5.LOANS

The composition of loans is as follows (dollars in thousands):


	June 30,		December 31,
	2016		2015

Commercial real estate	$	354,878	$	312,805
Commercial, financial, and agricultural		130,054		122,140
One to four family residential real estate		194,167		140,502
Construction :
Consumer		11,840		11,770
Commercial		18,576		15,330
Consumer		16,120		15,847

Total loans	$	725,635	$	618,394

The Corporation completed the acquisition of Peninsula Financial Corporation (“PFC”) on December 5, 2014 and The First National Bank of Eagle River (“Eagle”) on April 29, 2016. The acquired loans were divided into loans with evidence of credit quality deterioration, which are accounted for under ASC 310-30 (“acquired impaired”) and loans that do not meet that criteria, which are accounted for under ASC 310-20 (“acquired nonimpaired”). The PFC acquired impaired loans totaled $10.312 million and the Eagle acquired impaired loans totaled $3.401 million. The Corporation recorded all acquired loans at fair value taking into account a number of factors, including remaining life, estimated loss, estimated value of the underlying collateral and net present values of cash flows. In the first six months of 2015, the Corporation had positive resolution of one PFC acquired nonperforming loan which resulted in the recognition of approximately $.429 million of the accretable interest.

The table below details the outstanding balances of the PFC acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands):


	Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total
Loans acquired - contractual payments	$	13,290	$	53,849	$	67,139
Nonaccretable difference		(2,234)		—		(2,234)
Expected cash flows		11,056		53,849		64,905
Accretable yield		(744)		(2,100)		(2,844)
Carrying balance at acquisition date	$	10,312	$	51,749	$	62,061

The table below details the outstanding balances of the Eagle acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands):


	Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total
Loans acquired - contractual payments	$	3,401	$	82,639	$	86,040
Nonaccretable difference		(1,172)		—		(1,172)
Expected cash flows		2,229		82,639		84,868
Accretable yield		(391)		(1,700)		(2,091)
Carrying balance at acquisition date	$	1,838	$	80,939	$	82,777

The table below presents a rollforward of the accretable yield on acquired loans for the six months ended June 30, 2016 (dollars in thousands):


	Peninsula						Eagle
	Acquired		Acquired		Acquired		Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total		Impaired		Non-impaired		Total

Balance, December 31, 2015	$	426	$	1,342	$	1,768	$	—	$	—	$	—
Acquisition of Eagle River		—		—		—		391		1,700		2,091
Accretion		—		(350)		(350)		—		(94)		(94)
Reclassification from nonaccretable difference		(68)		—		(68)		—		—		—
Balance, June 30, 2016	$	358	$	992	$	1,350	$	391	$	1,606	$	1,997

The table below presents a rollforward of the accretable yield on acquired loans for the six months ended June 30, 2015 (dollars in thousands):


	Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total

Balance, December 31, 2014	$	744	$	2,042	$	2,786
Accretion		(429)		(350)		(779)
Reclassification from nonaccretable difference		188		—		188
Balance, June 30, 2015	$	503	$	1,692	$	2,195

An analysis of the allowance for loan losses for the six months ended June 30, 2016 and the year ended December 31, 2015 is as follows (dollars in thousands):


	June 30,		December 31,
	2016		2015

Balance, January 1	$	5,004	$	5,140
Recoveries on loans previously charged off		84		690
Loans charged off		(505)		(2,030)
Provision		150		1,204

Balance at end of period	$	4,733	$	5,004

In the first half of 2016, net charge-offs were $.421 million, or .13% of average loans, annualized, compared to net charge-offs of $.045 million in the same period in 2015. In the first six months of 2016, the Corporation recorded a provision for loan loss of $.150 million compared to $.505 million in the first six months of 2015. The Corporation’s allowance for loan loss reserve policy calls for a measurement of the adequacy of the reserve at each quarter end. This process includes an analysis of the loan portfolio to take into account increases in loans outstanding and portfolio composition, historical loss rates, and specific reserve requirements of nonperforming loans.

A breakdown of the allowance for loan losses and recorded balances in loans at June 30, 2016 is as follows (dollars in thousands):


			Commercial,				One to four
	Commercial		financial and		Commercial		family residential		Consumer
	real estate		agricultural		construction		real estate		construction		Consumer		Unallocated		Total
Three Months Ended June 30, 2016
Allowance for loan loss reserve:
Beginning balance ALLR	$	1,615	$	580	$	74	$	257	$	7	$	40	$	2,251	$	4,824
Charge-offs		(224)		(25)		—		(10)		—		(10)		—		(269)
Recoveries		15		10		—		1		—		2		—		28
Provision		418		135		4		100		(2)		(9)		(496)		150
Ending balance ALLR	$	1,824	$	700	$	78	$	348	$	5	$	23	$	1,755	$	4,733

Six Months Ended June 30, 2016
Allowance for loan loss reserve:
Beginning balance ALLR	$	1,611	$	645	$	79	$	274	$	7	$	64	$	2,324	$	5,004
Charge-offs		(224)		(214)		—		(49)		—		(18)		—		(505)
Recoveries		22		49		—		2		7		4		—		84
Provision		415		220		(1)		121		(9)		(27)		(569)		150
Ending balance ALLR	$	1,824	$	700	$	78	$	348	$	5	$	23	$	1,755	$	4,733

At June 30, 2016
Loans:
Ending balance	$	354,878	$	130,054	$	18,576	$	194,167	$	11,840	$	16,120	$	—	$	725,635
Ending balance ALLR		(1,824)		(700)		(78)		(348)		(5)		(23)		(1,755)		(4,733)
Net loans	$	353,054	$	129,354	$	18,498	$	193,819	$	11,835	$	16,097	$	(1,755)	$	720,902

Ending balance ALLR:
Individually evaluated	$	533	$	252	$	—	$	48	$	—	$	16	$	—	$	849
Collectively evaluated		1,291		448		78		300		5		7		1,755		3,884
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—
Total	$	1,824	$	700	$	78	$	348	$	5	$	23	$	1,755	$	4,733

Ending balance Loans:
Individually evaluated	$	1,755	$	354	$	—	$	1,021	$	—	$	48	$	—	$	3,178
Collectively evaluated		347,677		129,647		18,576		188,033		11,760		16,070		—		711,763
Acquired with deteriorated credit quality		5,446		53		—		5,113		80		2		—		10,694
Total	$	354,878	$	130,054	$	18,576	$	194,167	$	11,840	$	16,120	$	—	$	725,635

Impaired loans, by definition, are individually evaluated.

A breakdown of the allowance for loan losses and recorded balances in loans as of and for the twelve months ended December 31, 2015 is as follows (dollars in thousands):


			Commercial,				One to four
	Commercial		financial and		Commercial		family residential		Consumer
	real estate		agricultural		construction		real estate		construction		Consumer		Unallocated		Total
Allowance for loan loss reserve:
Beginning balance ALLR	$	2,813	$	1,539	$	142	$	285	$	6	$	13	$	342	$	5,140
Charge-offs		(52)		(1,749)		—		(142)		—		(87)		—		(2,030)
Recoveries		588		22		52		2		—		26		—		690
Provision		(1,738)		833		(115)		129		1		112		1,982		1,204
Ending balance ALLR	$	1,611	$	645	$	79	$	274	$	7	$	64	$	2,324	$	5,004

Loans:
Ending balance	$	312,805	$	122,140	$	15,330	$	140,502	$	11,770	$	15,847	$	—	$	618,394
Ending balance ALLR		(1,611)		(645)		(79)		(274)		(7)		(64)		(2,324)		(5,004)
Net loans	$	311,194	$	121,495	$	15,251	$	140,228	$	11,763	$	15,783	$	(2,324)	$	613,390

Ending balance ALLR:
Individually evaluated	$	420	$	192	$	—	$	60	$	—	$	55	$	—	$	727
Collectively evaluated		1,191		453		79		214		7		9		2,324		4,277
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—
Total	$	1,611	$	645	$	79	$	274	$	7	$	64	$	2,324	$	5,004

Ending balance Loans:
Individually evaluated	$	1,086	$	617	$	—	$	325	$	83	$	—	$	—	$	2,111
Collectively evaluated		307,336		121,345		15,330		136,940		11,686		15,845		—		608,482
Acquired with deteriorated credit quality		4,383		178		—		3,237		1		2		—		7,801
Total	$	312,805	$	122,140	$	15,330	$	140,502	$	11,770	$	15,847	$	—	$	618,394

Impaired loans, by definition, are individually evaluated.

A breakdown of the allowance for loan losses and recorded balances in loans at June 30, 2015 is as follows (dollars in thousands):


			Commercial,				One to four
	Commercial		financial and		Commercial		family residential		Consumer
	real estate		agricultural		construction		real estate		construction		Consumer		Unallocated		Total
Three Months Ended June 30, 2015
Allowance for loan loss reserve:
Beginning balance ALLR	$	2,770	$	2,353	$	144	$	244	$	6	$	19	$	(9)	$	5,527
Charge-offs		—		(110)		—		(30)		—		(7)		—		(147)
Recoveries		11		—		—		1		—		8		—		20
Provision		(231)		328		(16)		67		(1)		7		46		200
Ending balance ALLR	$	2,550	$	2,571	$	128	$	282	$	5	$	27	$	37	$	5,600

Six Months Ended June 30, 2015
Allowance for loan loss reserve:
Beginning balance ALLR	$	2,813	$	1,539	$	142	$	285	$	6	$	13	$	342	$	5,140
Charge-offs		—		(110)		—		(30)		—		(18)		—		(158)
Recoveries		92		—		—		1		1		19		—		113
Provision		(355)		1,142		(14)		26		(2)		13		(305)		505
Ending balance ALLR	$	2,550	$	2,571	$	128	$	282	$	5	$	27	$	37	$	5,600

At June 30, 2015
Loans:
Ending balance	$	320,013	$	107,205	$	19,868	$	142,276	$	8,722	$	17,163	$	—	$	615,247
Ending balance ALLR		(2,550)		(2,571)		(128)		(282)		(5)		(27)		(37)		(5,600)
Net loans	$	317,463	$	104,634	$	19,740	$	141,994	$	8,717	$	17,136	$	(37)	$	609,647

Ending balance ALLR:
Individually evaluated	$	570	$	1,591	$	—	$	53	$	—	$	18	$	—	$	2,232
Collectively evaluated		1,980		980		128		229		5		9		37		3,368
Total	$	2,550	$	2,571	$	128	$	282	$	5	$	27	$	37	$	5,600

Ending balance Loans:
Individually evaluated	$	1,984	$	4,905	$	—	$	368	$	—	$	33	$	—	$	7,290
Collectively evaluated		312,969		102,110		19,762		137,846		8,722		17,127		—		598,536
Acquired with deteriorated credit quality		5,060		190		106		4,062		—		3		—		9,421
Total	$	320,013	$	107,205	$	19,868	$	142,276	$	8,722	$	17,163	$	—	$	615,247

As part of the management of the loan portfolio, risk ratings are assigned to all commercial loans. Through the loan review process, ratings are modified as believed to be appropriate to reflect changes in the credit. Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans.

To do so, we operate a credit risk rating system under which our credit management personnel assign a credit risk rating to each loan at the time of origination and review loans on a regular basis to determine each loan’s credit risk rating on a scale of 1 through 8, with higher scores indicating higher risk. The credit risk rating structure used is shown below.

In the context of the credit risk rating structure, the term Classified is defined as a problem loan which may or may not be in a nonaccrual status, dependent upon current payment status and collectability.

Strong (1)

Borrower is not vulnerable to sudden economic or technological changes. They have “strong” balance sheets and are within an industry that is very typical for our markets or type of lending culture. Borrowers also have “strong” financial and cash flow performance and excellent collateral (low loan to value or readily available to liquidate collateral) in conjunction with an impeccable repayment history.

Good (2)

Borrower shows limited vulnerability to sudden economic change. These borrowers have “above average” financial and cash flow performance and a very good repayment history. The balance sheet of the company is also very good as compared to peer and the company is in an industry that is familiar to our markets or our type of lending. The collateral securing the deal is also very good in terms of its type, loan to value, etc.

Average (3)

Borrower is typically a well-seasoned business, however may be susceptible to unfavorable changes in the economy, and could be somewhat affected by seasonal factors. The borrowers within this category exhibit financial and cash flow performance that appear “average” to “slightly above average” when compared to peer standards and they show an adequate payment history. Collateral securing this type of credit is good, exhibiting above average loan to values, etc.

Acceptable/Acceptable Watch (4)

A borrower within this category exhibits financial and cash flow performance that appear adequate and satisfactory when compared to peer standards and they show a satisfactory payment history. The collateral securing the request is within supervisory limits and overall is acceptable. Borrowers rated acceptable could also be newer businesses that are typically susceptible to unfavorable changes in the economy, and more than likely could be affected by seasonal factors.

Special Mention (5)

The borrower may have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Examples of this type of credit include a start-up company fully based on projections, a documentation issue that needs to be corrected or a general market condition that the borrower is working through to get corrected.

Substandard (6)

Substandard loans are classified assets exhibiting a number of well-defined weaknesses that jeopardize normal repayment. The assets are no longer adequately protected due to declining net worth, lack of earning capacity, or insufficient collateral offering the distinct possibility of the loss of a portion of the loan principal. Loans classified as substandard clearly represent troubled and deteriorating credit situations requiring constant supervision.

Doubtful (7)

Loans in this category exhibit the same, if not more pronounced weaknesses used to describe the substandard credit. Loans are frozen with collection improbable. Such loans are not yet rated as Charge-off because certain actions may yet occur which would salvage the loan.

Charge-off/Loss (8)

Loans in this category are largely uncollectible and should be charged against the loan loss reserve immediately.

General Reserves:

For loans with a credit risk rating of 5 or better and any loans with a risk rating of 6 or 7 with no specific reserve, reserves are established based on the type of loan collateral, if any, and the assigned credit risk rating.

Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogenous loans based on historical loss experience, and consideration of current environmental factors and economic trends, all of which may be susceptible to significant change.

Using a historical average loss by loan type as a base, each loan graded as higher risk is assigned a specific percentage. The residential real estate and consumer loan portfolios are assigned a loss percentage as a homogenous group. If, however, on an individual loan the projected loss based on collateral value and payment histories are in excess of the computed allowance, the allocation is increased for the higher anticipated loss. These computations provide the basis for the allowance for loan losses as recorded by the Corporation.

Below is a breakdown of loans by risk category as of June 30, 2016 (dollars in thousands):


							(4)
	(1)		(2)		(3)		Acceptable/		(5)		(6)		(7)		Rating
	Strong		Good		Average		Acceptable Watch		Sp. Mention		Substandard		Doubtful		Unassigned		Total

Commercial real estate	$	1	$	25,183	$	118,729	$	204,188	$	—	$	6,777	$	—	$	—	$	354,878
Commercial, financial and agricultural		5,829		3,977		52,084		66,556		—		1,608		—		—		130,054
Commercial construction		—		942		3,882		7,329		—		407		—		6,016		18,576
One-to-four family residential real estate		501		1,510		3,677		9,329		—		5,829		—		173,321		194,167
Consumer construction		29		—		—		—		—		21		—		11,790		11,840
Consumer		19		—		16		2		—		60		—		16,023		16,120

Total loans	$	6,379	$	31,612	$	178,388	$	287,404	$	—	$	14,702	$	—	$	207,150	$	725,635

Below is a breakdown of loans by risk category as of December 31, 2015 (dollars in thousands):


							(4)
	(1)		(2)		(3)		Acceptable/		(5)		(6)		(7)		Rating
	Strong		Good		Average		Acceptable Watch		Sp. Mention		Substandard		Doubtful		Unassigned		Total

Commercial real estate	$	2,072	$	26,197	$	113,868	$	164,954	$	—	$	5,714	$	—	$	—	$	312,805
Commercial, financial and agricultural		13,067		5,954		47,194		53,791		—		2,134		—		—		122,140
Commercial construction		—		400		3,869		8,257		—		395		—		2,409		15,330
One-to-four family residential real estate		591		1,222		3,172		4,078		—		4,093		—		127,346		140,502
Consumer construction		—		—		—		—		—		—		—		11,770		11,770
Consumer		24		—		19		—		—		61		—		15,743		15,847

Total loans	$	15,754	$	33,773	$	168,122	$	231,080	$	—	$	12,397	$	—	$	157,268	$	618,394

Impaired Loans

Nonperforming loans are those which are contractually past due 90 days or more as to interest or principal payments, on nonaccrual status, or loans, the terms of which have been renegotiated to provide a reduction or deferral on interest or principal. Interest income recorded during impairment for the three and six months ended June 30, 2016 was $.185 million and $.542 million. Interest income that would have been recognized during this period was $.205 million and $.588 million, respectively. For the three months and six months ended June 30, 2015, interest income recorded during impairment was $.105 million and $.628 million, and the amount that would have been recognized was $.236 million and $.831 million.

The accrual of interest on loans is discontinued when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans are considered impaired when, based on current information and events, it is probable the Corporation will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loans basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Purchased loans acquired in a business combination are recorded at estimated fair value on their purchase date with no carryover of the related allowance for loan losses. In determining the estimated fair value of purchased loans, management considers a number of factors including the remaining life of the acquired loans, estimated prepayments, estimated loss ratios, estimated value of the underlying collateral, net present value of cash flows expected to be received, among others. Purchased loans are accounted for in accordance with guidance for certain loans acquired in a transfer (ASC 310-30), when the loans have evidence of credit deterioration since origination and it is probable at the date of acquisition that the acquirer will not collect all contractually required principal and interest payments. The difference between contractually required payments and the cash flows expected to be collected at acquisition is referred to as the non-accretable difference. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in expected cash flows will result in a reversal of the provision for loan losses to the extent of prior charges and then an adjustment to accretable yield, which would have a positive impact on interest income.

The ASC 310-30 mark on PFC impaired loans totaled $2.978 million as of the acquisition date. The accretable yield related to these impaired loans was estimated at $.744 million. The Corporation recorded no accretable yield of the PFC loan mark in 2016 and recorded $.429 million due to the positive resolution of one large acquired nonperforming commercial loan relationship in the first quarter of 2015.

The ASC 310-30 mark on Eagle impaired loans totaled $1.563 million as of the acquisition date. The accretable yield related to these impaired loans was estimated at $.391 million. The Corporation recorded no accretable yield of the Eagle loan mark in 2016.

The following is a summary of impaired loans and their effect on interest income (dollars in thousands):


											Three Months Ended				Six Months Ended
					QTD		YTD				Interest Income		Interest Income		Interest Income		Interest Income
	Nonaccrual		Accrual		Average		Average		Related		Recognized		on		Recognized		on
	Basis		Basis		Investment		Investment		Valuation Reserve		During Impairment		Accrual Basis		During Impairment		Accrual Basis
June 30, 2016

With no valuation reserve:
Commercial real estate	$	614	$	3,344	$	4,502	$	4,354	$	—	$	71	$	80	$	295	$	311
Commercial, financial and agricultural		—		—		75		243		—		—		—		6		10
Commercial construction		—		—		—		—		—		—		—		—		—
One to four family residential real estate		1,247		3,168		4,291		3,914		—		110		121		237		262
Consumer construction		19		—		20		20		—		4		4		4		4
Consumer		53		—		54		56		—		—		—		—		1

With a valuation reserve:
Commercial real estate	$	1,233	$	—	$	912	$	475	$	113	$	—	$	—		—	$	—
Commercial, financial and agricultural		—		—		—		—		—		—		—		—		—
Commercial construction		—		—		—		—		—		—		—		—		—
One to four family residential real estate		149		—		104		90		39		—		—		—		—
Consumer construction		—		—		—		—		—		—		—		—		—
Consumer		6		—		6		7		6		—		—		—		—

Total:
Commercial real estate	$	1,847	$	3,344	$	5,414	$	4,829	$	113	$	71	$	80	$	295	$	311
Commercial, financial and agricultural		—		—		75		243		—		—		—		6		10
Commercial construction		—		—		—		—		—		—		—		—		—
One to four family residential real estate		1,396		3,168		4,395		4,004		39		110		121		237		262
Consumer construction		19		—		20		20		—		4		4		4		4
Consumer		59		—		60		63		6		—		—		—		1
Total	$	3,321	$	6,512	$	9,964	$	9,159	$	158	$	185	$	205	$	542	$	588


									Interest Income		Interest Income
	Nonaccrual		Accrual		Average		Related		Recognized		on
	Basis		Basis		Investment		Valuation Reserve		During Impairment		Accrual Basis
December 31, 2015

With no valuation reserve:
Commercial real estate	$	471	$	4,051	$	7,205	$	—	$	576	$	655
Commercial, financial and agricultural		—		1,778		4,849		—		78		214
Commercial construction		—		—		260		—		3		6
One to four family residential real estate		1,267		2,385		5,413		—		137		205
Consumer construction		20		2		99		—		—		1
Consumer		50		1		102		—		1		2

With a valuation reserve:
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—
Commercial, financial and agricultural		460		—		699		192		—		36
Commercial construction		—		—		—		—		—		—
One to four family residential real estate		229		—		232		58		—		6
Consumer construction		—		—		—		—		—		—
Consumer		10		0		10		1		0		0

Total:
Commercial real estate	$	471	$	4,051	$	7,205	$	—	$	576	$	655
Commercial, financial and agricultural		460		1,778		5,548		192		78		250
Commercial construction		—		—		260		—		3		6
One to four family residential real estate		1,496		2,385		5,645		58		137		211
Consumer construction		20		2		99		—		—		1
Consumer		60		1		112		1		1		2
Total	$	2,507	$	8,217	$	18,869	$	251	$	795	$	1,125


											Three Months Ended				Six Months Ended
					QTD		YTD				Interest Income		Interest Income		Interest Income		Interest Income
	Nonaccrual		Accrual		Average		Average		Related		Recognized		on		Recognized		on
	Basis		Basis		Investment		Investment		Valuation Reserve		During Impairment		Accrual Basis		During Impairment		Accrual Basis
June 30, 2015

With no valuation reserve:
Commercial real estate	$	1,418	$	3,328	$	4,862	$	5,607	$	—	$	66	$	83	$	533	$	566
Commercial, financial and agricultural		69		190		229		517		—		2		3		19		21
Commercial construction		—		106		174		281		—		1		1		3		7
One to four family residential real estate		1,291		2,645		4,094		4,708		—		36		52		72		113
Consumer construction		22		—		23		131		—		—		1		—		1
Consumer		29		3		30		21		—		—		—		1		1

With a valuation reserve:
Commercial real estate	$	981	$	—	$	981	$	753	$	570	$	—	$	15	$	—	$	20
Commercial, financial and agricultural		4,836		—		5,704		3,599		1,591		—		71		—		90
Commercial construction		—		—		—		—		—		—		—		—		0
One to four family residential real estate		866		—		667		599		—		—		10		—		12
Consumer construction		—		—		—		—		82		—		—		—		—
Consumer		—		—		—		—		—		—		—		—		—

Total:
Commercial real estate	$	2,399	$	3,328	$	5,843	$	6,360	$	570	$	66	$	98	$	533	$	586
Commercial, financial and agricultural		4,905		190		5,933		4,116		1,591		2		74		19		111
Commercial construction		—		106		174		281		—		1		1		3		7
One to four family residential real estate		2,157		2,645		4,761		5,307		—		36		62		72		125
Consumer construction		22		—		23		131		82		—		1		—		1
Consumer		29		3		30		21		—		—		—		1		1
Total	$	9,512	$	6,272	$	16,764	$	16,216	$	2,243	$	105	$	236	$	628	$	831

A summary of past due loans at June 30, 2016 and December 31, 2015 is as follows (dollars in thousands):


	June 30,						December 31,
	2016						2015
	30-89 days		90+ days				30-89 days		90+ days
	Past Due		Past Due/				Past Due		Past Due/
	(accruing)		Nonaccrual		Total		(accruing)		Nonaccrual		Total

Commercial real estate	$	1,189	$	550	$	1,739	$	521	$	471	$	992
Commercial, financial and agricultural		550		21		571		222		460		682
Commercial construction		24		—		24		270		—		270
One to four family residential real estate		374		1,063		1,437		807		1,528		2,335
Consumer construction		—		19		19		—		20		20
Consumer		985		64		1,049		130		60		190

Total past due loans	$	3,122	$	1,717	$	4,839	$	1,950	$	2,539	$	4,489

Troubled Debt Restructuring

Troubled debt restructurings (“TDR”) are determined on a loan-by-loan basis. Generally restructurings are related to interest rate reductions, loan term extensions and short term payment forbearance as means to maximize collectability of troubled credits. If a portion of the TDR loan is uncollectible (including forgiveness of principal), the uncollectible amount will be charged off against the allowance at the time of the restructuring. In general, a borrower must make at least six consecutive timely payments before the Corporation would consider a return of a restructured loan to accruing status in accordance with FDIC guidelines regarding restoration of credits to accrual status.

The Corporation has, in accordance with generally accepted accounting principles and per recently enacted accounting standard updates, evaluated all loan modifications to determine the fair value impact of the underlying asset. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for collateral dependent loans, to the fair value of the collateral.

There were no troubled debt restructurings that occurred during the six months ended June 30, 2016 or June 30, 2015.

Insider Loans

The Bank, in the ordinary course of business, grants loans to the Corporation’s executive officers and directors, including their families and firms in which they are principal owners. Activity in such loans is summarized below (dollars in thousands):


	Six Months Ended		Year ended
	June 30,		December 31,
	2016		2015
Loans outstanding, January 1	$	6,887	$	8,789
New loans		—		—
Net activity on revolving lines of credit		895		778
Repayment		(2,090)		(2,680)

Loans outstanding at end of period	$	5,692	$	6,887

There were no loans to related parties classified substandard as of June 30, 2016 or December 31, 2015. In addition to the outstanding balances above, there were unfunded commitments of $1.694 million to related parties at June 30, 2016.