Loans and Allowance for Loan and Lease Losses | LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES Loans by type are summarized in the following table. June 30, December 31, June 30, Loans secured by real estate— (in thousands) Residential 1-4 family $ 184,110 $ 181,655 $ 178,482 Commercial 392,222 314,843 311,527 Construction 47,197 47,840 52,784 Multi-family and farmland 20,476 18,108 16,178 644,005 562,446 558,971 Commercial loans 98,265 73,985 65,952 Consumer installment loans 17,493 22,539 30,041 Other 4,648 4,652 4,575 Total loans 764,411 663,622 659,539 Allowance for loan and lease losses (9,600 ) (8,550 ) (9,400 ) Net loans $ 754,811 $ 655,072 $ 650,139 The allowance for loan and lease losses is composed of two primary components: (1) specific impairments for substandard/nonaccrual loans and leases and (2) general allocations for classified loan pools, including special mention and substandard/accrual loans, as well as all remaining pools of loans. The Company accumulates pools based on the underlying classification of the collateral. Each pool is assigned a loss severity rate based on historical loss experience and various qualitative and environmental factors, including, but not limited to, credit quality and economic conditions. The Company may include an unallocated component to the allowance for inherent risks within the loan portfolio that cannot be quantified through the loss factors or the qualitative factors. The Company determines the allowance on a quarterly basis. Because of uncertainties inherent in the estimation process, management’s estimate of credit losses in the loan portfolio and the related allowance may materially change in the near term. However, the amount of the change that is reasonably possible cannot be estimated. Included in the Company's loan portfolio are government guaranteed loans the Company purchased totaling $48.2 million , $51.3 million and $54.9 million at June 30, 2015 , December 31, 2014 and June 30, 2014 , respectively. Due to the nature of these loans, there is no specific or general allocation calculated or included in the allowance for loan and lease losses for this group of loans. These loans are reported within the appropriate classification, primarily commercial loans or commercial real estate loans. The following tables present an analysis of the activity in the allowance for loan and lease losses for the three and six months ended June 30, 2015 and 2014 . The provision for loan and lease losses in the tables below do not include the Company’s provision accrual for unfunded commitments of zero and $2 thousand for the three and six months ended June 30, 2015 , respectively, and $6 thousand and $12 thousand for the same periods in 2014 . The reserve for unfunded commitments is included in other liabilities in the consolidated balance sheets and totaled $308 thousand , $306 thousand and $294 thousand at June 30, 2015 , December 31, 2014 and June 30, 2014 , respectively. Allowance for Loan and Lease Losses For the Three Months Ended June 30, 2015 Real estate: Residential 1-4 family Real estate: Commercial Real estate: Construction Real estate: Multi-family and farmland Commercial Consumer Other Unallocated Total (in thousands) Beginning balance, March 31, 2015 2,443 2,919 691 516 1,205 780 7 89 $ 8,650 Charge-offs (3 ) — — — (307 ) (119 ) (8 ) — (437 ) Recoveries 47 60 19 4 549 100 2 — 781 Provision (Credit) (231 ) 107 (249 ) (54 ) 994 19 7 50 643 Allowance for loans transfered to held-for-sale — (37 ) — — — — — — (37 ) Ending balance, June 30, 2015 $ 2,256 $ 3,049 $ 461 $ 466 $ 2,441 $ 780 $ 8 $ 139 $ 9,600 Allowance for Loan and Lease Losses For the Six Months Ended June 30, 2015 Real estate: Residential 1-4 family Real estate: Commercial Real estate: Construction Real estate: Multi-family and farmland Commercial Consumer Other Unallocated Total (in thousands) Beginning balance, December 31, 2014 $ 2,617 $ 2,865 $ 716 $ 714 $ 795 $ 688 $ 6 $ 149 $ 8,550 Charge-offs (15 ) — — — (875 ) (450 ) (8 ) — (1,348 ) Recoveries 79 67 212 10 561 197 5 — 1,131 Provision (Credit) (405 ) 180 (467 ) (258 ) 1,960 345 5 (10 ) 1,350 Allowance for loans transfered to held-for-sale (20 ) (63 ) — — — — — — (83 ) Ending balance, June 30, 2015 $ 2,256 $ 3,049 $ 461 $ 466 $ 2,441 $ 780 $ 8 $ 139 $ 9,600 Allowance for Loan and Lease Losses For the Three Months Ended June 30, 2014 Real estate: Residential 1-4 family Real estate: Commercial Real estate: Construction Real estate: Multi-family and farmland Commercial Consumer Other Unallocated Total (in thousands) Beginning balance, March 31, 2014 $ 3,423 $ 2,882 $ 857 $ 731 $ 754 $ 545 $ 8 $ — $ 9,200 Charge-offs (49 ) (81 ) — — — (122 ) — — (252 ) Recoveries 96 469 17 5 61 52 22 — 722 Provision (Credit) (279 ) (657 ) 28 (18 ) 147 109 (23 ) 423 (270 ) Ending balance, June 30, 2014 $ 3,191 $ 2,613 $ 902 $ 718 $ 962 $ 584 $ 7 $ 423 $ 9,400 Allowance for Loan and Lease Losses For the Six Months Ended June 30, 2014 Real estate: Residential 1-4 family Real estate: Commercial Real estate: Construction Real estate: Multi-family and farmland Commercial Consumer Other Unallocated Total (in thousands) Beginning balance, December 31, 2013 $ 4,063 $ 3,299 $ 899 $ 916 $ 970 $ 342 $ 11 $ — $ 10,500 Charge-offs (243 ) (257 ) — — (6 ) (251 ) (30 ) — (787 ) Recoveries 178 477 78 9 78 139 70 — 1,029 Provision (Credit) (807 ) (806 ) (75 ) (207 ) (80 ) 354 (44 ) 423 (1,242 ) Allowance for loans transferred to held-for-sale — (100 ) — — — — — — (100 ) Ending balance, June 30, 2014 $ 3,191 $ 2,613 $ 902 $ 718 $ 962 $ 584 $ 7 $ 423 $ 9,400 The following table presents an analysis of the end of period balance of the allowance for loan and lease losses as of June 30, 2015 . As of June 30, 2015 Real estate: Residential 1-4 family Real estate: Commercial Real estate: Construction Real estate: Multi-family and farmland Total Real Estate Loans Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance (in thousands) Individually evaluated $ 98 $ — $ 1,824 $ — $ — $ — $ 62 $ — $ 1,984 $ — Collectively evaluated 184,012 2,256 390,398 3,049 47,197 461 20,414 466 642,021 6,232 Total evaluated $ 184,110 $ 2,256 $ 392,222 $ 3,049 $ 47,197 $ 461 $ 20,476 $ 466 $ 644,005 $ 6,232 Commercial Consumer Other Unallocated Grand Total (continued from above) Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance (in thousands) Individually evaluated $ 2,955 $ 1,319 $ 250 $ — $ — $ — $ — $ — $ 5,189 $ 1,319 Collectively evaluated 95,310 1,122 17,243 780 4,648 8 — 139 759,222 8,281 Total evaluated $ 98,265 $ 2,441 $ 17,493 $ 780 $ 4,648 $ 8 $ — $ 139 $ 764,411 $ 9,600 The following table presents an analysis of the end of period balance of the allowance for loan and lease losses as of December 31, 2014 . As of December 31, 2014 Real estate: Residential 1-4 family Real estate: Commercial Real estate: Construction Real estate: Multi-family and farmland Total Real Estate Loans Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance (in thousands) Individually evaluated $ 107 $ — $ 956 $ — $ — $ — $ — $ — $ 1,063 $ — Collectively evaluated 181,548 2,617 313,887 2,865 47,840 716 18,108 714 561,383 6,912 Total evaluated $ 181,655 $ 2,617 $ 314,843 $ 2,865 $ 47,840 $ 716 $ 18,108 $ 714 $ 562,446 $ 6,912 Commercial Consumer Other Unallocated Grand Total (continued from above) Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance (in thousands) Individually evaluated $ 218 $ — $ — $ — $ — $ — $ — $ — $ 1,281 $ — Collectively evaluated 73,767 795 22,539 688 4,652 6 — 149 662,341 8,550 Total evaluated $ 73,985 $ 795 $ 22,539 $ 688 $ 4,652 $ 6 $ — $ 149 $ 663,622 $ 8,550 The following table presents an analysis of the end of period balance of the allowance for loan and lease losses as of June 30, 2014 . As of June 30, 2014 Real estate: Residential 1-4 family Real estate: Commercial Real estate: Construction Real estate: Multi-family and farmland Total Real Estate Loans Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance (in thousands) Individually evaluated $ 264 $ 9 $ 1,812 $ 505 $ — $ — $ — $ — $ 2,076 $ 514 Collectively evaluated 178,218 3,182 309,715 2,108 52,784 902 16,178 718 556,895 6,910 Total evaluated $ 178,482 $ 3,191 $ 311,527 $ 2,613 $ 52,784 $ 902 $ 16,178 $ 718 $ 558,971 $ 7,424 Commercial Consumer Other Unallocated Grand Total (continued from above) Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance Carrying Value Associated Allowance (in thousands) Individually evaluated $ 230 $ — $ — $ — $ — $ — $ — $ — $ 2,306 $ 514 Collectively evaluated 65,722 962 30,041 584 4,575 7 — 423 657,233 8,886 Total evaluated $ 65,952 $ 962 $ 30,041 $ 584 $ 4,575 $ 7 $ — $ 423 $ 659,539 $ 9,400 The Company utilizes a risk rating system to evaluate the credit risk of its loan portfolio. The Company classifies loans as: pass, special mention, substandard/non-impaired, substandard/impaired, doubtful or loss. The following describes the Company's classifications and the various risk indicators associated with each rating. A pass rating is assigned to those loans that are performing as contractually agreed and do not exhibit the characteristics of the criticized and classified risk ratings as defined below. The Company utilizes six grade classifications within the Pass rating based on the varying risk characteristics of the loan. Pass loan pools do not include the unfunded portions of binding commitments to lend, standby letters of credit, deposit secured loans or mortgage loans originated with commitments to sell in the secondary market. Loans that are not required to have an allowance reserve include: loans secured by segregated deposits held by FSGBank, loans held-for-sale, and the government guaranteed portion of SBA and USDA loans. A special mention loan risk rating is considered criticized but is not considered as severe as a classified loan risk rating. Special mention loans contain one or more potential weakness(es), which if not corrected, could result in an unacceptable increase in credit risk at some future date. These loans may be characterized by the following risks and/or trends: Loans to Businesses: • Downward trend in sales, profit levels and margins • Impaired working capital position compared to industry • Cash flow strained in order to meet debt repayment schedule • Technical defaults due to noncompliance with financial covenants • Recurring trade payable slowness • High leverage compared to industry average with shrinking equity cushion • Questionable abilities of management • Weak industry conditions • Inadequate or outdated financial statements Loans to Businesses or Individuals: • Loan delinquencies and overdrafts may occur • Original source of repayment questionable • Documentation deficiencies may not be easily correctable • Loan may need to be restructured • Collateral or guarantor offers adequate protection • Unsecured debt to tangible net worth is excessive A substandard loan risk rating is characterized as having specifically identified weaknesses and deficiencies typically resulting from severe adverse trends of a financial, economic, or managerial nature, and may warrant non-accrual status. The Company segregates substandard loans into two classifications based on the Company’s allowance methodology for impaired loans. The Company defines a substandard/impaired loan as a substandard loan relationship in excess of $250 thousand that is individually reviewed. Substandard loans have a greater likelihood of loss and may require a protracted work-out plan. In addition to the factors listed for special mention loans, substandard loans may be characterized by the following risks and/or trends: Loans to Businesses: • Sustained losses that have severely eroded equity and cash flows • Concentration in illiquid assets • Serious management problems or internal fraud • Chronic trade payable slowness; may be placed on COD or collection by trade creditor • Inability to access other funding sources • Financial statements with adverse opinion or disclaimer; may be received late • Insufficient documented cash flows to meet contractual debt service requirements Loans to Businesses or Individuals: • Chronic or severe delinquency or has met the retail classification standards which is generally past dues greater than 90 days • Frequent overdrafts • Likelihood of bankruptcy exists • Serious documentation deficiencies • Reliance on secondary sources of repayment which are presently considered adequate • Demand letter sent • Litigation may have been filed against the borrower Loans with a risk rating of doubtful are individually analyzed to determine the Company's best estimate of the loss based on the most recent assessment of all available sources of repayment. Doubtful loans are considered impaired and placed on nonaccrual. For doubtful loans, the collection or liquidation in full of principal and/or interest is highly questionable or improbable. The Company estimates the specific potential loss based upon an individual analysis of the relationship risks, the borrower’s cash flow, the borrower’s management and any underlying secondary sources of repayment. The amount of the estimated loss, if any, is then either specifically reserved in a separate component of the allowance or charged-off. In addition to the characteristics listed for substandard loans, the following characteristics apply to doubtful loans: Loans to Businesses: • Normal operations are severely diminished or have ceased • Seriously impaired cash flow • Numerous exceptions to loan agreement • Outside accountant questions entity’s survivability as a “going concern” • Financial statements may be received late, if at all • Material legal judgments filed • Collection of principal and interest is impaired • Collateral/Guarantor may offer inadequate protection Loans to Businesses or Individuals: • Original repayment terms materially altered • Secondary source of repayment is inadequate • Asset liquidation may be in process with all efforts directed at debt retirement • Documentation deficiencies not correctable The consistent application of the above loan risk rating methodology ensures that the Company has the ability to track historical losses and appropriately estimate potential future losses in our allowance. Additionally, appropriate loan risk ratings assist the Company in allocating credit and special asset personnel in the most effective manner. Significant changes in loan risk ratings can have a material impact on the allowance and thus a material impact on the Company's financial results by requiring significant increases or decreases in provision expense. The Company individually reviews these relationships on a quarterly basis to determine the required allowance or loss, as applicable. During the first quarter of 2015 , the Company changed the dollar threshold utilized to evaluate loan relationships for impairment. Prior to 2015 , the dollar threshold utilized was $500 thousand . The Company determined it was appropriate given alignment with a change in internal procedures and controls related to credit quality monitoring and loan review scope. The reduction in the dollar threshold impacts the Company's estimated allowance for loan and lease loss. The change in our estimated allowance for loan and lease losses and provision expense, due to the change in accounting policy, was recorded in the period the change in the dollar threshold took place. The reduction in the dollar threshold increased impaired loans by approximately $729 thousand at June 30, 2015 . The change in the dollar threshold also decreased the estimated allowance for loan and lease loss and associated provision expense by approximately $64 thousand for the six months ended June 30, 2015 . The following table presents the Company’s internal risk rating by loan classification as utilized in the allowance analysis as of June 30, 2015 : As of June 30, 2015 Pass Special Mention Substandard – Non-impaired Substandard – Impaired Total (in thousands) Loans by Classification Real estate: Residential 1-4 family $ 173,539 $ 5,283 $ 5,190 $ 98 $ 184,110 Real estate: Commercial 385,813 2,130 2,455 1,824 392,222 Real estate: Construction 46,628 63 506 — 47,197 Real estate: Multi-family and farmland 20,309 95 10 62 20,476 Commercial 88,472 3,567 3,271 2,955 98,265 Consumer 17,182 38 23 250 17,493 Other 4,619 — 29 — 4,648 Total Loans $ 736,562 $ 11,176 $ 11,484 $ 5,189 $ 764,411 The following table presents the Company’s internal risk rating by loan classification as utilized in the allowance analysis as of December 31, 2014 : As of December 31, 2014 Pass Special Mention Substandard – Non-impaired Substandard – Impaired Total (in thousands) Loans by Classification Real estate: Residential 1-4 family $ 170,044 $ 5,700 $ 5,804 $ 107 $ 181,655 Real estate: Commercial 308,677 2,993 2,217 956 314,843 Real estate: Construction 43,453 3,688 699 — 47,840 Real estate: Multi-family and farmland 17,930 98 80 — 18,108 Commercial 68,780 1,834 3,153 218 73,985 Consumer 22,218 57 264 — 22,539 Other 4,621 1 30 — 4,652 Total Loans $ 635,723 $ 14,371 $ 12,247 $ 1,281 $ 663,622 The following table presents the Company’s internal risk rating by loan classification as utilized in the allowance analysis as of June 30, 2014 : As of June 30, 2014 Pass Special Mention Substandard – Non-impaired Substandard – Impaired Total (in thousands) Loans by Classification Real estate: Residential 1-4 family $ 163,385 $ 8,036 $ 6,797 $ 264 $ 178,482 Real estate: Commercial 304,083 1,629 4,003 1,812 311,527 Real estate: Construction 48,399 3,450 935 — 52,784 Real estate: Multi-family and farmland 15,355 148 675 — 16,178 Commercial 59,027 3,655 3,040 230 65,952 Consumer 29,687 84 270 — 30,041 Other 4,541 — 34 — 4,575 Total Loans $ 624,477 $ 17,002 $ 15,754 $ 2,306 $ 659,539 The Company classifies a loan as impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans were $ 5.2 million , $1.3 million and $2.3 million at June 30, 2015 , December 31, 2014 and June 30, 2014 , respectively. For impaired loans, the Company generally applies all payments directly to principal. Accordingly, the Company did not recognize any significant amount of interest income for impaired loans during the three and six months ended June 30, 2015 and 2014 . The following table presents additional information on the Company’s impaired loans as of June 30, 2015 , December 31, 2014 and June 30, 2014 : As of June 30, 2015 As of December 31, 2014 Recorded Investment Unpaid Principal Balance Related Allowance Average Balance of Recorded Investment Recorded Investment Unpaid Principal Balance Related Allowance Average (in thousands) Impaired loans with no related allowance recorded: Real estate: Residential 1-4 family $ 98 $ 461 $ — $ 211 $ 107 $ 277 $ — $ 260 Real estate: Commercial 1,824 2,277 — 944 956 1,342 — 727 Real estate: Construction — — — — — — — — Real estate: Multi-family and farmland 62 425 — 20 — — — — Commercial 317 362 — 217 218 556 — 244 Consumer 250 250 — 78 — — — — Other — — — — — — — — Total $ 2,551 $ 3,775 $ — $ 1,470 $ 1,281 $ 2,175 $ — $ 1,231 Impaired loans with an allowance recorded: Real estate: Residential 1-4 family $ — $ — $ — $ — $ — $ — $ — $ — Real estate: Commercial — — — — — — — — Real estate: Construction — — — — — — — — Real estate: Multi-family and farmland — — — — — — — — Commercial 2,638 7,402 1,319 580 — — — — Consumer — — — — — — — — Other — — — — — — — — Total 2,638 7,402 1,319 580 — — — — Total impaired loans $ 5,189 $ 11,177 $ 1,319 $ 2,050 $ 1,281 $ 2,175 $ — $ 1,231 As of June 30, 2014 Recorded Investment Unpaid Principal Balance Related Allowance Average Balance of Recorded Investment (in thousands) Impaired loans with no related allowance recorded: Real estate: Residential 1-4 family $ 143 $ 143 $ — $ 396 Real estate: Commercial 301 301 — 349 Real estate: Construction — — — — Real estate: Multi-family and farmland — — — — Commercial 230 230 — 265 Consumer — — — — Other — — — — Total $ 674 $ 674 $ — $ 1,010 Impaired loans with an allowance recorded: Real estate: Residential 1-4 family $ 121 $ 121 $ 9 $ 121 Real estate: Commercial 1,511 1,511 505 1,489 Real estate: Construction — — — — Real estate: Multi-family and farmland — — — — Commercial — — — — Consumer — — — — Other — — — — Total 1,632 1,632 514 1,610 Total impaired loans $ 2,306 $ 2,306 $ 514 $ 2,620 Nonaccrual loans were $6.7 million , $4.3 million and $4.9 million at June 30, 2015 , December 31, 2014 and June 30, 2014 , respectively. The following table provides nonaccrual loans by type: As of June 30, 2015 As of December 31, 2014 As of June 30, 2014 (in thousands) Nonaccrual Loans by Classification Real estate: Residential 1-4 family $ 996 $ 1,529 $ 1,262 Real estate: Commercial 1,823 955 1,876 Real estate: Construction — 162 363 Real estate: Multi-family and farmland 63 64 56 Commercial 3,603 1,382 1,079 Consumer and other 260 256 255 Total Nonaccrual Loans $ 6,745 $ 4,348 $ 4,891 The Company monitors loans by past due status. The following table provides the past due status for all loans. Nonaccrual loans are included in the applicable classification. As of June 30, 2015 30-89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Total Greater than 90 Days Past Due and Accruing (in thousands) Loans by Classification Real estate: Residential 1-4 family $ 1,239 $ 723 $ 1,962 $ 182,148 $ 184,110 $ 544 Real estate: Commercial 484 1,425 1,909 390,313 392,222 334 Real estate: Construction — 168 168 47,029 47,197 169 Real estate: Multi-family and farmland — 63 63 20,413 20,476 — Subtotal of real estate secured loans 1,723 2,379 4,102 639,903 644,005 1,047 Commercial 3,191 3,214 6,405 91,860 98,265 360 Consumer 99 267 366 17,127 17,493 9 Other — — — 4,648 4,648 — Total Loans $ 5,013 $ 5,860 $ 10,873 $ 753,538 $ 764,411 $ 1,416 As of December 31, 2014 30-89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Total Greater than 90 Days Past Due and Accruing (in thousands) Loans by Classification Real estate: Residential 1-4 family $ 1,546 $ 746 $ 2,292 $ 179,363 $ 181,655 $ 11 Real estate: Commercial 192 955 1,147 313,696 314,843 — Real estate: Construction — 230 230 47,610 47,840 68 Real estate: Multi-family and farmland — 64 64 18,044 18,108 — Subtotal of real estate secured loans 1,738 1,995 3,733 558,713 562,446 79 Commercial 435 592 1,027 72,958 73,985 — Consumer 110 271 381 22,158 22,539 21 Leases — — — — — — Other — — — 4,652 4,652 — Total Loans $ 2,283 $ 2,858 $ 5,141 $ 658,481 $ 663,622 $ 100 As of June 30, 2014 30-89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Total Greater than 90 Days Past Due and Accruing (in thousands) Loans by Classification Real estate: Residential 1-4 family $ 1,689 $ 1,346 $ 3,035 $ 175,447 $ 178,482 $ 716 Real estate: Commercial — 188 188 311,339 311,527 188 Real estate: Construction — 524 524 52,260 52,784 170 Real estate: Multi-family and farmland — 56 56 16,122 16,178 — Subtotal of real estate secured loans 1,689 2,114 3,803 555,168 558,971 1,074 Commercial 269 256 525 65,427 65,952 — Consumer 17 262 279 29,762 30,041 9 Other — — — 4,575 4,575 — Total Loans $ 1,975 $ 2,632 $ 4,607 $ 654,932 $ 659,539 $ 1,083 As of June 30, 2015 , the Company had eight loans, not on non-accrual, that were considered troubled debt restructurings. Four residential loans totaling $122 thousand were restructured with lower interest rates and payments, two commercial real estate loans totaling $777 thousand were restructured with short term extensions to allow collection of financial information and re-evaluate, and two consumer loans totaling $27 thousand were restructured with lower payments. As of June 30, 2015 , these loans were performing under the modified terms. The Company had $926 thousand , $177 thousand and $497 thousand in total troubled debt restructurings outstanding as of June 30, 2015 , December 31, 2014 and June 30, 2014 , respectively. The Company has allocated no specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2015 , December 31, 2014 and June 30, 2014 . The Company has not committed to lend additional amounts as of June 30, 2015 , December 31, 2014 and June 30, 2014 to customers with outstanding loans that are classified as troubled debt restructurings. The Company completed one modification totaling $734 thousand that would qualify as a troubled debt restructuring during the three months ended June 30, 2015 and four modifications totaling $800 thousand that would qualify as troubled debt restructurings during the six months ended June 30, 2015 . The Company completed two modifications totaling $81 thousand for the year ended December 31, 2014 that would qualify as a troubled debt restructuring and completed one modification totaling $47 thousand that would qualify as a troubled debt restructuring for the three and six months ended June 30, 2014 . The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three and six months ended June 30, 2015 and 2014 and the year ended December 31, 2014 : Three Months Ended Three Months Ended June 30, 2015 June 30, 2014 Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment (dollar amounts in thousands) (dollar amounts in thousands) Residential real estate — $ — $ — — $ — $ — Troubled Debt Restructurings That Subsequently Defaulted: — $ — $ — — $ — $ — Six Months Ended Six Months Ended June 30, 2015 June 30, 2014 Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment (dollar amounts in thousands) (dollar amounts in thousands) Residential real estate 1 $ 20 $ 20 0 $ — $ — Troubled Debt Restructurings That Subsequently Defaulted: 1 $ 20 $ 20 0 $ — $ — Year Ended December 31, 2014 Number of Pre-Modification Post-Modification (dollar amounts in thousands) Troubled Debt Restructurings That Subsequently Defaulted: Residential real estate 1 $ 36 $ 36 Commercial real estate 1 45 45 Total 2 $ 81 $ 81 A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. The troubled debt restructuring that subsequently defaulted described above increased charge-offs by $12 thousand and had no impact on the allowance for loan losses during the three and six months ended June 30, 2015 . The troubled debt restructurings that subsequently defaulted above had no impact on the allowance for loan losses or charge-offs during the year ended December 31, 2014 and the three and six months ended June 30, 2014 . |