Highlands Bankshares 10-Q 14 Aug 15 2015 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Aug. 14, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	HIGHLANDS BANKSHARES INC /VA/
Entity Central Index Key	1,008,579
Document Period End Date	Jun. 30, 2015
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		7,851,780
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false

Consolidated Balance Sheets (Un

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Cash and due from banks	$ 20,384	$ 15,018
Federal funds sold	31,364	40,792
Total Cash and Cash Equivalents	51,748	55,810
Investment securities available for sale (amortized cost $84,028 at June 30, 2015, $84,191 at December 31, 2014)	83,896	84,335
Other investments, at cost	6,599	6,767
Loans, net of allowance for loan losses of $5,446 at June 30, 2015, $5,477 at December 31, 2014	408,496	401,520
Premises and equipment, net	20,112	20,236
Deferred tax assets	11,695	10,744
Interest receivable	2,233	2,235
Bank owned life Insurance	14,379	14,183
Other real estate owned	7,955	6,685
Other assets	2,974	2,599
Total Assets	610,087	605,114
Deposits:
Non-interest bearing	118,592	118,557
Interest bearing	368,608	364,940
Total Deposits	487,200	483,497
Interest, taxes and other liabilities	1,010	1,014
Other short-term borrowings	20,051	20,051
Long-term debt	47,724	47,750
Total Other Liabilities	68,785	68,815
Total Liabilities	555,985	552,312
STOCKHOLDERS' EQUITY
Common stock (7,851 shares issued and outstanding)	4,907	4,907
Preferred stock (2,092 shares issued and outstanding)	4,184	4,184
Additional paid-in capital	17,947	18,180
Retained earnings	27,150	25,436
Accumulated other comprehensive income	(86)	95
Total Stockholders' Equity	54,102	52,802
Total Liabilities and Stockholders' Equity	$ 610,087	$ 605,114

Consolidated Balance Sheets (U3

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
ASSETS
Investment securities available for sale, amortization cost	$ 84,028	$ 84,191
Loans, allowance for loan losses	$ 5,446	$ 5,477
STOCKHOLDERS' EQUITY
Common stock, shares issued (in shares)	7,851	7,851
Common stock, shares outstanding (in shares)	7,851	7,851
Preferred stock shares issued	2,092	2,092
Preferred stock shares outstanding	2,092	2,092

Consolidated Statements of Inco

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
INTEREST INCOME
Loans receivable and fees on loans	$ 5,276	$ 5,195	$ 10,574	$ 10,587
Securities available for sale:
Taxable	279	192	592	414
Exempt from taxable income	89	124	197	247
Other investment income	61	56	113	101
Federal funds sold	25	40	46	78
Total Interest Income	5,730	5,607	11,522	11,427
INTEREST EXPENSE
Deposits	547	640	1,117	1,303
Other borrowed funds	591	715	1,176	1,456
Total Interest Expense	1,138	1,355	2,293	2,759
Net Interest Income	4,592	4,252	9,229	8,668
Provision for Loan Losses	382	631	482	896
Net Interest Income after Provision for Loan Losses	$ 4,210	$ 3,621	8,747	$ 7,772
NON-INTEREST INCOME
Securities gains, losses, net			16
Service charges on deposit accounts	$ 430	$ 494	821	$ 946
Other service charges, commissions and fees	494	453	829	852
Other operating income	157	212	281	361
Total Non-Interest Income	1,081	1,159	1,947	2,159
NON-INTEREST EXPENSE
Salaries and employee benefits	2,567	2,506	5,013	4,973
Occupancy expense of bank premises	285	296	594	576
Furniture and equipment expense	336	270	676	572
Other operating expense	1,415	1,472	2,732	2,661
Foreclosed Assets - Write-down and operating expenses	589	499	823	772
Total Non-Interest Expense	5,192	5,043	9,838	9,554
Income Before Income Taxes	99	(263)	856	377
Income Tax Benefit	(1,035)	(1,169)	(858)	(1,030)
Net Income	$ 1,134	$ 906	$ 1,714	$ 1,407
Basic Earnings Per Common Share - Weighted Average	$ 0.14	$ 0.13	$ 0.22	$ 0.23
Earnings Per Common Share - Assuming Dilution	$ 0.11	$ 0.10	$ 0.17	$ 0.17

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Consolidated Statements Of Comprehensive Income
Net Income	$ 1,134	$ 906	$ 1,714	$ 1,407
Other Comprehensive Income
Unrealized gains (losses) on securities during the period	$ (508)	$ 495	(258)	$ 1,016
Less: reclassification adjustment for gains included in net income			(16)
Other Comprehensive Income (Loss), before tax	$ (508)	$ 495	(274)	$ 1,016
Income tax (expense) benefit related to other comprehensive income	173	(168)	93	(345)
Other Comprehensive Income (Loss)	(335)	327	(181)	671
Comprehensive Income	$ 799	$ 1,233	$ 1,533	$ 2,078

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 1,714	$ 1,407
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses	482	896
Depreciation and amortization	490	$ 435
Net realized (gains) losses on available for sale securities	(16)
Net amortization on securities	$ 526	$ 269
Amortization of Capital issue costs		7
(Increase) decrease in interest receivable	$ 2	(104)
Valuation adjustment of other real estate owned	20	160
Valuation adjustment of deferred tax assets	(1,000)	(1,000)
Increase in other assets	(245)	(1,274)
Increase (decrease) in interest, taxes and other liabilities	(4)	154
Net cash provided by operating activities	1,969	$ 950
Securities available for sale:
Proceeds from sale of securities	1,025
Proceeds from maturities of securities	8,945	$ 3,870
Purchase of securities	(10,317)	(3,445)
(Purchases) sales of other investments	168	(1,820)
Net increase in loans	(10,979)	(6,391)
Proceeds from sales of other real estate owned	1,709	1,236
Premises and equipment expenditures	(259)	(242)
Net cash used in investing activities	$ (9,708)	(6,792)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock		9,356
Issuance of Preferred Stock		7,168
Net decrease in time deposits	$ (7,249)	(7,111)
Net increase (decrease) in demand, savings and other deposits	$ 10,952	(718)
Decrease in short-term borrowings		(3,450)
Decrease in long-term debt	$ (26)	(26)
Net cash provided by financing activities	3,677	5,219
Net decrease in cash and cash equivalents	(4,062)	(623)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	55,810	83,995
CASH AND CASH EQUIVALENTS AT END OF PERIOD	51,748	83,372
Cash paid during the period for:
Interest	2,302	2,381
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Transfer of loans to other real estate owned	3,520	2,358
Loans originated from sales of other real estate owned	$ 130	$ 342

Consolidated Statements of Chan

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Preferred Stock	Additional Paid In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Balance at Dec. 31, 2013	$ 3,132		$ 7,783	$ 22,910	$ (834)	$ 32,991
Balance, Shares at Dec. 31, 2013	5,011
Net Income				$ 1,407		1,407
Common Stock Issuance	$ 1,671		$ 7,685			9,356
Common Stock Issuance, Shares	2,673
Preferred Stock Issuance		$ 4,096	$ 3,073			7,169
Preferred Stock Issuance, Shares		2,048
Other Comprehensive Income (Loss)					$ 671	671
Balance at Jun. 30, 2014	$ 4,803	$ 4,096	$ 18,541	$ 24,317	(163)	51,594
Balance, Shares at Jun. 30, 2014	7,684	2,048
Balance at Mar. 31, 2014	$ 3,132		$ 7,783	23,411	$ (490)	33,836
Balance, Shares at Mar. 31, 2014	5,011
Net Income				$ 906		906
Common Stock Issuance	$ 1,671		$ 7,685			9,356
Common Stock Issuance, Shares	2,673
Preferred Stock Issuance		$ 4,096	$ 3,073			7,169
Preferred Stock Issuance, Shares		2,048
Other Comprehensive Income (Loss)					$ 327	327
Balance at Jun. 30, 2014	$ 4,803	$ 4,096	$ 18,541	$ 24,317	(163)	51,594
Balance, Shares at Jun. 30, 2014	7,684	2,048
Balance at Dec. 31, 2014	$ 4,907	$ 4,184	$ 18,180	25,436	$ 95	52,802
Balance, Shares at Dec. 31, 2014	7,851	2,092
Net Income				$ 1,714		1,714
Additional Paid In Capital			$ (233)			(233)
Other Comprehensive Income (Loss)					$ (181)	(181)
Balance at Jun. 30, 2015	$ 4,907	$ 4,184	$ 17,947	$ 27,150	(86)	54,102
Balance, Shares at Jun. 30, 2015	7,851	2,092
Balance at Mar. 31, 2015	$ 4,907	$ 4,184	$ 17,947	26,016	$ 249	53,303
Balance, Shares at Mar. 31, 2015	7,851	2,092
Net Income				$ 1,134		1,134
Other Comprehensive Income (Loss)					$ (335)	(335)
Balance at Jun. 30, 2015	$ 4,907	$ 4,184	$ 17,947	$ 27,150	$ (86)	$ 54,102
Balance, Shares at Jun. 30, 2015	7,851	2,092

1. General

1. General	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
General	The consolidated financial statements of Highlands Bankshares, Inc. (the “Company”) conform to United States generally accepted accounting principles and to banking industry practices. The accompanying consolidated interim financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. All such adjustments are of a normal and recurring nature. The consolidated balance sheet as of December 31, 2014 has been extracted from the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Form 10-K”). The notes included herein should be read in conjunction with the notes to consolidated financial statements included in the 2014 Form 10-K. The results of operations for the three month and six month periods ended June 30, 2015 are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. Loans and Allowance for Loan

2. Loans and Allowance for Loan Losses	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
Loans and Allowance for Loan Losses	Ending Balance: Collectively Evaluated for Impairment 174,163 21,168 16,705 60,764 31,180 7,401 6,940 8,540 20,903 32,926 - 380,690 Ending Balance: June 30, 2014 $182,424 $21,168 $18,383 $71,349 $33,437 $7,549 $7,371 $9,019 $21,208 $34,317 - $406,225 A loan is considered impaired and an allowance for loan losses is established on loans for which it is probable that the full collection of principal and interest is in doubt. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value based on recent appraisal and /or tax assessment value, liquidation value and/or discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2015 and December 31, 2014, all of the total impaired loans were evaluated based on the fair value of the collateral. On a quarterly basis, the ALLL methodology begins with the determination of individually impaired loans. All loans that are rated “7” (Doubtful) are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are rated “6” (Substandard) or are expected to be downgraded to “6”, require additional analysis to determine whether they may be impaired. All loans that are rated “5” (Special Mention) are presumed not to be impaired. However, “5” rated loans with the following characteristics warrant further analysis before completing an assessment of impairment: • A loan is 60 days or more delinquent on scheduled principal or interest; • A loan is presently in an unapproved over advanced position; • A loan is newly modified; or • A loan is expected to be modified. The Company’s credit administration personnel and senior financial officers are responsible for tracking, coding, and monitoring loans that become Troubled Debt Restructurings (“TDRs”). Concessions are made to existing borrowers in the form of modified interest rates and / or payment terms. The loans are segregated for regulatory and external reporting. Each specific TDR is reviewed to determine if the accrual of interest should be discontinued and also reviewed for impairment. The Company’s senior credit administration officer performs this analysis on a quarterly basis in addition to determining any other loans that are impaired within the loan portfolio. The Company had a total of $9,494 In the determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings by adjusting the loan grades of such loans. Defaults resulting in charge-offs affect the historical loss experience ratios which are a component of the allowance calculation. Additionally, specific reserves may be established on restructured loans evaluated individually. The following tables summarize the troubled debt restructurings during the six months ended June 30, 2015 and 2014. Troubled Debt Restructurings –Six months ended June 30, 2015 Interest only Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 188 188 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 2 2,203 2,203 Commercial Real Estate- Non Owner Occupied Second Mortgages 1 68 68 Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 4 2,459 2,459 Troubled Debt Restructurings Below Market Rate Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 863 863 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 1,547 1,547 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 2 2,410 2,410 Troubled Debt Restructurings Loan term extension Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Business Commercial Agricultural Total Troubled Debt Restructurings All Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Total Restructurings 6 4,869 4,869 Troubled Debt Restructurings That subsequently defaulted Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total - - - Troubled Debt Restructurings –Six months ended June 30, 2014 Interest only Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 1,395 1,395 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 1 1,395 1,395 Troubled Debt Restructurings Below Market Rate Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 879 879 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 707 707 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 2 1,586 1,586 Troubled Debt Restructurings Loan term extension Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 6 1,217 1,217 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Business Commercial Agricultural 1 129 129 Total 7 1,346 1,346 Troubled Debt Restructurings All Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Total Restructurings 10 4,327 4,327 Troubled Debt Restructurings That subsequently defaulted Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total - - - The loan review function performs various tasks that are utilized to discover weaknesses within the loan portfolio. These include annual reviews on loan relationships that are greater than $500. The relationship review includes a discussion on the collateral, repayment history, guarantor(s) financial position, and debt service coverage on an individual and global level. These reviews are based primarily upon federal tax returns for cash flow determination, internally prepared interim statements and personal financial statements. Debt service coverage (DSC) is calculated on each individual customer, or guarantor, as well as the aggregate or global DSC. The DSC is discounted to determine a “stressed” DSC. Collateral evaluation includes an inspection of the collateral file to determine if the Bank is indeed properly securitized. Collateral is discounted, when appropriate, to determine a “stressed” loan to value (LTV) ratio. In addition to annual loan relationship reviews, quarterly reviews on all loan relationships over $100 that are graded Substandard, Doubtful and Loss are also completed. This quarterly review process is comprised of a shortened version of the full relationship review. These quarterly reviews include a discussion on personal credit management, DSC and LTV. In addition to these quarterly reviews of non-pass watch list relationships, a semi-annual review is conducted on all Special Mention loan relationships that are on the watch list. These reviews are prepared in the same manner as the quarterly non-pass relationship reviews. The appropriateness of the risk rating of each relationship is assessed, with changes to the risk rating being made by the Senior Credit Review Officer, when deemed appropriate. Other measures taken to determine potential problem relationships include the monthly preparation of the watch list. During that process, past due loan reports are reviewed, as well as any other information that might be presented by loan officers, regarding a particular loan relationship that is exhibiting stress. To be considered as a watch list relationship, distinct characteristics must be exhibited. These include, but are not limited to late payments greater than 60 days, a low DSC calculation, bankruptcy filings, casualty losses, or other issues that would cause a perceived increase in the risk of loss to the Bank. The final segment of the loan review process involves special reviews. These reviews target specific segments of the loan portfolio, i.e. credit cards, equity lines, consumer loans, construction loans, and other specific segments of the loan portfolio that management wishes to have reviewed. However, currently, the primary emphasis of the loan review function is loan relationship review work, and watch list management. The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. In reviewing risk, management has determined there to be several different risk categories within the loan portfolio. The allowance for loan losses consists of amounts applicable to: (i) the commercial loan portfolio; (ii) the commercial real estate loan portfolio; (iii) the construction loan portfolio; (iv) the consumer loan portfolio; and, (v) the residential loan portfolio. The commercial real estate (“CRE”) loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include multifamily structures and owner-occupied commercial structures. The construction loan segment is further disaggregated into two classes. One-to-four family residential construction loans are generally made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Commercial construction loans are generally made to developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures. Construction lending is generally considered to involve a higher degree of credit risk than long-term permanent financing. The following describes the Company’s basic methodology for computing its ALLL. On a quarterly basis, the ALLL methodology begins with the identification of loans subject to ASC 310. All loans that are rated “7” (Doubtful) are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are rated “6” (Substandard) or are expected to be downgraded to “6”, require additional analysis to determine whether they may be impaired under ASC 310. All loans that are rated “5” (Special Mention) are presumed not to be impaired. However, “5” rated loans, together with any Troubled Debt Restructured (TDR) loan, may warrant further analysis before completing an assessment of impairment. For ASC 310 loans that are individually evaluated and found to be impaired (primarily those designated as Substandard and Doubtful), the associated ALLL will be based upon one of the three impairment measurement methods specified within ASC 310: (1) Present value of expected future cash flows discounted at the loan’s effective interest rate; (2) Loan’s observable market price; or (3) Fair value of the collateral. To determine the amount of loan loss exposure for the impaired ASC 310 loans, the value of collateral for secured loans is evaluated to determine the current value and potential exposure. The collateral value is adjusted for its age and condition, and, for real estate, adjusted for condition, location, and age of the most current appraisal. If the adjusted value of the collateral is less than the current principal balance, the difference is designated as direct exposure for loan loss calculations. The total balance of unsecured loans is considered as direct exposure. ASC 450 Loan Loss For all other loans, including individual loans determined not to be impaired under ASC 310, the associated ALLL is calculated in accordance with ASC 450 that provides for estimated credit losses likely to be realized on groups of loans with similar risk characteristics. The Company uses standard call report categories to segregate loans into groups with similar risk characteristics. Estimated credit losses reflect significant factors that affect the collectability of the portfolio as of the evaluation date. Key factors that influence risk within the Company’s loan portfolio are divided into three major categories: (1) Historical Loss Factor: To calculate the anticipated loan loss in each call report category for ASC 450 loans, the Company begins with the net loss in each category for each of the last twelve quarters. The Company uses a rolling twelve quarter weighted historical loss average where the most recent quarters are weighted heavier than the earlier quarters so that the calculation reflects current risk trends within the portfolio. The weighting used by the Company is similar to the Rule of 78’s with the net losses of the most recent quarter weighted at 12/78ths and those in the first quarter in the twelve quarter period weighted at 1/78 th . (2) External economic factors: Economic conditions have a significant impact on Company’s loan portfolio because deteriorating conditions can adversely impact both collateral values and the customer’s ability to service debt. Management has selected the following external factors as indicators of economic conditions: a. National GDP Growth Rate b. Local Unemployment Rates c. The Prime Rate The values for external factors are updated on a quarterly basis based on current economic data. (3) Internal process factors: Internal factors that influence loss rates as a result of risk management and control practices include the following: d. Past-Due Loans e. Non-Accrual Loans f. CRE Concentrations g. Loan Volume Level h. Level and Trend of Classified Loans The values for internal factors are updated on a quarterly basis based on current portfolio metrics. Once the quarterly ALLL is computed, the calculations are reviewed by the Company’s credit administration committee which is comprised of the CEO, CFO, and Senior Lending Officers, including Credit Review personnel. The Company’s controller also performs a detailed review of the computations, estimates, etc. included in the ALLL calculation. The ALLL is then reviewed and approved by the Board of Directors." id="sjs-B4">The composition of net loans is as follows: June 30, 2015 December 31, 2014 Real Estate Secured: Residential 1-4 family $ 190,840 $ 186,829 Multifamily 23,599 21,131 Construction and Land Loans 17,007 18,518 Commercial, Owner Occupied 69,382 70,748 Commercial, Non-owner occupied 32,118 32,173 Second mortgages 7,870 8,075 Equity lines of credit 5,902 6,499 Farmland 9,113 8,246 355,831 352,219 Secured (other) and unsecured Personal 21,056 20,901 Commercial 34,376 31,586 Agricultural 3,143 2,683 58,575 55,170 Overdrafts 246 285 414,652 407,674 Less: Allowance for loan losses 5,446 5,477 Net deferred fees 710 677 6,156 6,154 Loans, net $ 408,496 $ 401,520 The following table is an analysis of past due loans as of June 30, 2015: 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Total Past Due Current Total Financing Receivables Recorded Investment > 90 Days and Accruing Real Estate Secured Residential 1-4 family $ 3,966 $ 2,179 $ 1,909 $ 8,054 $ 182,786 $ 190,840 $ - Equity lines of credit 33 12 6 51 5,851 5,902 - Multifamily - - - - 23,599 23,599 - Farmland 1,206 - 68 1,274 7,839 9,113 - Construction, Land Development, Other Land Loans 435 61 81 577 16,430 17,007 - Commercial Real Estate- Owner Occupied 2,236 - 3,592 5,828 63,554 69,382 - Commercial Real Estate- Non Owner Occupied - 368 85 453 31,665 32,118 - Second Mortgages 59 61 52 172 7,698 7,870 - Non Real Estate Secured Personal 362 55 193 610 20,692 21,302 - Commercial 484 348 484 1,316 33,060 34,376 - Agricultural 24 - - 24 3,119 3,143 - Total $ 8,805 $ 3,084 $ 6,470 $ 18,359 $ 396,293 $ 414,652 $ - The following table is an analysis of past due loans as of December 31, 2014: 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Total Past Due Current Total Financing Receivables Recorded Investment > 90 Days and Accruing Real Estate Secured Residential 1-4 family $ 4,521 $ 3,001 $ 2,884 $ 10,406 $ 176,423 $ 186,829 $ - Equity lines of credit 45 - - 45 6,454 6,499 - Multifamily 1,252 - - 1,252 19,879 21,131 - Farmland 208 - 477 685 7,561 8,246 - Construction, Land Development, Other Land Loans 417 31 168 616 17,902 18,518 - Commercial Real Estate- Owner Occupied 2,193 790 2,344 5,327 65,421 70,748 - Commercial Real Estate- Non Owner Occupied 225 85 1,547 1,857 30,316 32,173 - Second Mortgages 107 51 134 292 7,783 8,075 - Non Real Estate Secured Personal 404 105 233 742 20,444 21,186 22 Commercial 720 49 447 1,216 30,370 31,586 - Agricultural 3 - - 3 2,680 2,683 - Total $ 10,095 $ 4,112 $ 8,234 $ 22,441 $ 385,233 $ 407,674 $ 22 Loans are considered delinquent when payments have not been made according to the terms of the contract. The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Credit card loans and other personal loans are typically charged off no later than 180 days past due. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. The following is a summary of non-accrual loans at June 30, 2015 and December 31, 2014: June 30, 2015 December 31, 2014 Real Estate Secured Residential 1-4 Family $ 1,909 $ 3,401 Multifamily - - Construction and Land Loans 81 168 Commercial-Owner Occupied 3,592 5,259 Commercial- Non Owner Occupied 1,627 1,547 Second Mortgages 52 134 Equity Lines of Credit 6 - Farmland 146 477 Secured (other) and Unsecured Personal 193 211 Commercial 484 447 Agricultural - - Total $ 8,090 $ 11,644 The following is a summary of residential real estate currently in the process of foreclosure as well as foreclosed residential real estate as of June 30, 2015. Number Balance Residential real estate in the process of foreclosure - $ - Foreclosed residential real estate 13 $ 1,631 The following tables represent a summary of credit quality indicators of the Company’s loan portfolio at June 30, 2015 and December 31, 2014. The grades are assigned and/or modified by the Company’s credit review and credit analysis departments based on the creditworthiness of the borrower and the overall strength of the loan. Credit Risk Profile by Internally Assigned Grade as of June 30, 2015 Grade (1) Residential 1-4 Family Multifamily Farmland Construction, Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate Non-Owner Occupied Quality 28,340 1,253 29 2,272 3,181 527 Satisfactory 103,372 17,545 4,527 6,909 35,174 15,371 Acceptable 45,678 2,783 3,542 5,552 19,977 11,832 Special Mention 3,671 810 196 2,159 3,277 2,394 Substandard 9,779 1,208 819 115 7,773 1,994 Doubtful - - - - - - Total $ 190,840 $ 23,599 $ 9,113 $ 17,007 $ 69,382 $ 32,118 Credit Risk Profile by Internally Assigned Grade as of December 31, 2014 Grade (1) Residential 1-4 Family Multifamily Farmland Construction, Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate Non-Owner Occupied Quality 29,494 6 37 3,278 4,159 874 Satisfactory 100,767 16,326 3,090 8,091 31,018 15,052 Acceptable 44,021 2,719 4,080 4,745 20,987 12,223 Special Mention 2,640 828 198 2,231 3,994 2,108 Substandard 9,907 1,252 841 173 10,590 1,916 Doubtful - - - - - - Total $ 186,829 $ 21,131 $ 8,246 $ 18,518 $ 70,748 $ 32,173 (1) Quality • Conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind). • Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources. • Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor. For existing loans, all of the requirements above apply plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are either stable or improving. Satisfactory- • General conformity to the Bank's policy requirements, product guidelines and underwriting standards. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors. • Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources. • Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor For existing loans, all of the requirements outlined above will apply, plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are stable with any declines considered minor and temporary. Acceptable- • Additional exceptions to the Bank's policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank. Although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors. • Unproved, insufficient or marginal primary sources of repayment that appear sufficient to service the debt at this time. Repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance. • Marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor. For existing loans, payments have generally been made as agreed with only minor and isolated delinquencies. Special Mention • Loans with underwriting guideline tolerances and/or exceptions with no identifiable mitigating factors. • Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank's position at some future date. Potential weaknesses are the result of deviations from prudent lending practices. • Loans where adverse economic conditions that develop subsequent to the loan origination do not jeopardize liquidation of the debt, but do substantially increase the level of risk may also warrant this rating. Substandard- The weaknesses may include, but are not limited to: • High debt to worth ratios and or declining or negative earnings trends; • Declining or inadequate liquidity; • Improper loan structure or questionable repayment sources; • Lack of well-defined secondary repayment source; and, • Unfavorable competitive comparisons. Such loans are no longer considered to be adequately protected due to the borrower's declining net worth, lack of earnings capacity, declining collateral margins and/or unperfected collateral positions. A possibility of loss of a portion of the loan balance cannot be ruled out. The repayment ability of the borrower is marginal or weak and the loan may have exhibited excessive overdue status or extensions and/or renewals. Doubtful However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. Among these events are: • Injection of capital; • Alternative financing; and/or, • Liquidation of assets or the pledging of additional collateral. Credit Risk Profile based on payment activity as of June 30, 2015 Consumer - Non Real Estate Equity Line of Credit / Second Mortgages Commercial - Non Real Estate Agricultural - Non Real Estate Performing $ 21,109 $ 13,714 $ 33,892 $ 3,143 Nonperforming (>90 days past due) 193 58 484 - Total $ 21,302 $ 13,772 $ 34,376 $ 3,143 Credit Risk Profile based on payment activity as of December 31, 2014 Consumer - Non Real Estate Equity Line of Credit /Jr. liens Commercial - Non Real Estate Agricultural - Non Real Estate Performing $ 20,953 $ 14,440 $ 31,139 $ 2,683 Nonperforming (>90 days past due) 233 134 447 - Total $ 21,186 $ 14,574 $ 31,586 $ 2,683 The following tables reflect the Bank’s impaired loans at June 30, 2015: June 30, 2015 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With No Related Allowance Real Estate Secured Residential 1-4 family $ 8,067 $ 8,067 $ - $ 8,028 $ 180 Equity lines of credit 76 76 - 50 2 Multifamily 1,208 1,208 - 1,230 32 Farmland 830 830 - 836 30 Construction, Land Development, Other Land Loans 1,591 1,591 - 1,665 46 Commercial Real Estate- Owner Occupied 7,022 7,022 - 8,105 75 Commercial Real Estate- Non Owner Occupied 85 85 - 43 - Second Mortgages 239 239 - 429 6 Non Real Estate Secured Personal /Consumer 57 57 - 56 2 Commercial 438 438 - 400 4 Agricultural - - - - - Total $ 19,613 $ 19,613 $ - $ 20,842 $ 377 June 30, 2015 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With an Allowance Recorded Real Estate Secured Residential 1-4 family $ 2,952 $ 2,952 $ 567 $ 3,050 $ 70 Equity lines of credit 6 6 6 3 - Multifamily - - - - - Farmland - - - - - Construction, Land Development, Other Land Loans 366 366 20 366 11 Commercial Real Estate- Owner Occupied 750 750 1 1,077 18 Commercial Real Estate- Non Owner Occupied 1,909 1,909 314 1,913 17 Second Mortgages - - - - - Non Real Estate Secured Personal /Consumer 184 184 124 219 3 Commercial 834 834 666 818 16 Agricultural - - - - - Total $ 7,001 $ 7,001 $ 1,698 $ 7,446 $ 135 The following tables reflect the Bank’s impaired loans at December 31, 2014: December 31, 2014 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no Related Allowance Real Estate Secured Residential 1-4 family $ 7,988 $ 7,988 $ - $ 7,015 $ 256 Equity lines of credit 24 24 - 194 1 Multifamily 1,252 1,252 - 626 21 Farmland 842 842 - 663 32 Construction, Land Development, Other Land Loans 1,738 1,738 - 1,716 64 Commercial Real Estate- Owner Occupied 9,188 9,392 - 7,291 262 Commercial Real Estate- Non Owner Occupied - - - 3,227 - Second Mortgages 618 618 - 340 20 Non Real Estate Secured Personal 54 54 - 53 3 Commercial 361 361 - 229 20 Agricultural - - - - - Total $ 22,065 $ 22,269 $ - $ 21,354 $ 679 December 31, 2014 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With an Allowance Recorded Real Estate Secured Residential 1-4 family $ 3,148 $ 3,148 $ 586 $ 3,087 $ 125 Equity lines of credit - - - 19 - Multifamily - - - - - Farmland - - - 100 - Construction, Land Development, Other Land Loans 366 366 20 183 13 Commercial Real Estate- Owner Occupied 1,403 1,403 143 2,466 56 Commercial Real Estate- Non Owner Occupied 1,916 1,916 322 3,249 31 Second Mortgages - - - 28 - Non Real Estate Secured Personal 253 253 188 193 7 Commercial 802 802 540 863 28 Agricultural 7 7 7 94 1 Total $ 7,895 $ 7,895 $ 1,806 $ 10,282 $ 261 The following tables present the balance in the allowance for loan losses and the recorded investment in loans by loan category and is segregated by impairment evaluation method as of June 30, 2015 and June 30, 2014. Six months ended June 30, 2015 Residential 1-4 Family Multifamily Construction and Land Loans Commercial R./E Owner Occupied Commercial R/E Non-Owner Occupied Second Mortgages Equity Line of Credit Farmland Personal and Overdrafts Commercial and Agricultural Unallocated Total Allowance for Credit Losses: Beginning Balance December 31, 2014 $ 995 $ 20 $ 87 $ 409 $ 1,063 $ 67 $ 74 $ 12 $ 665 $ 982 $ 1,103 $ 5,477 Provision for Credit Losses 64 (20) (52) (123) (18) (8) (80) (1) 134 362 224 482 Charge-offs 98 - - - 392 3 - - 230 177 - 900 Recoveries (1) - (18) (1) (275) - (41) - (44) (7) - (387) Net Charge-offs 97 - (18) (1) 117 3 (41) - 186 170 - 513 Ending Balance June 30, 2015 962 - 53 287 928 56 35 11 613 1,174 1,327 5,446 Ending Balance: Individually evaluated for impairment 567 - 20 1 314 - 6 - 124 666 - 1,698 Ending Balance: Collectively Evaluated for Impairment 395 - 33 286 614 56 29 11 489 508 1,327 3,748 Loans: Ending Balance: Individually Evaluated for Impairment 11,019 1,208 1,957 7,772 1,994 239 82 830 241 1,272 - 26,614 Ending Balance: Collectively Evaluated for Impairment 179,821 22,391 15,050 61,610 30,124 7,631 5,820 8,283 21,061 36,247 - 388,038 Ending Balance: June 30, 2015 $190,840 $23,599 $17,007 $69,382 $32,118 $7,870 $5,902 $9,113 $21,302 $37,519 - $414,652 Six months ended June 30, 2014 Residential 1-4 Family Multifamily Construction and Land Loans Commercial R./E Owner Occupied Commercial R/E Non-Owner Occupied Second Mortgages Equity Line of Credit Farmland Personal and Overdrafts Commercial and Agricultural Unallocated Total Allowance for Credit Losses: Beginning Balance December 31, 2013 $ 975 $ 143 $ 230 $ 1,029 $ 1,415 $ 153 $ 50 $ 65 $ 483 $ 1,264 $ 1,018 $ 6,825 Provision for Credit Losses 259 (62) (65) (45) 1,071 (39) 134 (43) 234 (74) (474) 896 Charge-offs 141 - 18 240 1,163 25 9 - 187 329 - 2,112 Recoveries - - (2) - - (1) - - (41) (20) - 64 Net Charge-offs 141 - 16 240 1,163 24 9 - 146 309 - 2,048 Ending Balance June 30, 2014 1,069 81 149 744 1,323 90 175 22 571 881 568 5,673 Ending Balance: Individually evaluated for impairment 530 - - 308 397 - 162 - 164 427 - 1,988 Ending Balance: Collectively Evaluated for Impairment 539 81 149 436 926 90 13 22 407 454 568 3,685 Loans: Ending Balance: Individually Evaluated for Impairment 8,261 - 1,678 10,585 2,257 148 431 479 305 1,391 - 25,535 es, Serif">Ending Balance: Collectively Evaluated for Impairment 174,163 21,168 16,705 60,764 31,180 7,401 6,940 8,540 20,903 32,926 - 380,690 Ending Balance: June 30, 2014 $182,424 $21,168 $18,383 $71,349 $33,437 $7,549 $7,371 $9,019 $21,208 $34,317 - $406,225 A loan is considered impaired and an allowance for loan losses is established on loans for which it is probable that the full collection of principal and interest is in doubt. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value based on recent appraisal and /or tax assessment value, liquidation value and/or discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2015 and December 31, 2014, all of the total impaired loans were evaluated based on the fair value of the collateral. On a quarterly basis, the ALLL methodology begins with the determination of individually impaired loans. All loans that are rated “7” (Doubtful) are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are rated “6” (Substandard) or are expected to be downgraded to “6”, require additional analysis to determine whether they may be impaired. All loans that are rated “5” (Special Mention) are presumed not to be impaired. However, “5” rated loans with the following characteristics warrant further analysis before completing an assessment of impairment: • A loan is 60 days or more delinquent on scheduled principal or interest; • A loan is presently in an unapproved over advanced position; • A loan is newly modified; or • A loan is expected to be modified. The Company’s credit administration personnel and senior financial officers are responsible for tracking, coding, and monitoring loans that become Troubled Debt Restructurings (“TDRs”). Concessions are made to existing borrowers in the form of modified interest rates and / or payment terms. The loans are segregated for regulatory and external reporting. Each specific TDR is reviewed to determine if the accrual of interest should be discontinued and also reviewed for impairment. The Company’s senior credit administration officer performs this analysis on a quarterly basis in addition to determining any other loans that are impaired within the loan portfolio. The Company had a total of $9,494 In the determination of the allowance for loan losses, management considers troubled debt restructurings and subsequent defaults in these restructurings by adjusting the loan grades of such loans. Defaults resulting in charge-offs affect the historical loss experience ratios which are a component of the allowance calculation. Additionally, specific reserves may be established on restructured loans evaluated individually. The following tables summarize the troubled debt restructurings during the six months ended June 30, 2015 and 2014. Troubled Debt Restructurings –Six months ended June 30, 2015 Interest only Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 188 188 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 2 2,203 2,203 Commercial Real Estate- Non Owner Occupied Second Mortgages 1 68 68 Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 4 2,459 2,459 Troubled Debt Restructurings Below Market Rate Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 863 863 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 1,547 1,547 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 2 2,410 2,410 Troubled Debt Restructurings Loan term extension Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Business Commercial Agricultural Total Troubled Debt Restructurings All Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Total Restructurings 6 4,869 4,869 Troubled Debt Restructurings That subsequently defaulted Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total - - - Troubled Debt Restructurings –Six months ended June 30, 2014 Interest only Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 1,395 1,395 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 1 1,395 1,395 Troubled Debt Restructurings Below Market Rate Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 879 879 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 707 707 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 2 1,586 1,586 Troubled Debt Restructurings Loan term extension Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 6 1,217 1,217 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Business Commercial Agricultural 1 129 129 Total 7 1,346 1,346 Troubled Debt Restructurings All Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Total Restructurings 10 4,327 4,327 Troubled Debt Restructurings That subsequently defaulted Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total - - - The loan review function performs various tasks that are utilized to discover weaknesses within the loan portfolio. These include annual reviews on loan relationships that are greater than $500. The relationship review includes a discussion on the collateral, repayment history, guarantor(s) financial position, and debt service coverage on an individual and global level. These reviews are based primarily upon federal tax returns for cash flow determination, internally prepared interim statements and personal financial statements. Debt service coverage (DSC) is calculated on each individual customer, or guarantor, as well as the aggregate or global DSC. The DSC is discounted to determine a “stressed” DSC. Collateral evaluation includes an inspection of the collateral file to determine if the Bank is indeed properly securitized. Collateral is discounted, when appropriate, to determine a “stressed” loan to value (LTV) ratio. In addition to annual loan relationship reviews, quarterly reviews on all loan relationships over $100 that are graded Substandard, Doubtful and Loss are also completed. This quarterly review process is comprised of a shortened version of the full relationship review. These quarterly reviews include a discussion on personal credit management, DSC and LTV. In addition to these quarterly reviews of non-pass watch list relationships, a semi-annual review is conducted on all Special Mention loan relationships that are on the watch list. These reviews are prepared in the same manner as the quarterly non-pass relationship reviews. The appropriateness of the risk rating of each relationship is assessed, with changes to the risk rating being made by the Senior Credit Review Officer, when deemed appropriate. Other measures taken to determine potential problem relationships include the monthly preparation of the watch list. During that process, past due loan reports are reviewed, as well as any other information that might be presented by loan officers, regarding a particular loan relationship that is exhibiting stress. To be considered as a watch list relationship, distinct characteristics must be exhibited. These include, but are not limited to late payments greater than 60 days, a low DSC calculation, bankruptcy filings, casualty losses, or other issues that would cause a perceived increase in the risk of loss to the Bank. The final segment of the loan review process involves special reviews. These reviews target specific segments of the loan portfolio, i.e. credit cards, equity lines, consumer loans, construction loans, and other specific segments of the loan portfolio that management wishes to have reviewed. However, currently, the primary emphasis of the loan review function is loan relationship review work, and watch list management. The segments of the Company’s loan portfolio are disaggregated to a level that allows management to monitor risk and performance. In reviewing risk, management has determined there to be several different risk categories within the loan portfolio. The allowance for loan losses consists of amounts applicable to: (i) the commercial loan portfolio; (ii) the commercial real estate loan portfolio; (iii) the construction loan portfolio; (iv) the consumer loan portfolio; and, (v) the residential loan portfolio. The commercial real estate (“CRE”) loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include multifamily structures and owner-occupied commercial structures. The construction loan segment is further disaggregated into two classes. One-to-four family residential construction loans are generally made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Commercial construction loans are generally made to developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures. Construction lending is generally considered to involve a higher degree of credit risk than long-term permanent financing. The following describes the Company’s basic methodology for computing its ALLL. On a quarterly basis, the ALLL methodology begins with the identification of loans subject to ASC 310. All loans that are rated “7” (Doubtful) are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are rated “6” (Substandard) or are expected to be downgraded to “6”, require additional analysis to determine whether they may be impaired under ASC 310. All loans that are rated “5” (Special Mention) are presumed not to be impaired. However, “5” rated loans, together with any Troubled Debt Restructured (TDR) loan, may warrant further analysis before completing an assessment of impairment. For ASC 310 loans that are individually evaluated and found to be impaired (primarily those designated as Substandard and Doubtful), the associated ALLL will be based upon one of the three impairment measurement methods specified within ASC 310: (1) Present value of expected future cash flows discounted at the loan’s effective interest rate; (2) Loan’s observable market price; or (3) Fair value of the collateral. To determine the amount of loan loss exposure for the impaired ASC 310 loans, the value of collateral for secured loans is evaluated to determine the current value and potential exposure. The collateral value is adjusted for its age and condition, and, for real estate, adjusted for condition, location, and age of the most current appraisal. If the adjusted value of the collateral is less than the current principal balance, the difference is designated as direct exposure for loan loss calculations. The total balance of unsecured loans is considered as direct exposure. ASC 450 Loan Loss For all other loans, including individual loans determined not to be impaired under ASC 310, the associated ALLL is calculated in accordance with ASC 450 that provides for estimated credit losses likely to be realized on groups of loans with similar risk characteristics. The Company uses standard call report categories to segregate loans into groups with similar risk characteristics. Estimated credit losses reflect significant factors that affect the collectability of the portfolio as of the evaluation date. Key factors that influence risk within the Company’s loan portfolio are divided into three major categories: (1) Historical Loss Factor: To calculate the anticipated loan loss in each call report category for ASC 450 loans, the Company begins with the net loss in each category for each of the last twelve quarters. The Company uses a rolling twelve quarter weighted historical loss average where the most recent quarters are weighted heavier than the earlier quarters so that the calculation reflects current risk trends within the portfolio. The weighting used by the Company is similar to the Rule of 78’s with the net losses of the most recent quarter weighted at 12/78ths and those in the first quarter in the twelve quarter period weighted at 1/78 th . (2) External economic factors: Economic conditions have a significant impact on Company’s loan portfolio because deteriorating conditions can adversely impact both collateral values and the customer’s ability to service debt. Management has selected the following external factors as indicators of economic conditions: a. National GDP Growth Rate b. Local Unemployment Rates c. The Prime Rate The values for external factors are updated on a quarterly basis based on current economic data. (3) Internal process factors: Internal factors that influence loss rates as a result of risk management and control practices include the following: d. Past-Due Loans e. Non-Accrual Loans f. CRE Concentrations g. Loan Volume Level h. Level and Trend of Classified Loans The values for internal factors are updated on a quarterly basis based on current portfolio metrics. Once the quarterly ALLL is computed, the calculations are reviewed by the Company’s credit administration committee which is comprised of the CEO, CFO, and Senior Lending Officers, including Credit Review personnel. The Company’s controller also performs a detailed review of the computations, estimates, etc. included in the ALLL calculation. The ALLL is then reviewed and approved by the Board of Directors.

3. Income Taxes

3. Income Taxes	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
Income Taxes	Income tax expense (benefit) for the six months ended June 30 is different than the amount computed by applying the statutory corporate federal income tax rate of 34% to income before taxes. The reasons for these differences are as follows: 2015 2014 Tax expense at statutory rate $ 291 $ 128 Reduction in taxes from: Tax-exempt interest (67) (84) Valuation adjustment for deferred tax assets (1,000) (1,000) Other, net (82) (74) Income tax benefit $ (858) $ (1,030) In the second quarter of 2015, the Company reversed the remaining balance of the valuation allowance that was established against the deferred tax assets (“DTA”) during the fourth quarter of 2011. The valuation allowance was established during 2011 due to uncertainty at the time regarding the ability to generate sufficient future taxable income to fully realize the benefit of the net DTA. Subsequent to 2011, earnings performance and asset quality have improved resulting in greater expected realization of the DTA. In addition, the Company raised $16,123 in net proceeds of new capital in 2014 which allowed the Company to pay off two high rate debt instruments (the Company’s Community Bankers Bank note and Trust Preferred Securities) improving future earnings potential. As a result of these factors, the Company reversed $1,000 of the DTA in the second quarter of 2014, and due to the continued improvements in asset quality and earnings performance the remaining $1,000 of the DTA valuation allowance was reversed in the second quarter of 2015. In assessing the realizability of DTA, management considers whether it is more likely than not that some portion or all of the DTA will not be realized. The Company evaluates the carrying amount of its DTA on a quarterly basis in accordance with the guidance provided in FASB ASC Topic 740 (“ASC 740”), in particular, applying the criteria set forth therein to determine whether it is more likely than not (i.e., a likelihood of more than 50%) that some portion, or all, of the DTA will not be realized within its life cycle, based on the weight of available evidence. In most cases, the realization of the DTA is dependent upon the Company generating a sufficient level of taxable income in future periods, which can be difficult to predict. If the Company’s forecast of taxable income within the carry forward periods available under applicable law is not sufficient to cover the amount of net deferred assets, such assets may be impaired. Management considers the reversal of deferred tax liabilities (including the impact of available carry-back and carry-forward periods), projected future taxable income and tax-planning strategies in making this assessment.

4. Capital Requirements

4. Capital Requirements	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
Capital Requirements	Regulators of the Company and its subsidiary, Highlands Union Bank (the “Bank”), have implemented risk-based capital guidelines which require compliance with certain minimum capital ratios as a percent of assets and other certain off-balance sheet items that are adjusted for predefined credit risk factors. On July 7, 2013 the Federal Reserve Board approved Basel III Final Rules to begin implementation January 1, 2015. The desired overall objective of Basel III is to improve the banking sector’s ability to absorb shocks arising from financial and economic stress. The Final Rule includes a new Common Equity Tier 1 (CET1) minimum ratio and raises the Tier 1 Risk Weighted Assets ratio to 6% from 4%. In addition, the new rules require a bank to maintain a capital conservation buffer of between 2 and 2 ½ % beginning in 2016. Additionally, the new rules increase the risk weighting of various assets. The new rules began phase in during 2015 with complete compliance required by 2019. Generally, the Basel III Final Rule will require banks to maintain higher levels of common equity and regulatory capital. On December 18, 2014, the President of the United States signed into law Public Law 113-250 (the “Act”), which directs the Board of Governors of the Federal Reserve System (Board) to propose revisions to the Small Bank Holding Company Policy Statement (Policy Statement) to raise the total consolidated asset threshold in the Policy Statement from $500 million to $1 billion. On February 5, 2015 the Company received notification from the Federal Reserve Bank that it would no longer be required to report holding company consolidated capital ratios. The following tables present the capital ratios for the Bank only. June 30, 2015 Entity Tier 1 Total Risk Based Leverage CET 1 Effective in 2015 Highlands Union Bank 11.63% 12.89% 7.41% 11.63% December 31, 2014 Entity Tier 1 Total Risk Based Leverage CET 1 Highlands Union Bank 12.93% 14.19% 7.71% N/A

5. Private Placement Capital Ra

5. Private Placement Capital Raise / Rights Offering	6 Months Ended
	Jun. 30, 2015
Private Placement Capital Raise Rights Offering
Private Placement Capital Raise / Rights Offering	On April 16, 2014, management and board of directors of Highlands Bankshares, Inc. announced the completion of a $16,525 private placement capital raise. Purchasers in the private placement included outside investors, as well as certain directors and executive officers of the Company. The Company sold 2,673,249 newly issued shares of the Company’s common stock at $3.50 per share, and 2,048,179 shares of Series-A convertible perpetual preferred stock at $3.50 per share. The private placement was disclosed on Form 8-K on April 16, 2014. The Company immediately paid off a Holding Company Loan in the amount of $3,440 to Community Bankers Bank on April 16, 2014 with the funds received from the capital raise. The Company also paid off the remaining $3,150 of its trust preferred securities including accrued interest. The payoff totaling $4,802 was completed on July 15, 2014. The Company down-streamed to the subsidiary Bank in June 2014 $7,500 of funds received from the capital raise. During the third quarter of 2014, the Company also conducted a rights offering to its existing shareholders other than directors and executive officers. The Company raised a total of $556 as a result of the offering. The Company immediately down-streamed $400 of the $556 to the Bank in September of 2014. In October 2014, one of the private placement purchasers, TNH Financial Fund, LP, purchased another $183 of common and preferred stock which allowed them to maintain the same ownership percentage that was held immediately prior to the rights offering. Net proceeds received from the private placement issues and rights offering totaled $16,123.

6. Per Share Amounts

6. Per Share Amounts	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
Per Share Amounts	Earnings per common share is computed using the weighted average outstanding shares for the three and six months ended June 30, 2014 and 2015. Outstanding stock options impact on earnings per share is determined using the treasury stock method. For 2015 and 2014, the impact of conversions of outstanding stock options was anti-dilutive. During 2014, the Company issued a total of 2,092,287 shares of Series A preferred stock (See Note 5). These preferred shares are non-voting mandatorily convertible non-cumulative preferred shares which are entitled to receive dividends equal to dividends paid on the Company’s common shares. The Series A preferred shares will rank pari passu with the common stock with respect to all terms (other than voting), including, the payment of dividends or distributions, and payments and rights upon liquidation and dissolution. The following is a reconciliation of the numerators and the denominators of the basic and diluted earnings per common share computation: For the three months ended June 30 2015 2014 Income available to common stockholders $ 1,134 $ 906 Weighted average shares outstanding 7,851 7,244 Shares outstanding including assumed conversion 9,943 9,292 Basic earnings per common share $ 0.14 $ 0.13 Fully diluted earnings per share (including convertible preferred shares outstanding) $ 0.11 $ 0.10 For the six months ended June 30 2015 2014 Income available to common stockholders $ 1,714 $ 1,407 Weighted average shares outstanding 7,851 6,134 Shares outstanding including assumed conversion 9,943 8,182 Basic earnings per common share $ 0.22 $ 0.23 Fully diluted earnings per share (including convertible preferred shares outstanding) $ 0.17 $ 0.17

7. Commitments and Contingencie

7. Commitments and Contingencies	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
Commitments and Contingencies	The Bank is a party to various financial instruments with off-balance sheet risk arising in the normal course of business to meet the financing needs of its customers. Those financial instruments include commitments to extend credit and standby letters of credit. At June 30, 2015, these commitments included: standby letters of credit of $336; equity lines of credit of $8,041; credit card lines of credit of $6,291; commercial real estate, construction and land development commitments of $4,665; and other unused commitments to fund interest earning assets of $27,309.

8. Fair Value

8. Fair Value	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
Fair Value	The Company utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets. Fair Value Hierarchy Under ASC Topic 820 on Fair Value Measurements and Disclosures, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are: Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets. Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon third party models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Recurring - Investment Securities Available for Sale Securities classified as available for sale are reported at fair value utilizing Level 2. For Level 2 securities, the Company obtains fair value measurements from multiple independent third party sources. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the bond’s terms and conditions, among other things. The following tables summarize the Company’s available for sale securities portfolio measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014, segregated by the level of the valuation inputs within the fair value hierarchy. June 30, 2015 Level 1 Level 2 Level 3 Total Fair Value Available for Sale Securities State and Political Subdivisions $ - $ 7,267 $ - $ 7,267 Mortgage Backed Securities $ - $ 64,850 $ - $ 64,850 Single Issue Trust Preferred $ - $ 475 $ - $ 475 SBA Pools $ - $ 11,304 $ - $ 11,304 Total AFS Securities $ - $ 83,896 $ - $ 83,896 December 31, 2014 Level 1 Level 2 Level 3 Total Fair Value Available for Sale Securities State and Political Subdivisions $ - $ 9,701 $ - $ 9,701 Mortgage Backed Securities $ - $ 61,723 $ - $ 61,723 Single Issue Trust Preferred $ - $ 488 $ - $ 488 SBA Pools $ - $ 12,423 $ - $ 12,423 Total AFS Securities $ - $ 84,335 $ - $ 84,335 Non Recurring - Loans The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including recently appraised collateral value and /or tax assessed value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At June 30, 2015 and December 31, 2014, all of the total impaired loans were evaluated based on the fair value of the collateral. The Company frequently obtains appraisals prepared by external professional appraisers and applies discounts ranging from 8% to 40% depending on type of property, condition, location, etc. which the Company considers to be nonrecurring Level 3. The Company also, in certain instances, prepares internally generated valuations from on-site inspections, third-party valuation models or other information. Non Recurring -Foreclosed Assets / Repossessions Foreclosed assets and repossessions are adjusted to fair value upon transfer of the loans to foreclosed assets and repossessions. Subsequently, foreclosed assets and repossessions are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices or recent appraised values of the collateral, which the Company considers to be nonrecurring Level 2. When the current appraised value is not available and /or further discounted below the most recent appraised value less selling costs due to such things as absorption rates and market conditions, the Company classifies the foreclosed assets within Level 3 of the fair value hierarchy. The following table summarizes the Company’s assets at fair value on a non - recurring basis as of June 30, 2015 and December 31, 2014 segregated by the level of the valuation inputs within the fair value hierarchy. The tables disclose the recorded investment of impaired loans requiring a specific allowance. June 30, 2015 Level 1 Level 2 Level 3 Total Fair Value Impaired Loans $ - $ - $ 7,001 $ 7,001 Repossessions/OREO, net $ - $ - $ 7,980 $ 7,980 December 31, 2014 Level 1 Level 2 Level 3 Total Fair Value Impaired Loans $ - $ - $ 7,895 $ 7,895 Repossessions/OREO, net $ - $ - $ 6,704 $ 6,704 The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Company uses Level 3 inputs to determine fair value (dollars in thousands): Quantitative Information about Level 3 Fair Value Measurements June 30, December 31, Valuation Unobservable Range 2015 2014 Techniques Input (2) (Weighted Average) OREO,Repossessions $ 7,980 $ 6,704 Appraisal of collateral (1) Appraisal adjustments 0% to 45% (13%) Liquidation expenses 0% to 10% (9%) Impaired loans $ 7,001 $ 7,895 Fair value of collateral –real estate (1), (3) Appraisal adjustments 0% to 10% (9%) Fair value of collateral –equipment, inventory, other (1), (3) Appraisal adjustments 25% to 50% (33%) Liquidation expenses 0% to 10% (9%) Valuation adjustments and liquidation cost adjustments represent unobservable inputs for OREO and impaired loans. The ranges of discounts applied are based on age of independent appraisals, type and condition of collateral, current market conditions, and experience with the local market. (1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. (2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range and weighted average of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal. (3) Includes qualitative adjustments by management. General The Company has no liabilities carried at fair value or measured at fair value on a recurring or non-recurring basis. Fair Value of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. Cash and Cash Equivalents The carrying amount reported in the balance sheets for cash, short-term investments and federal funds sold approximates fair value. Securities Available for Sale Fair values are determined in the manner as described above. Other Investments Other investments include Federal Home Loan Bank stock, Federal Reserve Bank stock, Community Bankers Bank stock, and Pacific Coast Bankers Bank. The carrying value of those securities approximates fair value based on the redemption provisions of those Banks. Also included in other investments are certificates of deposit purchased from other FDIC insured banks in which the carrying amount approximates fair value. Loans The fair value of loans represent the amount at which the loans of the Bank could be exchanged on the open market, based upon the current lending rate for similar types of lending arrangements discounted over the remaining life of the loans. For fixed rate loans and for variable rate loans with infrequent re-pricing or re-pricing limits, fair value is based on discounted cash flows using current market rates applied to the cash flow analysis. Deposits The fair value of time deposits is based on discounted cash flows using current market rates applied to the cash flow analysis for each time deposit. Other non-maturity deposits are reported at their carrying values. Other Short-Term Borrowings Fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. Estimated maturity dates are also included in the calculation of fair value for these borrowings. Long-term Debt and Capital Securities Rates currently available to the Company for debt with similar terms and remaining maturities or established call prices are used to estimate fair value of existing debt. Off-Balance Sheet Instruments The amount of off-balance sheet commitments to extend credit, standby letters of credit, and financial guarantees, is considered equal to fair value. Because of the uncertainty involved in attempting to assess the likelihood and timing of commitments being drawn upon, coupled with the lack of an established market and the wide diversity of fee structures, the Company does not believe it is meaningful to provide an estimate of fair value that differs from the given value of the commitment. The carrying amounts and fair values of the Company's financial instruments at June 30, 2015 and December 31, 2014 were as follows: June 30, 2015 December 31, 2014 Carrying Amount Fair Value Carrying Amount Fair Value Cash and cash equivalents $ 51,748 $ 51,748 $ 55,810 $ 55,810 Securities available for sale 83,896 85,896 84,335 84,335 Other investments 6,599 6,599 6,767 6,767 Loans, net 408,496 403,871 401,520 398,019 Deposits (487,200) (467,620) (483,497) (464,335) Other short-term borrowings (20,051) (21,299) (20,051) (21,495) Long-term debt (47,724) (50,683) (47,750) (50,799)

9. Investment Securities Availa

9. Investment Securities Available For Sale	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
Investment Securities Available For Sale	The amortized cost and market value of securities available for sale are as follows: June 30, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value State and political subdivisions $ 7,139 $ 128 $ - $ 7,267 Mortgage backed securities 64,877 262 289 64,850 Single Issue Trust Preferred 500 - 25 475 SBA Pools 11,512 12 220 11,304 $ 84,028 $ 402 $ 534 $ 83,896 December 31, 2014 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value State and political subdivisions $ 9,546 $ 163 $ 8 $ 9,701 Mortgage backed securities 61,476 395 148 61,723 Single Issue Trust Preferred 500 - 12 488 SBA Pools 12,669 29 275 12,423 $ 84,191 $ 587 $ 443 $ 84,335 Investment securities available for sale with an amortized cost of $34,705 and $39,298 at June 30, 2015 and December 31, 2014, respectively, and a market value of $34,676 and $39,325 at June 30, 2015 and December 31, 2014, respectively, were pledged as collateral on public deposits, FHLB advances and for other purposes as required or permitted by law The following table presents the age of gross unrealized losses and fair value by investment category: June 30, 2015 Less Than 12 months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses State and political subdivisions $ - $ - $ - $ - $ - $ - Mortgage-backed securities 29,474 168 6,343 121 35,817 289 Single Issue Trust Preferred - - 475 25 475 25 SBA Pools - - 10,152 220 10,152 220 Total $ 29,474 $ 168 $ 16,970 $ 366 $46,444 $ 534 December 31, 2014 Less Than 12 months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses State and political subdivisions $ - $ - $ 1,002 $ 8 $ 1,002 $ 8 Mortgage-backed securities 5,244 19 7,586 129 12,830 148 Single Issue Trust Preferred - - 488 12 488 12 SBA Pools - - 11,239 275 11,239 275 Total $ 5,244 $ 19 $ 20,315 $ 424 $25,559 $ 443 The Company assesses its securities for “OTTI” (other than temporary impairment) quarterly by reviewing credit ratings, financial and regulatory reports as well as other pertinent published financial data. As of June 30, 2015 and December 31, 2014, the Company's assessment revealed no impairment other than that deemed temporary on those securities. The amortized cost and estimated fair value of securities available for sale at June 30, 2015 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Cost Approximate Market Value Due in one year or less $ - $ - Due after one year through five years 2,586 2,631 Due after five years through ten years 380 378 Due after ten years 16,185 16,037 19,151 19,046 Mortgage-backed securities 64,877 64,850 $ 84,028 $ 83,896

10. Formal Written Agreement

10. Formal Written Agreement	6 Months Ended
	Jun. 30, 2015
Formal Written Agreement
Formal Written Agreement	On October 13, 2010, the Company and Bank entered into a written agreement (“Written Agreement”) with the Federal Reserve Bank of Richmond (the “Reserve Bank”). Under the terms of the Written Agreement, the Bank has agreed to develop and submit to the Reserve Bank for approval within the time periods specified therein written plans or programs to: · strengthen board oversight of the management and operations of the Bank; · strengthen credit risk management and administration; · provide for the effective grading of the Bank’s loan portfolio; · summarize the findings of its review of the adequacy of the staffing of its loan review function; · improve the Bank’s position with respect to loans, relationships, or other assets in excess of $500 that currently are or in the future become past due more than 90 days, on the Bank’s problem loan list, or adversely classified in any report of examination of the Bank; · review and revise the Bank’s methodology for determining the allowance for loan and lease losses (“ALLL”) and maintain an adequate ALLL; · maintain sufficient capital at the Company and the Bank; · establish a revised written contingency funding plan; · establish a revised written strategic and capital plan; · establish a revised investment policy; · improve the Bank’s earnings and overall condition; · revise the Bank’s information technology program; · establish a disaster recovery and business continuity program; and, · establish a committee to monitor compliance with all aspects of the written agreement. Further, both the Company and the Bank have agreed to refrain from declaring or paying dividends without prior regulatory approval. The Company has agreed that it will not take any other form of payment representing a reduction in Bank’s capital or make any distributions of interest, principal or other sums on subordinated debentures or trust preferred securities without prior regulatory approval. The Company also has agreed not to incur, increase or guarantee any debt or not to purchase or redeem any shares of its stock without prior regulatory approval.

11. Summary of Significant Acco

11. Summary of Significant Accounting Policy Update For Certain Required Disclosures	6 Months Ended
	Jun. 30, 2015
NotesToFinancialStatementsAbstract
Summary of Significant Accounting Policy Update For Certain Required Disclosures	Accounting Standards Update (ASU) No. 2014-04, Receivables - Troubled Debt Restructurings by Creditors - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure On May 28, 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers Other accounting standards have been issued by the FASB that are not currently applicable to the Company or are not expected to have a material impact on the Company’s financial statements

11. Summary of Significant Ac19

11. Summary of Significant Accounting Policy Update For Certain Required Disclosures (Policies)	6 Months Ended
	Jun. 30, 2015
Summary Of Significant Accounting Policy Update For Certain Required Disclosures Policies
Recently Issued Accounting Pronouncements	Accounting Standards Update (ASU) No. 2014-04, Receivables - Troubled Debt Restructurings by Creditors - Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure On May 28, 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers Other accounting standards have been issued by the FASB that are not currently applicable to the Company or are not expected to have a material impact on the Company’s financial statements

2. Loans and Allowance for Lo20

2. Loans and Allowance for Loan Losses (Tables)	6 Months Ended
	Jun. 30, 2015
DisclosureLoansAndAllowanceForLoanLossesTablesAbstract
Composition of net loans	June 30, 2015 December 31, 2014 Real Estate Secured: Residential 1-4 family $ 190,840 $ 186,829 Multifamily 23,599 21,131 Construction and Land Loans 17,007 18,518 Commercial, Owner Occupied 69,382 70,748 Commercial, Non-owner occupied 32,118 32,173 Second mortgages 7,870 8,075 Equity lines of credit 5,902 6,499 Farmland 9,113 8,246 355,831 352,219 Secured (other) and unsecured Personal 21,056 20,901 Commercial 34,376 31,586 Agricultural 3,143 2,683 58,575 55,170 Overdrafts 246 285 414,652 407,674 Less: Allowance for loan losses 5,446 5,477 Net deferred fees 710 677 6,156 6,154 Loans, net $ 408,496 $ 401,520
Analysis of past due loans	The following table is an analysis of past due loans as of June 30, 2015: 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Total Past Due Current Total Financing Receivables Recorded Investment > 90 Days and Accruing Real Estate Secured Residential 1-4 family $ 3,966 $ 2,179 $ 1,909 $ 8,054 $ 182,786 $ 190,840 $ - Equity lines of credit 33 12 6 51 5,851 5,902 - Multifamily - - - - 23,599 23,599 - Farmland 1,206 - 68 1,274 7,839 9,113 - Construction, Land Development, Other Land Loans 435 61 81 577 16,430 17,007 - Commercial Real Estate- Owner Occupied 2,236 - 3,592 5,828 63,554 69,382 - Commercial Real Estate- Non Owner Occupied - 368 85 453 31,665 32,118 - Second Mortgages 59 61 52 172 7,698 7,870 - Non Real Estate Secured Personal 362 55 193 610 20,692 21,302 - Commercial 484 348 484 1,316 33,060 34,376 - Agricultural 24 - - 24 3,119 3,143 - Total $ 8,805 $ 3,084 $ 6,470 $ 18,359 $ 396,293 $ 414,652 $ - The following table is an analysis of past due loans as of December 31, 2014: 30-59 Days Past Due 60-89 Days Past Due Greater Than 90 Days Total Past Due Current Total Financing Receivables Recorded Investment > 90 Days and Accruing Real Estate Secured Residential 1-4 family $ 4,521 $ 3,001 $ 2,884 $ 10,406 $ 176,423 $ 186,829 $ - Equity lines of credit 45 - - 45 6,454 6,499 - Multifamily 1,252 - - 1,252 19,879 21,131 - Farmland 208 - 477 685 7,561 8,246 - Construction, Land Development, Other Land Loans 417 31 168 616 17,902 18,518 - Commercial Real Estate- Owner Occupied 2,193 790 2,344 5,327 65,421 70,748 - Commercial Real Estate- Non Owner Occupied 225 85 1,547 1,857 30,316 32,173 - Second Mortgages 107 51 134 292 7,783 8,075 - Non Real Estate Secured Personal 404 105 233 742 20,444 21,186 22 Commercial 720 49 447 1,216 30,370 31,586 - Agricultural 3 - - 3 2,680 2,683 - Total $ 10,095 $ 4,112 $ 8,234 $ 22,441 $ 385,233 $ 407,674 $ 22
Schedule of non-accrual loans	June 30, 2015 December 31, 2014 Real Estate Secured Residential 1-4 Family $ 1,909 $ 3,401 Multifamily - - Construction and Land Loans 81 168 Commercial-Owner Occupied 3,592 5,259 Commercial- Non Owner Occupied 1,627 1,547 Second Mortgages 52 134 Equity Lines of Credit 6 - Farmland 146 477 Secured (other) and Unsecured Personal 193 211 Commercial 484 447 Agricultural - - Total $ 8,090 $ 11,644
Residential real estate current	Number Balance Residential real estate in the process of foreclosure - $ - Foreclosed residential real estate 13 $ 1,631
Credit Risk Profile by Internally Assigned Grade	Credit Risk Profile by Internally Assigned Grade as of June 30, 2015 Grade (1) Residential 1-4 Family Multifamily Farmland Construction, Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate Non-Owner Occupied Quality 28,340 1,253 29 2,272 3,181 527 Satisfactory 103,372 17,545 4,527 6,909 35,174 15,371 Acceptable 45,678 2,783 3,542 5,552 19,977 11,832 Special Mention 3,671 810 196 2,159 3,277 2,394 Substandard 9,779 1,208 819 115 7,773 1,994 Doubtful - - - - - - Total $ 190,840 $ 23,599 $ 9,113 $ 17,007 $ 69,382 $ 32,118 Credit Risk Profile by Internally Assigned Grade as of December 31, 2014 Grade (1) Residential 1-4 Family Multifamily Farmland Construction, Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate Non-Owner Occupied Quality 29,494 6 37 3,278 4,159 874 Satisfactory 100,767 16,326 3,090 8,091 31,018 15,052 Acceptable 44,021 2,719 4,080 4,745 20,987 12,223 Special Mention 2,640 828 198 2,231 3,994 2,108 Substandard 9,907 1,252 841 173 10,590 1,916 Doubtful - - - - - - Total $ 186,829 $ 21,131 $ 8,246 $ 18,518 $ 70,748 $ 32,173
Credit Risk Profile based on payment activity	Credit Risk Profile based on payment activity as of June 30, 2015 Consumer - Non Real Estate Equity Line of Credit / Second Mortgages Commercial - Non Real Estate Agricultural - Non Real Estate Performing $ 21,109 $ 13,714 $ 33,892 $ 3,143 Nonperforming (>90 days past due) 193 58 484 - Total $ 21,302 $ 13,772 $ 34,376 $ 3,143 Credit Risk Profile based on payment activity as of December 31, 2014 Consumer - Non Real Estate Equity Line of Credit /Jr. liens Commercial - Non Real Estate Agricultural - Non Real Estate Performing $ 20,953 $ 14,440 $ 31,139 $ 2,683 Nonperforming (>90 days past due) 233 134 447 - Total $ 21,186 $ 14,574 $ 31,586 $ 2,683
Impaired loans	The following tables reflect the Bank’s impaired loans at June 30, 2015: June 30, 2015 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With No Related Allowance Real Estate Secured Residential 1-4 family $ 8,067 $ 8,067 $ - $ 8,028 $ 180 Equity lines of credit 76 76 - 50 2 Multifamily 1,208 1,208 - 1,230 32 Farmland 830 830 - 836 30 Construction, Land Development, Other Land Loans 1,591 1,591 - 1,665 46 Commercial Real Estate- Owner Occupied 7,022 7,022 - 8,105 75 Commercial Real Estate- Non Owner Occupied 85 85 - 43 - Second Mortgages 239 239 - 429 6 Non Real Estate Secured Personal /Consumer 57 57 - 56 2 Commercial 438 438 - 400 4 Agricultural - - - - - Total $ 19,613 $ 19,613 $ - $ 20,842 $ 377 June 30, 2015 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With an Allowance Recorded Real Estate Secured Residential 1-4 family $ 2,952 $ 2,952 $ 567 $ 3,050 $ 70 Equity lines of credit 6 6 6 3 - Multifamily - - - - - Farmland - - - - - Construction, Land Development, Other Land Loans 366 366 20 366 11 Commercial Real Estate- Owner Occupied 750 750 1 1,077 18 Commercial Real Estate- Non Owner Occupied 1,909 1,909 314 1,913 17 Second Mortgages - - - - - Non Real Estate Secured Personal /Consumer 184 184 124 219 3 Commercial 834 834 666 818 16 Agricultural - - - - - Total $ 7,001 $ 7,001 $ 1,698 $ 7,446 $ 135 The following tables reflect the Bank’s impaired loans at December 31, 2014: December 31, 2014 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no Related Allowance Real Estate Secured Residential 1-4 family $ 7,988 $ 7,988 $ - $ 7,015 $ 256 Equity lines of credit 24 24 - 194 1 Multifamily 1,252 1,252 - 626 21 Farmland 842 842 - 663 32 Construction, Land Development, Other Land Loans 1,738 1,738 - 1,716 64 Commercial Real Estate- Owner Occupied 9,188 9,392 - 7,291 262 Commercial Real Estate- Non Owner Occupied - - - 3,227 - Second Mortgages 618 618 - 340 20 Non Real Estate Secured Personal 54 54 - 53 3 Commercial 361 361 - 229 20 Agricultural - - - - - Total $ 22,065 $ 22,269 $ - $ 21,354 $ 679 December 31, 2014 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With an Allowance Recorded Real Estate Secured Residential 1-4 family $ 3,148 $ 3,148 $ 586 $ 3,087 $ 125 Equity lines of credit - - - 19 - Multifamily - - - - - Farmland - - - 100 - Construction, Land Development, Other Land Loans 366 366 20 183 13 Commercial Real Estate- Owner Occupied 1,403 1,403 143 2,466 56 Commercial Real Estate- Non Owner Occupied 1,916 1,916 322 3,249 31 Second Mortgages - - - 28 - Non Real Estate Secured Personal 253 253 188 193 7 Commercial 802 802 540 863 28 Agricultural 7 7 7 94 1 Total $ 7,895 $ 7,895 $ 1,806 $ 10,282 $ 261
Allowance for loan losses and the recorded investment in loans by loan category	The following tables present the balance in the allowance for loan losses and the recorded investment in loans by loan category and is segregated by impairment evaluation method as of June 30, 2015 and June 30, 2014. Six months ended June 30, 2015 Residential 1-4 Family Multifamily Construction and Land Loans Commercial R./E Owner Occupied Commercial R/E Non-Owner Occupied Second Mortgages Equity Line of Credit Farmland Personal and Overdrafts Commercial and Agricultural Unallocated Total Allowance for Credit Losses: Beginning Balance December 31, 2014 $ 995 $ 20 $ 87 $ 409 $ 1,063 $ 67 $ 74 $ 12 $ 665 $ 982 $ 1,103 $ 5,477 Provision for Credit Losses 64 (20) (52) (123) (18) (8) (80) (1) 134 362 224 482 Charge-offs 98 - - - 392 3 - - 230 177 - 900 Recoveries (1) - (18) (1) (275) - (41) - (44) (7) - (387) Net Charge-offs 97 - (18) (1) 117 3 (41) - 186 170 - 513 Ending Balance June 30, 2015 962 - 53 287 928 56 35 11 613 1,174 1,327 5,446 Ending Balance: Individually evaluated for impairment 567 - 20 1 314 - 6 - 124 666 - 1,698 Ending Balance: Collectively Evaluated for Impairment 395 - 33 286 614 56 29 11 489 508 1,327 3,748 Loans: Ending Balance: Individually Evaluated for Impairment 11,019 1,208 1,957 7,772 1,994 239 82 830 241 1,272 - 26,614 Ending Balance: Collectively Evaluated for Impairment 179,821 22,391 15,050 61,610 30,124 7,631 5,820 8,283 21,061 36,247 - 388,038 Ending Balance: June 30, 2015 $190,840 $23,599 $17,007 $69,382 $32,118 $7,870 $5,902 $9,113 $21,302 $37,519 - $414,652 Six months ended June 30, 2014 Residential 1-4 Family Multifamily Construction and Land Loans Commercial R./E Owner Occupied Commercial R/E Non-Owner Occupied Second Mortgages Equity Line of Credit Farmland Personal and Overdrafts Commercial and Agricultural Unallocated Total Allowance for Credit Losses: Beginning Balance December 31, 2013 $ 975 $ 143 $ 230 $ 1,029 $ 1,415 $ 153 $ 50 $ 65 $ 483 $ 1,264 $ 1,018 $ 6,825 Provision for Credit Losses 259 (62) (65) (45) 1,071 (39) 134 (43) 234 (74) (474) 896 Charge-offs 141 - 18 240 1,163 25 9 - 187 329 - 2,112 Recoveries - - (2) - - (1) - - (41) (20) - 64 Net Charge-offs 141 - 16 240 1,163 24 9 - 146 309 - 2,048 Ending Balance June 30, 2014 1,069 81 149 744 1,323 90 175 22 571 881 568 5,673 Ending Balance: Individually evaluated for impairment 530 - - 308 397 - 162 - 164 427 - 1,988 Ending Balance: Collectively Evaluated for Impairment 539 81 149 436 926 90 13 22 407 454 568 3,685 Loans: Ending Balance: Individually Evaluated for Impairment 8,261 - 1,678 10,585 2,257 148 431 479 305 1,391 - 25,535 Ending Balance: Collectively Evaluated for Impairment 174,163 21,168 16,705 60,764 31,180 7,401 6,940 8,540 20,903 32,926 - 380,690 Ending Balance: June 30, 2014 $182,424 $21,168 $18,383 $71,349 $33,437 $7,549 $7,371 $9,019 $21,208 $34,317 - $406,225
Troubled debt restructurings	Troubled Debt Restructurings –Six months ended June 30, 2015 Interest only Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 188 188 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 2 2,203 2,203 Commercial Real Estate- Non Owner Occupied Second Mortgages 1 68 68 Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 4 2,459 2,459 Troubled Debt Restructurings Below Market Rate Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 863 863 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 1,547 1,547 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 2 2,410 2,410 Troubled Debt Restructurings Loan term extension Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Business Commercial Agricultural Total Troubled Debt Restructurings All Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Total Restructurings 6 4,869 4,869 Troubled Debt Restructurings That subsequently defaulted Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total - - - Troubled Debt Restructurings –Six months ended June 30, 2014 Interest only Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 1,395 1,395 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 1 1,395 1,395 Troubled Debt Restructurings Below Market Rate Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 1 879 879 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied 1 707 707 Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total 2 1,586 1,586 Troubled Debt Restructurings Loan term extension Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family 6 1,217 1,217 Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Business Commercial Agricultural 1 129 129 Total 7 1,346 1,346 Troubled Debt Restructurings All Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Total Restructurings 10 4,327 4,327 Troubled Debt Restructurings That subsequently defaulted Number of Contracts Pre- Modification Outstanding Recorded Investment Post - Modification Recorded Investment Real Estate Secured Residential 1-4 family Equity lines of credit Multifamily Farmland Construction, Land Development, Other Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate- Non Owner Occupied Second Mortgages Non Real Estate Secured Personal / Consumer Commercial Agricultural Total - - -

3. Income Taxes (Tables)

3. Income Taxes (Tables)	6 Months Ended
	Jun. 30, 2015
Loans: [Abstract]
Income tax reconciliation	2015 2014 Tax expense at statutory rate $ 291 $ 128 Reduction in taxes from: Tax-exempt interest (67) (84) Valuation adjustment for deferred tax assets (1,000) (1,000) Other, net (82) (74) Income tax benefit $ (858) $ (1,030)

4. Capital Requirements (Tables

4. Capital Requirements (Tables)	6 Months Ended
	Jun. 30, 2015
Farmland, real estate secured impaired loans, fair value disclosure
Schedule of Capital Ratios as Required by Regulators	June 30, 2015 Entity Tier 1 Total Risk Based Leverage CET 1 Effective in 2015 Highlands Union Bank 11.63% 12.89% 7.41% 11.63% December 31, 2014 Entity Tier 1 Total Risk Based Leverage CET 1 Highlands Union Bank 12.93% 14.19% 7.71% N/A

6. Per Share Amounts (Tables)

6. Per Share Amounts (Tables)	6 Months Ended
	Jun. 30, 2015
Past due days
Schedule of Earnings Per Share, Basic and Diluted	For the three months ended June 30 2015 2014 Income available to common stockholders $ 1,134 $ 906 Weighted average shares outstanding 7,851 7,244 Shares outstanding including assumed conversion 9,943 9,292 Basic earnings per common share $ 0.14 $ 0.13 Fully diluted earnings per share (including convertible preferred shares outstanding) $ 0.11 $ 0.10 For the six months ended June 30 2015 2014 Income available to common stockholders $ 1,714 $ 1,407 Weighted average shares outstanding 7,851 6,134 Shares outstanding including assumed conversion 9,943 8,182 Basic earnings per common share $ 0.22 $ 0.23 Fully diluted earnings per share (including convertible preferred shares outstanding) $ 0.17 $ 0.17

8. Fair Value (Tables)

8. Fair Value (Tables)	6 Months Ended
	Jun. 30, 2015
Liabilities Less Deposits
Available for sale securities portfolio measured at fair value on a recurring basis	June 30, 2015 Level 1 Level 2 Level 3 Total Fair Value Available for Sale Securities State and Political Subdivisions $ - $ 7,267 $ - $ 7,267 Mortgage Backed Securities $ - $ 64,850 $ - $ 64,850 Single Issue Trust Preferred $ - $ 475 $ - $ 475 SBA Pools $ - $ 11,304 $ - $ 11,304 Total AFS Securities $ - $ 83,896 $ - $ 83,896 December 31, 2014 Level 1 Level 2 Level 3 Total Fair Value Available for Sale Securities State and Political Subdivisions $ - $ 9,701 $ - $ 9,701 Mortgage Backed Securities $ - $ 61,723 $ - $ 61,723 Single Issue Trust Preferred $ - $ 488 $ - $ 488 SBA Pools $ - $ 12,423 $ - $ 12,423 Total AFS Securities $ - $ 84,335 $ - $ 84,335
Assets at fair value on a non - recurring basis segregated by the level of the valuation inputs within the fair value hierarchy	June 30, 2015 Level 1 Level 2 Level 3 Total Fair Value Impaired Loans $ - $ - $ 7,001 $ 7,001 Repossessions/OREO, net $ - $ - $ 7,980 $ 7,980 December 31, 2014 Level 1 Level 2 Level 3 Total Fair Value Impaired Loans $ - $ - $ 7,895 $ 7,895 Repossessions/OREO, net $ - $ - $ 6,704 $ 6,704
Level 3 inputs for assets measured on a nonrecurring basis	Quantitative Information about Level 3 Fair Value Measurements June 30, December 31, Valuation Unobservable Range 2015 2014 Techniques Input (2) (Weighted Average) OREO,Repossessions $ 7,980 $ 6,704 Appraisal of collateral (1) Appraisal adjustments 0% to 45% (13%) Liquidation expenses 0% to 10% (9%) Impaired loans $ 7,001 $ 7,895 Fair value of collateral –real estate (1), (3) Appraisal adjustments 0% to 10% (9%) Fair value of collateral –equipment, inventory, other (1), (3) Appraisal adjustments 25% to 50% (33%) Liquidation expenses 0% to 10% (9%)
Carrying amounts and fair values of financial instruments	June 30, 2015 December 31, 2014 Carrying Amount Fair Value Carrying Amount Fair Value Cash and cash equivalents $ 51,748 $ 51,748 $ 55,810 $ 55,810 Securities available for sale 83,896 85,896 84,335 84,335 Other investments 6,599 6,599 6,767 6,767 Loans, net 408,496 403,871 401,520 398,019 Deposits (487,200) (467,620) (483,497) (464,335) Other short-term borrowings (20,051) (21,299) (20,051) (21,495) Long-term debt (47,724) (50,683) (47,750) (50,799)

9. Investment Securities Avai25

9. Investment Securities Available For Sale (Tables)	6 Months Ended
	Jun. 30, 2015
Maximum amount of all loan relationships review in addition to annual loan relationship
Schedule of amortized cost and market value of securities available-for-sale	June 30, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value State and political subdivisions $ 7,139 $ 128 $ - $ 7,267 Mortgage backed securities 64,877 262 289 64,850 Single Issue Trust Preferred 500 - 25 475 SBA Pools 11,512 12 220 11,304 $ 84,028 $ 402 $ 534 $ 83,896 December 31, 2014 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value State and political subdivisions $ 9,546 $ 163 $ 8 $ 9,701 Mortgage backed securities 61,476 395 148 61,723 Single Issue Trust Preferred 500 - 12 488 SBA Pools 12,669 29 275 12,423 $ 84,191 $ 587 $ 443 $ 84,335
Age of gross unrealized losses and fair value by investment category	June 30, 2015 Less Than 12 months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses State and political subdivisions $ - $ - $ - $ - $ - $ - Mortgage-backed securities 29,474 168 6,343 121 35,817 289 Single Issue Trust Preferred - - 475 25 475 25 SBA Pools - - 10,152 220 10,152 220 Total $ 29,474 $ 168 $ 16,970 $ 366 $46,444 $ 534 December 31, 2014 Less Than 12 months 12 Months or More Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses State and political subdivisions $ - $ - $ 1,002 $ 8 $ 1,002 $ 8 Mortgage-backed securities 5,244 19 7,586 129 12,830 148 Single Issue Trust Preferred - - 488 12 488 12 SBA Pools - - 11,239 275 11,239 275 Total $ 5,244 $ 19 $ 20,315 $ 424 $25,559 $ 443
Amortized cost and estimated fair value of securities available-for-sale by contractual maturity	Amortized Cost Approximate Market Value Due in one year or less $ - $ - Due after one year through five years 2,586 2,631 Due after five years through ten years 380 378 Due after ten years 16,185 16,037 19,151 19,046 Mortgage-backed securities 64,877 64,850 $ 84,028 $ 83,896

2. Loans and Allowance for Lo26

2. Loans and Allowance for Loan Losses (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	$ 414,652	$ 407,674
Allowance for loan losses	5,446	5,477
Net deferred fees	710	677
Total allowances and net deferred fees	6,156	6,154
Loans, net	408,496	401,520
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	8,805	10,095
60 to 89 Days Past Due	3,084	4,112
Greater Than 90 Days	6,470	8,234
Total Past Due	18,359	22,441
Current	396,293	385,233
Total Financing Receivables	414,652	407,674
Recorded Investment > 90 Days and Accruing	0	22
Non-accrual loans	8,090	11,644
Real Estate Secured [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	355,831	352,219
Real Estate Secured [Member] | Residential 1-4 Family [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	190,840	186,829
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	3,966	4,521
60 to 89 Days Past Due	2,179	3,001
Greater Than 90 Days	1,909	2,884
Total Past Due	8,054	10,406
Current	182,786	176,423
Total Financing Receivables	190,840	186,829
Recorded Investment > 90 Days and Accruing	0	0
Non-accrual loans	1,909	3,401
Real Estate Secured [Member] | Multifamily [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	23,599	21,131
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	0	1,252
60 to 89 Days Past Due	0	0
Greater Than 90 Days	0	0
Total Past Due	0	1,252
Current	23,599	19,879
Total Financing Receivables	23,599	21,131
Recorded Investment > 90 Days and Accruing	0	0
Non-accrual loans	0	0
Real Estate Secured [Member] | Construction, Land Development, Other Land Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	17,007	18,518
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	435	417
60 to 89 Days Past Due	61	31
Greater Than 90 Days	81	168
Total Past Due	577	616
Current	16,430	17,902
Total Financing Receivables	17,007	18,518
Recorded Investment > 90 Days and Accruing	0	0
Non-accrual loans	81	168
Real Estate Secured [Member] | Commercial Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	69,382	70,748
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	2,236	2,193
60 to 89 Days Past Due	0	790
Greater Than 90 Days	3,592	2,344
Total Past Due	5,828	5,327
Current	63,554	65,421
Total Financing Receivables	69,382	70,748
Recorded Investment > 90 Days and Accruing	0	0
Non-accrual loans	3,592	5,259
Real Estate Secured [Member] | Commercial Non Owner Occupied [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	32,118	32,173
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	0	225
60 to 89 Days Past Due	368	85
Greater Than 90 Days	85	1,547
Total Past Due	453	1,857
Current	31,665	30,316
Total Financing Receivables	32,118	32,173
Recorded Investment > 90 Days and Accruing	0	0
Non-accrual loans	1,627	1,547
Real Estate Secured [Member] | Second Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	7,870	8,075
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	59	107
60 to 89 Days Past Due	61	51
Greater Than 90 Days	52	134
Total Past Due	172	292
Current	7,698	7,783
Total Financing Receivables	7,870	8,075
Recorded Investment > 90 Days and Accruing	0	0
Non-accrual loans	52	134
Real Estate Secured [Member] | Equity Line of Credit [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	5,902	6,499
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	33	45
60 to 89 Days Past Due	12	0
Greater Than 90 Days	6	0
Total Past Due	51	45
Current	5,851	6,454
Total Financing Receivables	5,902	6,499
Recorded Investment > 90 Days and Accruing	0	0
Non-accrual loans	6	0
Real Estate Secured [Member] | Farmland [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	9,113	8,246
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	1,206	208
60 to 89 Days Past Due	0	0
Greater Than 90 Days	68	477
Total Past Due	1,274	685
Current	7,839	7,561
Total Financing Receivables	9,113	8,246
Recorded Investment > 90 Days and Accruing	0	0
Non-accrual loans	146	477
Secured (other) and unsecured [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	58,575	55,170
Secured (other) and unsecured [Member] | Personal [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	21,056	20,901
Analysis of past due loans [Abstract]
Non-accrual loans	193	211
Secured (other) and unsecured [Member] | Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	34,376	31,586
Analysis of past due loans [Abstract]
Non-accrual loans	484	447
Secured (other) and unsecured [Member] | Agricultural [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	3,143	2,683
Analysis of past due loans [Abstract]
Non-accrual loans	0	0
Secured (other) and unsecured [Member] | Overdrafts [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans, gross	246	285
Non Real Estate Secured [Member] | Personal [Member]
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	362	404
60 to 89 Days Past Due	55	105
Greater Than 90 Days	193	233
Total Past Due	610	742
Current	20,692	20,444
Total Financing Receivables	21,302	21,186
Recorded Investment > 90 Days and Accruing	0	22
Non Real Estate Secured [Member] | Commercial [Member]
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	484	720
60 to 89 Days Past Due	348	49
Greater Than 90 Days	484	447
Total Past Due	1,316	1,216
Current	33,060	30,370
Total Financing Receivables	34,376	31,586
Recorded Investment > 90 Days and Accruing	0	0
Non Real Estate Secured [Member] | Agricultural [Member]
Analysis of past due loans [Abstract]
30 to 59 Days Past Due	24	3
60 to 89 Days Past Due	0	0
Greater Than 90 Days	0	0
Total Past Due	24	3
Current	3,119	2,680
Total Financing Receivables	3,143	2,683
Recorded Investment > 90 Days and Accruing	$ 0	$ 0

2. Loans and Allowance for Lo27

2. Loans and Allowance for Loan Losses, Foreclosed (Details) - Jun. 30, 2015 $ in Thousands	USD ($)Property
Residential real estate in the process of foreclosure [Member
Number	0
Value of Property | $	$ 0
Foreclosed residential real estate [Member
Number	13
Value of Property | $	$ 1,631

2. Loans and Allowance for Lo28

2. Loans and Allowance for Loan Losses, Credit Risk Profile (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Residential 1-4 Family [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 190,840	$ 186,829
Residential 1-4 Family [Member] | Quality [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	28,340	29,494
Residential 1-4 Family [Member] | Satisfactory [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	103,372	100,767
Residential 1-4 Family [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	45,678	44,021
Residential 1-4 Family [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,671	2,640
Residential 1-4 Family [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	9,779	9,907
Residential 1-4 Family [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Multifamily [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	23,599	21,131
Multifamily [Member] | Quality [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,253	6
Multifamily [Member] | Satisfactory [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	17,545	16,326
Multifamily [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,783	2,719
Multifamily [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	810	828
Multifamily [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,208	1,252
Multifamily [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Farmland [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	9,113	8,246
Farmland [Member] | Quality [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	29	37
Farmland [Member] | Satisfactory [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	4,527	3,090
Farmland [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,542	4,080
Farmland [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	196	198
Farmland [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	819	841
Farmland [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Construction, Land Development, Other Land Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	17,007	18,518
Construction, Land Development, Other Land Loans [Member] | Quality [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,272	3,278
Construction, Land Development, Other Land Loans [Member] | Satisfactory [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	6,909	8,091
Construction, Land Development, Other Land Loans [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	5,552	4,745
Construction, Land Development, Other Land Loans [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,159	2,231
Construction, Land Development, Other Land Loans [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	115	173
Construction, Land Development, Other Land Loans [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial Real Estate- Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	69,382	70,748
Commercial Real Estate- Owner Occupied [Member] | Quality [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,181	4,159
Commercial Real Estate- Owner Occupied [Member] | Satisfactory [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	35,174	31,018
Commercial Real Estate- Owner Occupied [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	19,977	20,987
Commercial Real Estate- Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,277	3,994
Commercial Real Estate- Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	7,773	10,590
Commercial Real Estate- Owner Occupied [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Commercial Real Estate - Non Owner Occupied [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	32,118	32,173
Commercial Real Estate - Non Owner Occupied [Member] | Quality [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	527	874
Commercial Real Estate - Non Owner Occupied [Member] | Satisfactory [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	15,371	15,052
Commercial Real Estate - Non Owner Occupied [Member] | Acceptable [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	11,832	12,223
Commercial Real Estate - Non Owner Occupied [Member] | Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	2,394	2,108
Commercial Real Estate - Non Owner Occupied [Member] | Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	1,994	1,916
Commercial Real Estate - Non Owner Occupied [Member] | Doubtful [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	0	0
Consumer Non Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	21,302	21,186
Consumer Non Real Estate [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	21,109	20,953
Consumer Non Real Estate [Member] | Nonperforming (>90 days past due) [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	193	233
Equity Line of Credit Second Mortgages [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	13,772	14,574
Equity Line of Credit Second Mortgages [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	13,714	14,440
Equity Line of Credit Second Mortgages [Member] | Nonperforming (>90 days past due) [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	58	134
Commercial Non Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	34,376	31,586
Commercial Non Real Estate [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	33,892	31,139
Commercial Non Real Estate [Member] | Nonperforming (>90 days past due) [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	484	447
Agricultural - Non Real Estatel [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,143	2,683
Agricultural - Non Real Estatel [Member] | Performing [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	3,143	2,683
Agricultural - Non Real Estatel [Member] | Nonperforming (>90 days past due) [Member]
Financing Receivable, Recorded Investment [Line Items]
Loans	$ 0	$ 0

2. Loans and Allowance for Lo29

2. Loans and Allowance for Loan Losses, Impaired Loans (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Recorded Investment [Abstract]
With No Related Allowance	$ 19,613	$ 22,065
With Related Allowance	7,001	7,895
Unpaid Principal Balance [Abstract]
With No Related Allowance	19,613	22,269
With Related Allowance	7,001	7,895
Related Allowance	1,698	1,806
Average Recorded Investment [Abstract]
With No Related Allowance	20,842	21,354
With Related Allowance	7,446	10,282
Interest Income Recognized [Abstract]
With No Related Allowance	377	679
With Related Allowance	135	261
Real Estate Secured [Member] | Residential 1-4 Family [Member]
Recorded Investment [Abstract]
With No Related Allowance	8,067	7,988
With Related Allowance	2,952	3,148
Unpaid Principal Balance [Abstract]
With No Related Allowance	8,067	7,988
With Related Allowance	2,952	3,148
Related Allowance	567	586
Average Recorded Investment [Abstract]
With No Related Allowance	8,028	7,015
With Related Allowance	3,050	3,087
Interest Income Recognized [Abstract]
With No Related Allowance	180	256
With Related Allowance	70	125
Real Estate Secured [Member] | Equity Line of Credit [Member]
Recorded Investment [Abstract]
With No Related Allowance	76	24
With Related Allowance	6	0
Unpaid Principal Balance [Abstract]
With No Related Allowance	76	24
With Related Allowance	6	0
Related Allowance	6	0
Average Recorded Investment [Abstract]
With No Related Allowance	50	194
With Related Allowance	3	19
Interest Income Recognized [Abstract]
With No Related Allowance	2	1
With Related Allowance	0	0
Real Estate Secured [Member] | Multifamily [Member]
Recorded Investment [Abstract]
With No Related Allowance	1,208	1,252
With Related Allowance	0	0
Unpaid Principal Balance [Abstract]
With No Related Allowance	1,208	1,252
With Related Allowance	0	0
Related Allowance	0	0
Real Estate Secured [Member] | Farmland [Member]
Recorded Investment [Abstract]
With No Related Allowance	830	842
With Related Allowance	0	0
Unpaid Principal Balance [Abstract]
With No Related Allowance	830	842
With Related Allowance	0	0
Related Allowance	0	0
Average Recorded Investment [Abstract]
With No Related Allowance	836	663
With Related Allowance	0	100
Interest Income Recognized [Abstract]
With No Related Allowance	30	32
With Related Allowance	0	0
Real Estate Secured [Member] | Construction, Land Development, Other Land Loans [Member]
Recorded Investment [Abstract]
With No Related Allowance	1,591	1,738
With Related Allowance	366	366
Unpaid Principal Balance [Abstract]
With No Related Allowance	1,591	1,738
With Related Allowance	366	366
Related Allowance	20	20
Average Recorded Investment [Abstract]
With No Related Allowance	1,665	1,716
With Related Allowance	366	183
Interest Income Recognized [Abstract]
With No Related Allowance	46	64
With Related Allowance	11	13
Real Estate Secured [Member] | Commercial Real Estate- Owner Occupied [Member]
Recorded Investment [Abstract]
With No Related Allowance	7,022	9,188
With Related Allowance	750	1,403
Unpaid Principal Balance [Abstract]
With No Related Allowance	7,022	9,392
With Related Allowance	750	1,403
Related Allowance	1	143
Average Recorded Investment [Abstract]
With No Related Allowance	8,105	7,291
With Related Allowance	1,077	2,466
Interest Income Recognized [Abstract]
With No Related Allowance	75	262
With Related Allowance	18	56
Real Estate Secured [Member] | Commercial Real Estate - Non Owner Occupied [Member]
Recorded Investment [Abstract]
With No Related Allowance	85	0
With Related Allowance	1,909	1,916
Unpaid Principal Balance [Abstract]
With No Related Allowance	85	0
With Related Allowance	1,909	1,916
Related Allowance	314	322
Average Recorded Investment [Abstract]
With No Related Allowance	43	3,227
With Related Allowance	1,913	3,249
Interest Income Recognized [Abstract]
With No Related Allowance	0	0
With Related Allowance	17	31
Real Estate Secured [Member] | Second Mortgage [Member]
Recorded Investment [Abstract]
With No Related Allowance	239	618
With Related Allowance	0	0
Unpaid Principal Balance [Abstract]
With No Related Allowance	239	618
With Related Allowance	0	0
Related Allowance	0	0
Average Recorded Investment [Abstract]
With No Related Allowance	429	340
With Related Allowance	0	28
Interest Income Recognized [Abstract]
With No Related Allowance	6	20
With Related Allowance	0	0
Real Estate Secured [Member] | Multifamily [Member]
Average Recorded Investment [Abstract]
With No Related Allowance	1,230	626
With Related Allowance	0	0
Interest Income Recognized [Abstract]
With No Related Allowance	32	21
With Related Allowance	0	0
Non Real Estate Secured [Member] | Personal [Member]
Recorded Investment [Abstract]
With No Related Allowance	57	54
With Related Allowance	184	253
Unpaid Principal Balance [Abstract]
With No Related Allowance	57	54
With Related Allowance	184	253
Related Allowance	124	188
Average Recorded Investment [Abstract]
With No Related Allowance	56	53
With Related Allowance	219	193
Interest Income Recognized [Abstract]
With No Related Allowance	2	3
With Related Allowance	3	7
Non Real Estate Secured [Member] | Commercial [Member]
Recorded Investment [Abstract]
With No Related Allowance	438	361
With Related Allowance	834	802
Unpaid Principal Balance [Abstract]
With No Related Allowance	438	361
With Related Allowance	834	802
Related Allowance	666	540
Average Recorded Investment [Abstract]
With No Related Allowance	400	229
With Related Allowance	818	863
Interest Income Recognized [Abstract]
With No Related Allowance	4	20
With Related Allowance	16	28
Non Real Estate Secured [Member] | Agricultural [Member]
Recorded Investment [Abstract]
With No Related Allowance	0	0
With Related Allowance	0	7
Unpaid Principal Balance [Abstract]
With No Related Allowance	0	0
With Related Allowance	0	7
Related Allowance	0	7
Average Recorded Investment [Abstract]
With No Related Allowance	0	0
With Related Allowance	0	94
Interest Income Recognized [Abstract]
With No Related Allowance	0	0
With Related Allowance	$ 0	$ 1

2. Loans and Allowance for Lo30

2. Loans and Allowance for Loan Losses, Alowance for Credit Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Allowance for Credit Losses [Roll Forward]
Beginning Balance			$ 5,477	$ 6,825
Provision for Credit Losses	$ 382	$ 631	482	896
Charge-offs			900	2,112
Recoveries			(387)	64
Net Charge-offs			513	2,048
Ending Balance	5,446	5,673	5,446	5,673
Ending Balance: Individually evaluated for impairment	1,698	1,988	1,698	1,988
Ending Balance: Collectively evaluated for impairment	3,748	3,685	3,748	3,685
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	26,614	25,535	26,614	25,535
Ending balance: Collectively Evaluated for Impairment	388,038	380,690	388,038	380,690
Ending Balance	414,652	406,225	414,652	406,225
Residential 1-4 Family [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			995	975
Provision for Credit Losses			64	259
Charge-offs			98	141
Recoveries			(1)	0
Net Charge-offs			97	141
Ending Balance	962	1,069	962	1,069
Ending Balance: Individually evaluated for impairment	567	530	567	530
Ending Balance: Collectively evaluated for impairment	395	539	395	539
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	11,019	8,261	11,019	8,261
Ending balance: Collectively Evaluated for Impairment	179,821	174,163	179,821	174,163
Ending Balance	190,840	182,424	190,840	182,424
Multifamily [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			20	143
Provision for Credit Losses			(20)	(62)
Charge-offs			0	0
Recoveries			0	0
Net Charge-offs			0	0
Ending Balance	0	0	0	0
Ending Balance: Individually evaluated for impairment	0	0	0	0
Ending Balance: Collectively evaluated for impairment	0	81	0	81
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	1,208	0	1,208	0
Ending balance: Collectively Evaluated for Impairment	22,391	21,168	22,391	21,168
Ending Balance	23,599	21,168	23,599	21,168
Construction and Land Loans [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			87	230
Provision for Credit Losses			(52)	(65)
Charge-offs			0	18
Recoveries			(18)	(2)
Net Charge-offs			(18)	16
Ending Balance	53	149	53	149
Ending Balance: Individually evaluated for impairment	20	0	20	0
Ending Balance: Collectively evaluated for impairment	33	149	33	149
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	1,957	1,678	1,957	1,678
Ending balance: Collectively Evaluated for Impairment	15,050	16,705	15,050	16,705
Ending Balance	17,007	18,383	17,007	18,383
Commercial Owner Occupied [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			409	1,029
Provision for Credit Losses			(123)	(45)
Charge-offs			0	240
Recoveries			(1)	0
Net Charge-offs			(1)	240
Ending Balance	287	744	287	744
Ending Balance: Individually evaluated for impairment	1	308	1	308
Ending Balance: Collectively evaluated for impairment	286	436	286	436
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	7,772	10,585	7,772	10,585
Ending balance: Collectively Evaluated for Impairment	61,610	60,764	61,610	60,764
Ending Balance	69,382	71,349	69,382	71,349
Commercial Non Owner Occupied [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			1,063	1,415
Provision for Credit Losses			(18)	1,071
Charge-offs			392	1,163
Recoveries			(275)	0
Net Charge-offs			117	1,163
Ending Balance	928	1,323	928	1,323
Ending Balance: Individually evaluated for impairment	314	397	314	397
Ending Balance: Collectively evaluated for impairment	614	926	614	926
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	1,994	2,257	1,994	2,257
Ending balance: Collectively Evaluated for Impairment	30,124	31,180	30,124	31,180
Ending Balance	32,118	33,437	32,118	33,437
Second Mortgage [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			67	153
Provision for Credit Losses			(8)	(39)
Charge-offs			3	25
Recoveries			0	(1)
Net Charge-offs			3	24
Ending Balance	56	90	56	90
Ending Balance: Individually evaluated for impairment	0	0	0	0
Ending Balance: Collectively evaluated for impairment	56	90	56	90
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	239	148	239	148
Ending balance: Collectively Evaluated for Impairment	7,631	7,401	7,631	7,401
Ending Balance	7,870	7,549	7,870	7,549
Equity Line of Credit [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			74	50
Provision for Credit Losses			(80)	134
Charge-offs			0	9
Recoveries			(41)	0
Net Charge-offs			(41)	9
Ending Balance	35	175	35	175
Ending Balance: Individually evaluated for impairment	6	162	6	162
Ending Balance: Collectively evaluated for impairment	29	13	29	13
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	82	431	82	431
Ending balance: Collectively Evaluated for Impairment	5,820	6,940	5,820	6,940
Ending Balance	5,902	7,371	5,902	7,371
Farmland [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			12	65
Provision for Credit Losses			(1)	(43)
Charge-offs			0	0
Recoveries			0	0
Net Charge-offs			0	0
Ending Balance	11	22	11	22
Ending Balance: Individually evaluated for impairment	0	0	0	0
Ending Balance: Collectively evaluated for impairment	11	22	11	22
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	830	479	830	479
Ending balance: Collectively Evaluated for Impairment	8,283	8,540	8,283	8,540
Ending Balance	9,113	9,019	9,113	9,019
Personal and Overdrafts [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			665	483
Provision for Credit Losses			134	234
Charge-offs			230	187
Recoveries			(44)	(41)
Net Charge-offs			186	146
Ending Balance	613	571	613	571
Ending Balance: Individually evaluated for impairment	124	164	124	164
Ending Balance: Collectively evaluated for impairment	489	407	489	407
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	241	305	241	305
Ending balance: Collectively Evaluated for Impairment	21,061	20,903	21,061	20,903
Ending Balance	21,302	21,208	21,302	21,208
Commercial and Agricultural [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			982	1,264
Provision for Credit Losses			362	(74)
Charge-offs			177	329
Recoveries			(7)	(20)
Net Charge-offs			170	309
Ending Balance	1,174	881	1,174	881
Ending Balance: Individually evaluated for impairment	666	427	666	427
Ending Balance: Collectively evaluated for impairment	508	454	508	454
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	1,272	1,391	1,272	1,391
Ending balance: Collectively Evaluated for Impairment	36,247	32,926	36,247	32,926
Ending Balance	37,519	34,317	37,519	34,317
Unallocated [Member]
Allowance for Credit Losses [Roll Forward]
Beginning Balance			1,103	1,018
Provision for Credit Losses			224	(474)
Charge-offs			0	0
Recoveries			0	0
Net Charge-offs			0	0
Ending Balance	1,327	568	1,327	568
Ending Balance: Individually evaluated for impairment	0	0	0	0
Ending Balance: Collectively evaluated for impairment	1,327	568	1,327	568
Loans: [Abstract]
Ending Balance: Individually Evaluated for Impairment	0	0	0	0
Ending balance: Collectively Evaluated for Impairment	0	0	0	0
Ending Balance	$ 0	$ 0	$ 0	$ 0

2. Loans and Allowance for Lo31

2. Loans and Allowance for Loan Losses, Troubed Debt Resturcturing (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2015USD ($)Contract	Jun. 30, 2014USD ($)Contract
Interest only [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	4	1
Pre-Modification Outstanding Recorded Investment	$ 2,459	$ 1,395
Post-Modification Recorded Investment	$ 2,459	$ 1,395
Interest only [Member] | Residential 1-4 Family [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	1
Pre-Modification Outstanding Recorded Investment	$ 188
Post-Modification Recorded Investment	$ 188
Interest only [Member] | Commercial Real Estate- Owner Occupied [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	2	1
Pre-Modification Outstanding Recorded Investment	$ 2,203	$ 1,395
Post-Modification Recorded Investment	$ 2,203	$ 1,395
Interest only [Member] | Second Mortgage [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	1
Pre-Modification Outstanding Recorded Investment	$ 68
Post-Modification Recorded Investment	$ 68
Below Market Rate [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	2	2
Pre-Modification Outstanding Recorded Investment	$ 2,410	$ 1,586
Post-Modification Recorded Investment	$ 2,410	$ 1,586
Below Market Rate [Member] | Residential 1-4 Family [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	1	1
Pre-Modification Outstanding Recorded Investment	$ 863	$ 879
Post-Modification Recorded Investment	$ 863	$ 879
Below Market Rate [Member] | Commercial Real Estate- Owner Occupied [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	1	1
Pre-Modification Outstanding Recorded Investment	$ 1,547	$ 707
Post-Modification Recorded Investment	$ 1,547	$ 707
Loan term extension [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	0	7
Pre-Modification Outstanding Recorded Investment	$ 0	$ 1,346
Post-Modification Recorded Investment	$ 0	$ 1,346
Loan term extension [Member] | Residential 1-4 Family [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract		6
Pre-Modification Outstanding Recorded Investment		$ 1,217
Post-Modification Recorded Investment		$ 1,217
Loan term extension [Member] | Agricultural [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract		1
Pre-Modification Outstanding Recorded Investment		$ 129
Post-Modification Recorded Investment		$ 129
Troubled Debt Restructurings [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	6	10
Pre-Modification Outstanding Recorded Investment	$ 4,869	$ 4,327
Post-Modification Recorded Investment	$ 4,869	$ 4,327
Subsequently defaulted [Member]
Troubled Debt Restructurings Interest Only [Abstract]
Number of Contracts | Contract	0	0
Pre-Modification Outstanding Recorded Investment	$ 0	$ 0
Post-Modification Recorded Investment	$ 0	$ 0

3. Income Taxes (Details)

3. Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Loan originated from sales of other real estate owned
Tax expense at statutory rate			$ 291	$ 128
Reduction in taxes from:
Tax-exempt interest			(67)	(84)
Valuation adjustment for deferred tax assets			(1,000)	(1,000)
Other, net			(82)	(74)
Income tax benefit	$ (1,035)	$ (1,169)	$ (858)	$ (1,030)

4. Capital Requirements (Detail

4. Capital Requirements (Details) - Highlands Union Bank [Member]	Jun. 30, 2015	Dec. 31, 2014
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Tier 1	11.63%	12.93%
Total Risk Based	12.89%	14.19%
Leverage	7.41%	7.71%
CET 1	11.63%	0.00%

6. Per Share Amounts (Details)

6. Per Share Amounts (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
One to Four Family Residential, real estate secured impaired loans, fair value disclosure
Income available to common stockholders	$ 1,134	$ 906	$ 1,714	$ 1,407
Weighted average shares outstanding	7,851	7,244	7,851	6,134
Shares outstanding including assumed conversion	9,943	9,292	9,943	8,182
Basic earnings per common share	$ 0.14	$ 0.13	$ 0.22	$ 0.23
Fully diluted earnings per share (including convertible preferred shares oustanding)	$ 0.11	$ 0.10	$ 0.17	$ 0.17

6. Per Share Amounts (Details N

6. Per Share Amounts (Details Narrative)	12 Months Ended
	Dec. 31, 2014shares
NotesToFinancialStatementsAbstract
Preferred stock shares issued	2,092,287

7. Commitments and Contingenc36

7. Commitments and Contingencies (Details Narrative) $ in Thousands	Jun. 30, 2015USD ($)
Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Commitments, maximum exposure	$ 336
Equity Line of Credit [Member]
Loss Contingencies [Line Items]
Commitments, maximum exposure	8,041
Credit Card Lines of Credit [Member]
Loss Contingencies [Line Items]
Commitments, maximum exposure	6,291
Construction and land development commitments [Member]
Loss Contingencies [Line Items]
Commitments, maximum exposure	4,665
Unused Commitments to Fund Interest Earning Assets [Member]
Loss Contingencies [Line Items]
Commitments, maximum exposure	$ 27,309

8. Fair Value (Details)

8. Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total AFS Securities	$ 83,896	$ 84,335
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
State and Political Subdivisions	7,267	9,701
Mortgage Backed Securities	64,850	61,723
Single Issue Trust Preferred	475	488
SBA Pools	11,304	12,423
Total AFS Securities	83,896	84,335
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
State and Political Subdivisions	0	0
Mortgage Backed Securities	0	0
Single Issue Trust Preferred	0	0
SBA Pools	0	0
Total AFS Securities	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
State and Political Subdivisions	7,267	9,701
Mortgage Backed Securities	64,850	61,723
Single Issue Trust Preferred	475	488
SBA Pools	11,304	12,423
Total AFS Securities	83,896	84,335
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
State and Political Subdivisions	0	0
Mortgage Backed Securities	0	0
Single Issue Trust Preferred	0	0
SBA Pools	0	0
Total AFS Securities	$ 0	$ 0

8. Fair Value, Loans (Details)

8. Fair Value, Loans (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Loans	$ 7,001	$ 7,895
Repossessions/OREO, net	7,980	6,704
Fair Value, Inputs, Level 1 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Loans	0	0
Repossessions/OREO, net	0	0
Fair Value, Inputs, Level 2 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Loans	0	0
Repossessions/OREO, net	0	0
Fair Value, Inputs, Level 3 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Impaired Loans	7,001	7,895
Repossessions/OREO, net	$ 7,980	$ 6,704

8. Fair Value, Off-Balance Shee

8. Fair Value, Off-Balance Sheet Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available-for-sale	$ 83,896	$ 84,335
Carrying Amount [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	51,748	55,810
Securities available-for-sale	83,896	84,335
Other investments	6,599	6,767
Loans, net	408,496	401,520
Deposits	(487,200)	(483,497)
Other short-term borrowings	(20,051)	(20,051)
Long-term debt	(47,724)	(47,750)
Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	51,748	55,810
Securities available-for-sale	85,896	84,335
Other investments	6,599	6,767
Loans, net	403,871	398,019
Deposits	(467,620)	(464,335)
Other short-term borrowings	(21,299)	(21,495)
Long-term debt	$ (50,683)	$ (50,799)

9. Investment Securities Avai40

9. Investment Securities Available For Sale (Details) - Fair Value Disclosure Item Amounts Domain - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 84,028	$ 84,191
Gross Unrealized Gains	402	587
Gross Unrealized Losses	534	443
Total AFS Securities	83,896	84,335
Age of gross unrealized losses and fair value by investment category [Abstract]
Less Than 12 months, Fair Value	29,474	5,244
Less Than 12 months, Unrealized Losses	168	19
12 Months or More, Fair value	16,970	20,315
12 Months or More, Unrealized Losses	366	424
Fair Value	46,444	25,559
Unrealized Losses	534	443
Fiscal Year Maturity - Amortized Cost [Abstract]
Amortized cost - due in one year or less	0
Amortized cost - due after one year through five years	2,586
Amortized cost - due after five years through ten years	380
Amortized cost - due after ten years	16,185
Amortized cost - total	19,151
Mortgage-backed securities	64,877
Amortized cost - sub-total	84,028	84,191
Fiscal Year Maturity - Fair Value [Abstract]
Fair value - due in one year or less	0
Fair value - due after one year through five years	2,631
Fair value - due after five years through ten years	378
Fair value - after ten years	16,037
Fair value - sub total	19,046
Mortgage-backed securities	64,850
Fair value - grand total	83,896
State and political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	7,139	9,546
Gross Unrealized Gains	128	163
Gross Unrealized Losses	0	8
Total AFS Securities	7,267	9,701
Age of gross unrealized losses and fair value by investment category [Abstract]
Less Than 12 months, Fair Value	0	0
Less Than 12 months, Unrealized Losses	0	0
12 Months or More, Fair value	0	1,002
12 Months or More, Unrealized Losses	0	8
Fair Value	0	1,002
Unrealized Losses	0	8
Fiscal Year Maturity - Amortized Cost [Abstract]
Amortized cost - sub-total	7,139	9,546
Mortgage-backed securitiess [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	64,877	61,476
Gross Unrealized Gains	262	395
Gross Unrealized Losses	289	148
Total AFS Securities	64,850	61,723
Age of gross unrealized losses and fair value by investment category [Abstract]
Less Than 12 months, Fair Value	29,474	5,244
Less Than 12 months, Unrealized Losses	168	19
12 Months or More, Fair value	6,343	7,586
12 Months or More, Unrealized Losses	121	129
Fair Value	35,817	12,830
Unrealized Losses	289	148
Fiscal Year Maturity - Amortized Cost [Abstract]
Amortized cost - sub-total	64,877	61,476
Single Issue Trust Preferred [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	500	500
Gross Unrealized Gains	0	0
Gross Unrealized Losses	25	12
Total AFS Securities	475	488
Age of gross unrealized losses and fair value by investment category [Abstract]
Less Than 12 months, Fair Value	0	0
Less Than 12 months, Unrealized Losses	0	0
12 Months or More, Fair value	475	488
12 Months or More, Unrealized Losses	25	12
Fair Value	475	488
Unrealized Losses	25	12
Fiscal Year Maturity - Amortized Cost [Abstract]
Amortized cost - sub-total	500	500
SBA Pools [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	11,512	12,669
Gross Unrealized Gains	12	29
Gross Unrealized Losses	220	275
Total AFS Securities	11,304	12,423
Age of gross unrealized losses and fair value by investment category [Abstract]
Less Than 12 months, Fair Value	0	0
Less Than 12 months, Unrealized Losses	0	0
12 Months or More, Fair value	10,152	11,239
12 Months or More, Unrealized Losses	220	275
Fair Value	10,152	11,239
Unrealized Losses	220	275
Fiscal Year Maturity - Amortized Cost [Abstract]
Amortized cost - sub-total	$ 11,512	$ 12,669

9. Investment Securities Avai41

9. Investment Securities Available For Sale (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Investment Securities Available For Sale Details Narrative
Investment securities available for sale	$ 34,705	$ 39,298
Investment securities pledged as collateral on public deposits	$ 34,676	$ 39,325

10. Formal Written Agreement (D

10. Formal Written Agreement (Details Narrative) - Jun. 30, 2015 - USD ($) $ in Thousands	Total
Formal Written Agreement
Loan and other assets amount requiring improvement	$ 500
Past due days	90 days