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EX-31.2 - EXHIBIT 31.2 - Village Bank & Trust Financial Corp.v417006_ex31-2.htm
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EX-32.1 - EXHIBIT 32.1 - Village Bank & Trust Financial Corp.v417006_ex32-1.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

__________

 

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2015

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______ to ______

 

__________

 

Commission file number: 0-50765

 

VILLAGE BANK AND TRUST FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

 

Virginia 16-1694602
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
   
13319 Midlothian Turnpike, Midlothian, Virginia 23113
(Address of principal executive offices) (Zip code)

 

804-897-3900

(Registrant’s telephone number, including area code)

 

Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ¨ Accelerated Filer ¨
Non-Accelerated Filer ¨  (Do not check if smaller reporting company) Smaller Reporting Company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

1,412,897 shares of common stock, $4.00 par value, outstanding as of July 27, 2015

 

 

 

 

Village Bank and Trust Financial Corp. and Subsidiary

Form 10-Q

 

TABLE OF CONTENTS

 

Part I – Financial Information  
   
Item 1.  Financial Statements  
   
Consolidated Balance Sheets June 30, 2015 (unaudited) and December 31, 2014 3
   
Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2015 and 2014 (unaudited) 4
   
Consolidated Statements of Changes in Comprehensive Income For the Three and Six Months Ended June 30, 2015 and 2014 (unaudited) 5
   
Consolidated Statements of Shareholders’ Equity For the Six Months Ended June 30, 2015 and 2014 (unaudited) 6
   
Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2015 and 2014 (unaudited) 7
   
Notes to Consolidated Financial Statements (unaudited) 8
   
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 40
   
Item 3.  Quantitative and Qualitative Disclosures About Market Risk 62
   
Item 4. Controls and Procedures 62
   
Part II – Other Information  
   
Item 1.  Legal Proceedings 63
   
Item 1A. Risk Factors 63
   
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 63
   
Item 3.  Defaults Upon Senior Securities 63
   
Item 4.  Mine Safety Disclosures 63
   
Item 5.  Other Information 63
   
Item 6.  Exhibits 64
   
Signatures 65

 

2 

 

 

Part I – Financial Information

 

ITEM 1 – FINANCIAL STATEMENTS

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Balance Sheets
June 30, 2015 (Unaudited) and December 31, 2014
(dollars in thousands)

 

   June 30,   December 31, 
   2015   2014 
Assets          
Cash and due from banks  $15,796   $25,115 
Federal funds sold   4,174    23,988 
Total cash and cash equivalents   19,970    49,103 
Investment securities available for sale   39,420    39,542 
Loans held for sale   20,662    9,914 
Loans          
Outstandings   301,629    286,146 
Allowance for loan losses   (5,567)   (5,729)
Deferred fees and costs   1,060    722 
    297,122    281,139 
Other real estate owned, net of valuation allowance   8,605    12,638 
Assets held for sale   13,711    13,502 
Premises and equipment, net   13,718    14,301 
Bank owned life insurance   7,038    6,947 
Accrued interest receivable   2,041    1,372 
Other assets   5,779    5,546 
           
   $428,066   $434,004 
           
Liabilities and Shareholders' Equity          
Liabilities          
Deposits          
Noninterest bearing demand  $74,482   $77,496 
Interest bearing   295,929    301,364 
Total deposits   370,411    378,860 
Federal Home Loan Bank advances   7,000    14,000 
Long-term debt - trust preferred securities   8,764    8,764 
Other borrowings   3,657    3,302 
Accrued interest payable   1,254    1,167 
Other liabilities   7,078    8,853 
Total liabilities   398,164    414,946 
           
Shareholders' equity          
Preferred stock, $4 par value, $1,000 liquidation preference,1,000,000 shares authorized; 5,715 shares issued and outstanding at June 30, 2015, 14,738 shares issued and oustanding at December 31, 2014   23    59 
Common stock, $4 par value, 10,000,000 shares authorized; 1,403,647 shares issued and outstanding at June 30, 2015 350,622 shares issued and outstanding at December 31, 2014   5,553    1,339 
Additional paid-in capital   58,417    58,188 
Accumulated deficit   (34,171)   (40,539)
Common stock warrant   732    732 
Stock in directors rabbi trust   (1,034)   (878)
Directors deferred fees obligation   1,034    878 
Accumulated other comprehensive loss   (652)   (721)
Total shareholders' equity   29,902    19,058 
           
   $428,066   $434,004 

 

See accompanying notes to consolidated financial statements.

 

3 

 

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2015 and 2014
(Unaudited)
(dollars in thousands, except per share amounts)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2015   2014   2015   2014 
Interest income                    
Loans  $3,692   $3,795   $7,316   $7,766 
Investment securities   154    322    309    654 
Federal funds sold   18    25    36    44 
Total interest income   3,864    4,142    7,661    8,464 
                     
Interest expense                    
Deposits   620    767    1,256    1,553 
Borrowed funds   103    138    225    300 
Total interest expense   723    905    1,481    1,853 
                     
Net interest income   3,141    3,237    6,180    6,611 
Provision for loan losses   -    -    -    100 
Net interest income after provision for loan losses   3,141    3,237    6,180    6,511 
                     
Noninterest income                    
Service charges and fees   683    601    1,275    1,084 
Gain on sale of loans   1,728    1,352    2,957    2,163 
Gain on sale of assets   -    3    -    3 
Gain on sale of investment securities   -    1    7    1 
Rental income   250    250    490    506 
Other   75    112    177    236 
Total noninterest income   2,736    2,319    4,906    3,993 
                     
Noninterest expense                    
Salaries and benefits   2,711    2,679    5,379    5,449 
Commissions   443    347    735    569 
Occupancy   409    393    887    875 
Equipment   212    174    398    380 
Write down of assets held for sale   687    -    687    - 
Supplies   65    78    134    166 
Professional and outside services   649    642    1,296    1,281 
Advertising and marketing   101    56    173    139 
Loss (gain) on sale and write down of OREO, net   (218)   404    (86)   687 
Other operating expense   734    816    1,404    1,648 
Total noninterest expense   5,793    5,589    11,007    11,194 
                     
Net income (loss) before income tax expense (benefit)   84    (33)   79    (690)
Income tax expense (benefit)   -    -    -    - 
                     
Net income (loss)   84    (33)   79    (690)
                     
Preferred stock dividends and amortization of discount   (167)   (347)   (330)   (661)
Preferred stock principal forgiveness   -    -    4,404    - 
Preferred stock dividend forgiveness   -    -    2,215    - 
Income (loss) available to common shareholders  $(83)  $(380)  $6,368   $(1,351)
                     
Earnings (loss) per share, basic  $(0.06)  $(1.14)  $7.00   $(4.04)
Earnings (loss) per share, diluted  $(0.06)  $(1.14)  $6.92   $(4.04)

 

See accompanying notes to consolidated financial statements.

 

4 

 

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Statements of Changes in Comprehensive Income (Loss)
Three and Six Months Ended June 30, 2015 and 2014
(Unaudited)
(dollars in thousands)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2015   2014   2015   2014 
                 
Net income (loss)  $84   $(33)  $79   $(690)
Other comprehensive income (loss)                    
Unrealized holding gains (losses) arising during the period   (551)   1,323    106    3,149 
Tax effect   (187)   450    37    1,070 
Net change in unrealized holding gains (losses) on securities available for sale, net of tax   (364)   873    69    2,079 
                     
Reclassification adjustment                    
Reclassification adjustment for gains realized in net income   -    (1)   (7)   (1)
Tax effect   -    -    (2)   - 
Reclassification for gains included in net income, net of tax   -    (1)   (5)   (1)
                     
Minimum pension adjustment   3    3    6    6 
Tax effect   1    1    2    2 
Minimum pension adjustment, net of tax   2    2    4    4 
                     
Total other comprehensive income (loss)   (362)   874    69    2,082 
                     
Total comprehensive income (loss)  $(278)  $841   $148   $1,392 

 

See accompanying notes to consolidated financial statements.

 

5 

 

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Statements of Shareholders' Equity
Six Months Ended June 30, 2015 and 2014
(Unaudited)
(dollars in thousands)

 

                               Directors         
           Additional           Discount on   Stock in   Deferred   Accumulated     
   Preferred   Common   Paid-in   Accumulated       Preferred   Directors   Fees   Other     
   Stock   Stock   Capital   Deficit   Warrant   Stock   Rabbi Trust   Obligation   loss   Total 
                                                   
Balance, December 31, 2014  $59   $1,339   $58,188   $(40,539)  $732   $-   $(878)  $878   $(721)  $19,058 
Preferred stock dividend   -    -    -    (330)   -    -    -    -    -    (330)
Restricted stock issuance   -    7    (85)   -    -    -    (156)   156    -    (78)
Issuance of common stock, net of offering expense of $1,200   -    2,875    5,842    -    -    -    -    -    -    8,717 
Preferred stock exchanged for commmon stock   (18)   1,332    (1,314)   -    -    -    -    -    -    - 
Preferred stock principal forgiveness   (18)   -    (4,386)   4,404    -    -    -    -    -    - 
Preferred stock dividend forgiveness   -    -    -    2,215    -    -    -    -    -    2,215 
Stock based compensation   -    -    172    -    -    -    -    -    -    172 
Minimum pension adjustment (net of income taxes of $1)   -    -    -    -    -    -    -    -    4    4 
Net income   -    -    -    79    -    -    -    -    -    79 
Change in unrealized gain (loss) on investment securities available-for-sale, net of reclassification and tax effect   -    -    -    -    -    -    -    -    65    65 
                                                   
Balance, June 30, 2015  $23   $5,553   $58,417   $(34,171)  $732   $-   $(1,034)  $1,034   $(652)  $29,902 
                                                   
Balance, December 31, 2013  $59   $21,353   $38,054   $(38,066)  $732   $(50)  $(878)  $878   $(3,838)  $18,244 
Amortization of preferred stock discount   -    -    -    (50)   -    50    -    -    -    - 
Preferred stock dividend   -    -    -    (611)   -    -    -    -    -    (611)
Stock based compensation   -    -    24    -    -    -    -    -    -    24 
Minimum pension adjustment (net of income taxes of $1)   -    -    -    -    -    -    -    -    4    4 
Net loss   -    -    -    (690)   -    -    -    -    -    (690)
Change in unrealized gain (loss) on investment securities available-for-sale, net of reclassification and tax effect   -    -    -    -    -    -    -    -    2,078    2,078 
                                                   
Balance, June 30, 2014  $59   $21,353   $38,078   $(39,417)  $732   $-   $(878)  $878   $(1,756)  $19,049 

 

See accompanying notes to consolidated financial statements.

 

6 

 

 

Village Bank and Trust Financial Corp. and Subsidiary
Consolidated Statements of Cash Flows
Six Months Ended June 30, 2015 and 2014
(Unaudited)
(dollars in thousands)

 

   2015   2014 
         
Cash Flows from Operating Activities          
Net income (loss)  $79   $(690)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Depreciation and amortization   445    325 
Deferred income taxes   52    (308)
Valuation allowance deferred income taxes   (52)   308 
Provision for loan losses   -    100 
Write-down of other real estate owned   158    369 
Valuation allowance other real estate owned   (293)   (429)
Write-down of assets held for sale   687    - 
Gain on securities sold   (7)   (1)
Gain on loans sold   (2,957)   (2,163)
(Gain) loss on sale and disposal of premises and equipment   12    (3)
Gain on sale of other real estate owned   (451)   (234)
Stock compensation expense   172    24 
Proceeds from sale of mortgage loans   101,559    79,367 
Origination of mortgage loans for sale   (109,350)   (81,022)
Amortization of premiums and accretion of discounts on securities, net   142    205 
Decrease (increase) in interest receivable   (669)   146 
Increase in bank owned life insurance   (91)   (91)
Increase in other assets   (822)   (656)
Increase in interest payable   87    244 
Increase in other liabilities   134    1,300 
Net cash used in operating activities   (11,165)   (3,209)
           
Cash Flows from Investing Activities          
Purchases of available for sale securities   (6,748)   - 
Proceeds from the sale or calls of available for sale securities   6,834    3,207 
Net decrease (increase) in loans   (15,970)   17,426 
Proceeds from sale of other real estate owned   4,606    5,663 
Purchases of premises and equipment   (561)   (898)
Proceeds from sale of premises and equipment   -    17 
Net cash (used in) provided by investing activities   (11,839)   25,415 
           
Cash Flows from Financing Activities          
Net proceeds from sale of common stock, net of expenses of $990   8,965    - 
Net increase (decrease) in deposits   (8,449)   (1,351)
Net decrease in Federal Home Loan Bank Advances   (7,000)   (3,000)
Net increase in other borrowings   355    (726)
Net cash (used in) provided by financing activities   (6,129)   (5,077)
           
Net increase (decrease) in cash and cash equivalents   (29,133)   17,129 
Cash and cash equivalents, beginning of period   49,103    40,209 
           
Cash and cash equivalents, end of period  $19,970   $57,338 
           
Supplemental Disclsoure of Cash Flow Information          
Cash payments for interest  $1,395   $1,496 
Supplemental Schedule of Non Cash Activities          
Real estate owned assets acquired in settlement of loans  $279   $4,931 
Assets moved to held for sale  $831   $- 
Dividends on preferred stock accrued  $330   $611 
Non-Cash conversion of preferred shares  $4,619   $- 
Forgiveness of principal and accrued dividends  $6,619   $- 

 

See accompanying notes to consolidated financial statements.

 

7 

 

 

Village Bank and Trust Financial Corp. and Subsidiary

Notes to Consolidated Financial Statements

Three and Six Months Ended June 30, 2015 and 2014

(Unaudited)

 

Note 1 - Principles of presentation

 

Village Bank and Trust Financial Corp. (the “Company”) is the holding company of Village Bank (the “Bank”). The consolidated financial statements include the accounts of the Company, the Bank and the Bank’s subsidiary. All material intercompany balances and transactions have been eliminated in consolidation.

 

On August 6, 2014, the Company filed Articles of Amendment to its Articles of Incorporation with the Virginia State Corporation Commission to effect a reverse stock split of its outstanding common stock which became effective on August 8, 2014. As a result of the reverse split, every sixteen shares of the Company’s issued and outstanding common stock were consolidated into one issued and outstanding share of common stock. The computations of basic and diluted earnings (loss) per share have been adjusted retroactively to reflect the reverse stock split.

 

In the opinion of management, the accompanying condensed consolidated financial statements of the Company have been prepared on the accrual basis in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, all adjustments that are, in the opinion of management, necessary for a fair presentation have been included. The results of operations for the six month period ended June 30, 2015 is not necessarily indicative of the results to be expected for the full year ending December 31, 2015. The unaudited interim financial statements should be read in conjunction with the audited financial statements and notes to financial statements that are presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the Securities and Exchange Commission (“SEC”).

 

The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2015 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued.

 

Note 2 - Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the balance sheets and statements of operations for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change include the determination of the allowance for loan losses and its related provision, the valuation allowance on the deferred tax asset, and the estimate of the fair value of assets held for sale.

 

8 

 

 

Note 3 - Earnings (loss) per common share

 

The following table presents the basic and diluted earnings (loss) per common share computation (in thousands, except per share data):

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2015   2014   2015   2014 
Numerator                    
Net income (loss) - basic and diluted  $84   $(33)  $79   $(690)
Preferred stock dividend and accretion   (167)   (347)   (330)   (661)
Preferred stock principal forgiveness   -    -    4,404    - 
Preferred stock dividend forgiveness   -    -    2,215    - 
Net income (loss) available to common shareholders  $(83)  $(380)  $6,368   $(1,351)
                     
Denominator                    
Weighted average shares outstanding - basic   1,388    334    909    334 
Dilutive effect of common stock options and restricted stock awards   -    -    11    - 
                     
Weighted average shares outstanding - diluted   1,388    334    920    334 
                     
Earnings (loss) per share - basic  $(0.06)  $(1.14)  $7.00   $(4.04)
Earnings (loss) per share - diluted  $(0.06)  $(1.14)  $6.92   $(4.04)

 

Outstanding options and warrants to purchase common stock were considered in the computation of diluted earnings (loss) per share for the periods presented.

 

Stock options for 4,505 and 6,519 shares of common stock were not included in computing diluted earnings (loss) per share for the three and six months ended June 30, 2015 and 2014, respectively, because their effects were anti-dilutive. Warrants for 31,190 shares of common stock were not included in computing earnings (loss) per share in 2015 and 2014 because their effects were also anti-dilutive.

 

Note 4 – Investment securities available for sale

 

At June 30, 2015 and December 31, 2014, all of our securities were classified as available-for-sale. The following table presents the composition of our investment portfolio at the dates indicated (dollars in thousands):

 

9 

 

 

           Gross   Gross   Estimated     
   Par   Amortized   Unrealized   Unrealized   Fair   Average 
   Value   Cost   Gains   Losses   Value   Yield 
June 30, 2015                              
US Government Agencies                              
One to five years  $10,000   $10,193   $-   $(110)  $10,083    1.09%
Five to ten years   20,500    21,923    -    (659)   21,264    2.09%
More than ten years   3,418    3,426    3    (5)   3,424    0.82%
    33,918    35,542    3    (774)   34,771    1.49%
Mortgage-backed securities                              
One to five years   2,013    2,069    -    (33)   2,036    1.22%
More than ten years   1,363    1,426    2    (15)   1,413    1.30%
    3,376    3,495    2    (48)   3,449    1.29%
Municipals                              
More than ten years   1,130    1,260    -    (60)   1,200    3.72%
                               
Total investment securities  $38,424   $40,297   $5   $(882)  $39,420    1.54%
                               
December 31, 2014                              
US Government Agencies                              
One to five years  $10,000   $10,324   $-   $(225)  $10,099    1.10%
Five to ten years   22,500    23,895    -    (647)   23,248    1.98%
    32,500    34,219    -    (872)   33,347    1.71%
Mortgage-backed securities                              
More than ten years   471    484    2    (2)   484    0.31%
Municipals                              
Five to ten years   1,000    1,131    -    (20)   1,111    2.50%
More than ten years   4,130    4,684    2    (86)   4,600    2.89%
    5,130    5,815    2    (106)   5,711    2.82%
                               
Total investment securities  $38,101   $40,518   $4   $(980)  $39,542    1.85%

 

Investment securities available for sale that have an unrealized loss position at June 30, 2015 and December 31, 2014 are detailed below (in thousands):

 

   Securities in a loss   Securities in a loss         
   position for less than   position for more than         
   12 Months   12 Months   Total 
   Fair   Unrealized   Fair   Unrealized   Fair   Unrealized 
   Value   Losses   Value   Losses   Value   Losses 
June 30, 2015                              
US Government Agencies  $16,609   $(515)  $16,176   $(259)  $32,785   $(774)
Municipals   701    (22)   499    (38)   1,200    (60)
Mortgage-backed securities   3,091    (48)   -    -    3,091    (48)
                               
   $20,401   $(585)  $16,675   $(297)  $37,076   $(882)
                               
December 31, 2014                              
US Government Agencies  $-   $-   $33,347   $(872)  $33,347   $(872)
Municipals   -    -    5,497    (106)   5,497    (106)
Mortgage-backed securities   -    -    363    (2)   363    (2)
                               
   $-   $-   $39,207   $(980)  $39,207   $(980)

 

10 

 

 

Management does not believe that any individual unrealized loss as of June 30, 2015 and December 31, 2014 is other than a temporary impairment. These unrealized losses are primarily attributable to changes in interest rates. As of June 30, 2015, management does not have the intent to sell any of the securities classified as available for sale and management believes that it is more likely than not that the Company will not have to sell any such securities before a recovery of cost. Approximately $10 million of these securities are pledged against current and potential fundings.

 

Note 5 – Loans and allowance for loan losses

 

The following table presents the composition of our loan portfolio (excluding mortgage loans held for sale) at the dates indicated (dollars in thousands):

 

   June 30, 2015   December 31, 2014 
   Amount   %   Amount   % 
Construction and land development                    
Residential  $5,967    1.98%  $4,315    1.51%
Commercial   25,548    8.48%   25,152    8.80%
    31,515    10.46%   29,467    10.31%
Commercial real estate                    
Owner occupied   63,715    21.12%   58,804    20.55%
Non-owner occupied   38,231    12.67%   38,892    13.59%
Multifamily   8,989    2.98%   11,438    4.00%
Farmland   400    0.13%   434    0.15%
    111,335    36.91%   109,568    38.29%
Consumer real estate                    
Home equity lines   19,533    6.48%   20,082    7.02%
Secured by 1-4 family residential                    
First deed of trust   59,965    19.88%   61,837    21.61%
Second deed of trust   7,585    2.51%   7,854    2.74%
    87,083    28.87%   89,773    31.37%
Commercial and industrial loans (except those secured by real estate)   22,118    7.33%   22,165    7.75%
Guaranteed student loans   48,051    15.93%   33,562    11.73%
Consumer and other    1,527    0.50%   1,611    0.55%
                     
Total loans   301,629    100.00%   286,146    100.00%
Deferred loan cost, net   1,060         722      
Less: allowance for loan losses   (5,567)        (5,729)     
                     
   $297,122        $281,139      

 

The Company assigns risk rating classifications to its loans. These risk ratings are divided into the following groups:

 

·Risk rated 1 to 4 loans are considered of sufficient quality to preclude an adverse rating. These assets generally are well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral;
·Risk rated 5 loans are defined as having potential weaknesses that deserve management’s close attention;
·Risk rated 6 loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any;

 

11 

 

 

·Risk rated 7 loans have all the weaknesses inherent in substandard loans, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable; and
·Loans rated 6 or 7 are considered “Classified” loans for regulatory classification purposes.

 

The following tables provide information on the risk rating of loans at the dates indicated (in thousands):

 

   Risk Rated   Risk Rated   Risk Rated   Risk Rated   Total 
   1-4   5   6   7   Loans 
June 30, 2015                         
Construction and land development                         
Residential  $5,967   $-   $-   $-   $5,967 
Commercial   22,355    1,582    1,611         25,548 
    28,322    1,582    1,611    -    31,515 
Commercial real estate                         
Owner occupied   56,710    3,176    3,829    -    63,715 
Non-owner occupied   35,845    1,706    680    -    38,231 
Multifamily   8,784    205    -    -    8,989 
Farmland   400    -    -    -    400 
    101,739    5,087    4,509    -    111,335 
Consumer real estate                         
Home equity lines   17,758    187    1,588    -    19,533 
Secured by 1-4 family residential                         
First deed of trust   53,735    2,976    3,254    -    59,965 
Second deed of trust   6,693    26    866    -    7,585 
    78,186    3,189    5,708    -    87,083 
Commercial and industrial loans (except those secured by real estate)   20,492    353    1,273    -    22,118 
Guaranteed student loans   48,051    -    -    -    48,051 
Consumer and other   1,422    68    37    -    1,527 
                          
Total loans  $278,212   $10,279   $13,138   $-   $301,629 
                          
   Risk Rated   Risk Rated   Risk Rated   Risk Rated   Total 
   1-4   5   6   7   Loans 
December 31, 2014                         
Construction and land development                         
Residential  $3,946   $205   $164   $-   $4,315 
Commercial   20,641    1,622    2,889    -    25,152 
    24,587    1,827    3,053    -    29,467 
Commercial real estate                         
Owner occupied   47,175    5,234    6,395    -    58,804 
Non-owner occupied   36,439    1,811    642    -    38,892 
Multifamily   10,703    735    -    -    11,438 
Farmland   413    -    21    -    434 
    94,730    7,780    7,058    -    109,568 
Consumer real estate                         
Home equity lines   18,107    465    1,510    -    20,082 
Secured by 1-4 family residential                         
First deed of trust   52,513    4,763    4,561    -    61,837 
Second deed of trust   6,456    434    964    -    7,854 
    77,076    5,662    7,035    -    89,773 
Commercial and industrial loans (except those secured by real estate)   19,026    2,297    390    452    22,165 
Guaranteed student loans   33,562    -    -    -    33,562 
Consumer and other   1,488    74    49    -    1,611 
                          
Total loans  $250,469   $17,640   $17,585   $452   $286,146 

 

12 

 

 

The following table presents the aging of the recorded investment in past due loans and leases as of the dates indicated (in thousands):

 

                           Recorded 
           Greater               Investment > 
   30-59 Days   60-89 Days   Than   Total Past       Total   90 Days and 
   Past Due   Past Due   90 Days   Due   Current   Loans   Accruing 
June 30, 2015                                   
Construction and land development                                   
Residential  $-   $-   $-   $-   $5,967   $5,967   $- 
Commercial   65    -    -    65    25,483    25,548    - 
    65    -    -    65    31,450    31,515    - 
Commercial real estate                                   
Owner occupied   378    -    -    378    63,337    63,715    - 
Non-owner occupied   -    -    -    -    38,231    38,231    - 
Multifamily   -    -    -    -    8,989    8,989    - 
Farmland   -    -    -    -    400    400    - 
    378    -    -    378    110,957    111,335    - 
Consumer real estate                                   
Home equity lines   58    -    -    58    19,475    19,533    - 
Secured by 1-4 family residential                                   
First deed of trust   420    -    -    420    59,545    59,965    - 
Second deed of trust   -    -    -    -    7,585    7,585    - 
    478    -    -    478    86,605    87,083    - 
Commercial and industrial loans (except those secured by real estate)   7    -    -    7    22,111    22,118    - 
Guaranteed student loans   3,420    -    9,632    13,052    34,999    48,051    9,632 
Consumer and other   -    -    -    -    1,527    1,527    - 
                                    
Total loans  $4,348   $-   $9,632   $13,980   $287,649   $301,629   $9,632 
                                    
                           Recorded 
           Greater               Investment > 
   30-59 Days   60-89 Days   Than   Total Past       Total   90 Days and 
   Past Due   Past Due   90 Days   Due   Current   Loans   Accruing 
December 31, 2014                                   
Construction and land development                                   
Residential  $-   $-   $-   $-   $4,315   $4,315   $- 
Commercial   92    391    -    483    24,669    25,152    - 
    92    391    -    483    28,984    29,467    - 
Commercial real estate                                   
Owner occupied   715    -    -    715    58,089    58,804    - 
Non-owner occupied   -    -    -    -    38,892    38,892    - 
Multifamily   -    -    -    -    11,438    11,438    - 
Farmland   -    -    -    -    434    434    - 
    715    -    -    715    108,853    109,568    - 
Consumer real estate                                   
Home equity lines   31    139    -    170    19,912    20,082    - 
Secured by 1-4 family residential                                   
First deed of trust   -    153    -    153    61,684    61,837    - 
Second deed of trust   56    -    -    56    7,798    7,854    - 
    87    292    -    379    89,394    89,773    - 
Commercial and industrial loans (except those secured by real estate)   -    47    -    47    22,118    22,165    - 
Guaranteed student loans   671    392    720    1,783    31,779    33,562    720 
Consumer and other   -    8    -    8    1,603    1,611    - 
                                    
Total loans  $1,565   $1,130   $720   $3,415   $282,731   $286,146   $720 

 

Loans greater than 90 days past due are student loans that are guaranteed by the Department of Education which covers approximately 98% of the principal and interest. Accordingly, these loans will not be placed on nonaccrual status.

 

13 

 

 

Loans are considered impaired when, based on current information and events it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Loans evaluated individually for impairment include non-performing loans, such as loans on non-accrual, loans past due by 90 days or more, restructured loans and other loans selected by management. The evaluations are based upon discounted expected cash flows or collateral valuations. If the evaluation shows that a loan is individually impaired, then a specific reserve is established for the amount of impairment. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. Impaired loans are set forth in the following table as of the dates indicated (in thousands):

 

14 

 

 

   June 30, 2015 
       Unpaid     
   Recorded   Principal   Related 
   Investment   Balance   Allowance 
With no related allowance recorded               
Construction and land development               
Commercial  $2,713   $2,809   $- 
Commercial real estate               
Owner occupied   2,837    2,837      
Non-owner occupied   6,122    6,122    - 
Multifamily   -    -    - 
Farmland   -    -    - 
    8,959    8,959    - 
Consumer real estate               
Home equity lines   1,468    1,468    - 
Secured by 1-4 family residential               
First deed of trust   6,868    6,868    - 
Second deed of trust   959    1,394    - 
    9,295    9,730    - 
Commercial and industrial loans (except those secured by real estate)   120    178    - 
Consumer and other   30    30    - 
    21,117    21,706    - 
                
With an allowance recorded               
Construction and land development               
Commercial   580    579    25 
Commercial real estate               
Owner occupied   6,268    6,531    652 
Non-Owner occupied   464    464    38 
    6,732    6,995    690 
Consumer real estate               
Secured by 1-4 family residential               
First deed of trust   1,428    1,415    224 
Second deed of trust   360    353    153 
    1,788    1,768    377 
Commercial and industrial loans (except those secured by real estate)   421    684    20 
    9,521    10,026    1,112 
                
Total               
Construction and land development               
Commercial   3,293    3,388    25 
    3,293    3,388    25 
Commercial real estate               
Owner occupied   9,105    9,368    652 
Non-owner occupied   6,586    6,586    38 
    15,691    15,954    690 
Consumer real estate               
Home equity lines   1,468    1,468    - 
Secured by 1-4 family residential,               
First deed of trust   8,296    8,283    224 
Second deed of trust   1,319    1,747    153 
    11,083    11,498    377 
Commercial and industrial loans (except those secured by real estate)   541    862    20 
Consumer and other   30    30    - 
   $30,638   $31,732   $1,112 

 

15 

 

 

   December 31, 2014 
       Unpaid     
   Recorded   Principal   Related 
   Investment   Balance   Allowance 
With no related allowance recorded               
Construction and land development               
Residential  $164   $164   $- 
Commercial   3,379    3,379    - 
    3,543    3,543    - 
Commercial real estate               
Owner occupied   1,686    1,686      
Non-owner occupied   6,593    6,593    - 
Multifamily   2,322    2,322    - 
Farmland   21    450    - 
    10,622    11,051    - 
Consumer real estate               
Home equity lines   800    800    - 
Secured by 1-4 family residential               
First deed of trust   6,485    6,493    - 
Second deed of trust   1,103    1,373    - 
    8,388    8,666    - 
Commercial and industrial loans (except those secured by real estate)   263    365    - 
Consumer and other   23    36    - 
    22,839    23,661    - 
                
With an allowance recorded               
Construction and land development               
Commercial   589    589    26 
Commercial real estate               
Owner occupied   6,625    6,640    905 
                
Consumer real estate               
Secured by 1-4 family residential               
First deed of trust   1,415    1,415    200 
Second deed of trust   257    257    142 
    1,672    1,672    342 
Commercial and industrial loans (except those secured by real estate)   555    555    239 
    9,441    9,456    1,512 
                
Total               
Construction and land development               
Residential   164    164    - 
Commercial   3,968    3,968    26 
    4,132    4,132    26 
Commercial real estate               
Owner occupied   8,311    8,326    905 
Non-owner occupied   6,593    6,593    - 
Multifamily   2,322    2,322    - 
Farmland   21    450    - 
    17,247    17,691    905 
Consumer real estate               
Home equity lines   800    800    - 
Secured by 1-4 family residential,               
First deed of trust   7,900    7,908    200 
Second deed of trust   1,360    1,630    142 
    10,060    10,338    342 
Commercial and industrial loans (except those secured by real estate)   818    920    239 
Consumer and other   23    36    - 
   $32,280   $33,117   $1,512 

 

16 

 

 

The following is a summary of average recorded investment in impaired loans with and without a valuation allowance and interest income recognized on those loans for the periods indicated (in thousands):

 

   For the Three Months   For the Six Months 
   Ended June 30, 2015   Ended June 30, 2015 
   Average   Interest   Average   Interest 
   Recorded   Income   Recorded   Income 
   Investment   Recognized   Investment   Recognized 
With no related allowance recorded                    
Construction and land development                    
Residential  $-   $-   $115   $1 
Commercial   2,617    27    2,791    66 
    2,617    27    2,906    67 
Commercial real estate                    
Owner occupied   1,201    14    1,439    31 
Non-owner occupied   6,384    70    6,473    157 
Multifamily   -    -    481    6 
Farmland   -    -    7    - 
    7,585    84    8,400    194 
Consumer real estate                    
Home equity lines   605    -    702    4 
Secured by 1-4 family residential                    
First deed of trust   6,370    83    6,386    173 
Second deed of trust   1,199    16    1,191    30 
    8,174    99    8,279    207 
Commercial and industrial loans (except those secured by real estate)   134    2    181    4 
Consumer and other   22    -    20    1 
    18,532    212    19,786    473 
                     
With an allowance recorded                    
Construction and land development                    
Commercial   625    7    606    11 
Commercial real estate                    
Owner occupied   6,534    50    6,565    116 
Non-Owner occupied   220    11    161    12 
    6,754    61    6,727    128 
Consumer real estate                    
Secured by 1-4 family residential                    
First deed of trust   1,259    -    1,272    - 
Second deed of trust   251    -    253    - 
    1,510    -    1,525    - 
Commercial and industrial loans (except those secured by real estate)   421    11    457    16 
    9,310    79    9,315    155 
                     
Total                    
Construction and land development                    
Residential   -    -    115    1 
Commercial   3,242    34    3,397    77 
    3,242    34    3,512    78 
Commercial real estate                    
Owner occupied   7,735    64    8,005    147 
Non-owner occupied   6,604    81    6,634    169 
Multifamily   -    -    481    6 
Farmland   -    -    7    - 
    14,339    145    15,127    322 
Consumer real estate                    
Home equity lines   605    -    702    4 
Secured by 1-4 family residential,                    
First deed of trust   7,629    83    7,657    173 
Second deed of trust   1,450    16    1,444    30 
    9,684    99    9,803    207 
Commercial and industrial loans (except those secured by real estate)   555    13    638    20 
Consumer and other   22    -    20    1 
   $27,842   $291   $29,101   $628 

 

17 

 

 

   For the Three Months   For the Six Months 
   Ended June 30, 2014   Ended June 30, 2014 
   Average   Interest   Average   Interest 
   Recorded   Income   Recorded   Income 
   Investment   Recognized   Investment   Recognized 
With no related allowance recorded                    
Construction and land development                    
Residential  $182   $-   $384   $2 
Commercial   3,951    42    3,960    98 
    4,133    42    4,344    100 
Commercial real estate                    
Owner occupied   2,970    38    2,345    65 
Non-owner occupied   9,957    82    8,949    215 
Multifamily   2,352    36    2,359    71 
Farmland   21    -    21    - 
    15,300    156    13,674    351 
Consumer real estate                    
Home equity lines   1,398    2    1,026    16 
Secured by 1-4 family residential                    
First deed of trust   7,990    108    7,649    193 
Second deed of trust   1,224    19    1,090    33 
    10,612    129    9,765    242 
Commercial and industrial loans (except those secured by real estate)   821    10    758    23 
Consumer and other   26    1    20    1 
    30,892    338    28,561    717 
                     
With an allowance recorded                    
Construction and land development                    
Commercial   602    7    606    15 
Commercial real estate                    
Owner occupied   4,459    -    1,298    92 
Non-Owner occupied   1,288    -    4,108    - 
    5,747    -    5,406    92 
Consumer real estate                    
Secured by 1-4 family residential                    
First deed of trust   1,848    2    1,951    2 
Second deed of trust   107    3    108    3 
    1,955    5    2,059    5 
Commercial and industrial loans (except those secured by real estate)   115    -    116      
    8,419    12    8,187    112 
                     
Total                    
Construction and land development                    
Residential   182    -    384    2 
Commercial   4,553    49    4,566    113 
    4,735    49    4,950    115 
Commercial real estate                    
Owner occupied   7,429    38    3,643    157 
Non-owner occupied   11,245    82    13,057    215 
Multifamily   2,352    36    2,359    71 
Farmland   21    -    21    - 
    21,047    156    19,080    443 
Consumer real estate                    
Home equity lines   1,398    2    1,026    16 
Secured by 1-4 family residential,                    
First deed of trust   9,838    110    9,600    195 
Second deed of trust   1,331    22    1,198    36 
    12,567    134    11,824    247 
Commercial and industrial loans (except those secured by real estate)   936    10    874    23 
Consumer and other   26    1    20    1 
   $39,311   $350   $36,748   $829 

 

18 

 

 

Included in impaired loans are loans classified as troubled debt restructurings (“TDRs”). A modification of a loan’s terms constitutes a TDR if the creditor grants a concession to the borrower for economic or legal reasons related to the borrower’s financial difficulties that it would not otherwise consider. For loans classified as impaired TDRs, the Company further evaluates the loans as performing or nonperforming. If, at the time of restructure, the loan is not considered nonaccrual, it will be classified as performing. TDRs originally classified as nonperforming are able to be reclassified as performing if, subsequent to restructure, they experience six months of payment performance according to the restructured terms. The following is a summary of performing and nonaccrual TDRs and the related specific valuation allowance by portfolio segment as of the dates indicated (dollars in thousands):

 

               Valuation 
   Total   Performing   Nonaccrual   Allowance 
June 30, 2015                    
Construction and land development                    
Commercial  $1,799   $1,708   $91   $- 
    1,799    1,708    91    - 
Commercial real estate                    
Owner occupied   5,823    5,522    301    128 
Non-owner occupied   4,205    4,205    -    - 
    10,028    9,727    301    128 
Consumer real estate                    
Secured by 1-4 family residential                    
First deed of trust   4,647    4,045    602    - 
Second deed of trust   746    368    378    117 
    5,393    4,413    980    117 
Commercial and industrial loans (except those secured by real estate)   133    -    133    20 
Consumer and other    13    -    13    - 
   $17,366   $15,848   $1,518   $265 
                     
Number of loans   64    43    21    10 

 

19 

 

 

               Specific 
               Valuation 
   Total   Performing   Nonaccrual   Allowance 
December 31, 2014                    
Construction and land development                    
Residential  $7   $-   $7   $- 
Commercial   3,895    3,751    144    17 
    3,902    3,751    151    17 
Commercial real estate                    
Owner occupied   6,317    5,149    1,168    325 
Non-owner occupied   6,593    6,593    -    - 
Multifamily   2,322    2,322    -    - 
    15,232    14,064    1,168    325 
Consumer real estate                    
Home equity lines   -    -    -    - 
Secured by 1-4 family residential                    
First deeds of trust   6,990    5,494    1,496    200 
Second deeds of trust   762    658    104    5 
    7,752    6,152    1,600    205 
Commercial and industrial loans (except those secured by real estate)   239    -    239    12 
Consumer and other   16    -    16    - 
   $27,141   $23,967   $3,174   $559 
                     
Number of loans   107    77    30    21 

 

The following table provides information about TDRs identified during the indicated periods (dollars in thousands):

 

   Six Months Ended June 30, 2015   Six Months Ended June 30, 2014 
       Pre-   Post-       Pre-   Post- 
       Modification   Modification       Modification   Modification 
   Number of   Recorded   Recorded   Number of   Recorded   Recorded 
   Loans   Balance   Balance   Loans   Balance   Balance 
                         
Construction and land development                              
Commercial   -   $-   $-    1   $45   $45 
    -    -    -    1    45    45 
Commercial real estate                              
Owner occupied   -    -    -    1    344    344 
Non-owner occupied   -    -    -    1    412    412 
    -    -    -    2    756    756 
Consumer real estate                              
Secured by 1-4 family residential                              
First deed of trust   -    -    -    2    182    182 
    -    -    -    2    182    182 
                               
    -   $-   $-    5   $983   $983 

 

20 

 

 

The following table provides information about defaults on TDRs identified for the indicated periods (dollars in thousands):

 

   Six Months Ended June 30, 2015   Six Months Ended June 30, 2014 
   Number of   Recorded   Number of   Recorded 
   Loans   Balance   Loans   Balance 
                 
Construction and land development                    
Residential   -   $-    2   $145 
Commercial   3    91    4    140 
    3    91    6    285 
Commercial real estate                    
Owner occupied   1    158    1    344 
Non-owner occupied   -    -    -    - 
    1    158    1    344 
Consumer real estate                    
Home equity lines   -    -    1    160 
Secured by 1-4 family residential                    
First deed of trust   12    835    10    1,058 
Second deed of trust   2    98    1    318 
    14    933    12    1,536 
                     
Commercial and industrial (except those secured by real estate)   1    133    2    251 
    19   $1,315    21   $2,416 

 

21 

 

 

Activity in the allowance for loan losses is as follows for the periods indicated (dollars in thousands):

 

   Beginning   Provision for           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Three Months Ended June 30, 2015                         
Construction and land development                         
Residential  $35    57   $-   $-   $92 
Commercial   88    331    (71)   21    369 
    123    388    (71)   21    461 
Commercial real estate                         
Owner occupied   1,836    (23)   (127)   -    1,686 
Non-owner occupied   607    30    -    2    639 
Multifamily   78    32    -    -    110 
Farmland   130    (3)   -    -    127 
    2,651    36    (127)   2    2,562 
Consumer real estate                         
Home equity lines   469    11    (40)   1    441 
Secured by 1-4 family residential                         
First deed of trust   1,703    (456)   (66)   11    1,192 
Second deed of trust   284    17    (55)   4    250 
    2,456    (428)   (161)   16    1,883 
                          
Commercial and industrial loans (except those secured by real estate)   356    (20)   -    46    382 
Student Loans   217    37    (1)   -    253 
Consumer and other   41    (13)   (3)   1    26 
                          
   $5,844   $-   $(363)  $86   $5,567 

 

   Beginning   Provision for           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Three Months Ended June 30, 2014                         
Construction and land development                         
Residential  $140   $-   $-   $1   $141 
Commercial   849    -    (79)   -    770 
    989    -    (79)   1    911 
Commercial real estate                         
Owner occupied   1,853    -    (607)   -    1,246 
Non-owner occupied   -    -    (38)   23    (15)
Multifamily   17    -    -    -    17 
Farmland   409    -    -    -    409 
    2,279    -    (645)   23    1,657 
Consumer real estate                         
Home equity lines   466    -    (243)   2    225 
Secured by 1-4 family residential                         
First deed of trust   1,755    -    (53)   42    1,744 
Second deed of trust   329    -    1    110    440 
    2,550    -    (295)   154    2,409 
                          
Commercial and industrial loans (except those secured by real estate)   760    -    (136)   53    677 
Consumer and other   22    -    (2)   7    27 
                          
   $6,600   $-   $(1,157)  $238   $5,681 

 

22 

 

 

   Beginning   Provision for           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Six Months Ended June 30, 2015                         
Construction and land development                         
Residential  $34   $57   $-   $1   $92 
Commercial   202    330    (185)   22    369 
    236    387    (185)   23    461 
Commercial real estate                         
Owner occupied   1,836    (23)   (127)   -    1,686 
Non-owner occupied   607    30    -    2    639 
Multifamily   78    32    -    -    110 
Farmland   130    (3)   -    -    127 
    2,651    36    (127)   2    2,562 
Consumer real estate                         
Home equity lines   469    11    (40)   1    441 
Secured by 1-4 family residential                         
First deed of trust   1,345    (456)   (66)   369    1,192 
Second deed of trust   275    17    (55)   13    250 
    2,089    (428)   (161)   383    1,883 
Commercial and industrial loans (except those secured by real estate)   506    (20)   (162)   58    382 
Student Loans   217    37    (1)   -    253 
Consumer and other   30    (12)   (6)   14    26 
                          
   $5,729   $-   $(642)  $480   $5,567 

 

   Beginning   Provision for           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
                     
Six Months Ended June 30, 2014                         
Construction and land development                         
Residential  $135   $5   $-   $1   $141 
Commercial   1,274    (421)   (100)   17    770 
    1,409    (416)   (100)   18    911 
Commercial real estate                         
Owner occupied   1,199    653    (608)   -    1,244 
Non-owner occupied   670    (470)   (238)   23    (15)
Multifamily   20    (2)   -    -    18 
Farmland   337    168    (96)   -    409 
    2,226    349    (942)   23    1,656 
Consumer real estate                         
Home equity lines   424    223    (424)   2    225 
Secured by 1-4 family residential                         
First deed of trust   1,992    (65)   (238)   55    1,744 
Second deed of trust   394    12    (76)   110    440 
    2,810    170    (738)   167    2,409 
Commercial and industrial loans (except those secured by real estate)   724    45    (168)   77    678 
Consumer and other   70    (48)   (5)   10    27 
                          
   $7,239   $100   $(1,953)  $295   $5,681 

 

23 

 

 

   Beginning   Provision for           Ending 
   Balance   Loan Losses   Charge-offs   Recoveries   Balance 
Year Ended December 31, 2014                         
Construction and land development                         
Residential  $135   $(103)  $-   $2   $34 
Commercial   1,274    (1,016)   (100)   44    202 
    1,409    (1,119)   (100)   46    236 
Commercial real estate                         
Owner occupied   1,199    1,268    (631)   -    1,836 
Non-owner occupied   670    430    (518)   25    607 
Multifamily   20    58    -    -    78 
Farmland   337    (111)   (96)   -    130 
    2,226    1,645    (1,245)   25    2,651 
Consumer real estate                         
Home equity lines   424    506    (476)   15    469 
Secured by 1-4 family residential                         
First deed of trust   1,992    (442)   (277)   72    1,345 
Second deed of trust   394    (223)   (86)   190    275 
    2,810    (159)   (839)   277    2,089 
Commercial and industrial loans (except those secured by real estate)   724    (447)   (172)   401    506 
Student loans   -    217    -    -    217 
Consumer and other   70    (37)   (25)   22    30 
                          
   $7,239   $100   $(2,381)  $771   $5,729 

 

The allowance for loan losses at each of the periods presented includes an amount that could not be identified to individual types of loans referred to as the unallocated portion of the allowance. We recognize the inherent imprecision in estimates of losses due to various uncertainties and variability related to the factors used, and therefore a reasonable range around the estimate of losses is derived and used to ascertain whether the allowance is too high. We concluded that the unallocated portion of the allowance was warranted given the continued higher level of classified assets and was within a reasonable range around the estimate of losses.

 

24 

 

 

Loans were evaluated for impairment as follows for the periods indicated (in thousands):

  

   Recorded Investment in Loans 
   Allowance   Loans 
               Loans acquired               Loans acquired 
   Ending           with deteriorated   Ending           with deteriorated 
   Balance   Individually   Collectively   credit quaility   Balance   Individually   Collectively   credit quaility 
                                 
Period Ended June 30, 2015                                        
Construction and land development                                        
Residential  $35   $-   $35   $-   $5,967   $-   $5,967   $- 
Commercial   39    25    14    -    25,548    3,293    22,255    - 
    74    25    49    -    31,515    3,293    28,222    - 
Commercial real estate                                        
Owner occupied   1,709    652    1,057    -    63,715    9,105    54,610    - 
Non-owner occupied   609    38    571    -    38,231    6,586    31,645    - 
Multifamily   78    -    78    -    8,989    -    8,989    - 
Farmland   130    -    130    -    400    -    400    - 
    2,526    690    1,836    -    111,335    15,691    95,644    - 
Consumer real estate                                        
Home equity lines   430    -    430    -    19,533    1,468    18,065    - 
Secured by 1-4 family residential                                        
First deed of trust   1,648    224    1,424    -    59,965    8,296    51,669    - 
Second deed of trust   233    153    80    -    7,585    1,319    6,266    - 
    2,311    377    1,934    -    87,083    11,083    76,000    - 
Commercial and industrial loans (except those secured by real estate)   402    20    382    -    22,118    541    21,577    - 
Student loans   216    -    216         48,051    -    48,051    - 
Consumer and other   38    -    38    -    1,527    30    1,497    - 
                                         
   $5,567   $1,112   $4,455   $-   $ 301,629   $30,638   $270,991   $- 
                                         
Year Ended December 31, 2014