Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company establishes a risk rating at origination for all commercial loan and commercial real estate relationships. For relationships over $750 thousand, management monitors the loans on an ongoing basis for any changes in the borrower’s ability to service their debt. Management also affirms the risk ratings for the loans and leases in their respective portfolios on an annual basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of March 31, 2016 and December 31, 2015, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

(In Thousands of Dollars)	Pass		Special Mention		Sub standard		Doubtful		Total
March 31, 2016
Originated loans:
Commercial real estate
Owner occupied	$	106,803	$	1,053	$	4,336	$	0	$	112,192
Non-owner occupied		146,493		444		2,818		0		149,755
Other		49,542		0		289		0		49,831
Commercial		165,376		926		2,096		0		168,398
Total originated loans	$	468,214	$	2,423	$	9,539	$	0	$	480,176
Acquired loans:
Commercial real estate
Owner occupied	$	129,709	$	783	$	2,020	$	0	$	132,512
Non-owner occupied		25,975		736		391		0		27,102
Other		18,723		476		198		0		19,397
Commercial		61,053		1,594		3,036		0		65,683
Total acquired loans	$	235,460	$	3,589	$	5,645	$	0	$	244,694
Total loans	$	703,674	$	6,012	$	15,184	$	0	$	724,870

(In Thousands of Dollars)	Pass		Special Mention		Sub standard		Doubtful		Total
December 31, 2015
Originated loans:
Commercial real estate
Owner occupied	$	107,222	$	1,069	$	4,588	$	0	$	112,879
Non-owner occupied		135,847		461		2,861		0		139,169
Other		50,376		0		295		0		50,671
Commercial		154,215		939		1,973		0		157,127
Total originated loans	$	447,660	$	2,469	$	9,717	$	0	$	459,846
Acquired loans:
Commercial real estate
Owner occupied	$	130,028	$	0	$	1,645	$	0	$	131,673
Non-owner occupied		26,141		1,340		564		0		28,045
Other		22,843		476		217		0		23,536
Commercial		69,674		635		3,312		0		73,621
Total acquired loans	$	248,686	$	2,451	$	5,738	$	0	$	256,875
Total loans	$	696,346	$	4,920	$	15,455	$	0	$	716,721

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential, consumer indirect and direct loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. In the 1-4 family residential real estate portfolio at March 31, 2016 there were $430 thousand of other real estate owned properties and $791 thousand of properties in foreclosure. Other real estate owned and foreclosure properties were $328 thousand and $857 thousand at December 31, 2015, respectively.

The following table presents the recorded investment in residential, consumer indirect and direct auto loans based on payment activity as of March 31, 2016 and December 31, 2015. Nonperforming loans are loans past due 90 days or more and still accruing interest and nonaccrual loans.

	Residential Real Estate				Consumer
(In Thousands of Dollars)	1-4 Family Residential		Home Equity Lines of Credit		Indirect		Direct		Other
March 31, 2016
Originated loans:
Performing	$	188,865	$	43,843	$	130,852	$	20,116	$	4,699
Nonperforming		2,645		191		338		19		10
Total originated loans	$	191,510	$	44,034	$	131,190	$	20,135	$	4,709
Acquired loans:
Performing	$	129,346	$	39,377	$	0	$	28,589	$	275
Nonperforming		1,199		131		0		136		0
Total acquired loans		130,545		39,508		0		28,725		275
Total loans	$	322,055	$	83,542	$	131,190	$	48,860	$	4,984

	Residential Real Estate				Consumer
(In Thousands of Dollars)	1-4 Family Residential		Home Equity Lines of Credit		Indirect		Direct		Other
December 31, 2015
Originated loans:
Performing	$	176,472	$	40,984	$	130,864	$	17,440	$	4,484
Nonperforming		2,742		239		563		33		24
Total originated loans	$	179,214	$	41,223	$	131,427	$	17,473	$	4,508
Acquired loans:
Performing	$	132,776	$	40,797	$	0	$	31,254	$	204
Nonperforming		925		132		0		211		0
Total acquired loans		133,701		40,929		0		31,465		204
Total loans	$	312,915	$	82,152	$	131,427	$	48,938	$	4,712