Loans and the Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2013

Loans and the Allowance for Loan Losses [Abstract]

The following is a summary of the balances in each class of the Company's loan portfolio as of the dates indicated:

	December 31, 2013			December 31, 2012
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	$ 84,500		$	77,267
Commercial		287,071			274,613
Construction		14,505			12,005
Second mortgages		13,232			14,315
Equity lines of credit		32,163			32,327
Total mortgage loans on real estate		431,471			410,527
Commercial loans		30,702			25,341
Consumer loans		19,791			13,146
Other		18,735			22,119
Total loans		500,699			471,133
Less: Allowance for loan losses		(6,831	)		(7,324	)
Loans, net of allowance and deferred fees	$	493,868		$	463,809

Credit Quality Information

The following table presents credit quality exposures by internally assigned risk ratings as of the dates indicated:

Credit Quality Information

As of December 31, 2013

(in thousands)

	Pass		OAEM		Substandard		Total
Mortgage loans on real estate:
Residential 1-4 family	$	78,612	$	1,167	$	4,721	$	84,500
Commercial		274,749		5,693		6,629		287,071
Construction		10,319		640		3,546		14,505
Second mortgages		12,994		0		238		13,232
Equity lines of credit		31,690		0		473		32,163
Total mortgage loans on real estate		408,364		7,500		15,607		431,471
Commercial loans		30,164		319		219		30,702
Consumer loans		19,723		0		68		19,791
Other		18,735		0		0		18,735
Total	$	476,986	$	7,819	$	15,894	$	500,699

Credit Quality Information

As of December 31, 2012

(in thousands)

	Pass		OAEM		Substandard		Total
Mortgage loans on real estate:
Residential 1-4 family	$	70,961	$	1,711	$	4,595	$	77,267
Commercial		258,195		6,781		9,637		274,613
Construction		8,651		254		3,100		12,005
Second mortgages		13,488		242		585		14,315
Equity lines of credit		31,704		239		384		32,327
Total mortgage loans on real estate		382,999		9,227		18,301		410,527
Commercial loans		23,997		209		1,135		25,341
Consumer loans		13,042		0		104		13,146
Other		22,119		0		0		22,119
Total	$	442,157	$	9,436	$	19,540	$	471,133

Past Due Loans

AGE ANALYSIS OF PAST DUE LOANS BY CLASS

All classes of loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Interest and fees continue to accrue on past due loans until the date the loan is placed in nonaccrual status, if applicable. The following table includes an aging analysis of the recorded investment in past due loans as of the dates indicated. Also included in the table below are loans that are 90 days or more past due as to interest and principal and still accruing interest, because they are well-secured and in the process of collection. Loans in nonaccrual status that are also past due are included in the aging categories in the table below.

Age Analysis of Past Due Loans as of December 31, 2013

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due		Total Past Due		Total Current Loans (1)		Total Loans		Recorded Investment > 90 Days Past Due and Accruing
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	324	$	82	$	4,304	$	4,710	$	79,790	$	84,500	$	493
Commercial		120		704		53		877		286,194		287,071		0
Construction		0		0		2,545		2,545		11,960		14,505		0
Second mortgages		0		10		34		44		13,188		13,232		34
Equity lines of credit		139		0		0		139		32,024		32,163		0
Total mortgage loans on real estate		583		796		6,936		8,315		423,156		431,471		527
Commercial loans		15		80		0		95		30,607		30,702		0
Consumer loans		929		5		5		939		18,852		19,791		5
Other		51		15		14		80		18,655		18,735		14
Total	$	1,578	$	896	$	6,955	$	9,429	$	491,270	$	500,699	$	546

(1) For purposes of this table, Total Current Loans includes loans that are 1 - 29 days past due.

In the table above, the consumer category includes student loans that are 97 - 98% guaranteed by the government. These guaranteed loans totaled $744 thousand at December 31, 2013.

Age Analysis of Past Due Loans as of December 31, 2012

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due		Total Past Due		Total Current Loans (1)		Total Loans		Recorded Investment > 90 Days Past Due and Accruing
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	1,115	$	0	$	3,783	$	4,898	$	72,369	$	77,267	$	348
Commercial		207		0		724		931		273,682		274,613		0
Construction		140		0		2,925		3,065		8,940		12,005		0
Second mortgages		113		0		544		657		13,658		14,315		60
Equity lines of credit		90		0		287		377		31,950		32,327		0
Total mortgage loans on real estate		1,665		0		8,263		9,928		400,599		410,527		408
Commercial loans		275		13		122		410		24,931		25,341		25
Consumer loans		85		22		11		118		13,028		13,146		11
Other		54		7		3		64		22,055		22,119		3
Total	$	2,079	$	42	$	8,399	$	10,520	$	460,613	$	471,133	$	447

(1) For purposes of this table, Total Current Loans includes loans that are 1 - 29 days past due.

Nonaccrual Loans

The following table presents loans in nonaccrual status by class of loan as of the dates indicated:

Nonaccrual Loans by Class

	December 31, 2013		December 31, 2012
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	4,024	$	3,663
Commercial		4,606		3,037
Construction		2,545		3,065
Second mortgages		0		484
Equity lines of credit		0		286
Total mortgage loans on real estate		11,175		10,535
Commercial loans		149		97
Total	$	11,324	$	10,632

Reduction in interest income due to nonaccrual loans	$	511	$	552

Troubled Debt Restructurings by Class

The following table presents TDRs during the period indicated, by class of loan:

Troubled Debt Restructurings by Class

For the Year Ended December 31, 2013

(dollars in thousands)

	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification		Current Investment on December 31, 2013
Mortgage loans on real estate:
Residential 1-4 family		8	$	1,633	$	1,633	$	1,620
Commercial		3		3,665		3,665		3,657
Second mortgages		2		231		231		203
Total		13	$	5,529	$	5,529	$	5,480

Troubled Debt Restructurings by Class

For the Year Ended December 31, 2012

(dollars in thousands)

	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification		Current Investment on December 31, 2012
Mortgage loans on real estate:
Residential 1-4 family		1	$	93	$	87	$	80
Commercial		4		5,548		4,836		4,683
Second mortgages		1		111		145		138
Total		6	$	5,752	$	5,068	$	4,901

Restructurings that Subsequently Defaulted

The following table presents TDRs for the years indicated for which there was a payment default where the default occurred within twelve months of restructuring. The Company considers a TDR in default when any of the following occurs: the loan becomes 90 days or more past due; the loan is returned to non-accrual status; the loan is restructured again under terms that would qualify it as a TDR if it were not already so classified; or any portion of the loan is charged off.

Restructurings that Subsequently Defaulted
(in thousands)
	For the Years Ended December 31,
	2013			2012
Mortgage loans on real estate:
Residential 1-4 family		$	181		$	0
Commercial			2,062			0
Total mortgage loans on real estate			2,243			0

Impaired Loans by Class

The following table includes the recorded investment and unpaid principal balances (a portion of which may have been charged off) for impaired loans with the associated allowance amount, if applicable, as of the dates presented. Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized for the periods presented. The average balances are calculated based on daily average balances.

Impaired Loans by Class

(in thousands)

	As of December 31, 2013								For the year ended December 31, 2013
			Recorded Investment
	Unpaid Principal Balance		Without Valuation Allowance		With Valuation Allowance		Associated Allowance		Average Recorded Investment		Interest Income Recognized
Mortgage loans on real estate:
Residential 1-4 family	$	5,713	$	1,542	$	4,009	$	1,383	$	5,152	$	102
Commercial		12,905		6,882		4,300		307		10,631		591
Construction		3,309		2,545		0		0		2,798		0
Second mortgages		374		296		47		3		462		(19	)
Equity lines of credit		0		0		0		0		97		0
Total mortgage loans on real estate	$	22,301	$	11,265	$	8,356	$	1,693	$	19,140	$	674
Commercial loans		150		149		0		0		44		6
Consumer loans		15		0		15		0		17		1
Total	$	22,466	$	11,414	$	8,371	$	1,693	$	19,201	$	681

Impaired Loans by Class

(in thousands)

	As of December 31, 2012												For the year ended December 31, 2012

				Recorded Investment
	Unpaid Principal Balance			Without Valuation Allowance			With Valuation Allowance			Associated Allowance			Average Recorded Investment			Interest Income Recognized
Mortgage loans on real estate:
Residential 1-4 family		$	4,100		$	681		$	3,235		$	226		$	2,354		$	136
Commercial			12,459			3,741			5,817			180			10,151			242
Construction			3,782			3,064			0			0			3,320			(9	)
Second mortgages			695			583			47			5			542			12
Equity lines of credit			370			286			0			0			391			(2	)
Total mortgage loans on real estate		$	21,406		$	8,355		$	9,099		$	$ 411		$	16,758		$	379
Commercial loans			117			0			97			33			104			(14	)
Consumer loans			17			17			0			0			26			1
Total		$	21,540		$	8,372		$	9,196		$	444		$	$ 16,888		$	366

Allowance for loan losses by segment

ALLOWANCE FOR LOAN LOSSES BY SEGMENT

The total allowance reflects management's estimate of loan losses inherent in the loan portfolio at the balance sheet date. The Company considers the allowance for loan losses of $6.8 million adequate to cover loan losses inherent in the loan portfolio at .

The following table presents, by portfolio segment, the changes in the allowance for loan losses and the recorded investment in loans for the periods presented. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT IN LOANS

(in thousands)

For the Twelve Months Ended December 31, 2013	Commercial			Real Estate - Construction			Real Estate - Mortgage			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	677		$	187		$	6,179		$	204		$	77		$	7,324
Charge-offs		(200	)		(501	)		(1,548	)		(141	)		(316	)		(2,706	)
Recoveries		76			6			513			111			207			913
Provision for loan losses		(203	)		970			213			120			200			1,300
Ending balance	$	350		$	662		$	5,357		$	294		$	168		$	6,831
Ending balance individually evaluated for impairment	$	0		$	0		$	1,693		$	0		$	0		$	1,693
Ending balance collectively evaluated for impairment		350			662			3,664			294			168			5,138
Ending balance	$	350		$	662		$	5,357		$	294		$	168		$	6,831
Loan Balances:
Ending balance individually evaluated for impairment	$	149		$	2,545		$	17,076		$	15		$	0		$	19,785
Ending balance collectively evaluated for impairment		30,553			11,960			399,890			19,776			18,735			480,914
Ending balance	$	30,702		$	14,505		$	416,966		$	19,791		$	18,735		$	500,699

For the Year Ended December 31, 2012	Commercial			Real Estate - Construction			Real Estate - Mortgage			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	1,011		$	323		$	6,735		$	300		$	129		$	8,498
Charge-offs		(138	)		(831	)		(2,554	)		(259	)		(187	)		(3,969	)
Recoveries		67			30			162			70			66			395
Provision for loan losses		(263	)		665			1,836			93			69			2,400
Ending balance	$	677		$	187		$	6,179		$	204		$	77		$	7,324
Ending balance individually evaluated for impairment	$	33		$	0		$	411		$	0		$	0		$	444
Ending balance collectively evaluated for impairment		644			187			5,768			204			77			6,880
Ending balance	$	677		$	187		$	6,179		$	204		$	77		$	7,324
Loan Balances:
Ending balance individually evaluated for impairment	$	97		$	3,064		$	14,390		$	17		$	0		$	17,568
Ending balance collectively evaluated for impairment		25,244			8,941			384,132			13,129			22,119			453,565
Ending balance	$	25,341		$	12,005		$	398,522		$	13,146		$	22,119		$	471,133

Change in Allowance Methodology

The following table represents the effect on the loan loss provision for the year ended December 31, 2013 as a result of the changes to the methodology from that used in prior periods.

	Calculated Provision Based on Current Methodology			Calculated Provision Based on Prior Methodology			Difference
	(in thousands)
Portfolio Segment:
Commercial	$	(203	)	$	(217	)	$	14
Real estate - construction		970			452			518
Real estate - mortgage		213			669			(456	)
Consumer loans		120			3			117
Other		200			108			92
Total	$	1,300		$	1,015		$	285