Loans and Allowance for Loan Losses (Tables)

12 Months Ended

Dec. 31, 2018

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, 2018			December 31, 2017
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	110,009		$	101,021
Commercial - owner occupied		155,245			159,268
Commercial - non-owner occupied		131,287			107,514
Multifamily		28,954			22,900
Construction		32,383			27,489
Second mortgages		17,297			17,918
Equity lines of credit		57,649			56,610
Total mortgage loans on real estate		532,824			492,720
Commercial and industrial loans		63,398			60,398
Consumer automobile loans		120,796			119,251
Other consumer loans		48,342			54,974
Other (1)		8,649			11,197
Total loans		774,009			738,540
Less: Allowance for loan losses		(10,111	)		(9,448	)
Loans, net of allowance and deferred fees (2)	$	763,898		$	729,092

(1) Overdrawn deposit accounts are reclassified as loans and included in the Other category in the table above. Overdrawn deposit accounts, excluding internal use accounts, totaled $628 thousand and $424 thousand at December 31, 2018 and December 31, 2017, respectively.
(2) Net deferred loan costs totaled $864 thousand and $916 thousand at December 31, 2018 and December 31, 2017, respectively.

Acquired Loans

The outstanding principal balance and the carrying amount of total acquired loans included in the consolidated balance sheet as of December 31, 2018 are as follows:

	December 31, 2018
	(in thousands)
Outstanding principal balance	$	31,940
Carrying amount		31,497

The outstanding principal balance and related carrying amount of acquired impaired loans, for which the Company applies FASB ASC 310-30 to account for interest earned, as of December 31, 2018 are as follows:

	December 31, 2018
	(in thousands)
Outstanding principal balance	$	246
Carrying amount		91

The following table presents changes in the accretable yield on acquired impaired loans, for which the Company applies FASB ASC 310-30, at December 31, 2018:

	December 31, 2018
	(in thousands)
Balance at January 1, 2018	$	-
Additions from acquisition of Citizens		110
Accretion		(98	)
Other changes, net		-
Ending balance	$	12

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, 2018
	Pass		OAEM		Substandard		Total
					(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	108,274	$	-	$	1,735	$	110,009
Commercial - owner occupied		140,664		4,067		10,514		155,245
Commercial - non-owner occupied		121,523		3,937		5,827		131,287
Multifamily		28,954		-		-		28,954
Construction		31,896		71		416		32,383
Second mortgages		17,007		-		290		17,297
Equity lines of credit		56,893		-		756		57,649
Total mortgage loans on real estate		505,211		8,075		19,538		532,824
Commercial and industrial loans		60,967		1,987		444		63,398
Consumer automobile loans		120,365		-		431		120,796
Other consumer loans		48,298		-		44		48,342
Other		8,649		-		-		8,649
Total	$	743,490	$	10,062	$	20,457	$	774,009

	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 - owner occupied		142,778		4,944		11,546		159,268
Commercial - non-owner occupied		98,597		5,582		3,335		107,514
Multifamily		22,900		-		-		22,900
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

Past Due Loans

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 December 31, 2018
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due		Acquired Impaired		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	$	1,165	$	553	$	536	$	-	$	107,755	$	110,009	$	179
Commercial - owner occupied		1,059		83		-		91		154,012		155,245		-
Commercial - non-owner occupied		-		-		2,970		-		128,317		131,287		-
Multifamily		-		-		-		-		28,954		28,954		-
Construction		-		-		622		-		31,761		32,383		205
Second mortgages		65		-		135		-		17,097		17,297		136
Equity lines of credit		60		-		-		-		57,589		57,649		-
Total mortgage loans on real estate		2,349		636		4,263		91		525,485		532,824		520
Commercial and industrial loans		1,595		-		-		-		61,803		63,398		-
Consumer automobile loans		1,645		291		114		-		118,746		120,796		113
Other consumer loans		1,333		621		1,852		-		44,536		48,342		1,852
Other		133		8		12		-		8,496		8,649		12
Total	$	7,055	$	1,556	$	6,241	$	91	$	759,066	$	774,009	$	2,497

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

In the table above, the past due totals include student and small business loans with principal and interest amounts that are 97 - 100% guaranteed by the federal government. The past due principal portion of these guaranteed loans totaled $4.0 million at December 31, 2018.

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 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	$	99,361	$	101,021	$	261
Commercial - owner occupied		194		595		1,753		156,726		159,268		-
Commercial - non-owner occupied		-		176		-		107,338		107,514		-
Multifamily		-		-		-		22,900		22,900		-
Construction		-		-		721		26,768		27,489		-
Second mortgages		15		-		163		17,740		17,918		45
Equity lines of credit		75		19		53		56,463		56,610		-
Total mortgage loans on real estate		513		943		3,968		487,296		492,720		306
Commercial and industrial loans		709		-		1,060		58,629		60,398		471
Consumer automobile loans		517		122		41		118,571		119,251		41
Other consumer loans		2,222		544		2,360		49,848		54,974		2,360
Other		84		9		4		11,100		11,197		4
Total	$	4,045	$	1,618	$	7,433	$	725,444	$	738,540	$	3,182

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

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, 2018		December 31, 2017
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	1,386	$	1,447
Commercial - owner occupied		5,283		7,824
Commercial - non-owner occupied		4,371		1,644
Construction		417		721
Second mortgages		155		118
Equity lines of credit		231		292
Total mortgage loans on real estate		11,843		12,046
Commercial and industrial loans		298		836
Consumer loans		-		-
Total	$	12,141	$	12,882

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,
	2018			2017
	(in thousands)
Interest income that would have been recorded under original loan terms		$	533	$	474
Actual interest income recorded for the period			336		281
Reduction in interest income on nonaccrual loans		$	197	$	193

Troubled Debt Restructurings by Class

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

Troubled Debt Restructurings by Class For the Year Ended December 31, 2018
	Number of Modifications		Recorded Investment Prior to Modification		Recorded Investment After Modification		Current Investment on December 31, 2018
	(dollars in thousands)
Mortgage loans on real estate:
Residential 1-4 family		1	$	296	$	187	$	188
Equity lines of credit		1		248		231		231
Total mortgage loans on real estate		2		544		418		419
Commercial and industrial loans		1		146		138		139
Total		3	$	690	$	556	$	558

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 - owner occupied		2		3,663		3,663		3,663
Commercial - non-owner occupied		1		1,469		1,469		1,469
Total		4	$	5,274	$	5,274	$	5,272

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, 2018												For the Year Ended December 31, 2018
				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		$	2,057		$	1,686		$	239		$	51		$	2,073		$	66
Commercial			15,254			12,721			-			-			14,232			455
Construction			509			417			92			18			665			7
Second mortgages			496			347			148			33			508			15
Equity lines of credit			232			-			232			3			301			1
Total mortgage loans on real estate		$	18,548		$	15,171		$	711		$	105		$	17,779		$	544
Commercial and industrial loans			384			78			220			11			446			5
Consumer loans			38			-			-			-			43			-
Total		$	18,970		$	15,249		$	931		$	116		$	18,268		$	549

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

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, 2018	Commercial			Real Estate - Construction			Real Estate - Mortgage			Consumer			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	1,889		$	541		$	5,217		$	1,644		$	157		$	9,448
Charge-offs		(81	)		-			(1,625	)		(769	)		(367	)		(2,842	)
Recoveries		140			-			158			262			84			644
Provision for loan losses		392			(385	)		2,206			217			431			2,861
Ending balance		2,340			156			5,956			1,354			305			10,111
Ending balance individually evaluated for impairment		11			18			87			-			-			116
Ending balance collectively evaluated for impairment		2,329			138			5,869			1,354			305			9,995
Ending balance acquired impaired loans		-			-			-			-			-			-
Ending balance		2,340			156			5,956			1,354			305			10,111
Loan Balances:
Ending balance individually evaluated for impairment		298			509			15,373			-			-			16,180
Ending balance collectively evaluated for impairment		63,009			31,874			485,068			169,138			8,649			757,738
Ending balance acquired impaired loans		91			-			-			-			-			91
Ending balance	$	63,398		$	32,383		$	500,441		$	169,138		$	8,649		$	774,009

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