Note 4 - Loans and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

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

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES

	March 31, 2016		December 31, 2015
Residential real estate	$	227,026	$	223,875
Commercial real estate:
Owner-occupied		71,117		73,458
Nonowner-occupied		71,731		72,002
Construction		26,512		23,852
Commercial and industrial		81,034		81,936
Consumer:
Automobile		44,952		44,566
Home equity		19,558		20,841
Other		43,915		45,222
		585,845		585,752
Less: Allowance for loan losses		6,946		6,648
Loans, net	$	578,899	$	579,104

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2016 and 2015:

March 31, 2016	Residential Real Estate			Commercial Real Estate		Commercial and Industrial		Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,087		$	1,959	$	2,589	$	1,013		$	6,648
Provision for loan losses		40			17		82		340			479
Loans charged off		(104	)		----		----		(483	)		(587	)
Recoveries		162			19		1		224			406
Total ending allowance balance	$	1,185		$	1,995	$	2,672	$	1,094		$	6,946

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

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, 2016 and December 31, 2015:

March 31, 2016	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	$	----	$	309	$	1,900	$	3	$	2,212
Collectively evaluated for impairment		1,185		1,686		772		1,091		4,734
Total ending allowance balance	$	1,185	$	1,995	$	2,672	$	1,094	$	6,946
Loans:
Loans individually evaluated for impairment	$	730	$	8,022	$	8,869	$	218	$	17,839
Loans collectively evaluated for impairment		226,296		161,338		72,165		108,207		568,006
Total ending loans balance	$	227,026	$	169,360	$	81,034	$	108,425	$	585,845

December 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	$	----	$	311	$	1,850	$	3	$	2,164
Collectively evaluated for impairment		1,087		1,648		739		1,010		4,484
Total ending allowance balance	$	1,087	$	1,959	$	2,589	$	1,013	$	6,648
Loans:
Loans individually evaluated for impairment	$	1,001	$	7,318	$	8,691	$	218	$	17,228
Loans collectively evaluated for impairment		222,874		161,994		73,245		110,411		568,524
Total ending loans balance	$	223,875	$	169,312	$	81,936	$	110,629	$	585,752

The following tables present information related to loans individually evaluated for impairment by class of loans as of March 31, 2016 and December 31, 2015:

March 31, 2016	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	204	$	204	$	204
Nonowner-occupied		393		393		105
Commercial and industrial		4,524		4,524		1,900
Consumer:
Home equity		218		218		3
With no related allowance recorded:
Residential real estate		730		730		----
Commercial real estate:
Owner-occupied		3,797		3,250		----
Nonowner-occupied		5,896		3,495		----
Construction		680		680		----
Commercial and industrial		4,345		4,345		----
Total	$	20,787	$	17,839	$	2,212

December 31, 2015	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	204	$	204	$	204
Nonowner-occupied		396		396		107
Commercial and industrial		4,355		4,355		1,850
Consumer:
Home equity		218		218		3
With no related allowance recorded:
Residential real estate		1,001		1,001		----
Commercial real estate:
Owner-occupied		3,812		3,265		----
Nonowner-occupied		5,178		2,773		----
Construction		680		680		----
Commercial and industrial		4,336		4,336		----
Total	$	20,180	$	17,228	$	2,164

The following tables present information related to loans individually evaluated for impairment by class of loans for the three months ended March 31, 2016 and 2015:

	Three months ended March 31, 2016
	Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	204	$	4	$	4
Nonowner-occupied		395		5		5
Commercial and industrial		4,439		41		41
Consumer:
Home equity		219		2		2
With no related allowance recorded:
Residential real estate		731		9		9
Commercial real estate:
Owner-occupied		3,257		43		43
Nonowner-occupied		3,134		13		13
Construction		680		----		----
Commercial and industrial		4,341		51		51
Total	$	17,400	$	168	$	168

	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

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 Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of March 31, 2016 and December 31, 2015, other real estate owned secured by residential real estate totaled $951 and $1,131, respectively. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $1,114 and $988 as of March 31, 2016 and December 31, 2015, respectively.

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, 2016 and December 31, 2015:

March 31, 2016	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	90	$	2,103
Commercial real estate:
Owner-occupied		----		367
Nonowner-occupied		----		2,635
Construction		----		769
Commercial and industrial		----		1,185
Consumer:
Automobile		47		15
Home equity		----		63
Other		4		5
Total	$	141	$	7,142

December 31, 2015	Loans Past Due 90 Days And Still Accruing		Nonaccrual
Residential real estate	$	20	$	2,048
Commercial real estate:
Owner-occupied		----		404
Nonowner-occupied		----		2,737
Construction		----		769
Commercial and industrial		----		1,152
Consumer:
Automobile		18		27
Home equity		----		96
Other		1		3
Total	$	39	$	7,236

The following table presents the aging of the recorded investment of past due loans by class of loans as of March 31, 2016 and December 31, 2015:

March 31, 2016	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	$	3,116	$	755	$	1,919	$	5,790	$	221,236	$	227,026
Commercial real estate:
Owner-occupied		412		1,038		231		1,681		69,436		71,117
Nonowner-occupied		----		239		2,635		2,874		68,857		71,731
Construction		----		----		769		769		25,743		26,512
Commercial and industrial		71		75		1,077		1,223		79,811		81,034
Consumer:
Automobile		552		198		62		812		44,140		44,952
Home equity		35		15		45		95		19,463		19,558
Other		324		73		4		401		43,514		43,915
Total	$	4,510	$	2,393	$	6,742	$	13,645	$	572,200	$	585,845

December 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	$	2,564	$	1,484	$	1,708	$	5,756	$	218,119	$	223,875
Commercial real estate:
Owner-occupied		141		33		371		545		72,913		73,458
Nonowner-occupied		35		334		2,737		3,106		68,896		72,002
Construction		----		2		769		771		23,081		23,852
Commercial and industrial		31		88		1,077		1,196		80,740		81,936
Consumer:
Automobile		727		197		36		960		43,606		44,566
Home equity		75		----		76		151		20,690		20,841
Other		420		104		4		528		44,694		45,222
Total	$	3,993	$	2,242	$	6,778	$	13,013	$	572,739	$	585,752

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, 2016 and December 31, 2015:

March 31, 2016	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
Residential real estate
Interest only payments	$	730	$	----	$	730
Commercial real estate:
Owner-occupied
Interest only payments		456		----		456
Rate reduction		----		232		232
Reduction of principal and interest payments		598		----		598
Maturity extension at lower stated rate than market rate		1,964		----		1,964
Credit extension at lower stated rate than market rate		204		----		204
Nonowner-occupied
Interest only payments		539		2,375		2,914
Rate reduction		393		----		393
Credit extension at lower stated rate than market rate		581		----		581
Commercial and industrial
Interest only payments		7,544		----		7,544
Credit extension at lower stated rate than market rate		439		391		830
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		218		----		218
Total TDR’s	$	13,666	$	2,998	$	16,664

December 31, 2015	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
Residential real estate
Interest only payments	$	1,001	$	----	$	1,001
Commercial real estate:
Owner-occupied
Interest only payments		433		----		433
Rate reduction		----		232		232
Reduction of principal and interest payments		604		----		604
Maturity extension at lower stated rate than market rate		1,996		----		1,996
Credit extension at lower stated rate than market rate		204		----		204
Nonowner-occupied
Interest only payments		300		2,473		2,773
Rate reduction		396		----		396
Commercial and industrial
Interest only payments		7,579		----		7,579
Credit extension at lower stated rate than market rate		226		391		617
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		218		----		218
Total TDR’s	$	12,957	$	3,096	$	16,053

During the three months ended March 31, 2016, the TDR's described above increased the provision expense and the allowance for loan losses by $48 with no corresponding charge-offs. During the year ended December 31, 2015, the TDR's described above increased the allowance for loan losses and provision expense by $93 with corresponding charge-offs of $1,422. The charge-offs of $1,422 during 2015 included $1,304 that were related to specific reserves that had already been provided for during 2014, and, as a result, did not impact provision expense during 2015.

At March 31, 2016, the balance in TDR loans increased $611, or 3.8%, from year-end 2015. The increase was largely due to concessions granted on two commercial real estate nonowner-occupied loans during the first quarter of 2016. The Company had 82% of its TDR's performing according to their modified terms at March 31, 2016, as compared to 81% at December 31, 2015. The Company's specific allocations in reserves to customers whose loan terms have been modified in TDR’s totaled $1,717 at March 31, 2016, as compared to $1,669 in reserves at December 31, 2015. At March 31, 2016, the Company had $823 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s, as compared to $995 at December 31, 2015.

The following table presents the pre- and post-modification balances of TDR loan modifications by class of loans that occurred during the three months ended March 31, 2016:

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
Three months ended March 31, 2016	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial real estate:
Nonowner-occupied
Interest only payments	$	238	$	238	$	----	$	----
Credit extension at lower stated rate than market rate		581		581		----		----
Total TDR’s	$	819	$	819	$	----	$	----

All of the Company’s loans that were restructured during the three months ended March 31, 2016 were performing in accordance with their modified terms. Furthermore, there were no TDR’s described above at March 31, 2016 that experienced any payment defaults within twelve months following their loan modification. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. TDR loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The loans modified during the three months ended March 31, 2016 had no impact on the provision expense or the allowance for loan losses. As of March 31, 2016, the Company had no allocation of reserves to customers whose loan terms were modified during the first three months of 2016.

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

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 through 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 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, 2016 and December 31, 2015, and based on the most recent analysis performed, the risk category of commercial loans by class of loans was as follows:

March 31, 2016	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	61,731	$	5,548	$	3,838	$	71,117
Nonowner-occupied		61,968		1,775		7,988		71,731
Construction		25,375		----		1,137		26,512
Commercial and industrial		69,708		4,809		6,517		81,034
Total	$	218,782	$	12,132	$	19,480	$	250,394

December 31, 2015	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	62,287	$	6,738	$	4,433	$	73,458
Nonowner-occupied		61,577		6,305		4,120		72,002
Construction		23,080		----		772		23,852
Commercial and industrial		70,852		5,232		5,852		81,936
Total	$	217,796	$	18,275	$	15,177	$	251,248

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, 2016 and December 31, 2015:

March 31, 2016	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	44,890	$	19,495	$	43,906	$	224,833	$	333,124
Nonperforming		62		63		9		2,193		2,327
Total	$	44,952	$	19,558	$	43,915	$	227,026	$	335,451

December 31, 2015	Consumer
	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	44,521	$	20,745	$	45,218	$	221,807	$	332,291
Nonperforming		45		96		4		2,068		2,213
Total	$	44,566	$	20,841	$	45,222	$	223,875	$	334,504

The Company, through its subsidiaries, originates residential, consumer, and commercial loans to customers located primarily in the southeastern areas of Ohio as well as the western counties of West Virginia. Approximately 6.09% of total loans were unsecured at March 31, 2015, up from 6.06% at December 31, 2015.