Note 4 - Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2015

Receivables [Abstract]

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

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are comprised of the following:	March 31,		December 31,
	2015		2014
Residential real estate	$	221,310	$	223,628
Commercial real estate:
Owner-occupied		79,047		78,848
Nonowner-occupied		72,159		71,229
Construction		25,987		27,535
Commercial and industrial		89,447		83,998
Consumer:
Automobile		43,022		42,849
Home equity		19,198		18,291
Other		44,347		48,390
		594,517		594,768
Less: Allowance for loan losses		8,320		8,334
Loans, net	$	586,197	$	586,434

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2015 and 2014:

March 31, 2015	Residential Real Estate			Commercial Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334
Provision for loan losses		31			6			14			(129	)		(78	)
Loans charged off		(97	)		(8	)		(2	)		(261	)		(368	)
Recoveries		105			17			124			186			432
Total ending allowance balance	$	1,465		$	4,210		$	1,738		$	907		$	8,320

March 31, 2014	Residential Real Estate			Commercial Real Estate			Commercial and Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,169		$	2,914		$	1,279		$	793		$	6,155
Provision for loan losses		309			57			(19	)		147			494
Loans charged off		(54	)		(157	)		----			(255	)		(466	)
Recoveries		13			31			71			164			279
Total ending allowance balance	$	1,437		$	2,845		$	1,331		$	849		$	6,462

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

March 31, 2015	Residential Real Estate		Commercial Real Estate		Commercial and Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	2,533	$	1,021	$	4	$	3,558
Collectively evaluated for impairment		1,465		1,677		717		903		4,762
Total ending allowance balance	$	1,465	$	4,210	$	1,738	$	907	$	8,320
Loans:
Loans individually evaluated for impairment	$	1,411	$	11,590	$	7,358	$	219	$	20,578
Loans collectively evaluated for impairment		219,899		165,603		82,089		106,348		573,939
Total ending loans balance	$	221,310	$	177,193	$	89,447	$	106,567	$	594,517

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

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

March 31, 2015	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	478	$	478	$	445
Nonowner-occupied		7,580		7,580		2,088
Commercial and industrial		3,045		3,045		1,021
Consumer:
Home equity		219		219		4
With no related allowance recorded:
Residential real estate		1,411		1,411		----
Commercial real estate:
Owner-occupied		3,099		2,552		----
Nonowner-occupied		1,294		300		----
Construction		680		680		----
Commercial and industrial		4,435		4,313		----
Total	$	22,241	$	20,578	$	3,558

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

The following tables present information related to loans individually evaluated for impairment by class of loans for the three months ended March 31, 2015 and 2014:

	Three months ended March 31, 2015
	Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	827	$	----	$	----
Nonowner-occupied		7,618		16		16
Commercial and industrial		2,701		25		25
Consumer:
Home equity		219		3		3
With no related allowance recorded:
Residential real estate		1,412		9		9
Commercial real estate:
Owner-occupied		2,566		30		30
Nonowner-occupied		300		12		12
Construction		340		----		----
Commercial and industrial		4,390		55		55
Total	$	20,373	$	150	$	150

	Three months ended March 31, 2014
	Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate	$	906	$	9	$	9
Commercial real estate:
Nonowner-occupied		3,344		34		34
Commercial and industrial		892		10		10
Consumer:
Home equity		218		2		2
With no related allowance recorded:
Residential real estate		527		7		7
Commercial real estate:
Owner-occupied		1,203		9		9
Nonowner-occupied		5,717		75		75
Commercial and industrial		1,734		20		20
Total	$	14,541	$	166	$	166

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

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

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

March 31, 2015	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	34	$	3,594
Commercial real estate:
Owner-occupied		----		781
Nonowner-occupied		----		3,988
Construction		----		769
Commercial and industrial		----		91
Consumer:
Automobile		38		11
Home equity		----		149
Other		----		69
Total	$	72	$	9,452

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

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

March 31, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days Or More Past Due		Total Past Due		Loans Not Past Due		Total
Residential real estate	$	1,997	$	493	$	3,406	$	5,896	$	215,414	$	221,310
Commercial real estate:
Owner-occupied		227		----		781		1,008		78,039		79,047
Nonowner-occupied		323		----		3,988		4,311		67,848		72,159
Construction		----		69		769		838		25,149		25,987
Commercial and industrial		256		----		21		277		89,170		89,447
Consumer:
Automobile		516		162		49		727		42,295		43,022
Home equity		26		----		149		175		19,023		19,198
Other		452		79		69		600		43,747		44,347
Total	$	3,797	$	803	$	9,232	$	13,832	$	580,685	$	594,517

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

Troubled Debt Restructurings:

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

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

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

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
March 31, 2015
Residential real estate
Interest only payments	$	516	$	----	$	516
Commercial real estate:
Owner-occupied
Interest only payments		457		----		457
Rate reduction		----		240		240
Reduction of principal and interest payments		621		----		621
Maturity extension at lower stated rate than market rate		1,030		----		1,030
Credit extension at lower stated rate than market rate		204		----		204
Nonowner-occupied
Interest only payments		3,487		3,988		7,475
Rate reduction		405		----		405
Commercial and industrial
Interest only payments		6,963		----		6,963
Credit extension at lower stated rate than market rate		395		----		395
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		219		----		219
Total TDR’s	$	14,297	$	4,228	$	18,525

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

During the three months ended March 31, 2015, the TDR’s described above increased the provision expense and the allowance for loan losses by $115 with no corresponding charge-offs. This is compared to a $26 decrease in the provision expense and the allowance for loan losses during the three months ended March 31, 2014 with no corresponding charge-offs.

At March 31, 2015, the balance in TDR loans increased $428, or 2.4%, from year-end 2014. The increase was largely due to line of credit advances related to one commercial and industrial loan during the first quarter of 2015. There were no new loans classified as TDR's during the first quarter of 2015. The Company had 77% of its TDR's performing according to their modified terms at both March 31, 2015 and December 31, 2014. TDR loans not performing to modified terms were largely impacted by a commercial real estate loan totaling $4,013 that was converted to nonaccrual status during the fourth quarter of 2014 after it was determined that full loan repayment was in significant doubt. Furthermore, the collateral values of this commercial real estate loan were re-evaluated during the fourth quarter of 2014 and additional impairment was identified that resulted in a $1,340 specific allocation. As a result, the Company's specific allocations in reserves to customers whose loan terms have been modified in TDR’s totaled $3,113 at March 31, 2015, as compared to $2,998 in reserves at December 31, 2014. At March 31, 2015, the Company had $1,337 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s, as compared to $1,871 at December 31, 2014.

There were no TDR loan modifications that occurred during the three months ended March 31, 2015 and 2014.

Credit Quality Indicators:

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

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

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

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

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

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

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

March 31, 2015	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	73,091	$	2,147	$	3,809	$	79,047
Nonowner-occupied		61,483		2,430		8,246		72,159
Construction		25,050		----		937		25,987
Commercial and industrial		81,291		547		7,609		89,447
Total	$	240,915	$	5,124	$	20,601	$	266,640

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

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

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

March 31, 2015	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	42,973	$	19,049	$	44,278	$	217,682	$	323,982
Nonperforming		49		149		69		3,628		3,895
Total	$	43,022	$	19,198	$	44,347	$	221,310	$	327,877

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

The Company, through its subsidiaries, originates residential, consumer, and commercial loans to customers located primarily in the southeastern areas of Ohio as well as the western counties of West Virginia. Approximately 5.89% of total loans were unsecured at March 31, 2015, up from 5.66% at December 31, 2014.