Loans and the Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2016

Loans and the Allowance for Loan Losses [Abstract]

The following is a summary of the balances in each class of the Company's loan portfolio as of the dates indicated:

	June 30, 2016			December 31, 2015
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	96,892		$	96,997
Commercial		281,323			277,758
Construction		26,286			19,685
Second mortgages		16,673			15,148
Equity lines of credit		46,669			47,256
Total mortgage loans on real estate		467,843			456,844
Commercial loans		54,996			43,197
Consumer loans		44,112			50,427
Other		31,210			18,007
Total loans, net of deferred fees (1)		598,161			568,475
Less: Allowance for loan losses		(7,934	)		(7,738	)
Loans, net of allowance and deferred fees (1)	$	590,227		$	560,737

(1) Deferred loan fees totaled $443 thousand and $407 thousand at June 30, 2016 and December 31, 2015, respectively.

Overdrawn deposit accounts are reclassified as loans and included in the Other category in the table above. Overdrawn deposit accounts totaled $617 thousand and $648 thousand at June 30, 2016 and December 31, 2015, respectively.

Credit Quality Information

The following table presents credit quality exposures by internally assigned risk ratings as of the dates indicated:

Credit Quality Information As of June 30, 2016
(in thousands)
	Pass		OAEM		Substandard		Total
Mortgage loans on real estate:
Residential 1-4 family	$	94,796	$	0	$	2,096	$	96,892
Commercial		262,291		10,627		8,405		281,323
Construction		25,375		164		747		26,286
Second mortgages		16,346		0		327		16,673
Equity lines of credit		46,575		0		94		46,669
Total mortgage loans on real estate		445,383		10,791		11,669		467,843
Commercial loans		52,485		1,483		1,028		54,996
Consumer loans		44,035		0		77		44,112
Other		31,210		0		0		31,210
Total	$	573,113	$	12,274	$	12,774	$	598,161

Credit Quality Information As of December 31, 2015
(in thousands)
	Pass		OAEM		Substandard		Total
Mortgage loans on real estate:
Residential 1-4 family	$	94,576	$	0	$	2,421	$	96,997
Commercial		261,749		7,394		8,615		277,758
Construction		18,931		0		754		19,685
Second mortgages		14,835		0		313		15,148
Equity lines of credit		47,161		0		95		47,256
Total mortgage loans on real estate		437,252		7,394		12,198		456,844
Commercial loans		40,268		467		2,462		43,197
Consumer loans		50,327		0		100		50,427
Other		18,007		0		0		18,007
Total	$	545,854	$	7,861	$	14,760	$	568,475

As of June 30, 2016 and December 31, 2015, the Company did not have any loans internally classified as Loss or Doubtful.

Past Due Loans

All classes of loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Interest and fees continue to accrue on past due loans until the date the loan is placed in nonaccrual status, if applicable. The following table includes an aging analysis of the recorded investment in past due loans as of the dates indicated. Also included in the table below are loans that are 90 days or more past due as to interest and principal and still accruing interest, because they are well-secured and in the process of collection. Loans in nonaccrual status that are also past due are included in the aging categories in the table below.

Age Analysis of Past Due Loans as of June 30, 2016
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due		Total Past Due		Total Current Loans ⁽¹⁾		Total Loans		Recorded Investment > 90 Days Past Due and Accruing
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	505	$	309	$	810	$	1,624	$	95,268	$	96,892	$	520
Commercial		1,582		0		129		1,711		279,612		281,323		17
Construction		0		0		0		0		26,286		26,286		0
Second mortgages		144		0		214		358		16,315		16,673		60
Equity lines of credit		28		0		51		79		46,590		46,669		51
Total mortgage loans on real estate		2,259		309		1,204		3,772		464,071		467,843		648
Commercial loans		2		16		86		104		54,892		54,996		0
Consumer loans		1,191		971		2,570		4,732		39,380		44,112		2,570
Other		49		9		4		62		31,148		31,210		4
Total	$	3,501	$	1,305	$	3,864	$	8,670	$	589,491	$	598,161	$	3,222

⁽¹⁾ For purposes of this table, Total Current Loans includes loans that are 1 - 29 days past due.

In the table above, the consumer category includes student loans with principal and interest amounts that are 97 - 98% guaranteed by the federal government. The past due principal portion of these guaranteed loans totaled $4.5 million at June 30, 2016.

Age Analysis of Past Due Loans as of December 31, 2015
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due		Total Past Due		Total Current Loans ⁽¹⁾		Total Loans		Recorded Investment > 90 Days Past Due and Accruing
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	309	$	1,042	$	275	$	1,626	$	95,371	$	96,997	$	0
Commercial		1,266		31		23		1,320		276,438		277,758		23
Construction		161		0		0		161		19,524		19,685		0
Second mortgages		21		39		165		225		14,923		15,148		0
Equity lines of credit		170		0		0		170		47,086		47,256		0
Total mortgage loans on real estate		1,927		1,112		463		3,502		453,342		456,844		23
Commercial loans		500		88		232		820		42,377		43,197		164
Consumer loans		1,673		1,350		3,163		6,186		44,241		50,427		3,163
Other		64		3		6		73		17,934		18,007		6
Total	$	4,164	$	2,553	$	3,864	$	10,581	$	557,894	$	568,475	$	3,356

⁽¹⁾ For purposes of this table, Total Current Loans includes loans that are 1 - 29 days past due.

Although the portion of the student loan portfolio that is 90 days or more past due would normally be considered impaired, the Company does not include these loans in its impairment analysis. Because the federal government has provided guarantees of repayment of these student loans in an amount ranging from 97% to 98% of the total principal and interest of the loans, management does not expect significant increases in past due student loans to have a material effect on the Company.

Nonaccrual Loans

The following table presents loans in nonaccrual status by class of loan as of the dates indicated:

Nonaccrual Loans by Class
	June 30, 2016		December 31, 2015
	(in thousands)
Mortgage loans on real estate
Residential 1-4 family	$	1,058	$	1,457
Commercial		2,501		2,623
Second mortgages		154		226
Total mortgage loans on real estate		3,713		4,306
Commercial loans		197		276
Total	$	3,910	$	4,582

Interest Income Would Have Been Recorded Under Original Loan Terms

The following table presents the interest income that the Company would have earned under the original terms of its nonaccrual loans and the actual interest recorded by the Company on nonaccrual loans for the periods presented:

	Six Months Ended June 30,
	2016			2015
	(in thousands)
Interest income that would have been recorded under original loan terms		$	101	$	110
Actual interest income recorded for the period			85		97
Reduction in interest income on nonaccrual loans		$	16	$	13

Troubled Debt Restructurings by Class

The following table presents TDRs during the period indicated, by class of loan. There were no troubled debts restructured in the first six months of 2015 or in the second quarter of 2016.

Troubled Debt Restructurings by Class For the Six Months Ended June 30, 2016
(dollars in thousands)
	Number of Modifications		Recorded Investment Prior to Modification			Recorded Investment After Modification			Current Investment on June 30, 2016
Commercial loans		1		$	152		$	152		$	110

Impaired Loans by Class

The following table includes the recorded investment and unpaid principal balances (a portion of which may have been charged off) for impaired loans with the associated allowance amount, if applicable, as of the dates presented. Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized for the periods presented. The average balances are calculated based on daily average balances.

Impaired Loans by Class (in thousands)
	As of June 30, 2016												For the six months ended June 30, 2016
				Recorded Investment
	Unpaid Principal Balance			Without Valuation Allowance			With Valuation Allowance			Associated Allowance			Average Recorded Investment			Interest Income Recognized
Mortgage loans on real estate:
Residential 1-4 family		$	2,721		$	1,735		$	640		$	124		$	2,642		$	51
Commercial			10,183			6,188			3,168			463			9,353			232
Construction			633			536			97			35			366			21
Second mortgages			526			482			0			0			517			14
Total mortgage loans on real estate		$	14,063		$	8,941		$	3,905		$	622		$	12,878		$	318
Commercial loans			1,145			197			824			137			664			41
Consumer loans			0			0			0			0			6			0
Total		$	15,208		$	9,138		$	4,729		$	759		$	13,548		$	359

Impaired Loans by Class (in thousands)
	As of December 31, 2015											For the Year Ended December 31, 2015
			Recorded Investment
	Unpaid Principal Balance		Without Valuation Allowance			With Valuation Allowance			Associated Allowance			Average Recorded Investment			Interest Income Recognized
Mortgage loans on real estate:
Residential 1-4 family	$	2,994		$	1,530		$	1,261		$	146		$	2,267		$	132
Commercial		10,203			6,166			3,208			608			9,305			473
Construction		99			0			99			36			465			5
Second mortgages		535			499			0			0			571			21
Total mortgage loans on real estate	$	13,831		$	8,195		$	4,568		$	790		$	12,608		$	631
Commercial loans		330			207			68			8			952			28
Consumer loans		12			12			0			0			13			1
Total	$	14,173		$	8,414		$	4,636		$	798		$	13,573		$	660

Allowance for Loan Losses by Segment

The following table presents, by portfolio segment, the changes in the allowance for loan losses and the recorded investment in loans for the periods presented. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT IN LOANS
(in thousands)
For the Six Months Ended June 30, 2016	Commercial			Real Estate - Construction		Real Estate - Mortgage ⁽¹⁾			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	633		$	985	$	5,628		$	279		$	213		$	7,738
Charge-offs		(858	)		0		(268	)		(99	)		(62	)		(1,287	)
Recoveries		24			3		17			22			17			83
Provision for loan losses		1,287			297		(496	)		198			114			1,400
Ending balance	$	1,086		$	1,285	$	4,881		$	400		$	282		$	7,934
Ending balance individually evaluated for impairment	$	137		$	35	$	587		$	0		$	0		$	759
Ending balance collectively evaluated for impairment		949			1,250		4,294			400			282			7,175
Ending balance	$	1,086		$	1,285	$	4,881		$	400		$	282		$	7,934
Loan Balances:
Ending balance individually evaluated for impairment	$	1,021		$	633	$	12,213		$	0		$	0		$	13,867
Ending balance collectively evaluated for impairment		53,975			25,653		429,344			44,112			31,210			584,294
Ending balance	$	54,996		$	26,286	$	441,557		$	44,112		$	31,210		$	598,161

For the Year Ended December 31, 2015	Commercial			Real Estate - Construction		Real Estate - Mortgage ⁽¹⁾			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	595		$	703	$	5,347		$	219		$	211		$	7,075
Charge-offs		(293	)		0		(321	)		(92	)		(191	)		(897	)
Recoveries		50			1		393			39			52			535
Provision for loan losses		281			281		209			113			141			1,025
Ending balance	$	633		$	985	$	5,628		$	279		$	213		$	7,738
Ending balance individually evaluated for impairment	$	8		$	36	$	754		$	0		$	0		$	798
Ending balance collectively evaluated for impairment		625			949		4,874			279			213			6,940
Ending balance	$	633		$	985	$	5,628		$	279		$	213		$	7,738
Loan Balances:
Ending balance individually evaluated for impairment	$	275		$	99	$	12,664		$	12		$	0		$	13,050
Ending balance collectively evaluated for impairment		42,922			19,586		424,495			50,415			18,007			555,425
Ending balance	$	43,197		$	19,685	$	437,159		$	50,427		$	18,007		$	568,475

⁽¹⁾ The real estate-mortgage segment includes residential 1 – 4 family, commercial real estate, second mortgages and equity lines of credit.