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

12 Months Ended

Dec. 31, 2015

Disclosure Text Block Supplement [Abstract]

Allowance for Credit Losses [Text Block]

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

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

Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) and larger, non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate the probability that collection will not occur when due according to the loan’s terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “other assets especially mentioned.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair value. Impaired loans that are not troubled debt restructures and for which fair value measurement indicates an impairment loss are designated nonaccrual. A restructured loan that maintains current status for at least six months may be in accrual status.

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

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

Portfolio Segments and Classes

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

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

Historical Loss Rates

The Company’s allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The Company averages loss rates for the most recent 8 quarters to determine the historical loss rate for each class.

Two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or lower. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date.

Risk Factors

In addition to historical loss rates, risk factors pertinent to credit risk for each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality, loan officers’ experience, lending policies and the Company’s loan review system.

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

Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, housing and commercial building market trends, and interest rates.

The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates.

The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate.

Commercial non real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates. Public sector and IDA loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends.

Consumer non real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates.

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

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

	Years ended December 31,
	2015			2014			2013
Balance at beginning of year	$	8,263		$	8,227		$	8,349
Loans charged off		(2,120	)		(1,860	)		(1,820	)
Recoveries of loans previously charged off		145			255			167
Provision for loan losses		2,009			1,641			1,531
Balance at end of year	$	8,297		$	8,263		$	8,227

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

Activity in the Allowance for Loan Losses by Segment for the year ended December 31, 2015

Real Estate

Construction

Consumer

Real Estate

Commercial

Real Estate

Commercial

Non Real

Estate

Public

Sector and

IDA

Consumer

Non Real

Estate

Unallocated

Total

Balance, December 31, 2014

612

1,662

3,537

1,475

327

602

8,263

Charge-offs

---

(205

)

(1,114

)

(490

)

---

(311

)

---

(2,120

)

Recoveries

---

145

Provision for loan losses

(36

)

407

1,637

(331

)

109

243

(20

)

2,009

Balance, December 31, 2015

576

1,866

4,109

655

436

627

8,297

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

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

Allowance for Loan Losses by Segment and Evaluation Method as of

December 31, 2015

Real Estate

Construction

Consumer

Real Estate

Commercial

Real Estate

Commercial

Non Real

Estate

Public

Sector and

IDA

Consumer

Non Real

Estate

Unallocated

Total

Individually evaluated for impairment

---

Collectively evaluated for impairment

576

1,844

4,086

655

436

627

8,252

Total

576

1,866

4,109

655

436

627

8,297

Loans by Segment and Evaluation Method as of

December 31, 2015

Real Estate

Construction

Consumer

Real Estate

Commercial

Real Estate

Commercial

Non Real

Estate

Public

Sector and

IDA

Consumer

Non Real

Estate

Unallocated

Total

Individually evaluated for impairment

718

962

12,575

1,091

---

15,346

Collectively evaluated for impairment

47,533

142,542

296,803

36,480

51,335

29,845

---

604,538

Total

48,251

143,504

309,378

37,571

51,335

29,845

---

619,884

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

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

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

	December 31,
	2015			2014
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees		1.34	%		1.36	%
Ratio of net charge-offs to average loans, net of unearned income and deferred fees		0.32	%		0.27	%

A summary of nonperforming assets follows:

	December 31,
	2015			2014
Nonperforming assets:
Nonaccrual loans	$	2,043		$	3,999
Restructured loans in nonaccrual		4,639			5,288
Total nonperforming loans		6,682			9,287
Other real estate owned, net		4,165			4,744
Total nonperforming assets	$	10,847		$	14,031
Ratio of nonperforming assets to loans, net of unearned income and deferred fees, plus other real estate owned		1.74	%		2.30	%
Ratio of allowance for loan losses to nonperforming loans⁽¹⁾		124.17	%		88.97	%

(1)

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

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

	December 31,
	2015			2014
Loans past due 90 days or more and still accruing	$	156		$	207
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees		0.03	%		0.03	%
Accruing restructured loans	$	8,814		$	6,040
Impaired loans:
Impaired loans with no valuation allowance	$	12,973		$	7,615
Impaired loans with a valuation allowance		2,373			7,506
Total impaired loans		15,346			15,121
Valuation allowance		(45	)		(282	)
Impaired loans, net of allowance	$	15,301		$	14,839
Average recorded investment in impaired loans⁽¹⁾	$	17,297		$	16,311
Income recognized on impaired loans, after designation as impaired	$	769		$	473
Amount of income recognized on a cash basis	$	---		$	---

(1)

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

No interest income was recognized on nonaccrual loans for the years ended December 31, 2015, 2014 or 2013. Nonaccrual loans that meet the Company’s balance thresholds are designated as impaired.

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

Impaired Loans as of December 31, 2015

Principal

Balance

(A)

Total

Recorded

Investment⁽¹⁾

Recorded

Investment⁽¹⁾ in (A)

for Which There is

No Related

Allowance

Recorded

Investment⁽¹⁾ in

(A) for Which

There is a Related

Allowance

Related

Allowance

Real Estate Construction⁽²⁾

Construction 1-4 family residential

718

---

Consumer Real Estate⁽²⁾

Residential closed-end first liens

713

669

305

364

Residential closed-end junior liens

218

---

218

Investor-owned residential real estate

---

Commercial Real Estate⁽²⁾

Multifamily real estate

1,988

1,728

---

Commercial real estate, owner occupied

5,068

5,020

3,304

1,716

Commercial real estate, other

5,990

5,827

---

Commercial Non Real Estate⁽²⁾

Commercial and Industrial

1,099

1,091

---

Total

15,869

15,346

12,973

2,373

	Impaired Loans as of December 31, 2014
	Principal Balance		(A) Total Recorded Investment⁽¹⁾		Recorded Investment⁽¹⁾ in (A) for Which There is No Related Allowance		Recorded Investment⁽¹⁾ in (A) for Which There is a Related Allowance		Related Allowance
Consumer Real Estate⁽²⁾
Residential closed-end first liens	$	530	$	503	$	311	$	192	$	2
Residential closed-end junior liens		239		239		---		239		8
Investor-owned residential real estate		77		77		---		77		4

Commercial Real Estate⁽²⁾
Multifamily real estate		2,911		2,735		868		1,866		170
Commercial real estate, owner occupied		4,919		4,821		3,314		1,508		74
Commercial real estate, other		6,080		6,068		3,072		2,996		14

Commercial Non Real Estate⁽²⁾
Commercial and Industrial		678		678		50		628		10
Total	$	15,434	$	15,121	$	7,615	$	7,506	$	282

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

	Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2015
	Average Recorded Investment⁽¹⁾		Interest Income Recognized
Real Estate Construction⁽²⁾
Construction 1-4 family residential	$	612	$	23
Consumer Real Estate⁽²⁾
Residential closed-end first liens		681		43
Residential closed-end junior liens		228		15
Investor-owned residential real estate		76		5

Commercial Real Estate⁽²⁾
Multifamily real estate		2,581		84
Commercial real estate, owner occupied		6,141		251
Commercial real estate, other		5,888		308

Commercial Non Real Estate⁽²⁾
Commercial and Industrial		1,090		40
Total	$	17,297	$	769

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

	Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2014
	Average Recorded Investment⁽¹⁾		Interest Income Recognized
Consumer Real Estate⁽²⁾
Residential closed-end first liens	$	555	$	31
Residential closed-end junior liens		249		16
Investor-owned residential real estate		77		5

Commercial Real Estate⁽²⁾
Multifamily real estate		2,773		---
Commercial real estate, owner occupied		5,836		203
Commercial real estate, other		6,114		175

Commercial Non Real Estate⁽²⁾
Commercial and Industrial		707		43
Total	$	16,311	$	473

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

	Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 2013
	Average Recorded Investment⁽¹⁾		Interest Income Recognized
Real Estate Construction⁽²⁾
Construction, residential	$	40	$	---
Construction, other		2,885		---

Consumer Real Estate⁽²⁾
Residential closed-end first liens		364		3
Residential closed-end junior liens		280		9
Investor-owned residential real estate		131		6

Commercial Real Estate⁽²⁾
Multifamily real estate		4,172		---
Commercial real estate, owner occupied		5,265		136
Commercial real estate, other		3,369		110

Commercial Non Real Estate⁽²⁾
Commercial and Industrial		117		3

Consumer Non Real Estate⁽²⁾
Automobile		31		---
Total	$	16,654	$	267

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

An analysis of past due and nonaccrual loans follows:

December 31, 2015

30 – 89

Days Past

Due

90 or More

Days Past Due

90 or More

Days Past Due

and Still

Accruing

Nonaccruals (Including

Impaired Nonaccruals)

Real Estate Construction

Construction, residential

---

718

Construction, other

---

Consumer Real Estate

Equity lines

---

Residential closed-end first liens

1,402

106

Residential closed-end junior liens

123

---

Investor-owned residential real estate

248

---

Commercial Real Estate

Multifamily real estate

684

1,728

---

1,728

Commercial real estate, owner occupied

---

357

---

494

Commercial real estate, other

---

2,845

Commercial Non Real Estate

Commercial and Industrial

142

883

---

883

Public Sector and IDA

Public sector and IDA

---

Consumer Non Real Estate

Credit cards

---

Automobile

286

---

Other consumer loans

---

Total

2,992

3,124

156

6,682

December 31, 2014
	30 – 89 Days Past Due		90 or More Days Past Due		90 or More Days Past Due and Still Accruing		Nonaccruals (Including Impaired Nonaccruals)
Real Estate Construction
Construction, residential	$	---	$	---	$	---	$	---
Construction, other		28		---		---		---

Consumer Real Estate
Equity lines		25		---		---		---
Residential closed-end first liens		719		185		80		105
Residential closed-end junior liens		74		1		1		---
Investor-owned residential real estate		336		45		---		59

Commercial Real Estate
Multifamily real estate		850		868		---		2,735
Commercial real estate, owner occupied		---		1,066		102		2,573
Commercial real estate, other		---		70		---		3,066

Commercial Non Real Estate
Commercial and Industrial		153		43		---		749

Public Sector and IDA
Public sector and IDA		---		---		---		---

Consumer Non Real Estate
Credit cards		3		4		4		---
Automobile		205		20		20		---
Other consumer loans		54		---		---		---
Total	$	2,447	$	2,302	$	207	$	9,287

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

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

Determination of risk grades was completed for the portfolio as of December 31, 2015, 2014 and 2013.

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

December 31, 2015

Pass

Special

Mention

(Excluding

Impaired)

Classified

(Excluding

Impaired)

Real Estate Construction

Construction, 1-4 family residential

10,626

3,694

---

Construction, other

33,213

---

Consumer Real Estate

Equity lines

16,236

Closed-end first liens

78,614

708

1,370

Closed-end junior liens

4,983

Investor-owned residential real estate

39,616

766

Commercial Real Estate

Multifamily residential real estate

77,060

---

1,804

Commercial real estate owner-occupied

121,741

1,165

1,274

Commercial real estate, other

93,701

---

Commercial Non Real Estate

Commercial and Industrial

35,652

285

543

Public Sector and IDA

States and political subdivisions

51,335

---

Consumer Non Real Estate

Credit cards

5,773

---

Automobile

12,414

102

138

Other consumer

11,359

Total

592,323

6,144

6,071

December 31, 2014

	Pass		Special Mention (Excluding Impaired)		Classified (Excluding Impaired)
Real Estate Construction
Construction, 1-4 family residential	$	14,222	$	---	$	2,265
Construction, other		29,047		---		28

Consumer Real Estate
Equity lines		15,861		59		60
Closed-end first liens		78,806		1,566		1,412
Closed-end junior liens		4,258		21		95
Investor-owned residential real estate		42,781		688		614

Commercial Real Estate
Multifamily residential real estate		73,611		1,397		850
Commercial real estate owner-occupied		125,643		202		2,855
Commercial real estate, other		90,821		1,177		582

Commercial Non Real Estate
Commercial and Industrial		31,247		97		1,390

Public Sector and IDA
States and political subdivisions		41,361		---		---

Consumer Non Real Estate
Credit cards		5,705		---		---
Automobile		11,505		93		128
Other consumer		10,745		---		6
Total	$	575,613	$	5,300	$	10,285

Sales, Purchases and Reclassification of Loans

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

Troubled Debt Restructurings

From time to time the Company modifies loans in troubled debt restructurings (“TDRs”). The following tables present restructurings by class that occurred during the years ended December 31, 2015 and 2014.

Note: Only classes with restructured loans are presented.

Restructurings that occurred during the year ended

December 31, 2015

Number of

Contracts

Pre-

Modification

Outstanding

Recorded

Investment

Post-

Modification

Outstanding

Recorded

Investment⁽¹⁾

Real Estate Construction

Construction, 1-4 family residential

718

Commercial Real Estate

Commercial real estate owner-occupied

2,710

2,623

Commercial Non Real Estate

Commercial and industrial

200

Total

3,628

3,541

(1)

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

During the twelve-month period ended December 31, 2015, the Company modified six loans in troubled debt restructurings in order to provide payment relief. One commercial real estate owner-occupied loan was restructured to forgive principal of $100, reduce the interest rate, capitalize interest and re-amortize payments. The fair value measurement of the restructured loan as of December 31, 2015 resulted in no specific allocation to the allowance for loan losses. Two commercial real estate owner-occupied loans were modified during the fourth quarter of 2015 to require payments of interest only. As of December 31, 2015, the impairment analysis determined a combined allocation to the allowance for loan losses of $23. Two construction loans were modified during the fourth quarter of 2015 to become non-revolving and require payments of interest only. The fair value measurement of the restructured loans as of December 31, 2015 resulted in no specific allocation to the allowance for loan losses. One commercial loan was restructured during the fourth quarter of 2015 to extend the maturity date. The fair value measurement of the restructured loan as of December 31, 2015 resulted in no specific allocation to the allowance for loan losses.

	Restructurings that occurred during the year ended December 31, 2014
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment⁽¹⁾
Consumer Real Estate
Closed-end first liens		1	$	126	$	143

Commercial Real Estate
Multifamily residential real estate		1		2,484		2,484
Commercial real estate owner-occupied		1		184		208
Commercial real estate non owner-occupied		2		2,967		3,008
Total		5	$	5,761	$	5,843

(1)

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

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

Of the Company’s TDR’s that defaulted in 2015 and 2014, none were modified within 12 months prior to default. The company defines default as one or more payments that occur more than 90 days past the due date, charge-off or foreclosure subsequent to modification.