Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | 4. Loans and Allowance for Loan Losses The Company’s loan and allowance for loan loss policies are as follows: Loans are stated at unpaid principal balances, less net deferred loan fees and the allowance for loan losses. The Company grants real estate mortgage, commercial business and consumer loans. A substantial portion of the loan portfolio is represented by mortgage loans to customers in southern Indiana. The ability of the Company’s customers to honor their loan agreements is dependent upon the real estate and general economic conditions in this area. Loan origination and commitment fees, as well as certain direct costs of underwriting and closing loans, are deferred and amortized as a yield adjustment to interest income over the lives of the related loans using the interest method. Amortization of net deferred loan fees is discontinued when a loan is placed on nonaccrual status. The recognition of income on a loan is discontinued and previously accrued interest is reversed, when interest or principal payments become ninety (90) days past due unless, in the opinion of management, the outstanding interest remains collectible. Past due status is determined based on contractual terms. Generally, by applying the cash receipts method, interest income is subsequently recognized only as received until the loan is returned to accrual status. The cash receipts method is used when the likelihood of further loss on the loan is remote. Otherwise, the Company applies the cost recovery method and applies all payments as a reduction of the unpaid principal balance until the loan qualifies for return to accrual status. Interest income on impaired loans is recognized using the cost recovery method, unless the likelihood of further loss on the loan is remote. A loan is restored to accrual status when all principal and interest payments are brought current and the borrower has demonstrated the ability to make future payments of principal and interest as scheduled, which generally requires that the borrower demonstrate a period of performance of at least six consecutive months. For portfolio segments other than consumer loans, the Company’s practice is to charge-off any loan or portion of a loan when the loan is determined by management to be uncollectible due to the borrower’s failure to meet repayment terms, the borrower’s deteriorating or deteriorated financial condition, the depreciation of the underlying collateral, the loan’s classification as a loss by regulatory examiners, or for other reasons. A partial charge-off is recorded on a loan when the uncollectibility of a portion of the loan has been confirmed, such as when a loan is discharged in bankruptcy, the collateral is liquidated, a loan is restructured at a reduced principal balance, or other identifiable events that lead management to determine the full principal balance of the loan will not be repaid. A specific reserve is recognized as a component of the allowance for estimated losses on loans individually evaluated for impairment. Partial charge-offs on nonperforming and impaired loans are included in the Company’s historical loss experience used to estimate the general component of the allowance for loan losses as discussed below. Specific reserves are not considered charge-offs in management’s analysis of the allowance for loan losses because they are estimates and the outcome of the loan relationship is undetermined. At June 30, 2015, the Company had 11 loans on which partial charge-offs of $464,000 had been recorded. Consumer loans not secured by real estate are typically charged off at 90 days past due, or earlier if deemed uncollectible, unless the loans are in the process of collection. Overdrafts are charged off after 45 days past due. Charge-offs are typically recorded on loans secured by real estate when the property is foreclosed upon. The allowance for loan losses reflects management’s judgment of probable loan losses inherent in the loan portfolio at the balance sheet date. Additions to the allowance for loan losses are made by the provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The Company uses a disciplined process and methodology to evaluate the allowance for loan losses on at least a quarterly basis that is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance consists of specific and general components. The specific component relates to loans that are individually evaluated for impairment or loans otherwise classified as doubtful, substandard, or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and classified loans that are found, upon individual evaluation, to not be impaired. Such loans are pooled by segment and losses are modeled using annualized historical loss experience adjusted for qualitative factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent twelve calendar quarters unless the historical loss experience is not considered indicative of the level of risk in the remaining balance of a particular portfolio segment, in which case an adjustment is determined by management. The Company’s historical loss experience is then adjusted by an overall loss factor weighting adjustment based on a qualitative analysis prepared by management and reviewed on a quarterly basis. The overall loss factor considers changes in underwriting standards, economic conditions, changes and trends in past due and classified loans and other internal and external factors. Management also applies additional loss factor multiples to loans classified as watch, special mention and substandard that are not individually evaluated for impairment. The loss factor multiples for classified loans are based on management’s assessment of historical trends regarding losses experienced on classified loans in prior periods. See below for additional discussion of the overall loss factor and loss factor multiples for classified loans as of June 30, 2015 and December 31, 2014, as well as a discussion of changes in management’s allowance for loan losses methodology from 2014 to 2015. Management exercises significant judgment in evaluating the relevant historical loss experience and the qualitative factors. Management also monitors the differences between estimated and actual incurred loan losses for loans considered impaired in order to evaluate the effectiveness of the estimation process and make any changes in the methodology as necessary. Management utilizes the following portfolio segments in its analysis of the allowance for loan losses: residential real estate, land, construction, commercial real estate, commercial business, home equity and second mortgage, and other consumer loans. Additional discussion of the portfolio segments and the risks associated with each segment can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Values for collateral dependent loans are generally based on appraisals obtained from independent licensed real estate appraisers, with adjustments applied for estimated costs to sell the property, costs to complete unfinished or repair damaged property and other factors. New appraisals are generally obtained for all significant properties when a loan is identified as impaired, and a property is considered significant if the value of the property is estimated to exceed $200,000. Subsequent appraisals are obtained as needed or if management believes there has been a significant change in the market value of the property. In instances where it is not deemed necessary to obtain a new appraisal, management bases its impairment and allowance for loan loss analysis on the original appraisal with adjustments for current conditions based on management’s assessment of market factors and management’s inspection of the property. At June 30, 2015, the recorded investments in loans secured by residential real estate properties for which formal foreclosure proceedings are in process was $436,000. Loans at June 30, 2015 and December 31, 2014 consisted of the following: (In thousands) June 30, December 31, Real estate mortgage loans: Residential $ 107,136 $ 106,679 Land 10,526 11,028 Residential construction 13,691 10,347 Commercial real estate 75,521 78,314 Commercial real estate contruction 474 1,422 Commercial business loans 24,983 28,282 Consumer loans: Home equity and second mortgage loans 37,844 37,513 Automobile loans 27,194 25,274 Loans secured by savings accounts 920 1,018 Unsecured loans 3,445 3,316 Other consumer loans 6,007 5,075 Gross loans 307,741 308,268 Less undisbursed portion of loans in process (5,824 ) (3,325 ) Principal loan balance 301,917 304,943 Deferred loan origination fees, net 548 506 Allowance for loan losses (3,600 ) (4,846 ) Loans, net $ 298,865 $ 300,603 The following table provides the components of the Company’s recorded investment in loans at June 30, 2015: Residential Land Construction Commercial Commercial Home Equity & Other Total (In thousands) Recorded Investment in Loans: Principal loan balance $ 107,136 $ 10,526 $ 8,341 $ 75,521 $ 24,983 $ 37,844 $ 37,566 $ 301,917 Accrued interest receivable 339 38 21 168 131 124 146 967 Net deferred loan origination fees and costs 63 4 0 (37 ) (7 ) 525 0 548 Recorded investment in loans $ 107,538 $ 10,568 $ 8,362 $ 75,652 $ 25,107 $ 38,493 $ 37,712 $ 303,432 Recorded Investment in Loans as Evaluated for Impairment: Individually evaluated for impairment $ 1,419 $ 20 $ 0 $ 1,800 $ 0 $ 143 $ 0 $ 3,382 Collectively evaluated for impairment 106,119 10,548 8,362 73,852 25,107 38,350 37,712 300,050 Acquired with deteriorated credit quality 0 0 0 0 0 0 0 0 Ending balance $ 107,538 $ 10,568 $ 8,362 $ 75,652 $ 25,107 $ 38,493 $ 37,712 $ 303,432 The following table provides the components of the Company’s recorded investment in loans at December 31, 2014: Residential Land Construction Commercial Commercial Home Equity & Other Total (In thousands) Recorded Investment in Loans: Principal loan balance $ 106,679 $ 11,028 $ 8,444 $ 78,314 $ 28,282 $ 37,513 $ 34,683 $ 304,943 Accrued interest receivable 368 48 20 186 131 131 152 1,036 Net deferred loan origination fees and costs 49 4 (1 ) (20 ) (7 ) 481 0 506 Recorded investment in loans $ 107,096 $ 11,080 $ 8,463 $ 78,480 $ 28,406 $ 38,125 $ 34,835 $ 306,485 Recorded Investment in Loans as Evaluated for Impairment: Individually evaluated for impairment $ 1,411 $ 16 $ 0 $ 1,819 $ 1,642 $ 151 $ 0 $ 5,039 Collectively evaluated for impairment 105,685 11,064 8,463 76,661 26,764 37,974 34,835 301,446 Acquired with deteriorated credit quality 0 0 0 0 0 0 0 0 Ending balance $ 107,096 $ 11,080 $ 8,463 $ 78,480 $ 28,406 $ 38,125 $ 34,835 $ 306,485 An analysis of the allowance for loan losses as of June 30, 2015 is as follows: Residential Land Construction Commercial Commercial Home Equity & Other Total (In thousands) Ending allowance balance attributable to loans: Individually evaluated for impairment $ 75 $ 0 $ 0 $ 8 $ 0 $ 10 $ 0 $ 93 Collectively evaluated for impairment 559 173 51 1,661 161 638 264 3,507 Acquired with deteriorated credit quality 0 0 0 0 0 0 0 0 Ending balance $ 634 $ 173 $ 51 $ 1,669 $ 161 $ 648 $ 264 $ 3,600 An analysis of the allowance for loan losses as of December 31, 2014 is as follows: Residential Land Construction Commercial Commercial Home Equity & Other Total (In thousands) Ending allowance balance attributable to loans: Individually evaluated for impairment $ 47 $ 0 $ 0 $ 11 $ 1,293 $ 0 $ 0 $ 1,351 Collectively evaluated for impairment 562 201 60 1,490 187 720 275 3,495 Acquired with deteriorated credit quality 0 0 0 0 0 0 0 0 Ending balance $ 609 $ 201 $ 60 $ 1,501 $ 1,480 $ 720 $ 275 $ 4,846 An analysis of the changes in the allowance for loan losses for the three months and six months ended June 30, 2015 is as follows: Residential Land Construction Commercial Commercial Home Equity & Other Total (In thousands) Allowance for loan losses: Changes in Allowance for Loan Losses for the three-months ended June 30, 2015 Beginning balance $ 672 $ 197 $ 65 $ 1,462 $ 239 $ 716 $ 283 $ 3,634 Provisions for loan losses (39 ) (24 ) (14 ) 204 (58 ) (38 ) 19 50 Charge-offs 0 0 0 0 (22 ) (31 ) (72 ) (125 ) Recoveries 1 0 0 3 2 1 34 41 Ending balance $ 634 $ 173 $ 51 $ 1,669 $ 161 $ 648 $ 264 $ 3,600 Changes in Allowance for Loan Losses for the six-months ended June 30, 2015 Beginning balance $ 609 $ 201 $ 60 $ 1,501 $ 1,480 $ 720 $ 275 $ 4,846 Provisions for loan losses 42 (28 ) (9 ) 156 (117 ) (45 ) 51 50 Charge-offs (20 ) 0 0 0 (1,205 ) (33 ) (124 ) (1,382 ) Recoveries 3 0 0 12 3 6 62 86 Ending balance $ 634 $ 173 $ 51 $ 1,669 $ 161 $ 648 $ 264 $ 3,600 An analysis of the changes in the allowance for loan losses for the three months and six months ended June 30, 2014 is as follows: Residential Land Construction Commercial Commercial Home Equity & Other Total (In thousands) Allowance for loan losses: Changes in Allowance for Loan Losses for the three-months ended June 30, 2014 Beginning balance $ 838 $ 144 $ 70 $ 1,276 $ 1,450 $ 902 $ 331 $ 5,011 Provisions for loan losses 24 9 8 4 (10 ) 41 14 90 Charge-offs (21 ) 0 0 0 0 (36 ) (36 ) (93 ) Recoveries 2 0 0 0 4 25 27 58 Ending balance $ 843 $ 153 $ 78 $ 1,280 $ 1,444 $ 932 $ 336 $ 5,066 Changes in Allowance for Loan Losses for the six-months ended June 30, 2014 Beginning balance $ 811 $ 152 $ 63 $ 1,284 $ 1,446 $ 877 $ 289 $ 4,922 Provisions for loan losses 113 1 15 (4 ) (7 ) (70 ) 67 115 Charge-offs (84 ) 0 0 0 0 (54 ) (88 ) (226 ) Recoveries 3 0 0 0 5 179 68 255 Ending balance $ 843 $ 153 $ 78 $ 1,280 $ 1,444 $ 932 $ 336 $ 5,066 At June 30, 2015 and December 31, 2014, management applied specific qualitative factor adjustments to the residential real estate, construction, commercial real estate, commercial business, vacant land, and home equity and second mortgage portfolio segments as they determined that the historical loss experience was not indicative of the level of risk in the remaining balance of those portfolio segments. These adjustments increased the loss factors by 0.25% to 20% for certain loan groups, and increased the estimated allowance for loan losses related to those portfolio segments by approximately $1.4 million and $1.6 million at June 30, 2015 and December 31, 2014, respectively. These changes were made to reflect management’s estimates of inherent losses in these portfolio segments at June 30, 2015 and December 31, 2014. At June 30, 2015 and December 31, 2014, for each loan portfolio segment, management applied an overall qualitative factor of 1.18 to the Company’s historical loss factors. The overall qualitative factor is derived from management’s analysis of changes and trends in the following qualitative factors: underwriting standards, economic conditions, past due loans and other internal and external factors. Each of the four factors above was assigned an equal weight to arrive at an average for the overall qualitative factor of 1.18 at June 30, 2015 and December 31, 2014, respectively. The effect of the overall qualitative factor was to increase the estimated allowance for loan losses by $527,000 and $520,000 at June 30, 2015 and December 31, 2014, respectively. Additional discussion of the overall qualitative factor can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. There were no changes in management’s assessment of the overall qualitative factor components from December 31, 2014 to June 30, 2015. Management also adjusts the historical loss factors for loans classified as watch, special mention and substandard that are not individually evaluated for impairment. The adjustments consider the increased likelihood of loss on classified loans based on the Company’s separate historical experience for classified loans. The effect of the adjustments for classified loans was to increase the estimated allowance for loan losses by $532,000 and $664,000 at June 30, 2015 and December 31, 2014, respectively. The following table summarizes the Company’s impaired loans as of June 30, 2015 and for the three months and six months ended June 30, 2015. The Company did not recognize any interest income on impaired loans using the cash receipts method of accounting for the three or six month periods ended June 30, 2015: At June 30, 2015 Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Recorded Unpaid Related Average Interest Average Interest (In thousands) Loans with no related allowance recorded: Residential $ 1,122 $ 1,444 $ 0 $ 1,235 $ 5 $ 1,204 $ 10 Land 20 22 0 20 0 18 0 Construction 0 0 0 0 0 0 0 Commercial real estate 1,762 1,801 0 1,773 19 1,774 38 Commercial business 0 0 0 13 0 9 0 Home equity/2nd mortgage 63 81 0 65 0 67 1 Other consumer 0 0 0 0 0 0 0 2,967 3,348 0 3,106 24 3,072 49 Loans with an allowance recorded: Residential 297 335 75 254 0 259 0 Land 0 0 0 0 0 0 0 Construction 0 0 0 0 0 0 0 Commercial real estate 38 63 8 39 0 40 0 Commercial business 0 0 0 18 0 559 0 Home equity/2nd mortgage 80 81 10 80 0 80 0 Other consumer 0 0 0 0 0 0 0 415 479 93 391 0 938 0 Total: Residential 1,419 1,779 75 1,489 5 1,463 10 Land 20 22 0 20 0 18 0 Construction 0 0 0 0 0 0 0 Commercial real estate 1,800 1,864 8 1,812 19 1,814 38 Commercial business 0 0 0 31 0 568 0 Home equity/2nd mortgage 143 162 10 145 0 147 1 Other consumer 0 0 0 0 0 0 0 $ 3,382 $ 3,827 $ 93 $ 3,497 $ 24 $ 4,010 $ 49 The following table summarizes the Company’s impaired loans for the three months and six months ended June 30, 2014. The Company did not recognize any interest income on impaired loans using the cash receipts method of accounting for the three or six month periods ended June 30, 2014: Three Months Ended June 30, 2014 Six Months Ended June 30, 2014 Average Interest Average Interest Loans with no related allowance recorded: Residential $ 1,345 $ 8 $ 1,427 $ 18 Land 119 0 119 0 Construction 130 0 87 0 Commercial real estate 1,525 17 1,562 34 Commercial business 94 0 126 0 Home equity/2nd mortgage 169 0 197 1 Other consumer 0 0 0 0 3,382 25 3,518 53 Loans with an allowance recorded: Residential 436 0 440 0 Land 3 0 2 0 Construction 0 0 0 0 Commercial real estate 1,123 0 1,065 0 Commercial business 1,726 0 1,720 0 Home equity/2nd mortgage 16 0 18 0 Other consumer 0 0 0 0 3,304 0 3,245 0 Total: Residential 1,781 8 1,867 18 Land 122 0 121 0 Construction 130 0 87 0 Commercial real estate 2,648 17 2,627 34 Commercial business 1,820 0 1,846 0 Home equity/2nd mortgage 185 0 215 1 Other consumer 0 0 0 0 $ 6,686 $ 25 $ 6,763 $ 53 The following table summarizes the Company’s impaired loans as of December 31, 2014: Recorded Unpaid Related (In thousands) Loans with no related allowance recorded: Residential $ 1,141 $ 1,446 $ 0 Land 16 18 0 Construction 0 0 0 Commercial real estate 1,777 1,808 0 Commercial business 0 0 0 Home equity/2nd mortgage 71 87 0 Other consumer 0 0 0 3,005 3,359 0 Loans with an allowance recorded: Residential 270 304 47 Land 0 0 0 Construction 0 0 0 Commercial real estate 42 65 11 Commercial business 1,642 1,909 1,293 Home equity/2nd mortgage 80 98 0 Other consumer 0 0 0 2,034 2,376 1,351 Total: Residential 1,411 1,750 47 Land 16 18 0 Construction 0 0 0 Commercial real estate 1,819 1,873 11 Commercial business 1,642 1,909 1,293 Home equity/2nd mortgage 151 185 0 Other consumer 0 0 0 $ 5,039 $ 5,735 $ 1,351 Nonperforming loans consists of nonaccrual loans and loans over 90 days past due and still accruing interest. The following table presents the recorded investment in nonperforming loans at June 30, 2015 and December 31, 2014: June 30, 2015 December 31, 2014 Nonaccrual Loans 90+ Days Total Nonaccrual Loans 90+ Days Total (In thousands) Residential $ 1,069 $ 14 $ 1,083 $ 919 $ 68 $ 987 Land 20 0 20 16 0 16 Construction 0 0 0 0 0 0 Commercial real estate 434 21 455 433 0 433 Commercial business 0 0 0 1,642 0 1,642 Home equity/2nd mortgage 122 0 122 129 14 143 Other consumer 0 19 19 0 3 3 Total $ 1,645 $ 54 $ 1,699 $ 3,139 $ 85 $ 3,224 The following table presents the aging of the recorded investment in loans at June 30, 2015: 30-59 Days 60-89 Days 90 Days or More Total Current Total (In thousands) Residential $ 2,556 $ 519 $ 587 $ 3,662 $ 103,876 $ 107,538 Land 0 8 20 28 10,540 10,568 Construction 0 0 0 0 8,362 8,362 Commercial real estate 0 192 77 269 75,383 75,652 Commercial business 0 0 0 0 25,107 25,107 Home equity/2nd mortgage 124 92 3 219 38,274 38,493 Other consumer 200 25 19 244 37,468 37,712 Total $ 2,880 $ 836 $ 706 $ 4,422 $ 299,010 $ 303,432 The following table presents the aging of the recorded investment in loans at December 31, 2014: 30-59 Days 60-89 Days 90 Days or More Total Current Total (In thousands) Residential $ 3,070 $ 551 $ 308 $ 3,929 $ 103,167 $ 107,096 Land 24 124 0 148 10,932 11,080 Construction 0 0 0 0 8,463 8,463 Commercial real estate 54 133 42 229 78,251 78,480 Commercial business 0 0 0 0 28,406 28,406 Home equity/2nd mortgage 153 23 97 273 37,852 38,125 Other consumer 263 26 3 292 34,543 34,835 Total $ 3,564 $ 857 $ 450 $ 4,871 $ 301,614 $ 306,485 The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, public information, historical payment experience, credit documentation, and current economic trends, among other factors. The Company classifies loans based on credit risk at least quarterly. The Company uses the following regulatory definitions for risk ratings: Special Mention: Substandard: Doubtful: Loss: Loans not meeting the criteria above that are analyzed individually as part of the described process are considered to be pass rated loans. The following table presents the recorded investment in loans by risk category as of the date indicated: Residential Land Construction Commercial Commercial Home Equity & Other Total (In thousands) June 30, 2015 Pass $ 105,401 $ 7,661 $ 8,362 $ 72,937 $ 24,264 $ 38,229 $ 37,639 $ 294,493 Special Mention 100 92 0 1,649 514 1 57 2,413 Substandard 968 2,795 0 632 329 141 16 4,881 Doubtful 1,069 20 0 434 0 122 0 1,645 Loss 0 0 0 0 0 0 0 0 Total $ 107,538 $ 10,568 $ 8,362 $ 75,652 $ 25,107 $ 38,493 $ 37,712 $ 303,432 December 31, 2014 Pass $ 104,780 $ 7,969 $ 7,722 $ 73,204 $ 26,137 $ 37,860 $ 34,770 $ 292,442 Special Mention 105 94 741 2,648 298 2 49 3,937 Substandard 1,292 3,001 0 2,195 329 134 16 6,967 Doubtful 919 16 0 433 1,642 129 0 3,139 Loss 0 0 0 0 0 0 0 0 Total $ 107,096 $ 11,080 $ 8,463 $ 78,480 $ 28,406 $ 38,125 $ 34,835 $ 306,485 The following table summarizes the Company’s troubled debt restructurings (TDRs) by accrual status as of June 30, 2015 and December 31, 2014: June 30, 2015 December 31, 2014 Accruing Nonaccrual Total Related Allowance Accruing Nonaccrual Total Related Allowance (In thousands) Troubled debt restructurings: Residential real estate $ 349 $ 310 $ 659 $ 3 $ 492 $ 166 $ 658 $ 6 Commercial real estate 1,367 331 1,698 0 1,386 338 1,724 0 Commercial business 0 0 0 0 0 1,642 1,642 1,292 Home equity and 2nd mortgage 21 0 21 0 22 0 22 0 Total $ 1,737 $ 641 $ 2,378 $ 3 $ 1,900 $ 2,146 $ 4,046 $ 1,298 At June 30, 2015 and December 31, 2014, there were no commitments to lend additional funds to debtors whose loan terms have been modified in a TDR. There were no TDRs that were restructured during the three or six months ended June 30, 2015. The following table summarizes information in regard to TDRs that were restructured during the six months ended June 30, 2014. There were no TDRs that were restructured during the three months ended June 30, 2014: Six months ended June 30, 2014 Number of Pre-Modification Post-Modification (Dollars in thousands) Troubled debt restructurings: Commercial real estate 3 $ 542 $ 542 Total 3 $ 542 $ 542 For the TDRs listed above, the terms of modification included a temporary decrease in the borrowers’ monthly payments. There were no principal charge-offs recorded as a result of TDRs during the three months and six months ended June 30, 2014, and there was no specific allowance for loan losses related to TDRs modified during the three months and six months ended June 30, 2014. There were no TDRs modified within the previous 12 months for which there was a subsequent payment default (defined as the loan becoming more than 90 days past due, being moved to nonaccrual status, or the collateral being foreclosed upon) during the three months and six months ended June 30, 2015 and 2014. In the event that a TDR subsequently defaults, the Company evaluates the restructuring for possible impairment. As a result, the related allowance for loan losses may be increased or charge-offs may be taken to reduce the carrying amount of the loan. | (4) LOANS AND ALLOWANCE FOR LOAN LOSSES Loans at December 31, 2014 and 2013 consisted of the following: (In thousands) 2014 2013 Real estate mortgage loans: Residential $ 106,679 $ 107,029 Land 11,028 10,309 Residential construction 10,347 14,423 Commercial real estate 78,314 76,496 Commercial real estate construction 1,422 1,715 Commercial business loans 28,282 21,956 Consumer loans: Home equity and second mortgage loans 37,513 34,815 Automobile loans 25,274 23,983 Loans secured by savings accounts 1,018 1,138 Unsecured loans 3,316 3,541 Other consumer loans 5,075 4,824 Gross loans 308,268 300,229 Less undisbursed portion of loans in process (3,325 ) (7,142 ) Principal loan balance 304,943 293,087 Deferred loan origination fees, net 506 341 Allowance for loan losses (4,846 ) (4,922 ) Loans, net $ 300,603 $ 288,506 At December 31, 2014, residential mortgage loans secured by residential properties without private mortgage insurance or government guarantee and with loan-to-value ratios exceeding 90% amounted to approximately $2.5 million. Mortgage loans serviced for the benefit of others amounted to $169,000 and $200,000 at December 31, 2014 and 2013, respectively. The Bank has entered into loan transactions with certain directors, officers and their affiliates (i.e., related parties). In the opinion of management, such indebtedness was incurred in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with unrelated persons. The following table represents the aggregate activity for related party loans during the year ended December 31, 2014. The beginning balance has been adjusted to reflect new directors and officers, as well as directors and officers that are no longer with the Company. (In thousands) Beginning balance $ 6,549 New loans 10,612 Payments (8,507 ) Ending balance $ 8,654 A director of the Company and the Bank is a shareholder of a farm implement dealership that contracts with the Bank to provide sales financing to the dealership’s customers. In the opinion of management, these transactions were made in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with unrelated parties. During the year ended December 31, 2014, the Bank purchased approximately $978,000 of loans to customers of the corporation and the aggregate outstanding balance of all loans purchased from the corporation was approximately $1.2 million and $951,000 at December 31, 2014 and 2013, respectively. The following table provides the components of the Company’s recorded investment in loans at December 31, 2014 and 2013: Residential Real Estate Land Construction Commercial Real Estate Commercial Business Home Equity and Second Mortgage Other Consumer Total (In thousands) December 31, 2014 Principal loan balance $ 106,679 $ 11,028 $ 8,444 $ 78,314 $ 28,282 $ 37,513 $ 34,683 $ 304,943 Accrued interest receivable 368 48 20 186 131 131 152 1,036 Net deferred loan origination fees and costs 49 4 (1 ) (20 ) (7 ) 481 0 506 Recorded investment in loans $ 107,096 $ 11,080 $ 8,463 $ 78,480 $ 28,406 $ 38,125 $ 34,835 $ 306,485 December 31, 2013 Principal loan balance $ 107,029 $ 10,309 $ 8,996 $ 76,496 $ 21,956 $ 34,815 $ 33,486 $ 293,087 Accrued interest receivable 427 49 22 202 56 126 168 1,050 Net deferred loan origination fees and costs 52 2 0 (32 ) (9 ) 328 0 341 Recorded investment in loans $ 107,508 $ 10,360 $ 9,018 $ 76,666 $ 22,003 $ 35,269 $ 33,654 $ 294,478 An analysis of the allowance for loan losses and recorded investment in loans as of and for the year ended December 31, 2014 is as follows: Residential Real Estate Land Construction Commercial Real Estate Commercial Business Home Equity and Second Mortgage Other Consumer Total (In thousands) Allowance for Loan Losses: Beginning balance $ 811 $ 152 $ 63 $ 1,284 $ 1,446 $ 877 $ 289 $ 4,922 Provisions (69 ) 49 (3 ) 211 23 (195 ) 174 190 Charge-offs (140 ) 0 0 0 (6 ) (154 ) (320 ) (620 ) Recoveries 7 0 0 6 17 192 132 354 Ending balance $ 609 $ 201 $ 60 $ 1,501 $ 1,480 $ 720 $ 275 $ 4,846 Ending allowance balance attributable to loans: Individually evaluated for impairment $ 47 $ 0 $ 0 $ 11 $ 1,293 $ 0 $ 0 $ 1,351 Collectively evaluated for impairment 562 201 60 1,490 187 720 275 3,495 Ending balance $ 609 $ 201 $ 60 $ 1,501 $ 1,480 $ 720 $ 275 $ 4,846 Recorded Investment in Loans: Individually evaluated for impairment $ 1,411 $ 16 $ 0 $ 1,819 $ 1,642 $ 151 $ 0 $ 5,039 Collectively evaluated for impairment 105,685 11,064 8,463 76,661 26,764 37,974 34,835 301,446 Ending balance $ 107,096 $ 11,080 $ 8,463 $ 78,480 $ 28,406 $ 38,125 $ 34,835 $ 306,485 An analysis of the allowance for loan losses and recorded investment in loans as of and for the year ended December 31, 2013 is as follows: Residential Real Estate Land Construction Commercial Real Estate Commercial Business Home Equity and Second Mortgage Other Consumer Total (In thousands) Allowance for Loan Losses: Beginning balance $ 922 $ 71 $ 0 $ 1,310 $ 1,223 $ 919 $ 291 $ 4,736 Provisions 182 83 63 47 169 4 177 725 Charge-offs (353 ) (2 ) 0 (90 ) (20 ) (90 ) (337 ) (892 ) Recoveries 60 0 0 17 74 44 158 353 Ending balance $ 811 $ 152 $ 63 $ 1,284 $ 1,446 $ 877 $ 289 $ 4,922 Ending allowance balance attributable to loans: Individually evaluated for impairment $ 112 $ 0 $ 0 $ 145 $ 1,259 $ 13 $ 0 $ 1,529 Collectively evaluated for impairment 699 152 63 1,139 187 864 289 3,393 Ending balance $ 811 $ 152 $ 63 $ 1,284 $ 1,446 $ 877 $ 289 $ 4,922 Recorded Investment in Loans: Individually evaluated for impairment $ 2,040 $ 120 $ 0 $ 2,586 $ 1,898 $ 276 $ 0 $ 6,920 Collectively evaluated for impairment 105,468 10,240 9,018 74,080 20,105 34,993 33,654 287,558 Ending balance $ 107,508 $ 10,360 $ 9,018 $ 76,666 $ 22,003 $ 35,269 $ 33,654 $ 294,478 At December 31, 2014 and 2013, management applied specific qualitative factor adjustments to the residential real estate, construction, commercial real estate, commercial business, vacant land, and home equity and second mortgage portfolio segments as they determined that the historical loss experience was not indicative of the level of risk in the remaining balance of those portfolio segments. These adjustments increased the loss factors by 0.25% to 20% for certain loan groups, and increased the estimated allowance for loan losses related to those portfolio segments by approximately $1.6 million and $1.4 million, respectively. These changes were made to reflect management’s estimates of inherent losses in these portfolio segments at December 31, 2014 and 2013. At December 31, 2014 and 2013, for each loan portfolio segment management applied an overall qualitative factor of 1.18 to the Company’s historical loss factors. The overall qualitative factor is derived from management’s analysis of changes and trends in the following qualitative factors: · Underwriting Standards – Management reviews the findings of periodic internal audit loan reviews, independent outsourced loan reviews and loan reviews performed by the banking regulators to evaluate the risk associated with changes in underwriting standards. At December 31, 2014 and 2013, management assessed the risk associated with this component as neutral, requiring no adjustment to the historical loss factors. · Economic Conditions – Management analyzes trends in housing and unemployment data in the Harrison, Floyd and Clark counties of Indiana, the Company’s primary market area, to evaluate the risk associated with economic conditions. Due to a decrease in new home construction and an increase in unemployment in the Company’s primary market area, management assigned a risk factor of 1.20 for this component at December 31, 2014 and 2013. · Past Due Loans – Management analyzes trends in past due loans for the Company to evaluate the risk associated with delinquent loans. In general, past due loan ratios have remained at elevated levels compared to historical amounts since 2007, and management assigned a risk factor of 1.20 for this component at December 31, 2014 and 2013. · Other Internal and External Factors – This component includes management’s consideration of other qualitative factors such as loan portfolio composition. The Company has focused on the origination of commercial business and real estate loans in an effort to convert the Company’s balance sheet from that of a traditional thrift institution to a commercial bank. In addition, the Company has increased its investment in mortgage loans in which it does not hold a first lien position. Commercial loans and second mortgage loans generally entail greater credit risk than residential mortgage loans secured by a first lien. As a result of changes in the loan portfolio composition and other factors, management has maintained the elevated risk factor of 1.30 for this component at December 31, 2014 and 2013. Each of the four factors above was assigned an equal weight to arrive at an average for the overall qualitative factor of 1.18 at December 31, 2014 and 2013. The effect of the overall qualitative factor was to increase the estimated allowance for loan losses by $520,000 and $471,000 at December 31, 2014 and 2013, respectively. Management also adjusts the historical loss factors for loans classified as watch, special mention and substandard that are not individually evaluated for impairment. The adjustments consider the increased likelihood of loss on classified loans based on the Company’s separate historical experience for classified loans. The effect of the adjustments for classified loans was to increase the estimated allowance for loan losses by $664,000 and $521,000 at December 31, 2014 and 2013, respectively. The following table summarizes the Company’s impaired loans as of and for the year ended December 31, 2014. The Company did not recognize any interest income on impaired loans using the cash receipts method of accounting for the year ended December 31, 2014. Recorded Investment Unpaid Principal Balance Average Related Allowance Interest Recorded Investment Income Recognized (In thousands) Loans with no related allowance recorded Residential real estate $ 1,141 $ 1,446 $ 0 $ 1,293 $ 26 Land 16 18 0 96 0 Construction 0 0 0 52 0 Commercial real estate 1,777 1,808 0 1,626 70 Commercial business 0 0 0 113 0 Home equity and second mortgage 71 87 0 147 2 Other consumer 0 0 0 0 0 $ 3,005 $ 3,359 $ 0 $ 3,327 $ 98 Loans with an allowance recorded Residential real estate $ 270 $ 304 $ 47 $ 369 $ 0 Land 0 0 0 1 0 Construction 0 0 0 0 0 Commercial real estate 42 65 11 656 0 Commercial business 1,642 1,909 1,293 1,696 0 Home equity and second mortgage 80 98 0 46 0 Other consumer 0 0 0 0 0 $ 2,034 $ 2,376 $ 1,351 $ 2,768 $ 0 Total Residential real estate $ 1,411 $ 1,750 $ 47 $ 1,662 $ 26 Land 16 18 0 97 0 Construction 0 0 0 52 0 Commercial real estate 1,819 1,873 11 2,282 70 Commercial business 1,642 1,909 1,293 1,809 0 Home equity and second mortgage 151 185 0 193 2 Other consumer 0 0 0 0 0 $ 5,039 $ 5,735 $ 1,351 $ 6,095 $ 98 The following table summarizes the Company’s impaired loans as of and for the year ended December 31, 2013. The Company did not recognize any interest income on impaired loans using the cash receipts method of accounting for the year ended December 31, 2013. Recorded Investment Unpaid Principal Balance Average Related Allowance Interest Recorded Investment Income Recognized (In thousands) Loans with no related allowance recorded Residential real estate $ 1,591 $ 1,869 $ 0 $ 1,508 $ 32 Land 120 131 0 124 0 Construction 0 0 0 173 0 Commercial real estate 1,637 1,643 0 1,410 63 Commercial business 189 209 0 38 4 Home equity and second mortgage 254 268 0 164 5 Other consumer 0 0 0 0 0 $ 3,791 $ 4,120 $ 0 $ 3,417 $ 104 Loans with an allowance recorded Residential real estate $ 449 $ 487 $ 112 $ 624 $ 2 Land 0 0 0 1 0 Construction 0 0 0 0 0 Commercial real estate 949 1,048 145 1,108 0 Commercial business 1,709 1,909 1,259 1,801 0 Home equity and second mortgage 22 22 13 47 0 Other consumer 0 0 0 0 0 $ 3,129 $ 3,466 $ 1,529 $ 3,581 $ 2 Total Residential real estate $ 2,040 $ 2,356 $ 112 $ 2,132 $ 34 Land 120 131 0 125 0 Construction 0 0 0 173 0 Commercial real estate 2,586 2,691 145 2,518 63 Commercial business 1,898 2,118 1,259 1,839 4 Home equity and second mortgage 276 290 13 211 5 Other consumer 0 0 0 0 0 $ 6,920 $ 7,586 $ 1,529 $ 6,998 $ 106 Nonperforming loans consists of nonaccrual loans and loans over 90 days past due and still accruing interest. The following table presents the recorded investment in nonperforming loans at December 31, 2014 and 2013: December 31, 2014 December 31, 2013 Nonaccrual Loans Loans 90+ Days Past Due Still Accruing Total Nonperforming Loans Nonaccrual Loans Loans 90+ Days Past Due Still Accruing Total Nonperforming Loans (In thousands) Residential real estate $ 919 $ 68 $ 987 $ 1,533 $ 180 $ 1,713 Land 16 0 16 120 0 120 Construction 0 0 0 0 0 0 Commercial real estate 433 0 433 1,456 0 1,456 Commercial business 1,642 0 1,642 1,898 0 1,898 Home equity and second mortgage 129 14 143 252 39 291 Other consumer 0 3 3 0 8 8 Total $ 3,139 $ 85 $ 3,224 $ 5,259 $ 227 $ 5,486 The following table presents the aging of the recorded investment in loans at December 31, 2014: 30-59 Days Past Due 60-89 Days Past Due Over 90 Days Past Due Total Past Due Current Total Loans (In thousands) Residential real estate $ 3,070 $ 551 $ 308 $ 3,929 $ 103,167 $ 107,096 Land 24 124 0 148 10,932 11,080 Construction 0 0 0 0 8,463 8,463 Commercial real estate 54 133 42 229 78,251 78,480 Commercial business 0 0 0 0 28,406 28,406 Home equity and second mortgage 153 23 97 273 37,852 38,125 Other consumer 263 26 3 292 34,543 34,835 Total $ 3,564 $ 857 $ 450 $ 4,871 $ 301,614 $ 306,485 The following table presents the aging of the recorded investment in loans at December 31, 2013: 30-59 Days Past Due 60-89 Days Past Due Over 90 Days Past Due Total Past Due Current Total Loans (In thousands) Residential real estate $ 3,160 $ 830 $ 701 $ 4,691 $ 102,817 $ 107,508 Land 162 109 12 283 10,077 10,360 Construction 0 0 0 0 9,018 9,018 Commercial real estate 231 500 49 780 75,886 76,666 Commercial business 0 0 189 189 21,814 22,003 Home equity and second mortgage 411 24 132 567 34,702 35,269 Other consumer 296 34 8 338 33,316 33,654 Total $ 4,260 $ 1,497 $ 1,091 $ 6,848 $ 287,630 $ 294,478 The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, public information, historical payment experience, credit documentation, and current economic trends, among other factors. The Company classifies loans based on credit risk at least quarterly. The Company uses the following regulatory definitions for risk ratings: Special Mention: Substandard: Doubtful: Loss: Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. The following table presents the recorded investment in loans by risk category as of the date indicated: Residential Real Estate Land Construction Commercial Real Estate Commercial Business Home Equity and Second Mortgage Other Consumer Total (In thousands) December 31, 2014 Pass $ 104,780 $ 7,969 $ 7,722 $ 73,204 $ 26,137 $ 37,860 $ 34,770 $ 292,442 Special mention 105 94 741 2,648 298 2 49 3,937 Substandard 1,292 3,001 0 2,195 329 134 16 6,967 Doubtful 919 16 0 433 1,642 129 0 3,139 Loss 0 0 0 0 0 0 0 0 Total $ 107,096 $ 11,080 $ 8,463 $ 78,480 $ 28,406 $ 38,125 $ 34,835 $ 306,485 December 31, 2013 Pass $ 103,594 $ 7,096 $ 9,018 $ 71,893 $ 19,328 $ 34,693 $ 33,627 $ 279,249 Special mention 756 0 0 2,627 458 198 27 4,066 Substandard 1,625 3,144 0 690 319 126 0 5,904 Doubtful 1,533 120 0 1,456 1,898 252 0 5,259 Loss 0 0 0 0 0 0 0 0 Total $ 107,508 $ 10,360 $ 9,018 $ 76,666 $ 22,003 $ 35,269 $ 33,654 $ 294,478 Troubled Debt Restructurings The following table summarizes the Company’s TDRs by accrual status as of December 31, 2014 and 2013: December 31, 2014 December 31, 2013 Accruing Nonaccrual Total Related Allowance for Loan Losses Accruing Nonaccrual Total Related Allowance for Loan Losses (In thousands) Residential real estate $ 492 $ 166 $ 658 $ 6 $ 508 $ 226 $ 734 $ 45 Commercial real estate 1,386 338 1,724 0 1,130 0 1,130 0 Commercial business 0 1,642 1,642 1,292 0 1,709 1,709 1,259 Home equity and second mortgage 22 0 22 0 24 0 24 0 Total $ 1,900 $ 2,146 $ 4,046 $ 1,298 $ 1,662 $ 1,935 $ 3,597 $ 1,304 At December 31, 2014 and 2013, there were no commitments to lend additional funds to debtors whose loan terms have been modified in a TDR. The following table summarizes information in regard to TDRs that were restructured during the year ended December 31, 2014: Number of Contracts Pre-Modification Outstanding Balance Post-Modification Outstanding Balance (In thousands) Commercial real estate 5 $ 641 $ 641 Total 5 $ 641 $ 641 For the TDRs listed above, the terms of modification included temporary interest-only payment periods and a temporary decrease in the borrowers’ monthly payments. There were no principal charge-offs recorded as a result of TDRs during 2014 and there was no specific allowance for loan losses related to TDRs modified during 2014 at December 31, 2014. The following table summarizes information in regard to TDRs that were restructured during the year ended December 31, 2013: Number of Contracts Pre-Modification Outstanding Balance Post-Modification Outstanding Balance (In thousands) Residential real estate 5 $ 310 $ 310 Total 5 $ 310 $ 310 For the TDRs listed above, the terms of modification included reduction of the stated interest rate and the extension of the maturity date. There were no principal charge-offs recorded as a result of TDRs during 2013 and there was no specific allowance for loan losses related to TDRs modified during 2013 at December 31, 2013. There were no TDRs modified within the previous 12 months for which there was a subsequent payment default (defined as the loan becoming more than 90 days past due, being moved to nonaccrual status, or the collateral being foreclosed upon) during the years ended December 31, 2014 and 2013. In the event that a TDR subsequently defaults, the Company evaluates the restructuring for possible impairment. As a result, the related allowance for loan losses may be increased or charge-offs may be taken to reduce the carrying amount of the loan. |