LOANS (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of composition of loans

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

	2019		2018
Commercial real estate	$	514,394		$	496,207
Commercial, financial, and agricultural		211,023			191,060
Commercial construction		40,107			29,765
One to four family residential real estate		253,918			286,908
Consumer		21,238			20,371
Consumer construction		18,096			14,553
Total loans	$	1,058,776		$	1,038,864

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, 2019 (dollars in thousands):

	PFC						Eagle River
	Acquired		Acquired		Acquired		Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total		Impaired		Non-impaired		Total
Balance, December 31, 2018	$	128	$	—	$	128	$	213	$	16	$	229
Accretion		(90)		—		(90)		(17)		(16)		(33)
Reclassification from nonaccretable difference		67		—		67		13		—		13
Balance, December 31, 2019	$	105	$	—	$	105	$	209	$	—	$	209
	Niagara						First Federal Northern Michigan
	Acquired		Acquired		Acquired		Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total		Impaired		Non-impaired		Total
Balance, December 31, 2018	$	26	$	69	$	95	$	571	$	3,446	$	4,017
Accretion		(30)		(69)		(99)		(214)		(1,493)		(1,707)
Reclassification from nonaccretable difference		23		—		23		161		—		161
Balance, December 31, 2019	$	19	$	—	$	19	$	518	$	1,953	$	2,471
	Lincoln Community Bank						Total
	Acquired		Acquired		Acquired		Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total		Impaired		Non-impaired		Total
Balance, December 31, 2018	$	140	$	442	$	582	$	1,078	$	3,973	$	5,051
Accretion		(128)		(178)		(306)		(479)		(1,756)		(2,235)
Reclassification from nonaccretable difference		96		—		96		360		—		360
Balance, December 31, 2019	$	108	$	264	$	372	$	959	$	2,217	$	3,176

The table below presents a rollforward of the accretable yield on acquired loans for year ended December 31, 2018 (dollars in thousands):

	PFC						Eagle River
	Acquired		Acquired		Acquired		Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total		Impaired		Non-impaired		Total
Balance, December 31, 2017	$	149	$	—	$	149	$	218	$	603	$	821
Accretion		(86)		—		(86)		(22)		(587)		(609)
Reclassification from nonaccretable difference		65		—		65		17		—		17
Balance, December 31, 2018	$	128	$	—	$	128	$	213	$	16	$	229
	Niagara						First Federal Northern Michigan
	Acquired		Acquired		Acquired		Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total		Impaired		Non-impaired		Total
Balance, December 31, 2017	$	38	$	281	$	319	$	—	$	—	$	—
Acquisition		—		—		—		700		4,498		5,198
Accretion		(48)		(212)		(260)		(515)		(1,052)		(1,567)
Reclassification from nonaccretable difference		36		—		36		386		—		386
Balance, December 31, 2018	$	26	$	69	$	95	$	571	$	3,446	$	4,017
	Lincoln Community Bank						Total
	Acquired		Acquired		Acquired		Acquired		Acquired		Acquired
	Impaired		Non-impaired		Total		Impaired		Non-impaired		Total
Balance, December 31, 2017	$	—	$	—	$	—	$	405	$	884	$	1,289
Acquisition		140		493		633		840		4,991		5,831
Accretion		—		(51)		(51)		(671)		(1,902)		(2,573)
Reclassification from nonaccretable difference		—		—		—		504		—		504
Balance, December 31, 2018	$	140	$	442	$	582	$	1,078	$	3,973	$	5,051

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, 2019 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	$	1,682	$	648	$	101	$	199	$	6	$	8	$	2,539	$	5,183
Charge-offs		(27)		(103)		—		(152)		—		(228)		—		(510)
Recoveries		159		4		2		49		—		36		—		250
Provision		(625)		648		(32)		52		5		197		140		385
Ending balance ALLR	$	1,189	$	1,197	$	71	$	148	$	11	$	13	$	2,679	$	5,308
Loans:
Ending balance	$	514,394	$	211,023	$	40,107	$	253,918	$	18,096	$	21,238	$	—	$	1,058,776
Ending balance ALLR		(1,189)		(1,197)		(71)		(148)		(11)		(13)		(2,679)		(5,308)
Net loans	$	513,205	$	209,826	$	40,036	$	253,770	$	18,085	$	21,225	$	(2,679)	$	1,053,468
Ending balance ALLR:
Individually evaluated	$	497	$	770	$	—	$	—	$	—	$	—	$	—	$	1,267
Collectively evaluated		692		427		71		148		11		13		2,679		4,041
Total	$	1,189	$	1,197	$	71	$	148	$	11	$	13	$	2,679	$	5,308
Ending balance Loans:
Individually evaluated	$	2,374	$	1,475	$	—	$	—	$	—	$	—	$	—	$	3,849
Collectively evaluated		507,702		207,194		39,734		251,998		18,096		21,229		—		1,045,953
Acquired with deteriorated credit quality		4,318		2,354		373		1,920		—		9		—		8,974
Total	$	514,394	$	211,023	$	40,107	$	253,918	$	18,096	$	21,238	$	—	$	1,058,776

Impaired loans, by definition, are individually evaluated.

A breakdown of the allowance for loan losses and recorded balances in loans at December 31, 2018 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	$	1,650	$	576	$	54	$	160	$	6	$	10	$	2,623	$	5,079
Charge-offs		(198)		(132)		—		(230)		—		(156)		—		(716)
Recoveries		55		164		2		64		—		35		—		320
Provision		175		40		45		205		—		119		(84)		500
Ending balance ALLR	$	1,682	$	648	$	101	$	199	$	6	$	8	$	2,539	$	5,183
Loans:
Ending balance	$	496,207	$	191,060	$	29,765	$	286,908	$	14,553	$	20,371	$	—	$	1,038,864
Ending balance ALLR		(1,682)		(648)		(101)		(199)		(6)		(8)		(2,539)		(5,183)
Net loans	$	494,525	$	190,412	$	29,664	$	286,709	$	14,547	$	20,363	$	(2,539)	$	1,033,681
Ending balance ALLR:
Individually evaluated	$	486	$	340	$	—	$	—	$	—	$	—	$	—	$	826
Collectively evaluated		1,196		308		101		199		6		8		2,539		4,357
Total	$	1,682	$	648	$	101	$	199	$	6	$	8	$	2,539	$	5,183
Ending balance Loans:
Individually evaluated	$	2,148	$	577	$	—	$	—	$	—	$	—	$	—	$	2,725
Collectively evaluated		491,282		189,023		29,399		285,677		14,336		20,329		—		1,030,046
Acquired with deteriorated credit quality		2,777		1,460		366		1,231		217		42		—		6,093
Total	$	496,207	$	191,060	$	29,765	$	286,908	$	14,553	$	20,371	$	—	$	1,038,864

Schedule of breakdown of loans by risk category

Below is a breakdown of loans by risk category as of December 31, 2019 (dollars in thousands):

	(1)		(2)		(3)		(4)		(44)		(6)		(7)		Rating
	Strong		Good		Average		Acceptable		Acceptable Watch		Substandard		Doubtful		Unassigned		Total
Commercial real estate	$	9,979	$	17,516	$	228,962	$	248,177	$	4,468	$	5,292	$	—	$	—	$	514,394
Commercial, financial and agricultural		15,126		4,510		70,748		115,229		930		4,480		—		—		211,023
Commercial construction		—		292		6,390		28,893		400		607		—		3,525		40,107
One-to-four family residential real estate		40		2,145		4,937		15,168		634		2,632		—		228,362		253,918
Consumer construction		—		—		—		—		—		—		—		18,096		18,096
Consumer		—		158		250		640		—		41		—		20,149		21,238
Total loans	$	25,145	$	24,621	$	311,287	$	408,107	$	6,432	$	13,052	$	—	$	270,132	$	1,058,776

Below is a breakdown of loans by risk category as of December 31, 2018 (dollars in thousands)

	(1)		(2)		(3)		(4)		(44)		(6)		(7)		Rating
	Strong		Good		Average		Acceptable		Acceptable Watch		Substandard		Doubtful		Unassigned		Total
Commercial real estate	$	9,564	$	22,265	$	189,898	$	257,627	$	5,993	$	10,860	$	—	$	—	$	496,207
Commercial, financial and agricultural		8,077		8,678		72,466		97,441		2,269		2,129		—		—		191,060
Commercial construction		734		706		6,844		12,244		829		823		—		7,585		29,765
One-to-four family residential real estate		70		2,873		6,941		15,711		2,095		4,757		—		254,461		286,908
Consumer construction		—		—		—		200		50		11		—		14,292		14,553
Consumer		19		236		625		1,156		42		77		—		18,216		20,371
Total loans	$	18,464	$	34,758	$	276,774	$	384,379	$	11,278	$	18,657	$	—	$	294,554	$	1,038,864

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, 2019
Commercial real estate	$	4,318	$	2,374	$	6,692	$	7,937	$	497
Commercial, financial and agricultural		2,354		1,475		3,829		4,892		770
Commercial construction		373		—		373		386		—
One to four family residential real estate		1,920		—		1,920		2,881		—
Consumer construction		—		—		—		—		—
Consumer		9		—		9		33		—
Total	$	8,974	$	3,849	$	12,823	$	16,129	$	1,267
December 31, 2018
Commercial real estate	$	2,777	$	2,148	$	4,925	$	10,740	$	486
Commercial, financial and agricultural		1,460		577		2,037		2,249		340
Commercial construction		366		—		366		1,132		—
One to four family residential real estate		1,231		—		1,231		4,136		—
Consumer construction		217		—		217		—		—
Consumer		42		—		42		55		—
Total	$	6,093	$	2,725	$	8,818	$	18,312	$	826

	Individually Evaluated Impaired Loans
	December 31, 2019				December 31, 2018
	Average		Interest Income		Average		Interest Income
	Balance for		Recognized for		Balance for		Recognized for
	the Period		the Period		the Period		the Period
Commercial real estate	$	8,374	$	301	$	5,024	$	410
Commercial, financial and agricultural		1,144		2		374		26
Commercial construction		396		—		383		13
One to four family residential real estate		3,508		219		2,879		203
Consumer construction		—		—		9		—
Consumer		44		2		38		4
Total	$	13,466	$	524	$	8,707	$	656

Summary of past due loans

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

	December 31,								December 31,
	2019								2018
	30-89 days		90+ days						30-89 days		90+ days
	Past Due		Past Due						Past Due		Past Due
	(accruing)		(accruing)		Nonaccrual		Total		(accruing)		(accruing)		Nonaccrual		Total
Commercial real estate	$	1,055	$	—	$	671	$	1,726	$	298	$	—	$	1,700	$	1,998
Commercial, financial and agricultural		829		—		527		1,356		398		—		320		718
Commercial construction		59		—		105		164		112		—		266		378
One to four family residential real estate		4,357		11		3,850		8,218		5,456		18		2,725		8,199
Consumer construction		—		—		—		—		—		—		—		—
Consumer		83		—		19		102		108		5		43		156
Total past due loans	$	6,383	$	11	$	5,172	$	11,566	$	6,372	$	23	$	5,054	$	11,449

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):

	2019		2018
Loans outstanding, January 1	$	9,817	$	10,037
New loans		1,872		660
Net activity on revolving lines of credit		1,200		(245)
Change in status of insiders		(289)		-
Repayment		(404)		(635)
Loans outstanding at end of period	$	12,196	$	9,817

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

FFNM

Schedule of acquired portfolio at acquisition date

The table below details the outstanding balances of the FFNM 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	$	5,440	$	187,302	$	192,742
Nonaccretable difference		(2,100)		—		(2,100)
Expected cash flows		3,340		187,302		190,642
Accretable yield		(700)		(4,498)		(5,198)
Carrying balance at acquisition date	$	2,640	$	182,804	$	185,444

Lincoln Community Bank

Schedule of acquired portfolio at acquisition date

The table below details the outstanding balances of the Lincoln 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	$	1,901	$	37,700	$	39,601
Nonaccretable difference		(421)		—		(421)
Expected cash flows		1,480		37,700		39,180
Accretable yield		(140)		(493)		(633)
Carrying balance at acquisition date	$	1,340	$	37,207	$	38,547