LOANS (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of composition of loans

The composition of loans at December 31 is as follows (dollars in thousands):

	2016		2015
Commercial real estate	$	389,420	$	312,805
Commercial, financial, and agricultural		142,648		122,140
Commercial construction		11,505		15,330
One to four family residential real estate		205,945		140,502
Consumer		20,113		15,847
Consumer construction		12,226		11,770
Total loans	$	781,857	$	618,394

Schedule of the accretable yield by acquisition

The table below presents a rollforward of the accretable yield on acquired loans for year ended December 31, 2016 (dollars in thousands):

	PFC						Eagle River						Niagara
	Acquired		Acquired		Acquired		Acquired		Acquired		Acquired		Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total		Impaired		Non-impaired		Total		Impaired		Non-impaired		Total
Balance, December 31, 2015	$	426	$	1,342	$	1,768	$	—	$	—	$	—	$	—	$	—	$	—
Acquisitions		—		—		—		391		1,700		2,091		88		600		688
Accretion		(50)		(700)		(750)		(46)		(479)		(525)		—		(95)		(95)
Reclassification from nonaccretable difference		94		—		94		109		—		109		36		—		36
Balance, December 31, 2016	$	282	$	642	$	924	$	236	$	1,221	$	1,457	$	52	$	505	$	557

The table below presents a rollforward of the accretable yield on acquired loans for year ended December 31, 2015 (dollars in thousands):

	Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total
Balance, December 31, 2014	$	744	$	2,042	$	2,786
Accretion		(578)		(700)		(1,278)
Reclassification from nonaccretable difference		260		—		260
Balance, December 31, 2015	$	426	$	1,342	$	1,768

Schedule of breakdown of the allowance for loan losses and recorded balances in loans

A breakdown of the allowance for loan losses and recorded balances in loans at December 31, 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
Allowance for loan loss reserve:
Beginning balance ALLR	$	1,611	$	645	$	79	$	274	$	7	$	64	$	2,324	$	5,004
Charge-offs		(245)		(232)		—		(133)		—		(113)		—		(723)
Recoveries		54		41		7		5		—		32		—		139
Provision		(75)		160		(29)		150		(1)		107		288		600
Ending balance ALLR	$	1,345	$	614	$	57	$	296	$	6	$	90	$	2,612	$	5,020
Loans:
Ending balance	$	389,420	$	142,648	$	11,505	$	205,945	$	12,226	$	20,113	$	—	$	781,857
Ending balance ALLR		(1,345)		(614)		(57)		(296)		(6)		(90)		(2,612)		(5,020)
Net loans	$	388,075	$	142,034	$	11,448	$	205,649	$	12,220	$	20,023	$	(2,612)	$	776,837
Ending balance ALLR:
Individually evaluated	$	470	$	365	$	—	$	43	$	—	$	80	$	—	$	958
Collectively evaluated		875		249		57		253		6		10		2,612		4,062
Total	$	1,345	$	614	$	57	$	296	$	6	$	90	$	2,612	$	5,020
Ending balance Loans:
Individually evaluated	$	1,304	$	1,461	$	—	$	1,125	$	—	$	181	$	—	$	4,071
Collectively evaluated		384,882		141,187		11,505		202,028		12,169		19,928		—		771,699
Acquired with deteriorated credit quality		3,234		—		—		2,792		57		4		—		6,087
Total	$	389,420	$	142,648	$	11,505	$	205,945	$	12,226	$	20,113	$	—	$	781,857

Impaired loans, by definition, are individually evaluated.

A breakdown of the allowance for loan losses and recorded balances in loans at 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
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

Schedule of breakdown of loans by risk category

Below is a breakdown of loans by risk category as of December 31, 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	$	3,021	$	23,940	$	140,618	$	205,710	$	10,808	$	5,323	$	—	$	—	$	389,420
Commercial, financial and agricultural		10,421		13,434		49,434		65,097		2,485		1,777		—		—		142,648
Commercial construction		—		900		3,146		1,877		783		385		—		4,414		11,505
One-to-four family residential real estate		740		1,373		3,412		6,927		2,658		5,493		—		185,342		205,945
Consumer construction		28		—		—		—		—		17		—		12,181		12,226
Consumer		20		—		15		42		13		103		—		19,920		20,113
Total loans	$	14,230	$	39,647	$	196,625	$	279,653	$	16,747	$	13,098	$	—	$	221,857	$	781,857

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

Summary of impaired loans and their effect on interest income

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

											Interest Income
	Nonaccrual			Nonaccrual	Accrual		Average		Related		on
	Recorded Balance			Unpaid Balance	Basis		Investment		Valuation Reserve		Accrual Basis
December 31, 2016
With no valuation reserve:
Commercial real estate	$	1,426	$	1,891	$	3,234	$	5,318	$	—	$	232
Commercial, financial and agricultural		11		11		—		116		—		3
Commercial construction		—		—		—		—		—		—
One to four family residential real estate		1,623		2,198		2,792		4,500		—		196
Consumer construction		17		22		57		36		—		4
Consumer		82		86		4		127		—		2
With a valuation reserve:
Commercial real estate	$	306	$	328	$	—	$	103	$	50	$	—
Commercial, financial and agricultural		326		357		—		109		231		—
Commercial construction		—		—		—		—		—		—
One to four family residential real estate		333		333		—		171		94		—
Consumer construction		—		—		—		—		—		—
Consumer		—		—		—		5		5		—
Total:
Commercial real estate	$	1,732	$	2,219	$	3,234	$	5,421	$	50	$	232
Commercial, financial and agricultural		337		368		—		225		231		3
Commercial construction		—		—		—		—		—		—
One to four family residential real estate		1,956		2,531		2,792		4,671		94		196
Consumer construction		17		22		57		36		—		4
Consumer		82		86		4		132		5		2
Total	$	4,124	$	5,226	$	6,087	$	10,485	$	380	$	437
December 31, 2015
With no valuation reserve:
Commercial real estate	$	471	$	803	$	4,051	$	7,205	$	—	$	224
Commercial, financial and agricultural		—		—		1,778		4,849		—		9
Commercial construction		—		—		—		260		—		—
One to four family residential real estate		1,267		1,598		2,385		5,413		—		128
Consumer construction		20		22		2		99		—		—
Consumer		50		51		1		102		—		0
With a valuation reserve:
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—
Commercial, financial and agricultural		460		1,139		—		699		192		—
Commercial construction		—		—		—		—		—		—
One to four family residential real estate		229		244		—		232		58		—
Consumer construction		—		—		—		—		—		—
Consumer		10		9		—		10		1		—
Total:
Commercial real estate	$	471	$	803	$	4,051	$	7,205	$	—	$	224
Commercial, financial and agricultural		460		1,139		1,778		5,548		192		9
Commercial construction		—		—		—		260		—		—
One to four family residential real estate		1,496		1,842		2,385		5,645		58		128
Consumer construction		20		22		2		99		—		—
Consumer		60		60		1		112		1		—
Total	$	2,507	$	3,866	$	8,217	$	18,869	$	251	$	361

Summary of past due loans

A summary of past due loans at December 31, is as follows (dollars in thousands):

	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	$	942	$	1,732	$	2,674	$	521	$	471	$	992
Commercial, financial and agricultural		186		337		523		222		460		682
Commercial construction		—		—		—		270		—		270
One to four family residential real estate		2,113		1,956		4,069		807		1,528		2,335
Consumer construction		—		17		17		—		20		20
Consumer		133		82		215		130		60		190
Total past due loans	$	3,374	$	4,124	$	7,498	$	1,950	$	2,539	$	4,489

Schedule of activity in insider loans granted to the entity's executive officers and directors, including their families and firms

Activity in such loans is summarized below (dollars in thousands):

	2016		2015
Loans outstanding, January 1	$	6,887	$	8,789
New loans		2,510		0
Net activity on revolving lines of credit		2,119		778
Repayment		(2,321)		(2,680)
Loans outstanding at end of period	$	9,195	$	6,887

PFC

Schedule of acquired portfolio at acquisition date

The table below details the outstanding balances of the PFC acquired portfolio and the acquisition 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

Eagle River

Schedule of acquired portfolio at acquisition date

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

	Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total
Loans acquired - contractual payments	$	3,401	$	80,737	$	84,138
Nonaccretable difference		(1,172)		—		(1,172)
Expected cash flows		2,229		80,737		82,966
Accretable yield		(391)		(1,700)		(2,091)
Carrying balance at acquisition date	$	1,838	$	79,037	$	80,875

Niagara Bancorporation

Schedule of acquired portfolio at acquisition date

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

	Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total
Loans acquired - contractual payments	$	2,105	$	30,555	$	32,660
Nonaccretable difference		(265)		—		(265)
Expected cash flows		1,840		30,555		32,395
Accretable yield		(88)		(600)		(688)
Carrying balance at acquisition date	$	1,752	$	29,955	$	31,707