Note

- Loans and Allowance for Loan Losses

Loans are comprised of the following at

December

31:

	2016			2015
Residential real estate	$	286,022		$	223,875
Commercial real estate:
Owner-occupied		77,605			73,458
Nonowner-occupied		90,532			72,002
Construction		45,870			23,852
Commercial and industrial		100,589			81,936
Consumer:
Automobile		59,772			44,566
Home equity		20,861			20,841
Other		53,650			45,222
		734,901			585,752
Less: Allowance for loan losses		(7,699	)		(6,648	)

Loans, net	$	727,202		$	579,104

The following table presents the activity in the allowance for loan losses by portfolio segment for the years ended

December

31,

2016,

2015

and

2014:

December 31, 2016	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,087		$	1,959		$	2,589		$	1,013		$	6,648
Provision for loan losses		(63	)		2,287			(1,112	)		1,714			2,826
Loans charged off		(384	)		(63	)		(586	)		(2,170	)		(3,203	)
Recoveries		299			132			16			981			1,428
Total ending allowance balance	$	939		$	4,315		$	907		$	1,538		$	7,699

December 31, 2015	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334
Provision for loan losses		103			(469	)		777			679			1,090
Loans charged off		(828	)		(1,971	)		(24	)		(1,428	)		(4,251	)
Recoveries		386			204			234			651			1,475
Total ending allowance balance	$	1,087		$	1,959		$	2,589		$	1,013		$	6,648

December 31, 2014	Residential Real Estate			Commercial Real Estate			Commercial & Industrial			Consumer			Total
Allowance for loan losses:
Beginning balance	$	1,169		$	2,914		$	1,279		$	793		$	6,155
Provision for loan losses		458			1,408			(28	)		949			2,787
Loans charged off		(487	)		(235	)		(41	)		(1,216	)		(1,979	)
Recoveries		286			108			392			585			1,371
Total ending allowance balance	$	1,426		$	4,195		$	1,602		$	1,111		$	8,334

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

December

31,

2016

and

2015:

December 31, 2016	Residential Real Estate		Commercial Real Estate		Commercial & Industrial		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	----	$	2,535	$	241	$	205	$	2,981
Collectively evaluated for impairment		939		1,780		666		1,333		4,718
Total ending allowance balance	$	939	$	4,315	$	907	$	1,538	$	7,699

Loans:
Loans individually evaluated for impairment	$	717	$	13,111	$	8,465	$	416	$	22,709
Loans collectively evaluated for impairment		285,305		200,896		92,124		133,867		712,192
Total ending loans balance	$	286,022	$	214,007	$	100,589	$	134,283	$	734,901

December 31, 2015	Residential Real Estate		Commercial Real Estate		Commercial & 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 table presents information related to loans individually evaluated for impairment by class of loans as of the years ended

December

31,

2016,

2015

and

2014:

December 31, 2016	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	5,477	$	5,477	$	2,435	$	3,185	$	300	$	300
Nonowner-occupied		384		384		100		390		19		19
Commercial and industrial		392		392		241		391		----		----
Consumer:
Home equity		416		416		205		421		21		21

With no related allowance recorded:
Residential real estate		717		717		----		726		31		31
Commercial real estate:
Owner-occupied		3,638		3,091		----		3,005		178		178
Nonowner-occupied		5,078		3,632		----		3,572		79		79
Construction		1,001		527		----		522		136		136
Commercial and industrial		8,073		8,073		----		7,681		381		381
Total	$	25,176	$	22,709	$	2,981	$	19,893	$	1,145	$	1,145

December 31, 2015	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied	$	204	$	204	$	204	$	204	$	13	$	13
Nonowner-occupied		396		396		107		402		75		75
Commercial and industrial		4,355		4,355		1,850		3,545		149		149
Consumer:
Home equity		218		218		3		219		8		8

With no related allowance recorded:
Residential real estate		1,001		1,001		----		809		45		45
Commercial real estate:
Owner-occupied		3,812		3,265		----		2,747		181		181
Nonowner-occupied		5,178		2,773		----		3,439		49		49
Construction		680		680		----		544		----		----
Commercial and industrial		4,336		4,336		----		3,985		180		180
Total	$	20,180	$	17,228	$	2,164	$	15,894	$	700	$	700

December 31, 2014	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Impaired Loans		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate	$	----	$	----	$	----	$	----	$	6	$	6
Commercial real estate:
Owner-occupied		1,177		1,177		414		471		32		32
Nonowner-occupied		7,656		7,656		2,092		8,303		398		398
Commercial and industrial		2,356		2,356		900		2,441		110		110
Consumer:
Home equity		219		219		6		219		7		7

With no related allowance recorded:
Residential real estate		1,415		1,415		----		882		58		58
Commercial real estate:
Owner-occupied		3,125		2,578		----		2,135		113		113
Nonowner-occupied		1,298		300		----		300		50		50
Commercial and industrial		4,703		4,468		----		2,278		180		180

Total	$	21,949	$	20,169	$	3,412	$	17,029	$	954	$	954

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

Nonaccrual loans and loans past due

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

December

31,

2016

and

December

31,

2015,

other real estate owned secured by residential real estate totaled

$938

and

$1,131,

respectively. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of

$1,492

and

$988

as of

December

31,

2016

and

December

31,

2015,

respectively.

The following table presents the recorded investment of nonaccrual loans and loans past due

days or more and still accruing by class of loans as of

December

31,

2016

and

2015:

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2016
Residential real estate	$	132	$	3,445
Commercial real estate:
Owner-occupied		28		1,571
Nonowner-occupied		----		2,506
Construction		----		527
Commercial and industrial		----		867
Consumer:
Automobile		121		5
Home equity		----		34
Other		46		6
Total	$	327	$	8,961

	Loans Past Due 90 Days And Still Accruing		Nonaccrual
December 31, 2015
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

December

31,

2016

and

2015:

December 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	$	3,728	$	953	$	2,201	$	6,882	$	279,140	$	286,022
Commercial real estate:
Owner-occupied		134		366		1,325		1,825		75,780		77,605
Nonowner-occupied		261		18		2,506		2,785		87,747		90,532
Construction		66		52		182		300		45,570		45,870
Commercial and industrial		1,283		483		800		2,566		98,023		100,589
Consumer:
Automobile		1,091		221		126		1,438		58,334		59,772
Home equity		349		45		----		394		20,467		20,861
Other		685		155		46		886		52,764		53,650

Total	$	7,597	$	2,293	$	7,186	$	17,076	$	717,825	$	734,901

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

December

31,

2016

and

December

31,

2015:

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2016
Residential real estate:
Interest only payments	$	717	$	----	$	717
Commercial real estate:
Owner-occupied
Interest only payments		284		----		284
Rate reduction		----		232		232
Reduction of principal and interest payments		579		----		579
Maturity extension at lower stated rate than market rate		1,582		----		1,582
Nonowner-occupied
Interest only payments		600		2,210		2,810
Rate reduction		384		----		384
Credit extension at lower stated rate than market rate		574		----		574
Commercial and industrial
Interest only payments		8,074		----		8,074
Credit extension at lower stated rate than market rate		----		391		391
Consumer:
Home equity
Maturity extension at lower stated rate than market rate		213		----		213
Credit extension at lower stated rate than market rate		203		----		203

Total TDR’s	$	13,210	$	2,833	$	16,043

	TDR’s Performing to Modified Terms		TDR’s Not Performing to Modified Terms		Total TDR’s
December 31, 2015
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

twelve

months ended

December

31,

2016,

the TDR’s described above decreased the allowance for loan losses and provision expense by

$1,112,

with corresponding charge-offs of

$11.

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.

December

31,

2016,

the balance in TDR loans decreased

$10,

0.1%,

from year-end

2015.

The Company had

82%

of its TDR’s performing according to their modified terms at

December

31,

2016,

as compared to

81%

December

31,

2015.

The Company’s specific allocations in reserves to customers whose loan terms have been modified in TDR’s totaled

$546

December

31,

2016,

as compared to

$1,669

in reserves at

December

31,

2015.

Lower specific reserves in

2016

was impacted by the reduction of

$1,160

in specific reserves that were previously related to

one

commercial and industrial loan relationship. During the

second

quarter of

2016,

a re-evaluation of this borrower’s financial performance identified significant improvement, which resulted in a credit quality upgrade to the borrower relationship and no identified collateral impairment. At

December

31,

2016,

the Company had

$2,427

in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s, as compared to

$995

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 years ended

December

31,

2016

and

2015:

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
December 31, 2016
Commercial real estate:
Nonowner-occupied
Interest only payments	$	----	$	----	$	226	$	226
Credit extension at lower stated rate than market rate		574		574		----		----

Total TDR’s	$	574	$	574	$	226	$	226

	TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms
	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
December 31, 2015
Residential real estate
Interest only payments	$	495	$	495		----		----
Commercial real estate:
Owner-occupied
Maturity extension at lower stated rate than market rate		1,025		1,025		----		----
Commercial and industrial
Credit extension at lower stated rate than market rate		226		226		----		----

Total TDR’s	$	1,746	$	1,746		----		----

During the

twelve

months ended

December

31,

2016,

the Company placed

one

commercial real estate TDR totaling

$226

on nonaccrual status. The borrower continues to experience financial difficulty and the Company has started the foreclosure process. The Company reviewed the loan's collateral during the

third

quarter and identified

$11

in collateral impairment, which resulted in a partial charge-off of principal. There were no specific allocations of the allowance for loan losses recorded on the impaired TDR loan at

December

31,

2016.

All of the Company’s loans that were restructured during the

twelve

months ended

December

31,

2015

were performing in accordance with their modified terms. Excluding the commercial real estate loan of

$226

previously mentioned, there were

other TDR's described above at

December

31,

2016

and

2015

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

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

twelve

months ended

December

31,

2016

increased the provision expense and the allowance for loan losses by

$11.

As of

December

31,

2016,

the Company had no allocation of reserves to customers whose loan terms were modified during the year ended

2016.

The loans modified during the

twelve

months ended

December

31,

2015

had no impact on the provision expense or the allowance for loan losses. As of

December

31,

2015,

the Company had no allocation of reserves to customers whose loan terms were modified during the year ended of

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

through

11.

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

and its classified assets to be loans that are graded

through

11.

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.

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.

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

loans. Collateral liquidation considered likely to satisfy debt.

Doubtful

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, and 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.

Loss

Loans classified as loss are considered uncollectible and are of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the credit has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset yielding such a minimum value even though partial recovery

may

be affected in the future. Amounts classified as loss should be promptly charged off.

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

(Prime) to

(Watch). All commercial loans are categorized into a risk category either at the time of origination or re-evaluation date. As of

December

31,

2016

and

December

31,

2015,

and based on the most recent analysis performed, the risk category of commercial loans by class of loans is as follows:

December 31, 2016	Pass		Criticized		Classified		Total
Commercial real estate:
Owner-occupied	$	66,495	$	428	$	10,682	$	77,605
Nonowner-occupied		83,103		2,364		5,065		90,532
Construction		45,325		----		545		45,870
Commercial and industrial		94,091		188		6,310		100,589
Total	$	289,014	$	2,980	$	22,602	$	314,596

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 not thereafter. 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 payment activity as of

December

31,

2016

and

December

31,

2015:

	Consumer
December 31, 2016	Automobile		Home Equity		Other		Residential Real Estate		Total
Performing	$	59,646	$	20,827	$	53,598	$	282,445	$	416,516
Nonperforming		126		34		52		3,577		3,789
Total	$	59,772	$	20,861	$	53,650	$	286,022	$	420,305

	Consumer
December 31, 2015	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, grants residential, consumer, and commercial loans to customers located primarily in the southeastern area of Ohio as well as the western counties of West Virginia. Approximately

5.61%

of total loans were unsecured at

December

31,

2016,

down from

6.06%

December

31,

2015.