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Loans

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Loans

(3)

Loans. The components of loans are as follows (in thousands):

		At September 30,				At December 31,
		2015				2014

Residential real estate		$	18,179			$	21,276
Multi-family real estate			3,718				1,979
Commercial real estate			29,916				31,255
Land and construction			5,283				6,177
Commercial			18,843				17,180
Consumer			2,952				20

Total loans			78,891				77,887

Add (deduct):
Net deferred loan fees, costs and premiums			146				186
Allowance for loan losses			(1,987	)			(2,244	)

Loans, net		$	77,050			$	75,829

		Residential				Multi-Family				Commercial				Land
		Real				Real				Real				and
		Estate				Estate				Estate				Construction				Commercial				Consumer				Unallocated				Total

Three Months Ended September 30, 2015:
Beginning balance		$	48			$	24			$	1,365			$	34			$	98			$	147			$	463			$	2,179
Provision (credit) for loan losses			181				(13	)			(140	)			14				(48	)			16				(10	)			—
Charge-offs			(195	)			—				—				—				—				—				—				(195	)
Recoveries			—				—				—				—				—				3				—				3

Ending balance		$	34			$	11			$	1,225			$	48			$	50			$	166			$	453			$	1,987

Nine Months Ended September 30, 2015:
Beginning balance		$	65			$	2			$	1,589			$	99			$	22			$	0			$	467			$	2,244
Provision (credit) for loan losses			236				9				(364	)			(51	)			28				156				(14	)			—
Charge-offs			(267	)			—				—				—				—				—				—				(267	)
Recoveries			—				—				—				—				—				10				—				10

Ending balance		$	34			$	11			$	1,225			$	48			$	50			$	166			$	453			$	1,987

Three Months Ended September 30, 2014:
Beginning balance		$	55			$	7			$	1,270			$	432			$	66			$	—			$	408			$	2,238
Provision (credit) for loan losses			(42	)			(4	)			331				(368	)			(57	)			(3	)			143				—
Charge-offs			—				—				—				—				—				—				—				—
Recoveries			—				—				—				—				—				3				—				3

Ending balance		$	13			$	3			$	1,601			$	64			$	9			$	—			$	551			$	2,241

Nine Months Ended September 30, 2014:
Beginning balance		$	49			$	4			$	934			$	458			$	61			$	—			$	705			$	2,211
Provision (credit) for loan losses			(56	)			(1	)			667				(394	)			(52	)			(10	)			(154	)			—
Charge-offs			—				—				—				—				—				—				—				—
Recoveries			20				—				—				—				—				10				—				30

Ending balance		$	13			$	3			$	1,601			$	64			$	9			$	—			$	551			$	2,241

At September 30, 2015:
Individually evaluated for impairment:
Recorded investment		$	2,915			$	—			$	2,153			$	—			$	2,136			$	—			$	—			$	7,204
Balance in allowance for loan losses		$	—			$	—			$	—			$	—			$	14			$	—			$	—			$	14

Collectively evaluated for impairment:
Recorded investment		$	15,264			$	3,718			$	27,763			$	5,283			$	16,804			$	2,952			$	—			$	71,784
Balance in allowance for loan losses		$	34			$	11			$	1,225			$	48			$	36			$	166			$	453			$	1,973

At December 31, 2014:
Individually evaluated for impairment:
Recorded investment		$	4,838			$	—			$	4,096			$	—			$	1,151			$	—			$	—			$	10,085
Balance in allowance for loan losses		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—

Collectively evaluated for impairment:
Recorded investment		$	16,438			$	1,979			$	27,159			$	6,177			$	16,029			$	20			$	—			$	67,802
Balance in allowance for loan losses		$	65			$	2			$	1,589			$	99			$	22			$	—			$	467			$	2,244

(continued)

	*Loans, Continued.* The Company has divided the loan portfolio into six portfolio segments, each with different risk characteristics and methodologies for assessing risk. All loans are underwritten in accordance with written policies set forth and approved by the Board of Directors (“Board”). The portfolio segments identified by the Company are as follows:

	*Residential* *Real Estate, Multi-Family Real Estate, Commercial Real Estate, Land and Construction.* Residential real estate loans are underwritten based on repayment capacity and source, value of the underlying property, credit history and stability. Multi-family real estate and commercial real estate loans are secured by the subject property and are underwritten based on among other factors, loan to value limits, cash flow coverage and general creditworthiness of the obligors. Land and construction loans to borrowers are to finance the construction of commercial and investment properties. These loans are categorized as construction loans during the construction period, later converting to commercial real estate loans after the construction is complete and amortization of the loan begins. Real estate development and construction loans are approved based on an analysis of the borrower and guarantor, the viability of the project and on an acceptable percentage of the appraised value of the property securing the loan. Real estate development and construction loan funds are disbursed periodically based on the percentage of construction completed. The Company carefully monitors these loans with on-site inspections and requires the receipt of lien waivers on funds advanced. Development and construction loans are typically secured by the properties under development or construction, and personal guarantees are typically obtained. Further, to assure that reliance is not placed solely on the value of the underlying property, the Company considers the market conditions and feasibility of proposed projects, the financial condition and reputation of the borrower and guarantors, the amount of the borrower’s equity in the project, independent appraisals, costs estimates and pre-construction sale information. The Company also makes loans on occasion for the purchase of land for future development by the borrower. Land loans are extended for the future development for either commercial or investment use by the borrower. The Company carefully analyzes the intended use of the property and the viability thereof.

	*Commercial.* Commercial loans are primarily underwritten on the basis of the borrowers’ ability to service such debt from income. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. As a general practice, the Company takes as collateral a security interest in any available real estate, equipment, or other chattel, although loans may also be made on an unsecured basis. Collateralized working capital loans typically are secured by short-term assets whereas long-term loans are primarily secured by long-term assets. These loans are also affected by adverse economic conditions should they prevail within the Company’s local market.

	*Consumer.* Consumer loans are extended through an existing online consumer credit marketplace that brings together consumers in search of lower cost unsecured installment loans and investors to fund the loans. These loans are fully amortizing with terms of either 36 or 60 months. Risk is mitigated by the fact that the loans are of smaller individual amounts and reliance on sophisticated underwriting and pricing models. Consumer loans are also extended for various purposes, including purchases of automobiles, recreational vehicles, and boats, as well as home improvement loans, lines of credit, personal loans, and deposit account collateralized loans. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Loans to consumers are extended after a credit evaluation, including the creditworthiness of the borrower(s), the purpose of the credit, and the secondary source of repayment. Consumer loans are made at fixed and variable interest rates and may be made on terms of up to ten years.

		Pass				OLEM (Other Loans Especially Mentioned)				Sub- standard				Doubtful				Loss				Total
At September 30, 2015:
Residential real estate		$	15,263			$	350			$	2,566			$	—			$	—			$	18,179
Multi-family real estate			3,718				—				—				—				—				3,718
Commercial real estate			27,182				580				2,154				—				—				29,916
Land and construction			5,236				47				—				—				—				5,283
Commercial			14,789				—				4,054				—				—				18,843
Consumer			2,952				—				—				—				—				2,952

Total		$	69,140			$	977			$	8,774			$	—			$	—			$	78,891

At December 31, 2014:
Residential real estate		$	15,170			$	—			$	6,106			$	—			$	—			$	21,276
Multi-family real estate			1,979				—				—				—								1,979
Commercial real estate			28,391				602				2,262				—				—				31,255
Land and construction			4,232				1,945				—				—				—				6,177
Commercial			12,938				—				4,242				—				—				17,180
Consumer			20				—				—				—				—				20

Total		$	62,730			$	2,547			$	12,610			$	—			$	—			$	77,887

	Pass – a Pass loan’s primary source of loan repayment is satisfactory, with secondary sources very likely to be realized if necessary. These are loans that conform in all aspects to bank policy and regulatory requirements, and no repayment risk has been identified.

	OLEM (Other Loans Especially Mentioned) – an Other Loan Especially Mentioned has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date.

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

	Doubtful – a loan classified Doubtful has all the weaknesses inherent in one classified Substandard, 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.

	Loss – a loan classified Loss is considered uncollectible and of such little value that continuance as a bankable asset is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. The Company fully charges off any loan classified as Loss.

		Accruing Loans
		30-59 Days Past Due				60-89 Days Past Due				Greater Than 90 Days Past Due				Total Past Due				Current				Nonaccrual Loans				Total Loans
*At September 30, 2015:*
Residential real estate		$	—			$	—			$	—			$	—			$	15,613			$	2,566			$	18,179
Multi-family real estate			—				—				—				—				3,718				—				3,718
Commercial real estate			1,386				—				—				1,386				26,377				2,153				29,916
Land and construction			—				—				—				—				5,283				—				5,283
Commercial			—				—				—				—				17,742				1,101				18,843
Consumer			—				—				—				—				2,952				—				2,952

Total		$	1,386			$	—			$				$	1,386			$	71,685			$	5,820			$	78,891

*At December 31, 2014:*
Residential real estate		$	—			$	1,267			$	—			$	1,267			$	17,910			$	2,099			$	21,276
Multi-family real estate			—				—				—				—				1,979				—				1,979
Commercial real estate			293				—				—				293				29,895				1,067				31,255
Land and construction			—				—				—				—				6,177				—				6,177
Commercial			—				—				—				—				16,029				1,151				17,180
Consumer			—				—				—				—				20				—				20

Total		$	293			$	1,267			$	—			$	1,560			$	72,010			$	4,317			$	77,887

The following summarizes the amount of impaired loans (in thousands):

		At September 30, 2015												At December 31, 2014
			Recorded Investment				Unpaid Principal Balance				Related Allowance				Recorded Investment				Unpaid Principal Balance				Related Allowance
With no related allowance recorded:
Residential real estate		$	2,915			$	3,689			$	—			$	4,838			$	5,345			$	—
Commercial real estate			2,153				3,967				—				4,096				5,910				—
Commercial			1,101				1,343				—				1,151				1,392				—

With an allowance recorded:
Commercial		$	1,035			$	1,048			$	14

Total:
Residential real estate		$	2,915			$	3,689			$	—
Commercial real estate		$	2,153			$	3,967			$	—
Commercial		$	2,136			$	2,391			$	14

Total		$	7,204			$	10,047			$	14

Loans, Continued. The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands):

		Three Months Ended September 30,
		2015												2014
		Average				Interest				Interest				Average				Interest				Interest
			Recorded				Income				Income				Recorded				Income				Income
			Investment				Recognized				Received				Investment				Recognized				Received

Residential real estate		$	4,532			$	35			$	58			$	4,914			$	35			$	62
Commercial real estate		$	3,792			$	18			$	49			$	5,534			$	58			$	81
Commercial		$	1,106			$	—			$	16			$	1,173			$	—			$	16

Total		$	9,430			$	53			$	123			$	11,621			$	93			$	159

		Nine Months Ended September 30,
		2015												2014
		Average				Interest				Interest				Average				Interest				Interest
			Recorded				Income				Income				Recorded				Income				Income
			Investment				Recognized				Received				Investment				Recognized				Received

Residential real estate		$	5,367			$	104			$	211			$	6,334			$	386			$	259
Commercial real estate		$	3,951			$	57			$	166			$	4,544			$	196			$	140
Commercial		$	1,123			$	—			$	49			$	1,344			$	—			$	49

Total		$	10,441			$	161			$	426			$	12,222			$	582			$	448

No loans have been determined to be troubled debt restructurings during the nine months ended September 30, 2015 or 2014.