Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | NOTE 7 - LOANS AND RELATED ALLOWANCE FOR LOAN AND LEASE LOSSES Major classifications of loans are summarized as follows (in thousands): March 31, December 31, 2016 2015 Commercial and industrial $ 47,436 $ 42,536 Real estate - construction 21,005 22,137 Real estate - mortgage: Residential 238,489 232,478 Commercial 218,363 231,701 Consumer installment 5,063 4,858 530,356 533,710 Less: Allowance for loan and lease losses 6,357 6,385 Net loans $ 523,999 $ 527,325 The Company’s primary business activity is with customers located within its local Northeastern Ohio 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, loans outstanding to individuals and businesses are dependent upon the local economic conditions in the Company’s immediate trade area. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff generally are reported at their outstanding unpaid principal balances net of the allowance for loan and lease losses. Interest income is recognized as income when earned on the accrual method. The accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of interest is doubtful. Interest received on nonaccrual loans is recorded as income or applied against principal according to management’s judgment as to the collectability of such principal. Loan origination fees and certain direct loan origination costs are being deferred and the net amount amortized as an adjustment of the related loan’s yield. Management is amortizing these amounts over the contractual life of the related loans. The following tables summarize the primary segments of the loan portfolio and allowance for loan and lease losses (in thousands): Real Estate- Mortgage March 31, 2016 Commercial and industrial Real estate- construction Residential Commercial Consumer installment Total Loans: Individually evaluated for impairment $ 865 $ 1,453 $ 4,085 $ 9,239 $ 5 $ 15,647 Collectively evaluated for impairment 46,571 19,552 234,404 209,124 5,058 514,709 Total loans $ 47,436 $ 21,005 $ 238,489 $ 218,363 $ 5,063 $ 530,356 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 March 31, 2016 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 $ 323 $ 118 $ 269 $ 101 $ - $ 811 Collectively evaluated for impairment 260 129 2,447 2,682 28 5,546 Total ending allowance balance $ 583 $ 247 $ 2,716 $ 2,783 $ 28 $ 6,357 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 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 (“CRE”), 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. The decrease in C&I collectively evaluated loans during the three month period ended March 31, 2016 is due primarily to reclassification of loans to CRE in the first quarter of 2016. The impact on CRE collective evaluation, outside of reclassification, as well as residential real estate, is due to updates to the qualitative factors in the ALLL calculation. These factors were increased based on economic conditions, loan volume, and external factors. Management evaluates individual loans in all of the commercial segments for possible impairment based on guidance established by the Board of Directors. 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 the following 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): March 31, 2016 Impaired Loans Unpaid Recorded Principal Related Investment Balance Allowance With no related allowance recorded: Commercial and industrial $ 477 $ 477 $ - Real estate - construction 1,335 1,330 - Real estate - mortgage: Residential 2,928 2,926 - Commercial 2,319 2,315 - Consumer installment 5 5 - Total $ 7,064 $ 7,053 $ - With an allowance recorded: Commercial and industrial $ 388 $ 388 $ 323 Real estate - construction 118 118 118 Real estate - mortgage: Residential 1,157 1,155 269 Commercial 6,920 6,906 101 Total $ 8,583 $ 8,567 $ 811 Total: Commercial and industrial $ 865 $ 865 $ 323 Real estate - construction 1,453 1,448 118 Real estate - mortgage: Residential 4,085 4,081 269 Commercial 9,239 9,221 101 Consumer installment 5 5 - Total $ 15,647 $ 15,620 $ 811 December 31, 2015 Impaired Loans Unpaid Recorded Principal Related Investment Balance 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 The following tables present interest income by class, recognized on impaired loans (in thousands): For the Three Months Ended March 31, 2016 Average Recorded Investment Interest Income Recognized Total: Commercial and industrial $ 1,337 $ 13 Real estate - construction 1,620 25 Real estate - mortgage: Residential 3,983 36 Commercial 7,719 123 Consumer installment 6 - $ 14,665 $ 197 For the Three Months Ended March 31, 2015 Average Recorded Investment Interest Income Recognized Total: Commercial and industrial $ 1,227 $ 14 Real estate - construction 2,882 20 Real estate - mortgage: Residential 4,833 38 Commercial 4,266 39 Consumer installment 6 - $ 13,214 $ 111 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 with loan balances of $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 primary risk of commercial and industrial loans is the current economic uncertainties. C&I loans are, by nature, secured by less substantial collateral than real estate-secured loans. The primary risk of real estate construction loans is potential delays and /or disputes during the completion process. The primary risk of residential real estate loans is current economic uncertainties along with the slow recovery in the housing market. The primary risk of commercial real estate loans is loss of income of the owner or occupier of the property and the inability of the market to sustain rent levels. Consumer installment loans historically have experienced higher delinquency rates. Consumer installments are typically secured by less substantial collateral than other types of credits. The following tables present the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk-rating system (in thousands): Special Total Pass Mention Substandard Doubtful Loans March 31, 2016 Commercial and industrial $ 45,742 $ 485 $ 1,209 $ - $ 47,436 Real estate - construction 20,886 - - 119 21,005 Real estate - mortgage: Residential 231,785 493 6,211 - 238,489 Commercial 208,808 1,223 8,332 - 218,363 Consumer installment 5,060 - 3 - 5,063 Total $ 512,281 $ 2,201 $ 15,755 $ 119 $ 530,356 Special Total Pass Mention Substandard Doubtful 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 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. Nonperforming assets include nonaccrual loans, troubled debt restructurings (TDRs), loans 90 days or more past due, EMORECO assets, other real estate owned, and repossessed assets. A loan is classified as nonaccrual when, in the opinion of management, there are serious doubts about collectability of interest and principal. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions, the borrower’s financial condition is such that collection of principal and interest is doubtful. Payments received on nonaccrual loans are applied against the principal balance. The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans (in thousands): 30-59 Days 60-89 Days 90 Days+ Total Total Current Past Due Past Due Past Due Past Due Loans March 31, 2016 Commercial and industrial $ 47,080 $ 2 $ 9 $ 345 $ 356 $ 47,436 Real estate - construction 21,005 - - - - 21,005 Real estate - mortgage: Residential 236,114 1,261 91 1,023 2,375 238,489 Commercial 217,625 21 112 605 738 218,363 Consumer installment 5,063 - - - - 5,063 Total $ 526,887 $ 1,284 $ 212 $ 1,973 $ 3,469 $ 530,356 30-59 Days 60-89 Days 90 Days+ Total Total Current Past Due Past Due Past Due Past Due 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 The following tables present the classes of the loan portfolio summarized by nonaccrual loans (in thousands): March 31, 2016 90+ Days Past Nonaccrual Due and Accruing Commercial and industrial $ 1,058 $ - Real estate - construction 118 - Real estate - mortgage: Residential 4,435 67 Commercial 1,922 - Consumer installment 1 - Total $ 7,534 $ 67 December 31, 2015 December 31, 2015 90+ Days Past Nonaccrual Due and Accruing 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 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 Statements on the Allowance for Loan and Lease Losses and other bank regulatory guidance. The total of the two components represents the Company’s ALLL. Management also performs impairment analyses on TDRs, which may result in specific reserves. 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 using the last four consecutive historical 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, 2015 $ 867 $ 276 $ 3,139 $ 2,078 $ 25 $ 6,385 Charge-offs (120 ) - (42 ) - (15 ) (177 ) Recoveries 37 - 4 - 3 44 Provision (201 ) (29 ) (385 ) 705 15 105 ALLL balance at March 31, 2016 $ 583 $ 247 $ 2,716 $ 2,783 $ 28 $ 6,357 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 (100 ) (385 ) (191 ) - (3 ) (679 ) Recoveries 162 - 12 - 1 175 Provision (211 ) 11 (65 ) 382 (12 ) 105 ALLL balance at March 31, 2015 $ 493 $ 494 $ 3,459 $ 1,958 $ 43 $ 6,447 The following tables summarize troubled debt restructurings (in thousands): For the Three Months Ended March 31, 2016 Pre-Modification Post-Modification Number of Contracts Outstanding Outstanding Term Recorded Recorded Troubled Debt Restructurings Modification Other Total Investment Investment Commercial and industrial 2 - 2 $ 33 $ 33 Residential real estate 2 - 2 74 74 Commercial real estate 2 - 2 581 581 For the Three Months Ended March 31, 2015 Pre-Modification Post-Modification Number of Contracts Outstanding Outstanding Term Recorded Recorded Troubled Debt Restructurings Modification Other Total Investment Investment Commercial and industrial 1 - 1 $ 48 $ 48 Residential real estate 1 - 1 175 195 No TDRs, modified in the twelve months prior to March 31, 2016 and March 31, 2015, subsequently defaulted in the three months ended March 31, 2016 and March 31, 2015. |