercial | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due
Loans Receivable | Commercial | Greater than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due		$ 116
Loans Receivable | Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 15	45
Current	4,261	3,839
Purchased Credit Impaired Loans	2	10
Total loans receivables, gross	4,278	3,894
Loans Receivable | Consumer | 30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	13	25
Loans Receivable | Consumer | 60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 2	10
Loans Receivable | Consumer | Greater than 90 Days
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due		$ 10

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - Quantitative information about Level 3 fair value measurements (Unaudited) (Details 3) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate held for sale	$ 492	$ 983
Securities available for sale - Corporate	134,978	128,885
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale - Corporate	1,294	1,322
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Impaired loans
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 12	$ 3,357
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Impaired loans | Comparative sales based on independent appraisal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Techniques	Comparative sales based on independent appraisal	Comparative sales based on independent appraisal
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Impaired loans | Comparative sales based on independent appraisal | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability Discount		10.00%
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Impaired loans | Comparative sales based on independent appraisal | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability Discount		20.00%
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Impaired loans | Comparative sales based on independent appraisal | Weighted Average
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability Discount	70.00%
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Real estate held for sale
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate held for sale	$ 283
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Real estate held for sale | Comparative sales based on independent appraisal
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Techniques	Comparative sales based on independent appraisal
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Real estate held for sale | Comparative sales based on independent appraisal | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability Discount	10.00%
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Real estate held for sale | Comparative sales based on independent appraisal | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Marketability Discount	20.00%
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Corporate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 1,294
Securities available for sale - Corporate		$ 1,322
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Corporate | Discounted cash flows
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Valuation Techniques	Discounted cash flows	Discounted cash flows
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Corporate | Discounted cash flows | Minimum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Default probability	1.80%	1.80%
Loss, given default	85.00%	85.00%
Discount rate	3.03%	3.03%
Recovery rate	10.00%	10.00%
Prepayment rate	1.00%	1.00%
Fair Value, Measurements, Recurring | Unobservable (Level 3) Inputs | Corporate | Discounted cash flows | Maximum
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Default probability	75.00%	75.00%
Loss, given default	100.00%	100.00%
Discount rate	4.75%	4.75%
Recovery rate	75.00%	75.00%
Prepayment rate	2.00%	2.00%

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair value measurements of assets and liabilities on nonrecurring basis (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate held for sale	$ 492	$ 983
Fair Value, Measurements, Nonrecurring | Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	12	$ 3,357
Real estate held for sale	$ 283
Fair Value, Measurements, Nonrecurring | Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans
Real estate held for sale
Fair Value, Measurements, Nonrecurring | Fair Value Measurements Using Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans
Real estate held for sale
Fair Value, Measurements, Nonrecurring | Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	$ 12	$ 3,357
Real estate held for sale	$ 283

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LOANS AND ALLOWANCE - Corporation's nonaccrual loans (Details 5) - Loans Receivable - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total nonaccrual loans	$ 6,994	$ 10,745
Construction/Land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total nonaccrual loans	1,819	2,148
One-to-four family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total nonaccrual loans	$ 1,861	4,214
Multi-family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total nonaccrual loans		1,013
Nonresidential and agricultural land
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total nonaccrual loans	$ 3,203	3,132
Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total nonaccrual loans	$ 111	230
Consumer and other
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total nonaccrual loans		$ 8

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - Estimated fair values of Corporation's financial instruments and level within fair value hierarchy (Unaudited) (Details 4) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Carrying Amount
Assets
Cash and cash equivalents	$ 15,177	$ 13,264
Interest-bearing deposits	2,964	1,984
Loans, held for sale		423
Loans, net of allowance for losses	329,670	331,995
Stock in Federal Home Loan Bank	3,127	3,796
Interest receivable	2,563	2,391
Liabilities
Deposits	400,658	397,083
Borrowings	50,967	54,872
Interest payable	199	209
Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets
Cash and cash equivalents	15,177	13,264
Interest-bearing deposits	$ 2,964	$ 1,984
Loans, held for sale
Loans, net of allowance for losses
Stock in Federal Home Loan Bank
Interest receivable
Liabilities
Deposits
Borrowings		$ 4,155
Interest payable
Fair Value Measurements Using Significant Other Observable Inputs (Level 2)
Assets
Cash and cash equivalents
Interest-bearing deposits
Loans, held for sale		$ 423
Loans, net of allowance for losses	$ 327,172	340,790
Stock in Federal Home Loan Bank	3,127	3,796
Interest receivable	2,563	2,391
Liabilities
Deposits	400,685	397,388
Borrowings	44,992	44,920
Interest payable	$ 199	$ 209
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Assets
Cash and cash equivalents
Interest-bearing deposits
Loans, held for sale
Loans, net of allowance for losses
Stock in Federal Home Loan Bank
Interest receivable
Liabilities
Deposits
Borrowings	$ 7,179	$ 7,218
Interest payable

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INVESTMENT SECURITIES - Amortized cost and approximate fair values of securities (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 133,494	$ 127,773
Gross Unrealized Gains	2,112	2,244
Gross Unrealized Losses	(628)	(1,132)
Fair Value	134,978	128,885
Federal agencies
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	31,716	31,894
Gross Unrealized Gains	223	147
Gross Unrealized Losses	(28)	(419)
Fair Value	31,911	31,622
State and municipal
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	47,138	40,710
Gross Unrealized Gains	1,266	1,537
Gross Unrealized Losses	(130)	(47)
Fair Value	48,274	42,200
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	51,016	51,533
Gross Unrealized Gains	620	558
Gross Unrealized Losses	(138)	(350)
Fair Value	51,498	51,741
Corporate
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	3,624	3,636
Gross Unrealized Gains	3	2
Gross Unrealized Losses	(332)	(316)
Fair Value	$ 3,295	$ 3,322

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Consolidated Condensed Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Operating Activities
Net income	$ 4,289	$ 3,325
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	297	347
Depreciation and amortization	572	616
Investment securities gains	(123)	(245)
Loans originated for sale in the secondary market	(11,253)	(7,304)
Proceeds from sale of loans in the secondary market	11,931	7,802
Gain on sale of loans	(374)	(244)
Amortization of net loan origination cost	4	109
Net accretion relative to purchased loans	(308)	(135)
Loss on premises held for sale		111
Loss (gain) on real estate held for sale	57	194
Stock compensation expense	129	169
Net change in
Interest receivable	(172)	(114)
Interest payable	(10)	(56)
Other adjustments	2,500	986
Net cash provided by operating activities	7,539	5,561
Investing Activities
Purchase of interest-bearing deposits	(980)
Purchases of securities available-for-sale	(22,292)	(36,353)
Proceeds from maturities and paydowns of securities available for sale	10,492	11,877
Proceeds from sales of securities available-for-sale	5,897	10,156
Net change in loans	806	(8,189)
Purchases of premises and equipment	(391)	(1,079)
Proceeds from sale of real estate acquired through foreclosure	1,960	736
Proceeds from sale of FHLB of Indianapolis stock	669
Proceeds from Bank owned life insurance		256
Other investing activity	16	8
Net cash used in investing activities	(3,823)	(22,588)
Net change in
Noninterest-bearing, interest-bearing demand and savings deposits	9,647	21,915
Certificates of deposit	(6,072)	(19,828)
Short-term borrowings	(4,155)	4,164
Proceeds from borrowings	20,000	18,000
Repayment of borrowings	(19,750)	(25,000)
Cash dividends	(1,734)	(1,270)
Common shares issued		17,776
Proceeds from exercise of stock options		111
Advances by borrowers for taxes and insurance	261	216
Net cash provided by (used in) financing activities	(1,803)	16,084
Net Change in Cash and Cash Equivalents	1,913	(943)
Cash and Cash Equivalents, Beginning of Period	13,264	10,244
Cash and Cash Equivalents, End of Period	15,177	9,301
Additional Cash Flows and Supplementary Information
Interest paid	2,518	2,655
Income tax paid, net of refund	220	80
Transfers to real estate held for sale	1,526	1,929
Dividends declared not paid	$ 578	$ 578

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INVESTMENT SECURITIES - Amortized cost and fair values of securities by contractual maturity (Details 1) $ in Thousands	Sep. 30, 2015 USD ($)
Amortized Cost
Within one year	$ 3,002
One to five years	30,454
Five to ten years	12,367
After ten years	36,655
Available for sale securities debt by contracted maturities amortized cost basis, Total	82,478
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities	51,016
Totals	133,494
Fair Value
Within one year	3,025
One to five years	30,639
Five to ten years	12,719
After ten years	37,097
Available for sale securities debt by contracted maturities fair value basis, Total	83,480
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities	51,498
Totals	$ 134,978

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LOANS AND ALLOWANCE - Activity in allowance for loan losses (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Allowance for Loan and Lease Losses [Roll Forward]
Balances at beginning of period:			$ 4,005
Provision for losses	$ 99	$ 149	297	$ 347
Balances at end of period	3,727		3,727
Loans Receivable
Allowance for Loan and Lease Losses [Roll Forward]
Balances at beginning of period:	3,675	3,762	4,005	4,510
Provision for losses	99	149	297	347
Loans charged off	(58)	(75)	(787)	(1,352)
Recoveries on loans	11	104	212	435
Balances at end of period	3,727	3,940	3,727	3,940
Loans Receivable | Construction/Land
Allowance for Loan and Lease Losses [Roll Forward]
Balances at beginning of period:	922	676	740	676
Provision for losses	$ (253)	$ (90)	$ (138)	$ (90)
Loans charged off
Recoveries on loans		$ 77	$ 67	$ 77
Balances at end of period	$ 669	663	669	663
Loans Receivable | 1-4 Family
Allowance for Loan and Lease Losses [Roll Forward]
Balances at beginning of period:	1,387	1,391	1,977	1,749
Provision for losses	150	290	210	513
Loans charged off	(11)	(9)	(665)	(629)
Recoveries on loans	2	2	6	41
Balances at end of period	1,528	1,674	1,528	1,674
Loans Receivable | Multi-Family
Allowance for Loan and Lease Losses [Roll Forward]
Balances at beginning of period:	27	303	28	404
Provision for losses	$ 19	$ (18)	$ (2)	392
Loans charged off				$ (511)
Recoveries on loans			$ 20
Balances at end of period	$ 46	$ 285	46	$ 285
Loans Receivable | Nonresidential
Allowance for Loan and Lease Losses [Roll Forward]
Balances at beginning of period:	1,240	1,232	1,107	1,470
Provision for losses	94	(36)	136	(439)
Loans charged off	(13)	(20)	(13)	(94)
Recoveries on loans	1	1	92	240
Balances at end of period	1,322	1,177	1,322	1,177
Loans Receivable | Commercial
Allowance for Loan and Lease Losses [Roll Forward]
Balances at beginning of period:	87	152	151	189
Provision for losses	$ 49	$ (26)	3	$ (77)
Loans charged off			$ (18)
Recoveries on loans		$ 5		$ 19
Balances at end of period	$ 136	131	$ 136	131
Loans Receivable | Consumer
Allowance for Loan and Lease Losses [Roll Forward]
Balances at beginning of period:	12	8	2	22
Provision for losses	40	29	88	48
Loans charged off	(34)	(46)	(91)	(118)
Recoveries on loans	8	19	27	58
Balances at end of period	$ 26	$ 10	$ 26	$ 10

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Consolidated Condensed Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Assets
Cash and due from banks	$ 3,862	$ 5,971
Interest-bearing demand deposits	10,507	598
Federal funds sold	808	6,695
Cash and cash equivalents	15,177	13,264
Interest-bearing deposits	2,964	1,984
Investment securities available-for-sale	134,978	128,885
Loans held for sale		423
Loans	333,397	336,000
Allowance for loan losses	(3,727)	(4,005)
Net loans	329,670	331,995
Premises and equipment, net	9,514	9,707
Real estate, held for sale	492	983
Federal Home Loan Bank stock	3,127	3,796
Interest receivable	2,563	2,391
Cash value of life insurance	12,710	12,477
Goodwill	200	200
Core deposit intangibles	282	334
Other assets	2,025	3,036
Total assets	513,702	509,475
Deposits
Noninterest-bearing	52,139	51,986
Interest-bearing	348,519	345,097
Total deposits	400,658	397,083
Borrowings	50,967	54,872
Interest payable	199	209
Other liabilities	6,233	4,569
Total liabilities	$ 458,057	$ 456,733
Commitments and Contingencies
Stockholders' Equity
Common stock, no par value Authorized - 5,000,000 sharesIssued and outstanding - 2,513,696 and 2,513,696 shares	$ 26,064	$ 25,935
Retained earnings	28,611	26,056
Accumulated other comprehensive income	970	751
Total stockholders' equity	55,645	52,742
Total liabilities and stockholders' equity	$ 513,702	$ 509,475

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LOANS AND ALLOWANCE - Information pertaining to principal balances and specific reserve allocations for impaired loans, as well as average balances of and interest recognized on impaired loans (Details 6) - Loans Receivable - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Impaired loans without a specific allowance:
Impaired loans without a specific allowance, Recorded Investment	$ 9,370	$ 7,883
Impaired loans without a specific allowance, Unpaid Principal Balance	9,981	8,191
Impaired loans with a specific allowance:
Impaired loans with a specific allowance, Recorded Investment	3,175	5,327
Impaired loans with a specific allowance, Unpaid Principal Balance	3,202	5,496
Impaired loans with a related allowance, Specific Allowance	890	1,593
Total Impaired Loans:
Total impaired loans, Recorded Investment	12,545	13,210
Total impaired loans, Unpaid Principal Balance	13,183	13,687
Total impaired loans, Specific Allowance	890	1,593
Construction/Land
Impaired loans without a specific allowance:
Impaired loans without a specific allowance, Recorded Investment	1,648	2,300
Impaired loans without a specific allowance, Unpaid Principal Balance	1,649	2,342
Impaired loans with a specific allowance:
Impaired loans with a specific allowance, Recorded Investment	1,670	1,747
Impaired loans with a specific allowance, Unpaid Principal Balance	1,684	1,761
Impaired loans with a related allowance, Specific Allowance	391	391
Total Impaired Loans:
Total impaired loans, Recorded Investment	3,318	4,047
Total impaired loans, Unpaid Principal Balance	3,333	4,103
Total impaired loans, Specific Allowance	391	391
1-4 family residential
Impaired loans without a specific allowance:
Impaired loans without a specific allowance, Recorded Investment	4,047	1,952
Impaired loans without a specific allowance, Unpaid Principal Balance	4,631	1,962
Impaired loans with a specific allowance:
Impaired loans with a specific allowance, Recorded Investment	562	2,496
Impaired loans with a specific allowance, Unpaid Principal Balance	575	2,512
Impaired loans with a related allowance, Specific Allowance	181	816
Total Impaired Loans:
Total impaired loans, Recorded Investment	4,609	4,448
Total impaired loans, Unpaid Principal Balance	5,206	4,474
Total impaired loans, Specific Allowance	$ 181	816
Multi-family residential
Impaired loans without a specific allowance:
Impaired loans without a specific allowance, Recorded Investment		1,013
Impaired loans without a specific allowance, Unpaid Principal Balance		$ 1,013
Impaired loans with a specific allowance:
Impaired loans with a specific allowance, Recorded Investment
Impaired loans with a specific allowance, Unpaid Principal Balance
Impaired loans with a related allowance, Specific Allowance
Total Impaired Loans:
Total impaired loans, Recorded Investment		$ 1,013
Total impaired loans, Unpaid Principal Balance		$ 1,013
Total impaired loans, Specific Allowance
Nonresidential
Impaired loans without a specific allowance:
Impaired loans without a specific allowance, Recorded Investment	$ 3,437	$ 2,360
Impaired loans without a specific allowance, Unpaid Principal Balance	3,462	2,614
Impaired loans with a specific allowance:
Impaired loans with a specific allowance, Recorded Investment	930	955
Impaired loans with a specific allowance, Unpaid Principal Balance	930	955
Impaired loans with a related allowance, Specific Allowance	310	310
Total Impaired Loans:
Total impaired loans, Recorded Investment	4,367	3,315
Total impaired loans, Unpaid Principal Balance	4,392	3,569
Total impaired loans, Specific Allowance	310	310
Commercial
Impaired loans without a specific allowance:
Impaired loans without a specific allowance, Recorded Investment	238	250
Impaired loans without a specific allowance, Unpaid Principal Balance	239	251
Impaired loans with a specific allowance:
Impaired loans with a specific allowance, Recorded Investment	13	129
Impaired loans with a specific allowance, Unpaid Principal Balance	13	268
Impaired loans with a related allowance, Specific Allowance	8	76
Total Impaired Loans:
Total impaired loans, Recorded Investment	251	379
Total impaired loans, Unpaid Principal Balance	252	519
Total impaired loans, Specific Allowance	$ 8	76
Consumer
Impaired loans without a specific allowance:
Impaired loans without a specific allowance, Recorded Investment		8
Impaired loans without a specific allowance, Unpaid Principal Balance		$ 9
Impaired loans with a specific allowance:
Impaired loans with a specific allowance, Recorded Investment
Impaired loans with a specific allowance, Unpaid Principal Balance
Impaired loans with a related allowance, Specific Allowance
Total Impaired Loans:
Total impaired loans, Recorded Investment		$ 8
Total impaired loans, Unpaid Principal Balance		$ 9
Total impaired loans, Specific Allowance

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Consolidated Condensed Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Statement Of Income and Comprehensive Income [Abstract]
Net income	$ 1,287	$ 1,119	$ 4,289	$ 3,325
Unrealized gains (losses) on securities available-for-sale
Unrealized holding gains arising during the period, net of tax expense of $542, $154, $194 and $1,140	1,002	300	300	2,131
Less: Reclassification adjustment for gains included in net income, net of tax expense of $2, $0, $42 and $83	3		81	162
Other comprehensive income, net of tax	999	300	219	1,969
Comprehensive income	$ 2,286	$ 1,419	$ 4,508	$ 5,294

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INVESTMENT SECURITIES (Detail Textuals 1) $ in Thousands	Sep. 30, 2015 USD ($) Security	Dec. 31, 2014 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Unrealized losses on investment in/of certain of the corporation's corporate securities	$ 628	$ 1,132
Corporate Securities
Schedule of Available-for-sale Securities [Line Items]
Unrealized losses on investment in/of certain of the corporation's corporate securities	$ 332	316
Pooled Trust Preferred Issues
Schedule of Available-for-sale Securities [Line Items]
Number of securities in unrealized loss position | Security	2
Percentage of book value of corporation's investment portfolio	1.21%
Percentage of market value of corporation's investment portfolio	0.96%
Pooled Trust Preferred Issues | ALESCO 9A | Moody's, Baa3 Rating | Corporate Securities
Schedule of Available-for-sale Securities [Line Items]
Unrealized losses on investment in/of certain of the corporation's corporate securities	$ 309	313
Pooled Trust Preferred Issues | PRETSL XXVII | Moody's, A2 Rating | Corporate Securities
Schedule of Available-for-sale Securities [Line Items]
Unrealized losses on investment in/of certain of the corporation's corporate securities	$ 15	$ 1

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INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

Schedule of amortized cost and approximate fair values of securities

	September 30, 2015
	AmortizedCost		GrossUnrealizedGains		GrossUnrealizedLosses			FairValue
	(Unaudited; In Thousands)
Available-for-sale securities
Federal agencies	$	31,716	$	223	$	(28	)	$	31,911
State and municipal		47,138		1,266		(130	)		48,274
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,016		620		(138	)		51,498
Corporate		3,624		3		(332	)		3,295
Totals	$	133,494	$	2,112	$	(628	)	$	134,978
	December 31, 2014
	AmortizedCost		GrossUnrealizedGains		GrossUnrealizedLosses			FairValue
	(In Thousands)
Available-for-sale securities
Federal agencies	$	31,894	$	147	$	(419	)	$	31,622
State and municipal		40,710		1,537		(47	)		42,200
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,533		558		(350	)		51,741
Corporate		3,636		2		(316	)		3,322
Totals	$	127,773	$	2,244	$	(1,132	)	$	128,885

Schedule of amortized cost and fair value of available-for-sale securities by contractual maturity

	Available-for-Sale
	Amortized Cost		Fair Value
	(Unaudited; In Thousands)
Within one year	$	3,002	$	3,025
One to five years		30,454		30,639
Five to ten years		12,367		12,719
After ten years		36,655		37,097
		82,478		83,480
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,016		51,498
Totals	$	133,494	$	134,978

Schedule of gross unrealized losses on investment and fair value

	September 30, 2015
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses
	(Unaudited; In Thousands)
Federal agencies	$	7,986	$	(10	)	$	2,982	$	(18	)	$	10,968	$	(28	)
State and municipal		10,189		(119	)		531		(11	)		10,720		(130	)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		4,771		(16	)		4,894		(122	)		9,665		(138	)
Corporate		1,182		(23	)		604		(309	)		1,786		(332	)
Total temporarily impaired securities	$	24,128	$	(168	)	$	9,011	$	(460	)	$	33,139	$	(628	)
	December 31, 2014
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses
	(In Thousands)
Federal agencies	$	12,302	$	(178	)	$	8,756	$	(241	)	$	21,058	$	(419	)
State and municipal		1,651		(14	)		2,706		(33	)		4,357		(47	)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		6,230		(74	)		10,697		(276	)		16,927		(350	)
Corporate		724		(1	)		1,095		(315	)		1,819		(316	)
Total temporarily impaired securities	$	20,907	$	(267	)	$	23,254	$	(865	)	$	44,161	$	(1,132	)

XML

ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER - Carrying amount of loans included in balance sheet of loans receivable (Details) - Loans Receivable - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Business Acquisition [Line Items]
Carrying balance of acquired credit-impaired loans	$ 1,387	$ 1,873
Construction/Land
Business Acquisition [Line Items]
Carrying balance of acquired credit-impaired loans	56	411
One-to-four family residential
Business Acquisition [Line Items]
Carrying balance of acquired credit-impaired loans	$ 918	$ 1,035
Multi-family residential
Business Acquisition [Line Items]
Carrying balance of acquired credit-impaired loans
Commercial
Business Acquisition [Line Items]
Carrying balance of acquired credit-impaired loans	$ 13	$ 14
Dupont State Bank
Business Acquisition [Line Items]
Outstanding balance of acquired credit-impaired loans	1,920	2,703
Fair value adjustment for credit-impaired loans	(533)	(830)
Carrying balance of acquired credit-impaired loans	1,387	1,873
Dupont State Bank | Construction/Land
Business Acquisition [Line Items]
Outstanding balance of acquired credit-impaired loans	131	682
Dupont State Bank | One-to-four family residential
Business Acquisition [Line Items]
Outstanding balance of acquired credit-impaired loans	$ 1,209	$ 1,400
Dupont State Bank | Multi-family residential
Business Acquisition [Line Items]
Outstanding balance of acquired credit-impaired loans
Dupont State Bank | Nonresidential real estate and agricultural land
Business Acquisition [Line Items]
Outstanding balance of acquired credit-impaired loans	$ 538	$ 568
Dupont State Bank | Commercial
Business Acquisition [Line Items]
Outstanding balance of acquired credit-impaired loans	22	24
Dupont State Bank | Consumer and other
Business Acquisition [Line Items]
Outstanding balance of acquired credit-impaired loans	$ 20	$ 29

XML

LOANS AND ALLOWANCE (Tables)

9 Months Ended

Sep. 30, 2015

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Schedule of breakdown of loans

	September 30, 2015			December 31, 2014
	(Unaudited)
	(In Thousands)
Construction/Land	$	21,192		$	26,055
One-to-four family residential		129,730			133,904
Multi-family residential		25,326			20,936
Nonresidential		125,873			122,894
Commercial		28,128			27,861
Consumer		4,278			3,894
		334,527			335,544
Unamortized deferred loan costs		517			513
Undisbursed loans in process		(1,647	)		(57	)
Allowance for loan losses		(3,727	)		(4,005	)
Total loans	$	329,670		$	331,995

Schedule of the activity in the allowance for loan losses

	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(Unaudited; In Thousands)
Three Months Ended September 30, 2015
Balances at beginning of period:	$	922		$	1,387		$	27		$	1,240		$	87		$	12		$	3,675
Provision for losses		(253	)		150			19			94			49			40			99
Loans charged off		-			(11	)		-			(13	)		-			(34	)		(58	)
Recoveries on loans		-			2			-			1			-			8			11
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
Nine Months Ended September 30, 2015
Balances at beginning of period:	$	740		$	1,977		$	28		$	1,107		$	151		$	2		$	4,005
Provision for losses		(138	)		210			(2	)		136			3			88			297
Loans charged off		-			(665	)		-			(13	)		(18	)		(91	)		(787	)
Recoveries on loans		67			6			20			92			-			27			212
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
As of September 30, 2015
Allowance for losses:
Individually evaluated for impairment:	$	391		$	181		$	-		$	310		$	-		$	8		$	890
Collectively evaluated for impairment:		278			1,237			46			912			136			18			2,627
Loans acquired with a deteriorated credit quality:		-			110			-			100			-			-			210
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
Loans:
Individually evaluated for impairment:	$	3,318		$	4,609		$	-		$	4,367		$	251		$	-		$	12,545
Collectively evaluated for impairment:		17,818			124,203			25,326			121,108			27,864			4,276			320,595
Loans acquired with a deteriorated credit quality:		56			918			-			398			13			2			1,387
Balances at end of period	$	21,192		$	129,730		$	25,326		$	125,873		$	28,128		$	4,278		$	334,527

	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(Unaudited; In Thousands)
Three Months Ended September 30, 2014
Balances at beginning of period:	$	676		$	1,391		$	303		$	1,232		$	152		$	8		$	3,762
Provision for losses		(90	)		290			(18	)		(36	)		(26	)		29			149
Loans charged off		-			(9	)		-			(20	)		-			(46	)		(75	)
Recoveries on loans		77			2			-			1			5			19			104
Balances at end of period	$	663		$	1,674		$	285		$	1,177		$	131		$	10		$	3,940
Nine Months Ended September 30, 2014
Balances at beginning of period:	$	676		$	1,749		$	404		$	1,470		$	189		$	22		$	4,510
Provision for losses		(90	)		513			392			(439	)		(77	)		48			347
Loans charged off		-			(629	)		(511	)		(94	)		-			(118	)		(1,352	)
Recoveries on loans		77			41			-			240			19			58			435
Balances at end of period	$	663		$	1,674		$	285		$	1,177		$	131		$	10		$	3,940
	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(In Thousands)
As of December 31, 2014
Allowance for losses:
Individually evaluated for impairment:	$	391		$	816		$	-		$	310		$	76		$	-		$	1,593
Collectively evaluated for impairment:		349			1,023			28			745			75			2			2,222
Loans acquired with a deteriorated credit quality:		-			138			-			52			-			-			190
Balances at end of period	$	740		$	1,977		$	28		$	1,107		$	151		$	2		$	4,005
Loans:
Individually evaluated for impairment:	$	4,047		$	4,448		$	1,013		$	3,315		$	379		$	8		$	13,210
Collectively evaluated for impairment:		21,597			128,421			19,923			119,176			27,468			3,876			320,461
Loans acquired with a deteriorated credit quality:		411			1,035			-			403			14			10			1,873
Balances at end of period	$	26,055		$	133,904		$	20,936		$	122,894		$	27,861		$	3,894		$	335,544

Schedule of credit risk profile of the corporation's loan portfolio based on rating category

September 30, 2015	Total Portfolio		Pass		Special Mention		Substandard		Doubtful
	(Unaudited; In Thousands)
Construction/Land	$	21,192	$	17,818	$	-	$	3,374	$	-
1-4 family residential		129,730		123,318		1,197		5,135		80
Multi-family residential		25,326		25,285		41		-		-
Nonresidential		125,873		120,345		1,337		4,188		3
Commercial		28,128		27,859		26		243		-
Consumer		4,278		4,278		-		-		-
Total loans	$	334,527	$	318,904	$	2,601	$	12,940	$	83

December 31, 2014	Total Portfolio		Pass		Special Mention		Substandard		Doubtful
	(In Thousands)
Construction/Land	$	26,055	$	21,907	$	31	$	4,117	$	-
1-4 family residential		133,904		124,969		2,817		6,013		105
Multi-family residential		20,936		19,881		42		1,013		-
Nonresidential		122,894		117,336		2,486		2,923		149
Commercial		27,861		27,432		9		355		65
Consumer		3,894		3,875		-		19		-
Total loans	$	335,544	$	315,400	$	5,385	$	14,440	$	319

Schedule of corporation's loan portfolio aging analysis

September 30, 2015	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans Receivables
	(Unaudited; In Thousands)
Construction/Land	$	-	$	4	$	-	$	4	$	21,132	$	56	$	21,192
1-4 family residential		561		542		1,011		2,114		126,698		918		129,730
Multi-family residential		-		-		-		-		25,326		-		25,326
Nonresidential		171		371		1,998		2,540		122,935		398		125,873
Commercial		88		-		-		88		28,027		13		28,128
Consumer		13		2		-		15		4,261		2		4,278
	$	833	$	919	$	3,009	$	4,761	$	328,379	$	1,387	$	334,527

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans Receivables
	(In Thousands)
Construction/Land	$	-	$	-	$	187	$	187	$	25,457	$	411	$	26,055
1-4 family residential		418		760		2,855		4,033		128,836		1,035		133,904
Multi-family residential		-		-		-		-		20,936		-		20,936
Nonresidential		458		-		1,745		2,203		120,288		403		122,894
Commercial		-		-		116		116		27,731		14		27,861
Consumer		25		10		10		45		3,839		10		3,894
	$	901	$	770	$	4,913	$	6,584	$	327,087	$	1,873	$	335,544

Schedule of corporation's nonaccrual loans

	September 30, 2015		December 31, 2014
	(Unaudited)
Construction/Land	$	1,819	$	2,148
One-to-four family residential		1,861		4,214
Multi-family residential		-		1,013
Nonresidential and agricultural land		3,203		3,132
Commercial		111		230
Consumer and other		-		8
Total nonaccrual loans	$	6,994	$	10,745

Schedule of principal balances and specific valuation allocations for impaired loans

The following tables present information pertaining to the principal balances and specific valuation allocations for impaired loans, as of September 30, 2015 (unaudited; in thousands):

Impaired loans without a specific allowance:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	1,648	$	1,649	$	-
1-4 family residential		4,047		4,631		-
Multi-family residential		-		-		-
Nonresidential		3,437		3,462		-
Commercial		238		239		-
Consumer		-		-		-
	$	9,370	$	9,981	$	-

Impaired loans with a specific allowance:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	1,670	$	1,684	$	391
1-4 family residential		562		575		181
Multi-family residential		-		-		-
Nonresidential		930		930		310
Commercial		13		13		8
Consumer		-		-		-
	$	3,175	$	3,202	$	890

Total impaired loans:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction Land	$	3,318	$	3,333	$	391
1-4 family residential		4,609		5,206		181
Multi-family residential		-		-		-
Nonresidential		4,367		4,392		310
Commercial		251		252		8
Consumer		-		-		-
	$	12,545	$	13,183	$	890

The following tables present information pertaining to the principal balances and specific valuation allocations for impaired loans as of December 31, 2014 (in thousands):

Impaired loans without a specific allowance:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	2,300	$	2,342	$	-
1-4 family residential		1,952		1,962		-
Multi-family residential		1,013		1,013		-
Nonresidential		2,360		2,614		-
Commercial		250		251		-
Consumer		8		9		-
	$	7,883	$	8,191	$	-

Impaired loans with a specific allowance:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	1,747	$	1,761	$	391
1-4 family residential		2,496		2,512		816
Multi-family residential		-		-		-
Nonresidential		955		955		310
Commercial		129		268		76
Consumer		-		-		-
	$	5,327	$	5,496	$	1,593

Total impaired loans:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	4,047	$	4,103	$	391
1-4 family residential		4,448		4,474		816
Multi-family residential		1,013		1,013		-
Nonresidential		3,315		3,569		310
Commercial		379		519		76
Consumer		8		9		-
	$	13,210	$	13,687	$	1,593

Schedule of information related to the average recorded investment and interest income recognized on impaired loans

	Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
	Average Investment		Interest Income Recognized		AverageInvestment		Interest Income Recognized
	(Unaudited; In Thousands)
Construction/Land	$	3,287	$	25	$	3,953	$	26
1-4 family residential		3,257		46		4,630		40
Multi-family residential		-		-		1,000		4
Nonresidential		3,188		26		3,975		21
Commercial		218		3		304		2
Consumer		-		-		-		-
	$	9,950	$	100	$	13,862	$	93

	Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
	Average Investment		Interest Income Recognized		AverageInvestment		Interest Income Recognized
	(Unaudited; In Thousands)
Construction/Land	$	3,592	$	98	$	4,078	$	105
1-4 family residential		3,487		139		5,081		133
Multi-family residential		-		-		1,014		16
Nonresidential		3,232		80		3,977		85
Commercial		280		18		332		13
Consumer		3		-		-		-
	$	10,594	$	335	$	14,482	$	352

Schedule of troubled debt restructurings by class

	For the Three Months Ended September 30, 2015
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		1	$	149	$	149
One-to-four family residential		-		-		-
Multi-family residential		-		-		-
Nonresidential and agricultural land		-		-		-
Commercial		-		-		-
		1	$	149	$	149

	For the Three Months Ended September 30, 2014
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		3	$	1,830	$	1,985
One-to-four family residential		1		485		485
Multi-family residential		1		1,019		1,019
Nonresidential and agricultural land		1		43		46
Commercial		1		130		153
		7	$	3,507	$	3,688

	For the Nine Months Ended September 30, 2015
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		7	$	3,473	$	3,473
One-to-four family residential		-		-		-
Multi-family residential		-		-		-
Nonresidential and agricultural land		-		-		-
Commercial		2		76		66
		9	$	3,549	$	3,539

	For the Nine Months Ended September 30, 2014
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
Construction/Land		5	$	4,278	$	4,473
One-to-four family residential		7		2,606		2,876
Multi-family residential		2		2,087		2,102
Nonresidential and agricultural land		2		243		209
Commercial		5		201		240
		21	$	9,415	$	9,900

Schedule of troubled debt restructurings by type of modification

The following tables present information regarding post-modification balances of newly restructured troubled debt by type of modification for the three months ended September 30, 2015 and 2014.

September 30, 2015	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	149	$	-	$	-	$	149
One-to-four family residential		-		-		-		-
Multi-family residential		-		-		-		-
Nonresidential		-		-		-		-
Commercial		-		-		-		-
	$	149	$	-	$	-	$	149

September 30, 2014	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	155	$	1,830	$	-	$	1,985
One-to-four family residential		-		485		-		485
Multi-family residential		-		1,019		-		1,019
Nonresidential		-		-		46		46
Commercial		-		-		153		153
	$	155	$	3,334	$	199	$	3,688

      The following tables present information regarding post-modification balances of newly restructured troubled debt by type of modification for the nine months ended September 30, 2015 and 2014.

September 30, 2015	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	149	$	3,324	$	-	$	3,473
One-to-four family residential		-		-		-		-
Multi-family residential		-		-		-		-
Nonresidential		-		-		66		66
Commercial		-		-		-		-
	$	149	$	3,324	$	66	$	3,539

September 30, 2014	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	155	$	2,048	$	2,270	$	4,473
One-to-four family residential		-		595		2,281		2,876
Multi-family residential		-		1,019		1,083		2,102
Nonresidential		-		-		209		209
Commercial		-		-		240		240
	$	155	$	3,662	$	6,083	$	9,900

XML

Consolidated Condensed Statements of Comprehensive Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Statement Of Income and Comprehensive Income [Abstract]
Unrealized holding gains arising during the period, tax expense	$ 542	$ 154	$ 194	$ 1,140
Reclassification adjustment for gains included in net income, tax expense	$ 2	$ 0	$ 42	$ 83

XML

Consolidated Condensed Balance Sheets (Parentheticals) - $ / shares	Sep. 30, 2015	Dec. 31, 2014
Statement Of Financial Position [Abstract]
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized	5,000,000	5,000,000
Common stock, shares issued	2,513,696	2,513,696
Common stock, shares outstanding	2,513,696	2,513,696

XML

STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 2015

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

STOCK BASED COMPENSATION

NOTE 9: STOCK BASED COMPENSATION

The Corporation’s shareholders approved the 2014 Stock Option and Incentive Plan (the “2014 Plan”) at the April 16, 2014 Annual Meeting of the Corporation. Under the terms of the 2014 Plan, the Corporation may issue or deliver to participants up to 150,000 shares of the Corporation’s common stock pursuant to grants of incentive and non-qualified stock options, restricted and unrestricted stock awards, performance shares and units, and stock appreciation rights. On July 15, 2014, the Corporation granted 30,000 stock options and 30,000 shares of restricted stock to its directors and officers pursuant to the terms of the 2014 Plan. The stock options and restricted stock awards vest over a period of four to nine years with certain stock options and awards vesting immediately. Stock based compensation expense, including expense related to stock options and awards issued in prior periods, was $54,000 and $33,000 for the three months ended September 30, 2015 and 2014, respectively, and was $129,000 and 169,000 for the nine months ended September 30, 2015 and 2014, respectively.

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 09, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	RIVER VALLEY BANCORP
Entity Central Index Key	0001015593
Trading Symbol	rivr
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		2,513,696
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3

XML

RECENT ACCOUNTING PRONOUNCEMENTS

9 Months Ended

Sep. 30, 2015

Accounting Changes and Error Corrections [Abstract]

RECENT ACCOUNTING PRONOUNCEMENTS

NOTE 10: RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, FASB, in joint cooperation with the International Accounting Standards Board, issued ASU 2014-09, “Revenue from Contracts with Customers.” The topic of revenue recognition had become broad, with several other regulatory agencies issuing standards which lacked cohesion. The new guidance establishes a common framework and reduces the number of requirements which an entity must consider in recognizing revenue and yet provides improved disclosures to assist stakeholders reviewing financial statements. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2016. With the issuance of ASU 2015-14 in July 2015, FASB approved the deferral of the effective date of ASU 2014-09 for one year, giving companies the option to early adopt using the original effective dates. The Corporation will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In June 2014, FASB issued ASU 2014-12, “Compensation – Stock Compensation.” This Update defines the accounting treatment for share-based payments and “resolves the diverse accounting treatment of those awards in practice.” The new requirement mandates that “a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.” Compensation cost will now be recognized in the period in which it becomes likely that the performance target will be met. The amendments in this Update are effective for annual and interim reporting periods beginning after December 15, 2015. Early adoption is permitted. The Corporation will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

In August 2014, FASB issued ASU 2014-14, “Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure.” The objective of this Update is to reduce diversity in practice by addressing the classification of foreclosed mortgage loans that are fully or partially guaranteed under government programs. Currently, some creditors reclassify those loans to real estate as with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables. The amendments affect creditors that hold government-guaranteed mortgage loans, including those guaranteed by the FHA and the VA. The amendments in this Update are effective for annual reporting periods ending after December 15, 2015 and interim periods beginning after December 15, 2015. An entity should adopt the amendments in this Update using either a prospective transition method or a modified retrospective transition method. For prospective transition, an entity should apply the amendments in this Update to foreclosures that occur after the date of adoption. For the modified retrospective transition, an entity should apply the amendments in the Update by means of a cumulative-effect adjustment (through a reclassification to a separate other receivable) as of the beginning of the annual period of adoption. Prior periods should not be adjusted. However, a reporting entity must apply the same method of transition as elected under ASU No. 2014-04. Early adoption, including adoption in an interim period, is permitted if the entity already has adopted update 2014-04. The Corporation will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on the Corporation’s consolidated financial statements.

In August 2014, FASB issued ASU 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The Update provides U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a Corporation’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a Corporation’s ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in this Update are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter.  Early adoption is permitted. Adoption of the ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

In November 2014, FASB issued ASU No. 2014-16, “Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.” For hybrid financial instruments issued in the form of a share, an entity (an issuer or an investor) should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. That is, an entity should determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host contract.

In evaluating the stated and implied substantive terms and features, the existence or omission of any single term or feature does not necessarily determine the economic characteristics and risks of the host contract. Although an individual term or feature may weigh more heavily in the evaluation on the basis of facts and circumstances, an entity should use judgment based on an evaluation of all the relevant terms and features. For example, the presence of a fixed-price, noncontingent redemption option held by the investor in a convertible preferred stock contract is not, in and of itself, determinative in the evaluation of whether the nature of the host contract is more akin to a debt instrument or more akin to an equity instrument. Rather, the nature of the host contract depends on the economic characteristics and risks of the entire hybrid financial instrument.

The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.

The amendments in this Update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption in an interim period, is permitted. If an entity early adopts the amendments in an interim period, any adjustments shall be reflected as of the beginning of the fiscal year that includes that interim period. Adoption of the ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

In November 2014, FASB issued ASU 2014-17, “Pushdown Accounting.” The amendments in this Update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.

An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. An acquired entity should determine whether to elect to apply pushdown accounting for each individual change-in-control event in which an acquirer obtains control of the acquired entity. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent change-in-control event. An election to apply pushdown accounting in a reporting period after the reporting period in which the change-in-control event occurred should be considered a change in accounting principle in accordance with Topic 250, Accounting Changes and Error Corrections. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable.

If an acquired entity elects the option to apply pushdown accounting in its separate financial statements, it should disclose information in the current reporting period that enables users of financial statements to evaluate the effect of pushdown accounting.

The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event.  However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle.  Adoption of the ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

In January 2015, FASB issued ASU, 2015-1, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” FASB issued this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users of financial statements.

This Update eliminates from GAAP the concept of extraordinary items. Subtopic 225-20, Income Statement—Extraordinary and Unusual Items, required that an entity separately classify, present, and disclose extraordinary events and transactions. Presently, an event or transaction is presumed to be an ordinary and usual activity of the reporting entity unless evidence clearly supports its classification as an extraordinary item. Paragraph 225-20-45-2 contains the following criteria that must both be met for extraordinary classification:

1. Unusual nature. The underlying event or transaction should possess a high degree of abnormality and be of a type clearly unrelated to, or only incidentally related to, the ordinary and typical activities of the entity, taking into account the environment in which the entity operates.

2. Infrequency of occurrence. The underlying event or transaction should be of a type that would not reasonably be expected to recur in the foreseeable future, taking into account the environment in which the entity operates.

If an event or transaction meets the criteria for extraordinary classification, an entity is required to segregate the extraordinary item from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. The entity also is required to disclose applicable income taxes and either present or disclose earnings-per-share data applicable to the extraordinary item.

The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities.

For an entity that prospectively applies the guidance, the only required transition disclosure will be to disclose, if applicable, both the nature and the amount of an item included in income from continuing operations after adoption that adjusts an extraordinary item previously classified and presented before the date of adoption. An entity retrospectively applying the guidance should provide the disclosures in paragraphs 250-10-50-1 through 50-2. Adoption of the ASU is not expected to have a significant effect on the Corporation’s consolidated financial statements.

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Consolidated Condensed Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Interest Income
Loans receivable	$ 4,103	$ 4,077	$ 12,756	$ 12,067
Investment securities	811	777	2,379	2,259
Interest-earning deposits and other	51	55	157	182
Total interest income	4,965	4,909	15,292	14,508
Interest Expense
Deposits	447	481	1,341	1,498
Borrowings	384	358	1,167	1,101
Total interest expense	831	839	2,508	2,599
Net Interest Income	4,134	4,070	12,784	11,909
Provision for loan losses	99	149	297	347
Net Interest Income After Provision for Loan Losses	4,035	3,921	12,487	11,562
Other Income
Service fees and charges	684	644	1,828	1,836
Net realized gains on sale of available-for-sale securities (includes $5, $0, $123 and $245, respectively, related to accumulated other comprehensive earnings reclassifications)	5		123	245
Net gains on loan sales	122	102	374	244
Interchange fee income	164	160	490	468
Increase in cash value of life insurance	78	61	233	185
Loss on premises held for sale				(111)
Loss on real estate held for sale	(113)	(35)	(57)	(194)
Other income	160	105	434	341
Total other income	1,100	1,037	3,425	3,014
Other Expenses
Salaries and employee benefits	1,967	1,953	5,763	5,641
Net occupancy and equipment expenses	509	504	1,508	1,525
Data processing fees	172	138	469	434
Advertising	123	165	376	404
Mortgage servicing rights	59	48	157	142
Office supplies	36	31	117	80
Professional fees	199	47	462	279
Federal Deposit Insurance Corporation assessment	84	105	263	315
Loan related expenses	99	138	296	381
Other expenses	434	388	1,288	1,124
Total other expenses	3,682	3,517	10,699	10,325
Income Before Income Tax	1,453	1,441	5,213	4,251
Income tax expense (includes $2, $0, $42 and $83, respectively, related to income tax expense from reclassification items)	166	322	924	926
Net Income	$ 1,287	1,119	$ 4,289	3,325
Preferred stock dividends		(91)		(272)
Net Income Available to Common Stockholders	$ 1,287	$ 1,028	$ 4,289	$ 3,053
Basic earnings per common share (in dollars per share)	$ 0.51	$ 0.42	$ 1.71	$ 1.66
Diluted earnings per common share (in dollars per share)	0.51	0.42	1.70	1.66
Dividends per share (in dollars per share)	$ 0.23	$ 0.23	$ 0.69	$ 0.67

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 4: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The Corporation recognizes fair values in accordance with Financial Accounting Standards Codification (ASC) Topic 820. ASC Topic 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Recurring Measurements

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis and recognized in the accompanying consolidated condensed balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. The Corporation does not currently hold any Level 1 securities. If quoted market prices are not available, then fair values are estimated by using pricing models which utilize certain market information or quoted prices of securities with similar characteristics (Level 2). For securities where quoted prices, market prices of similar securities or pricing models which utilize observable inputs are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). Discounted cash flows are calculated using spread to swap and LIBOR curves that are updated to incorporate loss severities, volatility, credit spread and optionality. Rating agency industry research reports as well as defaults and deferrals on individual securities are reviewed and incorporated into calculations. Level 2 securities include residential mortgage-backed agency securities, federal agency securities, municipal securities and corporate bonds. Securities classified within Level 3 of the hierarchy include pooled trust preferred securities which are less liquid securities.

Fair value determinations for Level 3 measurements of securities are the responsibility of the Vice President of Finance (“VP of Finance”). The VP of Finance contracts with a third party pricing specialist who generates fair value estimates on a quarterly basis. The VP of Finance’s office challenges the reasonableness of the assumptions used and reviews the methodology to ensure the estimated fair value complies with accounting standards generally accepted in the United States.

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying consolidated condensed balance sheets measured at fair value on a recurring basis and the level within the ASC Topic 820 fair value hierarchy in which the fair value measurements fall at September 30, 2015 and December 31, 2014, respectively.

			September 30, 2015Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	(Unaudited; In Thousands)
Federal agencies	$	31,911	$	-	$	31,911	$	-
State and municipal		48,274		-		48,274		-
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,498		-		51,498		-
Corporate		3,295		-		2,001		1,294
Total	$	134,978	$	-	$	133,684	$	1,294

			December 31, 2014Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	(In Thousands)
Federal agencies	$	31,622	$	-	$	31,622	$	-
State and municipal		42,200		-		42,200		-
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,741		-		51,741		-
Corporate		3,322		-		2,000		1,322
Total	$	128,885	$	-	$	127,563	$	1,322

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying consolidated condensed balance sheets using significant unobservable (Level 3) inputs for the three-month and nine-month periods ended September 30, 2015 and September 30, 2014:

	Available-for-Sale Securities
	Three Months Ended September 30, 2015			Three Months Ended September 30, 2014
	(Unaudited; In Thousands)
Beginning balance	$	1,317		$	1,384
Accretion		2			2
Total realized and unrealized gains and losses
Unrealized losses included in other comprehensive income		(17	)		(101	)
Settlements, including pay downs		(8	)		(6	)
Ending balance	$	1,294		$	1,279
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	-		$	-

	Available-for-Sale Securities
	Nine Months Ended September 30, 2015			Nine Months Ended September 30, 2014
	(Unaudited; In Thousands)
Beginning balance	$	1,322		$	1,268
Accretion		7			7
Total realized and unrealized gains and losses
Unrealized gains (losses) included in other comprehensive income		(10	)		29
Settlements, including pay downs		(25	)		(25	)
Ending balance	$	1,294		$	1,279
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	-		$	-

There were no realized or unrealized gains or losses of Level 3 securities included in net income for the three-month and nine-month periods ended September 30, 2015 and September 30, 2014.

At September 30, 2015, Level 3 securities included two pooled trust preferred securities. The fair value on these securities is calculated using a combination of observable and unobservable assumptions as a quoted market price is not readily available. Both securities remain in Level 3 at September 30, 2015. For the past two fiscal years, trading of these types of securities has only been conducted on a distress sale or forced liquidation basis, although some trading activity has occurred for instruments similar to the instruments held by the Corporation. As a result, the Corporation continues to measure the fair values using discounted cash flow projections and has included the securities in Level 3.

Nonrecurring Measurements

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying consolidated condensed balance sheets measured at fair value on a nonrecurring basis and the level within the ASC Topic 820 fair value hierarchy in which the fair value measurements fall at September 30, 2015 and December 31, 2014.

			Fair Value Measurements Using
As of September 30, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Unaudited; In Thousands)
Impaired loans	$	12	$	-	$	-	$	12
Real estate held for sale	$	283	$	-	$	-	$	283

			Fair Value Measurements Using
As of December 31, 2014	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Impaired loans	$	3,357	$	-	$	-	$	3,357

Following is a description of the valuation methodologies used for instruments measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated condensed balance sheets, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Impaired Loans (Collateral Dependent)

Loans for which it is probable that the Corporation will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

The Corporation considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by policy. Appraisals are reviewed for accuracy and consistency by loan review personnel and reported to management. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated costs to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by loan review personnel by comparison to historical results.

Real Estate Held for Sale

Real estate held for sale is carried at the fair value less cost to sell and is periodically evaluated for impairment. Real estate held for sale recorded during the current accounting period is recorded at fair value less cost to sell. Appraisals of real estate held for sale are obtained when the real estate is acquired and subsequently as deemed necessary by policy. Appraisals are reviewed for accuracy and consistency by loan review personnel and reported to management. Appraisers are selected from the list of approved appraisers maintained by management. Real estate held for sale is classified within Level 3 of the fair value hierarchy.

Sensitivity of Significant Unobservable Inputs

The following tables represent quantitative information about unobservable Level 3 fair value measurements at September 30, 2015 and December 31, 2014:

	Fair Value at September 30, 2015		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	(Unaudited; In Thousands)
Impaired loans	$	12	Comparative sales based on independent appraisal	Marketability Discount		70	%
Real estate held for sale	$	283	Comparative sales based on independent appraisal	Marketability Discount		10%-20	%
Securities available-for-sale
Corporate	$	1,294	Discounted cash flows	*Default probability		1.80%-75	%
				*Loss, given default		85%-100	%
				*Discount rate		3.03%-4.75	%
				*Recovery rate		10%-75	%
				*Prepayment rate		1%-2	%

	Fair Value atDecember 31, 2014		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	(In Thousands)
Impaired loans	$	3,357	Comparative sales based on independent appraisal	Marketability Discount		10%-20	%
Securities available-for-sale
Corporate	$	1,322	Discounted cash flows	*Default probability		1.80%-75	%
				*Loss, given default		85%-100	%
				*Discount rate		3.03%-4.75	%
				*Recovery rate		10%-75	%
				*Prepayment rate		1%-2	%

Following is a discussion of the sensitivity of significant unobservable inputs, the interrelationships between those inputs and other unobservable inputs used in recurring and nonrecurring fair value measurement and of how those inputs might magnify or mitigate the effect of changes in the unobservable inputs on the fair value measurement.

Securities Available-for-sale – Pooled Trust Preferred Securities

Pooled trust preferred securities are collateralized debt obligations backed by a pool of debt securities issued by financial institutions. The collateral generally consists of trust preferred securities and subordinated debt securities issued by banks, bank holding companies, and insurance companies. A full discounted cash flow analysis is used to estimate fair values and assess impairment for each security within this portfolio. A third party specialist with direct industry experience in pooled trust preferred security evaluations is engaged to provide assistance estimating the fair value and expected cash flows on this portfolio. The full cash flow analysis is completed by evaluating the relevant credit and structural aspects of each pooled trust preferred security in the portfolio, including collateral performance projections for each piece of collateral in the security, and terms of the security’s structure. The credit review includes an analysis of profitability, credit quality, operating efficiency, leverage, and liquidity using available financial and regulatory information for each underlying collateral issuer. The analysis also includes a review of historical industry default data, current/near term operating conditions, prepayment projections, credit loss assumptions, and the impact of macroeconomic and regulatory changes. Where available, actual trades of securities with similar characteristics are used to further support the value.

The significant unobservable inputs used in the fair value measurement of the Corporation’s pooled trust preferred securities are probability of default, estimated loss given default, discount rate, and recovery and prepayment rates. Significant increases or decreases in any of those inputs in isolation could result in a significant change in the fair value measurement.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash and Cash Equivalents and Interest-bearing Deposits – The fair value approximates carrying value.

Loans Held for Sale – Fair values are based on quoted market prices.

Loans – The fair value for loans is estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

FHLB Stock – Fair value of Federal Home Loan Bank (“FHLB”) stock is based on the price at which it may be resold to the FHLB.

Interest Receivable/Payable – The fair values of interest receivable/payable approximate carrying values.

Deposits – The fair values of noninterest-bearing, interest-bearing demand and savings accounts are equal to the amount payable on demand at the balance sheet date. The carrying amounts for variable rate, fixed-term certificates of deposit approximate their fair values at the balance sheet date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on such time deposits.

Borrowings – The fair value of these borrowings are estimated using a discounted cash flow calculation, based on current rates for similar debt or, as applicable, based on quoted market prices for the identical liability when traded as an asset.

Off-balance sheet Commitments – Commitments include commitments to originate mortgage and consumer loans and standby letters of credit and are generally of a short-term nature. The fair value of such commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The carrying amounts of these commitments, which are immaterial, are reasonable estimates of the fair value of these financial instruments.

The following tables present estimated fair values of the Corporation’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2015 and December 31, 2014.

			Fair Value Measurements Using
	CarryingAmount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)
	(Unaudited; In Thousands)
September 30, 2015:
Assets
Cash and cash equivalents	$	15,177	$	15,177	$	-	$	-
Interest-bearing deposits		2,964		2,964		-		-
Loans, net of allowance for losses		329,670		-		327,172		-
Stock in Federal Home Loan Bank		3,127		-		3,127		-
Interest receivable		2,563		-		2,563		-
Liabilities
Deposits		400,658		-		400,685		-
Borrowings		50,967		-		44,992		7,179
Interest payable		199		-		199		-

			Fair Value Measurements Using
	CarryingAmount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)
	(In Thousands)
December 31, 2014:
Assets
Cash and cash equivalents	$	13,264	$	13,264	$	-	$	-
Interest-bearing deposits		1,984		1,984		-		-
Loans, held for sale		423		-		423		-
Loans, net of allowance for losses		331,995		-		340,790		-
Stock in Federal Home Loan Bank		3,796		-		3,796		-
Interest receivable		2,391		-		2,391		-
Liabilities
Deposits		397,083		-		397,388		-
Borrowings		54,872		4,155		44,920		7,218
Interest payable		209		-		209		-

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 3: EARNINGS PER SHARE

The Corporation has granted stock compensation awards with non-forfeitable dividend rights, which are considered participating securities. Accordingly, earnings per share (“EPS”) is computed using the two-class method as required by ASC 260-10-45. Basic EPS is computed by dividing net income allocated to common stock by the weighted average number of common shares outstanding during the period, which excludes the participating securities. ESOP shares are not considered outstanding for EPS computation purposes until they are earned. The following table presents the computation of basic and diluted EPS for the periods indicated:

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	2015			2014			2015			2014
	(Unaudited; Dollar Amounts in Thousands)
Net income	$	1,287		$	1,119		$	4,289		$	3,325
Allocated to preferred stock		-			(91	)		-			(272	)
Allocated to participating securities		(9	)		(5	)		(38	)		(7	)
Net income allocated to common shareholders	$	1,278		$	1,023		$	4,251		$	3,046
Weighted average common shares outstanding, gross		2,513,696			2,427,984			2,513,696			1,836,126
Less:  Average participating securities		(18,913	)		(12,782	)		(22,304	)		(4,261	)
Weighted average common shares outstanding, net		2,494,783			2,415,202			2,491,392			1,831,865
Effect of diluted based awards		3,246			2,938			3,143			3,816
Weighted average shares and common stock equivalents		2,498,029			2,418,140			2,494,535			1,835,681
Basic	$	0.51		$	0.42		$	1.71		$	1.66
Diluted	$	0.51		$	0.42		$	1.70		$	1.66
Options excluded from the calculation due to their anti-dilutive effect on earnings per share		30,000			30,000			30,000			30,000

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ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER (Tables)

9 Months Ended

Sep. 30, 2015

Accounting For Certain Loans Acquired In Transfer [Abstract]

Schedule of carrying amount of loans

	September 30, 2015			December 31, 2014
	(Unaudited)
Construction/Land	$	131		$	682
One-to-four family residential		1,209			1,400
Multi-family residential		-			-
Nonresidential real estate and agricultural land		538			568
Commercial		22			24
Consumer and other		20			29
Outstanding balance of acquired credit-impaired loans		1,920			2,703
Fair value adjustment for credit-impaired loans		(533	)		(830	)
Carrying balance of acquired credit-impaired loans	$	1,387		$	1,873

Schedule of accretable yield or income expected to be collected

	Three Months EndedSeptember 30, 2015			Nine Months EndedSeptember 30, 2015
	(Unaudited; In Thousands)
Balance at the beginning of the period	$	1,029		$	1,262
Additions		-			-
Accretion		(50	)		(350	)
Reclassification from non-accretable difference		12			79
Disposals		-			-
Balance September 30, 2015	$	991		$	991

	Three Months EndedSeptember 30, 2014			Nine Months EndedSeptember 30, 2014
	(Unaudited; In Thousands)
Balance at the beginning of the period	$	1,311		$	1,345
Additions		-			-
Accretion		(86	)		(296	)
Reclassification from non-accretable difference		39			215
Disposals		-			-
Balance September 30, 2014	$	1,264		$	1,264

Schedule of loans acquired

Contractually required payments receivable at acquisition
Construction / Land	$	750
One-to-four family residential		2,193
Multi-family residential		687
Nonresidential and agricultural land		1,530
Commercial		73
Consumer		52
Total required payments receivable at acquisition	$	5,285
Cash flows expected to be collected at acquisition	$	3,838
Basis in acquired loans at acquisition	$	3,088

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 11: SUBSEQUENT EVENTS

On October 26, 2015, the Corporation and German American Bancorp, Inc. (“GABC”) jointly announced the signing of a definitive agreement on October 26, 2015 (the “Merger Agreement”) pursuant to which the Corporation will be merged with and into GABC (the “Merger”). Simultaneously with the Merger, the Bank will merge with and into German American Bancorp, an Indiana bank and wholly owned subsidiary of GABC.

Under the terms of the Merger Agreement, which was approved by the boards of directors of both companies, the Corporation’s shareholders will receive 0.770 shares of GABC common stock and $9.90 in cash for each share of the Corporation’s common stock. This cash component of the merger consideration is subject to certain adjustments, calculated prior to closing, in the event shareholders’ equity of the Corporation (as defined and calculated in accordance with the Merger Agreement) is below a specified amount.

At the Effective Time (as defined in the Merger Agreement) of the Merger, each outstanding option to purchase a share of common stock of the Corporation will vest fully and be converted into the right to receive, in cash, an amount equal to $9.90 plus the product obtained by multiplying the 0.770 exchange ratio by the Average GABC Closing Price (as defined in the Merger Agreement), less the option exercise price per share and applicable withholding taxes. This amount is also subject to certain adjustments, calculated prior to closing, in the event shareholders’ equity of the Corporation (as defined and calculated in accordance with the Merger Agreement) is below a specified amount. Also at the Effective Time, all shares of restricted stock shall be released from the transfer restrictions to which the shares are subject.

Three employees of the Corporation will be employed by GABC, but will terminate their existing employment agreements with the Corporation and receive at the closing the change of control payments to which each was entitled under his existing employment agreement with the Corporation.

As a condition to the closing of the Merger, the Corporation will submit both the Merger Agreement and Articles of Amendment to its Articles of Incorporation to the shareholders for approval. The Articles of Amendment will repeal Article 11, which prohibits the acquisition of beneficial ownership of more than 10% of any class of equity security of the Corporation. Subject to certain terms and conditions, the board of directors will recommend that the shareholders vote in favor of the Merger Agreement, the Merger and the Articles of Amendment at a special meeting to be called for that purpose, and will solicit proxies voting in favor of the Merger Agreement, the Merger and the Articles of Amendment from the Corporation’s shareholders.

The Corporation has agreed to pay GABC a termination fee of $3,236,000 upon termination of the Agreement if (1) the Corporation breaches its obligations with respect to inquiries from other interested acquirors; or (2) the Corporation’s board of directors fails to recommend the Merger Agreement, the Merger and the Articles of Amendment to its shareholders, or withdraws its recommendation after receipt of a competing acquisition proposal.

The Merger is expected to close in the first quarter of 2016. The closing of the Merger is subject to other conditions, including the approval of the Merger by the shareholders of the Corporation, the receipt of regulatory approvals, the effectiveness of a registration statement to be filed by GABC with the Securities and Exchange Commission with respect to the common stock of GABC to be issued in the Merger, and other customary closing conditions prescribed in the Merger Agreement.

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LOANS AND ALLOWANCE

9 Months Ended

Sep. 30, 2015

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

LOANS AND ALLOWANCE

NOTE 7: LOANS AND ALLOWANCE

The Corporation’s loan and allowance policies are as follows:

Loans

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances, adjusted for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term.

Discounts and premiums on purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments. Discounts and premiums on purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method.

Generally, loans are placed on nonaccrual status at 90 days past due and interest is considered a loss, unless the loan is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. For all loan classes, the entire balance of the loan is considered past due if the minimum payment contractually required to be paid is not received by the contractual due date. For all loan classes, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Corporation’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except one-to-four family residential properties and consumer, the Corporation promptly charges off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Corporation charges off one-to-four family residential and consumer loans, or portions thereof, when the Corporation reasonably determines the amount of the loss. The Corporation adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of one-to-four family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge-down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Corporation can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all loan classes, when loans are placed on nonaccrual, or charged off, interest accrued but not collected is reversed against interest income. Subsequent payments on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. In general, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. However, for impaired loans and troubled debt restructured, which is included in impaired loans, the Corporation requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

Interest income on credit-impaired loans purchased in an acquisition is allocated to income as accretion on those loans, over the life of the loan.

When cash payments are received on impaired loans in each loan class, the Corporation records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan. Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on at least a quarterly basis by management and is based upon management’s periodic review of the collectability of the loans in light of several factors, including historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-impaired loans and is based on historical charge-off experience by segment. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Corporation over the prior five years. Previously, management utilized a three-year historical loss experience methodology. Given the loss experiences of financial institutions over the last five years, management believes it is appropriate to utilize a five-year look-back period for loss history and made this change effective in 2013. Other adjustments (qualitative or environmental considerations) for each segment may be added to the allowance for each loan segment after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

A loan is considered impaired when, based on current information and events, it is probable that the Corporation 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 determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, 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. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. For impaired loans where the Corporation utilizes the discounted cash flows to determine the level of impairment, the Corporation includes the entire change in the present value of cash flows as provision expense.

Segments of loans with similar risk characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment measurements.

The following table presents the breakdown of loans as of September 30, 2015 and December 31, 2014.

	September 30, 2015			December 31, 2014
	(Unaudited)
	(In Thousands)
Construction/Land	$	21,192		$	26,055
One-to-four family residential		129,730			133,904
Multi-family residential		25,326			20,936
Nonresidential		125,873			122,894
Commercial		28,128			27,861
Consumer		4,278			3,894
		334,527			335,544
Unamortized deferred loan costs		517			513
Undisbursed loans in process		(1,647	)		(57	)
Allowance for loan losses		(3,727	)		(4,005	)
Total loans	$	329,670		$	331,995

The risk characteristics of each loan portfolio segment are as follows:

Construction, Land and Land Development

The Construction, Land and Land Development segments include loans for raw land, loans to develop raw land preparatory to building construction, and construction loans of all types. Construction and development loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction and development loans are generally based on estimates of costs and value associated with the complete project. These estimates may be inaccurate. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Corporation until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest-rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Land loans are secured by raw land held as an investment, for future development, or as collateral for other use. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. These loans are underwritten based on the underlying purpose of the loan with repayment primarily from the sale or use of the underlying collateral.

One-to-Four Family Residential and Consumer

With respect to residential loans that are secured by one-to-four family residences and are usually owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. This segment also includes residential loans secured by non-owner occupied one-to-four family residences. Management tracks the level of owner-occupied residential loans versus non-owner-occupied residential loans as a portion of our recent loss history relates to these loans. Home equity loans are typically secured by a subordinate interest in one-to-four family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Nonresidential (including agricultural land) and Multi-family Residential

These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Nonresidential and multi-family residential real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Nonresidential and multi-family residential real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Corporation’s nonresidential and multi-family residential real estate portfolio are diverse in terms of type and geographic location. Management monitors and evaluates these loans based on collateral, geography and risk grade criteria. As a general rule, the Corporation avoids financing single-purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied residential real estate loans versus non-owner-occupied residential loans.

Commercial

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

The following tables present the activity in the allowance for loan losses for the three and nine-month periods ended September 30, 2015 and 2014, and information regarding the breakdown of the balance in the allowance for loan losses and the recorded investment in loans, both presented by portfolio class and impairment method, as of September 30, 2015 and December 31, 2014.

	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(Unaudited; In Thousands)
Three Months Ended September 30, 2015
Balances at beginning of period:	$	922		$	1,387		$	27		$	1,240		$	87		$	12		$	3,675
Provision for losses		(253	)		150			19			94			49			40			99
Loans charged off		-			(11	)		-			(13	)		-			(34	)		(58	)
Recoveries on loans		-			2			-			1			-			8			11
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
Nine Months Ended September 30, 2015
Balances at beginning of period:	$	740		$	1,977		$	28		$	1,107		$	151		$	2		$	4,005
Provision for losses		(138	)		210			(2	)		136			3			88			297
Loans charged off		-			(665	)		-			(13	)		(18	)		(91	)		(787	)
Recoveries on loans		67			6			20			92			-			27			212
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
As of September 30, 2015
Allowance for losses:
Individually evaluated for impairment:	$	391		$	181		$	-		$	310		$	-		$	8		$	890
Collectively evaluated for impairment:		278			1,237			46			912			136			18			2,627
Loans acquired with a deteriorated credit quality:		-			110			-			100			-			-			210
Balances at end of period	$	669		$	1,528		$	46		$	1,322		$	136		$	26		$	3,727
Loans:
Individually evaluated for impairment:	$	3,318		$	4,609		$	-		$	4,367		$	251		$	-		$	12,545
Collectively evaluated for impairment:		17,818			124,203			25,326			121,108			27,864			4,276			320,595
Loans acquired with a deteriorated credit quality:		56			918			-			398			13			2			1,387
Balances at end of period	$	21,192		$	129,730		$	25,326		$	125,873		$	28,128		$	4,278		$	334,527

	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(Unaudited; In Thousands)
Three Months Ended September 30, 2014
Balances at beginning of period:	$	676		$	1,391		$	303		$	1,232		$	152		$	8		$	3,762
Provision for losses		(90	)		290			(18	)		(36	)		(26	)		29			149
Loans charged off		-			(9	)		-			(20	)		-			(46	)		(75	)
Recoveries on loans		77			2			-			1			5			19			104
Balances at end of period	$	663		$	1,674		$	285		$	1,177		$	131		$	10		$	3,940
Nine Months Ended September 30, 2014
Balances at beginning of period:	$	676		$	1,749		$	404		$	1,470		$	189		$	22		$	4,510
Provision for losses		(90	)		513			392			(439	)		(77	)		48			347
Loans charged off		-			(629	)		(511	)		(94	)		-			(118	)		(1,352	)
Recoveries on loans		77			41			-			240			19			58			435
Balances at end of period	$	663		$	1,674		$	285		$	1,177		$	131		$	10		$	3,940
	Construction/ Land			1-4 Family			Multi-Family			Nonresidential			Commercial			Consumer			Total
	(In Thousands)
As of December 31, 2014
Allowance for losses:
Individually evaluated for impairment:	$	391		$	816		$	-		$	310		$	76		$	-		$	1,593
Collectively evaluated for impairment:		349			1,023			28			745			75			2			2,222
Loans acquired with a deteriorated credit quality:		-			138			-			52			-			-			190
Balances at end of period	$	740		$	1,977		$	28		$	1,107		$	151		$	2		$	4,005
Loans:
Individually evaluated for impairment:	$	4,047		$	4,448		$	1,013		$	3,315		$	379		$	8		$	13,210
Collectively evaluated for impairment:		21,597			128,421			19,923			119,176			27,468			3,876			320,461
Loans acquired with a deteriorated credit quality:		411			1,035			-			403			14			10			1,873
Balances at end of period	$	26,055		$	133,904		$	20,936		$	122,894		$	27,861		$	3,894		$	335,544

The following tables present the credit risk profile of the Corporation’s loan portfolio based on rating category as of September 30, 2015 and December 31, 2014. Loans acquired from Dupont State Bank in the November 2012 acquisition have been adjusted to fair value for these periods.

September 30, 2015	Total Portfolio		Pass		Special Mention		Substandard		Doubtful
	(Unaudited; In Thousands)
Construction/Land	$	21,192	$	17,818	$	-	$	3,374	$	-
1-4 family residential		129,730		123,318		1,197		5,135		80
Multi-family residential		25,326		25,285		41		-		-
Nonresidential		125,873		120,345		1,337		4,188		3
Commercial		28,128		27,859		26		243		-
Consumer		4,278		4,278		-		-		-
Total loans	$	334,527	$	318,904	$	2,601	$	12,940	$	83

December 31, 2014	Total Portfolio		Pass		Special Mention		Substandard		Doubtful
	(In Thousands)
Construction/Land	$	26,055	$	21,907	$	31	$	4,117	$	-
1-4 family residential		133,904		124,969		2,817		6,013		105
Multi-family residential		20,936		19,881		42		1,013		-
Nonresidential		122,894		117,336		2,486		2,923		149
Commercial		27,861		27,432		9		355		65
Consumer		3,894		3,875		-		19		-
Total loans	$	335,544	$	315,400	$	5,385	$	14,440	$	319

Credit Quality Indicators

The Corporation categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually on an ongoing basis by classifying the loans as to credit risk and assigning grade classifications. Loan grade classifications of special mention, substandard, doubtful, or loss are reported to the Corporation’s board of directors monthly. The Corporation uses the following definitions for credit risk grade classifications:

Pass: Loans not meeting the criteria below are considered to be pass rated loans.

Special Mention: These assets are currently protected, but potentially weak. They have credit deficiencies deserving a higher degree of attention by management. These assets do not presently exhibit a sufficient degree of risk to warrant adverse classification. Concerns may lie with cash flow, liquidity, leverage, collateral, or industry conditions. These are graded special mention so that the appropriate level of attention is administered.

Substandard: By regulatory definition, “substandard” loans are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged. These types of loans have well defined weaknesses that jeopardize the liquidation of the debt. A distinct possibility exists that the institution will sustain some loss if the deficiencies are not corrected. These loans are considered workout credits. They exhibit at least one of the following characteristics.

· An expected loan payment is in excess of 90 days past due (non-performing), or non-earning.

· The financial condition of the borrower has deteriorated to such a point that close monitoring is necessary. Payments do not necessarily have to be past due.

· Repayment from the primary source of repayment is gone or impaired.

· The borrower has filed for bankruptcy protection.

· The loans are inadequately protected by the net worth and cash flow of the borrower.

· The guarantors have been called upon to make payments.

· The borrower has exhibited a continued inability to reduce principal (although interest payment may be current).

· The Corporation is considering a legal action against the borrower.

· The collateral position has deteriorated to a point where there is a possibility the Corporation may sustain some loss. This may be due to the financial condition or to a reduction in the value of the collateral.

· Although loss may not seem likely, the Corporationhas gone to extraordinary lengths (restructuring with extraordinary lengths) to protect its position in order to maintain a high probability of repayment.

Doubtful: These loans exhibit the same characteristics as those rated “substandard,” plus weaknesses that make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. This would include inadequately secured loans that are being liquidated, and inadequately protected loans for which the likelihood of liquidation is high. This classification is temporary. Pending events are expected to materially reduce the amount of the loss. This means that the “doubtful” classification will result in either a partial or complete loss on the loan (write-down or specific reserve), with reclassification of the asset as “substandard,” or removal of the asset from the classified list, as in foreclosure or full loss.

The Corporation evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during the quarter or fiscal year.

The following tables present the Corporation’s loan portfolio aging analysis as of September 30, 2015 and December 31, 2014:

September 30, 2015	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans Receivables
	(Unaudited; In Thousands)
Construction/Land	$	-	$	4	$	-	$	4	$	21,132	$	56	$	21,192
1-4 family residential		561		542		1,011		2,114		126,698		918		129,730
Multi-family residential		-		-		-		-		25,326		-		25,326
Nonresidential		171		371		1,998		2,540		122,935		398		125,873
Commercial		88		-		-		88		28,027		13		28,128
Consumer		13		2		-		15		4,261		2		4,278
	$	833	$	919	$	3,009	$	4,761	$	328,379	$	1,387	$	334,527

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Purchased Credit Impaired Loans		Total Loans Receivables
	(In Thousands)
Construction/Land	$	-	$	-	$	187	$	187	$	25,457	$	411	$	26,055
1-4 family residential		418		760		2,855		4,033		128,836		1,035		133,904
Multi-family residential		-		-		-		-		20,936		-		20,936
Nonresidential		458		-		1,745		2,203		120,288		403		122,894
Commercial		-		-		116		116		27,731		14		27,861
Consumer		25		10		10		45		3,839		10		3,894
	$	901	$	770	$	4,913	$	6,584	$	327,087	$	1,873	$	335,544

At September 30, 2015, there was one one-to-four family residential loan of $67,000 that was past due 90 days or more and accruing. At December 31, 2014, there were four loans, totaling $28,000, that were past due 90 days or more and accruing. Of those, there was one commercial loan of $25,000, a one-to-four family residential loan in the amount of $1,000, and the remaining $2,000 was for two consumer loans.

At September 30, 2015, the Corporation held residential real estate held for sale as a result of foreclosure (REO) totaling $82,000 and residential real estate in the process of foreclosure of $271,000.  This compares to $452,000 and $2,611,000, respectively, as of September 30, 2014.

The following table presents the Corporation’s nonaccrual loans as of September 30, 2015 and December 31, 2014, which includes both non-performing troubled debt restructured and loans contractually delinquent 90 days or more (in thousands):

	September 30, 2015		December 31, 2014
	(Unaudited)
Construction/Land	$	1,819	$	2,148
One-to-four family residential		1,861		4,214
Multi-family residential		-		1,013
Nonresidential and agricultural land		3,203		3,132
Commercial		111		230
Consumer and other		-		8
Total nonaccrual loans	$	6,994	$	10,745

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include non-performing commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

The following tables present information pertaining to the principal balances and specific valuation allocations for impaired loans, as of September 30, 2015 (unaudited; in thousands):

Impaired loans without a specific allowance:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	1,648	$	1,649	$	-
1-4 family residential		4,047		4,631		-
Multi-family residential		-		-		-
Nonresidential		3,437		3,462		-
Commercial		238		239		-
Consumer		-		-		-
	$	9,370	$	9,981	$	-

Impaired loans with a specific allowance:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	1,670	$	1,684	$	391
1-4 family residential		562		575		181
Multi-family residential		-		-		-
Nonresidential		930		930		310
Commercial		13		13		8
Consumer		-		-		-
	$	3,175	$	3,202	$	890

Total impaired loans:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction Land	$	3,318	$	3,333	$	391
1-4 family residential		4,609		5,206		181
Multi-family residential		-		-		-
Nonresidential		4,367		4,392		310
Commercial		251		252		8
Consumer		-		-		-
	$	12,545	$	13,183	$	890

The following is a summary by class of information related to the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2015 and 2014.

	Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
	Average Investment		Interest Income Recognized		AverageInvestment		Interest Income Recognized
	(Unaudited; In Thousands)
Construction/Land	$	3,287	$	25	$	3,953	$	26
1-4 family residential		3,257		46		4,630		40
Multi-family residential		-		-		1,000		4
Nonresidential		3,188		26		3,975		21
Commercial		218		3		304		2
Consumer		-		-		-		-
	$	9,950	$	100	$	13,862	$	93

	Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
	Average Investment		Interest Income Recognized		AverageInvestment		Interest Income Recognized
	(Unaudited; In Thousands)
Construction/Land	$	3,592	$	98	$	4,078	$	105
1-4 family residential		3,487		139		5,081		133
Multi-family residential		-		-		1,014		16
Nonresidential		3,232		80		3,977		85
Commercial		280		18		332		13
Consumer		3		-		-		-
	$	10,594	$	335	$	14,482	$	352

For the three and nine months ended September 30, 2015, interest income recognized on a cash basis included above was $49,000 and $206,000, respectively. For the three and nine months ended September 30, 2014, interest income recognized on a cash basis included above was $59,000 and $243,000, respectively.

The following tables present information pertaining to the principal balances and specific valuation allocations for impaired loans as of December 31, 2014 (in thousands):

Impaired loans without a specific allowance:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	2,300	$	2,342	$	-
1-4 family residential		1,952		1,962		-
Multi-family residential		1,013		1,013		-
Nonresidential		2,360		2,614		-
Commercial		250		251		-
Consumer		8		9		-
	$	7,883	$	8,191	$	-

Impaired loans with a specific allowance:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	1,747	$	1,761	$	391
1-4 family residential		2,496		2,512		816
Multi-family residential		-		-		-
Nonresidential		955		955		310
Commercial		129		268		76
Consumer		-		-		-
	$	5,327	$	5,496	$	1,593

Total impaired loans:	Recorded Investment		Unpaid Principal Balance		SpecificAllowance
Construction/Land	$	4,047	$	4,103	$	391
1-4 family residential		4,448		4,474		816
Multi-family residential		1,013		1,013		-
Nonresidential		3,315		3,569		310
Commercial		379		519		76
Consumer		8		9		-
	$	13,210	$	13,687	$	1,593

Troubled Debt Restructurings

In the course of working with borrowers, the Corporation may choose to restructure the contractual terms of certain loans. In restructuring the loan, the Corporation attempts to work out an alternative payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified, whether through a new agreement replacing the old or via changes to an existing loan agreement, are reviewed by the Corporation to identify if a troubled debt restructuring (“TDR”) has occurred. A troubled debt restructuring occurs when, for economic or legal reasons related to a borrower’s financial difficulties, the Corporation grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status, and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two. If such efforts by the Corporation do not result in a satisfactory arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Corporation may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan.

Nonaccrual loans, including TDRs that have not met the six month minimum performance criterion, are reported in this report as non-performing loans. On at least a quarterly basis, the Corporation reviews all TDR loans to determine if the loan meets this criterion. A loan is generally classified as nonaccrual when the Corporation believes that receipt of principal and interest is questionable under the terms of the loan agreement. Most generally, this is at 90 or more days past due.

For all loan classes, it is the Corporation’s policy to have any restructured loans which are on nonaccrual status prior to being restructured, remain on nonaccrual status until six months of satisfactory borrower performance, at which time management would consider their return to accrual status.

Loans reported as TDR as of September 30, 2015 totaled $5.1 million. TDR loans reported as nonaccrual (non-performing) loans, and included in total nonaccrual (non-performing) loans, were $3.3 million at September 30, 2015. The remaining TDR loans, totaling $1.8 million, were accruing at September 30, 2015 and reported as performing loans.

All TDRs are considered impaired by the Corporation for the life of the loan and reflected so in the Corporation’s analysis of the allowance for credit losses. As a result, the determination of the amount of impaired loans for each portfolio segment within troubled debt restructurings is the same as detailed previously above.

At September 30, 2015, the Corporation had 21 loans that were modified in troubled debt restructurings and impaired. The modification of terms of such loans included one or a combination of the following:  an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

The following tables present information regarding troubled debt restructurings by class as of the three-month and nine-month periods ended September 30, 2015 and 2014, and new troubled debt restructuring for the three-month and nine-month periods ended September 30, 2015 and 2014:

	For the Three Months Ended September 30, 2015
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		1	$	149	$	149
One-to-four family residential		-		-		-
Multi-family residential		-		-		-
Nonresidential and agricultural land		-		-		-
Commercial		-		-		-
		1	$	149	$	149

	For the Three Months Ended September 30, 2014
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		3	$	1,830	$	1,985
One-to-four family residential		1		485		485
Multi-family residential		1		1,019		1,019
Nonresidential and agricultural land		1		43		46
Commercial		1		130		153
		7	$	3,507	$	3,688

	For the Nine Months Ended September 30, 2015
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
	(Unaudited; In Thousands)
Construction/Land		7	$	3,473	$	3,473
One-to-four family residential		-		-		-
Multi-family residential		-		-		-
Nonresidential and agricultural land		-		-		-
Commercial		2		76		66
		9	$	3,549	$	3,539

	For the Nine Months Ended September 30, 2014
	Number of Loans		Pre-Modification Recorded Balance		Post-Modification Recorded Balance
Construction/Land		5	$	4,278	$	4,473
One-to-four family residential		7		2,606		2,876
Multi-family residential		2		2,087		2,102
Nonresidential and agricultural land		2		243		209
Commercial		5		201		240
		21	$	9,415	$	9,900

The following tables present information regarding post-modification balances of newly restructured troubled debt by type of modification for the three months ended September 30, 2015 and 2014.

September 30, 2015	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	149	$	-	$	-	$	149
One-to-four family residential		-		-		-		-
Multi-family residential		-		-		-		-
Nonresidential		-		-		-		-
Commercial		-		-		-		-
	$	149	$	-	$	-	$	149

September 30, 2014	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	155	$	1,830	$	-	$	1,985
One-to-four family residential		-		485		-		485
Multi-family residential		-		1,019		-		1,019
Nonresidential		-		-		46		46
Commercial		-		-		153		153
	$	155	$	3,334	$	199	$	3,688

The following tables present information regarding post-modification balances of newly restructured troubled debt by type of modification for the nine months ended September 30, 2015 and 2014.

September 30, 2015	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	149	$	3,324	$	-	$	3,473
One-to-four family residential		-		-		-		-
Multi-family residential		-		-		-		-
Nonresidential		-		-		66		66
Commercial		-		-		-		-
	$	149	$	3,324	$	66	$	3,539

September 30, 2014	Interest Only		Term		Combination		Total Modifications
	(Unaudited; In Thousands)
Construction/Land	$	155	$	2,048	$	2,270	$	4,473
One-to-four family residential		-		595		2,281		2,876
Multi-family residential		-		1,019		1,083		2,102
Nonresidential		-		-		209		209
Commercial		-		-		240		240
	$	155	$	3,662	$	6,083	$	9,900

No loans classified and reported as troubled debt restructured within the twelve months prior to September 30, 2015, defaulted during the three-month or nine-month periods ended September 30, 2015. The Corporation defines default in this instance as being either past due 90 days or more at the end of the quarter or in the legal process of foreclosure.

Financial impact of these restructurings was immaterial to the financials of the Corporation at September 30, 2015 and 2014.

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INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2015

Investments, Debt and Equity Securities [Abstract]

INVESTMENT SECURITIES

NOTE 5: INVESTMENT SECURITIES

The amortized cost and approximate fair values of securities as of September 30, 2015 and December 31, 2014 are as follows:

	September 30, 2015
	AmortizedCost		GrossUnrealizedGains		GrossUnrealizedLosses			FairValue
	(Unaudited; In Thousands)
Available-for-sale securities
Federal agencies	$	31,716	$	223	$	(28	)	$	31,911
State and municipal		47,138		1,266		(130	)		48,274
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,016		620		(138	)		51,498
Corporate		3,624		3		(332	)		3,295
Totals	$	133,494	$	2,112	$	(628	)	$	134,978
	December 31, 2014
	AmortizedCost		GrossUnrealizedGains		GrossUnrealizedLosses			FairValue
	(In Thousands)
Available-for-sale securities
Federal agencies	$	31,894	$	147	$	(419	)	$	31,622
State and municipal		40,710		1,537		(47	)		42,200
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,533		558		(350	)		51,741
Corporate		3,636		2		(316	)		3,322
Totals	$	127,773	$	2,244	$	(1,132	)	$	128,885

The amortized cost and fair value of available-for-sale securities at September 30, 2015, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale
	Amortized Cost		Fair Value
	(Unaudited; In Thousands)
Within one year	$	3,002	$	3,025
One to five years		30,454		30,639
Five to ten years		12,367		12,719
After ten years		36,655		37,097
		82,478		83,480
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,016		51,498
Totals	$	133,494	$	134,978

No securities were pledged at September 30, 2015 or at December 31, 2014 to secure FHLB advances. Securities with a carrying value of $24,152,000 and $28,071,000 were pledged at September 30, 2015 and December 31, 2014, respectively, to secure public deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available-for-sale during the three-month period ended September 30, 2015 were $504,000. There were no proceeds from sales of securities available-for-sale during the three-month period ended September 30, 2014. Gross gains of $5,000 resulting from sales and calls of available-for-sale securities were realized for the three-month period ended September 30, 2015. There were no gross losses for the three-month period ended September 30, 2015. Because there were no sales of securities available-for-sale during the three-month period ended September 30, 2014, there were no gross gains or losses realized for that period.

Proceeds from sales of securities available-for-sale during the nine-month periods ended September 30, 2015 and 2014 were $5,897,000 and $10,156,000. Gross gains of $128,000 and $437,000 resulting from sales and calls of available-for-sale securities were realized for the nine-month periods ended September 30, 2015 and 2014, respectively. Gross losses of $5,000 were realized for the nine-month period ended September 30, 2015, and gross losses of $192,000 were realized for the nine-month period ended September 30, 2014.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2015 was $33,139,000, which is approximately 24.6% of the Corporation’s investment portfolio. The fair value of these investments at December 31, 2014 was $44,161,000, which represented approximately 34.3% of the Corporation’s investment portfolio. Management has the ability and intent to hold securities with unrealized losses to recovery, which may be maturity. Based on evaluation of available evidence, including recent changes in market interest rates, management believes that any declines in fair values for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting credit portion of the loss recognized in net income. The noncredit portion of the loss would be recognized in accumulated other comprehensive income in the period the other-than-temporary impairment is identified.

The following tables show the Corporation’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2015 and December 31, 2014:

	September 30, 2015
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses
	(Unaudited; In Thousands)
Federal agencies	$	7,986	$	(10	)	$	2,982	$	(18	)	$	10,968	$	(28	)
State and municipal		10,189		(119	)		531		(11	)		10,720		(130	)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		4,771		(16	)		4,894		(122	)		9,665		(138	)
Corporate		1,182		(23	)		604		(309	)		1,786		(332	)
Total temporarily impaired securities	$	24,128	$	(168	)	$	9,011	$	(460	)	$	33,139	$	(628	)
	December 31, 2014
	Less than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses			Fair Value		UnrealizedLosses
	(In Thousands)
Federal agencies	$	12,302	$	(178	)	$	8,756	$	(241	)	$	21,058	$	(419	)
State and municipal		1,651		(14	)		2,706		(33	)		4,357		(47	)
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		6,230		(74	)		10,697		(276	)		16,927		(350	)
Corporate		724		(1	)		1,095		(315	)		1,819		(316	)
Total temporarily impaired securities	$	20,907	$	(267	)	$	23,254	$	(865	)	$	44,161	$	(1,132	)

Federal Agencies

The unrealized losses on the Corporation’s investments in direct obligations of U.S. government agencies were primarily caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

State and Municipal

The unrealized losses on the Corporation’s investments in securities of state and political subdivisions were primarily caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

Government-Sponsored Enterprise (GSE) Residential Mortgage-Backed and Other Asset-Backed Agency Securities

The unrealized losses on the Corporation’s investment in residential mortgage-backed agency securities were primarily caused by interest rate changes. The Corporation expects to recover the amortized cost bases over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at September 30, 2015.

Corporate Securities

The unrealized losses on the Corporation’s investment in corporate securities were due primarily to losses on two pooled trust preferred issues held by the Corporation. The ALESCO 9A issue had an unrealized loss at September 30, 2015 of $309,000. The PRETSL XXVII issue was also at an unrealized loss of $15,000 at September 30, 2015. This compares to December 31, 2014, which showed unrealized losses on both ALESCO 9A and PRETSL XXVII of $313,000 and $1,000, respectively. These two securities are both “A” tranche investments (A2A and A-1 respectively) and have performed as agreed since purchase. The two are rated A2 and A1, respectively, by Moody’s indicating these securities are considered upper medium-grade quality and subject to low credit risk. Both provide good collateral coverage at those tranche levels, providing protection for the Corporation. The Corporation has reviewed the pricing reports for these investments and has determined that the decline in the market price is not other than temporary and indicates thin trading activity rather than a true decline in the value of the investment. Factors considered in reaching this determination included the class or “tranche” held by the Corporation, the collateral coverage position of the tranches, the number of deferrals and defaults on the issues, projected and actual cash flows and the credit ratings. These two investments represent 1.21% of the book value of the Corporation’s investment portfolio and approximately 0.96% of market value at September 30, 2015. The Corporation does not intend to sell the investments and it is not more likely than not that the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, and the Corporation expects to receive all contractual cash flows related to these investments. Based upon these factors, the Corporation has determined these securities are not other-than-temporarily impaired at September 30, 2015.

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ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER

9 Months Ended

Sep. 30, 2015

Accounting For Certain Loans Acquired In Transfer [Abstract]

ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER

NOTE 6: ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER

The Corporation acquired loans in the acquisition of Dupont State Bank during the year ended December 31, 2012. Certain of the transferred loans had evidence of deterioration of credit quality since origination and it was probable that all contractually required payments would not be collected.

Loans purchased with evidence of credit deterioration, for which it is probable that all contractually required payments will not be collected, are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include deterioration of collateral value, past due status and/or nonaccrual status, and borrower credit scores. Purchased credit-impaired loans are accounted for under accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and are initially measured at fair value, which includes estimated future losses that may be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over at the acquisition date. Management utilized cash flows prepared by a third party in arriving at the discount for credit-impaired loans acquired in the transaction. Those cash flows included estimation of current key assumptions, such as default rates, severity, and prepayment speeds.

The carrying amount of those loans included in the consolidated condensed balance sheet as loans receivable at September 30, 2015 and December 31, 2014 were (in thousands):

	September 30, 2015			December 31, 2014
	(Unaudited)
Construction/Land	$	131		$	682
One-to-four family residential		1,209			1,400
Multi-family residential		-			-
Nonresidential real estate and agricultural land		538			568
Commercial		22			24
Consumer and other		20			29
Outstanding balance of acquired credit-impaired loans		1,920			2,703
Fair value adjustment for credit-impaired loans		(533	)		(830	)
Carrying balance of acquired credit-impaired loans	$	1,387		$	1,873

Accretable yield, or income expected to be collected is as follows:

	Three Months EndedSeptember 30, 2015			Nine Months EndedSeptember 30, 2015
	(Unaudited; In Thousands)
Balance at the beginning of the period	$	1,029		$	1,262
Additions		-			-
Accretion		(50	)		(350	)
Reclassification from non-accretable difference		12			79
Disposals		-			-
Balance September 30, 2015	$	991		$	991

	Three Months EndedSeptember 30, 2014			Nine Months EndedSeptember 30, 2014
	(Unaudited; In Thousands)
Balance at the beginning of the period	$	1,311		$	1,345
Additions		-			-
Accretion		(86	)		(296	)
Reclassification from non-accretable difference		39			215
Disposals		-			-
Balance September 30, 2014	$	1,264		$	1,264

Loans acquired during 2012 for which it was probable at acquisition that all contractually required payments would not be collected were as follows (in thousands):

Contractually required payments receivable at acquisition
Construction / Land	$	750
One-to-four family residential		2,193
Multi-family residential		687
Nonresidential and agricultural land		1,530
Commercial		73
Consumer		52
Total required payments receivable at acquisition	$	5,285
Cash flows expected to be collected at acquisition	$	3,838
Basis in acquired loans at acquisition	$	3,088

During the three months and nine months ended September30, 2015, increases and decreases to the allowance for loan losses for loans acquired with deteriorated credit quality were immaterial to financial reporting.

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PUBLIC STOCK OFFERING

9 Months Ended

Sep. 30, 2015

Public Stock Offering [Abstract]

PUBLIC STOCK OFFERING

NOTE 8: PUBLIC STOCK OFFERING

On July 7, 2014, the Corporation issued 825,000 shares of its common stock in an underwritten public offering at an offering price of $20.50 per share. On July 15, 2014, as a result of the underwriter’s exercise of an over-allotment option, the Corporation issued an additional 121,390 shares of its common stock at the public offering price of $20.50 per share, bringing the total number of shares of common stock sold by the Corporation in the public offering to 946,390 shares. Gross proceeds to the Corporation from the public offering, including proceeds from the exercise of the over-allotment option, were approximately $19.4 million, and net proceeds after offering expenses were approximately $17.8 million.

The Corporation used a portion of the net proceeds from the offering to redeem all 5,000 of its issued and outstanding Fixed Rate Cumulative Perpetual Preferred Stock, Series A on December 15, 2014, when the preferred stock became redeemable. The Corporation intends to use the remaining net proceeds for general corporate purposes, including the contribution of a portion of the proceeds to the Bank as additional capital. The net proceeds will also support future growth, which may include organic growth in existing markets and opportunistic acquisitions of all or part of other financial institutions.

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INVESTMENT SECURITIES (Detail Textuals) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]
Carrying value securities pledged to secure public deposits and for other purposes	$ 24,152	$ 24,152		$ 28,071
Proceeds from sales of securities available-for-sale	504	5,897	$ 10,156
Gain on sales and calls of available-for-sale securities, gross	5	128	437
Realized losses on sales and calls of available-for-sale securities		(5)	$ (192)
Investments in debt securities with fair values below historical cost	$ 33,139	$ 33,139		$ 44,161
Percentage of total debts investment to corporation's investment portfolio	24.60%	24.60%		34.30%

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STOCK BASED COMPENSATION (Detail Textuals) - USD ($)		3 Months Ended		9 Months Ended
	Jul. 15, 2014	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Apr. 16, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense		$ 54,000	$ 33,000	$ 129,000	$ 169,000
Stock Options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period				4 years
Stock Options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period				9 years
Restricted Stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period				4 years
Restricted Stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period				9 years
2014 Stock Option and Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized to be issued under plan						150,000
2014 Stock Option and Incentive Plan | Directors and Officers | Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of stock options granted	30,000
2014 Stock Option and Incentive Plan | Directors and Officers | Restricted Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of restricted stock granted	30,000

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of fair value measurements of assets and liabilities recognized in the accompanying balance sheets measured at fair value on a recurring basis

			September 30, 2015Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	(Unaudited; In Thousands)
Federal agencies	$	31,911	$	-	$	31,911	$	-
State and municipal		48,274		-		48,274		-
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,498		-		51,498		-
Corporate		3,295		-		2,001		1,294
Total	$	134,978	$	-	$	133,684	$	1,294

			December 31, 2014Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	(In Thousands)
Federal agencies	$	31,622	$	-	$	31,622	$	-
State and municipal		42,200		-		42,200		-
Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities		51,741		-		51,741		-
Corporate		3,322		-		2,000		1,322
Total	$	128,885	$	-	$	127,563	$	1,322

Schedule of reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheets using significant unobservable (Level 3) inputs

	Available-for-Sale Securities
	Three Months Ended September 30, 2015			Three Months Ended September 30, 2014
	(Unaudited; In Thousands)
Beginning balance	$	1,317		$	1,384
Accretion		2			2
Total realized and unrealized gains and losses
Unrealized losses included in other comprehensive income		(17	)		(101	)
Settlements, including pay downs		(8	)		(6	)
Ending balance	$	1,294		$	1,279
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	-		$	-

	Available-for-Sale Securities
	Nine Months Ended September 30, 2015			Nine Months Ended September 30, 2014
	(Unaudited; In Thousands)
Beginning balance	$	1,322		$	1,268
Accretion		7			7
Total realized and unrealized gains and losses
Unrealized gains (losses) included in other comprehensive income		(10	)		29
Settlements, including pay downs		(25	)		(25	)
Ending balance	$	1,294		$	1,279
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	-		$	-

Schedule of fair value measurements of assets and liabilities recognized in the accompanying balance sheets measured at fair value on a nonrecurring basis

			Fair Value Measurements Using
As of September 30, 2015	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Unaudited; In Thousands)
Impaired loans	$	12	$	-	$	-	$	12
Real estate held for sale	$	283	$	-	$	-	$	283

			Fair Value Measurements Using
As of December 31, 2014	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In Thousands)
Impaired loans	$	3,357	$	-	$	-	$	3,357

Schedule of quantitative information about level 3 fair value measurements

	Fair Value at September 30, 2015		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	(Unaudited; In Thousands)
Impaired loans	$	12	Comparative sales based on independent appraisal	Marketability Discount		70	%
Real estate held for sale	$	283	Comparative sales based on independent appraisal	Marketability Discount		10%-20	%
Securities available-for-sale
Corporate	$	1,294	Discounted cash flows	*Default probability		1.80%-75	%
				*Loss, given default		85%-100	%
				*Discount rate		3.03%-4.75	%
				*Recovery rate		10%-75	%
				*Prepayment rate		1%-2	%

	Fair Value atDecember 31, 2014		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	(In Thousands)
Impaired loans	$	3,357	Comparative sales based on independent appraisal	Marketability Discount		10%-20	%
Securities available-for-sale
Corporate	$	1,322	Discounted cash flows	*Default probability		1.80%-75	%
				*Loss, given default		85%-100	%
				*Discount rate		3.03%-4.75	%
				*Recovery rate		10%-75	%
				*Prepayment rate		1%-2	%

Schedule of estimated fair values of the company's financial instruments

			Fair Value Measurements Using
	CarryingAmount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)
	(Unaudited; In Thousands)
September 30, 2015:
Assets
Cash and cash equivalents	$	15,177	$	15,177	$	-	$	-
Interest-bearing deposits		2,964		2,964		-		-
Loans, net of allowance for losses		329,670		-		327,172		-
Stock in Federal Home Loan Bank		3,127		-		3,127		-
Interest receivable		2,563		-		2,563		-
Liabilities
Deposits		400,658		-		400,685		-
Borrowings		50,967		-		44,992		7,179
Interest payable		199		-		199		-

			Fair Value Measurements Using
	CarryingAmount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs(Level 2)		Significant Unobservable Inputs(Level 3)
	(In Thousands)
December 31, 2014:
Assets
Cash and cash equivalents	$	13,264	$	13,264	$	-	$	-
Interest-bearing deposits		1,984		1,984		-		-
Loans, held for sale		423		-		423		-
Loans, net of allowance for losses		331,995		-		340,790		-
Stock in Federal Home Loan Bank		3,796		-		3,796		-
Interest receivable		2,391		-		2,391		-
Liabilities
Deposits		397,083		-		397,388		-
Borrowings		54,872		4,155		44,920		7,218
Interest payable		209		-		209		-

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair value measurements of assets and liabilities on recurring basis (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Available-for-sale securities
Investment securities available-for-sale	$ 134,978	$ 128,885
Fair Value, Measurements, Recurring | Fair Value
Available-for-sale securities
Investment securities available-for-sale	134,978	128,885
Fair Value, Measurements, Recurring | Fair Value | Federal agencies
Available-for-sale securities
Investment securities available-for-sale	31,911	31,622
Fair Value, Measurements, Recurring | Fair Value | State and municipal
Available-for-sale securities
Investment securities available-for-sale	48,274	42,200
Fair Value, Measurements, Recurring | Fair Value | Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
Available-for-sale securities
Investment securities available-for-sale	51,498	51,741
Fair Value, Measurements, Recurring | Fair Value | Corporate
Available-for-sale securities
Investment securities available-for-sale	$ 3,295	$ 3,322
Fair Value, Measurements, Recurring | Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1)
Available-for-sale securities
Investment securities available-for-sale
Fair Value, Measurements, Recurring | Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Federal agencies
Available-for-sale securities
Investment securities available-for-sale
Fair Value, Measurements, Recurring | Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) | State and municipal
Available-for-sale securities
Investment securities available-for-sale
Fair Value, Measurements, Recurring | Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
Available-for-sale securities
Investment securities available-for-sale
Fair Value, Measurements, Recurring | Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate
Available-for-sale securities
Investment securities available-for-sale
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Other Observable Inputs (Level 2)
Available-for-sale securities
Investment securities available-for-sale	$ 133,684	$ 127,563
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Other Observable Inputs (Level 2) | Federal agencies
Available-for-sale securities
Investment securities available-for-sale	31,911	31,622
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Other Observable Inputs (Level 2) | State and municipal
Available-for-sale securities
Investment securities available-for-sale	48,274	42,200
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Other Observable Inputs (Level 2) | Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
Available-for-sale securities
Investment securities available-for-sale	51,498	51,741
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Other Observable Inputs (Level 2) | Corporate
Available-for-sale securities
Investment securities available-for-sale	2,001	2,000
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Available-for-sale securities
Investment securities available-for-sale	$ 1,294	$ 1,322
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | Federal agencies
Available-for-sale securities
Investment securities available-for-sale
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | State and municipal
Available-for-sale securities
Investment securities available-for-sale
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | Government-sponsored enterprise (GSE) residential mortgage-backed and other asset-backed agency securities
Available-for-sale securities
Investment securities available-for-sale
Fair Value, Measurements, Recurring | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | Corporate
Available-for-sale securities
Investment securities available-for-sale	$ 1,294	$ 1,322

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LOANS AND ALLOWANCE (Detail Textuals)	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) Loan	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) Loan	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($) Loan
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate, held for sale	$ 492,000		$ 492,000		$ 983,000
Interest income recognized on a cash basis	49,000	$ 59,000	206,000	$ 243,000
Total amount of loan identified as troubled debt restructured	5,100,000		5,100,000
Residential Real Estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Real estate, held for sale	82,000	452,000	82,000	452,000
Real estate in the process of foreclosure	271,000	2,611,000	271,000	2,611,000
Loans Receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due 90 days or more and accruing					$ 28,000
Number of loans | Loan					4
Interest income recognized on a cash basis	$ 100,000	93,000	$ 335,000	352,000
Number of troubled debt restructuring | Loan	21		21
Loans Receivable | Commercial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due 90 days or more and accruing					$ 25,000
Number of loans | Loan					1
Interest income recognized on a cash basis	$ 3,000	2,000	$ 18,000	13,000
Loans Receivable | One-to-four family residential
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due 90 days or more and accruing	67,000		67,000		$ 1,000
Interest income recognized on a cash basis	46,000	$ 40,000	139,000	$ 133,000
Loans Receivable | Consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans past due 90 days or more and accruing					$ 2,000
Number of loans | Loan					2
Loans Receivable | Non-performing loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total amount of loan identified as troubled debt restructured	3,300,000		3,300,000
Loans Receivable | Performing loans
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total amount of loan identified as troubled debt restructured	$ 1,800,000		$ 1,800,000

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LOANS AND ALLOWANCE - Information regarding breakdown of balance in allowance for loan losses and recorded investment in loans (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Allowance for losses:
Balances at end of period	$ 3,727		$ 4,005
Loans:
Balances at end of period	333,397		336,000
Loans Receivable
Allowance for losses:
Individually evaluated for impairment	890		1,593
Collectively evaluated for impairment	2,627		2,222
Loans acquired with a deteriorated credit quality:	210		190
Balances at end of period	3,727	$ 3,675	4,005	$ 3,940	$ 3,762	$ 4,510
Loans:
Individually evaluated for impairment	12,545		13,210
Collectively evaluated for impairment	320,595		320,461
Loans acquired with a deteriorated credit quality:	1,387		1,873
Balances at end of period	334,527		335,544
Loans Receivable | Construction/Land
Allowance for losses:
Individually evaluated for impairment	391		391
Collectively evaluated for impairment	$ 278		$ 349
Loans acquired with a deteriorated credit quality:
Balances at end of period	$ 669	922	$ 740	663	676	676
Loans:
Individually evaluated for impairment	3,318		4,047
Collectively evaluated for impairment	17,818		21,597
Loans acquired with a deteriorated credit quality:	56		411
Balances at end of period	21,192		26,055
Loans Receivable | 1-4 Family
Allowance for losses:
Individually evaluated for impairment	181		816
Collectively evaluated for impairment	1,237		1,023
Loans acquired with a deteriorated credit quality:	110		138
Balances at end of period	1,528	1,387	1,977	1,674	1,391	1,749
Loans:
Individually evaluated for impairment	4,609		4,448
Collectively evaluated for impairment	124,203		128,421
Loans acquired with a deteriorated credit quality:	918		1,035
Balances at end of period	$ 129,730		$ 133,904
Loans Receivable | Multi-Family
Allowance for losses:
Individually evaluated for impairment
Collectively evaluated for impairment	$ 46		$ 28
Loans acquired with a deteriorated credit quality:
Balances at end of period	$ 46	27	$ 28	285	303	404
Loans:
Individually evaluated for impairment			1,013
Collectively evaluated for impairment	$ 25,326		$ 19,923
Loans acquired with a deteriorated credit quality:
Balances at end of period	$ 25,326		$ 20,936
Loans Receivable | Nonresidential
Allowance for losses:
Individually evaluated for impairment	310		310
Collectively evaluated for impairment	912		745
Loans acquired with a deteriorated credit quality:	100		52
Balances at end of period	1,322	1,240	1,107	1,177	1,232	1,470
Loans:
Individually evaluated for impairment	4,367		3,315
Collectively evaluated for impairment	121,108		119,176
Loans acquired with a deteriorated credit quality:	398		403
Balances at end of period	$ 125,873		122,894
Loans Receivable | Commercial
Allowance for losses:
Individually evaluated for impairment			76
Collectively evaluated for impairment	$ 136		$ 75
Loans acquired with a deteriorated credit quality:
Balances at end of period	$ 136	87	$ 151	131	152	189
Loans:
Individually evaluated for impairment	251		379
Collectively evaluated for impairment	27,864		27,468
Loans acquired with a deteriorated credit quality:	13		14
Balances at end of period	28,128		$ 27,861
Loans Receivable | Consumer
Allowance for losses:
Individually evaluated for impairment	8
Collectively evaluated for impairment	$ 18		$ 2
Loans acquired with a deteriorated credit quality:
Balances at end of period	$ 26	$ 12	$ 2	$ 10	$ 8	$ 22
Loans:
Individually evaluated for impairment			8
Collectively evaluated for impairment	$ 4,276		3,876
Loans acquired with a deteriorated credit quality:	2		10
Balances at end of period	$ 4,278		$ 3,894

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Consolidated Condensed Statements of Income (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Statement [Abstract]
Net realized gains on sale of available-for-sale securities related to accumulated other comprehensive earnings reclassifications	$ 5	$ 0	$ 123	$ 245
Reclassification adjustment for gains included in net income, tax expense	$ 2	$ 0	$ 42	$ 83

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PRINCIPLES OF CONSOLIDATION

9 Months Ended

Sep. 30, 2015

Principles Of Consolidation [Abstract]

PRINCIPLES OF CONSOLIDATION

NOTE 2: PRINCIPLES OF CONSOLIDATION

The consolidated condensed financial statements include the accounts of the Corporation and its subsidiaries, the Bank and River Valley Risk Management, Inc., a Nevada corporation formed in December 2014 as a captive insurance company. The Bank currently owns four subsidiaries. Madison 1st Service Corporation, which was incorporated under the laws of the State of Indiana on July 3, 1973, currently holds land but does not otherwise engage in significant business activities. RVFB Investments, Inc., RVFB Holdings, Inc., and RVFB Portfolio, LLC were established in Nevada the latter part of 2005. They hold and manage a significant portion of the Bank’s investment portfolio. All significant inter-company balances and transactions have been eliminated in the accompanying consolidated condensed financial statements.

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DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - Reconciliation of beginning and ending balances of recurring fair value measurements using significant unobservable (Details 1) - Fair Value, Measurements, Recurring - Available-for-Sale Securities - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 1,317	$ 1,384	$ 1,322	$ 1,268
Accretion	2	2	7	7
Total realized and unrealized gains and losses
Unrealized gains (losses) included in other comprehensive income	(17)	(101)	(10)	29
Settlements, including pay downs	(8)	(6)	(25)	(25)
Ending balance	$ 1,294	$ 1,279	$ 1,294	$ 1,279
Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date

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ACCOUNTING FOR CERTAIN LOANS ACQUIRED IN A TRANSFER - Summary of contractually required payments receivable at acquisition (Details 2) - Dupont State Bank - Loans Receivable $ in Thousands	Sep. 30, 2015 USD ($)
Contractually required payments receivable at acquisition:
Total required payments receivable at acquisition	$ 5,285
Cash flows expected to be collected at acquisition	3,838
Basis in acquired loans at acquisition	3,088
Construction/Land
Contractually required payments receivable at acquisition:
Total required payments receivable at acquisition	750
One-to-four family residential
Contractually required payments receivable at acquisition:
Total required payments receivable at acquisition	2,193
Multi-family residential
Contractually required payments receivable at acquisition:
Total required payments receivable at acquisition	687
Nonresidential and agricultural land
Contractually required payments receivable at acquisition:
Total required payments receivable at acquisition	1,530
Commercial
Contractually required payments receivable at acquisition:
Total required payments receivable at acquisition	73
Consumer
Contractually required payments receivable at acquisition:
Total required payments receivable at acquisition	$ 52

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Schedule of earnings per share computed based upon the weighted average common shares outstanding

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	2015			2014			2015			2014
	(Unaudited; Dollar Amounts in Thousands)
Net income	$	1,287		$	1,119		$	4,289		$	3,325
Allocated to preferred stock		-			(91	)		-			(272	)
Allocated to participating securities		(9	)		(5	)		(38	)		(7	)
Net income allocated to common shareholders	$	1,278		$	1,023		$	4,251		$	3,046
Weighted average common shares outstanding, gross		2,513,696			2,427,984			2,513,696			1,836,126
Less:  Average participating securities		(18,913	)		(12,782	)		(22,304	)		(4,261	)
Weighted average common shares outstanding, net		2,494,783			2,415,202			2,491,392			1,831,865
Effect of diluted based awards		3,246			2,938			3,143			3,816
Weighted average shares and common stock equivalents		2,498,029			2,418,140			2,494,535			1,835,681
Basic	$	0.51		$	0.42		$	1.71		$	1.66
Diluted	$	0.51		$	0.42		$	1.70		$	1.66
Options excluded from the calculation due to their anti-dilutive effect on earnings per share		30,000			30,000			30,000			30,000