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Loans Receivable
 12 Months Ended
Dec. 31, 2013
Receivables [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]
Note 4:
Loans Receivable
 
Categories of loans at December 31, include: 
 
 
 
December 31,
 
 
 
2013
 
2012
 
Real estate loans
 
 
 
 
 
 
 
Residential
 
$
191,007
 
$
128,815
 
Commercial
 
 
142,429
 
 
84,918
 
Total real estate loans
 
 
333,436
 
 
213,733
 
Commercial loans
 
 
55,168
 
 
14,271
 
Consumer loans
 
 
107,562
 
 
126,486
 
Total loans
 
 
496,166
 
 
354,490
 
Deferred loan origination costs and premiums and discounts on purchased loans
 
 
4,987
 
 
3,671
 
Allowance for loan losses
 
 
(5,426)
 
 
(5,833)
 
Total net loans
 
$
495,727
 
$
352,328
 
 
The risk characteristics of each loan portfolio segment are summarized as follows:
 
Commercial Real Estate: These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of property type and geographic location. Management monitors and evaluates commercial real estate loans based on property financial performance, collateral value, and other risk grade criteria. As a general rule, the Company avoids financing special use projects or properties outside of its designated market areas unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus nonowner-occupied loans.
 
Commercial: Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Loans are made for working capital, equipment purchases, or other purposes. Most commercial loans are secured by the assets being financed and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis.
 
Residential and Consumer: With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles, horse trailers, or recreational vehicles. Some consumer loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent upon the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.
 
The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2013 and 2012:
 
 
 
2013
 
 
 
Residential
 
Commercial
 
 
 
 
 
 
 
 
 
 
Real Estate
 
Real Estate
 
Commercial
 
Consumer
 
Total
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of year
 
$
1,149
 
$
3,107
 
$
371
 
$
1,206
 
$
5,833
 
Provision charged to expense
 
 
136
 
 
(352)
 
 
378
 
 
162
 
 
324
 
Losses charged off
 
 
(164)
 
 
(238)
 
 
—
 
 
(810)
 
 
(1,212)
 
Recoveries
 
 
98
 
 
—
 
 
70
 
 
313
 
 
481
 
Balance, end of year
 
$
1,219
 
$
2,517
 
$
819
 
$
871
 
$
5,426
 
Ending balance: individually evaluated for impairment
 
$
116
 
$
98
 
$
—
 
$
28
 
$
242
 
Ending balance: collectively evaluated for impairment
 
$
1,103
 
$
2,419
 
$
819
 
$
843
 
$
5,184
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
 
$
191,007
 
$
142,429
 
$
55,168
 
$
107,562
 
$
496,166
 
Ending balance: individually evaluated for impairment
 
$
1,684
 
$
1,054
 
$
—
 
$
339
 
$
3,077
 
Ending balance: collectively evaluated for impairment
 
$
189,323
 
$
141,375
 
$
55,168
 
$
107,223
 
$
493,089
 
 
 
 
2012
 
 
 
Residential
 
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Real Estate
 
Real Estate
 
Commercial
 
Consumer
 
Total
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of year
 
$
1,099
 
$
2,485
 
$
333
 
$
1,739
 
$
5,656
 
Provision charged to expense
 
 
411
 
 
2,086
 
 
(37)
 
 
392
 
 
2,852
 
Losses charged off
 
 
(509)
 
 
(1,464)
 
 
—
 
 
(1,438)
 
 
(3,411)
 
Recoveries
 
 
148
 
 
—
 
 
75
 
 
513
 
 
736
 
Balance, end of year
 
$
1,149
 
$
3,107
 
$
371
 
$
1,206
 
$
5,833
 
Ending balance: individually evaluated for impairment
 
$
206
 
$
682
 
$
—
 
$
54
 
$
942
 
Ending balance: collectively evaluated for impairment
 
$
943
 
$
2,425
 
$
371
 
$
1,152
 
$
4,891
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending balance
 
$
128,815
 
$
84,918
 
$
14,271
 
$
126,486
 
$
354,490
 
Ending balance: individually evaluated for impairment
 
$
2,482
 
$
2,467
 
$
—
 
$
474
 
$
5,423
 
Ending balance: collectively evaluated for impairment
 
$
126,333
 
$
82,451
 
$
14,271
 
$
126,012
 
$
349,067
 
 
The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans. Loans are graded on a scale of 1 to 8. A description of the general characteristics of the 8 risk grades is as follows:
 
•
Grades 1 & 2 - These grades are assigned to loans with very high credit quality borrowers of investment or near investment grade or where the loan is primarily secured by cash or conservatively margined high quality marketable securities. These borrowers are generally publicly traded, have significant capital strength, possess investment grade public debt ratings, demonstrate low leverage, exhibit stable earnings and growth, and have ready access to various financing alternatives.
 
•
Grades 3 & 4 - Loans assigned these grades include loans to borrowers possessing solid credit quality with acceptable risk. Borrowers in these grades are differentiated from higher grades on the basis of size (capital and/or revenue), leverage, asset quality, stability of the industry or specific market area and quality/coverage of collateral. These borrowers generally have a history of consistent earnings and reasonable leverage.
 
•
Grade 5 - This grade includes “pass grade” loans to borrowers which require special monitoring because of deteriorating financial results, declining credit ratings, decreasing cash flow, increasing leverage, marginal collateral coverage or industry stress that has resulted or may result in a changing overall risk profile.
 
•
Grade 6 - This grade is for “Special Mention” loans in accordance with regulatory guidelines. This grade is intended to include loans to borrowers whose credit quality has clearly deteriorated and where risk of further decline is possible unless active measures are taken to correct the situation. Weaknesses are considered potential at this state and are not yet fully defined.
 
•
Grade 7 - This grade includes “Substandard” loans in accordance with regulatory guidelines. Loans categorized in this grade possess a well-defined credit weakness, and the likelihood of repayment from the primary source is uncertain. Significant financial deterioration has occurred, and very close attention is warranted to ensure the full repayment without loss. Collateral coverage may be marginal, and the accrual of interest has been suspended.
 
•
Grade 8 - This grade includes “Doubtful” loans in accordance with regulatory guidelines. Such loans have been placed on nonaccrual status and may be heavily dependent upon collateral possessing a value that is difficult to determine or based upon some near-term event which lacks clear certainty. These loans have all of the weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of the principal balance highly improbable.
 
The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of December 31, 2013 and 2012:
 
 
 
2013
 
 
 
Commercial
 
 
 
 
 
Real Estate
 
Commercial
 
Rating:
 
 
 
 
 
 
 
1-5 Pass
 
$
139,052
 
$
54,035
 
6 Special Mention
 
 
2,323
 
 
1,133
 
7 Substandard
 
 
1,054
 
 
—
 
8 Doubtful
 
 
—
 
 
—
 
Total
 
$
142,429
 
$
55,168
 
 
 
 
2013
 
 
 
Residential
 
 
 
 
 
 
Real Estate
 
Consumer
 
Performing
 
$
190,377
 
$
107,412
 
Nonaccrual
 
 
630
 
 
150
 
Total
 
$
191,007
 
$
107,562
 
 
 
 
 
2012
 
 
 
Commercial
 
 
 
 
 
 
Real Estate
 
Commercial
 
Rating:
 
 
 
 
 
 
 
1-5 Pass
 
$
80,830
 
$
13,860
 
6 Special Mention
 
 
1,621
 
 
411
 
7 Substandard
 
 
2,467
 
 
—
 
8 Doubtful
 
 
—
 
 
—
 
Total
 
$
84,918
 
$
14,271
 
 
 
 
2012
 
 
 
Residential
 
 
 
 
 
 
Real Estate
 
Consumer
 
Performing
 
$
127,426
 
$
126,331
 
Nonaccrual
 
 
1,389
 
 
155
 
Total
 
$
128,815
 
$
126,486
 
 
The following tables present the Company’s loan portfolio aging analysis as of December 31, 2013 and 2012:
 
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90 Days or
 
 
 
30-59
 
60-89
 
90 Days
 
 
 
 
 
 
 
Total
 
 
 
 
More Past
 
 
 
Days
 
Days
 
or More
 
Total
 
 
 
 
Loans
 
Nonaccrual
 
Due
 
 
 
Past Due
 
Past Due
 
Past Due
 
Past Due
 
Current
 
Receivable
 
Loans
 
and Accruing
 
Residential real estate
 
$
122
 
$
—
 
$
603
 
$
725
 
$
190,282
 
$
191,007
 
$
630
 
$
—
 
Commercial real estate
 
 
—
 
 
—
 
 
955
 
 
955
 
 
141,474
 
 
142,429
 
 
1,054
 
 
—
 
Commercial
 
 
—
 
 
—
 
 
—
 
 
—
 
 
55,168
 
 
55,168
 
 
—
 
 
—
 
Consumer
 
 
484
 
 
45
 
 
84
 
 
613
 
 
106,949
 
 
107,562
 
 
150
 
 
18
 
Total
 
$
606
 
$
45
 
$
1,642
 
$
2,293
 
$
493,873
 
$
496,166
 
$
1,834
 
$
18
 
 
 
 
2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90 Days or
 
 
 
30-59
 
60-89
 
90 Days
 
 
 
 
 
 
 
Total
 
 
 
 
More Past
 
 
 
Days
 
Days
 
or More
 
Total
 
 
 
 
Loans
 
Nonaccrual
 
Due
 
 
 
Past Due
 
Past Due
 
Past Due
 
Past Due
 
Current
 
Receivable
 
Loans
 
and Accruing
 
Residential real estate
 
$
130
 
$
5
 
$
1,555
 
$
1,690
 
$
127,125
 
$
128,815
 
$
1,389
 
$
450
 
Commercial real estate
 
 
—
 
 
—
 
 
2,362
 
 
2,362
 
 
82,556
 
 
84,918
 
 
2,362
 
 
—
 
Commercial
 
 
—
 
 
—
 
 
—
 
 
—
 
 
14,271
 
 
14,271
 
 
—
 
 
—
 
Consumer
 
 
1,025
 
 
148
 
 
122
 
 
1,295
 
 
125,191
 
 
126,486
 
 
155
 
 
21
 
Total
 
$
1,155
 
$
153
 
$
4,039
 
$
5,347
 
$
349,143
 
$
354,490
 
$
3,906
 
$
471
 
 
A loan is considered impaired, in accordance with the impairment accounting guidance in ASC Topic 310, Receivables, when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.
 
  The following tables present the Company’s impaired loans as of December 31, 2013 and 2012:
 
 
 
2013
 
 
 
 
 
 
Unpaid
 
 
 
 
 
 
 
 
 
 
 
 
Recorded
 
Principal
 
Specific
 
Average
 
Interest
 
 
 
Balance
 
Balance
 
Allowance
 
Balance
 
Income
 
Loans without a specific valuation
   allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate loans
 
$
1,551
 
$
1,842
 
$
—
 
$
1,894
 
$
29
 
Commercial real estate loans
 
 
956
 
 
2,310
 
 
—
 
 
239
 
 
—
 
Commercial loans
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Consumer loans
 
 
271
 
 
326
 
 
—
 
 
315
 
 
28
 
Total
 
$
2,778
 
$
4,478
 
$
—
 
$
2,448
 
$
57
 
Loans with a specific valuation
   allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate loans
 
$
133
 
$
141
 
$
116
 
$
66
 
$
3
 
Commercial real estate loans
 
 
98
 
 
98
 
 
98
 
 
1,617
 
 
5
 
Commercial loans
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Consumer loans
 
 
68
 
 
80
 
 
28
 
 
78
 
 
2
 
Total
 
$
299
 
$
319
 
$
242
 
$
1,761
 
$
10
 
Total impaired loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate loans
 
$
1,684
 
$
1,983
 
$
116
 
$
1,960
 
$
32
 
Commercial real estate loans
 
 
1,054
 
 
2,408
 
 
98
 
 
1,856
 
 
5
 
Commercial loans
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Consumer loans
 
 
339
 
 
406
 
 
28
 
 
393
 
 
30
 
Total
 
$
3,077
 
$
4,797
 
$
242
 
$
4,209
 
$
67
 
 
 
 
2012
 
 
 
 
 
 
Unpaid
 
 
 
 
 
 
 
 
 
 
 
 
Recorded
 
Principal
 
Specific
 
Average
 
Interest
 
 
 
Balance
 
Balance
 
Allowance
 
Balance
 
Income
 
Loans without a specific valuation
    allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate loans
 
$
2,047
 
$
2,357
 
$
—
 
$
1,685
 
$
29
 
Commercial real estate loans
 
 
—
 
 
—
 
 
—
 
 
275
 
 
—
 
Commercial loans
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Consumer loans
 
 
380
 
 
577
 
 
—
 
 
385
 
 
—
 
Total
 
$
2,427
 
$
2,934
 
$
—
 
$
2,345
 
$
29
 
Loans with a specific valuation
    allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate loans
 
$
435
 
$
442
 
$
206
 
$
514
 
$
—
 
Commercial real estate loans
 
 
2,467
 
 
2,925
 
 
682
 
 
6,089
 
 
6
 
Commercial loans
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Consumer loans
 
 
94
 
 
206
 
 
54
 
 
93
 
 
—
 
Total
 
$
2,996
 
$
3,573
 
$
942
 
$
6,696
 
$
6
 
Total impaired loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate loans
 
$
2,482
 
$
2,799
 
$
206
 
$
2,199
 
$
29
 
Commercial real estate loans
 
 
2,467
 
 
2,925
 
 
682
 
 
6,364
 
 
6
 
Commercial loans
 
 
—
 
 
—
 
 
—
 
 
—
 
 
—
 
Consumer loans
 
 
474
 
 
783
 
 
54
 
 
478
 
 
—
 
Total
 
$
5,423
 
$
6,507
 
$
942
 
$
9,041
 
$
35
 
 
In the course of working with troubled borrowers, the Company may choose to restructure the contractual terms of certain loans in an effort to work out an alternative payment schedule with the borrower in order to optimize the collectability of the loan. Any loan modified is reviewed by the Company to identify if a TDR has occurred, which is when the Company grants a concession to the borrower that it would not otherwise consider based on economic or legal reasons related to a borrower’s financial difficulties. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status or the loan may be restructured to secure additional collateral and/or guarantees to support the debt, or a combination of the two.
 
Loans classified as a TDR during the years ended December 31, 2013 and 2012 are shown in the tables below. These modifications consisted primarily of interest rate and maturity date concessions.
 
 
 
2013
 
 
 
Modifications
 
 
 
 
 
Recorded
 
Recorded
 
 
 
Number of
 
Balance
 
Balance
 
 
 
Contracts
 
Before
 
After
 
Residential real estate
 
—
 
$
—
 
$
—
 
Commercial real estate
 
—
 
 
—
 
 
—
 
Commercial
 
—
 
 
—
 
 
—
 
Consumer
 
4
 
 
25
 
 
25
 
Total
 
4
 
$
25
 
$
25
 
 
 
 
2012
 
 
 
Modifications
 
 
 
 
 
Recorded
 
Recorded
 
 
 
Number of
 
Balance
 
Balance
 
 
 
Contracts
 
Before
 
After
 
Residential real estate
 
1
 
$
29
 
$
29
 
Commercial real estate
 
—
 
 
—
 
 
—
 
Commercial
 
—
 
 
—
 
 
—
 
Consumer
 
8
 
 
140
 
 
122
 
Total
 
9
 
$
169
 
$
151
 
 
There were zero TDR loans which had payment defaults during the year ended December 31, 2013.  TDR loans which had payment defaults during the year ended December 31, 2012 are shown in the table below. Default occurs when a loan is 90 days or more past due or transferred to nonaccrual within 12 months of restructuring. 
 
 
 
2012
 
 
 
Number
 
 
 
 
 
 
of
 
Recorded
 
 
 
Defaults
 
Balance
 
Residential real estate
 
1
 
$
29
 
Commercial real estate
 
—
 
 
—
 
Commercial
 
—
 
 
—
 
Consumer
 
1
 
 
20
 
Total
 
2
 
$
49
 
 
The following tables summarize loan modifications that occurred during the years ended December 31, 2013 and 2012:
 
 
 
2013
 
 
 
Payment Extension
 
Principal Reduction
 
Rate Reduction
 
 
 
Number
 
Amount
 
Number
 
Amount
 
Number
 
Amount
 
Residential real estate
 
—
 
$
—
 
—
 
$
—
 
—
 
$
—
 
Commercial real estate
 
—
 
 
—
 
—
 
 
—
 
—
 
 
—
 
Commercial
 
—
 
 
—
 
—
 
 
—
 
—
 
 
—
 
Consumer
 
2
 
 
2
 
—
 
 
—
 
2
 
 
23
 
Total
 
2
 
$
2
 
—
 
$
—
 
2
 
$
23
 
 
 
 
2012
 
 
 
Payment Extension
 
Principal Reduction
 
Rate Reduction
 
 
 
Number
 
Amount
 
Number
 
Amount
 
Number
 
Amount
 
Residential real estate
 
1
 
$
29
 
—
 
$
—
 
—
 
$
—
 
Commercial real estate
 
—
 
 
—
 
—
 
 
—
 
—
 
 
—
 
Commercial
 
—
 
 
—
 
—
 
 
—
 
—
 
 
—
 
Consumer
 
3
 
 
16
 
2
 
 
28
 
3
 
 
78
 
Total
 
4
 
$
45
 
2
 
$
28
 
3
 
$
78
 
 
Principal reductions were made based on orders from a bankruptcy court. Payment extensions and rate reductions have proven to be successful in optimizing the overall collectability of the loan by increasing the period of time that the borrower is able to make required payments to the Company.