Note 5 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

12 Months Ended

Dec. 31, 2014

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 5: Allowance for Loan Losses, Nonperforming Assets and Impaired Loans

The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan’s payment history, the borrower’s current financial situation and value of the underlying collateral.

Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) and larger, non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate the probability that collection will not occur according to the loan’s terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “other assets especially mentioned.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair market value.

Troubled debt restructurings impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal or accrued interest, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Further, restructured loans are individually evaluated for impairment, with amounts below fair value accrued in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or cash flows below those that were included in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent are charged down to fair value. Deficiencies indicated by impairment measurements for TDRs that are not collateral dependent may be accrued in the allowance for loan losses or charged off if deemed uncollectible.

The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. The methodology for calculating reserves for collectively-evaluated loans is applied at the class level.

Portfolio Segments and Classes

Beginning January 1, 2013, the Company segregated certain loans that were included within the classes of the Residential Real Estate segment, including Equity lines, Residential closed-end first liens and Residential closed-end junior liens. The loans segregated in 2013 are secured by residential real estate collateral that is owned by investors and for which the primary repayment source is rental income. The new class in the Residential Real Estate segment allows the Company to address credit risks characteristic of investor-owned residential real estate. Segregating the investor-owned residential real estate did not have a significant impact on the calculation of the allowance for loan losses. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the segments and classes in effect for the period.

The segments and classes used in determining the allowance for loan losses, beginning in 2013 are as follows.

Real Estate Construction Construction, residential Construction, other Consumer Real Estate Equity lines Residential closed-end first liens Residential closed-end junior liens Investor-owned residential real estate Commercial Real Estate Multifamily real estate Commercial real estate, owner-occupied Commercial real estate, other Commercial Non Real Estate Commercial and Industrial Public Sector and IDA Public sector and IDA Consumer Non Real Estate Credit cards Automobile Other consumer loans

Historical Loss Rates

The Company’s allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The annualized current-year loss rate is averaged with that of prior periods to obtain the historical loss rate. Prior to the first quarter of 2013, one historical loss rate for each class was calculated and applied to current class balance to obtain the allocation for historical loss rates.

Beginning with the first quarter of 2013, two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or lower. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date. Consistent with accounting guidance, prior periods have not been restated and are shown as originally published using the methodology in effect for the period.

Risk Factors

In addition to historical loss rates, risk factors pertinent to each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality and loan officers’ experience. Prior to the first quarter of 2013, management also reviewed the Company’s lending policies and loan review system to determine whether changes had occurred during the quarter that affected credit risk. Until the first quarter of 2013, no changes were found to affect credit risk and no additional allocations were applied. During the first quarter of 2013, the Company incorporated to the allowance methodology a factor for changes in the Company’s lending policies and a factor for changes in the quality of the Company’s loan review, and set standard allocations for associated risk. The addition of the factors formalized and standardized a practice already in place and did not have a significant impact on the calculation of the allowance for loan losses.

The analysis of certain factors results in standard allocations to all segments and classes. These factors include loan officers’ average years of experience, the risk from changes in lending policies, the risk from changes in loan review, unemployment rates, bankruptcy rates, and competition. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include levels of past due loans, nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment. Please refer to Note 1: Summary of Significant Accounting Policies for a discussion of risk factors pertinent to each class.

Factor allocations applied to each class are increased for loans rated special mention and increased to a greater extent for loans rated classified. The Company allocates additional reserves for “high risk” loans, determined to be junior lien mortgages, high loan-to-value loans and interest-only loans.

An analysis of the allowance for loan losses follows:

	Years ended December 31,
	2014			2013			2012
Balance at beginning of year	$	8,227		$	8,349		$	8,068
Loans charged off		(1,860	)		(1,820	)		(2,953	)
Recoveries of loans previously charged off		255			167			100
Provision for loan losses		1,641			1,531			3,134
Balance at end of year	$	8,263		$	8,227		$	8,349

A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows:

	Activity in the Allowance for Loan Losses by Segment for the year ended December 31, 2014
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA		Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2013	$	863		$	1,697		$	3,685		$	989		$	132	$	576		$	285		$	8,227
Charge-offs		(2	)		(222	)		(1,201	)		(89	)		---		(346	)		---			(1,860	)
Recoveries		---			---			50			132			---		73			---			255
Provision for loan losses		(249	)		187			1,003			443			195		299			(237	)		1,641
Balance, December 31, 2014	$	612		$	1,662		$	3,537		$	1,475		$	327	$	602		$	48		$	8,263

	Activity in the Allowance for Loan Losses by Segment for the year ended December 31, 2013
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2012	$	1,070		$	2,263		$	3,442		$	959		$	142		$	424		$	49	$	8,349
Charge-offs		(184	)		(256	)		(64	)		(968	)		---			(348	)		---		(1,820	)
Recoveries		44			1			25			18			---			79			---		167
Provision for loan losses		(67	)		(311	)		282			980			(10	)		421			236		1,531
Balance, December 31, 2013	$	863		$	1,697		$	3,685		$	989		$	132		$	576		$	285	$	8,227

	Activity in the Allowance for Loan Losses by Segment for the year ended December 31, 2012
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2011	$	1,079		$	1,245		$	3,515		$	1,473		$	232		$	403		$	121		$	8,068
Charge-offs		(640	)		(370	)		(1,589	)		(109	)		---			(245	)		---			(2,953	)
Recoveries		13			8			---			2			---			77			---			100
Provision for loan losses		618			1,380			1,516			(407	)		(90	)		189			(72	)		3,134
Balance, December 31, 2012	$	1,070		$	2,263		$	3,442		$	959		$	142		$	424		$	49		$	8,349

	Allowance for Loan Losses by Segment and Evaluation Method as of
	December 31, 2014
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	14	$	258	$	10	$	---	$	---	$	---	$	282
Collectively evaluated for impairment		612		1,648		3,279		1,465		327		602		48		7,981
Total	$	612	$	1,662	$	3,537	$	1,475	$	327	$	602	$	48	$	8,263

	Loans by Segment and Evaluation Method as of
	December 31, 2014
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	819	$	13,624	$	678	$	---	$	---	$	---	$	15,121
Collectively evaluated for impairment		45,562		146,220		297,138		32,735		41,361		28,182		---		591,198
Total	$	45,562	$	147,039	$	310,762	$	33,413	$	41,361	$	28,182	$	---	$	606,319

	Allowance for Loan Losses by Segment and Evaluation Method as of
	December 31, 2013
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	10	$	610	$	4	$	---	$	---	$	---	$	624
Collectively evaluated for impairment		863		1,687		3,075		985		132		576		285		7,603
Total	$	863	$	1,697	$	3,685	$	989	$	132	$	576	$	285	$	8,227

	Loans by Segment and Evaluation Method as of
	December 31, 2013
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated for impairment	$	---	$	780	$	12,079	$	102	$	---	$	24	$	---	$	12,985
Collectively evaluated for impairment		45,925		144,719		299,187		31,160		34,220		28,399		---		583,610
Total	$	45,925	$	145,499	$	311,266	$	31,262	$	34,220	$	28,423	$	---	$	596,595

A summary of ratios for the allowance for loan losses follows:

	December 31,
	2014			2013
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees		1.36	%		1.38	%
Ratio of net charge-offs to average loans, net of unearned income and deferred fees		0.27	%		0.28	%

A summary of nonperforming assets follows:

	December 31,
	2014			2013
Nonperforming assets:
Nonaccrual loans	$	3,999		$	5,732
Restructured loans in nonaccrual		5,288			852
Total nonperforming loans		9,287			6,584
Other real estate owned, net		4,744			4,712
Total nonperforming assets	$	14,031		$	11,296
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		2.30	%		1.88	%
Ratio of allowance for loan losses to nonperforming loans(1)		88.97	%		124.95	%

(1) The Company defines nonperforming loans as total nonaccrual and restructured loans that are nonaccrual. Loans 90 days past due and still accruing and accruing restructured loans are excluded.

A summary of loans past due 90 days or more and impaired loans follows:

	December 31,
	2014			2013
Loans past due 90 days or more and still accruing	$	207		$	190
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees		0.03	%		0.03	%
Accruing restructured loans	$	6,040		$	6,191
Impaired loans:
Impaired loans with no valuation allowance	$	7,615		$	10,372
Impaired loans with a valuation allowance		7,506			2,613
Total impaired loans		15,121			12,985
Valuation allowance		(282	)		(624	)
Impaired loans, net of allowance	$	14,839		$	12,361
Average recorded investment in impaired loans(1)	$	16,311		$	16,654
Income recognized on impaired loans, after designation as impaired	$	473		$	267
Amount of income recognized on a cash basis	$	---		$	---

(1) Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

No interest income was recognized on nonaccrual loans for the years ended December 31, 2014, 2013 or 2012. Nonaccrual loans that meet the Company’s balance thresholds are designated as impaired.

A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, by loan class follows:

	Impaired Loans as of December 31, 2014
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Consumer Real Estate(2)
Residential closed-end first liens		530		503		311		192		2
Residential closed-end junior liens		239		239		---		239		8
Investor-owned residential real estate		77		77		---		77		4
Commercial Real Estate(2)
Multifamily real estate		2,911		2,735		868		1,866		170
Commercial real estate, owner occupied		4,919		4,821		3,314		1,508		74
Commercial real estate, other		6,080		6,068		3,072		2,996		14
Commercial Non Real Estate(2)
Commercial and Industrial		678		678		50		628		10
Total	$	15,434	$	15,121	$	7,615	$	7,506	$	282

	Impaired Loans as of December 31, 2013
	Principal Balance		(A) Total Recorded Investment(1)		Recorded Investment(1) in (A) for Which There is No Related Allowance		Recorded Investment(1) in (A) for Which There is a Related Allowance		Related Allowance
Consumer Real Estate(2)
Residential closed-end first liens		440		442		232		210		3
Residential closed-end junior liens		259		261		---		261		7
Investor-owned residential real estate		81		82		82		---		---
Commercial Real Estate(2)
Multifamily real estate		3,278		3,274		3,274		---		---
Commercial real estate, owner occupied		5,643		5,645		3,864		1,781		610
Commercial real estate, other		3,158		3,158		3,158		---		---
Commercial Non Real Estate(2)
Commercial and Industrial		102		103		1		102		4
Consumer Non Real Estate(2)
Automobile		24		24		24		---		---
Total	$	12,985	$	12,989	$	10,635	$	2,354	$	624

(1)	Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
(2)	Only classes with impaired loans are shown.

	Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2014
	Average Recorded Investment(1)		Interest Income Recognized
Consumer Real Estate(2)
Residential closed-end first liens		555		31
Residential closed-end junior liens		249		16
Investor-owned residential real estate		77		5
Commercial Real Estate(2)
Multifamily real estate		2,773		---
Commercial real estate, owner occupied		5,836		203
Commercial real estate, other		6,114		175
Commercial Non Real Estate(2)
Commercial and Industrial		707		43
Total	$	16,311	$	473

(1)     Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

(2)     Only classes with impaired loans are shown.

	Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2013
	Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction(2)
Construction, residential	$	40	$	---
Construction, other		2,885		---
Consumer Real Estate(2)
Residential closed-end first liens		364		3
Residential closed-end junior liens		280		9
Investor-owned residential real estate		131		6
Commercial Real Estate(2)
Multifamily real estate		4,172		---
Commercial real estate, owner occupied		5,265		136
Commercial real estate, other		3,369		110
Commercial Non Real Estate(2)
Commercial and Industrial		117		3
Consumer Non Real Estate(2)
Automobile		31		---
Total	$	16,654	$	267

(1) Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

(2) Only classes with impaired loans are shown.

	Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2012
	Average Recorded Investment(1)		Interest Income Recognized
Real Estate Construction(2)
Construction, residential	$	1,171		---
Construction, other		4,290		1
Consumer Real Estate(2)
Equity lines		101		---
Residential closed-end first liens		873		2
Residential closed-end junior liens		234		---
Commercial Real Estate(2)
Multifamily real estate		1,466		5
Commercial real estate, owner occupied		4,806		1
Commercial Non Real Estate(2)
Commercial and Industrial		570		---
Consumer Non Real Estate(2)
Automobile		4		---
Other consumer		25		---
Total	$	13,540	$	9

(1) Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.

(2) Only classes with impaired loans are shown.

An analysis of past due and nonaccrual loans follows:

December 31, 2014
	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	---	$	---	$	---
Construction, other		28		---		---		---
Consumer Real Estate
Equity lines		25		---		---		---
Residential closed-end first liens		719		185		80		105
Residential closed-end junior liens		74		1		1		---
Investor-owned residential real estate		336		45		---		59
Commercial Real Estate
Multifamily real estate		850		868		---		2,735
Commercial real estate, owner occupied		---		1,066		102		2,573
Commercial real estate, other		---		70		---		3,066
Commercial Non Real Estate
Commercial and Industrial		153		43		---		749
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		3		4		4		---
Automobile		205		20		20		---
Other consumer loans		54		---		---		---
Total	$	2,447	$	2,302	$	207	$	9,287

December 31, 2013
	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	45	$	---	$	---	$	---
Construction, other		45		---		---		---
Consumer Real Estate
Equity lines		---		---		---		---
Residential closed-end first liens		903		252		128		308
Residential closed-end junior liens		10		---		---		---
Investor-owned residential real estate		422		91		---		91
Commercial Real Estate
Multifamily real estate		430		3,278		---		3,278
Commercial real estate, owner occupied		604		2,519		---		2,756
Commercial real estate, other		32		---		---		---
Commercial Non Real Estate
Commercial and Industrial		196		43		---		128
Public Sector and IDA
Public sector and IDA		---		---		---		---
Consumer Non Real Estate
Credit cards		3		13		13		---
Automobile		217		26		2		23
Other consumer loans		49		46		47		---
Total	$	2,956	$	6,268	$	190	$	6,584

The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk.

Credit quality indicators, which the Company terms risk grades, are assigned through the Company’s credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do not indicate heightened risk are graded as “pass.” Loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than 75 days, or that show weakness in the borrower’s financial condition are risk graded “special mention.” Loans with frequent or persistent delinquency exceeding 75 days or that have a higher level of weakness in the borrower’s financial condition are graded “classified.” Classified loans have regulatory risk ratings of “substandard” and “doubtful.” Allocations are increased by 50% and by 100% for loans with grades of “special mention” and “classified,” respectively.

Determination of risk grades was completed for the portfolio as of December 31, 2014, 2013 and 2012.

The following displays non-impaired gross loans by credit quality indicator:

December 31, 2014
	Pass		Special Mention (Excluding Impaired)		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	14,222	$	---	$	2,265
Construction, other		29,047		---		28
Consumer Real Estate
Equity lines		15,861		59		60
Closed-end first liens		78,806		1,566		1,412
Closed-end junior liens		4,258		21		95
Investor-owned residential real estate		42,781		688		614
Commercial Real Estate
Multifamily residential real estate		73,611		1,397		850
Commercial real estate owner-occupied		125,643		202		2,855
Commercial real estate, other		90,821		1,177		582
Commercial Non Real Estate
Commercial and Industrial		31,247		97		1,390
Public Sector and IDA
States and political subdivisions		41,361		---		---
Consumer Non Real Estate
Credit cards		5,705		---		---
Automobile		11,505		93		128
Other consumer		10,745		---		6
Total	$	575,613	$	5,300	$	10,285

December 31, 2013
	Pass		Special Mention (Excluding Impaired)		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	17,702	$	163	$	45
Construction, other		27,971		29		15
Consumer Real Estate
Equity lines		16,146		16		---
Closed-end first liens		82,767		1,007		1,275
Closed-end junior liens		4,813		109		3
Investor-owned residential real estate		38,071		105		407
Commercial Real Estate
Multifamily residential real estate		67,573		---		958
Commercial real estate owner-occupied		134,137		2,206		701
Commercial real estate, other		89,340		1,209		3,063
Commercial Non Real Estate
Commercial and Industrial		29,987		878		295
Public Sector and IDA
States and political subdivisions		24,220		---		---
Consumer Non Real Estate
Credit cards		6,354		---		---
Automobile		11,428		253		34
Other consumer		10,253		17		60
Total	$	570,762	$	5,992	$	6,856

Sales, Purchases and Reclassification of Loans

The Company finances mortgages under “best efforts” contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been no major reclassifications from portfolio loans to held for sale. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company’s normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied.

Troubled Debt Restructurings

From time to time the Company modifies loans in troubled debt restructurings (“TDRs”). The following tables present restructurings by class that occurred during the years ended December 31, 2014 and 2013.

Note: Only classes with restructured loans are presented.

	Restructurings that occurred during the year ended December 31, 2014
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment(1)
Consumer Real Estate
Closed-end first liens		1	$	126	$	143
Commercial Real Estate
Multifamily residential real estate		1		2,484		2,484
Commercial real estate owner-occupied		1		184		208
Commercial real estate non owner-occupied		2		2,967		3,008
Total		5	$	5,761	$	5,843

(1) Post-modification outstanding recorded investment considers amounts immediately following the modification. Amounts do not reflect balances at the end of the period.

	Restructurings that occurred during the year ended December 31, 2013
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment(1)
Consumer Real Estate
Closed-end first liens		2	$	453	$	525
Closed-end junior liens		1		262		267
Commercial Real Estate
Commercial real estate owner-occupied		1		154		239
Commercial real estate non owner-occupied		1		3,500		3,500
Commercial Non Real Estate
Commercial and Industrial		1		32		45
Total		6	$	4,401	$	4,576

(1) Post-modification outstanding recorded investment considers amounts immediately following the modification. Amounts do not reflect balances at the end of the period.

During the year ended December 31, 2014, the Company modified five loans in troubled debt restructurings. Each restructuring provided payment relief to the borrower without forgiveness of principal or accrued interest. Each restructuring included a reduction in interest rates. Interest was capitalized at time of restructuring on the residential real estate loan, commercial real estate owner occupied loan, and the two commercial real estate non-owner occupied loans. The multifamily real estate loan, commercial real estate owner occupied loan and residential real estate loan received re-amortization of payments over a longer term. Two commercial real estate non owner occupied loans received a change in payment structure from amortizing to one year of interest-only payments. Each of the loans restructured in 2014 are designated nonaccrual, with the exception of the residential real estate loan which met the criteria for accrual status. The fair value measurements of the restructured loans as of December 31, 2014 resulted in specific allocations to the allowance for loan losses totaling $206.

The modifications that resulted in troubled debt restructurings between January 1, 2013 and December 31, 2013 provided payment relief to the borrowers without forgiveness of principal or accrued interest. The date of conversion from interest-only to amortizing payments for one commercial real estate loan was extended beyond the date specified by the contract, resulting in designation as a troubled debt restructuring. During the second quarter of 2013, the loan was converted to amortizing payments. The other commercial real estate loan was modified to extend the term, lower the interest rate and provide debt consolidation to allow the borrower increased debt service ability. Two modifications to consumer real estate loans capitalized accrued interest and reduced interest rates, while the other modification did not reduce the interest rate and shifted payments from interest-only to amortizing. One commercial non-real estate loan was modified to reduce the interest rate, capitalize interest and shift payments from interest-only to amortizing.

Restructured loans are designated impaired and measured for impairment. The impairment measurement for restructured loans that occurred in 2014 resulted in an accrual to the allowance for loan losses of $206 at December 31, 2014. Restructurings in 2013 resulted in an accrual to the allowance for loan losses of $11 at December 31, 2013.

Of the Company’s TDR’s that defaulted in 2014, none were modified within 12 months prior to default. The following table presents restructured loans that defaulted in 2013 and that were modified 12 months prior to default. The company defines default as one or more payments that occur more than 90 days past the due date, charge-off or foreclosure subsequent to modification.

Restructurings that defaulted during the year ended December 31, 2013 that were modified within 12 months prior to default
	Number of Contracts		Recorded Investment(1)
Consumer Real Estate
Closed-end first liens		1	$	24
Closed-end junior liens		1		81
Commercial Real Estate
Commercial real estate owner occupied		2		834
Commercial Non Real Estate
Commercial and industrial		1		388
Total		5	$	1,327

(1) Recorded investment at the time the default occurred.

Of the TDRs that defaulted during 2013, 5 became TDRs within 12 months prior to default. One commercial real estate loan became past due and the collateral was foreclosed and placed into other real estate at the loan balance of $193. The collateral's fair value less selling costs was sufficient to cover the principal balance of the loan and no charge against the allowance for loan losses was required. One consumer real estate loan and one commercial non-real estate loan became past due and the underlying collateral was sold, with a resulting charge to the allowance for loan losses of $263. Two of the TDR loans remain in the loan portfolio. One consumer real estate loan became past due and impairment measurements required a $71 charge against the allowance for loan losses, while one commercial real estate loan became past due and impairment measurements indicated a specific allocation of $349 to the allowance for loan losses.