Loans and the Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2017

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, 2017			December 31, 2016
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	100,381		$	94,827
Commercial		286,512			285,429
Construction		25,768			23,116
Second mortgages		17,390			17,128
Equity lines of credit		53,467			51,024
Total mortgage loans on real estate		483,518			471,524
Commercial loans		57,585			54,434
Consumer loans		126,132			58,907
Other		12,554			19,017
Total loans, net of deferred fees (1)		679,789			603,882
Less: Allowance for loan losses		(8,710	)		(8,245	)
Loans, net of allowance and deferred fees (1)	$	671,079		$	595,637

(1) Net deferred loan fees totaled $764 thousand and $522 thousand at June 30, 2017 and December 31, 2016, respectively.

Overdrawn deposit accounts are reclassified as loans and included in the Other category in the table above. Overdrawn deposit accounts totaled $495 thousand and $536 thousand at June 30, 2017 and December 31, 2016, 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, 2017
(in thousands)
	Pass		OAEM		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential 1-4 family	$	98,779	$	0	$	1,602	$	0	$	100,381
Commercial		263,009		9,516		13,987		0		286,512
Construction		24,963		75		730		0		25,768
Second mortgages		16,773		456		161		0		17,390
Equity lines of credit		53,117		0		350		0		53,467
Total mortgage loans on real estate		456,641		10,047		16,830		0		483,518
Commercial loans		54,721		1,124		1,740		0		57,585
Consumer loans		125,998		0		134		0		126,132
Other		12,554		0		0		0		12,554
Total	$	649,914	$	11,171	$	18,704	$	0	$	679,789

Credit Quality Information
As of December 31, 2016
(in thousands)
	Pass		OAEM		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential 1-4 family	$	92,458	$	1,138	$	1,231	$	0	$	94,827
Commercial		260,948		10,014		14,467		0		285,429
Construction		22,219		162		735		0		23,116
Second mortgages		16,445		475		208		0		17,128
Equity lines of credit		50,387		500		137		0		51,024
Total mortgage loans on real estate		442,457		12,289		16,778		0		471,524
Commercial loans		49,979		2,278		2,177		0		54,434
Consumer loans		58,741		0		166		0		58,907
Other		19,017		0		0		0		19,017
Total	$	570,194	$	14,567	$	19,121	$	0	$	603,882

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, 2017
	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	$	408	$	0	$	1,042	$	1,450	$	98,931	$	100,381	$	394
Commercial		180		3,718		803		4,701		281,811		286,512		0
Construction		0		0		0		0		25,768		25,768		0
Second mortgages		62		0		0		62		17,328		17,390		0
Equity lines of credit		27		0		451		478		52,989		53,467		150
Total mortgage loans on real estate		677		3,718		2,296		6,691		476,827		483,518		544
Commercial loans		473		630		124		1,227		56,358		57,585		0
Consumer loans		1,604		538		2,904		5,046		121,086		126,132		2,823
Other		55		5		3		63		12,491		12,554		3
Total	$	2,809	$	4,891	$	5,327	$	13,027	$	666,762	$	679,789	$	3,370

⁽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 $4.1 million at June 30, 2017.

Age Analysis of Past Due Loans as of December 31, 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	$	564	$	0	$	496	$	1,060	$	93,767	$	94,827	$	218
Commercial		2,280		1,625		227		4,132		281,297		285,429		0
Construction		162		0		0		162		22,954		23,116		0
Second mortgages		0		200		188		388		16,740		17,128		58
Equity lines of credit		394		9		86		489		50,535		51,024		0
Total mortgage loans on real estate		3,400		1,834		997		6,231		465,293		471,524		276
Commercial loans		5		0		86		91		54,343		54,434		0
Consumer loans		1,876		713		2,684		5,273		53,634		58,907		2,603
Other		41		12		5		58		18,959		19,017		5
Total	$	5,322	$	2,559	$	3,772	$	11,653	$	592,229	$	603,882	$	2,884

⁽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, 2017		December 31, 2016
	(in thousands)
Mortgage loans on real estate
Residential 1-4 family	$	648	$	598
Commercial		8,916		6,033
Second mortgages		0		129
Equity lines of credit		301		87
Total mortgage loans on real estate		9,865		6,847
Commercial loans		1,610		231
Consumer loans		81		81
Total	$	11,556	$	7,159

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,
	2017			2016
	(in thousands)
Interest income that would have been recorded under original loan terms		$	241	$	101
Actual interest income recorded for the period			180		85
Reduction in interest income on nonaccrual loans		$	61	$	16

Troubled Debt Restructurings by Class

The following tables present TDRs during the periods indicated, by class of loan.

There were no troubled debt restructurings in the three months ended June 30, 2016.

Troubled Debt Restructurings by Class
For the Three Months Ended June 30, 2017
	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification		Current Investment on June 30, 2017
	(dollars in thousands)
Commercial real estate		2	$	3,663	$	3,663	$	3,663

Troubled Debt Restructurings by Class
For the Six Months Ended June 30, 2017
	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification		Current Investment on June 30, 2017
	(dollars in thousands)
Mortgage loans on real estate:
Residential 1-4 family		1	$	142	$	142	$	142
Commercial		2		3,663		3,663		3,663
Total		3	$	3,805	$	3,805	$	3,805

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

In the three and six months ended June 30, 2017 and 2016, there were no defaulting TDRs where the default occurred within twelve months of restructuring. The Company considers a TDR in default when any of the following occurs: the loan, as restructured, becomes 90 days or more past due; the loan is moved to nonaccrual status following the restructure; the loan is restructured again under terms that would qualify it as a TDR if it were not already so classified; or any portion of the loan is charged off.

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
	As of June 30, 2017												For the six months ended June 30, 2017
				Recorded Investment
	Unpaid Principal Balance			Without Valuation Allowance			With Valuation Allowance			Associated Allowance			Average Recorded Investment			Interest Income Recognized
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family		$	2,512		$	2,001		$	457		$	56		$	2,435		$	45
Commercial			13,232			11,888			436			53			14,361			276
Construction			94			0			94			20			357			3
Second mortgages			485			203			254			16			511			10
Equity lines of credit			335			53			248			19			203			0
Total mortgage loans on real estate		$	16,658		$	14,145		$	1,489		$	164		$	17,867		$	334
Commercial loans			1,660			103			1,507			496			1,772			42
Consumer loans			81			81			0			0			81			0
Total		$	18,399		$	14,329		$	2,996		$	660		$	19,720		$	376

Impaired Loans by Class
	As of December 31, 2016											For the Year Ended December 31, 2016
			Recorded Investment
	Unpaid Principal Balance		Without Valuation Allowance			With Valuation Allowance			Associated Allowance			Average Recorded Investment			Interest Income Recognized
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	2,496		$	1,835		$	622		$	75		$	2,741		$	119
Commercial		16,193			11,095			4,274			415			11,885			727
Construction		619			528			96			22			496			43
Second mortgages		526			309			141			17			511			25
Equity lines of credit		87			86			0			0			46			3
Total mortgage loans on real estate	$	19,921		$	13,853		$	5,133		$	529		$	15,679		$	917
Commercial loans		1,077			0			989			271			827			74
Consumer loans		81			81			0			0			68			1
Total	$	21,079		$	13,934		$	6,122		$	800		$	16,574		$	992

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, 2017	Commercial			Real Estate - Construction			Real Estate - Mortgage ⁽¹⁾			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	1,493		$	846		$	5,267		$	455		$	184		$	8,245
Charge-offs		(138	)		0			(983	)		(63	)		(72	)		(1,256	)
Recoveries		25			0			6			11			29			71
Provision for loan losses		342			(456	)		985			780			(1	)		1,650
Ending balance	$	1,722		$	390		$	5,275		$	1,183		$	140		$	8,710
Ending balance individually evaluated for impairment	$	496		$	20		$	144		$	0		$	0		$	660
Ending balance collectively evaluated for impairment		1,226			370			5,131			1,183			140			8,050
Ending balance	$	1,722		$	390		$	5,275		$	1,183		$	140		$	8,710
Loan Balances:
Ending balance individually evaluated for impairment	$	1,610		$	94		$	15,540		$	81		$	0		$	17,325
Ending balance collectively evaluated for impairment		55,975			25,674			442,210			126,051			12,554			662,464
Ending balance	$	57,585		$	25,768		$	457,750		$	126,132		$	12,554		$	679,789

For the Year Ended December 31, 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		(915	)		0			(504	)		(204	)		(147	)		(1,770	)
Recoveries		79			3			197			28			40			347
Provision for loan losses		1,696			(142	)		(54	)		352			78			1,930
Ending balance	$	1,493		$	846		$	5,267		$	455		$	184		$	8,245
Ending balance individually evaluated for impairment	$	271		$	22		$	507		$	0		$	0		$	800
Ending balance collectively evaluated for impairment		1,222			824			4,760			455			184			7,445
Ending balance	$	1,493		$	846		$	5,267		$	455		$	184		$	8,245
Loan Balances:
Ending balance individually evaluated for impairment	$	989		$	624		$	18,362		$	81		$	0		$	20,056
Ending balance collectively evaluated for impairment		53,445			22,492			430,046			58,826			19,017			583,826
Ending balance	$	54,434		$	23,116		$	448,408		$	58,907		$	19,017		$	603,882

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

Financing Receivable, Allowance for Credit Losses, Policy or Methodology Change [Policy Text Block]

There were no changes in the Company's accounting methodology for the allowance for loan losses in the first six months of 2017.