Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2014

The following represents the composition of the loan portfolio for the period ending:

	(Amounts in thousands)
	September 30, 2014				December 31, 2013
	Balance		%		Balance		%
Commercial	$	47,105		14.3	$	73,643		21.2
Commercial real estate		218,582		66.2		206,744		59.6
Residential real estate		39,942		12.1		42,288		12.2
Consumer - home equity		20,397		6.2		19,510		5.6
Consumer - other		4,161		1.2		4,648		1.4
Total loans	$	330,187			$	346,833

Certain Qualitative Factors Considered in Measuring Risk Trends

These factors include, but are not limited to, the following:

Factor Considered:		Risk Trend:
Levels of and trends in charge-offs, classifications and non-accruals		Stable
Trends in volume and terms		Increasing
Changes in lending policies and procedures		Stable
Experience, depth and ability of management		Stable
Economic trends		Decreasing
Concentrations of credit		Increasing

Factors Analyzed and Applied to Loans Internally Graded with Higher Credit Risk

The following factors are analyzed and applied to loans internally graded with higher credit risk in addition to the above factors for non-classified loans:

Factor Considered:		Risk Trend:
Levels and trends in classification		Stable
Declining trends in financial performance – Commercial real estate and Commercial		Stable
Structure and lack of performance measures – Commercial real estate and Commercial		Stable
Migration between risk categories		Increasing

Analysis of Changes in the Allowance for Loan Losses

The following is an analysis of changes in the allowance for loan losses for the periods ended:

Three Months Ended	(Amounts in thousands)
September 30, 2014	Commercial			Commercial real estate			Residential real estate			Consumer - home equity			Consumer - other			Total
Balance at beginning of period	$	749		$	2,891		$	295		$	100		$	99		$	4,134
Loan charge-offs		(11	)		(186	)		(49	)		—			(31	)		(277	)
Recoveries		—			3			1			12			17			33
Net loan recoveries (charge-offs)		(11	)		(183	)		(48	)		12			(14	)		(244	)
Provision charged to operations		29			123			79			(55	)		12			188
Balance at end of period	$	767		$	2,831		$	326		$	57		$	97		$	4,078

	(Amounts in thousands)
September 30, 2013	Commercial		Commercial real estate			Residential real estate			Consumer - home equity			Consumer - other			Total
Balance at beginning of period	$	551	$	3,035		$	340		$	127		$	92		$	4,145
Loan charge-offs		—		(407	)		(2	)		—			(39	)		(448	)
Recoveries		48		8			18			4			18			96
Net loan recoveries (charge-offs)		48		(399	)		16			4			(21	)		(352	)
Provision charged to operations		16		126			8			(19	)		19			150
Balance at end of period	$	615	$	2,762		$	364		$	112		$	90		$	3,943

Nine Months Ended	(Amounts in thousands)
September 30, 2014	Commercial			Commercial real estate			Residential real estate			Consumer - home equity			Consumer - other			Total
Balance at beginning of period	$	593		$	2,638		$	356		$	88		$	89		$	3,764
Loan charge-offs		(123	)		(186	)		(68	)		(39	)		(100	)		(516	)
Recoveries		262			3			3			20			54			342
Net loan recoveries (charge-offs)		139			(183	)		(65	)		(19	)		(46	)		(174	)
Provision charged to operations		35			376			35			(12	)		54			488
Balance at end of period	$	767		$	2,831		$	326		$	57		$	97		$	4,078

	(Amounts in thousands)
September 30, 2013	Commercial			Commercial real estate			Residential real estate			Consumer - home equity			Consumer - other			Total
Balance at beginning of period	$	639		$	2,616		$	343		$	123		$	104		$	3,825
Loan charge-offs		(1	)		(479	)		(81	)		—			(94	)		(655	)
Recoveries		164			11			23			13			62			273
Net loan recoveries (charge-offs)		163			(468	)		(58	)		13			(32	)		(382	)
Provision charged to operations		(187	)		614			79			(24	)		18			500
Balance at end of period	$	615		$	2,762		$	364		$	112		$	90		$	3,943

Allowance for Loan Losses and the Recorded Investment in Loans

The following tables present a full breakdown by portfolio segment of the allowance for loan losses and the recorded investment in loans at September 30, 2014 and December 31, 2013:

	(Amounts in thousands)
September 30, 2014	Commercial		Commercial real estate		Residential real estate		Consumer - home equity		Consumer - other		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	23	$	149	$	—	$	—	$	—	$	172
Collectively evaluated for impairment		744		2,682		326		57		97		3,906
Total ending allowance balance	$	767	$	2,831	$	326	$	57	$	97	$	4,078
Loan Portfolio:
Individually evaluated for impairment	$	240	$	5,537	$	—	$	—	$	—	$	5,777
Collectively evaluated for impairment		46,865		213,045		39,942		20,397		4,161		324,410
Total ending loans balance	$	47,105	$	218,582	$	39,942	$	20,397	$	4,161	$	330,187

	(Amounts in thousands)
December 31, 2013	Commercial		Commercial real estate		Residential real estate		Consumer - home equity		Consumer - other		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	50	$	251	$	—	$	—	$	—	$	301
Collectively evaluated for impairment		543		2,387		356		88		89		3,463
Total ending allowance balance	$	593	$	2,638	$	356	$	88	$	89	$	3,764
Loan Portfolio:
Individually evaluated for impairment	$	418	$	5,134	$	—	$	—	$	—	$	5,552
Collectively evaluated for impairment		73,225		201,610		42,288		19,510		4,648		341,281
Total ending loans balance	$	73,643	$	206,744	$	42,288	$	19,510	$	4,648	$	346,833

Summary of Credit Quality Indicators by Internally Assigned Grade

The following table is a summary of credit quality indicators by internally assigned grade as of September 30, 2014 and December 31, 2013:

	(Amounts in thousands)
	Commercial		Commercial real estate
September 30, 2014
Pass	$	41,597	$	195,862
Special Mention		3,457		13,621
Substandard		2,051		9,099
Doubtful		—		—
Ending Balance	$	47,105	$	218,582

	(Amounts in thousands)
	Commercial		Commercial real estate
December 31, 2013
Pass	$	72,562	$	192,604
Special Mention		626		9,158
Substandard		455		4,982
Doubtful		—		—
Ending Balance	$	73,643	$	206,744

Summary of Consumer Credit Exposure

The following table is a summary of consumer credit exposure as of September 30, 2014 and December 31, 2013:

	(Amounts in thousands)
	Residential real estate		Consumer - home equity		Consumer- other
September 30, 2014
Performing	$	38,469	$	20,207	$	4,152
Nonperforming		1,473		190		9
Total	$	39,942	$	20,397	$	4,161

	(Amounts in thousands)
	Residential real estate		Consumer - home equity		Consumer- other
December 31, 2013
Performing	$	41,807	$	19,438	$	4,632
Nonperforming		481		72		16
Total	$	42,288	$	19,510	$	4,648

The following table presents, by class, information related to loans modified in a TDR during the three and nine months ended September 30, 2013 (1):

	(Dollar amounts in thousands)
	Three Months Ended								Nine Months Ended
	September 30, 2013								September 30, 2013
	Number of contracts		Pre-modification recorded investment		Post-modification recorded investment		Increase in the allowance		Number of contracts		Pre-modification recorded investment		Post-modification recorded investment		Increase in the allowance
Commercial		3	$	300	$	300	$	20		3	$	300	$	300	$	20
Commercial real estate		—		—		—		—		2		650		650		—
Total restructured loans		3	$	300	$	300	$	20		5	$	950	$	950	$	20
Subsequently defaulted		—	$	—						—	$	—

(1) The period end balances are inclusive of all partial paydowns and charge-offs since the modification date. Loans modified in a TDR that were fully paid down, charged-off, or foreclosed upon by period end are not reported.

Aging Analysis of the Recorded Investment of Past Due Loans

The following table is an aging analysis of the recorded investment of past due loans as of September 30, 2014 and December 31, 2013:

	(Amounts in thousands)
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
September 30, 2014
Commercial	$	—	$	3	$	21	$	24	$	47,081	$	47,105	$	—
Commercial real estate		204		100		1,655		1,959		216,623		218,582		—
Residential real estate		156		138		1,284		1,578		38,364		39,942		—
Consumer:
Consumer - home equity		63		110		190		363		20,034		20,397		—
Consumer - other		22		3		9		34		4,127		4,161		—
Total	$	445	$	354	$	3,159	$	3,958	$	326,229	$	330,187	$	—

	(Amounts in thousands)
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
December 31, 2013
Commercial	$	—	$	—	$	30	$	30	$	73,613	$	73,643	$	—
Commercial real estate		—		—		1,136		1,136		205,608		206,744		—
Residential real estate		—		201		380		581		41,707		42,288		—
Consumer:
Consumer - home equity		—		7		65		72		19,438		19,510		—
Consumer - other		29		—		16		45		4,603		4,648		—
Total	$	29	$	208	$	1,627	$	1,864	$	344,969	$	346,833	$	—

Recorded Investment and Unpaid Principal Balances for Impaired Loans, Excluding Homogenous Loans for Which Impaired Analyses are Not Necessarily Performed

The following table presents the recorded investment and unpaid principal balances for impaired loans, excluding homogenous loans for which impaired analyses are not necessarily performed, with the associated allowance amount, if applicable, at September 30, 2014 and December 31, 2013. Also presented are the average recorded investments in the impaired balances and interest income recognized after impairment for the three and nine months ended September 30, 2014 and 2013.

	(Amounts in thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance
September 30, 2014
With no related allowance recorded:
Commercial	$	217	$	217	$	—
Commercial real estate		4,297		5,041		—
With an allowance recorded:
Commercial		23		23		23
Commercial real estate		1,240		1,240		149
Total:
Commercial	$	240	$	240	$	23
Commercial real estate	$	5,537	$	6,281	$	149

	(Amounts in thousands)
	Recorded Investment		Unpaid Principal Balance		Related Allowance
December 31, 2013
With no related allowance recorded:
Commercial	$	320	$	320	$	—
Commercial real estate		3,554		3,554		—
With an allowance recorded:
Commercial		98		98		50
Commercial real estate		1,580		1,580		251
Total:
Commercial	$	418	$	418	$	50
Commercial real estate	$	5,134	$	5,134	$	251

	(Amounts in thousands)
	Three Months Ended				Nine Months Ended
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
September 30, 2014
With no related allowance recorded:
Commercial	$	212	$	3	$	216	$	13
Commercial real estate		4,229		44		3,976		132
With an allowance recorded:
Commercial		23		—		64		—
Commercial real estate		1,345		23		1,495		59
Total:
Commercial	$	235	$	3	$	280	$	13
Commercial real estate	$	5,574	$	67	$	5,471	$	191

	(Amounts in thousands)
	Three Months Ended				Nine Months Ended
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
September 30, 2013
With no related allowance recorded:
Commercial	$	122	$	—	$	77	$	—
Commercial real estate		1,548		11		1,174		22
With an allowance recorded:
Commercial		104		—		64		—
Commercial real estate		2,709		24		3,305		65
Total:
Commercial	$	226	$	—	$	141	$	—
Commercial real estate	$	4,257	$	35	$	4,479	$	87

Summary of Classes of Loans on Non-Accrual Status

The following table is a summary of classes of loans on non-accrual status as of September 30, 2014 and December 31, 2013:

	(Amounts in thousands)
	September 30, 2014		December 31, 2013
Commercial	$	34	$	98
Commercial real estate		1,790		1,279
Residential real estate		1,473		481
Consumer:
Consumer - home equity		190		72
Consumer - other		9		16
Total	$	3,496	$	1,946