Loans and the Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 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:

(dollars in thousands)	September 30, 2019		December 31, 2018
Mortgage loans on real estate:
Residential 1-4 family	$	113,634	$	110,009
Commercial - owner occupied		137,949		155,245
Commercial - non-owner occupied		135,069		131,287
Multifamily		26,556		28,954
Construction		40,196		32,383
Second mortgages		15,058		17,297
Equity lines of credit		51,481		57,649
Total mortgage loans on real estate		519,943		532,824
Commercial and industrial loans		69,712		63,398
Consumer automobile loans		101,192		120,796
Other consumer loans		40,429		48,342
Other		9,534		8,649
Total loans, net of deferred fees		740,810		774,009
Less: Allowance for loan losses		10,612		10,111
Loans, net of allowance and deferred fees ⁽¹⁾	$	730,198	$	763,898

(1)

Net deferred loan fees totaled $630 thousand and $864 thousand at September 30, 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 September 30, 2019 and December 31, 2018 are as follows:

(dollars in thousands)	September 30, 2019		December 31, 2018
Outstanding principal balance	$	25,188	$	31,940
Carrying amount		24,854		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 September 30, 2019 and December 31, 2018 are as follows:

(dollars in thousands)	September 30, 2019		December 31, 2018
Outstanding principal balance	$	232	$	246
Carrying amount		83		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 September 30, 2019:

(dollars in thousands)	September 30, 2019
Balance at January 1, 2019	$	12
Accretion		5
Balance at end of period		17

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 September 30, 2019
(dollars in thousands)	Pass		OAEM		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential 1-4 family	$	112,117	$	-	$	1,517	$	-	$	113,634
Commercial - owner occupied		126,810		3,133		8,006		-		137,949
Commercial - non-owner occupied		131,173		2,543		1,353		-		135,069
Multifamily		26,556		-		-		-		26,556
Construction		40,196		-		-		-		40,196
Second mortgages		14,954		-		104		-		15,058
Equity lines of credit		51,481		-		-		-		51,481
Total mortgage loans on real estate	$	503,287	$	5,676	$	10,980	$	-	$	519,943
Commercial and industrial loans		69,221		75		416		-		69,712
Consumer automobile loans		100,497		-		695		-		101,192
Other consumer loans		40,388		-		41		-		40,429
Other		9,534		-		-		-		9,534
Total	$	722,927	$	5,751	$	12,132	$	-	$	740,810

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

Age Analysis of Past Due Loans as of September 30, 2019
(dollars in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due and still Accruing		PCI		Nonaccrual ⁽¹⁾		Total Current Loans⁽²⁾		Total Loans
Mortgage loans on real estate:
Residential 1-4 family	$	189	$	-	$	-	$	-	$	1,269	$	112,176	$	113,634
Commercial - owner occupied		-		-		-		83		4,856		133,010		137,949
Commercial - non-owner occupied		-		-		-		-		1,353		133,716		135,069
Multifamily		-		-		-		-		-		26,556		26,556
Construction		-		-		-		-		-		40,196		40,196
Second mortgages		-		-		-		-		104		14,954		15,058
Equity lines of credit		65		-		-		-		-		51,416		51,481
Total mortgage loans on real estate	$	254	$	-	$	-	$	83	$	7,582	$	512,024	$	519,943
Commercial and industrial loans		4		-		-		-		416		69,292		69,712
Consumer automobile loans		1,115		165		172		-		-		99,740		101,192
Other consumer loans		728		512		905		-		-		38,284		40,429
Other		57		6		19		-		-		9,452		9,534
Total	$	2,158	$	683	$	1,096	$	83	$	7,998	$	728,792	$	740,810

⁽¹⁾	Includes past due loans in non-accrual status of $3.5 million.

⁽²⁾	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 with principal and interest amounts that are 97 - 98% guaranteed by the federal government. The past due principal portion of these guaranteed loans totaled $1.8 million at September 30, 2019.

Age Analysis of Past Due Loans as of December 31, 2018
(dollars in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due and still Accruing		PCI		Nonaccrual ⁽¹⁾		Total Current Loans⁽²⁾		Total Loans
Mortgage loans on real estate:
Residential 1-4 family	$	1,165	$	553	$	180	$	-	$	1,386	$	106,725	$	110,009
Commercial - owner occupied		1,059		83		-		91		5,283		148,729		155,245
Commercial - non-owner occupied		-		-		-		-		4,371		126,916		131,287
Multifamily		-		-		-		-		-		28,954		28,954
Construction		-		-		205		-		417		31,761		32,383
Second mortgages		17		-		135		-		155		16,990		17,297
Equity lines of credit		60		-		-		-		231		57,358		57,649
Total mortgage loans on real estate	$	2,301	$	636	$	520	$	91	$	11,843	$	517,433	$	532,824
Commercial and industrial loans		1,595		-		-		-		298		61,505		63,398
Consumer automobile loans		1,645		291		114		-		-		118,746		120,796
Other consumer loans		1,333		621		1,851		-		-		44,537		48,342
Other		133		8		12		-		-		8,496		8,649
Total	$	7,007	$	1,556	$	2,497	$	91	$	12,141	$	750,717	$	774,009

⁽¹⁾	Includes past due loans in non-accrual status of $3.8 million.

⁽²⁾	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:

(dollars in thousands)	September 30, 2019		December 31, 2018
Mortgage loans on real estate:
Residential 1-4 family	$	1,269	$	1,386
Commercial - owner occupied		4,856		5,283
Commercial - non-owner occupied		1,353		4,371
Construction		-		417
Second mortgages		104		155
Equity lines of credit		-		231
Total mortgage loans on real estate	$	7,582	$	11,843
Commercial and industrial loans		416		298
Total	$	7,998	$	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:

	Nine Months Ended September 30,
(dollars in thousand)	2019		2018
Interest income that would have been recorded under original loan terms	$	198	$	388
Actual interest income recorded for the period		101		249
Reduction in interest income on nonaccrual loans	$	97	$	139

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 September 30, 2019								For the nine months ended September 30, 2019
(Dollars in thousands)	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	$	1,522	$	1,330	$	89	$	44	$	1,427	$	5
Commercial		10,065		4,918		4,236		714		9,222		114
Construction		89		-		89		15		90		3
Second mortgages		247		-		247		101		248		4
Equity lines of credit		-		-		-		-		-		-
Total mortgage loans on real estate		11,923		6,248		4,661		874		10,987		126
Commercial and industrial loans		516		430		-		-		439		5
Other consumer loans		22		22		-		-		23		1
Total	$	12,461	$	6,700	$	4,661	$	874	$	11,449	$	132

Impaired Loans by Class

	As of December 31, 2018								For the Year Ended December 31, 2018
(Dollars in thousands)	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	$	2,057	$	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
Other consumer loans		38		-		-		-		43		-
Total	$	18,970	$	15,249	$	931	$	116	$	18,268	$	549

Allowance for Loan Losses by Segment

The following tables present, 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
For the nine months ended September 30, 2019
(Dollars in thousands)	Commercial and Industrial			Real Estate Construction		Real Estate - Mortgage ⁽¹⁾			Consumer ⁽²⁾			Other			Unallocated		Total
Allowance for loan losses:
Balance, beginning	$	2,340		$	156	$	5,956		$	1,354		$	305		$	-	$	10,111
Charge-offs		-			-		(166	)		(512	)		(327	)		-		(1,005	)
Recoveries		8			-		190			244			51			-		493
Provision for loan losses		(1,022	)		99		337			677			697			225		1,013
Ending Balance	$	1,326		$	255	$	6,317		$	1,763		$	726		$	225	$	10,612

Individually evaluated for impairment	$	-		$	15	$	859		$	-		$	-		$	-	$	874
Collectively evaluated for impairment		1,326			240		5,458			1,763			726			225		9,738
Purchased credit-impaired loans		-			-		-			-			-					-
Ending Balance	$	1,326		$	255	$	6,317		$	1,763		$	726		$	225	$	10,612

Loans Balances:
Individually evaluated for impairment		430			89		10,820			22			-			-		11,361
Collectively evaluated for impairment		69,199			40,107		468,927			141,599			9,534			-		729,366
Purchased credit-impaired loans		83			-		-			-			-					83
Ending Balance	$	69,712		$	40,196	$	479,747		$	141,621		$	9,534		$	-	$	740,810

For the Year ended December 31, 2018
(Dollars in thousands)	Commercial and Industrial			Real Estate Construction			Real Estate - Mortgage ⁽¹⁾			Consumer ⁽²⁾			Other			Unallocated		Total
Allowance for loan losses:
Balance, beginning	$	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

Individually evaluated for impairment	$	11		$	18		$	87		$	-		$	-		$	-	$	116
Collectively evaluated for impairment		2,329			138			5,869			1,354			305			-		9,995
Purchased credit-impaired loans		-			-			-			-			-					-
Ending Balance	$	2,340		$	156		$	5,956		$	1,354		$	305		$	-	$	10,111

Loans Balances:
Individually evaluated for impairment		298			509			15,373			-			-			-		16,180
Collectively evaluated for impairment		63,009			31,874			485,068			169,138			8,649			-		757,738
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.