Your Community Bankshares, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.1 - EX-32.1 - Your Community Bankshares, Inc.	a16-6670_1ex32d1.htm
EX-31.2 - EX-31.2 - Your Community Bankshares, Inc.	a16-6670_1ex31d2.htm
EX-31.1 - EX-31.1 - Your Community Bankshares, Inc.	a16-6670_1ex31d1.htm
EX-10.3 - EX-10.3 - Your Community Bankshares, Inc.	a16-6670_1ex10d3.htm
EX-10.2 - EX-10.2 - Your Community Bankshares, Inc.	a16-6670_1ex10d2.htm
EX-10.1 - EX-10.1 - Your Community Bankshares, Inc.	a16-6670_1ex10d1.htm
EX-10.4 - EX-10.4 - Your Community Bankshares, Inc.	a16-6670_1ex10d4.htm
EX-32.2 - EX-32.2 - Your Community Bankshares, Inc.	a16-6670_1ex32d2.htm
EX-10.5 - EX-10.5 - Your Community Bankshares, Inc.	a16-6670_1ex10d5.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-25766

Your Community Bankshares, Inc.

(Exact name of registrant as specified in its charter)

Indiana		35-1938254
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

101 W. Spring Street, New Albany, Indiana		47150
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code 812-944-2224

Not applicable

Former name, former address and former fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer o		Accelerated Filer x

Non- Accelerated Filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. o Yes o No

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 5,453,271 shares of common stock were outstanding as of May 6, 2016.

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YOUR COMMUNITY BANKSHARES, INC.

INDEX

		Page
Part I	Financial Information

Item 1.	Financial Statements
	Consolidated Balance Sheets	3

	Consolidated Statements of Operations	4

	Consolidated Statements of Comprehensive Income	6

	Consolidated Statement of Changes in Shareholders Equity	7

	Consolidated Statements of Cash Flows	8

	Notes to Consolidated Financial Statements	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51

Item 4.	Controls and Procedures	54

Part II	Other Information

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

Item 6.	Exhibits	57

Signatures		58

Exhibit Index		59

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PART I - FINANCIAL INFORMATION

YOUR COMMUNITY BANKSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2016			December 31, 2015
	(In thousands, except share data)
ASSETS
Cash and due from financial institutions	$	24,439		$	30,425
Interest-bearing deposits in other financial institutions	20,726			13,365
Securities available for sale	348,068			378,978
Loans held for sale	234			1,015
Loans, net of allowance for loan losses of $6,188 and $6,851	1,041,320			1,009,463
Federal Home Loan Bank and Federal Reserve stock	3,882			3,890
Accrued interest receivable	5,124			5,328
Premises and equipment, net	32,576			33,270
Company owned life insurance	33,381			33,127
Goodwill	4,945			4,945
Core deposit intangible	4,716			5,015
Foreclosed and repossessed assets	6,228			9,952
Other assets	24,828			27,242
Total Assets	$	1,550,467		$	1,556,015

LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits
Non interest-bearing	$	283,518		$	286,739
Interest-bearing	954,446			975,325
Total deposits	1,237,964			1,262,064
Short-term borrowings	73,410			48,785
Other borrowings	97,551			108,347
Accrued interest payable	840			451
Other liabilities	7,785			9,282
Total liabilities	1,417,550			1,428,929

Commitments and contingent liabilities	—			—

Shareholders’ equity
Common stock, $0.10 par value per share; 10,000,000 shares authorized; 5,776,237 shares issued in 2016 and 2015; 5,453,271 and 5,429,766 outstanding in 2016 and 2015, respectively	578			578
Additional paid-in capital	91,159			90,869
Retained earnings	42,554			39,512
Accumulated other comprehensive income	4,183			2,089
Treasury stock, at cost (2016- 322,966 shares, 2015- 346,471 shares)	(5,557		)	(5,962		)
Total shareholders’ equity	132,917			127,086
Total Liabilities and Shareholders’ Equity	$	1,550,467		$	1,556,015

See accompanying notes to condensed consolidated financial statements.

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PART I - FINANCIAL INFORMATION

YOUR COMMUNITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2016			2015
	(In thousands, except share data)
Interest and dividend income
Loans, including fees	$	12,373		$	12,523
Taxable securities	1,153			1,340
Tax-exempt securities	1,027			743
Federal Home Loan Bank and Federal Reserve dividends	50			95
Interest-bearing deposits in other financial institutions	38			55
Interest and dividend income	14,641			14,756

Interest expense
Deposits	560			574
Short-term borrowings	67			22
Other borrowings	1,018			676
Interest expense	1,645			1,272
Net interest income	12,996			13,484

Provision for loan losses	—			106

Net interest income after provision for loan losses	12,996			13,378

Non-interest income
Service charges on deposit accounts	1,478			1,391
Commission income	46			47
Net gain on sales of available for sale securities	297			51
Mortgage banking income	78			117
Earnings on company owned life insurance	254			252
Interchange income	572			444
Amortization of tax credit investments	(350		)	(86		)
Other income	189			196
Non-interest income	2,564			2,412

Non-interest expense
Salaries and employee benefits	6,026			9,119
Occupancy	1,240			1,627
Equipment	512			581
Data processing	1,089			1,814
Marketing and advertising	145			210
Legal and professional service fees	623			1,558
FDIC insurance premiums	225			273
Foreclosed and repossessed assets, net	(110		)	344
Amortization of intangible assets	299			397
Other expense	1,187			2,001
Total non-interest expense	11,236			17,924
Income (loss) before income taxes	4,324			(2,134		)

Income tax expense (benefit)	629			(1,198		)

Net Income (loss)	3,695			(936		)

Preferred stock dividends	—			(110		)

Net income (loss) available (attributable) to common shareholders	$	3,695		$	(1,046	)

Table of Contents

	Three Months Ended March 31,
	2016		2015
	(In thousands, except share data)
Earnings (loss) per common share:
Basic	$	0.68	$	(0.19	)
Diluted	$	0.67	$	(0.19	)

Dividends per common share	$	0.12	$	0.12

See accompanying notes to condensed consolidated financial statements.

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PART I - FINANCIAL INFORMATION

YOUR COMMUNITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended March 31,
	2016			2015
	(In thousands)
Net income (loss)	$	3,695		$	(936	)

Other comprehensive income:
Unrealized gain on securities:
Unrealized gain arising during the period	3,545			3,039
Reclassification adjustment for gains included in net income	(297		)	(51		)
Tax effect	(1,137		)	(1,016		)
Net of tax	2,111			1,972

Defined benefit pension plans:
Net gain (loss) arising during the period	(31		)	6
Reclassification adjustment for amortization of unrecognized loss included in net periodic pension cost	5			4
Tax effect	9			(3		)
Net of tax	(17		)	7

Total other comprehensive income	2,094			1,979

Comprehensive income	$	5,789		$	1,043

See accompanying notes to condensed consolidated financial statements.

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PART I — FINANCIAL INFORMATION

YOUR COMMUNITY BANKSHARES, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(Dollar amounts in thousands, except per share data)

(Unaudited)

	Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income		Treasury Stock			Total Shareholders’ Equity
Balance, January 1, 2016	$	578	$	90,869		$	39,512		$	2,089	$	(5,962	)	$	127,086
Net income	—		—			3,695			—		—			3,695
Other comprehensive income	—		—			—			2,094		—			2,094
Dividends declared on common stock ($0.12 per share)	—		—			(653		)	—		—			(653		)
Issuance of treasury stock under dividend reinvestment plan	—		22			—			—		27			49
Stock activity under incentive compensation plans	—		(391		)	—			—		378			(13		)
Stock award expense	—		659			—			—		—			659
Balance, March 31, 2016	$	578	$	91,159		$	42,554		$	4,183	$	(5,557	)	$	132,917

See accompanying notes to condensed consolidated financial statements.

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PART I — FINANCIAL INFORMATION

YOUR COMMUNITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2016			2015
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	3,695		$	(936	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Provision for loan losses	—			106
Depreciation	616			934
Net amortization of securities	434			533
Amortization and accretion of purchase accounting adjustments, net	(625		)	(830		)
Net gain on sales of available for sale securities	(297		)	(51		)
Mortgage loans originated for sale	(3,134		)	(3,522		)
Proceeds from mortgage loan sales	3,992			5,190
Net gain on sales of mortgage loans	(77		)	(115		)
Earnings on company owned life insurance	(254		)	(252		)
Stock award compensation expense	659			202
Amortization of tax credit investments	350			86
Net loss on disposition of premises and equipment	11			—
Net loss on disposition of foreclosed and repossessed assets	33			74
Net change in:
Accrued interest receivable	204			(11		)
Accrued interest payable	389			(601		)
Other assets	950			(1,883		)
Other liabilities	(1,519		)	(3,695		)
Net cash from operating activities	5,427			(4,771		)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of First Financial Service Corporation, net	—			12,979
Net change in interest-bearing deposits	(7,361		)	14,515
Available for sale securities:
Sales	23,693			38,877
Purchases	(2,723		)	(4,575		)
Maturities, prepayments and calls	13,111			12,647
Redemption of Federal Home Loan Bank stock	8			3,593
Loan originations and payments, net	(30,468		)	(2,210		)
Proceeds from the sale of foreclosed and repossessed assets	2,712			1,056
Proceeds from the sale of premises and equipment	242			—
Purchases of premises and equipment	(127		)	(553		)
Net cash from investing activities	(913		)	76,329
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	(23,741		)	(17,463		)
Net change in short-term borrowings	24,625			(6,590		)
Proceeds from issuance of other borrowings	150,000			—
Repayment of other borrowings	(160,695		)	(10,070		)
Taxes paid on stock award shares for employees	(117		)	(111		)
Issuance costs paid for common shares issued	—			(1,263		)
Proceeds from exercise of stock options	32			—
Redemption of acquired preferred shares and dividends	—			(2,445		)
Cash dividends paid on preferred shares	—			(110		)
Cash dividends paid on common shares	(604		)	(594		)
Net cash from financing activities	(10,500		)	(38,646		)
Net change in cash and due from financial institutions	(5,986		)	32,912
Cash and due from financial institutions at beginning of period	30,425			12,872
Cash and due from financial institutions at end of period	$	24,439		$	45,784

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PART I — FINANCIAL INFORMATION

YOUR COMMUNITY BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Supplemental cash flow information:
Interest paid	$	1,256	$	652
Income taxes paid, net of refunds	—		—

Supplemental noncash disclosures:
Transfer from loans to foreclosed assets	649		9,486
Issuance of treasury shares under dividend reinvestment plan	27		32
Issuance of treasury shares for net settlement of stock options	15		18
Sale and financing of foreclosed assets	1,622		193
Issuance of common shares	—		25,031
Redemption of preferred shares and unpaid dividends of First Financial Service Corporation	—		18,043
Declared, unpaid dividends on preferred shares	—		110

See accompanying notes to condensed consolidated financial statements.

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Presentation of Interim Information

Your Community Bankshares, Inc. (“we,” “our”, “us”, or “the Company”) is a bank holding company headquartered in New Albany, Indiana. Our wholly-owned banking subsidiary is Your Community Bank (“Your Community Bank” or “YCB”). YCB (at times referred to herein as the “Bank”) is a state-chartered commercial bank regulated by the Indiana Department of Financial Institutions. Your Community Bank is also regulated by the Federal Deposit Insurance Corporation and, with respect to its Kentucky branches, the Kentucky Office of Financial Institutions. The Company formed a captive insurance company in 2012, CBIN Insurance, Inc., which issues policies to the Company’s subsidiaries to cover gaps in coverage and other risks not insured by its third-party provider.

Your Community Bank has three wholly-owned subsidiaries to manage its investment portfolio. CBSI Holdings, Inc. and CBSI Investments, Inc. are Nevada corporations which jointly own CBSI Investment Portfolio Management, LLC, a Nevada limited liability Company which holds and manages investment securities previously owned by Your Community Bank.

In June 2004 and June 2006, we completed placements of floating rate subordinated debentures through two trusts that we formed, Community Bank Shares (IN) Statutory Trust I and Trust II (“Trusts”). Also, in conjunction with the acquisition of First Financial Service Corporation in 2015, the Company acquired First Federal Statutory Trust II and III and assumed their underlying subordinated debentures. Because the Trusts are not consolidated with us, our financial statements reflect the subordinated debt we issued to the Trusts.

To prepare financial statements in conformity with U.S. generally accepted accounting principles management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

In the opinion of management, the unaudited consolidated financial statements include all normal adjustments considered necessary to present fairly the financial position as of March 31, 2016, the results of operations for the three months ended March 31, 2016 and 2015, and cash flows for the three months ended March 31, 2016 and 2015. All of these adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of results for a full year.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes included in our annual report on Form 10-K for the year ended December 31, 2015. The consolidated financial statements include our accounts and our subsidiaries’ accounts. All material intercompany balances and transactions have been eliminated in consolidation.

Reclassifications: Some of the items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income or shareholder’s equity.

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Recent Accounting Pronouncements

FASB ASC 842 – In February 2016, the FASB issued its new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting in largely unchanged. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements, but it is expected to have a material impact.

3. Securities

The fair value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
March 31, 2016:
Securities available for sale:
State and municipal	$	119,883	$	5,930	$	(48	)	$	125,765
Residential mortgage-backed agencies issued by U.S. Government sponsored entities	198,761		1,483		(586		)	199,658
U.S. Government sponsored entities and agencies	21,944		448		—			22,392
Mutual funds	250		3		—			253
Total securities available for sale	$	340,838	$	7,864	$	(634	)	$	348,068

December 31, 2015:
Securities available for sale:
State and municipal	$	117,995	$	5,553	$	(56	)	$	123,492
Residential mortgage-backed agencies issued by U.S. Government sponsored entities	221,944		320		(1,933		)	220,331
U.S. Government sponsored entities and agencies	31,472		145		(154		)	31,463
Corporate	3,394		43		—			3,437
Mutual funds	250		5		—			255
Total securities available for sale	$	375,055	$	6,066	$	(2,143	)	$	378,978

Sales of available for sale securities were as follows.

	Three Months Ended March 31,
	2016		2015
	(In thousands)
Proceeds	$	23,693	$	38,877
Gross gains	297		366
Gross losses	—		(315		)

The tax provision applicable to these net realized gains amounted to $104,000 and $17,000, respectively.

The amortized cost and fair value of the contractual maturities of available for sale securities at March 31, 2016 were as follows. Mortgage-backed agencies and mutual funds which do not have a single maturity date are shown separately.

	March 31, 2016
	Amortized Cost		Fair Value
	(In thousands)
Within one year	$	988	$	996
One to five years	10,446		11,033
Five to ten years	43,813		46,246
Beyond ten years	86,580		89,882
Residential mortgage-backed securities issued by U.S. Government sponsored entities	198,761		199,658
Mutual funds	250		253
Total	$	340,838	$	348,068

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Securities (Continued)

Securities with unrealized losses at March 31, 2016 and December 31, 2015, aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:

	Less than 12 Months					12 Months or More					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Loss			Value		Loss			Value		Loss
	(In thousands)
March 31, 2016
State and municipal	$	3,802	$	(27	)	$	710	$	(21	)	$	4,512	$	(48	)
Residential mortgage-backed securities issued by U.S. Government sponsored entities	20,282		(33		)	34,908		(553		)	55,190		(586		)
Total temporarily impaired	$	24,084	$	(60	)	$	35,618	$	(574	)	$	59,702	$	(634	)

December 31, 2015
State and municipal	$	2,835	$	(16	)	$	3,041	$	(40	)	$	5,876	$	(56	)
Residential mortgaged-backed securities issued by U.S. Government sponsored agencies	114,227		(574		)	45,516		(1,359		)	159,743		(1,933		)
U.S. Government sponsored entities and agencies	—		—			8,861		(154		)	8,861		(154		)
Total temporarily impaired	$	117,062	$	(590	)	$	57,418	$	(1,553	)	$	174,480	$	(2,143	)

Management evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

In determining OTTI, management considers many factors, including: (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the market decline was affected by macroeconomic conditions, and (4) whether the entity has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time.

As of March 31, 2016, the Company’s security portfolio consisted of 375 securities, 30 of which were in an unrealized loss position. The majority of the unrealized losses are related to the Company’s residential mortgage-backed agencies issued by U.S. Government sponsored entities, as discussed below:

Residential mortgage-backed Securities issued by U.S. Government sponsored entities

At March 31, 2016, all of the mortgage-backed securities held by the Company were issued by U.S. government-sponsored entities, primarily Fannie Mae and Freddie Mac, institutions which the government has affirmed its commitment to support. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2016.

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Loans

Loans at March 31, 2016 and December 31, 2015 consisted of the following:

	March 31, 2016			December 31, 2015
	(In thousands)
Commercial	$	184,202		$	179,753
Construction	88,577			89,833
Commercial real estate:
Owner occupied nonfarm/residential	173,763			157,653
Other nonfarm/residential	200,229			191,016
Residential real estate:
Secured by first liens	306,025			301,597
Home equity	74,367			76,285
Consumer	20,345			20,177
Subtotal	1,047,508			1,016,314
Allowance for loan losses	(6,188		)	(6,851		)
Loans, net	$	1,041,320		$	1,009,463

During 2016 and 2015, substantially all of the Company’s residential and commercial real estate loans were pledged as collateral to the Federal Home Loan Bank to secure advances.

Purchased Credit Impaired Loans:

The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans is as follows:

	March 31, 2016		December 31, 2015
	(In thousands)
Commercial	$	111	$	283
Construction	2,258		2,525
Commercial Real Estate	19,233		19,454
Residential Real Estate	10,554		11,668
Consumer	8		9
Carrying amount	$	32,164	$	33,939

There was $72,000 and $59,000 allowance for loan losses as of March 31, 2016 and December 31, 2015, respectively, for purchased credit impaired loans.

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Loans (Continued)

Accretable yield, or income expected to be collected, is as follows:

	Three Months Ended March 31,
	2016			2015
	(In thousands)
Balance, beginning of period	$	979		$	306
New loans purchased	—			1,632
Accretion of income	(57		)	(184		)
Reclassifications from nonaccretable difference	230			—
Balance, end of period	$	1,152		$	1,754

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Loans (Continued)

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

March 31, 2016

	Commercial			Construction			Commercial Real Estate			Residential Real Estate			Consumer			Total

Beginning balance	$	1,907		$	1,943		$	1,368		$	1,374		$	259		$	6,851
Provision for loan losses	358			(32		)	(582		)	7			249			—
Loans charged-off	(578		)	—			—			(81		)	(191		)	(850		)
Recoveries	34			1			46			70			36			187
Ending balance	$	1,721		$	1,912		$	832		$	1,370		$	353		$	6,188

March 31, 2015

	Commercial			Construction		Commercial Real Estate			Residential Real Estate			Consumer			Total

Beginning balance	$	970		$	1,992	$	1,268		$	2,133		$	102		$	6,465
Provision for loan losses	354			190		(586		)	150			(2		)	106
Loans charged-off	(124		)	—		(2		)	(147		)	(73		)	(346		)
Recoveries	19			—		788			26			62			895
Ending balance	$	1,219		$	2,182	$	1,468		$	2,162		$	89		$	7,120

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Loans (Continued)

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2016 and December 31, 2015 (in thousands):

March 31, 2016:

	Commercial		Construction		Commercial Real Estate		Residential Real Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	104	$	308	$	49	$	263	$	—	$	724
Collectively evaluated for impairment	1,617		1,599		718		1,105		353		5,392
Acquired with deteriorated credit quality	—		5		65		2		—		72
Total ending allowance balance	$	1,721	$	1,912	$	832	$	1,370	$	353	$	6,188

Loans:
Loans individually evaluated for impairment	$	3,407	$	1,851	$	1,225	$	1,898	$	—	$	8,381
Loans collectively evaluated for impairment	180,684		84,468		353,534		367,940		20,337		1,006,963
Loans acquired with deteriorated credit quality	111		2,258		19,233		10,554		8		32,164
Total ending loans balance	$	184,202	$	88,577	$	373,992	$	380,392	$	20,345	$	1,047,508

December 31, 2015:

	Commercial		Construction		Commercial Real Estate		Residential Real Estate		Consumer		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	497	$	368	$	1	$	325	$	—	$	1,191
Collectively evaluated for impairment	1,410		1,571		1,312		1,049		259		5,601
Acquired with deteriorated credit quality	—		4		55		—		—		59
Total ending allowance balance	$	1,907	$	1,943	$	1,368	$	1,374	$	259	$	6,851

Loans:
Loans individually evaluated for impairment	$	3,944	$	2,288	$	862	$	2,690	$	—	$	9,784
Loans collectively evaluated for impairment	175,526		85,020		328,353		363,524		20,168		972,591
Loans acquired with deteriorated credit quality	283		2,525		19,454		11,668		9		33,939
Total ending loans balance	$	179,753	$	89,833	$	348,669	$	377,882	$	20,177	$	1,016,314

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(Unaudited)

4. Loans (Continued)

The following table presents information related to loans individually evaluated for impairment by class of loans as of and for the three month period ended March 31, 2016:

March 31, 2016:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Average Recorded Investment		Interest Income Recognized and Received
	(In thousands)
With no related allowance recorded:
Commercial	$	5,589	$	3,240	$	—	$	3,063	$	41
Construction	—		—		—		47		—
Commercial real estate:
Owner occupied nonfarm/nonresidential	80		80		—		40		—
Other nonfarm/nonresidential	331		331		—		334		5
Residential real estate:
Secured by first liens	—		—		—		87		—
Home equity	—		—		—		—		—
Consumer	—		—		—		—		—
Total	$	6,000	$	3,651	$	—	$	3,571	$	46

With an allowance recorded:
Commercial	$	167	$	167	104		$	612	$	2
Construction	1,851		1,851		308		2,023		21
Commercial real estate:
Owner occupied nonfarm/nonresidential	295		295		47		147		—
Other nonfarm/nonresidential	519		519		2		522		7
Residential real estate:
Secured by first liens	1,283		1,283		224		1,589		12
Home equity	615		615		39		619		8
Consumer	—		—		—		—		—
Total	$	4,730	$	4,730	$	724	$	5,512	$	50

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(Unaudited)

4. Loans (Continued)

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2015:

December 31, 2015:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With no related allowance recorded:
Commercial	$	2,886	$	2,886	$	—
Construction	93		93		—
Commercial real estate:
Owner occupied nonfarm/nonresidential	—		—		—
Other nonfarm/nonresidential	337		337		—
Residential real estate:
Secured by first liens	173		173		—
Home equity	—		—		—
Consumer	—		—		—
Total	$	3,489	$	3,489	$	—

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
With an allowance recorded:
Commercial	$	2,916	$	1,058	$	497
Construction	2,195		2,195		368
Commercial real estate:
Owner occupied nonfarm/nonresidential	—		—		—
Other nonfarm/nonresidential	525		525		1
Residential real estate:
Secured by first liens	1,895		1,895		285
Home equity	622		622		40
Consumer	—		—		—
Total	$	8,153	$	6,295	$	1,191

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for net charge-offs.

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(Unaudited)

4. Loans (Continued)

The following table presents information for loans individually evaluated for impairment by class of loans for the three months ended March 31, 2015:

	Average Recorded Investment		Interest Income Recognized and Received
	(In thousands)
With no related allowance recorded:
Commercial	$	4,261	$	4
Construction	3,902		7
Commercial real estate:
Owner occupied nonfarm/nonresidential	690		—
Other nonfarm/nonresidential	896		7
Residential real estate:
Secured by first liens	2,174		7
Home equity	7		—
Consumer	1		—
Total	$	11,931	$	25

With an allowance recorded:
Commercial	$	104	$	—
Construction	3,742		34
Commercial real estate:
Owner occupied nonfarm/nonresidential	201		2
Other nonfarm/nonresidential	—		—
Residential real estate:
Secured by first liens	1,738		17
Home equity	738		8
Consumer	9		—
Total	$	6,532	$	61

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Loans (Continued)

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2016 and December 31, 2015:

	March 31, 2016				December 31, 2015
	Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Nonaccrual		Loans Past Due Over 90 Days Still Accruing
	(In thousands)
Commercial	$	400	$	—	$	944	$	—
Construction	—		—		—		—
Commercial real estate:
Owner occupied nonfarm/nonresidential	370		—		41		—
Other nonfarm/nonresidential	—		—		—		—
Residential real estate:
Secured by first liens	1,606		—		2,810		89
Home equity	180		—		176		—
Consumer	16		—		42		—
Total	$	2,572	$	—	$	4,013	$	89

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(Unaudited)

4. Loans (Continued)

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

March 31, 2016:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due

Commercial	$	208	$	531	$	400	$	1,139	$	183,063
Construction	—		—		—		—		88,577
Commercial real estate:
Owner occupied nonfarm/nonresidential	473		95		370		938		172,825
Other nonfarm/nonresidential	—		—		—		—		200,229
Residential real estate:
Secured by first liens	2,575		69		1,606		4,250		301,775
Home equity	51		322		180		553		73,814
Consumer	155		32		16		203		20,142
Total	$	3,462	$	1,049	$	2,572	$	7,083	$	1,040,425

December 31, 2015:

	30 – 59 Days Past Due		60 – 89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due

Commercial	$	373	$	29	$	944	$	1,346	$	178,407
Construction	—		34		—		34		89,799
Commercial real estate:
Owner occupied nonfarm/nonresidential	34		160		41		235		157,418
Other nonfarm/nonresidential	—		—		—		—		191,016
Residential real estate:
Secured by first liens	3,801		1,194		2,787		7,782		293,815
Home equity	292		58		176		526		75,759
Consumer	342		20		42		404		19,773
Total	$	4,842	$	1,495	$	3,990	$	10,327	$	1,005,987

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(Unaudited)

4. Loans (Continued)

Troubled Debt Restructurings:

Troubled debt restructurings totaled $10.2 million and $11.4 million March 31, 2016 and December 31, 2015, respectively. Of the total TDRs, $400,000 and $1.6 million were on non-accrual as of March 31, 2016 and December 31, 2015. The Company has allocated $584,000 and $1.1 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of March 31, 2016 and December 31, 2015, respectively. The Company did not have any commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings as of March 31, 2016 and December 31, 2015.

The detail of outstanding TDRs by class and modification type as of March 31, 2016 and December 31, 2015 follows:

March 31, 2016:

	Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
Commercial:
Extended maturity	$	18	18
Multiple modifications	417		—
Construction:
Extended maturity	63		—
Multiple modifications	1,851		308
Commercial real estate:
Owner occupied nonfarm/nonresidential
Interest only payments	168		—
Other nonfarm/nonresidential
Extended maturity	3,084		32
Multiple modifications	787		—
Residential real estate:
Secured by first liens
Interest rate reduction	314		133
Extended maturity	1,777		42
Multiple modifications	1,130		12
Home equity
Multiple modifications	615		39
Total	$	10,224	$	584

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Loans (Continued)

December 31, 2015:

	Recorded Investment		Allowance for Loan Losses Allocated
	(In thousands)
Commercial:
Extended maturity	$	890	$	390
Multiple modifications	35		18
Construction:
Extended maturity	93		—
Multiple modifications	2,195		368
Commercial real estate:
Owner occupied nonfarm/nonresidential
Interest only payments	171		—
Other nonfarm/nonresidential
Extended maturity	3,105		23
Multiple modifications	801		—
Residential real estate:
Secured by first liens
Interest rate reduction	316		134
Extended maturity	1,966		44
Multiple modifications	1,216		63
Home equity
Multiple modifications	622		40
Total	$	11,410	$	1,080

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Loans (Continued)

A loan is considered in payment default once it is 30 days contractually past due under the modified terms. The following table summarizes the Company’s TDR’s by class, modification type and performance as of March 31, 2016 and December 31, 2015 (in thousands):

March 31, 2016:

	TDRs Greater than 30 Days Past Due and Still Accruing		TDRs on Nonaccrual		Total TDRs Not Performing to Modified Terms		Total TDRs Performing to Modified Terms
	(In thousands)
Commercial:
Extended maturity	$	18	$	—	$	18	$	—
Multiple modifications	—		400		400		17
Construction:
Extended maturity	—		—		—		63
Multiple modifications	—		—		—		1,851
Commercial real estate:
Owner occupied nonfarm/nonresidential
Interest only	—		—		—		168
Other nonfarm/nonresidential
Extended maturity	—		—		—		3,084
Multiple modifications	—		—		—		787
Residential:
Secured by first liens
Interest rate reduction	—		—		—		314
Extended maturity	63		—		63		1,714
Multiple modifications	124		—		124		1,006
Home equity
Multiple modifications	—		—		—		615
Total	$	205	$	400	$	605	$	9,619

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(Unaudited)

4. Loans (Continued)

December 31, 2015:

	TDRs Greater than 30 Days Past Due and Still Accruing		TDRs on Nonaccrual		Total TDRs Not Performing to Modified Terms		Total TDRs Performing to Modified Terms
	(In thousands)
Commercial:
Extended maturity	$	—	$	890	$	890	$	—
Multiple modifications	—		—		—		35
Construction:
Extended maturity	—		—		—		93
Multiple modifications	—		—		—		2,195
Commercial real estate:
Owner occupied nonfarm/nonresidential
Interest only	—		—		—		171
Other nonfarm/nonresidential
Extended maturity	—		—		—		3,105
Multiple modifications	—		—		—		801
Residential:
Secured by first liens
Interest rate reduction	—		—		—		316
Extended maturity	—		64		64		1,902
Multiple modifications	—		615		615		601
Home equity
Multiple modifications	—		—		—		622
Total	$	—	$	1,569	$	1,569	$	9,841

There were two troubled debt restructurings totaling $240,000 that defaulted within 12 months of modification during the first quarter of 2016. There were no troubled debt restructurings that defaulted within 12 months of modification during the first quarter of 2015. TDRs that defaulted in 2016 within 12 months of modification did not impact the allowance for loan losses.

During the quarters ended March 31, 2016 and 2015, the terms of certain loans were modified as troubled debt restructurings. 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; or adjustment of scheduled loan payments from principal and interest to interest only.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the company’s internal underwriting policy.

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(Unaudited)

4. Loans (Continued)

The following table presents loans by class modified as troubled debt restructurings that occurred during the quarters ended March 31, 2016 and 2015 and their performance, by modification type:

	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		TDRs Performing to Modified Terms		TDRs Not Performing to Modified Terms
March 31, 2016:
Residential real estate:
Secured by first liens:
Multiple modifications	2	$	521	$	533	$	533	$	—

March 31, 2015:
Commercial:
Multiple modifications	1	$	53	$	53	$	53	$	—

Loans modified as TDRs during the quarters ended March 31, 2016 and 2015 did not impact the allowance for loan losses.

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. The Company analyzes loans individually by classifying the loans as to credit risk and groups these loans into categories called “criticized” and “classified” assets. The Company considers its criticized assets to be loans risk rated as Watch or Special Mention and its classified assets to be loans risk rated Substandard or Doubtful. On a monthly basis, the Company reviews its loans that are risk rated Watch, Special Mention, Substandard, or Doubtful to determine they are properly classified. In addition, the Company reviews loans rated as a “pass” that have exhibited signs that may require a classification change, such as past due greater than 30 days and other relevant information including: loan officer recommendations, knowledge of specific borrower circumstances, and receipt of borrower financial statements.

The Company uses the following definitions for its criticized loan risk ratings:

Watch. Loans classified as watch are not considered “rated” or “classified” for regulatory purposes, but are considered criticized assets which exhibit modest deterioration in financial performance or external threats.

Special Mention. Loans classified as special mention exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan, or in the Company’s credit position at some future date. Economic or market conditions exist which may affect the borrower more severely than other companies in its industry.

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(Unaudited)

4. Loans (Continued)

The Company uses the following definitions for its classified loan risk ratings:

Substandard. Loans classified as substandard are characterized by having well defined financial weakness. Substandard loans are usually evidenced by chronic or emerging past due performance and serious deficiencies in the primary source of repayment.

Doubtful. Loans classified as doubtful have a well-defined and documented financial weaknesses. They have all the weaknesses of a substandard loan with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. Generally, loans classified as doubtful are on non-accrual.

Loans not meeting the criteria above that are listed as pass are included in groups of homogeneous loans. The risk category of loans by class of loans based on the most recent analysis performed as of March 31, 2016 and December 31, 2015 is as follows:

March 31, 2016:

	Criticized		Classified		Pass		Total
	(In thousands)
Commercial	$	6,542	$	3,439	$	174,221	$	184,202
Construction	4,075		1,914		82,588		88,577
Commercial real estate:
Owner occupied nonfarm/residential	5,202		3,259		165,302		173,763
Other nonfarm/residential	15,134		11,453		173,642		200,229
Residential real estate:
Secured by first liens	18,050		4,533		283,442		306,025
Home equity	535		1,055		72,777		74,367
Consumer	3		25		20,317		20,345
Total	$	49,541	$	25,678	$	972,289	$	1,047,508

December 31, 2015:

	Criticized		Classified		Pass		Total
	(In thousands)
Commercial	$	7,318	$	4,076	$	168,359	$	179,753
Construction	4,270		3,490		82,073		89,833
Commercial real estate:
Owner occupied nonfarm/residential	3,184		3,042		151,427		157,653
Other nonfarm/residential	13,434		13,460		164,122		191,016
Residential real estate:
Secured by first liens	19,005		7,238		275,354		301,597
Home equity	441		1,920		73,924		76,285
Consumer	28		36		20,113		20,177
Total	$	47,680	$	33,262	$	935,372	$	1,016,314

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(Unaudited)

5. Foreclosed and Repossessed Assets

The following table presents the major categories of foreclosed and repossessed assets Foreclosed and repossessed asset activity was as follows:

	March 31, 2016		December 31, 2015
	(In thousands)
Construction	$	1,841	$	1,917
Commercial real estate:
Owner occupied nonfarm/residential	702		791
Other nonfarm/residential	1,746		5,648
Residential real estate:
Secured by first liens	1,871		1,529
Consumer	68		67
	$	6,228	$	9,952

Foreclosed and repossessed asset activity was as follows for the three months ended March 31, 2016 and 2015:

	2016			2015
	(In thousands)
Balance as of January 1	$	9,952		$	4,431
Loans transferred to foreclosed and repossessed assets	649			9,486
Foreclosed and repossessed assets acquired from First Financial Service Corporation	—			3,228
Direct write-downs	(177		)	(63		)
Sales	(4,196		)	(1,264		)
Balance as of March 31	$	6,228		$	15,818

Expenses for the three months ended March 31, 2016 and 2015 related to foreclosed and repossessed assets include:

	2016			2015
	(In thousands)
Net (gain)loss on sales	$	(144	)	$	11
Direct write-downs	177			63
Operating expenses, net of rental income	(143		)	270
	$	(110	)	$	344

The Company was in process of foreclosure of residential real estate loans with outstanding balances of $1.5 million and $1.7 million as March 31, 2016 and December 31, 2015, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Deposits

Deposits at March 31, 2016 and December 31, 2015 consisted of the following:

	March 31, 2016		December 31, 2015
	(In thousands)
Demand (NOW)	$	307,279	$	312,149
Money market accounts	209,517		212,233
Savings	143,319		137,765
Time deposits $250,000 and over	41,326		42,291
Time deposits less than $250,000	253,005		270,887

Total interest bearing deposits	954,446		975,325

Total non-interest bearing deposits	283,518		286,739

Total deposits	$	1,237,964	$	1,262,064

7. Earnings (Loss) Per Common Share

Earnings (loss) per share were computed as follows:

	Three months ended March 31,
	2016		2015
	(In thousands, except share and per share amounts)
Basic:
Net income (loss)	$	3,695	$	(936	)
Preferred stock dividends	—		(110		)
Net income (loss) available (attributable) to common shareholders	$	3,695	$	(1,046	)

Average shares outstanding	5,449,364		5,374,819

Net income (loss) per common share, basic	$	0.68	$	(0.19	)

Diluted:
Net income (loss) available (attributable) to common shareholders	$	3,695	$	(1,046	)
Average shares:
Common shares outstanding for basic	5,449,364		5,374,819
Add: Dilutive effects of outstanding stock options	23,154		—
Add: Dilutive effects of outstanding stock awards	75,692		—
Average dilutive potential common shares	5,548,210		5,374,819
Net income (loss) per common share, diluted	$	0.67	$	(0.19	)

Stock options for 0 and 122,500 shares of common stock were excluded from the calculation of diluted net income per common share for the three months ended March 31, 2016 and 2015, respectively, because their effect was antidilutive.

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(Unaudited)

7. Earnings (Loss) Per Common Share (Continued)

Restricted stock units of 0 and 77,675 common shares were excluded from the calculation of diluted net income per common share for the three months ended March 31, 2016 and 2015 because their effect was antidilutive.

8. Stock-Based Compensation Plans

The Company has three share based compensation plans as described below. Total compensation cost that has been charged against income for those plans was $659,000 and $202,000 for three months ended March 31, 2016 and 2015. The total income tax benefit was $231,000 and $71,000 for the respective periods.

Stock Options: The Company’s stock option plan provides for the granting of both incentive and nonqualified stock options and other share based awards, including restricted stock and deferred stock units, for up to 500,000 shares of common stock at exercise prices not less than the fair market value of the common stock on the date of grant and expiration dates of up to ten years. Terms of the options are determined by the Board of Directors at the date of grant and generally vest over periods of three to four years. Payment of the option price may be in cash or shares of common stock at fair market value on the exercise date at the election of the employee. Non-employee directors are eligible to receive only nonqualified stock options. As of March 31, 2016, the plan allows for additional option and share-based award grants of up to 339,000 shares.

The fair value of each option award is estimated on the date of grant using the Black-Scholes model. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

A summary of the activity in the stock option plan for 2016 follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(In thousands, except exercise prices)
Outstanding at beginning of year	76		$	22.20
Granted	—		—
Exercised	(5	)	21.93
Forfeited	—		—
Expired	—		—
Outstanding at end of period	71		$	22.21	0.8	$	651
Vested and expected to vest	71		$	22.21	0.8	$	651
Exercisable at end of period	71		$	22.21	0.8	$	651

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Stock-Based Compensation Plans (Continued)

For the three months ended March 31, 2016 no options were granted while 4,500 stock options were exercised. The Company received proceeds of $32,000 for the exercise of 1,500 stock options while the remainder were exercised using the cashless option, with the Company issuing net shares to option holders. The intrinsic value of stock options exercised during 2016 was $45,000. As of March 31, 2016, all outstanding stock options had vested and there was no remaining compensation cost to be recognized.

Performance Units Awards: The Company may grant performance unit awards to employees for up to 275,000 shares of common stock. The level of performance shares eventually distributed is contingent upon the achievement of specific performance criteria within a specified award period set at the grant date. The Company estimates the progress toward achieving these objectives when estimating the number of awards expected to vest and correspondingly, periodic compensation expense.

The compensation cost attributable to these restricted performance units awards is based on both the fair market value of the shares at the grant date and the Company’s stock price at the end of a reporting cycle. Thirty-five percent of the total award will be paid in cash and is therefore classified as a liability, with total compensation cost changing as the Company’s stock price changes. The remaining sixty-five percent is classified as an equity award; total compensation cost is based on the fair market value of sixty-five percent of the total award on the date of grant. The compensation expense is recognized over the specified performance period.

As of March 31, 2016, there were no outstanding units granted under the Plan. There were no units outstanding during the periods ended March 31, 2016 and 2015. There were no modifications or cash paid to settle performance unit awards during the three month periods ending March 31, 2016 and 2015.

Restricted Stock Units: Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at issue date. The fair value of the units was determined using the market value of the Company’s stock on the grant date. The restricted stock units have vesting periods ranging from one to five years from the anniversary of the grant date.

A summary of changes in the Company’s nonvested restricted stock units for the year follows:

	Units		Weighted-Average Grant-Date Fair Value
	(In thousands, except per share amounts)
Nonvested at beginning of year	191		$	27.31
Granted	8		33.52
Vested	(23	)	25.96
Forfeited	—		—
Nonvested at March 31, 2016	176		$	27.78

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. Stock-Based Compensation Plans (Continued)

As of March 31, 2016, there was $3.3 million of total unrecognized compensation cost related to nonvested restricted stock units granted under the Plan. The cost is expected to be recognized over a weighted-average period of 2.8 years. The fair value of units vested during the three months ended March 31, 2016 and 2015 was $747,000 and $536,000. There were no modifications or cash paid to settle restricted stock units during the three month periods ended March 31, 2016 and 2015.

9. Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate fair value.

Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). In instances where broker quotes are used, these quotes are obtained from market makers or broker-dealers recognized to be market participants. These valuation methods are classified as Level 2 in the fair value hierarchy.

Impaired Loans: Impaired loans are evaluated at the time the loan is identified as impaired and are recorded at the lower of the carrying amount of the loan or the fair value of the underlying collateral. For collateral dependent loans, the fair value of real estate is primarily determined based on appraisals by qualified licensed appraisers. These appraisals may use a single valuation approach or a combination depending on the type of collateral including the comparable sales or income capitalization approach. The appraisals are discounted to reflect management’s estimate of the fair value of the collateral given the current circumstances and condition of the collateral including the market for the particular collateral and management’s experience with similar types of collateral. Impaired loans are evaluated quarterly for additional impairment. Fair value of impaired loans is classified as Level 3 in the fair value hierarchy.

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Fair Value (Continued)

Foreclosed and Repossessed Assets: Foreclosed and repossessed assets are initially recorded at fair value less estimated costs to sell when acquired. The fair value of foreclosed and repossessed assets is primarily determined based on appraisals by qualified appraisers whose qualifications have been reviewed by the Company. The appraisals are discounted to reflect management’s estimate of the fair value of the collateral given the current circumstances of the collateral and reduced by management’s estimate of costs to dispose of the asset. Also, management reviews the assumptions included the appraisals and makes adjustments where circumstances warrant such as recent experience with similar assets. Fair value of foreclosed and repossessed assets is classified as Level 3 in the fair value hierarchy.

Assets measured at fair value on a recurring basis are summarized below:

			Fair Value Measurements Using
	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(in thousands)
Assets (March 31, 2016):
Available for sale securities:
State and municipal	$	125,765	$	—	$	125,765	$	—
U.S. Government sponsored entities and agencies	22,392		—		22,392		—
Residential mortgage-backed securities issued by U.S. Government sponsored entities	199,658		—		199,658		—
Mutual Funds	253		—		253		—
Total available for sale securities	$	348,068	$	—	$	348,068	$	—

Assets (December 31, 2015):
Available for sale securities:
State and municipal	$	123,492	$	—	$	123,492	$	—
U.S. Government sponsored entities and agencies	31,463		—		31,463		—
Residential mortgage-backed securities issued by U.S. Government sponsored entities	220,331		—		220,331		—
Corporates	3,437		—		3,437		—
Mutual Funds	255		—		255		—
Total available for sale securities	$	378,978	$	—	$	378,978	$	—

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Fair Value (Continued)

Assets measured at fair value on a nonrecurring basis are summarized below.

			Fair Value Measurements Using
	Assets at Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
			(in thousands)
Assets (March 31, 2016):
Impaired loans:
Commercial	$	64	$	—	$	—	$	64
Commercial real estate:
Owner occupied nonfarm/nonresidential	248		—		—		248
Residential real estate:
Secured by first liens	1,059		—		—		1,059

Foreclosed and repossessed assets:
Commercial real estate:
Owner occupied nonfarm/nonresidential	500		—		—		500
Residential real estate:
Secured by first liens	90		—		—		90

Assets (December 31, 2015):
Impaired loans:
Commercial	$	560	$	—	$	—	$	560
Residential real estate:
Secured by first liens	1,610		—		—		1,610

Foreclosed and repossessed assets:
Commercial real estate:
Owner occupied nonfarm/nonresidential	119		—		—		119

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Fair Value (Continued)

The Company measures for impairment using the fair value of the collateral less costs to sell for collateral-dependent loans. The Company’s collateral dependent impaired loans had a carrying value of $1.7 million as of March 31, 2016 with a valuation allowance of $375,000, resulting in provision for loan losses of $53,000 for the three months ended March 31, 2016. The Company recorded $27,000 in provision for loan losses for collateral-dependent impaired loans for the three months ended March 31, 2015. Impaired loans totaled $9.8 million as of December 31, 2015, which included collateral dependent loans with a carrying value of $3.0 million and a valuation allowance of $782,000.

The Company evaluates the fair value of foreclosed and repossessed assets at the time they are transferred from loans and on a quarterly basis thereafter. During the three months ended March 31, 2016 and 2015, the Company recognized $177,000 and $63,000 of charges to write down foreclosed and repossessed assets to their fair value.

The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at March 31, 2016:

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in thousands)
March 31, 2016:
Impaired Loans:
Commercial	$	64	Sales comparison approach	Adjustments for differences between comparable sales	28%
Commercial real estate	248		Sales comparison approach	Adjustments for differences between comparable sales	40%
Residential real estate	1,059		Sales comparison approach	Adjustments for differences between comparable sales	19%-37% (30%)

Foreclosed and repossessed assets:
Commercial real estate	500		Sales comparison approach	Adjustments for differences between comparable sales	17%
Residential real estate	90		Sales comparison approach	Adjustments for differences between comparable sales	11%

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Fair Value (Continued)

	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(in thousands)
December 31, 2015:
Impaired Loans:
Commercial	$	560	Sales comparison approach	Adjustments for differences between comparable sales	28%-81% (72%)
Residential real estate	1,610		Sales comparison approach	Adjustments for differences between comparable sales	19%-37% (30%)

Foreclosed and repossessed assets:
Commercial real estate	$	119	Sales comparison approach	Adjustments for differences between comparable sales	33%

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Fair Value (Continued)

Fair value of Financial Instruments

Carrying amount and estimated fair values of financial instruments, not previously presented, at March 31, 2016 and December 31, 2015 were as follows:

			Fair Value Measurements Using
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(in thousands)
March 31, 2016:
Financial assets:
Cash and due from financial institutions	$	24,439	$	24,439	$	—	$	—	$	24,439
Interest-bearing deposits in other financial institutions	20,726		20,726		—		—		20,726
Loans held for sale	234		—		242		—		242
Loans, net	1,041,508		—		—		1,055,946		1,055,946
Accrued interest receivable	5,124		20		1,840		3,264		5,124
Federal Home Loan Bank and Federal Reserve Stock	3,882		n/a		n/a		n/a		n/a

Financial liabilities:
Deposits	1,237,964		—		1,237,889		—		1,237,889
Short-term borrowings	73,410		—		74,015		—		74,015
Other borrowings	97,551		—		40,168		50,766		90,934
Accrued interest payable	840		—		288		552		840

December 31, 2015:
Financial assets:
Cash and due from financial institutions	$	30,425	$	30,425	$	—	$	—	$	30,425
Interest-bearing deposits in other financial institutions	13,365		13,365		—		—		13,365
Loans held for sale	1,015		—		1,038		—		1,038
Loans, net	1,009,463		—		—		1,023,175		1,023,175
Accrued interest receivable	5,328		17		1,879		3,432		5,328
Federal Home Loan Bank and Federal Reserve Stock	3,890		n/a		n/a		n/a		n/a

Financial liabilities:
Deposits	1,262,064		—		1,261,084		—		1,261,084
Short-term borrowings	48,785		—		48,776		—		48,776
Other borrowings	108,347		—		51,269		50,472		101,741
Accrued interest payable	451		—		366		85		451

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Fair Value (Continued)

The methods and assumptions, not previously presented, used to estimate fair values are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

(b) FHLB and FRB Stock

It is not practical to determine the fair value of FHLB and FRB stock due to restrictions placed on transferability.

(c) Loans

Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price.

The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

(d) Deposits

The fair value disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

(e) Other Borrowings

The fair values of the Company’s long-term borrowings are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 2 classification.

The fair values of the Company’s Subordinated Debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Fair Value (Continued)

(f) Accrued Interest Receivable/Payable

The carrying amounts of accrued interest approximate fair value resulting in a Level 1, Level 2, or Level 3 classification depending upon the classification of the associated asset or liability.

(g) Off-balance Sheet Instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.

10. Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component, net of tax, is presented below for the three month periods ended March 31, 2016 and 2015:

	Unrealized Gains and Losses on Available-for- Sale Securities			Defined Benefit Pension Items			Total
	(In thousands)
March 31, 2016:
Balance, beginning of period	$	2,589		$	(500	)	$	2,089
Other comprehensive income (loss) before reclassifications	2,305			(21		)	2,284
Amounts reclassified from accumulated other comprehensive income (loss)	(193		)	3			(190		)
Balance, end of period	$	4,701		$	(518	)	$	4,183

March 31, 2015:
Balance, beginning of period	$	2,280		$	(471	)	$	1,809
Other comprehensive income before reclassifications	2,006			4			2,010
Amounts reclassified from accumulated other comprehensive income (loss)	(34		)	3			(31		)
Balance, end of period	$	4,252		$	(464	)	$	3,788

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YOUR COMMUNITY BANKSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

10. Accumulated Other Comprehensive Income (Loss) (Continued)

The following is a detail of amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three months ending March 31, 2016 and 2015:

March 31, 2016:

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented
	(In Thousands)
Unrealized gains and losses on available-for-sale securities	$	(297	)	Net gain on sales of available-for-sale securities
	104			Income tax expense
	$	(193	)	Net of tax

Amortization of defined benefit pension plan unrecognized loss	$	5		Salaries and employee benefits
	(2		)	Income tax expense
	$	3		Net of tax

Total reclassifications for the period	$	(190	)	Net of tax

March 31, 2015

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified From Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Statement Where Net Income Is Presented
	(In Thousands)
Unrealized gains and losses on available-for-sale securities	$	(51	)	Net gain on sales of available-for-sale securities
	17			Income tax expense
	$	(34	)	Net of tax

Amortization of defined benefit pension plan unrecognized loss	$	4		Salaries and employee benefits
	(1		)	Income tax expense
	$	3		Net of tax

Total reclassifications for the period	$	(31	)	Net of tax

11. Subsequent Event — Merger Agreement

On May 3, 2016, the Company entered into a definitive agreement and plan of merger with WesBanco, Inc. (“WesBanco”) providing for the merger of the Company with and into WesBanco. The merger agreement provides that Company shareholders will receive 0.964 of a share of WesBanco common stock plus $7.70 in cash for each share of Company common stock they own on the date the merger becomes effective. The merger is expected to be completed in the third or fourth quarter of 2016. Consummation of the merger is subject to approval of the merger agreement by the Company’s shareholders, receipt of required regulatory approvals, the aggregate amount of certain Company loans not exceeding an agreed upon amount, and other customary conditions.

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PART I - ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YOUR COMMUNITY BANKSHARES, INC.

Safe Harbor Statement for Forward-Looking Statements

This report may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on our current expectations regarding our business strategies and their intended results and our future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to our actual results, performance, and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; competitive conditions in the banking markets served by our subsidiaries; the adequacy of the allowance for losses on loans and the level of future provisions for losses on loans; and other factors disclosed periodically in our filings with the Securities and Exchange Commission.

Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this report or made elsewhere from time to time by us or on our behalf. We assume no obligation to update any forward-looking statements.

Financial Condition

Total assets as of March 31, 2016 remained flat at $1.6 billion compared to December 31, 2015 while the asset mix shifted during the period as net loans increased by $31.9 million while securities available for sale decreased by $30.9 million. Also during the period, the Company’s foreclosed and repossessed assets decreased to $6.2 million as of March 31, 2016 from $10.0 million as of December 31, 2015. Total liabilities decreased by $11.4 million as the increase in short-term borrowings of $24.6 million was offset by decreases in total deposits of $24.1 million and other borrowings of $10.8 million.

Net loans increased by $31.9 million to $1.0 billion as of March 31, 2016 with the majority of the increase in commercial real estate. During 2015 and extending into 2016, the Company has focused its efforts on growing the loan portfolio through the addition of experienced business service lenders in the markets in which it operates. To continue to increase net interest income and offset margin pressure, management has focused on reducing the securities portfolio and shifting to higher yielding commercial loans.

Securities available for sale decreased by $30.9 million to $348.1 million as of March 31, 2016 from $379.0 million at December 31, 2015 primarily due to sales of $23.7 million and maturities, prepayments and calls of $13.1 million, offset by purchases of $2.7 million. The securities portfolio serves as a source of liquidity and earnings and plays an important part in the management of interest rate risk. The current strategy for the investment portfolio is to maintain an overall average repricing term between 3.0 and 3.5 years to limit exposure to rising interest rates.

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Total deposits decreased by $24.1 million to $1.2 billion as of March 31, 2016 from $1.3 billion as of December 31, 2015. The decrease is attributable to seasonal fluctuation in some of the Company’s municipal deposit relationships as tax receipts increase the balance in those accounts during the fourth quarter and are distributed in the first quarter.

Net Income (Loss) Available (Attributable) to Common Shareholders. Net income available to common shareholders was $3.7 million for the three months ended March 31, 2016 as compared to a net loss attributable to common shareholders of $1.0 million for the same period in 2015. Basic and diluted earnings per common share were $0.68 and $0.67 for the first quarter of 2016 as compared to basic and diluted loss per common share of $0.19 for 2015. The increase in net income available to common shareholders was attributable to substantial merger and integration expenses related to the acquisition of First Financial Service Corporation (“FFKY”) during the first quarter of 2015 that were not repeated in 2016. The annualized return on average assets and average shareholders’ equity were 0.95% and 11.34% for the three months ended March 31, 2016, respectively, compared to -0.23% and -2.57% for the equivalent period in 2015.

Net interest income. Net interest income decreased to $13.0 million for the three months ended March 31, 2016 from $13.5 million in 2015 while the net interest margin on a fully taxable equivalent basis increased to 3.91% from 3.87% over the same periods. The increase in net interest margin was due to a shift in asset mix from lower yielding taxable investments to higher yielding loans, offset by an increase in the average cost of other borrowings. The average balance of taxable securities decreased to $244.7 million for the first three months of 2016 as compared to $318.7 million in 2015 while the average balance of loans increased to $1.0 billion from $993.5 million over the same periods. For the three months ended March 31, 2016, the average yield of taxable securities was 1.90% as compared to 4.89% for loans. Also impacting the average yield on loans was accretion income of $417,000 in 2016 as compared to $601,000 in 2015. The average balance of interest-bearing liabilities decreased to $1.1 billion for the three months ended March 31, 2016 from $1.2 billion in 2015 while the average cost increased to 0.58% from 0.43% over the respective periods. The increase was due to the issuance of $25.0 million of subordinated debt by YCB during the fourth quarter of 2015 which currently has a fixed rate of 6.25%.

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Average Balance Sheets. The following tables set forth certain information relating to our average balance sheets and reflect the average yields earned and rates paid. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. Average balances are computed on daily average balances. For analytical purposes, net interest margin and net interest spread are adjusted to a taxable equivalent adjustment basis to recognize the income tax savings on tax-exempt assets, such as state and municipal securities. A tax rate of 35% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent (“FTE”) basis. Loans held for sale and loans no longer accruing interest are included in total loans.

	Three Months Ended March 31,
	2016								2015
	Average Balance			Interest			Average Yield/Cost		Average Balance			Interest			Average Yield/Cost
	(In thousands)
ASSETS
Earning assets:
Interest-bearing deposits in other financial institutions	$	12,327		$	38		1.24	%	$	63,092		$	56		0.36	%
Taxable securities	244,685			1,153			1.90		318,695			1,340			1.70
Tax-exempt securities	118,927			1,579			5.34		83,217			1,125			5.49
Total loans and fees (1) (2) (3)	1,037,140			12,600			4.89		993,536			12,620			5.15
Federal Home Loan Bank and Federal Reserve stock	3,886			49			5.07		6,484			95			5.94
Total earning assets	1,416,965			15,419			4.38		1,465,024			15,236			4.22

Less: Allowance for loan losses	(6,318		)						(6,838		)
Non-earning assets:
Cash and due from financial institutions	27,396								38,987
Premises and equipment, net	33,078								38,136
Other assets	90,794								124,855
Total assets	$	1,561,915							$	1,660,164

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing liabilities:
Savings and other	$	653,364		$	266		0.16	%	$	697,094		$	265		0.15	%
Time deposits	307,936			294			0.38		377,230			309			0.33
Short-term borrowings	62,788			67			0.43		38,253			22			0.23
Other borrowings	111,685			1,018			3.67		87,999			676			3.12
Total interest-bearing liabilities	1,135,773			1,645			0.58		1,200,576			1,272			0.43

Non-interest bearing liabilities:
Non-interest bearing deposits	283,859								279,879
Accrued interest payable and other liabilities	11,288								12,026
Stockholders’ equity	130,995								167,683
Total liabilities and shareholders’ equity	$	1,561,915							$	1,660,164

Net interest income (taxable equivalent basis)				$	13,774							$	13,964
Less: taxable equivalent adjustment				(778		)						(480		)
Net interest income				$	12,996							$	13,484
Net interest spread							3.80	%							3.79	%
Net interest margin							3.91								3.87

(1) The amount of direct loan origination cost (income) included in interest on loans was $(2) and $21 for the three months ended March 31, 2016 and 2015.

(2) Calculations include non-accruing loans in the average loan amounts outstanding.

(3) The amount of accretion recorded for acquired loans included in interest income was $417 and $601 for the three months ended March 31, 2016 and 2015.

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Rate/Volume Analysis. The table below illustrates the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities affected our interest income and interest expense on a FTE basis during the periods indicated. Information is provided in each category with respect to (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.

	Three Months Ended March 31, 2016 compared to Three Months Ended March 31, 2015 Increase/(Decrease) Due to
	Total Net Change			Volume			Rate
	(In thousands)
Interest income:
Interest-bearing deposits in other financial institutions	$	(18	)	$	(72	)	$	54
Taxable securities	(187		)	(336		)	149
Tax-exempt securities	454			474			(20		)
Total loans and fees	(20		)	542			(562		)
Federal Home Loan Bank and Federal Reserve stock	(46		)	(34		)	(12		)
Total increase (decrease) in interest income	183			574			(391		)

Interest expense:
Savings and other	1			(17		)	18
Time deposits	(15		)	(62		)	47
Short-term borrowings	45			19			26
Other borrowings	342			202			140
Total increase (decrease) in interest expense	373			142			231
Increase (decrease) in net interest income	$	(190	)	$	432		$	(622	)

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Allowance and Provision for Loan Losses. Our financial performance depends on the quality of the loans we originate and management’s ability to assess the degree of risk in existing loans when it determines the allowance for loan losses. An increase in loan charge-offs or non-performing loans or an inadequate allowance for loan losses could have an adverse effect on net income. The allowance is determined based on the application of loss estimates to graded loans by categories.

Summary of Loan Loss Experience:

	Three Months Ended March 31,
Activity for the period ended:	2016			2015
	(In thousands)
Beginning balance	$	6,851		$	6,465
Charge-offs:
Residential real estate	(81		)	(133		)
Commercial real estate	—			(2		)
Construction	—			—
Commercial	(578		)	(124		)
Home equity	—			(14		)
Consumer	(191		)	(73		)
Total	(850		)	(346		)

Recoveries:
Residential real estate	60			5
Commercial real estate	46			788
Construction	1			—
Commercial	34			19
Home equity	10			21
Consumer	36			62
Total	187			895
Net loan (charge-offs) recoveries	(663		)	549

Provision	—			106

Ending balance	$	6,188		$	7,120

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The Company did not record a provision for loan losses during the first three months of 2016 compared to $106,000 for 2015 while net loan charge-offs increased to $663,000 from net recoveries of $549,000 over the same periods. The Company continues to see continued improvement in credit quality as non-performing loans decreased to $2.6 million as of March 31, 2016 from $4.1 million at December 31, 2015 while classified loans decreased to $25.7 million from $33.3 million over the respective periods. Additionally, loans individually evaluated for impairment declined to $8.4 million as of March 31, 2016 from $9.8 million at December 31, 2015 while loans with acquired deteriorated credit decreased to $32.2 million from $33.9 million, respectively.

The Company did not record a provision for loan losses in the first quarter of 2016 due to the improving credit trends noted above as well as reductions in the allocation for loans collectively evaluated for impairment. The Company applies an allocation for loans collectively evaluated for impairment based on an average of the previous 12 quarters net charge-off rate, adjusted for certain qualitative factors by call report code. Due to the Company’s improving credit quality and reduction in net charge-offs, the rate applied has decreased substantially. The reduction in the rate applied to loans collectively for impairment has been partially offset by an increase in the balance of loans. Also, during the first quarter of 2016, the Company did not identify any significant new impaired credits or substantially increase its exposure on any previously identified impaired credits.

Federal regulations require insured institutions to classify their assets on a regular basis. The regulations provide for three categories of classified loans: substandard, doubtful and loss. The regulations also contain a special mention and a specific allowance category. Special mention is defined as loans that do not currently expose an insured institution to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving management’s close attention. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified as loss, the insured institution must either establish specified allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge off such amount. The Company continues to closely monitor its loan portfolio to identify any additional problem credits, deterioration in underlying collateral values, and credits requiring further downgrades in accordance with the Company’s internal policies. As of March 31, 2016, management believes it has provided for probable incurred losses within the loan portfolio based on information currently available to the Company.

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Asset Quality. Loans, including impaired loans, are placed on non-accrual status when they become past due ninety days or more as to principal or interest, unless they are adequately secured and in the process of collection. When these loans are placed on non-accrual status, all unpaid accrued interest is reversed and the loans remain on non-accrual status until the loan becomes current or the loan is deemed uncollectible and is charged off. Impaired loans are those loans for which it is probable that all scheduled interest and principal payments will not be received based on the contractual terms of the loan agreement. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. TDRs totaled $10.2 million and $11.4 million at March 31, 2016 and December 31, 2015, respectively, while $400,000 and $1.6 million were included in the Company’s non-accrual loans as of the same dates.

The Company’s non-performing assets as of March 31, 2016 and December 31, 2015 were as follows:

	March 31, 2016			December 31, 2015
	(In thousands)

Loans on non-accrual status	$	2,572		$	4,013
Loans past due over 90 days still on accrual	—			89
Total non-performing loans	2,572			4,102
Foreclosed and repossessed assets	6,228			9,952
Total non-performing assets	$	8,800		$	14,054

Non-performing loans to total loans	0.25		%	0.40		%
Non-performing assets to total loans	0.84			1.38
Allowance as a percent of non-performing loans	240.59			170.72
Allowance as a percent of total loans	0.59			0.67

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Non-interest income. Non-interest income increased to $2.6 million for the three months ended March 31, 2016 from $2.4 million for the equivalent period in 2015 as increases in net gains on sales of available for sale securities and interchange income were partially offset by an increase in impairment on tax credit investments. During the first quarter of 2016, the Company sold $23.7 million of securities, realizing a net gain on sale of $297,000 as compared to net gains of $51,000 in 2015. The Company sold the securities to fund the increase in the loan portfolio and offset reductions in deposits. Interchange income increased to $572,000 for the three months ended March 31, 2016 from $444,000 for the same period in 2015. The increase was due in part to a reduction in fees associated with processing debit card transactions as well as an increase in interchange revenue. The Company recognized amortization of its tax credit investments of $350,000 in the first quarter of 2016 as compared to $86,000 in 2015. The increase was recorded primarily on low income housing investments acquired from FFKY which generate tax credits of $876,000 annually through 2020 and expire in 2021 during which $107,000 of credits will be generated. The Company has a remaining investment in low income housing acquired from FFKY of $6.1 million at March 31, 2016 which will be amortized over the remainder of the period in which tax credits are generated.

Non-interest expense. Non-interest expense decreased to $11.2 million for the three months ended March 31, 2016 from $17.9 million due to merger and integration charges incurred during the first quarter of 2015 associated with the acquisition of FFKY. Salaries and employee benefits decreased to $6.0 million from $9.1 million due to $2.1 million of employee termination-related expenses during 2015 that were not repeated in 2016 including change in control payments, severance, retention bonuses and salaries for former FFKY personnel on the data conversion team. The decrease in employee termination expenses was partially offset by an increase in stock based compensation of $457,000. Occupancy expense declined to $1.2 million in 2016 from $1.6 million in 2015 as the Company incurred $308,000 of merger and integration charges associated with the acquisition of FFKY in 2015. Data processing expense was $1.1 million for the first three months of 2016 as compared to $1.8 million due primarily to $631,000 of contract cancellation fees incurred during 2015. Legal and professional fees decreased to $623,000 from $1.6 million as the Company incurred expense associated with the FFKY acquisition in 2015 for valuation services, legal fees to effect the acquisition, and fees for investment banking services. Foreclosed assets, net were $(110,000) in 2016 as compared to $344,000 in 2015 as the Company recognized higher rental income on commercial real estate properties during 2016. Other expenses declined by $814,000 to $1.2 million due to reductions in postage and charitable contributions.

Income tax expense. Income tax expense was $629,000 for the three months ended March 31, 2016 as compared to an income tax benefit of $1.2 million in 2015 while the effective tax rate for the respective periods were 14.5% and -56.2%. The increase in income tax expense and effective tax rate from 2015 to 2016 was attributable to merger and integration expenses incurred during the first quarter of 2015 associated with the acquisition of FFKY which were not repeated in 2016. Due to the merger and integration charges, the Company had a loss before income taxes in 2015 of $2.1 million as compared to income before income taxes of $4.3 million in 2016.

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Liquidity and Capital Resources Liquidity levels are adjusted in order to meet funding needs for deposit outflows, repayment of borrowings, and loan commitments and to meet asset/liability objectives. Our primary sources of funds are customer deposits, customer repurchase agreements, proceeds from loan repayments, maturing securities and FHLB advances. While loan repayments and maturities are a predictable source of funds, deposit flows and mortgage prepayments are greatly influenced by market interest rates, general economic conditions and competition. At March 31, 2016, we had cash and interest-bearing deposits with banks of $45.2 million and unpledged securities available-for-sale with a fair value of $137.8 million. If we require funds beyond the funds we are able to generate internally, we have $36.6 million in additional aggregate borrowing capacity with the Federal Home Loan Bank of Indianapolis based on our current FHLB stock holdings and unused federal funds lines of credit with various nonaffiliated financial institutions of $18.5 million. Management believes the Company’s liquidity sources are adequate to meet its operational needs.

The Company is subject to various regulatory capital requirements administered by federal banking agencies. At March 31, 2016, the Company and its subsidiaries exceed the regulatory minimums and met the regulatory definition of well-capitalized based on the most recent regulatory definition as detailed below:

March 31, 2016:

	Tier 1 Capital to Total Average Assets		Common Equity Tier 1 Capital to Risk-Adjusted Total Assets		Tier 1 Capital to Risk- Adjusted Total Assets		Total Capital to Risk- Adjusted Total Asset
Consolidated	9.5	%	9.7	%	12.2	%	14.8	%
Your Community Bank	9.7	%	12.3	%	12.3	%	14.9	%

Minimum for banks to be well capitalized under regulatory capital requirements:	5.0	%	6.5	%	8.0	%	10.0	%

December 31, 2015:

	Tier 1 Capital to Total Average Assets		Common Equity Tier 1 Capital to Risk-Adjusted Total Assets		Tier 1 Capital to Risk- Adjusted Total Assets		Total Capital to Risk- Adjusted Total Asset
Consolidated	9.2	%	9.7	%	12.0	%	14.7	%
Your Community Bank	9.7	%	12.4	%	12.4	%	15.0	%

Minimum for banks to be well capitalized under regulatory capital requirements:	5.0	%	6.5	%	8.0	%	10.0	%

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Each of the federal bank regulatory agencies has established risk-based capital requirements for banking organizations. The Basel III regulatory capital reforms became effective for the Company and YCB on January 1, 2015, and include new minimum risk-based capital and leverage ratios. These rules refine the definition of what constitutes “capital” for purposes of calculating those ratios, including the definitions of Tier 1 capital and Tier 2 capital. The final rules allow banks and their holding companies with less than $250 billion in assets a one-time opportunity to opt-out of a requirement to include unrealized gains and losses in accumulated other comprehensive income in their capital calculation. The Company and YCB opted out of this requirement. The rules also establish a “capital conservation buffer” of 2.5%, to be phased in over three years, above the regulatory minimum risk-based capital ratios. Once the capital conservation buffer is fully phased in, the minimum ratios are a common equity Tier 1 risk-based capital ratio of 7.0%, a Tier 1 risk-based capital ratio of 8.5%, and a total risk-based capital ratio of 10.5%. The phase-in of the capital conservation buffer requirement begins in January 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented in January 2019. An institution is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if capital levels fall below minimum levels plus the buffer amounts. These limitations establish a maximum percentage of eligible retained income that could be utilized for such actions.

Off Balance Sheet Arrangements and Contractual Obligations

The Company uses off balance sheet financial instruments, such as commitments to make loans, credit lines and letters of credit to meet customer financing needs. These agreements provide credit or support the credit of others and usually have expiration dates but may expire without being used. In addition to credit risk, the Company also has liquidity risk associated with these commitments as funding for these obligations could be required immediately. The contractual amount of these financial instruments with off balance sheet risk was as follows at March 31, 2016:

	(In thousands)
Commitments to make loans	$	18,413
Unused lines of credit	214,299
Standby letters of credit	3,720
Total	$	236,432

Aggregate Contractual Obligations

As of March 31, 2016: (Dollars in thousands)	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Time deposits	$	294,331	$	174,175	$	76,251	$	37,110	$	6,795
Short-term borrowings	73,410		73,410		—		—		—
Other borrowings	97,551		22,257		15,317		2,000		57,977
Defined benefit plan	1,038		361		196		98		383
Lease commitments	7,848		1,252		1,904		1,554		3,138
Total	$	474,178	$	271,455	$	93,668	$	40,762	$	68,293

Time deposits represent certificates of deposit issued by the Company.

Short-term borrowings consist of repurchase agreements of $46.9 million, federal funds purchased of $26.5 million, and note payable of $30,000. The note payable represents amounts due for the participation in construction of a low income housing development project and is payable on demand.

Other borrowings consist of FHLB advances of $31.8 million, subordinated debentures of $57.8 million, and a term loan of $8.0 million. FHLB advances represent the amounts that are due from the FHLB and consist of fixed rate advances. Subordinated debentures represent the scheduled maturities of subordinated debentures issued to trusts formed by the Company in connection with the issuance of trust preferred securities. The term loan represents the scheduled maturities of holding company debt.

The defined benefit plan represents expected benefit payments to be paid to participants.

Lease commitments represent the total minimum lease payments under noncancelable operating leases, before considering renewal options that generally are present.

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PART I - ITEM 3

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Asset/liability management is the process of balance sheet control designed to ensure safety and soundness and to maintain liquidity and regulatory capital standards while maintaining acceptable net interest income. Interest rate risk is the exposure to adverse changes in net interest income as a result of market fluctuations in interest rates. Management continually monitors interest rate and liquidity risk so that it can implement appropriate funding, investment, and other balance sheet strategies. Management considers market interest rate risk to be our most significant ongoing business risk consideration.

We currently contract with an independent third party consulting firm to measure our interest rate risk position. The consulting firm utilizes an earnings simulation model to analyze net interest income sensitivity. Current balance sheet amounts, current yields and costs, corresponding maturity and repricing amounts and rates, other relevant information, and certain assumptions made by management are combined with gradual movements in interest rates of 200 basis points up at December 31, 2015 and March 31, 2016 within the model to estimate their combined effects on net interest income over a one-year horizon. A majority of our loans are indexed to the prime, therefore, the Company has excluded an evaluation of the effect on net interest income assuming a decrease in interest rates as further reductions in the prime rate are extremely unlikely. We feel that using gradual interest rate movements within the model is more representative of future rate changes than instantaneous interest rate shocks. Growth in amounts are not projected for any balance sheet category when constructing the model because of the belief that projected growth can mask current interest rate risk imbalances over the projected horizon. We believe that the changes made to the model’s interest rate risk measurement process have improved the accuracy of results of the process, consequently giving better information on which to base asset and liability allocation decisions going forward.

Assumptions based on the historical behavior of our deposit rates and balances in relation to changes in interest rates are incorporated into the model. These assumptions are inherently uncertain and, as a result, the model cannot precisely measure future net interest income or precisely predict the impact of fluctuations in market interest rates on net interest income. We continually monitor and update the assumptions as new information becomes available. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes, and actual variations from the managerial assumptions utilized under the model, as well as changes in market conditions and the application and timing of various management strategies.

The base scenario represents projected net interest income over a one year forecast horizon exclusive of interest rate changes to the simulation model. Given a gradual 200 basis point increase in the projected yield curve used in the simulation model (Up 200 Scenario), we estimated that as of March 31, 2016 our net interest income would decrease by an estimated 1.2%, or $625,000, over the one year forecast horizon. As of December 31, 2015, in the Up 200 Scenario we estimated that net interest income would decrease $467,000, over a one year forecast horizon ending December 31, 2016.

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The projected results are within our asset/liability management policy limits which states that the negative impact to net interest income should not exceed 7% in a 100 or 200 basis point increase or decrease in the projected yield curve over a one year forecast horizon. The forecast results are heavily dependent on the assumptions regarding changes in deposit rates; we can minimize the reduction in net interest income in a period of rising interest rates to the extent that we can curtail raising deposit rates during this period. We continue to explore transactions and strategies to both increase our net interest income and minimize our interest rate risk.

Our interest sensitivity profile at any point in time will be affected by a number of factors. These factors include the mix of interest sensitive assets and liabilities as well as their relative repricing schedules. It is also influenced by market interest rates, deposit growth, loan growth, and other factors. The tables below illustrate our estimated annualized earnings sensitivity profile based on the above referenced asset/liability model as of March 31, 2016 and December 31, 2015, respectively. The tables below are representative only and are not precise measurements of the effect of changing interest rates on our net interest income in the future.

The following table illustrates our estimated one year net interest income sensitivity profile based on the asset/liability model as of March 31, 2016 and ending on March 31, 2017:

	Interest Rate Sensitivity as of March 31, 2016
	Base		Gradual Increase in Rates of 200 Basis Points

Projected interest income:
Loans	$	49,308	$	51,682
Investments	8,461		8,661
FHLB and FRB stock	165		165
Interest-bearing deposits in other financial institutions	95		287
Total interest Income	58,029		60,795

Projected interest expense:
Deposits	2,213		4,539
Short-term borrowings	379		1,169
Other borrowings	4,152		4,427
Total interest expense	6,744		10,135
Net interest income	$	51,285	$	50,660

Change from base			(625		)
Percent change from base			(1.2		)%

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The following table illustrates our estimated one year net interest income sensitivity profile based on the asset/liability model as of December 31, 2015 and ending December 31, 2016:

	Interest Rate Sensitivity as of December 31, 2015
	Base		Gradual Increase in Rates of 200 Basis Points
Projected interest income:
Loans	$	48,447	$	50,733
Investments	9,328		9,490
FHLB and FRB stock	165		165
Interest-bearing deposits in other financial Institutions	37		119
Total interest income	57,977		60,507

Projected interest expense:
Deposits	2,298		4,561
Short-term borrowings	104		639
Other borrowings	3,987		4,186
Total interest expense	6,389		9,386
Net interest income	$	51,588	$	51,121

Change from base			$	(467	)
% Change from base			(0.9		)%

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PART I – ITEM 4

CONTROLS AND PROCEDURES

With the participation of the Chief Executive Officer (the principal executive officer) and the Chief Financial Officer (the principal financial officer) of Your Community Bankshares, Inc. (“YCBI”), YCBI’s management has evaluated the effectiveness of YCBI’s disclosure controls and procedures (as defined in Rule 13a-15(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, YCBI’s Chief Executive Officer and Chief Financial Officer have concluded that YCBI’s disclosure controls and procedures are effective as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by YCBI in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by YCBI in the reports that it files or submits under the Exchange Act is accumulated and communicated to YCBI’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in YCBI’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fiscal quarter ended March 31, 2016 that has materially affected, or is reasonably likely to materially affect, YCBI’s internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

There are various claims and lawsuits in which the Company or its subsidiaries are periodically involved, such as claims to enforce liens, foreclosure or condemnation proceedings on properties in which the Banks hold mortgages or security interests, claims involving the making and servicing of real property loans and other issues incidental to the Banks’ business. In the opinion of management, no material loss is expected from any such pending claims or lawsuits.

Item 1A. Risk Factors

In addition to the information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company did not purchase its common shares during the three months ended March 31, 2016.

Item 5. Other Information

Amendments to Employment Agreements

In connection with the execution of the Agreement and Plan of Merger between the Company and WesBanco, Inc. on May 3, 2016, the Company, WesBanco and their respective subsidiary banks entered into amendments to the employment agreements of President and Chief Executive Officer James D. Rickard, Executive Vice President and Chief Financial Officer Paul A. Chrisco, and Executive Vice President and Chief Credit Officer Michael K. Bauer. The amendments are subject to, and will take effect upon, the consummation of the Company’s merger with and into WesBanco.

Title, Term and Salary after the Merger. These provisions of the amendments are summarized in the chart below:

Name	Title	Term	Base Salary

James D. Rickard	Market President of the Business Line	Two years from the merger date	$	230,000

Paul A. Chrisco	Senior Vice President and Business Line Chief Financial Officer	Two years from the merger date	$	209,000

Michael K. Bauer	Senior Vice President & Senior Credit Officer of the Business Line	Three years from the merger date	$	170,000

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Payments upon Consummation of the Merger. Mr. Rickard, Mr. Chrisco and Mr. Bauer would be entitled to receive the following compensation payments upon consummation of the Merger:

Mr. Rickard

· WesBanco would pay Mr. Rickard $1,395,000 in a single cash payment on the merger date.

· Except for his RSUs scheduled to vest on December 15, 2016, all of Mr. Rickard’s Restricted Stock Units would vest and be converted into the shares and cash consideration to be paid in the Merger; and

· Mr. Rickard’s deferred compensation agreement would be amended to provide that no contributions would be made by his employer from and after the merger date.

Mr. Chrisco

· Wesbanco would pay Mr. Chrisco $137,402 in a single cash payment on the merger date.

· Wesbanco would pay Mr. Chrisco $250,000 in a single cash payment as consideration for the restrictive covenants provided in the amendment to his employment agreement subject to clawback for violating those covenants.

· Except for his RSUs scheduled to vest on December 16, 2016 and January 14, 2017, all of his non-vested RSUs would vest and be converted into the shares and cash consideration to be paid in the Merger.

· Wesbanco would pay Mr. Chrisco $9,370 per month for 24 months as a retention payment to encourage him to remain an employee for the amended term of the employment agreement as amended. No payment would be made after termination of employment during the term of the employment agreement, and the aggregate amount of retention payments is subject to repayment if termination is for cause.

Mr. Bauer

· Wesbanco will pay Mr. Bauer $653,570 in a single cash payment on the merger date.

· All of his non-vested RSUs would vest and be converted into the shares and cash consideration to be paid in the Merger.

Effective on the merger date, the amendments would modify change the severance arrangements with each of Mr. Rickard, Mr. Chrisco and Mr. Bauer. Mr. Rickard and Mr. Chrisco would be entitled to receive a cash severance amount equal to the base salary which he would have earned over the shorter of one year or the then remaining term of the amended agreement, payable in equal monthly installments beginning with the first business day of the month following the date of termination. Mr. Bauer would be entitled to receive a cash severance amount equal in aggregate to the base salary which he would have earned over the shortest of one year, twenty-four months, or the then remaining period of time between the merger date and the second anniversary of the merger date.

The amendments for each of Mr. Rickard, Mr. Chrisco and Mr. Bauer provide for the elimination of change in control provisions, such that no change of control payments will be provided for after the merger date. In addition, the amendment for each executive provides for him (or his spouse in the event of his death) to receive health and welfare benefits for a certain period following termination of employment.

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Other Terms.

The amendments also provide for the renewal and restatement of the restrictive covenants contained in the Executive’s previous employment agreements.

In addition to the salary provided in the table above, Mr. Bauer will be compensated through participation in Wesbanco’s annual incentive plan at a guaranteed annual bonus of no less than 15% of Mr. Bauer’s base salary for each bonus year during the term of the Agreement, and through a grant of 3,500 shares of restricted stock under and in accordance with the terms and conditions of the Wesbanco Incentive Bonus Stock Restricted Stock Plan.

Amendments to Restricted Stock Unit Award Agreements.

On November 30, 2015, the Company entered into amendments to the Restricted Stock Unit Award Agreements with James D. Rickard and Paul A. Chrisco to provide that any unvested restricted stock units awarded to them would become fully vested in the event of the named executive officer’s death, disability or a Change in Control of the Company.

In connection with the execution of the Merger Agreement, the Company entered into amendments to certain of the Award Agreements with Mr. Rickard and Mr. Chrisco to revoke the November 30, 2015 amendment and the acceleration of the original vesting dates with respect to the following RSU awards:

Executive	Number of RSUs	Vesting Date

James D. Rickard	2,000	December 15, 2016

Paul A. Chrisco	2,000	December 15, 2016
	408	January 14, 2017

The foregoing summary of the amendments to the employment agreements and the restricted stock unit award agreements in this Item 5 is not complete and is qualified in its entirety by reference to the complete text of the amendments, which are filed as exhibits to this report.

Item 6. Exhibits

Exhibits

The exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index of this Form 10-Q and are filed as a part of this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned thereunto duly authorized.

		YOUR COMMUNITY BANKSHARES, INC.
		(Registrant)

Dated:	May 10, 2016	BY:	/s/ James D. Rickard
			James D. Rickard
			President and
			Chief Executive Officer
			(Principal Executive Officer)

Dated:	May 10, 2016	BY:	/s/ Paul. A. Chrisco
			Paul A. Chrisco
			Executive Vice-President and
			Chief Financial Officer
			(Principal Financial Officer)

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EXHIBIT INDEX

YOUR COMMUNITY BANKSHARES, INC.

EXHIBIT INDEX

Exhibit No.		Description

2.1		Agreement and Plan of Merger dated May 3, 2016 by and between Wesbanco, Inc., Wesbanco Bank, Inc., Your Community Bankshares, Inc. and Your Community Bank (incorporated by reference to Form 8-K of Wesbanco, Inc. dated May 3, 2016).

10.1		Amendment to Employment Agreement by and between James D. Rickard, Your Community Bankshares, Inc., Your Community Bank, Wesbanco, Inc., and Wesbanco Bank, Inc. dated May 3, 2016

10.2		Amendment to Employment Agreement by and between Paul A. Chrisco, Your Community Bankshares, Inc., Your Community Bank, Wesbanco, Inc., and Wesbanco Bank, Inc. dated May 3, 2016

10.3		Amendment to Employment Agreement by and between Michael K. Bauer, Your Community Bankshares, Inc., Your Community Bank, Wesbanco, Inc., and Wesbanco Bank, Inc. dated May 3, 2016

10.4		Your Community Bankshares, Inc. Restricted Stock Units Agreement Modification by and between James Rickard and Your Community Bankshares, Inc. dated May 2, 2016

10.5		Your Community Bankshares, Inc. Restricted Stock Units Agreement Modification by and between Paul Chrisco and Your Community Bankshares, Inc. dated May 2, 2016

31.1		Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act

31.2		Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act

32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		The following financial information from Your Community Bankshares, Inc. Quarterly Report on Form 10-Q for the period ended March 31, 2016, filed with the SEC on May 10, 2016, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets at March 31, 2016 and December 31, 2015, (ii) Consolidated Statements of Operations for the three months ended March 31, 2016 and March 31, 2015, (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2016 and March 31, 2015 (iv) Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2016, (v) Consolidated Statements of Cash Flows for the three months ended March 31, 2016 and March 31, 2015 and (vi) Notes to Consolidated Financial Statements Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Sections 11 and 12 of the Securities

*Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Exchange Act of 1934, or otherwise subject to the liability of those sections, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act of 1933 or the Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filings.

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