LOANS (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of composition of loans

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

	2017		2016
Commercial real estate	$	406,742	$	389,420
Commercial, financial, and agricultural		156,951		142,648
Commercial construction		9,243		11,505
One to four family residential real estate		209,890		205,945
Consumer		17,434		20,113
Consumer construction		10,818		12,226
Total loans	$	811,078	$	781,857

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, 2017 (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, 2016	$	282	$	642	$	924	$	236	$	1,221	$	1,457	$	52	$	505	$	557
Acquisitions		—		—		—		—		—		—		—		—		—
Accretion		(460)		(642)		(1,102)		(70)		(618)		(688)		(20)		(224)		(244)
Reclassification from nonaccretable difference		327				327		52		—		52		6		—		6
Balance, December 31, 2017	$	149	$	—	$	149	$	218	$	603	$	821	$	38	$	281	$	319

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	$	—	$	—	$	—	$	—	$	—	$	—
Acquisition		—		—		—		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

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, 2017 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	$	1,345	$	614	$	57	$	296	$	6	$	90	$	2,612	$	5,020
Charge-offs		(155)		(264)		—		(155)		—		(229)		—		(803)
Recoveries		80		39		2		65		—		51		—		237
Provision		380		187		(5)		(46)		—		98		11		625
Ending balance ALLR	$	1,650	$	576	$	54	$	160	$	6	$	10	$	2,623	$	5,079
Loans:
Ending balance	$	406,742	$	156,951	$	9,243	$	209,890	$	10,818	$	17,434	$	—	$	811,078
Ending balance ALLR		(1,650)		(576)		(54)		(160)		(6)		(10)		(2,623)		(5,079)
Net loans	$	405,092	$	156,375	$	9,189	$	209,730	$	10,812	$	17,424	$	(2,623)	$	805,999
Ending balance ALLR:
Individually evaluated	$	168	$	166	$	—	$	—	$	—	$	—	$	—	$	334
Collectively evaluated		1,482		410		54		160		6		10		2,623		4,745
Total	$	1,650	$	576	$	54	$	160	$	6	$	10	$	2,623	$	5,079
Ending balance Loans:
Individually evaluated	$	516	$	166	$	—	$	—	$	—	$	—	$	—	$	682
Collectively evaluated		404,835		156,785		9,243		208,269		10,801		17,413		—		807,346
Acquired with deteriorated credit quality		1,391		—		—		1,621		17		21		—		3,050
Total	$	406,742	$	156,951	$	9,243	$	209,890	$	10,818	$	17,434	$	—	$	811,078

Impaired loans, by definition, are individually evaluated.

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	$	70	$	251	$	—	$	—	$	—	$	—	$	—	$	321
Collectively evaluated		1,275		363		57		296		6		90		2,612		4,699
Total	$	1,345	$	614	$	57	$	296	$	6	$	90	$	2,612	$	5,020
Ending balance Loans:
Individually evaluated	$	345	$	325	$	—	$	—	$	—	$	—	$	—	$	670
Collectively evaluated		385,841		142,323		11,505		203,153		12,169		20,109		—		775,100
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

Schedule of breakdown of loans by risk category

Below is a breakdown of loans by risk category as of December 31, 2017 (dollars in thousands):

	(1)		(2)		(3)		(4)		(44)		(6)		(7)		Rating
	Strong		Good		Average		Acceptable		Acceptable Watch		Substandard		Doubtful		Unassigned		Total
Commercial real estate	$	2,775	$	23,929	$	159,385	$	207,921	$	8,700	$	4,032	$	—	$	—	$	406,742
Commercial, financial and agricultural		11,528		8,980		53,448		77,964		3,658		1,373		—		—		156,951
Commercial construction		—		308		2,749		1,310		648		374		—		3,854		9,243
One-to-four family residential real estate		—		1,377		2,575		5,449		1,212		3,515		—		195,762		209,890
Consumer construction		—		—		—		—		—		14		—		10,804		10,818
Consumer		—		—		—		28		5		96		—		17,305		17,434
Total loans	$	14,303	$	34,594	$	218,157	$	292,672	$	14,223	$	9,404	$	—	$	227,725	$	811,078

Below is a breakdown of loans by risk category as of December 31, 2016 (dollars in thousands)

	(1)		(2)		(3)		(4)		(44)		(6)		(7)		Rating
	Strong		Good		Average		Acceptable		Acceptable Watch		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

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):

	Impaired Loans		Impaired Loans		Total		Unpaid		Related
	with No Related		with Related		Impaired		Principal		Allowance for
	Allowance		Allowance		Loans		Balance		Loan Losses
December 31, 2017
Commercial real estate	$	1,511	$	516	$	2,027	$	3,326	$	168
Commercial, financial and agricultural		—		166		166		326		166
Commercial construction		—		—		—		—		—
One to four family residential real estate		1,621		—		1,621		2,315		—
Consumer construction		17		—		17		66		—
Consumer		21		—		21		21		—
Total	$	3,170	$	682	$	3,852	$	6,054	$	334
December 31, 2016
Commercial real estate	$	3,234	$	345	$	3,579	$	4,700	$	70
Commercial, financial and agricultural		—		325		325		400		251
Commercial construction		—		—		—		—		—
One to four family residential real estate		2,792		—		2,792		3,794		—
Consumer construction		57		—		57		80		—
Consumer		4		—		4		28		—
Total	$	6,087	$	670	$	6,757	$	9,002	$	321
	Individually Evaluated Impaired Loans
	2017				2016				2015
	Average		Interest Income		Average		Interest Income		Average		Interest Income
	Balance for		Recognized for		Balance for		Recognized for		Balance for		Recognized for
	the Period		the Period		the Period		the Period		the Period		the Period
Commercial real estate	$	2,784	$	141	$	3,848	$	178	$	2,656	$	232
Commercial, financial and agricultural		246		1		200		4		628		9
Commercial construction		—		3		—		—		—		—
One to four family residential real estate		2,057		134		3,794		182		2,120		129
Consumer construction		37		—		40		4		—		—
Consumer		13		2		14		2		—		—
Total	$	5,137	$	281	$	7,896	$	370	$	5,404	$	370

Summary of past due loans

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

	2017								2016
	30-89 days								30-89 days
	Past Due		90+ days						Past Due		90+ days
	(accruing)		Past Due		Nonaccrual		Total		(accruing)		Past Due		Nonaccrual		Total
Commercial real estate	$	460	$	—	$	866	$	1,326	$	942	$	—	$	1,732	$	2,674
Commercial, financial and agricultural		16		—		338		354		186		—		337		523
Commercial construction		73		—		14		87		—		—		—		—
One to four family residential real estate		3,424		—		1,350		4,774		2,113		—		1,956		4,069
Consumer construction		—		—		—		—		—		—		17		17
Consumer		72		—		—		72		133		—		82		215
Total past due loans	$	4,045	$	—	$	2,568	$	6,613	$	3,374	$	—	$	4,124	$	7,498

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):

	2017		2016
Loans outstanding, January 1	$	9,195	$	6,887
New loans		2,018		2,510
Net activity on revolving lines of credit		237		2,119
Repayment		(1,413)		(2,321)
Loans outstanding at end of period	$	10,037	$	9,195

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