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Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2014
Allowance for Loan Losses
Note 6. Allowance for Loan Losses

A disaggregation of and an analysis of the change in the allowance for loan losses by segment is shown below.

 

(Dollars in thousands)    Mortgage
Loans on
Real Estate		      Commercial
and
Industrial		      Consumer
and Other
Loans		      Total  

For the Twelve Months Ended December 31, 2014

                            

Beginning Balance

    $ 2,465       $ 256       $ 204       $ 2,925   

(Charge-offs)

      (313 )       —           (79 )       (392 ) 

Recoveries

      36         —           25         61   

Provision

      590         67         (46 )       611   
  

 

 

     

 

 

     

 

 

     

 

 

  

Ending Balance

 $ 2,778    $ 323    $ 104    $ 3,205   
  

 

 

     

 

 

     

 

 

     

 

 

  

Individually evaluated for impairment

 $ 665    $ —      $ 11    $ 676   

Collectively evaluated for impairment

   2,113      323      93      2,529   
(Dollars in thousands)    Mortgage
Loans on
Real Estate		      Commercial
and
Industrial		      Consumer
and other
Loans		      Total  

For the Twelve Months Ended December 31, 2013

                            

Beginning Balance

    $ 2,572       $ 262       $ 260       $ 3,094   

(Charge-offs)

      (879 )       (17 )       (132 )       (1,028 ) 

Recoveries

      68         1         14         83   

Provision

      704         10         62         776   
  

 

 

     

 

 

     

 

 

     

 

 

  

Ending Balance

 $ 2,465    $ 256    $ 204    $ 2,925   
  

 

 

     

 

 

     

 

 

     

 

 

  

Individually evaluated for impairment

 $ 634    $ —      $ 33    $ 667   

Collectively evaluated for impairment

   1,831      256      171      2,258   

 

Loan receivables evaluated for impairment individually and collectively by segment as of December 31, 2014 and 2013 are as follows:

 

(Dollars in thousands)    Mortgage
Loans		      Commercial
and		      Consumer         

As of December 31, 2014

    on Real Estate      Industrial      Loans      Total  

Individually evaluated for impairment

    $ 6,842       $ —         $ 16       $ 6,858   

Collectively evaluated for impairment

      251,861         34,002         5,333         291,196   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Gross Loans

 $ 258,703    $ 34,002    $ 5,349    $ 298,054   
  

 

 

     

 

 

     

 

 

     

 

 

  

As of December 31, 2013

                            

Individually evaluated for impairment

    $ 6,306       $ 311       $ 39       $ 6,656   

Collectively evaluated for impairment

      214,101         23,627         5,947         243,675   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Gross Loans

 $ 220,407    $ 23,938    $ 5,986    $ 250,331   
  

 

 

     

 

 

     

 

 

     

 

 

  

Internal risk rating grades are shown in the following table.

 

(Dollars in thousands)   

Construction,
Land and

Land

             Commercial
Mortgages
(Non-Owner		      Commercial
Mortgages
(Owner		     

Commercial

and

         
As of December 31, 2014    Development      Farmland      Occupied)      Occupied)      Industrial      Total  

Grade:

                  

Pass

    $ 34,913       $ 1,128       $ 16,426       $ 23,967       $ 31,041       $ 107,475   

Watch

      5,649         —           3,770         4,430         2,492         16,341   

Special mention

      1,403         —           —           2,789         154         4,346   

Substandard

      1,083         —           338         2,140         315         3,876   

Doubtful

      —           —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

 $ 43,048    $ 1,128    $ 20,534    $ 33,326    $ 34,002    $ 132,038   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
As of December 31, 2013    Construction,
Land and
Land
Development		      Farmland      Commercial
Mortgages
(Non-Owner
Occupied)		      Commercial
Mortgages
(Owner
Occupied)		      Commercial
and
Industrial		      Total  

Grade:

                  

Pass

    $ 25,616       $ 1,262       $ 9,083       $ 23,984       $ 20,309       $ 80,254   

Watch

      3,493         —           5,204         7,429         2,743         18,869   

Special mention

      1,416         —           —           1,001         487         2,904   

Substandard

      1,314         —           339         1,763         399         3,815   

Doubtful

      —           —           —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

 $ 31,839    $ 1,262    $ 14,626    $ 34,177    $ 23,938    $ 105,842   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Loans not assigned internal risk rating grades are comprised of smaller residential mortgages and smaller consumer loans. Payment activity of these loans is reviewed monthly by management. However, some of these loans are graded when the borrower’s total exposure to the Bank exceeds the limits noted above. Loans are considered to be nonperforming when they are delinquent by 90 days or more or non-accruing and credit risk is primarily evaluated by delinquency status, as shown in the table below.

 

(Dollars in thousands)    Residential      Residential
Revolving		                
As of December 31, 2014    First      and Junior      Consumer         

PAYMENT ACTIVITY STATUS

    Mortgages (1)      Mortgages (2)      Loans (3)      Total  

Performing

    $ 134,908       $ 25,369       $ 5,234       $ 165,511   

Nonperforming

      359         31         115         505   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

 $ 135,267    $ 25,400    $ 5,349    $ 166,016   
  

 

 

     

 

 

     

 

 

     

 

 

  
As of December 31, 2013    Residential
First		      Residential
Revolving
and Junior		      Consumer         

PAYMENT ACTIVITY STATUS

    Mortgages (4)      Mortgages (5)      Loans (6)      Total  

Performing

    $ 113,375       $ 23,969       $ 5,964       $ 143,308   

Nonperforming

      1,083         76         22         1,181   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

 $ 114,458    $ 24,045    $ 5,986    $ 144,489   
  

 

 

     

 

 

     

 

 

     

 

 

  

Notes:

 

(1) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $2.1 million as of December 31, 2014.
(2) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $219 thousand as of December 31, 2014.
(3) Consumer Loans which have been assigned a risk rating grade of Substandard totaled $1 thousand as of December 31, 2014.
(4) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $2.6 million as of December 31, 2013.
(5) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $216 thousand as of December 31, 2013.
(6) Consumer Loans which have been assigned a risk rating grade of Substandard totaled $9 thousand as of December 31, 2013.

The following tables show the Company’s recorded investment and the customers’ unpaid principal balances for impaired loans, with the associated allowance amount, if applicable, as of December 31, 2014 and 2013, along with the average recorded investment and interest income recognized for the years ended December 31, 2014 and 2013.

 

(Dollars in thousands)    As of December 31, 2014      As of December 31, 2013  

IMPAIRED LOANS

                                          
     Recorded      Customers’ Unpaid      Related      Recorded      Customers’ Unpaid      Related  

With no related allowance:

    Investment      Principal Balance      Allowance      Investment      Principal Balance      Allowance  

Construction, land and land development

    $ 450       $ 452       $ —         $ 453       $ 453       $ —     

Residential First Mortgages

      1,568         1,584         —           1,053         1,057         —     

Residential Revolving and Junior Mortgages (1)

      50         50         —           —           —           —     

Commercial Mortgages (Non-owner occupied)

      264         264         —           264         264         —     

Commercial Mortgages (Owner occupied)

      1,887         1,916         —           1,831         1,840         —     

Commercial and Industrial

      —           —           —           311         311         —     

Consumer (2)

      5         5         —           —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  4,224      4,271      —        3,912      3,925      —     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

                                          

Construction, land and land development

      277         292         144         151         156         51   

Residential First Mortgages

      2,173         2,173         437         2,198         2,198         409   

Residential Revolving and Junior Mortgages (1)

      173         173         84         251         879         173   

Commercial Mortgages (Non-owner occupied)

      —           —           —           —           —           —     

Commercial Mortgages (Owner occupied)

      —           —           —           105         105         1   

Commercial and Industrial

      —           —           —           —           —           —     

Consumer (2)

      11         11         11         39         39         33   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
  2,634      2,649      676      2,744      3,377      667   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total Impaired Loans:

                                          

Construction, land and land development

      727         744         144         604         609         51   

Residential First Mortgages

      3,741         3,757         437         3,251         3,255         409   

Residential Revolving and Junior Mortgages (1)

      223         223         84         251         879         173   

Commercial Mortgages (Non-owner occupied)

      264         264         —           264         264         —     

Commercial Mortgages (Owner occupied)

      1,887         1,916         —           1,936         1,945         1   

Commercial and Industrial

      —           —           —           311         311         —     

Consumer (2)

      16         16         11         39         39         33   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
$ 6,858    $ 6,920    $ 676    $ 6,656    $ 7,302    $ 667   
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Notes:

 

(1) Junior mortgages include equity lines.
(2) includes credit cards.

 

     For the Year Ended      For the Year Ended  
     December 31, 2014      December 31, 2013  
     Average
Recorded		      Interest
Income		      Average
Recorded		      Interest
Income		  
(Dollars in thousands)    Investment      Recognized      Investment      Recognized  

With no related allowance:

                            

Construction, land and land development

    $ 451       $ 3       $ 189       $ 1   

Residential First Mortgages

      1,148         49         678         48   

Residential Revolving and Junior Mortgages (1)

      10         —           —           —     

Commercial Mortgages (Non-owner occupied)

      264         16         106         8   

Commercial Mortgages (Owner occupied)

      1,911         79         1,092         56   

Commercial and Industrial

      —           —           62         —     

Consumer (2)

      6         —           —           —     
  

 

 

     

 

 

     

 

 

     

 

 

  
  3,790      147      2,127      113   
  

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

                            

Construction, land and land development

      168         4         30         —     

Residential First Mortgages

      2,184         100         1,916         108   

Residential Revolving and Junior Mortgages (1)

      174         9         254         8   

Commercial Mortgages (Non-owner occupied)

      —           —           —           —     

Commercial Mortgages (Owner occupied)

      —           —           21         2   

Commercial and Industrial

      —           —           —           —     

Consumer (2)

      24         2         60         5   
  

 

 

     

 

 

     

 

 

     

 

 

  
  2,550      115      2,281      123   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

                            

Construction, land and land development

      619         7         219         1   

Residential First Mortgages

      3,332         149         2,594         156   

Residential Revolving and Junior Mortgages (1)

      184         9         254         8   

Commercial Mortgages (Non-owner occupied)

      264         16         106         8   

Commercial Mortgages (Owner occupied)

      1,911         79         1,113         58   

Commercial and Industrial

      —           —           62         —     

Consumer (2)

      30         2         60         5   
  

 

 

     

 

 

     

 

 

     

 

 

  
$ 6,340    $ 262    $ 4,408    $ 236   
  

 

 

     

 

 

     

 

 

     

 

 

  

Notes:

 

(1) Junior mortgages include equity lines.
(2) Includes credit cards.

Smaller non-accruing loans and non-accruing loans that are not graded because they are included in homogenous pools generally do not meet the criteria for impairment testing, and are therefore excluded from impaired loan disclosures. At December 31, 2014 and 2013, non-accruing loans excluded from impaired loan disclosure totaled $663 thousand and $724 thousand, respectively. If interest on these non-accruing loans had been accrued, such income would have approximated $32 thousand and $23 thousand during the years ended December 31, 2014 and 2013, respectively.

Loans modified as TDRs are considered impaired and are individually evaluated for the amount of impairment in the ALL. The following table presents, by segments of loans, information related to loans modified as TDRs during the years ended December 31, 2014 and 2013.

 

    For the Year Ended
December 31, 2014		     For the Year Ended
December 31, 2013		  
          Pre-Modification     Post-Modification           Pre-Modification     Post-Modification  
(Dollars in thousands)         Outstanding     Outstanding           Outstanding     Outstanding  

TROUBLED DEBT RESTRUCTURINGS

   Number of
Loans		     Recorded
Investment		     Recorded
Investment		     Number of
Loans		     Recorded
Investment		     Recorded
Investment		  

Construction, land and land development (1)

     2      $ 282      $ 277        3      $ 196      $ 196   

Residenital first mortages (2)

     —          —          —          1        207        204   

Residential revolving and junior mortgages (1)

     1        50        50        —          —          —     

Commercial mortgages (Owner occupied) (1)

     —          —          —          2        263        263   

Consumer (2)

     —          —          —          1        8        7   

Notes:

 

(1) Modifications were an extention of the loan terms.
(2) Modifications were capitalization of the interest.

 

     For the Year Ended
December 31, 2014		      For the Year Ended
December 31, 2013		  

TROUBLED DEBT RESTRUCTURINGS THAT SUBSEQUENTLY DEFAULTED

    Number of
Loans		      Recorded
Investment		      Number of
Loans		      Recorded
Investment		  

Residential first mortgages

      —         $ —           1       $ 106   

Residential revolving and junior mortgages

      1         75         —           —     

Commerical mortgages (Owner occupied)

      2         255         —           —     

 

Of the TDRs restructured in 2014 and 2013 which did not subsequently default, all are performing. Of the three loans that defaulted, one loan in the amount of $75 thousand was charged-off in 2014. There were 14 TDRs with an aggregate balance of $2.5 million outstanding as of both December 31, 2014 and December 31, 2013.