LOANS

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

LOANS

3. LOANS

Major classifications of loans (including deferred fees of $89,441 and $66,289) are as follows:

	DECEMBER 31,
	2014			2013
Commercial loans	$	49,899,577		$	53,303,569
Commercial real estate:
Commercial real estate construction		1,511,702			1,516,545
Commercial real estate other		115,739,682			104,740,578
Consumer:
Consumer real estate		62,054,983			54,669,359
Consumer other		4,911,848			4,090,253
		234,117,792			218,320,304
Allowance for loan losses		(3,334,848	)		(3,292,277	)
Loans, net	$	230,782,944		$	215,028,027

  Changes in the Allowance for Loan Losses are summarized as follows:

	YEARS ENDED DECEMBER 31,
	2014			2013			2012
Balance at beginning of year	$	3,292,277		$	3,432,844		$	3,106,884
Provision for loan losses		82,500			207,500			350,000
Charge offs		(113,030	)		(391,401	)		(172,288	)
Recoveries		73,101			43,334			148,248
Balance at end of year	$	3,334,848		$	3,292,277		$	3,432,844

We had impaired loans totaling $7,051,127 as of December 31, 2014 compared to $7,136,907 at December 31, 2013. Impaired loans include non-accrual loans with balances at December 31, 2014, and 2013, of $882,413 and $1,575,440, respectively, and TDR’s with balances at December 31, 2014 and 2013 of $466,541 and $1,196,341, respectively. One loan receivable reported with a non-accrual status in the amount of $61,959 at December 31, 2013, was returned to accrual status during the year ended December 31, 2014. The borrower had a documented change in income and employment. In addition, the customer made payments consistently, reducing their past due status to less than 30 days for a period of over 6 months. All principal and interest are current and repayment of the remaining contractual principal and interest is expected. The balance of this loan was $48,959 at December 31, 2014. One loan receivable was placed on non-accrual status during the year ended December 31, 2014. The balance of this loan receivable was $204,414 at December 31, 2014. In addition, two loan receivables in the amount of $557,416 at December 31, 2013, were moved to Other Real Estate Owned (“OREO”) during the year ended December 31, 2014. One of these loan receivables valued at $35,473 was ultimately sold at a gain of $2,382 during the year ended December 31, 2014.

We had two restructured loans at December 31, 2014, and four restructured loans at December 31, 2013. According to GAAP, we are required to account for certain loan modifications or restructuring as a TDR, when appropriate. In general, the modification or restructuring of a debt is considered a TDR if we, for economic or legal reasons related to a borrower’s financial difficulties, grant a concession to the borrower that we would not otherwise consider. At December 31, 2014 and 2013, troubled debt restructurings had an aggregate balance of $466,541 and $1,196,341, respectively. During the year ended December 31, 2014, a loan receivable with a balance of $596,125 at December 31, 2013, was removed from a TDR status. The borrower consistently paid as agreed and made substantial reductions to principal. Refinance guidance FASB ASC 310-20-35-9 allows for a loan to be removed from the TDR status if the terms of the loan reflect current market rates. To be in compliance with its modified terms, a loan that is a TDR must not be in nonaccrual status and must be current or less than 30 days past due on its contractual principal and interest payments under the modified repayment terms. Although we removed this loan receivable from a TDR status, it will remain classified as an impaired loan and will continue to be recorded, evaluated and disclosed as such. The balance of this loan was $494,933 at December 31, 2014. In addition, one loan receivable with a balance of $106,194 at December 31, 2013, was paid off during the year ended December 31, 2014. There were no additional loans identified as a TDR during the year ended December 31, 2014. In the past 12 months, no loan identified as a TDR defaulted.

The accrual of interest is generally discontinued on loans, which become 90 days past due as to principal or interest. The accrual of interest on some loans, however, may continue even though they are 90 days past due if the loans are well secured or in the process of collection and we deem it appropriate. If non-accrual loans decrease their past due status to less than 30 days for a period of six to nine months, they are reviewed individually to determine if they should be returned to accrual status.

There were three loans over 90 days past due and still accruing interest at December 31, 2014. This resulted from unusual circumstances with two customers that have had a long-term relationship with the bank. The customers are currently working to bring the loans current with improved cash flow in their respective businesses. There were no loans over 90 days past due still accruing interest at December 31, 2013.

The following is a summary of the non-accrual loans as of December 31, 2014 and December 31, 2013.

Loans Receivable on Non-Accrual
December 31, 2014
Commercial	$	—
Commercial Real Estate:
Commercial Real Estate - Construction		—
Commercial Real Estate - Other		882,413
Consumer:
Consumer - Real Estate		—
Consumer - Other		—
Total	$	882,413

Loans Receivable on Non-Accrual
December 31, 2013
Commercial	$	—
Commercial Real Estate:
Commercial Real Estate - Construction		—
Commercial Real Estate - Other		1,507,209
Consumer:		—
Consumer - Real Estate		68,231
Consumer - Other		—
Total	$	1,575,440

The following is a schedule of our delinquent loans, excluding mortgage loans to be sold, as of December 31, 2014 and December 31, 2013.

	December 31, 2014
		30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing
Commercial	$		557,608		2,474		—		560,082		49,339,495		49,899,577		—
Commercial Real Estate:
Commercial Real Estate - Construction			—		—		—		—		1,511,702		1,511,702		—
Commercial Real Estate - Other			229,607		589,705		1,665,673		2,484,985		113,254,697		115,739,682		1,274,119
Consumer:
Consumer Real Estate			—		—		—		—		62,054,983		62,054,983		—
Consumer - Other			17,468		—		—		17,468		4,894,380		4,911,848		—
Total	$		804,683		592,179		1,665,673		3,062,535		231,055,257		234,117,792		1,274,119

	December 31, 2013
		30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Recorded Investment > 90 Days and Accruing
Commercial		$	230,848		78,200		—		309,048		52,994,521		53,303,569		—
Commercial Real Estate:
Commercial Real Estate - Construction			—		—		—		—		1,516,545		1,516,545		—
Commercial Real Estate - Other			689,859		226,314		754,168		1,670,341		103,070,237		104,740,578		—
Consumer:
Consumer Real Estate			—		—		—		—		54,669,359		54,669,359		—
Consumer - Other			24,399		—		—		24,399		4,065,854		4,090,253		—
Total		$	945,106		304,514		754,168		2,003,788		216,316,516		218,320,304		—

We grant short to intermediate term commercial and consumer loans to customers throughout our primary market area of Charleston, Berkeley and Dorchester counties of South Carolina. Our primary market area is heavily dependent on tourism and medical services. Although we have a diversified loan portfolio, a substantial portion of our debtors’ ability to honor their contracts is dependent upon the stability of the economic environment in their primary market including the government, tourism and medical industries. The majority of the loan portfolio is located in our immediate market area with a concentration in Real Estate Related, Offices and Clinics of Medical Doctors, Real Estate Agents and Managers, and Legal Services.

As of December 31, 2014 and 2013, loans individually evaluated and considered impaired are presented in the following table:

Impaired and Restructured Loans As of the Year Ended December 31, 2014
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Related Allowance
Commercial	$	634,865	$	634,865	$	—
Commercial Real Estate		3,349,844		3,349,844		—
Consumer Real Estate		351,140		351,140		—
Consumer Other		—		—		—
Total	$	4,335,849	$	4,335,849	$	—
With an allowance recorded:
Commercial	$	1,157,560	$	1,157,560	$	784,561
Commercial Real Estate		846,008		846,008		209,189
Consumer Real Estate		672,163		672,163		250,590
Consumer Other		39,547		39,547		39,547
Total	$	2,715,278	$	2,715,278	$	1,283,887
Grand Total	$	7,051,127	$	7,051,127	$	1,283,887

Impaired and Restructured Loans As of the Year Ended December 31, 2014
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Related Allowance
Commercial	$	471,080	$	634,865	$	—
Commercial Real Estate		2,213,271		2,213,271		—
Consumer Real Estate		200,399		200,399		—
Consumer Other		—		—		—
Total	$	2,884,750	$	2,884,750	$	—
With an allowance recorded:
Commercial	$	1,175,329	$	1,175,329	$	1,175,329
Commercial Real Estate		2,191,875		2,191,875		535,766
Consumer Real Estate		842,127		842,127		423,705
Consumer Other		42,826		42,826		42,826
Total	$	4,252,157	$	4,252,157	$	2,177,626
Grand Total	$	7,136,907	$	7,136,907	$	2,177,626

The following table presents by class, information related to the average recorded investments and interest income recognized on impaired loans for the year ended December 31, 2014 and 2013.

Impaired and Restructured Loans For the Year Ended
	December 31, 2014				December 31, 2013
With no related allowance recorded:	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial		647,135		18,129		424,733		36,465
Commercial Real Estate		3,515,431		177,416		2,427,681		152,529
Consumer Real Estate		351,550		12,877		200,339		9,079
Consumer-Other		—		—		—		—
Total		4,514,116		208,422		3,052,753		198,073
With an allowance recorded:
Commercial		1,222,383		56,432		1,213,799		58,955
Commercial Real Estate		790,998		29,218		2,083,729		78,453
Consumer Real Estate		688,922		34,154		866,800		32,633
Consumer Other		41,631		1,923		46,697		2,268
Total		2,743,934		121,727		4,211,025		172,309
Grand Total		7,258,050		330,149		7,263,778		370,382

The following table illustrates credit risks by category and internally assigned grades at December 31, 2014 and December 31, 2013.

December 31, 2014
	Commercial		Commercial Real Estate Construction		Commercial Real Estate Other		Consumer – Real Estate		Consumer – Other		Total
Pass	$	45,154,058	$	1,062,185	$	108,568,274	$	58,744,677	$	4,512,912	$	218,042,106
Watch		2,401,715		—		1,697,883		1,818,923		276,557		6,195,078
OAEM		551,380		449,517		1,378,436		467,482		82,832		2,929,647
Sub-Standard		1,792,424		—		4,095,089		1,023,901		39,547		6,950,961
Doubtful		—		—		—		—		—		—
Loss		—		—		—		—		—		—
Total	$	49,899,577	$	1,511,702	$	115,739,682	$	62,054,983	$	4,911,848	$	234,117,792

December 31, 2013
		Commercial		Commercial Real Estate Construction		Commercial Real Estate Other		Consumer – Real Estate		Consumer – Other		Total
	Pass	$	48,383,912	$	1,516,545	$	95,942,918	$	50,846,709	$	3,703,400	$	200,393,484
	Watch		1,962,292		—		1,902,129		1,933,566		191,081		5,989,068
	OAEM		546,938		—		2,234,023		654,076		76,097		3,511,134
	Sub-Standard		2,410,427		—		4,661,508		1,235,008		119,675		8,426,618
	Doubtful		—		—		—		—		—		—
	Loss		—		—		—		—		—		—
	Total	$	53,303,569	$	1,516,545	$	104,740,578	$	54,669,359	$	4,090,253	$	218,320,304

The following table sets forth the changes in the allowance and an allocation of the allowance by loan category at December 31, 2014 and December 31, 2013. The allocation of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for current economic factors described above.

	December 31, 2014
		Commercial			Commercial Real Estate			Consumer Real Estate		Consumer Other			Total
Allowance for Loan Losses
Beginning Balance		$	1,448,804		$	1,064,363		$	694,950	$	84,160		$	3,292,277
Charge-offs			(83,042	)		(15,834	)		—		(14,154	)		(113,030	)
Recoveries			—			46,000			—		27,101			73,101
Provisions			(154,632	)		17,858			211,305		7,969			82,500
Ending Balance			1,211,130			1,112,387			906,255		105,076			3,334,848
Allowance for Loan Losses Ending Balances:
Individually evaluated for impairment			784,561			209,189			250,590		39,547			1,283,887
Collectively evaluated for impairment			426,569			903,198			655,665		65,529			2,050,961
Investment in Loans Ending Balance
Individually evaluated for impairment			1,792,425			4,195,852			1,023,303		39,547			7,051,127
Collectively evaluated for impairment		$	48,107,152		$	113,055,532		$	61,031,680	$	4,872,301		$	227,066,665

	December 31, 2013
		Commercial			Commercial Real Estate		Consumer Real Estate			Consumer Other			Total
Allowance for Loan Losses
Beginning Balance		$	1,576,002		$	767,170	$	977,859		$	111,813		$	3,432,844
Charge-offs			(245,599	)		—		—			(145,802	)		(391,401	)
Recoveries			23,004			15,348		—			4,982			43,334
Provisions			95,397			281,845		(282,909	)		113,167			207,500
Ending Balance			1,448,804			1,064,363		694,950			84,160			3,292,277
Allowance for Loan Losses Ending Balances:
Individually evaluated for impairment			1,175,329			535,766		423,705			42,826			2,177,626
Collectively evaluated for impairment			273,145			528,597		271,245			41,344			1,114,651
Investment in Loans Ending Balance
Individually evaluated for impairment			1,646,409			4,405,146		1,042,526			42,826			7,136,907
Collectively evaluated for impairment		$	51,657,160		$	101,851,977	$	53,626,833		$	4,047,427		$	211,183,397

Restructured loans (loans, still accruing interest, which have been renegotiated at below-market interest rates or for which other concessions have been granted) were $466,541 and $1,196,341 at December 31, 2014 and December 31, 2013, respectively, and are illustrated in the following table. The following restructured loans were renegotiated to interest only. All restructured loans were performing as agreed as of December 31, 2014 and 2013, respectively.

	Modification
	As of December 31, 2014
		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial			—	$	—	$	—
Commercial Real Estate			2	$	466,541	$	466,541
Commercial Real Estate Construction			—	$	—	$	—
Consumer Real Estate-Prime			—	$	—	$	—
Consumer Real Estate-Subprime			—	$	—	$	—
Consumer Other			—	$	—	$	—
Troubled Debt Restructurings That Subsequently Defaulted
Commercial			—	$	—	$	—
Commercial Real Estate			—	$	—	$	—
Commercial Real Estate Construction			—	$	—	$	—
Consumer Real Estate-Prime			—	$	—	$	—
Consumer Real Estate-Subprime			—	$	—	$	—
Consumer Other			—	$	—	$	—

	Modification
	As of December 31, 2013
		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial			1		106,194		106,194
Commercial Real Estate			3	$	1,090,147	$	1,090,147
Commercial Real Estate Construction			—		—		—
Consumer Real Estate-Prime			—	$	—	$	—
Consumer Real Estate-Subprime			—	$	—	$	—
Consumer Other			—	$	—	$	—
Troubled Debt Restructurings That Subsequently Defaulted
Commercial			—	$	—	$	—
Commercial Real Estate			—	$	—	$	—
Commercial Real Estate Construction			—	$	—	$	—
Consumer Real Estate-Prime			—	$	—	$	—
Consumer Real Estate-Subprime			—	$	—	$	—
Consumer Other			—	$	—	$	—

We had one property valued at $521,943 classified as OREO at December 31, 2014. Another property valued at $35,473 classified as OREO during 2014, was ultimately sold at a gain of $2,382. At December 31, 2013, we did not have any OREO.

The following table summarizes the activity in the other real estate owned at December 31, 2014 and December 31, 2013.

	December 31, 2014		December 31, 2013
Balance, beginning of year	$	—	$	—
Additions-foreclosure		557,416		—
Sales		35,473		—
Write-downs		—		—
Balance, end of year	$	521,943	$	—