Loans

Loans, excluding loans held for sale, at December 31, 2018 and 2017 were comprised of the following (dollars in thousands):



	December 31,
	2018		2017
Commercial	$	285,972	$	251,666
Commercial real estate:
Construction and land development	97,240		123,147
Commercial real estate	655,800		637,701
Residential real estate:
Residential	209,438		209,326
Home equity	103,933		109,857
Consumer	5,093		4,428
Total loans	$	1,357,476	$	1,336,125

Net deferred loan (fees) costs included in the above loan categories are $720,000 for 2018 and $463,000 for 2017.

Overdraft deposits were reclassified to consumer loans in the amount of $127,000 and $114,000 for 2018 and 2017, respectively.

Acquired Loans

The outstanding principal balance and the carrying amount of these loans, including ASC 310-30 loans, included in the consolidated balance sheets at December 31, 2018 and 2017 are as follows (dollars in thousands):



	2018		2017
Outstanding principal balance	$	63,619	$	79,523
Carrying amount	58,886		73,796

The outstanding principal balance and related carrying amount of purchased credit impaired loans, for which the Company applies ASC 310-30 to account for interest earned, at December 31, 2018 and 2017 are as follows (dollars in thousands):



	2018		2017
Outstanding principal balance	$	24,500	$	27,876
Carrying amount	20,611		23,430

The following table presents changes in the accretable yield on purchased credit impaired loans, for which the Company applies ASC 310-30, for the years ended December 31, 2018, 2017, and 2016 (dollars in thousands):



	2018			2017			2016
Balance at January 1	$	4,890		$	6,103		$	7,299
Accretion	(2,362		)	(3,117		)	(3,232		)
Reclassification from nonaccretable difference	956			1,006			2,197
Other changes, net	1,149			898			(161		)
Balance at December 31	$	4,633		$	4,890		$	6,103

Past Due Loans

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2018 (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	$	20	$	—	$	—	$	83	$	103	$	285,869	$	285,972
Commercial real estate:
Construction and land development	—		—		—		27		27		97,213		97,240
Commercial real estate	42		—		—		197		239		655,561		655,800
Residential:
Residential	456		157		72		659		1,344		208,094		209,438
Home equity	126		—		—		124		250		103,683		103,933
Consumer	21		3		—		—		24		5,069		5,093
Total	$	665	$	160	$	72	$	1,090	$	1,987	$	1,355,489	$	1,357,476

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2017 (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	$	92	$	—	$	—	$	90	$	182	$	251,484	$	251,666
Commercial real estate:
Construction and land development	—		—		—		36		36		123,111		123,147
Commercial real estate	86		—		280		489		855		636,846		637,701
Residential:
Residential	282		71		79		1,343		1,775		207,551		209,326
Home equity	141		16		—		243		400		109,457		109,857
Consumer	21		5		—		—		26		4,402		4,428
Total	$	622	$	92	$	359	$	2,201	$	3,274	$	1,332,851	$	1,336,125

Impaired Loans

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2018 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	28	$	28	$	—	$	44	$	14
Commercial real estate:
Construction and land development	—		—		—		—		—
Commercial real estate	376		373		—		542		36
Residential:
Residential	646		646		—		875		29
Home equity	49		49		—		108		10
Consumer	—		—		—		2		—
	$	1,099	$	1,096	$	—	$	1,571	$	89
With a related allowance recorded:
Commercial	$	62	$	58	$	55	$	354	$	40
Commercial real estate:
Construction and land development*	—		—		—		21		—
Commercial real estate*	—		—		—		18		—
Residential
Residential	173		173		9		342		9
Home equity*	—		—		—		128		1
Consumer*	—		—		—		—		—
	$	235	$	231	$	64	$	863	$	50
Total:
Commercial	$	90	$	86	$	55	$	398	$	54
Commercial real estate:
Construction and land development	—		—		—		21		—
Commercial real estate	376		373		—		560		36
Residential:
Residential	819		819		9		1,217		38
Home equity	49		49		—		236		11
Consumer	—		—		—		2		—
	$	1,334	$	1,327	$	64	$	2,434	$	139

______________________

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

In the table above, recorded investment may exceed unpaid principal balance due to acquired loans with a premium and loans with unearned costs that exceed unearned fees.

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2017 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	4	$	4	$	—	$	19	$	1
Commercial real estate:
Construction and land development	—		—		—		56		4
Commercial real estate	791		789		—		1,069		66
Residential:
Residential	717		719		—		575		41
Home equity	142		142		—		109		10
Consumer	5		5		—		6		1
	$	1,659	$	1,659	$	—	$	1,834	$	123
With a related allowance recorded:
Commercial	$	202	$	201	$	154	$	150	$	16
Commercial real estate:
Construction and land development*	37		37		—		56		—
Commercial real estate*	34		32		—		126		11
Residential:
Residential	1,022		1,022		12		1,174		27
Home equity	263		261		1		251		1
Consumer*	—		—		—		5		—
	$	1,558	$	1,553	$	167	$	1,762	$	55
Total:
Commercial	$	206	$	205	$	154	$	169	$	17
Commercial real estate:
Construction and land development	37		37		—		112		4
Commercial real estate	825		821		—		1,195		77
Residential:
Residential	1,739		1,741		12		1,749		68
Home equity	405		403		1		360		11
Consumer	5		5		—		11		1
	$	3,217	$	3,212	$	167	$	3,596	$	178

______________________

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

In the table above, recorded investment may exceed unpaid principal balance due to acquired loans with a premium and loans with unearned costs that exceed unearned fees.

The following table shows the detail of loans modified as TDRs during the year ended December 31, 2018, 2017, and 2016, included in the impaired loan balances (dollars in thousands):



	Loans Modified as TDRs for the Year Ended December 31, 2018
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	—	$	—	$	—
Commercial real estate	—	—		—
Home equity	—	—		—
Residential real estate	1	11		11
Consumer	—	—		—
Total	1	$	11	$	11



	Loans Modified as TDRs for the Year Ended December 31, 2017
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	5	$	212	$	212
Commercial real estate	—	—		—
Home equity	2	57		57
Residential real estate	1	36		36
Consumer	—	—		—
Total	8	$	305	$	305



	Loans Modified as TDRs 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
Home equity	—	—		—
Residential real estate	4	322		312
Consumer	—	—		—
Total	8	$	1,351	$	1,339

During the years ended December 31, 2018 and 2016, the Company had no loans that subsequently defaulted within twelve months of modification. During the year ended December 31, 2017, there were three commercial loans with a total recorded investment of $109,000 and one residential real estate loan with a recorded investment of $143,000 that 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. Any charge-offs resulting in default were adjusted through the allowance for loan losses.

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. Rate modifications include TDRs made with below market interest rates that also include modifications of loan structures (dollars in thousands):



	Year Ended December 31,
	2018						2017						2016
	Type of Modification				ALLL		Type of Modification				ALLL		Type of Modification				ALLL
	Rate		Structure		Impact		Rate		Structure		Impact		Rate		Structure		Impact
Commercial	$	—	$	—	$	—	$	—	$	212	$	137	$	—	$	24	$	—
Commercial real estate	—		—		—		—		—		—		—		1,003		—
Home equity	—		—		—		—		57		1		—		—		—
Residential real estate	—		11		—		—		36		—		—		312		1
Consumer	—		—		—		—		—		—		—		—		—
Total	$	—	$	11	$	—	$	—	$	305	$	138	$	—	$	1,339	$	1

The Company had $112,000 in residential real estate loans in the process of foreclosure at December 31, 2018 and $719,000 and $629,000 in residential OREO at December 31, 2018 and December 31, 2017, respectively.

Risk Ratings

The following table shows the Company's loan portfolio broken down by internal risk grading as of December 31, 2018 (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	$	285,092	$	93,000	$	647,519	$	204,261	$	103,541
Special Mention	154		1,840		4,403		1,685		—
Substandard	726		2,400		3,878		3,492		392
Doubtful	—		—		—		—		—
Total	$	285,972	$	97,240	$	655,800	$	209,438	$	103,933

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer
Performing	$	5,093
Nonperforming	—
Total	$	5,093

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, 2017 (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	$	248,714	$	114,502	$	625,861	$	200,405	$	107,705
Special Mention	1,763		7,114		6,914		4,438		1,325
Substandard	1,189		1,531		4,926		4,483		827
Doubtful	—		—		—		—		—
Total	$	251,666	$	123,147	$	637,701	$	209,326	$	109,857

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer
Performing	$	4,415
Nonperforming	13
Total	$	4,428