Loans and the Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2014

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:

	September 30, 2014			December 31, 2013
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	89,267		$	84,500
Commercial		288,027			287,071
Construction		12,332			14,505
Second mortgages		13,292			13,232
Equity lines of credit		40,850			32,163
Total mortgage loans on real estate		443,768			431,471
Commercial loans		35,574			30,702
Consumer loans		19,176			19,791
Other		26,772			18,735
Total loans		525,290			500,699
Less: Allowance for loan losses		(7,025	)		(6,831	)
Loans, net of allowance and deferred fees	$	518,265		$	493,868

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 September 30, 2014
(in thousands)
	Pass		OAEM		Substandard		Total
Mortgage loans on real estate:
Residential 1-4 family	$	87,346	$	0	$	1,921	$	89,267
Commercial		278,759		4,623		4,645		288,027
Construction		9,449		0		2,883		12,332
Second mortgages		13,132		0		160		13,292
Equity lines of credit		40,162		0		688		40,850
Total mortgage loans on real estate		428,848		4,623		10,297		443,768
Commercial loans		33,539		1,990		45		35,574
Consumer loans		19,152		0		24		19,176
Other		26,772		0		0		26,772
Total	$	508,311	$	6,613	$	10,366	$	525,290

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

Past Due Loans

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 September 30, 2014
	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	$	739	$	210	$	655	$	1,604	$	87,663	$	89,267	$	0
Commercial		0		641		355		996		287,031		288,027		0
Construction		0		0		2,883		2,883		9,449		12,332		0
Second mortgages		0		0		61		61		13,231		13,292		61
Equity lines of credit		0		0		0		0		40,850		40,850		0
Total mortgage loans on real estate		739		851		3,954		5,544		438,224		443,768		61
Commercial loans		181		0		42		223		35,351		35,574		42
Consumer loans		422		354		1,133		1,909		17,267		19,176		1,133
Other		70		9		4		83		26,689		26,772		4
Total	$	1,412	$	1,214	$	5,133	$	7,759	$	517,531	$	525,290	$	1,240

(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 with principal amounts that are 97 - 98% guaranteed by the government. The past due portion of these guaranteed loans totaled $1.9 million at September 30, 2014.

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.

Nonaccrual Loans

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

Nonaccrual Loans by Class
	September 30, 2014		December 31, 2013
	(in thousands)
Mortgage loans on real estate
Residential 1-4 family	$	995	$	4,024
Commercial		4,015		4,606
Construction		2,883		2,545
Total mortgage loans on real estate		7,893		11,175
Commercial loans		0		149
Total	$	7,893	$	11,324

Interest income that would have been recorded under original loan terms

The following table presents the interest income that the Company would have earned under the original terms of its nonaccrual loans and the actual interest recorded by the Company on nonaccrual loans for the periods presented:

	Nine Months Ended September 30,
	2014			2013
	(in thousands)
Interest income that would have been recorded under original loan terms		$	385	$	482
Actual interest income recorded for the period			195		95
Reduction in interest income on nonaccrual loans		$	190	$	387

Troubled Debt Restructurings by Class

The following table presents TDRs during the period indicated, by class of loan. The Company did not restructure any loans in the third quarter of 2014.

Troubled Debt Restructurings by Class For the Three Months Ended September 30, 2013
(dollars in thousands)
	Number of Modifications		Recorded Investment Prior to Modification			Recorded Investment After Modification			Current Investment on September 30, 2013
Mortgage loans on real estate:
Residential 1-4 family		3		$	488		$	488		$	487

Troubled Debt Restructurings by Class For the Nine Months Ended September 30, 2014
(dollars in thousands)
	Number of Modifications		Recorded Investment Prior to Modification			Recorded Investment After Modification			Current Investment on September 30, 2014
Mortgage loans on real estate:
Residential 1-4 family		1		$	276		$	276		$	270
Construction		1			103			103			102
Second mortgages		1			89			89			87
Total		3		$	468		$	468		$	459

Troubled Debt Restructurings by Class For the Nine Months Ended September 30, 2013
(dollars in thousands)
	Number of Modifications		Recorded Investment Prior to Modification			Recorded Investment After Modification			Current Investment on September 30, 2013
Mortgage loans on real estate:
Residential 1-4 family		6		$	1,164		$	1,164		$	1,158
Commercial		1			207			207			200
Total		7		$	1,371		$	1,371		$	1,358

Defaulting Troubled Debt Restructurings

The following tables presents TDRs for the periods 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, as restructured, becomes 90 days or more past due; the loan is moved to non-accrual status following the restructure; 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
For the Three Months Ended September 30, 2014
(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	295

Restructurings that Subsequently Defaulted
For the Three Months Ended September 30, 2013
(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	79

Restructurings that Subsequently Defaulted
For the Nine Months Ended September 30, 2014
(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	389

Restructurings that Subsequently Defaulted
For the Nine Months Ended September 30, 2013
(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	79
Commercial		1,829
Total	$	1,908

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 September 30, 2014											For the nine months ended September 30, 2014
			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	$	2,579		$	1,976		$	499		$	46		$	4,530		$	86
Commercial		12,541			7,041			3,784			183			10,847			345
Construction		3,750			67			2,919			358			2,854			19
Second mortgages		450			222			198			136			457			16
Total mortgage loans on real estate	$	19,320		$	9,306		$	7,400		$	723		$	18,688		$	466
Commercial loans		0			0			0			0			74			0
Consumer loans		14			14			0			0			30			1
Total	$	19,334		$	9,320		$	7,400		$	723		$	18,792		$	467

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

Allowance for loan losses by segment

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 Nine Months Ended September 30, 2014	Commercial			Real Estate - Construction			Real Estate - Mortgage			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	350		$	662		$	5,357		$	294		$	168		$	6,831
Charge-offs		(286	)		(51	)		(414	)		(136	)		(129	)		(1,016	)
Recoveries		42			8			264			48			48			410
Provision for loan losses		416			335			(108	)		15			142			800
Ending balance	$	522		$	954		$	5,099		$	221		$	229		$	7,025
Ending balance individually evaluated for impairment	$	0		$	358		$	365		$	0		$	0		$	723
Ending balance collectively evaluated for impairment		522			596			4,734			221			229			6,302
Ending balance	$	522		$	954		$	5,099		$	221		$	229		$	7,025
Loan Balances:
Ending balance individually evaluated for impairment	$	0		$	2,986		$	13,720		$	14		$	0		$	16,720
Ending balance collectively evaluated for impairment		35,574			9,346			417,716			19,162			26,772			508,570
Ending balance	$	35,574		$	12,332		$	431,436		$	19,176		$	26,772		$	525,290

For the Year 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