Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | 4. LOANS AND RELATED ALL OWANCE FOR LOAN LOSSES Major classifications of loans at December 31 are summarized as follows (in thousands): 2015 2014 Commercial and industrial $ 42,536 $ 34,928 Real estate - construction 22,137 30,296 Real estate - mortgage: Residential 232,478 210,096 Commercial 231,701 190,685 Consumer installment 4,858 4,579 533,710 470,584 Less allowance for loan and lease losses (6,385 ) (6,846 ) Net loans $ 527,325 $ 463,738 The Company’s primary business activity is with customers located within its local trade area, eastern Geauga County, and contiguous counties to the north, east, and south. The Company also serves the central Ohio market with offices in Dublin and Westerville, Ohio. Commercial, residential, consumer, and agricultural loans are granted. Although the Company has a diversified loan portfolio at December 31, 2015 and 2014, loans outstanding to individuals and businesses are dependent upon the local economic conditions in its immediate trade area. The following tables summarize the primary segments of the loan portfolio and the allowance for loan and lease losses as of December 31, 2015 and 2014 (in thousands): Real Estate- Mortgage December 31, 2015 Commercial and industrial Real estate- construction Residential Commercial Consumer installment Total Loans: Individually evaluated for impairment $ 1,808 $ 1,787 $ 3,881 $ 6,199 $ 6 $ 13,681 Collectively evaluated for impairment 40,728 20,350 228,597 225,502 4,852 520,029 Total loans $ 42,536 $ 22,137 $ 232,478 $ 231,701 $ 4,858 $ 533,710 Real estate- Mortgage December 31, 2014 Commercial and industrial Real estate- construction Residential Commercial Consumer installment Total Loans: Individually evaluated for impairment $ 1,393 $ 3,296 $ 5,183 $ 4,490 $ 6 $ 14,368 Collectively evaluated for impairment 33,535 27,000 204,913 186,195 4,573 456,216 Total loans $ 34,928 $ 30,296 $ 210,096 $ 190,685 $ 4,579 $ 470,584 Real Estate- Mortgage December 31, 2015 Commercial and industrial Real estate- construction Residential Commercial Consumer installment Total Allowance for loan and lease losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 388 $ 130 $ 276 $ 39 $ - $ 833 Collectively evaluated for impairment 479 146 2,863 2,039 25 5,552 Total ending allowance balance $ 867 $ 276 $ 3,139 $ 2,078 $ 25 $ 6,385 Real Estate- Mortgage December 31, 2014 Commercial and industrial Real estate- construction Residential Commercial Consumer installment Total Allowance for loan and lease losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 83 $ 589 $ 892 $ 30 $ 2 $ 1,596 Collectively evaluated for impairment 559 279 2,811 1,546 55 5,250 Total ending allowance balance $ 642 $ 868 $ 3,703 $ 1,576 $ 57 $ 6,846 The Company’s loan portfolio is segmented to a level that allows management to monitor risk and performance. The portfolio is segmented into Commercial and Industrial (“C&I”), Real Estate Construction, Real Estate - Mortgage which is further segmented into Residential and Commercial real estate, and Consumer Installment Loans. The C&I loan segment consists of loans made for the purpose of financing the activities of commercial customers. The residential mortgage loan segment consists of loans made for the purpose of financing the activities of residential homeowners. The commercial mortgage loan segment consists of loans made for the purpose of financing the activities of commercial real estate owners and operators. The consumer loan segment consists primarily of installment loans and overdraft lines of credit connected with customer deposit accounts. Management evaluates individual loans in all of the commercial segments for possible impairment if the loan is greater than $150,000 and if the loan either is in nonaccrual status, or is risk rated Substandard or Doubtful and is greater than 90 days past due. Loans are considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The Company does not separately evaluate individual consumer and residential mortgage loans for impairment, unless such loans are part of a larger relationship that is impaired. Once the determination has been made that a loan is impaired, the determination of whether a specific allocation of the allowance is necessary is measured by comparing the recorded investment in the loan to the fair value of the loan using one of three methods: (a) the present value of expected future cash flows discounted at the loan’s effective interest rate; (b) the loan’s observable market price; or (c) the fair value of the collateral less selling costs. The method is selected on a loan-by-loan basis, with management primarily utilizing the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made on a quarterly basis. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition. The following tables present impaired loans by class, segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary (in thousands): December 31, 2015 Impaired Loans Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance recorded: Commercial and industrial $ 1,027 $ 1,025 $ - Real estate - construction 1,657 1,651 - Real estate - mortgage: Residential 2,445 2,443 - Commercial 2,337 2,335 - Total $ 7,466 $ 7,454 $ - With an allowance recorded: Commercial and industrial $ 781 $ 781 $ 388 Real estate - construction 130 130 130 Real estate - mortgage: Residential 1,436 1,436 276 Commercial 3,862 3,846 39 Consumer installment 6 6 - Total $ 6,215 $ 6,199 $ 833 Total: Commercial and industrial $ 1,808 $ 1,806 $ 388 Real estate - construction 1,787 1,781 130 Real estate - mortgage: Residential 3,881 3,879 276 Commercial 6,199 6,181 39 Consumer installment 6 6 - Total $ 13,681 $ 13,653 $ 833 December 31, 2014 Impaired Loans Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance recorded: Commercial and industrial $ 1,146 $ 1,145 $ - Real estate - construction 2,707 2,705 - Real estate - mortgage: Residential 2,202 2,197 - Commercial 4,064 4,060 - Total $ 10,119 $ 10,107 $ - With an allowance recorded: Commercial and industrial $ 247 $ 247 $ 83 Real estate - construction 589 589 589 Real estate - mortgage: Residential 2,981 2,978 892 Commercial 426 426 30 Consumer installment 6 6 2 Total $ 4,249 $ 4,246 $ 1,596 Total: Commercial and industrial $ 1,393 $ 1,392 $ 83 Real estate - construction 3,296 3,294 589 Real estate - mortgage: Residential 5,183 5,175 892 Commercial 4,490 4,486 30 Consumer installment 6 6 2 Total $ 14,368 $ 14,353 $ 1,596 The tables above include troubled debt restructuring totaling $3.1 million and $2.9 million as of December 31, 2015 and 2014, respectively. The following table presents interest income by class, recognized on impaired loans (in thousands): As of December 31, 2015 As of December 31, 2014 As of December 31, 2013 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial and industrial $ 1,468 $ 100 $ 1,989 $ 85 $ 2,187 $ 119 Real estate - construction 2,407 115 3,631 154 3,743 183 Real estate - mortgage: Residential 4,356 160 5,331 171 5,380 293 Commercial 5,203 350 5,998 229 6,500 493 Consumer installment 6 - 11 1 13 1 Total $ 13,440 $ 725 $ 16,960 $ 640 $ 17,824 $ 1,090 Troubled Debt Restructuring (TDR) describes loans on which the bank has granted concessions for reasons related to the customer’s financial difficulties. Such concessions may include one or more of the following: ● reduction in the interest rate to below market rates ● extension of repayment requirements beyond normal terms ● reduction of the principal amount owed ● reduction of accrued interest due ● acceptance of other assets in full or partial payment of a debt In each case the concession is made due to deterioration in the borrower’s financial condition, and the new terms are less stringent than those required on a new loan with similar risk. The following tables present the number of loan modifications by class, the corresponding recorded investment, and the subsequently defaulted modifications (in thousands): December 31, 2015 Number of Contracts Pre-Modification Post-Modification Troubled Debt Restructurings Term Modification Other Total Outstanding Recorded Investment Outstanding Recorded Investment Commercial and industrial 6 - 6 $ 434 $ 434 Real estate construction 1 - 1 181 181 Residential real estate 5 1 6 515 535 Commercial real estate 1 - 1 270 270 December 31, 2015 Troubled Debt Restructurings subsequently defaulted Number of Contracts Recorded Investment Commercial and industrial 2 $ 14 Real estate construction 1 130 December 31, 2014 Number of Contracts Pre-Modification Post-Modification Troubled Debt Restructurings Term Modification Other Total Outstanding Recorded Investment Outstanding Recorded Investment Residential real estate 3 - 3 $ 140 $ 140 Commercial real estate 1 - 1 48 48 Consumer 1 - 1 6 6 December 31, 2014 Troubled Debt Restructurings Number of Contracts Recorded Investment Residential real estate 1 $ 15 December 31, 2013 Number of Contracts Pre-Modification Post-Modification Troubled Debt Restructurings Term Modification Other Total Outstanding Recorded Investment Outstanding Recorded Investment Commercial and industrial 6 1 7 $ 1,264 $ 1,264 Residential real estate 7 - 7 784 784 Commercial real estate 2 - 2 834 834 December 31, 2013 Troubled Debt Restructurings subsequently defaulted Number of Contracts Recorded Investment Commercial and industrial 5 $ 574 Commercial real estate 1 190 Management uses a nine-point internal risk-rating system to monitor the credit quality of the overall loan portfolio. The first five categories are considered not criticized and are aggregated as Pass-rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. Any portion of a loan that has been charged off is placed in the Loss category. To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan-rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as bankruptcy, repossession, or death, occurs to raise awareness of a possible credit event. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis with the Chief Credit Officer ultimately responsible for accurate and timely risk ratings. The Credit Department performs an annual review of all commercial relationships $1,000,000 or greater. Confirmation of the appropriate risk grade is included in the review on an ongoing basis. The Company engages an external consultant to conduct loan reviews on a semiannual basis. Generally, the external consultant reviews commercial relationships greater than $250,000 and/or criticized relationships greater than $125,000. Detailed reviews, including plans for resolution, are performed on loans classified as Substandard on a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance. The following tables present the classes of the loan portfolio summarized by the aggregate Pass rating and the criticized categories of Special Mention, Substandard, and Doubtful within the internal risk rating system as of December 31, 2015 and 2014 (in thousands): Pass Special Mention Substandard Doubtful Total Loans December 31, 2015 Commercial and industrial $ 40,560 $ 242 $ 1,734 $ - $ 42,536 Real estate - construction 22,007 - - 130 22,137 Real estate - mortgage: Residential 225,945 728 5,805 - 232,478 Commercial 219,331 4,327 8,043 - 231,701 Consumer installment 4,854 - 4 - 4,858 Total $ 512,697 $ 5,297 $ 15,586 $ 130 $ 533,710 Pass Special Mention Substandard Doubtful Total Loans December 31, 2014 Commercial and industrial $ 33,160 $ - $ 1,730 $ 38 $ 34,928 Real estate - construction 29,212 495 - 589 30,296 Real estate - mortgage: Residential 200,928 584 8,584 - 210,096 Commercial 180,899 3,908 5,878 - 190,685 Consumer installment 4,572 - 7 - 4,579 Total $ 448,759 $ 4,987 $ 16,211 $ 627 $ 470,584 Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the aging categories of loans and nonaccrual loans as of December 31, 2015 and 2014 (in thousands): Current 30-59 Days Past Due 60-89 Days Past Due 90 Days+ Past Due Total Past Due Total Loans December 31, 2015 Commercial and industrial $ 41,544 $ 225 $ 26 $ 741 $ 992 $ 42,536 Real estate - construction 22,137 - - - - 22,137 Real estate - mortgage: Residential 229,725 1,482 92 1,179 2,753 232,478 Commercial 230,903 189 - 609 798 231,701 Consumer installment 4,837 16 3 2 21 4,858 Total $ 529,146 $ 1,912 $ 121 $ 2,531 $ 4,564 $ 533,710 Current 30-59 Days Past Due 60-89 Days Past Due 90 Days+ Past Due Total Past Due Total Loans December 31, 2014 Commercial and industrial $ 34,480 $ 349 $ 68 $ 31 $ 448 $ 34,928 Real estate - construction 30,296 - - - - 30,296 Real estate - mortgage: Residential 205,753 2,065 363 1,915 4,343 210,096 Commercial 190,088 30 - 567 597 190,685 Consumer installment 4,547 27 3 2 32 4,579 Total $ 465,164 $ 2,471 $ 434 $ 2,515 $ 5,420 $ 470,584 The following tables present the classes of the loan portfolio summarized by nonaccrual loans and loans 90 days or more past due and still accruing as of December 31, 2015 and 2014 (in thousands): Nonaccrual 90+ Days Past Due and Accruing December 31, 2015 Commercial and industrial $ 1,450 $ - Real estate - construction 130 - Real estate - mortgage: Residential 4,122 - Commercial 1,842 - Consumer installment 1 2 Total $ 7,545 $ 2 Nonaccrual 90+ Days Past Due and Accruing December 31, 2014 Commercial and industrial $ 365 $ - Real estate - construction 587 - Real estate - mortgage: Residential 5,310 165 Commercial 1,083 - Consumer installment 2 - Total $ 7,347 $ 165 Interest income that would have been recorded had these loans not been placed on nonaccrual status was $259,000 in 2015, $207,000 in 2014, and $439,000 in 2013 . An allowance for loan and lease losses (“ALLL”) is maintained to absorb losses from the loan portfolio. The ALLL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of nonperforming loans. The Company’s methodology for determining the ALLL is based on the requirements of ASC Section 310-10-35 for loans individually evaluated for impairment (discussed above) and ASC Subtopic 450-20 for loans collectively evaluated for impairment, as well as the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Company’s ALLL. Loans that are collectively evaluated for impairment are analyzed, with general allowances being made as appropriate. For general allowances, historical loss trends are used in the estimation of losses in the current portfolio. These historical loss amounts are modified by other qualitative factors. The classes described above, which are based on the purpose code assigned to each loan, provide the starting point for the ALLL analysis. Management tracks the historical net charge-off activity at the purpose code level. A historical charge-off factor is calculated utilizing the last twelve consecutive quarters. Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor, because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; levels of and trends in delinquency rates and nonaccrual loans; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry, and/or geographic standpoint. Management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ALLL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ALLL. The following tables summarize the primary segments of the loan portfolio (in thousands): Commercial and industrial Real estate- construction Real estate- residential mortgage Real estate- commercial mortgage Consumer installment Total ALLL balance at December 31, 2014 $ 642 $ 868 $ 3,703 $ 1,576 $ 57 $ 6,846 Charge-offs (280 ) (385 ) (425 ) (92 ) (15 ) (1,197 ) Recoveries 207 - 186 5 23 421 Provision 298 (207 ) (325 ) 589 (40 ) 315 ALLL balance at December 31, 2015 $ 867 $ 276 $ 3,139 $ 2,078 $ 25 $ 6,385 Commercial and industrial Real estate- construction Real estate- residential mortgage Real estate- commercial mortgage Consumer installment Total ALLL balance at December 31, 2013 $ 614 $ 576 $ 3,664 $ 2,170 $ 22 $ 7,046 Charge-offs (237 ) - (671 ) (260 ) (44 ) (1,212 ) Recoveries 121 60 267 40 154 642 Provision 144 232 443 (374 ) (75 ) 370 ALLL balance at December 31, 2014 $ 642 $ 868 $ 3,703 $ 1,576 $ 57 $ 6,846 Commercial and industrial Real estate- construction Real estate- residential mortgage Real estate- commercial mortgage Consumer installment Total ALLL balance at December 31, 2012 $ 1,732 $ 1,123 $ 2,872 $ 1,991 $ 61 $ 7,779 Charge-offs (419 ) (191 ) (675 ) - (45 ) (1,330 ) Recoveries 191 33 107 46 24 401 Provision (890 ) (389 ) 1,360 133 (18 ) 196 ALLL balance at December 31, 2013 $ 614 $ 576 $ 3,664 $ 2,170 $ 22 $ 7,046 The decrease in the ALLL balance for real estate construction was largely due to a $0.4 million charge off. The decrease in the ALLL balance for residential real estate was largely due to aggregate charge offs of $0.3 million of loans secured by first liens. The increase in the ALLL balance for commercial real estate is mostly due to the 21.5% growth in the portfolio. |