Credit Quality Assessment

6 Months Ended

Jun. 30, 2015

Allowance for Credit Losses [Text Block]

Note 4: Credit Quality Assessment

Allowance for Credit Losses

The following table provides information on the activity in the allowance for credit losses by the respective loan portfolio segment for the three months and six months ended June 30, 2015 and June 30, 2014:

	June 30, 2015
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	and land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Allowance for credit losses:
Six months ended:
Beginning balance	$	174	$	272	$	55	$	160	$	562	$	2,366	$	13	$	3,602
Charge-offs		-		-		-		-		-		(494)		(4)		(498)
Recoveries		-		3		-		-		290		17		-		310
Provision for credit losses		330		53		(15)		106		(247)		550		8		785
Ending balance	$	504	$	328	$	40	$	266	$	605	$	2,439	$	17	$	4,199
Three months ended:
Beginning balance	$	164	$	278	$	55	$	175	$	625	$	2,527	$	15	$	3,839
Charge-offs		-		-		-		-		-		(481)		-		(481)
Recoveries		-		-		-		-		290		16		-		306
Provision for credit losses		340		50		(15)		91		(310)		377		2		535
Ending balance	$	504	$	328	$	40	$	266	$	605	$	2,439	$	17	$	4,199

	June 30, 2014
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	and land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Allowance for credit losses:
Six months ended:
Beginning balance	$	122	$	200	$	34	$	131	$	541	$	1,464	$	14	$	2,506
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		-		-		-		4		42		-		46
Provision for credit losses		37		(4)		(17)		7		116		365		(3)		501
Ending balance	$	159	$	196	$	17	$	138	$	661	$	1,871	$	11	$	3,053
Three months ended:
Beginning balance	$	143	$	187	$	16	$	137	$	686	$	1,518	$	13	$	2,700
Charge-offs		-		-		-		-		-		-		-		-
Recoveries		-		-		-		-		-		28		-		28
Provision for credit losses		16		9		1		1		(25)		325		(2)		325
Ending balance	$	159	$	196	$	17	$	138	$	661	$	1,871	$	11	$	3,053

The following table provides additional information on the allowance for credit losses by segment:

	June 30, 2015
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	and land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Allowance allocated to:
Legacy Loans:
individually evaluated for impairment		313		-		10		-		-		310		-		633
collectively evaluated for impairment		185		328		30		237		551		2,046		17		3,394
Acquired Loans:
individually evaluated for impairment		-		-		-		-		-		-		-		-
collectively evaluated for impairment		6		-		-		29		54		83		-		172
Loans:
Legacy Loans:
Ending balance		61,711		73,806		14,624		82,249		109,164		126,311		1,371		469,236
individually evaluated for impairment		1,144		459		74		-		2,684		2,803		-		7,164
collectively evaluated for impairment		60,567		73,347		14,550		82,249		106,480		123,508		1,371		462,072
Acquired Loans:
Ending balance		5,030		17,359		7,659		33,821		31,086		15,872		2,639		113,466
individually evaluated for impairment		-		343		60		-		-		420		-		823
collectively evaluated for impairment		5,030		17,016		7,599		33,821		31,086		15,452		2,639		112,643

	December 31, 2014
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	and land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Allowance allocated to:
Legacy Loans:
individually evaluated for impairment		60		-		-		-		-		483		-		543
collectively evaluated for impairment		108		271		25		142		502		1,745		13		2,806
Acquired Loans:
individually evaluated for impairment		-		-		30		-		-		55		-		85
collectively evaluated for impairment		6		1		-		18		60		83		-		168
Loans:
Legacy Loans:
Ending balance		56,490		58,904		11,006		85,824		100,589		113,176		1,485		427,474
individually evaluated for impairment		1,144		308		-		-		2,700		2,073		-		6,225
collectively evaluated for impairment		55,346		58,596		11,006		85,824		97,889		111,103		1,485		421,249
Acquired Loans:
Ending balance		6,260		19,525		7,539		37,519		33,021		18,745		2,834		125,443
individually evaluated for impairment		-		411		57		-		-		405		92		965
collectively evaluated for impairment		6,260		19,114		7,482		37,519		33,021		18,340		2,742		124,478

When potential losses are identified, a specific provision and/or charge-off may be taken, based on the then current likelihood of repayment, that is at least in the amount of the collateral deficiency, and any potential collection costs, as determined by the independent third party appraisal.

All loans that are considered impaired are subject to the completion of an impairment analysis. This analysis highlights any potential collateral deficiencies. A specific amount of impairment is established based on the Company’s calculation of the probable loss inherent in the individual loan. The actual occurrence and severity of losses involving impaired credits can differ substantially from estimates.

Credit risk profile by portfolio segment based upon internally assigned risk assignments are presented below:

	June 30, 2015
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	and land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Credit quality indicators:
Legacy Loans:
Not classified	$	60,567	$	73,347	$	14,550	$	82,249	$	106,480	$	123,749	$	1,371	$	462,313
Special mention		-		-		-		-		-		-		-		-
Substandard		-		301		-				2,090		691		-		3,082
Doubtful		1,144		158		74		-		594		1,871		-		3,841
Total	$	61,711	$	73,806	$	14,624	$	82,249	$	109,164	$	126,311	$	1,371	$	469,236

Acquired Loans:
Not classified	$	5,030	$	16,499	$	7,600	$	33,821	$	31,086	$	15,452	$	2,639	$	112,127
Special mention		-		-		-		-		-		-		-		-
Substandard		-		517		-		-		-		-		-		517
Doubtful		-		343		59		-		-		420		-		822
Total	$	5,030	$	17,359	$	7,659	$	33,821	$	31,086	$	15,872	$	2,639	$	113,466

	December 31, 2014
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	and land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Credit quality indicators:
Legacy Loans:
Not classified	$	55,346	$	58,439	$	10,932	$	85,580	$	97,889	$	111,312	$	1,485	$	420,983
Special mention		-		-		-		-		-		-		-		-
Substandard		1,144		465		74		244		2,700		1,864		-		6,491
Doubtful		-		-		-		-		-		-		-		-
Total	$	56,490	$	58,904	$	11,006	$	85,824	$	100,589	$	113,176	$	1,485	$	427,474

Acquired Loans:
Not classified	$	6,260	$	18,567	$	7,482	$	37,519	$	33,021	$	18,340	$	2,742	$	123,931
Special mention		-		-		-		-		-		-		-		-
Substandard		-		546		-		-		-		-		-		546
Doubtful		-		412		57		-		-		405		92		966
Total	$	6,260	$	19,525	$	7,539	$	37,519	$	33,021	$	18,745	$	2,834	$	125,443

	·	Special Mention - A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.
	·	Substandard - Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
	·	Doubtful - Loans classified Doubtful have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

Loans classified Special Mention, Substandard, Doubtful or Loss are reviewed at least quarterly to determine their appropriate classification. All commercial loan relationships are reviewed annually. Non-classified residential mortgage loans and consumer loans are not evaluated unless a specific event occurs to raise the awareness of a possible credit deterioration.

An aged analysis of past due loans are as follows:

	June 30, 2015
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	and land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Analysis of past due loans:
Legacy Loans:
Accruing loans current	$	60,531	$	73,648	$	14,550	$	82,249	$	108,570	$	122,693	$	1,345	$	463,586
Accruing loans past due:
31-59 days past due		-		-		-		-		-		100		-		100
60-89 days past due		-		-		-		-		-		956		1		957
Greater than 90 days past due		36		-		-		-		-		691		25		752
Total past due	$	36	$	-	$	-	$	-	$	-	$	1,747	$	26	$	1,809

Non-accrual loans		1,144		158		74		-		594		1,871		-		3,841

Total loans	$	61,711	$	73,806	$	14,624	$	82,249	$	109,164	$	126,311	$	1,371	$	469,236

Acquired Loans:
Accruing loans current	$	5,030	$	16,983	$	7,599	$	33,586	$	30,549	$	15,309	$	2,483	$	111,539
Accruing loans past due:
31-59 days past due		-		33		-		-		-		-		-		33
60-89 days past due		-		-		-		-		-		-		-		-
Greater than 90 days past due		-		-		-		235		537		193		156		1,121
Total past due	$	-	$	33	$	-	$	235	$	537	$	193	$	156	$	1,154

Non-accrual loans		-		343		60		-		-		370		-		773

Total loans	$	5,030	$	17,359	$	7,659	$	33,821	$	31,086	$	15,872	$	2,639	$	113,466

	December 31, 2014
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	and land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Analysis of past due loans:
Legacy Loans:
Accruing loans current	$	55,346	$	58,122	$	10,932	$	85,824	$	100,439	$	108,451	$	1,480	$	420,594
Accruing loans past due:
31-59 days past due		-		-		-		-		-		-		5		5
60-89 days past due		-		316		74		-		-		2,816		-		3,206
Greater than 90 days past due		-		158		-		-		150		244		-		552
Total past due	$	-	$	474	$	74	$	-	$	150	$	3,060	$	5	$	3,763

Non-accrual loans		1,144		308		-		-		-		1,665		-		3,117

Total loans	$	56,490	$	58,904	$	11,006	$	85,824	$	100,589	$	113,176	$	1,485	$	427,474

Acquired Loans:
Accruing loans current	$	5,982	$	18,867	$	7,430	$	37,519	$	33,021	$	17,990	$	2,742	$	123,551
Accruing loans past due:
31-59 days past due		-		247		52		-		-		54		-		353
60-89 days past due		-		-		-		-		-		24		-		24
Greater than 90 days past due		278		-		-		-		-		327		-		605
Total past due	$	278	$	247	$	52	$	-	$	-	$	405	$	-	$	982

Non-accrual loans		-		411		57		-		-		350		92		910

Total loans	$	6,260	$	19,525	$	7,539	$	37,519	$	33,021	$	18,745	$	2,834	$	125,443

Total loans either in non-accrual status or in excess of ninety days delinquent totaled $6.5 million or 1.11% of total loans outstanding at June 30, 2015, which increased from $5.2 million or 0.94% at December 31, 2014.

The impaired loans at June 30, 2015 and December 31, 2014 are as follows:

	June 30, 2015
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	& land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Impaired loans:
Legacy Loans:
Recorded investment	$	1,144	$	459	$	74	$	-	$	2,684	$	2,803	$	-	$	7,164
With an allowance recorded		1,144		-		74		-		-		425		-		1,643
With no related allowance recorded		-		459		-		-		2,684		2,378		-		5,521

Related allowance		313		-		10		-		-		310		-		633

Unpaid principal		1,144		459		74		-		2,684		2,803		-		7,164

Six months ended June 30, 2015
Average balance of impaired loans		1,144		484		74		-		3,597		3,251		-		8,550
Interest income recognized		-		12		-		-		60		62		-		134
Three months ended June 30, 2015
Average balance of impaired loans		1,144		484		74		-		2,691		3,159		-		7,552
Interest income recognized		-		6		-		-		27		43		-		76

Acquired Loans:
Recorded investment	$	-	$	343	$	60	$	-	$	-	$	420	$	-	$	823
With an allowance recorded		-		-		-		-		-		-		-		-
With no related allowance recorded		-		343		60		-		-		420		-		823

Related allowance		-		-		-		-		-		-		-		-

Unpaid principal		-		407		82		-		330		584		-		1,403

Six months ended June 30, 2015
Average balance of impaired loans		-		417		82		-		330		663		-		1,492
Interest income recognized		-		1		-		-		-		3		-		4
Three months ended June 30, 2015
Average balance of impaired loans		-		410		82		-		330		642		-		1,464
Interest income recognized		-		-		-		-		-		1		-		1

	December 31, 2014
							Commercial		Commercial		Commercial
	Construction		Residential		Residential		owner		non-owner		loans		Consumer
(in thousands)	& land		first lien		junior lien		occupied		occupied		and leases		loans		Total
Impaired loans:
Legacy Loans:
Recorded investment	$	1,144	$	308	$	-	$	-	$	2,700	$	2,073	$	-	$	6,225
With an allowance recorded		334		-		-		-		-		690		-		1,024
With no related allowance recorded		810		308		-		-		2,700		1,383		-		5,201

Related allowance		60		-		-		-		-		483		-		543

Unpaid principal		1,144		308		-		-		2,700		2,127		-		6,279

Average balance of impaired loans		1,108		329		-		-		2,713		2,558		-		6,708
Interest income recognized		37		18		-		-		166		167		-		388

Acquired Loans:
Recorded investment	$	-	$	411	$	57	$	-	$	-	$	405	$	92	$	965
With an allowance recorded		-		-		57		-		-		55		-		112
With no related allowance recorded		-		411		-		-		-		350		92		853

Related allowance		-		-		30		-		-		55		-		85

Unpaid principal		-		565		83		-		530		825		327		2,330

Average balance of impaired loans		-		568		83		-		560		829		379		2,419
Interest income recognized		-		-		-		-		-		-		-		-

Included in the total impaired loans above were non-accrual loans of $4.6 million and $4.0 million at June 30, 2015 and December 31, 2014, respectively. Interest income that would have been recorded if non-accrual loans had been current and in accordance with their original terms was $48 thousand for the first six months of 2015.

Management routinely evaluates other real estate owned (“OREO”) based upon periodic appraisals. For the six months ended June 30, 2015 and 2014 there were no additional valuation allowances recorded as the current appraised value less estimated cost to sell, was sufficient to cover the recorded OREO amount. For the six months ended June 30, 2015 and 2014 there were no new loans transferred from loans to OREO. For the first half of 2015 and 2014, the Company did not sell any properties held as OREO.

The trouble debt restructured loans (“TDRs”) at June 30, 2015 and December 31, 2014 are as follows:

	June 30, 2015
	Number		Non-Accrual		Number		Accrual		Total
(dollars in thousands)	of Loans		Status		of Loans		Status		TDRs
Legacy Loans:
Residential real estate - first lien		-	$	-		1	$	301	$	301
Commercial - non-owner occupied		1		594		1		2,090		2,684
		1	$	594		2	$	2,391	$	2,985

	December 31, 2014
	Number		Non-Accrual		Number		Accrual		Total
(dollars in thousands)	of Loans		Status		of Loans		Status		TDRs
Legacy Loans:
Residential real estate - first lien		1	$	308		-	$	-	$	308
Commercial loans		6		723		1		226		949
		7	$	1,031		1	$	226	$	1,257

A summary of TDR modifications outstanding and performing under modified terms are as follows:

	June 30, 2015
	Not Performing		Performing
	to Modified		to Modified		Total
(in thousands)	Terms		Terms		TDRs
Legacy Loans:
Residential real estate - first lien
Forbearance	$	-	$	301	$	301
Commercial - non-owner occupied
Rate modification				2,090		2,090
Commercial loans
Rate modification		594		-		594
Total trouble debt restructure loans	$	594	$	2,391	$	2,985

	December 31, 2014
	Not Performing		Performing
	to Modified		to Modified		Total
(in thousands)	Terms		Terms		TDRs
Legacy Loans:
Residential real estate - first lien
Forbearance	$	308	$	-	$	308
Commercial loans
Forbearance		723		-		723
Extension or other modification		-		226		226
Total trouble debt restructure loans	$	1,031	$	226	$	1,257

There was one commercial real estate loan restructured in the first six months of 2014. Performing TDRs were in compliance with their modified terms and there are no further commitments associated with these credits. One performing commercial TDR has been in compliance with its modified term for over 12 consecutive months and was removed from a TDR status during the six months ended June 30, 2015.