Loans and the Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2019

Loans and the Allowance for Loan Losses [Abstract]

The following is a summary of the balances in each class of the Company’s portfolio of loans held for investment as of the dates indicated:

	March 31, 2019			December 31, 2018
	(in thousands)
Mortgage loans on real estate:
Residential 1-4 family	$	111,809		$	110,009
Commercial - owner occupied		150,457			155,245
Commercial - non-owner occupied		129,632			131,287
Multifamily		28,744			28,954
Construction		36,700			32,383
Second mortgages		15,496			17,297
Equity lines of credit		54,133			57,649
Total mortgage loans on real estate		526,971			532,824
Commercial and industrial loans		63,753			63,398
Consumer automobile loans		116,997			120,796
Other consumer loans		47,417			48,342
Other		7,749			8,649
Total loans, net of deferred fees (1)		762,887			774,009
Less: Allowance for loan losses		(10,088	)		(10,111	)
Loans, net of allowance and deferred fees and costs (1)	$	752,799		$	763,898

(1) Net deferred loan fees totaled $789 thousand and $864 thousand at March 31, 2019 and December 31, 2018, respectively.

Acquired Loans

The outstanding principal balance and the carrying amount of total acquired loans included in the consolidated balance sheet as of March 31, 2019 and December 31, 2018 are as follows:

	March 31, 2019			December 31, 2018
	(in thousands)
Outstanding principal balance		$	29,254	$	31,940
Carrying amount			28,864		31,497

The outstanding principal balance and related carrying amount of purchased credit-impaired loans, for which the Company applies FASB ASC 310-30 to account for interest earned, as of March 31, 2019 and December 31, 2018 are as follows:

	March 31, 2019			December 31, 2018
	(in thousands)
Outstanding principal balance		$	241	$	246
Carrying amount			84		91

The following table presents changes in the accretable yield on purchased credit-impaired loans, for which the Company applies FASB ASC 310-30, at March 31, 2019:

	March 31, 2019
	(in thousands)
Balance at January 1, 2019		$	12
Accretion			(1	)
Balance at end of period		$	11

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 March 31, 2019
(in thousands)
	Pass		OAEM		Substandard		Total
Mortgage loans on real estate:
Residential 1-4 family	$	109,736	$	-	$	2,073	$	111,809
Commercial - owner occupied		136,427		4,715		9,315		150,457
Commercial - non-owner occupied		121,697		4,058		3,877		129,632
Multifamily		28,744		-		-		28,744
Construction		36,276		70		354		36,700
Second mortgages		15,343		-		153		15,496
Equity lines of credit		53,457		-		676		54,133
Total mortgage loans on real estate		501,680		8,843		16,448		526,971
Commercial and industrial loans		61,296		2,028		429		63,753
Consumer automobile loans		116,631		-		366		116,997
Other consumer loans		47,374		-		43		47,417
Other		7,749		-		-		7,749
Total	$	734,730	$	10,871	$	17,286	$	762,887

Credit Quality Information
As of December 31, 2018
(in thousands)
	Pass		OAEM		Substandard		Total
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

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 March 31, 2019
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due		Purchased Credit- 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	$	1,323	$	169	$	484	$	-	$	109,833	$	111,809	$	135
Commercial - owner occupied		840		915		2,582		84		146,036		150,457		-
Commercial - non-owner occupied		170		-		2,300		-		127,162		129,632		-
Multifamily		-		-		-		-		28,744		28,744		-
Construction		-		-		354		-		36,346		36,700		-
Second mortgages		36		-		48		-		15,412		15,496		-
Equity lines of credit		10		302		-		-		53,821		54,133		-
Total mortgage loans on real estate		2,379		1,386		5,768		84		517,354		526,971		135
Commercial loans		537		174		-		-		63,042		63,753		-
Consumer automobile loans		1,220		284		96		-		115,397		116,997		96
Other consumer loans		1,673		302		1,418		-		44,024		47,417		1,418
Other		86		32		29		-		7,602		7,749		29
Total	$	5,895	$	2,178	$	7,311	$	84	$	747,419	$	762,887	$	1,678

⁽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 loans 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 $3.1 million at March 31, 2019. While the past due totals increased from December 31, 2018 to March 31, 2019, the increase is primarily related to ongoing resolution of a large non-accrual credit which is anticipated to close during the second quarter of 2019 with no additional loss to the Company.

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		Purchased Credit- 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 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.

Nonaccrual Loans

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

Nonaccrual Loans by Class
	March 31, 2019		December 31, 2018
	(in thousands)
Mortgage loans on real estate
Residential 1-4 family	$	1,365	$	1,386
Commercial - owner occupied		4,979		5,283
Commercial - non-owner occupied		3,877		4,371
Construction		354		417
Second mortgages		152		155
Equity lines of credit		231		231
Total mortgage loans on real estate		10,958		11,843
Commercial loans		287		298
Total	$	11,245	$	12,141

Interest Income to be Earned Under Original Terms and Actual Interest Recorded

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:

	Three Months Ended March 31,
	2019			2018
	(in thousands)
Interest income that would have been recorded under original loan terms		$	64	$	130
Actual interest income recorded for the period			-		80
Reduction in interest income on nonaccrual loans		$	64	$	50

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, exclusive of purchased credit-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 March 31, 2019												For the three months ended March 31, 2019
				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		$	1,877		$	1,788		$	89		$	44		$	1,934		$	-
Commercial			11,861			11,861			-			-			12,683			-
Construction			445			354			91			17			487			1
Second mortgages			355			208			147			32			309			2
Equity lines of credit			232			-			232			3			232			-
Total mortgage loans on real estate			14,770			14,211			559			96			15,645			3
Commercial loans			287			212			75			8			292			-
Other consumer loans			-			-			-			-			-			-
Total		$	15,057		$	14,423		$	634		$	104		$	15,937		$	3

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 loans		384			78			220			11			446			5
Other consumer loans		38			-			-			-			43			-
Total	$	18,970		$	15,249		$	931		$	116		$	18,268		$	549

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 Three Months Ended March 31, 2019	Commercial			Real Estate - Construction		Real Estate - Mortgage ⁽¹⁾			Consumer ⁽²⁾			Other			Total
Allowance for Loan Losses:
Balance at the beginning of period	$	2,340		$	156	$	5,956		$	1,354		$	305		$	10,111
Charge-offs		-			-		(90	)		(212	)		(133	)		(435	)
Recoveries		2			-		75			91			18			186
Provision for loan losses		(203	)		42		(25	)		202			210			226
Ending balance	$	2,139		$	198	$	5,916		$	1,435		$	400		$	10,088
Ending balance individually evaluated for impairment	$	8		$	17	$	79		$	-		$	-		$	104
Ending balance collectively evaluated for impairment		2,131			181		5,837			1,435			400			9,984
Ending balance purchased credit-impaired loans		-			-		-			-			-			-
Ending balance	$	2,139		$	198	$	5,916		$	1,435		$	400		$	10,088
Loan Balances:
Ending balance individually evaluated for impairment	$	287		$	445	$	14,325		$	-		$	-		$	15,057
Ending balance collectively evaluated for impairment		63,382			36,255		475,946			164,414			7,749			747,746
Ending balance purchased credit-impaired loans		84			-		-			-			-			84
Ending balance	$	63,753		$	36,700	$	490,271		$	164,414		$	7,749		$	762,887

For the Year Ended December 31, 2018	Commercial			Real Estate - Construction			Real Estate - Mortgage ⁽¹⁾			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 purchased credit-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 purchased credit-impaired loans		91			-			-			-			-			91
Ending balance	$	63,398		$	32,383		$	500,441		$	169,138		$	8,649		$	774,009

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

⁽²⁾ The consumer segment includes consumer automobile loans.