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Loans Receivable, Net
9 Months Ended
Sep. 30, 2015
Loans Receivable, Net [Abstract]  
Financing Receivables [Text Block]
Loans Receivable, Net

Loans receivable, net, consisted of the following as of the dates shown:
 
September 30, 2015
 
December 31, 2014
Residential Real Estate Loans
$
77,915,013

 
$
77,282,817

Consumer Loans
50,800,750

 
50,391,224

Commercial Business Loans
8,974,570

 
10,564,467

Commercial Real Estate Loans
192,672,048

 
209,530,209

Total Loans Held For Investment
330,362,381

 
347,768,717

Loans Held For Sale
1,518,631

 
1,864,999

Total Loans Receivable, Gross
331,881,012

 
349,633,716

Less:
 
 
 
Allowance For Loan Losses
7,935,023

 
8,357,496

Loans In Process
4,153,996

 
1,379,114

Deferred Loan Fees
37,259

 
22,611

 
12,126,278

 
9,759,221

Total Loans Receivable, Net
$
319,754,734

 
$
339,874,495



Changes in the allowance for loan losses for the three and nine months ended September 30, 2015 and 2014 are summarized as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Balance At Beginning Of Period
$
7,795,582

 
$
9,112,157

 
$
8,357,496

 
$
10,241,970

Provision For Loan Losses
(200,000
)
 

 
(100,000
)
 
200,000

Charge Offs
(441,398
)
 
(590,942
)
 
(1,338,358
)
 
(2,384,994
)
Recoveries
780,839

 
125,759

 
1,015,885

 
589,998

Total Allowance For Loan Losses
$
7,935,023

 
$
8,646,974

 
$
7,935,023

 
$
8,646,974



The Company uses a risk based approach based on the following credit quality measures when analyzing the loan portfolio: pass, caution, special mention, and substandard. These indicators are used to rate the credit quality of loans for the purposes of determining the Company’s allowance for loan losses. Pass loans are loans that are performing and are deemed adequately protected by the net worth of the borrower or the underlying collateral value. These loans are considered to have the least amount of risk in terms of determining the allowance for loan losses. Loans that are graded as substandard are considered to have the most risk. These loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value. All loans 90 days or more past due are automatically classified in this category. The caution and special mention categories fall in between the pass and substandard grades and consist of loans that do not currently expose the Company to sufficient risk to warrant adverse classification but possess weaknesses.


8.    Loans Receivable, Net, Continued

The following tables list the loan grades used by the Company as credit quality indicators and the balance in each category at the dates presented, excluding loans held for sale.
 
Credit Quality Measures
September 30, 2015
 
Pass
 
 
Caution
 
Special
Mention
 
 
Substandard
 
 
Total Loans
Residential Real Estate
$
69,246,501

 
$
1,140,421

 
$
514,567

 
$
7,013,524

 
$
77,915,013

Consumer
47,428,417

 
1,868,970

 
124,082

 
1,379,281

 
50,800,750

Commercial Business
7,717,250

 
689,421

 
119,000

 
448,899

 
8,974,570

Commercial Real Estate
119,340,093

 
44,502,378

 
18,993,244

 
9,836,333

 
192,672,048

Total
$
243,732,261

 
$
48,201,190

 
$
19,750,893

 
$
18,678,037

 
$
330,362,381


 
Credit Quality Measures
December 31, 2014
 
Pass
 
 
Caution
 
Special
Mention
 
 
Substandard
 
 
Total Loans
Residential Real Estate
$
69,163,911

 
$
956,976

 
$
639,638

 
$
6,522,292

 
$
77,282,817

Consumer
48,283,560

 
1,046,624

 
128,033

 
933,007

 
50,391,224

Commercial Business
9,691,685

 
340,706

 
202,895

 
329,181

 
10,564,467

Commercial Real Estate
125,339,273

 
32,549,335

 
35,169,358

 
16,472,243

 
209,530,209

Total
$
252,478,429

 
$
34,893,641

 
$
36,139,924

 
$
24,256,723

 
$
347,768,717




The following tables present an age analysis of past due balances by category at September 30, 2015 and December 31, 2014:
September 30, 2015
 
30-59 Days
Past Due
 
 
60-89 Days
Past Due
 
90 Days or
More Past Due
 
 
Total Past
Due
 
 
 
Current
 
 
Total Loans
Receivable
Residential
   Real Estate
$

 
$
1,156,451

 
$
3,376,784

 
$
4,533,235

 
$
73,381,778

 
$
77,915,013

Consumer
745,482

 
91,814

 
410,509

 
1,247,805

 
49,552,945

 
50,800,750

Commercial
   Business
320,363

 

 
165,401

 
485,764

 
8,488,806

 
8,974,570

Commercial
   Real Estate
3,036,311

 
989,012

 
3,619,661

 
7,644,984

 
185,027,064

 
192,672,048

Total
$
4,102,156

 
$
2,237,277

 
$
7,572,355

 
$
13,911,788

 
$
316,450,593

 
$
330,362,381


December 31, 2014
 
30-59 Days
Past Due
 
 
60-89 Days
Past Due
 
90 Days or
More Past
Due
 
 
Total Past
Due
 
 
 
Current
 
 
Total Loans
Receivable
Residential
   Real Estate
$

 
$
1,087,299

 
$
3,061,339

 
$
4,148,638

 
$
73,134,179

 
$
77,282,817

Consumer
1,868,787

 
91,223

 
573,644

 
2,533,654

 
47,857,570

 
50,391,224

Commercial
   Business
162,481

 
99,784

 
246,977

 
509,242

 
10,055,225

 
10,564,467

Commercial
   Real Estate
4,544,813

 
1,094,701

 
9,859,689

 
15,499,203

 
194,031,006

 
209,530,209

Total
$
6,576,081

 
$
2,373,007

 
$
13,741,649

 
$
22,690,737

 
$
325,077,980

 
$
347,768,717

8.    Loans Receivable, Net, Continued

At September 30, 2015 and December 31, 2014, the Company did not have any loans that were 90 days or more past due and still accruing interest. Our strategy is to work with our borrowers to reach acceptable payment plans while protecting our interests in the existing collateral.  In the event an acceptable arrangement cannot be reached, we may have to acquire these properties through foreclosure or other means and subsequently sell, develop, or liquidate them.

The following table shows non-accrual loans by category at September 30, 2015 compared to December 31, 2014:
 
At September 30, 2015
 
At December 31, 2014
 
Increase (Decrease)
 
Amount
 
Percent (1)
 
Amount
 
Percent (1)
 
Amount
 
%
Non-accrual Loans:
 
 
 
 
 
 
 
 
 
 
 
Residential Real Estate
$
3,376,784

 
1.04
%
 
$
3,061,339

 
0.90
%
 
$
315,445

 
10.3
 %
Commercial Business
165,401

 
0.05

 
246,977

 
0.10

 
(81,576
)
 
(33.0
)
Commercial Real Estate
3,619,661

 
1.11

 
9,859,689

 
2.80

 
(6,240,028
)
 
(63.3
)
Consumer
410,509

 
0.13

 
573,644

 
0.20

 
(163,135
)
 
(28.4
)
Total Non-accrual Loans
$
7,572,355

 
2.33
%
 
$
13,741,649

 
4.00
%
 
$
(6,169,294
)
 
(44.9
)%

(1) PERCENT OF TOTAL LOANS HELD FOR INVESTMENT, NET OF DEFERRED FEES AND LOANS IN PROCESS. 

The following tables show the activity in the allowance for loan losses by category for the periods indicated:
 
 
For the Three Months Ended September 30, 2015
 
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
 
$
1,310,078

 
$
1,007,984

 
$
747,067

 
$
4,730,453

 
$
7,795,582

Provision
 
142,917

 
199,719

 
4,565

 
(547,201
)
 
(200,000
)
Charge-Offs
 
(59,996
)
 
(77,720
)
 

 
(303,682
)
 
(441,398
)
Recoveries
 
782

 
26,783

 
564

 
752,710

 
780,839

Ending Balance
 
$
1,393,781

 
$
1,156,766

 
$
752,196

 
$
4,632,280

 
$
7,935,023


 
 
For the Nine Months Ended September 30, 2015
 
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
 
$
1,392,065

 
$
886,716

 
$
159,353

 
$
5,919,362

 
$
8,357,496

Provision
 
106,079

 
656,424

 
595,906

 
(1,458,409
)
 
(100,000
)
Charge-Offs
 
(105,912
)
 
(471,345
)
 
(10,947
)
 
(750,154
)
 
(1,338,358
)
Recoveries
 
1,549

 
84,971

 
7,884

 
921,481

 
1,015,885

Ending Balance
 
$
1,393,781

 
$
1,156,766

 
$
752,196

 
$
4,632,280

 
$
7,935,023


8.    Loans Receivable, Net, Continued
 
 
For the Three Months Ended September 30, 2014
 
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
 
$
1,507,281

 
$
833,746

 
$
496,578

 
$
6,274,552

 
$
9,112,157

Provision
 
26,596

 
73,403

 
36,529

 
(136,528
)
 

Charge-Offs
 
(71,701
)
 
(75,262
)
 
(3,703
)
 
(440,276
)
 
(590,942
)
Recoveries
 
121

 
8,440

 
1,950

 
115,248

 
125,759

Ending Balance
 
$
1,462,297

 
$
840,327

 
$
531,354

 
$
5,812,996

 
$
8,646,974


 
 
For the Nine Months Ended September 30, 2014
 
 
Residential
Real Estate
 
 
Consumer
 
Commercial
Business
 
Commercial
Real Estate
 
 
Total
Beginning Balance
 
$
1,706,643

 
$
847,777

 
$
426,658

 
$
7,260,892

 
$
10,241,970

Provision
 
(60,716
)
 
230,236

 
104,527

 
(74,047
)
 
200,000

Charge-Offs
 
(319,364
)
 
(283,302
)
 
(20,835
)
 
(1,761,493
)
 
(2,384,994
)
Recoveries
 
135,734

 
45,616

 
21,004

 
387,644

 
589,998

Ending Balance
 
$
1,462,297

 
$
840,327

 
$
531,354

 
$
5,812,996

 
$
8,646,974


The following tables present information related to impaired loans evaluated individually and collectively for impairment in the allowance for loan losses at the dates indicated:
 
 
Allowance For Loan Losses
September 30, 2015
 
Individually Evaluated For
Impairment
 
Collectively Evaluated For
Impairment
 
 
Total
Residential Real Estate
 
$

 
$
1,393,781

 
$
1,393,781

Consumer
 
10,600

 
1,146,166

 
1,156,766

Commercial Business
 

 
752,196

 
752,196

Commercial Real Estate
 
29,300

 
4,602,980

 
4,632,280

Total
 
$
39,900

 
$
7,895,123

 
$
7,935,023


 
 
Allowance For Loan Losses
December 31, 2014
 
Individually Evaluated For
Impairment
 
Collectively Evaluated For
Impairment
 
 
Total
Residential Real Estate
 
$

 
$
1,392,065

 
$
1,392,065

Consumer
 
2,600

 
884,116

 
886,716

Commercial Business
 

 
159,353

 
159,353

Commercial Real Estate
 
472,400

 
5,446,962

 
5,919,362

Total
 
$
475,000

 
$
7,882,496

 
$
8,357,496



8.    Loans Receivable, Net, Continued

The following tables present information related to impaired loans evaluated individually and collectively for impairment in loans receivable at the dates indicated:
 
 
Loans Receivable
September 30, 2015
 
Individually Evaluated For
Impairment
 
Collectively Evaluated For
Impairment
 
 
Total
Residential Real Estate
 
$
3,043,675

 
$
74,871,338

 
$
77,915,013

Consumer
 
196,335

 
50,604,415

 
50,800,750

Commercial Business
 
165,401

 
8,809,169

 
8,974,570

Commercial Real Estate
 
10,478,577

 
182,193,471

 
192,672,048

Total
 
$
13,883,988

 
$
316,478,393

 
$
330,362,381

 
 
Loans Receivable
December 31, 2014
 
Individually Evaluated For
Impairment
 
Collectively Evaluated For
Impairment
 
 
Total
Residential Real Estate
 
$
2,519,814

 
$
74,763,003

 
$
77,282,817

Consumer
 
218,232

 
50,172,992

 
50,391,224

Commercial Business
 
236,030

 
10,328,437

 
10,564,467

Commercial Real Estate
 
17,273,879

 
192,256,330

 
209,530,209

Total
 
$
20,247,955

 
$
327,520,762

 
$
347,768,717



Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired management measures impairment and records the loan at fair value. Fair value is estimated using one of the following methods: fair value of the collateral less estimated costs to sale, discounted cash flows, or market value of the loan based on similar debt. The fair value of the collateral less estimated costs to sell is the most frequently used method. Typically, the Company reviews the most recent appraisal and if it is over 24 months old will request a new third party appraisal. Depending on the particular circumstances surrounding the loan, including the location of the collateral, the date of the most recent appraisal and the value of the collateral relative to the recorded investment in the loan, management may order an independent appraisal immediately or, in some instances, may elect to perform an internal analysis. The average balance of impaired loans was $14.1 million for the three months ended September 30, 2015 compared to $21.2 million for the three months ended September 30, 2014.

8.    Loans Receivable, Net, Continued

The following tables are a summary of information related to impaired loans at September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014.
 
 
 
 
At
 
 
 
At
 
 
September 30, 2015
 
December 31, 2014
Impaired Loans
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
 
Related
Allowance
With No Related Allowance Recorded:
 
 
 
 
 
 
 
 
 
 
 
 
Residential Real Estate
 
$
3,043,675

 
$
3,182,805

 
$

 
$
2,519,814

 
$
2,618,003

 
$

Consumer
 
96,530

 
105,030

 

 
152,029

 
159,529

 

Commercial Business
 
165,401

 
365,401

 

 
236,030

 
436,030

 

Commercial Real Estate
 
10,027,121

 
12,809,652

 

 
13,721,964

 
18,088,149

 

With An Allowance Recorded:
 
 
 
 
 
 
 
 
 
 
 
 
Residential Real Estate
 

 

 

 

 

 

Consumer
 
99,805

 
99,805

 
10,600

 
66,203

 
66,203

 
2,600

Commercial Business
 

 

 

 

 

 

Commercial Real Estate
 
451,456

 
458,256

 
29,300

 
3,551,915

 
3,582,465

 
472,400

Total
 
 
 
 
 
 
 
 
 
 
 
 
Residential Real Estate
 
3,043,675

 
3,182,805

 

 
2,519,814

 
2,618,003

 

Consumer
 
196,335

 
204,835

 
10,600

 
218,232

 
225,732

 
2,600

Commercial Business
 
165,401

 
365,401

 

 
236,030

 
436,030

 

Commercial Real Estate
 
10,478,577

 
13,267,908

 
29,300

 
17,273,879

 
21,670,614

 
472,400

Total
 
$
13,883,988

 
$
17,020,949

 
$
39,900

 
$
20,247,955

 
$
24,950,379

 
$
475,000

























8.    Loans Receivable, Net, Continued

 
 
For the Three Months Ended September 30,
 
 
2015
 
2014
Impaired Loans
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With No Related Allowance Recorded:
 
 
 
 
 
 
 
 
Residential Real Estate
 
$
3,084,808

 
$

 
$
2,618,971

 
$

Consumer
 
97,894

 

 
161,882

 

Commercial Business
 
170,601

 

 
16,089

 

Commercial Real Estate
 
10,168,004

 
71,766

 
16,726,235

 
98,542

With An Allowance Recorded:
 
 
 
 
 
 
 
 
Residential Real Estate
 

 

 

 

Consumer
 
100,743

 
1,201

 
67,239

 
2,082

Commercial Business
 

 

 
458,059

 

Commercial Real Estate
 
452,393

 
2,303

 
1,159,433

 
22,781

Total
 
 
 
 
 
 
 
 
Residential Real Estate
 
3,084,808

 

 
2,618,971

 

Consumer
 
198,637

 
1,201

 
229,121

 
2,082

Commercial Business
 
170,601

 

 
474,148

 

Commercial Real Estate
 
10,620,397

 
74,069

 
17,885,668

 
121,323

Total
 
$
14,074,443

 
$
75,270

 
$
21,207,908

 
$
123,405


 
 
For the Nine Months Ended September 30,
 
 
2015
 
2014
Impaired Loans
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With No Related Allowance Recorded:
 
 
 
 
 
 
 
 
Residential Real Estate
 
$
3,132,323

 
$
8,477

 
$
2,676,070

 
$

Consumer
 
100,937

 
247

 
171,364

 

Commercial Business
 
198,430

 

 
16,089

 

Commercial Real Estate
 
10,510,256

 
246,219

 
18,142,478

 
266,000

With An Allowance Recorded:
 
 
 
 
 
 
 
 
Residential Real Estate
 

 

 

 

Consumer
 
101,435

 
3,615

 
67,872

 
4,168

Commercial Business
 

 

 
461,206

 

Commercial Real Estate
 
456,982

 
15,919

 
1,173,816

 
51,156

Total
 
 
 
 
 
 
 
 
Residential Real Estate
 
3,132,323

 
8,477

 
2,676,070

 

Consumer
 
202,372

 
3,862

 
239,236

 
4,168

Commercial Business
 
198,430

 

 
477,295

 

Commercial Real Estate
 
10,967,238

 
262,138

 
19,316,294

 
317,156

Total
 
$
14,500,363

 
$
274,477

 
$
22,708,895

 
$
321,324

8.    Loans Receivable, Net, Continued

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. A troubled debt restructuring ("TDR") is a restructuring in which the Bank, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that it would not otherwise consider (Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 310-40).  The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation. The Bank grants such concessions to reassess the borrower’s financial status and develop a plan for repayment.  TDRs of $8.1 million and $9.6 million were included in impaired loans at September 30, 2015 and December 31, 2014, respectively.

Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of concession are initially classified as accruing TDRs if the note is reasonably assured of repayment and performance is expected in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the concession date if reasonable doubt exists as to the collection of interest or principal under the restructuring agreement. Nonaccrual TDRs are returned to accruing status when there is economic substance to the restructuring, there is documented credit evaluation of the borrower's financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally a minimum of six months).

The following table is a summary of loans restructured as TDRs during the periods indicated:
 
 
For the Three Months Ended September 30,
 
 
2015
 
2014
Troubled Debt Restructurings
 
 
 
Number of
Contracts
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
 
 
 
Number of
Contracts
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
Residential Real Estate
 

 
$

 
$

 

 
$

 
$

Consumer
 
1

 
36,460

 
36,460

 

 

 

Commercial Business
 

 

 

 

 

 

Commercial Real Estate
 
2

 
32,411

 
32,411

 

 

 

Total
 
3

 
$
68,871

 
$
68,871

 

 
$

 
$


 
 
For the Nine Months Ended September 30,
 
 
2015
 
2014
Troubled Debt Restructurings
 
 
 
Number of
Contracts
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
 
 
 
Number of
Contracts
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
Residential Real Estate
 

 
$

 
$

 

 
$

 
$

Consumer
 
1

 
36,460

 
36,460

 

 

 

Commercial Business
 

 

 

 

 

 

Commercial Real Estate
 
5

 
872,703

 
872,703

 
1

 
79,072

 
79,072

Total
 
6

 
$
909,163

 
$
909,163

 
1

 
$
79,072

 
$
79,072


During the nine months ended September 30, 2015, the Bank modified six loans as TDRs, three of which were modified during the three months ended September 30, 2015. The Bank lowered the interest rate on two of the loans to allow the borrowers to begin making monthly principal and interest payments on the loans and changed the monthly payment to an interest only payment for an agreed upon period for the other four loans.


8.    Loans Receivable, Net, Continued

There were no loans modified as a TDR during the three months ended September 30, 2014. During the nine months ended September 30, 2014, the Bank modified one loan as a TDR by lowering the interest rate. This modification allowed the borrower to begin making monthly principal and interest payments on the loan.

At September 30, 2015, three loans totaling $684,000 that had previously been restructured were in default. Two of the loans, with a combined outstanding balance of $555,000, defaulted during the nine month period ended September 30, 2015. In comparison, at September 30, 2014, five loans totaling $2.2 million that had previously been restructured were in default, all of which defaulted during the nine month period September 30, 2014. One loan that had been previously restructured within the last twelve months defaulted during the nine months ended September 30, 2015. The Bank considers any loan 30 days or more past due to be in default.

Our policy with respect to accrual of interest on loans restructured as a TDR follows relevant supervisory guidance.  That is, if a borrower has demonstrated performance under the original loan terms and shows the capacity to perform under the restructured loan terms, interest will continue to be accrued at the restructured interest rate.  If a borrower was materially delinquent on payments prior to the restructuring of the loan but shows the capacity to meet the restructured loan terms, the loan will likely continue as nonaccrual going forward.  Lastly, if the borrower does not perform under the restructured terms, the loan is placed on nonaccrual status.

We closely monitor these loans and will cease accruing interest on them if management believes that the borrowers may not continue performing based on the restructured note terms.  If, after previously being classified as a TDR, a loan is restructured a second time, then that loan is automatically placed on nonaccrual status.  Our policy with respect to nonperforming loans requires the borrower to make a minimum of six consecutive payments in accordance with the modified loan terms before that loan can be placed back on accrual status.  Further, the borrower must show capacity to continue performing into the future prior to restoration of accrual status.