Loans and the Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 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:

	December 31, 2014			December 31, 2013
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	91,318		$	84,500
Commercial		287,531			287,071
Construction		9,082			14,505
Second mortgages		13,403			13,232
Equity lines of credit		43,662			32,163
Total mortgage loans on real estate		444,996			431,471
Commercial loans		37,698			30,702
Consumer loans		30,493			19,791
Other		22,807			18,735
Total loans		535,994			500,699
Less: Allowance for loan losses		(7,075	)		(6,831	)
Loans, net of allowance and deferred fees	$	528,919		$	493,868

Overdrawn deposit accounts are reclassified as loans and included in the Other category in the table above. Overdrawn deposit accounts totaled $541 thousand and $641 thousand at December 31, 2014 and December 31, 2013, respectively.

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, 2014

(in thousands)

	Pass		OAEM		Substandard		Total
Mortgage loans on real estate:
Residential 1-4 family	$	89,480	$	0	$	1,838	$	91,318
Commercial		272,654		10,602		4,275		287,531
Construction		8,026		0		1,056		9,082
Second mortgages		13,306		0		97		13,403
Equity lines of credit		42,976		0		686		43,662
Total mortgage loans on real estate		426,442		10,602		7,952		444,996
Commercial loans		36,007		1,669		22		37,698
Consumer loans		30,463		0		30		30,493
Other		22,807		0		0		22,807
Total	$	515,719	$	12,271	$	8,004	$	535,994

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

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, 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	$	1,043	$	55	$	792	$	1,890	$	89,428	$	91,318	$	0
Commercial		31		0		432		463		287,068		287,531		0
Construction		0		0		499		499		8,583		9,082		0
Second mortgages		81		32		168		281		13,122		13,403		107
Equity lines of credit		49		0		0		49		43,613		43,662		0
Total mortgage loans on real estate		1,204		87		1,891		3,182		441,814		444,996		107
Commercial loans		195		0		10		205		37,493		37,698		10
Consumer loans		1,099		323		1,019		2,441		28,052		30,493		1,019
Other		51		3		5		59		22,748		22,807		5
Total	$	2,549	$	413	$	2,925	$	5,887	$	530,107	$	535,994	$	1,141

(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 $2.4 million at December 31, 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

	December 31, 2014		December 31, 2013
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	924	$	4,024
Commercial		4,086		4,606
Construction		499		2,545
Second mortgages		61		0
Total mortgage loans on real estate		5,570		11,175
Commercial loans		0		149
Total	$	5,570	$	11,324

Interest Income to be earned under the Original Terms [Table Text Block]

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:

	Years Ended December 31,
	2014			2013
	(in thousands)
Interest income that would have been recorded under original loan terms		$	301	$	762
Actual interest income recorded for the period			265		251
Reduction in interest income on nonaccrual loans		$	36	$	511

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, 2014

(dollars in thousands)

	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification		Current Investment on December 31, 2014
Mortgage loans on real estate:
Residential 1-4 family		2	$	375	$	375	$	366
Construction		1		103		103		102
Second mortgages		1		89		89		86
Total		4	$	567	$	567	$	554

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

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, as restructured, becomes 90 days or more past due; the loan is returned to nonaccrual 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
(dollars in thousands)
	For the Years Ended December 31,
	2014				2013
Mortgage loans on real estate:	Number of Defaults		Amount of Default		Number of Defaults		Amount of Default
Residential 1-4 family		2	$	389		2	$	181
Commercial		0		0		1		2,062
Total		2	$	389		3	$	2,243

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, 2014								For the year ended December 31, 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	$	2,898	$	2,083	$	646	$	91	$	4,099	$	126
Commercial		11,766		4,729		5,322		163		10,669		449
Construction		1,157		623		534		270		2,431		55
Second mortgages		506		195		282		178		470		25
Total mortgage loans on real estate	$	16,327	$	7,630	$	6,784	$	702	$	17,669	$	655
Commercial loans		0		0		0		0		37		0
Consumer loans		14		14		0		0		26		1
Total	$	16,341	$	7,644	$	6,784	$	702	$	17,732	$	656

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	)
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

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 $7.1 million adequate to cover loan losses inherent in the loan portfolio at December 31, 2014.

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 Year Ended December 31, 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	)			(563	)			(163	)			(175	)			(1,238	)
Recoveries			55				173				524				64				66				882
Provision for loan losses			476				(81	)			29				24				152				600
Ending balance		$	595			$	703			$	5,347			$	219			$	211			$	7,075
Ending balance individually evaluated for impairment		$	0			$	270			$	432			$	0			$	0			$	702
Ending balance collectively evaluated for impairment			595				433				4,915				219				211				6,373
Ending balance		$	595			$	703			$	5,347			$	219			$	211			$	7,075
Loan Balances:
Ending balance individually evaluated for impairment		$	0			$	1,157			$	13,257			$	14			$	0			$	14,428
Ending balance collectively evaluated for impairment			37,698				7,925				422,657				30,479				22,807				521,566
Ending balance		$	37,698			$	9,082			$	435,914			$	30,493			$	22,807			$	535,994

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

Change in Allowance Methodology

The following table represents the effect on the loan loss provision for the year ended December 31, 2014 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	$	476		$	320		$	156
Real estate - construction		(81	)		(143	)		62
Real estate - mortgage		29			(520	)		549
Consumer loans		24			(69	)		93
Other		152			157			(5	)
Total	$	600		$	(255	)	$	855