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Note 4 - Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 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:		June 30,				December 31,
		2015				2014
Residential real estate		$	224,923			$	223,628
Commercial real estate:
Owner-occupied			76,081				78,848
Nonowner-occupied			73,296				71,229
Construction			24,645				27,535
Commercial and industrial			85,573				83,998
Consumer:
Automobile			43,757				42,849
Home equity			20,138				18,291
Other			44,486				48,390
			592,899				594,768
Less: Allowance for loan losses			7,444				8,334

Loans, net		$	585,455			$	586,434

The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2015 and 2014:

June 30, 2015		Residential Real Estate				Commercial Real Estate				Commercial and Industrial				Consumer				Total
Allowance for loan losses:
Beginning balance		$	1,465			$	4,210			$	1,738			$	907			$	8,320
Provision for loan losses			(121	)			(64	)			478				506				799
Loans charged off			(126	)			(1,366	)			(22	)			(446	)			(1,960	)
Recoveries			12				15				93				165				285
Total ending allowance balance		$	1,230			$	2,795			$	2,287			$	1,132			$	7,444

June 30, 2014		Residential Real Estate				Commercial Real Estate				Commercial and Industrial				Consumer				Total
Allowance for loan losses:
Beginning balance		$	1,437			$	2,845			$	1,331			$	849			$	6,462
Provision for loan losses			444				383				201				358				1,386
Loans charged off			(139	)			----				(4	)			(197	)			(340	)
Recoveries			136				48				97				139				420
Total ending allowance balance		$	1,878			$	3,276			$	1,625			$	1,149			$	7,928

The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2015 and 2014:

June 30, 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			(90	)			(58	)			492				377				721
Loans charged off			(223	)			(1,374	)			(24	)			(707	)			(2,328	)
Recoveries			117				32				217				351				717
Total ending allowance balance		$	1,230			$	2,795			$	2,287			$	1,132			$	7,444

June 30, 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			753				440				182				505				1,880
Loans charged off			(193	)			(157	)			(4	)			(452	)			(806	)
Recoveries			149				79				168				303				699
Total ending allowance balance		$	1,878			$	3,276			$	1,625			$	1,149			$	7,928

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 June 30, 2015 and December 31, 2014:

June 30, 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		$	----			$	1,168			$	1,522			$	4			$	2,694
Collectively evaluated for impairment			1,230				1,627				765				1,128				4,750
Total ending allowance balance		$	1,230			$	2,795			$	2,287			$	1,132			$	7,444

Loans:
Loans individually evaluated for impairment		$	1,902			$	10,275			$	7,510			$	218			$	19,905
Loans collectively evaluated for impairment			223,021				163,747				78,063				108,163				572,994
Total ending loans balance		$	224,923			$	174,022			$	85,573			$	108,381			$	592,899

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 June 30, 2015 and December 31, 2014:

June 30, 2015		Unpaid Principal Balance				Recorded Investment				Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial real estate:
Owner-occupied		$	478			$	478			$	437
Nonowner-occupied			3,558				3,558				731
Commercial and industrial			3,325				3,325				1,522
Consumer:
Home equity			218				218				4
With no related allowance recorded:
Residential real estate			1,902				1,902				----
Commercial real estate:
Owner-occupied			3,133				2,587				----
Nonowner-occupied			4,667				2,972				----
Construction			680				680				----
Commercial and industrial			4,219				4,185				----
Total		$	22,180			$	19,905			$	2,694

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 and six months ended June 30, 2015 and 2014:

		Three months ended June 30, 2015												Six months ended June 30, 2015
		Average Impaired Loans				Interest Income Recognized				Cash Basis Interest Recognized				Average Impaired Loans				Interest Income Recognized				Cash Basis Interest Recognized
With an allowance recorded:
Commercial real estate:
Owner-occupied		$	478			$	----			$	----			$	711			$	----			$	----
Nonowner-occupied			3,575				49				49				3,598				65				65
Commercial and industrial			3,185				40				40				2,909				65				65
Consumer:
Home equity			218				2				2				219				4				4
With no related allowance recorded:
Residential real estate			1,656				16				16				1,575				25				25
Commercial real estate:
Owner-occupied			2,570				30				30				2,573				60				60
Nonowner-occupied			3,630				13				13				3,857				25				25
Construction			680				----				----				453				----				----
Commercial and industrial			4,249				51				51				4,322				107				107
Total		$	20,241			$	201			$	201			$	20,217			$	351			$	351

		Three months ended June 30, 2014												Six months ended June 30, 2014
		Average Impaired Loans				Interest Income Recognized				Cash Basis Interest Recognized				Average Impaired Loans				Interest Income Recognized				Cash Basis Interest Recognized
With an allowance recorded:
Residential real estate		$	898			$	8			$	8			$	902			$	17			$	17
Commercial real estate:
Nonowner-occupied			3,317				40				40				3,330				74				74
Commercial and industrial			2,441				28				28				2,514				57				57
Consumer:
Home equity			219				2				2				219				4				4
With no related allowance recorded:
Residential real estate			525				6				6				526				14				14
Commercial real estate:
Owner-occupied			1,387				21				21				1,255				30				30
Nonowner-occupied			5,665				76				76				5,691				151				151
Commercial and industrial			1,811				79				79				1,207				79				79
Total		$	16,263			$	260			$	260			$	15,644			$	426			$	426

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 June 30, 2015 and December 31, 2014:

June 30, 2015		Loans Past Due 90 Days And Still Accruing				Nonaccrual

Residential real estate		$	325			$	3,277
Commercial real estate:
Owner-occupied			----				715
Nonowner-occupied			----				2,672
Construction			----				769
Commercial and industrial			----				724
Consumer:
Automobile			10				6
Home equity			----				84
Other			5				1
Total		$	340			$	8,248

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 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 June 30, 2015 and December 31, 2014, other real estate owned secured by residential real estate totaled $350 and $368, respectively. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $2,010 and $1,692 as of June 30, 2015 and December 31, 2014, respectively.

The following table presents the aging of the recorded investment of past due loans by class of loans as of June 30, 2015 and December 31, 2014:

June 30, 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		$	2,115			$	579			$	3,402			$	6,096			$	218,827			$	224,923
Commercial real estate:
Owner-occupied			105				159				715				979				75,102				76,081
Nonowner-occupied			----				269				2,672				2,941				70,355				73,296
Construction			111				----				769				880				23,765				24,645
Commercial and industrial			403				516				91				1,010				84,563				85,573
Consumer:
Automobile			523				159				16				698				43,059				43,757
Home equity			68				----				62				130				20,008				20,138
Other			491				46				6				543				43,943				44,486
Total		$	3,816			$	1,728			$	7,733			$	13,277			$	579,622			$	592,899

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 June 30, 2015 and December 31, 2014:

		TDR’s Performing to Modified Terms				TDR’s Not Performing to Modified Terms				Total TDR’s
June 30, 2015
Residential real estate
Interest only payments		$	1,007			$	----			$	1,007
Commercial real estate:
Owner-occupied
Interest only payments			517				----				517
Rate reduction			----				236				236
Reduction of principal and interest payments			616				----				616
Maturity extension at lower stated rate than market rate			1,014				----				1,014
Credit extension at lower stated rate than market rate			204				----				204
Nonowner-occupied
Interest only payments			3,456				2,672				6,128
Rate reduction			402				----				402
Commercial and industrial
Interest only payments			6,622				----				6,622
Credit extension at lower stated rate than market rate			393				----				393
Consumer:
Home equity
Maturity extension at lower stated rate than market rate			218				----				218

Total TDR’s		$	14,449			$	2,908			$	17,357

		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 six months ended June 30, 2015, the TDR's described above increased the allowance for loan losses and provision expense by $68 with a corresponding charge-off of $1,304. This is compared to a $194 decrease in the provision expense and the allowance for loan losses during the six months ended June 30, 2014 with no corresponding charge-offs. The charge-off of $1,304 during 2015 was related to specific reserves that had already been provided for during 2014, and, as a result, did not impact provision expense during 2015. During the year ended December 31, 2014, the TDR's described above increased the allowance for loan losses and provision expense by $623 with no corresponding charge-offs.

At June 30, 2015, the balance in TDR loans decreased $740, or 4.1%, from year-end 2014. The decrease was largely due to a $1,304 charge-off of an existing specific allocation on a collateral-dependent commercial real estate loan. The effect from this specific allocation charge-off was partially offset by a $495 residential real estate loan classified as a TDR during the second quarter of 2015. The Company had 83% of its TDR's performing according to their modified terms at June 30, 2015, as compared to 77% at 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. A further review of the collateral values of this commercial real estate loan during the fourth quarter of 2014 identified additional impairment, resulting in a specific allocation of $1,340 at December 31, 2014. During the second quarter of 2015, the specific allocation related to this impaired loan was charged off, as previously mentioned. As a result, the Company's specific allocations in reserves to customers whose loan terms have been modified in TDR’s totaled $1,762 at June 30, 2015, as compared to $2,998 in reserves at December 31, 2014. At June 30, 2015, the Company had $1,678 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.

The following table presents the pre- and post-modification balances of TDR loan modifications by class of loans that occurred during the six months ended June 30, 2015 and 2014:

		TDR’s Performing to Modified Terms								TDR’s Not Performing to Modified Terms
Six months ended June 30, 2015		Pre-Modification Recorded Investment				Post-Modification Recorded Investment				Pre-Modification Recorded Investment				Post-Modification Recorded Investment

Residential real estate:
Interest only payments		$	495			$	495			$	----			$	----
Total TDR’s		$	495			$	495			$	----			$	----

		TDR’s Performing to Modified Terms								TDR’s Not Performing to Modified Terms
Six months ended June 30, 2014		Pre-Modification Recorded Investment				Post-Modification Recorded Investment				Pre-Modification Recorded Investment				Post-Modification Recorded Investment

Commercial real estate:
Owner-occupied
Maturity extension at lower stated rate than market rate		$	767			$	767			$	----			$	----
Commercial and industrial
Interest only payments			3,621				3,621				----				----
Total TDR’s		$	4,388			$	4,388			$	----			$	----

All of the Company’s loans that were restructured during the six months ended June 30, 2015 and 2014 were performing in accordance with their modified terms. Furthermore, there were no TDR’s described above at June 30, 2015 and 2014 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 six months ended June 30, 2015 had no impact on the provision expense or the allowance for loan losses. As of June 30, 2015, the Company had no allocation of reserves to customers whose loan terms were modified during the first six months of 2015. The loans modified during the six months ended June 30, 2014 had no impact on the provision expense or the allowance for loan losses. As of June 30, 2014, the Company had no allocation of reserves to customers whose loan terms were modified during the first six months of 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 June 30, 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:

June 30, 2015		Pass				Criticized				Classified				Total

Commercial real estate:
Owner-occupied		$	69,108			$	3,227			$	3,746			$	76,081
Nonowner-occupied			63,993				2,064				7,239				73,296
Construction			23,713				----				932				24,645
Commercial and industrial			76,927				639				8,007				85,573
Total		$	233,741			$	5,930			$	19,924			$	259,595

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 June 30, 2015 and December 31, 2014:

June 30, 2015		Consumer
		Automobile				Home Equity				Other				Residential Real Estate				Total

Performing		$	43,741			$	20,054			$	44,480			$	221,321			$	329,596
Nonperforming			16				84				6				3,602				3,708
Total		$	43,757			$	20,138			$	44,486			$	224,923			$	333,304

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 5.70% of total loans were unsecured at June 30, 2015, up from 5.66% at December 31, 2014.