Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2017

Loans and 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:

	December 31, 2017			December 31, 2016
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	101,021		$	94,827
Commercial		289,682			285,429
Construction		27,489			23,116
Second mortgages		17,918			17,128
Equity lines of credit		56,610			51,024
Total mortgage loans on real estate		492,720			471,524
Commercial and industrial loans		60,398			54,434
Consumer automobile loans		119,251			10,407
Other consumer loans		54,974			48,500
Other (1)		11,197			19,017
Total loans		738,540			603,882
Less: Allowance for loan losses		(9,448	)		(8,245	)
Loans, net of allowance and deferred fees (2)	$	729,092		$	595,637

(1) Overdrawn deposit accounts are reclassified as loans and included in the Other category in the table above. Overdrawn deposit accounts totaled $594 thousand and $536 thousand at December 31, 2017 and December 31, 2016, respectively.

(2) Net deferred loan costs totaled $916 thousand and $522 thousand at December 31, 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 December 31, 2017
	Pass		OAEM		Substandard		Total
					(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	98,656	$	-	$	2,365	$	101,021
Commercial		264,275		10,526		14,881		289,682
Construction		26,694		74		721		27,489
Second mortgages		17,211		431		276		17,918
Equity lines of credit		56,318		-		292		56,610
Total mortgage loans on real estate		463,154		11,031		18,535		492,720
Commercial and industrial loans		58,091		1,469		838		60,398
Consumer automobile loans		119,211		-		40		119,251
Other consumer loans		54,926		-		48		54,974
Other		11,197		-		-		11,197
Total	$	706,579	$	12,500	$	19,461	$	738,540

	Credit Quality Information As of December 31, 2016
	Pass		OAEM		Substandard		Total
					(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	92,458	$	1,138	$	1,231	$	94,827
Commercial		260,948		10,014		14,467		285,429
Construction		22,219		162		735		23,116
Second mortgages		16,445		475		208		17,128
Equity lines of credit		50,387		500		137		51,024
Total mortgage loans on real estate		442,457		12,289		16,778		471,524
Commercial and industrial loans		49,979		2,278		2,177		54,434
Consumer automobile loans		10,407		-		-		10,407
Other consumer loans		48,334		-		166		48,500
Other		19,017		-		-		19,017
Total	$	570,194	$	14,567	$	19,121	$	603,882

Past Due Loans

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 December 31, 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	$	229	$	153	$	1,278	$	1,660	$	99,361	$	101,021	$	261
Commercial		194		771		1,753		2,718		286,964		289,682		-
Construction		-		-		721		721		26,768		27,489		-
Second mortgages		15		-		163		178		17,740		17,918		45
Equity lines of credit		75		19		53		147		56,463		56,610		-
Total mortgage loans on real estate		513		943		3,968		5,424		487,296		492,720		306
Commercial and industrial loans		709		-		1,060		1,769		58,629		60,398		471
Consumer automobile loans		517		122		41		680		118,571		119,251		41
Other consumer loans		2,222		544		2,360		5,126		49,848		54,974		2,360
Other		84		9		4		97		11,100		11,197		4
Total	$	4,045	$	1,618	$	7,433	$	13,096	$	725,444	$	738,540	$	3,182

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

In the table above, the other 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 $4.2 million at December 31, 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	$	-	$	496	$	1,060	$	93,767	$	94,827	$	218
Commercial		2,280		1,625		227		4,132		281,297		285,429		-
Construction		162		-		-		162		22,954		23,116		-
Second mortgages		-		200		188		388		16,740		17,128		58
Equity lines of credit		394		9		86		489		50,535		51,024		-
Total mortgage loans on real estate		3,400		1,834		997		6,231		465,293		471,524		276
Commercial and industrial loans		5		-		86		91		54,343		54,434		-
Consumer automobile loans		-		11		-		11		10,396		10,407		-
Other consumer loans		1,876		702		2,684		5,262		43,238		48,500		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.

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 $4.8 million at December 31, 2016.

Nonaccrual Loans

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

Nonaccrual Loans by Class

	December 31, 2017		December 31, 2016
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	1,447	$	598
Commercial		9,468		6,033
Construction		721		-
Second mortgages		118		129
Equity lines of credit		292		87
Total mortgage loans on real estate		12,046		6,847
Commercial and industrial loans		836		231
Consumer loans		-		81
Total	$	12,882	$	7,159

Interest Income to be Earned under the Original 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:

	Years Ended December 31,
		2017		2016		2015
	(in thousands)
Interest income that would have been recorded under original loan terms		$	474	$	318	$	196
Actual interest income recorded for the period			281		269		141
Reduction in interest income on nonaccrual loans		$	193	$	49	$	55

Troubled Debt Restructurings by Class

The following table presents TDRs during the period indicated, by class of loan:

Troubled Debt Restructurings by Class

For the Year Ended December 31, 2017

		Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification		Current Investment on December 31, 2017
	(dollars in thousands)
Mortgage loans on real estate:
Residential 1-4 family			1	$	142	$	142	$	140
Commercial			3		5,132		5,132		5,132
Total			4	$	5,274	$	5,274	$	5,272

Troubled Debt Restructurings by Class

For the Year Ended December 31, 2016

	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification		Current Investment on December 31, 2016
	(dollars in thousands)
Mortgage loans on real estate:
Residential 1-4 family		6	$	1,061	$	1,061	$	992
Commercial		1		150		150		-
Second mortgages		1		53		53		53
Equity lines of credit		1		93		93		86
Total mortgage loans on real estate		9		1,357		1,357		1,131
Commercial and industrial loans		1		152		152		144
Consumer loans		2		8		8		-
Total		12	$	1,517	$	1,517	$	1,275

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 December 31, 2017								For the Year Ended December 31, 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		$	2,873	$	2,499	$	316	$	52	$	2,525	$	90
Commercial			15,262		11,622		1,644		1		13,541		579
Construction			814		721		92		18		406		23
Second mortgages			473		318		135		14		464		20
Equity lines of credit			293		53		239		10		261		-
Total mortgage loans on real estate		$	19,715	$	15,213	$	2,426	$	95	$	17,197	$	712
Commercial and industrial loans			1,115		836		-		-		1,388		30
Consumer loans			-		-		-		-		41		-
Total		$	20,830	$	16,049	$	2,426	$	95	$	18,626	$	742

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		-		-		46		3
Total mortgage loans on real estate		$	19,921	$	13,853	$	5,133	$	529	$	15,679	$	917
Commercial and industrial loans			1,077		-		989		271		827		74
Consumer loans			81		81		-		-		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 Year Ended December 31, 2017	Commercial			Real Estate - Construction			Real Estate - Mortgage			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	1,493		$	846		$	5,267		$	455		$	184		$	8,245
Charge-offs		(807	)		-			(1,934	)		(279	)		(267	)		(3,287	)
Recoveries		37			104			45			56			88			330
Provision for loan losses		1,166			(409	)		1,839			1,412			152			4,160
Ending balance		1,889			541			5,217			1,644			157			9,448
Ending balance individually evaluated for impairment		-			18			77			-			-			95
Ending balance collectively evaluated for impairment		1,889			523			5,140			1,644			157			9,353
Ending balance		1,889			541			5,217			1,644			157			9,448
Loan Balances:
Ending balance individually evaluated for impairment		836			813			16,826			-			-			18,475
Ending balance collectively evaluated for impairment		59,562			26,676			448,405			174,225			11,197			720,065
Ending balance	$	60,398		$	27,489		$	465,231		$	174,225		$	11,197		$	738,540

For the Year Ended December 31, 2016	Commercial			Real Estate - Construction			Real Estate - Mortgage			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	633		$	985		$	5,628		$	279		$	213		$	7,738
Charge-offs		(915	)		-			(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			-			-			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			-			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

Change in Allowance Methodology

The following table represents the effect on the loan loss provision as a result of these changes in methodology. It compares the methodology actually used for the year ended December 31, 2017 to that used in prior periods.

	Calculated Provision Based on Current Methodology			Calculated Provision Based on Prior Methodology			Difference
	(in thousands)
Portfolio Segment:
Commercial	$	1,166		$	1,653		$	(487	)
Real estate - construction		(409	)		(791	)		382
Real estate - mortgage		1,839			2,397			(558	)
Consumer loans		1,412			1,698			(286	)
Other		152			361			(209	)
Total	$	4,160		$	5,318		$	(1,158	)