Loans and Allowance for Loan and Lease Losses (Tables)

6 Months Ended

Jun. 30, 2015

Receivables [Abstract]

Classes of Loans

(Dollars in Thousands)

	At June 30,		At December 31,
	2015		2014
Real estate loans:
Commercial	$	116,472	$	111,455
Residential		163,467		163,839
Construction		18,637		13,570
Commercial loans and leases		30,196		29,358
Municipal loans		1,895		785
Consumer loans		1,875		2,018
Total loans		332,542		321,025
Less:
Undisbursed loan proceeds		594		302
Deferred loan fees, net		622		707
Allowance for loan losses		3,904		3,903
		5,120		4,912
Total loans - net	$	327,422	$	316,113

Allowance for Loan Losses and Recorded Investment in Loans

The following table presents the balance and activity in allowance for loan losses as of June 30, 2015 (dollars in thousands):

Allowance for Loan Losses

For Three Months Ended June 30, 2015

	Commercial Real Estate Loans			Residential Real Estate Loans			Construction Real Estate Loans			Commercial Loans and Leases			Municipal Loans		Consumer Loans			Total
Balance at beginning of quarter	$	1,133		$	1,983		$	225		$	512		$	—	$	131		$	3,984
Provision (credit) for losses		(46	)		70			(23	)		—			—		(1	)		—
Charge-offs (1)		—			(58	)		—			(48	)		—		(15	)		(121	)
Recoveries		—			26			—			5			—		10			41
Balance at end of quarter	$	1,087		$	2,021		$	202		$	469		$	—	$	125		$	3,904

The following table presents the balance and activity in allowance for loan losses and the recorded investment in loans and impairment methods as of June 30, 2015 (dollars in thousands):

Allowance for Loan Losses and Recorded Investment in Loans

For Six Months Ended June 30, 2015

	Commercial Real Estate Loans		Residential Real Estate Loans			Construction Real Estate Loans		Commercial Loans and Leases			Municipal Loans		Consumer Loans			Total
Balance at beginning of year	$	1,059	$	1,934		$	156	$	637		$	—	$	117		$	3,903
Provision (credit) for losses		28		139			45		(128	)		—		21			105
Charge-offs (1)		—		(83	)		—		(48	)		—		(28	)		(159	)
Recoveries		—		31			1		8			—		15			55
Balance at end of period	$	1,087	$	2,021		$	202	$	469		$	—	$	125		$	3,904
Ending allowance balance:
Individually evaluated for impairment	$	70	$	649		$	—	$	139		$	—	$	28		$	886
Collectively evaluated for impairment		1,017		1,372			202		330			—		97			3,018
Total	$	1,087	$	2,021		$	202	$	469		$	—	$	125		$	3,904
Ending loan balance:
Individually evaluated for impairment	$	4,263	$	7,275		$	1,948	$	435		$	—	$	88		$	14,009
Collectively evaluated for impairment		112,209		156,192			16,689		29,761			1,895		1,787			318,533
Total	$	116,472	$	163,467		$	18,637	$	30,196		$	1,895	$	1,875		$	332,542

The following tables present the balance and activity in allowance for loan losses as of June 30, 2014 (dollars in thousands):

Allowance for Loan Losses

For Three Months Ended June 30, 2014

	Commercial Real Estate Loans			Residential Real Estate Loans			Construction Real Estate Loans			Commercial Loans and Leases			Municipal Loans		Consumer Loans			Total
Balance at beginning of quarter	$	1,273		$	1,747		$	332		$	629		$	—	$	119		$	4,100
Provision for losses		73			13			65			(19	)		—		18			150
Charge-offs (1)		(101	)		(80	)		(6	)		(58	)		—		(18	)		(263	)
Recoveries		3			3			1			6			—		4			17
Balance at end of quarter	$	1,248		$	1,683		$	392		$	558		$	—	$	123		$	4,004

Allowance for Loan Losses

For Six Months Ended June 30, 2014

	Commercial Real Estate Loans			Residential Real Estate Loans			Construction Real Estate Loans			Commercial Loans and Leases			Municipal Loans		Consumer Loans			Total
Balance at beginning of year	$	1,165		$	1,743		$	356		$	623		$	—	$	106		$	3,993
Provision for losses		181			14			80			(17	)		—		42			300
Charge-offs (1)		(101	)		(80	)		(46	)		(59	)		—		(34	)		(320	)
Recoveries		3			6			2			11			—		9			31
Balance at end of period	$	1,248		$	1,683		$	392		$	558		$	—	$	123		$	4,004

The following table presents the balance in allowance for loan losses and recorded investment in loans and impairment methods as of December 31, 2014 (dollars in thousands):

Allowance for Loan Losses and Recorded Investment in Loans

For Year Ended December 31, 2014

	Commercial Real Estate Loans		Residential Real Estate Loans		Construction Real Estate Loans		Commercial Loans and Leases		Municipal Loans		Consumer Loans		Total
Ending allowance balance:
Individually evaluated for impairment	$	—	$	319	$	—	$	166	$	—	$	12	$	497
Collectively evaluated for impairment		1,059		1,615		156		471		—		105		3,406
Total	$	1,059	$	1,934	$	156	$	637	$	—	$	117	$	3,903
Ending loan balance:
Individually evaluated for impairment	$	4,263	$	3,967	$	2,004	$	516	$	—	$	89	$	10,839
Collectively evaluated for impairment		107,192		159,872		11,566		28,842		785		1,929		310,186
Total	$	111,455	$	163,839	$	13,570	$	29,358	$	785	$	2,018	$	321,025

(1) Policy for Charging Off Loans:

A loan should be charged off at any point in time when it no longer can be considered a bankable asset, meaning collectable within the parameters of policy. The Bank shall not renew any loan, or put a loan on a demand basis, only to defer a problem, nor is it appropriate to attempt long-term recoveries while reporting loans as assets.

An unsecured loan generally should be charged off no later than when it is 120 days past due as to principal or interest. For loans in the legal process of foreclosure against collateral of real and/or liquid value, the 120-day rule does not apply. Such charge-offs can be deferred until the foreclosure process progresses to the point where the Bank can adequately determine whether or not any ultimate loss will result. In similar instances where other legal actions will cause extraordinary delays, such as the settlement of an estate, if the loan is well collateralized, the 120-day period may be extended. On loans where the Bank is unsecured or not fully collateralized, the loan should be charged off or written down to the documented collateral value rather than merely being placed on non-accrual status.

Loan Portfolio Quality Indicators

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of June 30, 2015 and December 31, 2014 (dollars in thousands):

Loan Portfolio Quality Indicators

At June 30, 2015

	Commercial Real Estate Loans		Residential Real Estate Loans		Construction Real Estate Loans		Commercial Loans and Leases		Municipal Loans		Consumer Loans		Total
Rating:
Pass (Grades 1-5)	$	108,312	$	153,754	$	15,874	$	29,513	$	1,895	$	1,788	$	311,136
Watch (Grade 6)		3,897		3,633		1,703		248		—		—		9,481
Special Mention (Grade 7)		—		—		—		—		—		—		—
Substandard (Grade 8)		3,451		423		224		—		—		—		4,098
Doubtful (Grade 9)		812		5,657		836		435		—		87		7,827
Loss (Grade 10)		—		—		—		—		—		—		—
Total	$	116,472	$	163,467	$	18,637	$	30,196	$	1,895	$	1,875	$	332,542

Loan Portfolio Quality Indicators

At December 31, 2014

	Commercial Real Estate Loans		Residential Real Estate Loans		Construction Real Estate Loans		Commercial Loans and Leases		Municipal Loans		Consumer Loans		Total
Rating:
Pass (Grades 1-5)	$	100,095	$	157,518	$	10,786	$	28,516	$	785	$	1,929	$	299,629
Watch (Grade 6)		7,097		327		1,721		325		—		—		9,470
Special Mention (Grade 7)		—		3,355		—		—		—		—		3,355
Substandard (Grade 8)		3,451		427		228		—		—		—		4,106
Doubtful (Grade 9)		812		2,212		835		517		—		89		4,465
Loss (Grade 10)		—		—		—		—		—		—		—
Total	$	111,455	$	163,839	$	13,570	$	29,358	$	785	$	2,018	$	321,025

Loan Portfolio Aging Analysis

The following tables present the Company’s loan portfolio aging analysis as of June 30, 2015 and December 31, 2014 (dollars in thousands):

Loan Portfolio Aging Analysis

At June 30, 2015

	30-59 Days Past Due (A)		60-89 Days Past Due		90 Days and Greater		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 days & Accruing
Real estate loans:
Commercial	$	200	$	—	$	812	$	1,012	$	115,460	$	116,472	$	—
Residential		4,189		175		1,852		6,216		157,251		163,467		110
Construction		—		888		836		1,724		16,913		18,637		—
Commercial loans and leases		368		—		67		435		29,761		30,196		—
Municipal loans		—		—		—		—		1,895		1,895		—
Consumer loans		1		1		4		6		1,869		1,875		5
Total	$	4,758	$	1,064	$	3,571	$	9,393	$	323,149	$	332,542	$	115

(A) Includes $924,000 in loans classified as nonaccrual that are less than 30 days past due, of which $556,000 are residential real estate loans and $368,000 are commercial loans.

Loan Portfolio Aging Analysis

At December 31, 2014

	30-59 Days Past Due (A)		60-89 Days Past Due		Greater than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 days & Accruing
Real estate loans:
Commercial	$	—	$	—	$	812	$	812	$	110,643	$	111,455	$	—
Residential		1,346		212		1,598		3,156		160,683		163,839		14
Construction		—		—		836		836		12,734		13,570		—
Commercial loans and leases		80		320		117		517		28,841		29,358		—
Municipal loans		—		—		—		—		785		785		—
Consumer loans		10		4		1		15		2,003		2,018		1
Total	$	1,436	$	536	$	3,364	$	5,336	$	315,689	$	321,025	$	15

(A) Includes $667,000 in loans classified as nonaccrual that are less than 30 days past due, of which $587,000 are residential real estate loans and $80,000 are commercial loans.

Impaired Loans

The following table presents impaired loans as of June 30, 2015 (dollars in thousands):

Impaired Loans At June 30, 2015
							Three Months Ended June 30, 2015				Six Months Ended June 30, 2015
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans (1)		Interest Income Recognized (2)		Average Investment in Impaired Loans (1)		Interest Income Recognized (2)
Loans without a specific valuation allowance:
Real estate loans:
Commercial	$	3,451	$	3,929		N/A	$	3,451	$	43	$	3,451	$	86
Residential		2,819		3,120		N/A		2,706		14		2,684		28
Construction		1,948		1,948		N/A		1,962		17		1,976		33
Commercial loans and leases		67		95		N/A		69		—		70		—
Municipal loans		—		—		N/A		—		—		—		—
Consumer loans		—		—		N/A		—		—		—		—
Total	$	8,285	$	9,092		N/A	$	8,188	$	74	$	8,181	$	147
Loans with a specific valuation allowance:
Real estate loans:
Commercial	$	812	$	812	$	70	$	812	$	—	$	812	$	—
Residential		4,456		4,467		649		1,180		4		1,161		8
Construction		—		—		—		—		—		—		—
Commercial loans and leases		368		431		139		396		—		415		—
Municipal loans		—		—		—		—		—		—		—
Consumer loans		88		88		28		71		—		72		—
Total	$	5,724	$	5,798	$	886	$	2,459	$	4	$	2,460	$	8
All Impaired Loans	$	14,009	$	14,890	$	886	$	10,647	$	78	$	10,641	$	155

(1) Includes all loans that were classified as impaired at any time during the three-month and six-month periods (not just impaired loans at June 30, 2015), and their average balance for only the period during which they were classified as impaired.

(2) Interest recorded in income during only the period the loans were classified as impaired, for all loans that were classified as impaired at any time during the three months and six months ended June 30, 2015.

For all loan classes, interest income on loans individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.

The following table presents impaired loans as of June 30, 2014 (dollars in thousands):

Impaired Loans At June 30, 2014
							Three Months Ended June 30, 2014				Six Months Ended June 30, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans (1)		Interest Income Recognized (2)		Average Investment in Impaired Loans (1)		Interest Income Recognized (2)
Loans without a specific valuation allowance:
Real estate loans:
Commercial	$	4,339	$	4,817		N/A	$	4,471	$	59	$	4,435	$	110
Residential		2,655		2,920		N/A		3,273		17		3,014		35
Construction		1,222		2,057		N/A		1,389		18		1,329		36
Commercial loans and leases		70		98		N/A		564		—		399		—
Municipal loans		—		—		N/A		—		—		—		—
Consumer loans		—		—		N/A		—		—		—		—
Total	$	8,286	$	9,892		N/A	$	9,697	$	94	$	9,177	$	181
Loans with a specific valuation allowance:
Real estate loans:
Commercial	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential		2,589		2,662		381		2,609		21		2,602		42
Construction		3,149		3,149		245		2,901		25		3,025		51
Commercial loans and leases		148		192		109		163		—		161		—
Municipal loans		—		—		—		—		—		—		—
Consumer loans		95		95		8		66		—		78		—
Total	$	5,981	$	6,098	$	743	$	5,739	$	46	$	5,866	$	93
All Impaired Loans	$	14,267	$	15,990	$	743	$	15,436	$	140	$	15,043	$	274

(1) Includes all loans that were classified as impaired at any time during the three-month and six-month periods (not just impaired loans at June 30, 2014), and their average balance for only the period during which they were classified as impaired.

(2) Interest recorded in income during only the period the loans were classified as impaired, for all loans that were classified as impaired at any time during the three months and six months ended June 30, 2014.

For all loan classes, interest income on loans individually classified as impaired is recognized on a cash basis after all past due and current principal payments have been made.

The following table presents impaired loans as of December 31, 2014 (dollars in thousands):

Impaired Loans At December 31, 2014
							Year Ended December 31, 2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans (1)		Interest Income Recognized (2)
Loans without a specific valuation allowance:
Real estate loans:
Commercial	$	4,263	$	4,742		N/A	$	4,025	$	176
Residential		2,686		2,923		N/A		2,342		58
Construction		2,004		2,004		N/A		1,744		72
Commercial loans and leases		70		99		N/A		221		—
Municipal loans		—		—		N/A		—		—
Consumer loans		—		—		N/A		—		—
Total	$	9,023	$	9,768		N/A	$	8,332	$	306
Loans with a specific valuation allowance:
Real estate loans:
Commercial	$	—	$	—	$	—	$	481	$	22
Residential		1,281		1,340		319		2,806		78
Construction		—		—		—		2,368		55
Commercial loans and leases		446		495		166		222		—
Municipal loans		—		—		—		—		—
Consumer loans		89		89		12		81		—
Total	$	1,816	$	1,924	$	497	$	5,958	$	155
All Impaired Loans	$	10,839	$	11,692	$	497	$	14,290	$	461

(1) Includes all loans that were classified as impaired at any time during 2014 (not just impaired loans at December 31, 2014), and their average balance for only the period during which they were classified as impaired.

(2) Interest recorded in income during only the period the loans were classified as impaired, for all loans that were classified as impaired at any time during 2014.

Loans Accounted for on Non Accrual Basis

The following table presents the Company’s non-accrual loans at June 30, 2015 and December 31, 2014 (dollars in thousands):

Loans Accounted for on a Non-Accrual Basis

	At June 30,		At December 31,
	2015		2014
Real estate loans:
Commercial	$	812	$	812
Residential		2,344		2,212
Construction		836		836
Commercial loans and leases		435		516
Municipal loans		—		—
Consumer loans		—		—
Total	$	4,427	$	4,376

Loans Classified as Troubled Debt Restructuring Payment Concessions

There were two loans classified as a TDR during the three-month and six month periods ended June 30, 2015, and they are shown in the table below identified by class (dollars in thousands). The modifications were both payment concessions, one extending the amortization period to reduce the monthly payment amount and the other allowing the borrower to make interest only payments for a period of time.

	Three Months Ended June 30, 2015						Six Months Ended June 30, 2015
	Modifications						Modifications
	Number		Recorded Balance Before		Recorded Balance After		Number		Recorded Balance Before		Recorded Balance After
Real estate loans:
Commercial		—	$	—	$	—		—	$	—	$	—
Residential		1		3,311		3,311		1		3,311		3,311
Construction		—		—		—		—		—		—
Commercial loans and leases		1		308		308		1		308		308
Municipal loans		—		—		—		—		—		—
Consumer loans		—		—		—		—		—		—
Total		2	$	3,619	$	3,619		2	$	3,619	$	3,619