Note 3.

Loans

Loans at December 31, 2014 and 2013 are summarized as follows (in thousands):


	2014			2013
Real estate loans:
Construction and land development	$	29,475		$	34,060
Secured by 1-4 family residential		163,727			141,961
Other real estate		151,802			145,968
Commercial and industrial loans		21,166			22,803
Consumer and other loans		12,240			12,301

Total loans	$	378,410		$	357,093
Allowance for loan losses		(6,718	)		(10,644	)

Loans, net	$	371,692		$	346,449

Net deferred loan costs included in the above loan categories were $130 thousand at December 31, 2014. Net deferred loan fees included in the above loan categories were $18 thousand at December 31, 2013. Consumer and other loans included $285 thousand and $279 thousand of demand deposit overdrafts at December 31, 2014 and 2013, respectively.

The following tables provide a summary of loan classes and an aging of past due loans as of December 31, 2014 and 2013 (in thousands):


	December 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Loans		Non- Accrual Loans		90 Days or More Past Due and Accruing

Real estate loans:
Construction and land development	$	2,441	$	71	$	—	$	2,512	$	26,963	$	29,475	$	1,787	$	—
1-4 family residential		504		323		754		1,581		162,146		163,727		1,342		—
Other real estate loans		554		800		2,519		3,873		147,929		151,802		4,756		—
Commercial and industrial		10		106		—		116		21,050		21,166		115		—
Consumer and other loans		14		—		—		14		12,226		12,240		—		—

Total	$	3,523	$	1,300	$	3,273	$	8,096	$	370,314	$	378,410	$	8,000	$	—


	December 31, 2013
	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Loans		Non- Accrual Loans		90 Days or More Past Due and Accruing

Real estate loans:
Construction and land development	$	161	$	2,852	$	3,339	$	6,352	$	27,708	$	34,060	$	5,811	$	—
1-4 family residential		1,561		316		136		2,013		139,948		141,961		953		27
Other real estate loans		1,077		1,636		74		2,787		143,181		145,968		4,756		—
Commercial and industrial		165		—		22		187		22,616		22,803		144		22
Consumer and other loans		41		5		—		46		12,255		12,301		14		—

Total	$	3,005	$	4,809	$	3,571	$	11,385	$	345,708	$	357,093	$	11,678	$	49

Credit Quality Indicators

As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans. The Company utilizes a risk grading matrix to assign a rating to each of its loans. The loan ratings are summarized into the following categories: pass, special mention, substandard, doubtful and loss. Pass rated loans include all risk rated credits other than those included in special mention, substandard or doubtful. Loans classified as loss are charged-off. Loan officers assign risk grades to loans at origination and as renewals arise. The Bank’s Credit Administration department reviews risk grades for accuracy on a quarterly basis and as credit issues arise. In addition, a certain amount of loans are reviewed each year through the Company’s internal and external loan review process. A description of the general characteristics of the loan grading categories is as follows:

Pass – Loans classified as pass exhibit acceptable operating trends, balance sheet trends, and liquidity. Sufficient cash flow exists to service the loan. All obligations have been paid by the borrower as agreed.

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Bank’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weakness inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The Company considers all doubtful loans to be impaired and places the loan on non-accrual status.

Loss – Loans classified as loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted.

The following tables provide an analysis of the credit risk profile of each loan class as of December 31, 2014 and 2013 (in thousands):


	December 31, 2014
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
Construction and land development	$	20,476	$	2,962	$	6,037	$	—	$	29,475
Secured by 1-4 family residential		152,004		5,058		6,665		—		163,727
Other real estate loans		126,211		14,776		10,815		—		151,802
Commercial and industrial		20,428		463		275		—		21,166
Consumer and other loans		12,240		—		—		—		12,240

Total	$	331,359	$	23,259	$	23,792	$	—	$	378,410


	December 31, 2013
	Pass		Special Mention		Substandard		Doubtful		Total
Real estate loans:
Construction and land development	$	19,724	$	3,500	$	10,836	$	—	$	34,060
Secured by 1-4 family residential		130,048		5,378		6,535		—		141,961
Other real estate loans		118,663		10,227		17,078		—		145,968
Commercial and industrial		21,563		555		685		—		22,803
Consumer and other loans		12,287		—		14		—		12,301

Total	$	302,285	$	19,660	$	35,148	$	—	$	357,093