Loans

Loans, excluding loans held for sale, at December 31, 2016 and 2015 were comprised of the following (dollars in thousands):



	December 31,
	2016		2015
Commercial	$	208,717	$	177,481
Commercial real estate:
Construction and land development	114,258		72,968
Commercial real estate	510,960		430,186
Residential real estate:
Residential	215,104		220,434
Home equity	110,751		98,449
Consumer	5,031		6,007
Total loans	$	1,164,821	$	1,005,525

Net deferred loan (fees) costs included in the above loan categories are $(176,000) for 2016 and $(575,000) for 2015.

Overdraft deposits were reclassified to consumer loans in the amount of $128,000 and $82,000 for 2016 and 2015, respectively.

Acquired Loans

The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheets at December 31, 2016 and 2015, are as follows (dollars in thousands):



	2016		2015
Outstanding principal balance	$	104,172	$	145,380
Carrying amount	96,487		135,254

The outstanding principal balance and related carrying amount of acquired impaired loans, for which the Company applies ASC 310-30 to account for interest earned, as of the indicated dates are as follows (dollars in thousands):



	December 31, 2016		December 31, 2015
Outstanding principal balance	$	34,378	$	40,951
Carrying amount	28,669		33,885

The following table presents changes in the accretable yield on acquired impaired loans, for which the Company applies ASC 310-30, for the year ended December 31, 2016 (dollars in thousands):



	2016			2015			2014
Balance at January 1	$	7,299		$	1,440		$	2,046
Additions from merger with MainStreet	—			7,140			—
Accretion	(3,232		)	(4,313		)	(1,185		)
Reclassification from nonaccretable difference	2,197			238			579
Other changes, net	(161		)	2,794			—
Balance at December 31	$	6,103		$	7,299		$	1,440

Past Due Loans

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2016 (dollars in thousands):



	30- 59 Days Past Due		60-89 Days Past Due		90 Days + Past Due and Still Accruing		Non- Accrual Loans		Total Past Due		Current		Total Loans
Commercial	$	50	$	—	$	—	$	19	$	69	$	208,648	$	208,717
Commercial real estate:
Construction and land development	60		12		—		64		136		114,122		114,258
Commercial real estate	—		127		339		773		1,239		509,721		510,960
Residential:
Residential	1,280		117		248		1,802		3,447		211,657		215,104
Home equity	229		—		—		289		518		110,233		110,751
Consumer	6		5		—		18		29		5,002		5,031
Total	$	1,625	$	261	$	587	$	2,965	$	5,438	$	1,159,383	$	1,164,821

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2015 (dollars in thousands):



	30- 59 Days Past Due		60-89 Days Past Due		90 Days + Past Due and Still Accruing		Non- Accrual Loans		Total Past Due		Current		Total Loans
Commercial	$	137	$	—	$	—	$	90	$	227	$	177,254	$	177,481
Commercial real estate:
Construction and land development	—		—		—		258		258		72,710		72,968
Commercial real estate	135		182		—		2,497		2,814		427,372		430,186
Residential:
Residential	913		398		84		1,647		3,042		217,392		220,434
Home equity	140		12		—		620		772		97,677		98,449
Consumer	53		1		7		2		63		5,944		6,007
Total	$	1,378	$	593	$	91	$	5,114	$	7,176	$	998,349	$	1,005,525

Impaired Loans

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2016 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	24	$	24	$	—	$	12	$	2
Commercial real estate:
Construction and land development	158		157		—		198		16
Commercial real estate	1,916		1,917		—		1,409		107
Residential:
Residential	557		567		—		318		38
Home equity	6		6		—		153		16
Consumer	9		9		—		10		1
	$	2,670	$	2,680	$	—	$	2,100	$	180
With a related allowance recorded:
Commercial*	$	19	$	19	$	—	$	78	$	1
Commercial real estate:
Construction and land development*	64		65		—		272		10
Commercial real estate*	48		48		—		286		7
Residential
Residential	1,639		1,639		22		1,593		32
Home equity	386		385		1		345		4
Consumer*	18		18		—		14		—
	$	2,174	$	2,174	$	23	$	2,588	$	54
Total:
Commercial	$	43	$	43	$	—	$	90	$	3
Commercial real estate:
Construction and land development	222		222		—		470		26
Commercial real estate	1,964		1,965		—		1,695		114
Residential:
Residential	2,196		2,206		22		1,911		70
Home equity	392		391		1		498		20
Consumer	27		27		—		24		1
	$	4,844	$	4,854	$	23	$	4,688	$	234

*Allowance is reported as zero in the table due to presentation in thousands and rounding.

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2015 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	4	$	4	$	—	$	47	$	—
Commercial real estate:
Construction and land development	205		205		—		220		—
Commercial real estate	1,202		1,206		—		1,504		1
Residential:
Residential	127		124		—		126		—
Home equity	173		173		—		305		—
Consumer	13		13		—		14		—
	$	1,724	$	1,725	$	—	$	2,216	$	1
With a related allowance recorded:
Commercial*	$	91	$	91	$	—	$	99	$	—
Commercial real estate:
Construction and land development	448		449		6		563		26
Commercial real estate	390		391		3		353		17
Residential:
Residential*	1,649		1,690		—		1,034		22
Home equity	397		396		25		327		—
Consumer	8		9		1		11		—
	$	2,983	$	3,026	$	35	$	2,387	$	65
Total:
Commercial	$	95	$	95	$	—	$	146	$	—
Commercial real estate:
Construction and land development	653		654		6		783		26
Commercial real estate	1,592		1,597		3		1,857		18
Residential:
Residential	1,776		1,814		—		1,160		22
Home equity	570		569		25		632		—
Consumer	21		22		1		25		—
	$	4,707	$	4,751	$	35	$	4,603	$	66

*Allowance is reported as zero in the table due to presentation in thousands and rounding.

The following table shows the detail of loans modified as TDRs during the year ended December 31, 2016, 2015, and 2014, included in the impaired loan balances (dollars in thousands):



	Loans Modified as a TDR for the Year Ended December 31, 2016
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	2	$	24	$	24
Commercial real estate	2	1,005		1,003
Equity	—	—		—
Residential real estate	4	322		312
Consumer	—	—		—
Total	8	$	1,351	$	1,339



	Loans Modified as a TDR for the Year Ended December 31, 2015
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	—	$	—	$	—
Commercial real estate	3	394		394
Equity	1	107		105
Residential real estate	4	596		583
Consumer	—	—		—
Total	8	$	1,097	$	1,082



	Loans Modified as a TDR for the Year Ended December 31, 2014
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	—	$	—	$	—
Commercial real estate	2	743		737
Equity	1	8		8
Residential real estate	2	121		124
Consumer	—	—		—
Total	5	$	872	$	869

During the years ended December 31, 2016, 2015, and 2014, the Company had no loans that subsequently defaulted within twelve months of modification. The Company defines default as one or more payments that occur more than 90 days past the due date, charge-off or foreclosure subsequent to modification.

The following table summarizes the primary reason certain loan modifications were classified as TDRs and includes newly designated TDRs as well as modifications made to existing TDRs. Balances represent the recorded investment at the end of the year in which the modification was made. Rate modifications include TDRs made with below market interest rates that also include modifications of loan structures (dollars in thousands):



	Year Ended December 31,
	2016						2015						2014
	Type of Modification				ALLL		Type of Modification				ALLL		Type of Modification				ALLL
	Rate		Structure		Impact		Rate		Structure		Impact		Rate		Structure		Impact
Commercial	$	—	$	24	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	—		1,003		—		—		394		—		—		737		—
Equity	—		—		—		105		—		1		—		8		—
Residential real estate	—		312		1		—		583		19		—		124		1
Consumer	—		—		—		—		—		—		—		—		—
Total	$	—	$	1,339	$	1	$	105	$	977	$	20	$	—	$	869	$	1

The Company had $325,000 in residential real estate loans in the process of foreclosure at December 31, 2016 and $653,000 and $643,000 in residential OREO at December 31, 2016 and December 31, 2015, respectively.

Risk Ratings

The following table shows the Company's loan portfolio broken down by internal risk grading as of December 31, 2016 (dollars in thousands):

Commercial and Consumer Credit Exposure

Credit Risk Profile by Internally Assigned Grade



	Commercial		Construction and Land Development		Commercial Real Estate		Residential Real Estate		Home Equity
Pass	$	208,098	$	112,729	$	501,081	$	199,278	$	108,799
Special Mention	592		902		4,859		10,600		1,257
Substandard	27		627		5,020		5,226		695
Doubtful	—		—		—		—		—
Total	$	208,717	$	114,258	$	510,960	$	215,104	$	110,751

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer
Performing	$	5,003
Nonperforming	28
Total	$	5,031

Loans classified in the Pass category typically are fundamentally sound and risk factors are reasonable and acceptable.

Loans classified in the Special Mention category typically have been criticized internally, by loan review or the loan officer, or by external regulators under the current credit policy regarding risk grades.

Loans classified in the Substandard category typically have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are typically characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Loans classified in the Doubtful category typically have all the weaknesses inherent in loans classified as substandard, plus the added characteristic the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur that may salvage the debt.

Consumer loans are classified as performing or nonperforming. A loan is nonperforming when payments of interest and principal are past due 90 days or more, or payments are less than 90 days past due, but there are other good reasons to doubt that payment will be made in full.

The following table shows the Company's loan portfolio broken down by internal risk grading as of December 31, 2015 (dollars in thousands):

Commercial and Consumer Credit Exposure

Credit Risk Profile by Internally Assigned Grade



	Commercial		Construction and Land Development		Commercial Real Estate		Residential Real Estate		Home Equity
Pass	$	175,963	$	68,853	$	418,719	$	200,008	$	96,142
Special Mention	1,364		1,210		5,860		14,638		1,314
Substandard	154		2,905		5,607		5,788		993
Doubtful	—		—		—		—		—
Total	$	177,481	$	72,968	$	430,186	$	220,434	$	98,449

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer
Performing	$	5,999
Nonperforming	8
Total	$	6,007