Loans (Tables)

6 Months Ended

Jun. 30, 2016

Schedule of Accounts, Notes, Loans and Financing Receivable

Loans consist of the following:


(dollars in thousands)	June 30, 2016	%	December 31, 2015	%

Commercial real estate	$ 608,380	60.53%	$ 538,888	58.64%
Residential first mortgages	148,138	14.74%	131,401	14.30%
Residential rentals	100,202	9.97%	93,157	10.14%
Construction and land development	35,560	3.54%	36,189	3.94%
Home equity and second mortgages	22,104	2.20%	21,716	2.36%
Commercial loans	57,167	5.69%	67,246	7.32%
Consumer loans	332	0.03%	366	0.04%
Commercial equipment	33,185	3.30%	29,931	3.26%
	1,005,068	100.00%	918,894	100.00%
Less:
Deferred loan fees and premiums	447	0.04%	1,154	0.13%
Allowance for loan losses	9,106	0.91%	8,540	0.93%
	9,553		9,694
	$ 995,515		$ 909,200

Schedule of Financing Receivables, Non-Accrual Status

Non-accrual loans as of June 30, 2016 and December 31, 2015 were as follows:


	June 30, 2016
(dollars in thousands)	90 or Greater Days Delinquent	Number of Loans	Non-accrual Only Loans	Number of Loans	Total Non-accrual Loans	Total Number of Loans

Commercial real estate	$ 2,416	7	$ -	-	$ 2,416	7
Residential first mortgages	1,070	6	-	-	1,070	6
Residential rentals	689	5	-	-	689	5
Construction and land development	3,641	3	-	-	3,641	3
Home equity and second mortgages	-	-	-	-	-	-
Commercial loans	1,030	4	684	2	1,714	6
Commercial equipment	694	6	-	-	694	6
	$ 9,540	31	$ 684	2	$ 10,224	33


	December 31, 2015
(dollars in thousands)	90 or Greater Days Delinquent	Number of Loans	Non-accrual Only Loans	Number of Loans	Total Non-accrual Loans	Total Number of Loans

Commercial real estate	$ 2,875	7	$ -	-	$ 2,875	7
Residential first mortgages	1,948	7	-	-	1,948	7
Residential rentals	605	4	-	-	605	4
Construction and land development	3,555	3	-	-	3,555	3
Home equity and second mortgages	48	3	-	-	48	3
Commercial loans	1,361	8	693	2	2,054	10
Commercial equipment	348	4	-	-	348	4
	$ 10,740	36	$ 693	2	$ 11,433	38

Past Due Financing Receivables

Past due loans as of June 30, 2016 and December 31, 2015 were as follows:


	June 30, 2016
(dollars in thousands)	Current	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	Total Loan Receivables	Loans > 90 Days and Accruing
Commercial real estate	$ 605,520	$ -	$ 444	$ 2,416	$ 2,860	$ 608,380	$ -
Residential first mortgages	146,880	-	188	1,070	1,258	148,138	-
Residential rentals	99,513	-	-	689	689	100,202
Construction and land dev.	31,919	-	-	3,641	3,641	35,560	-
Home equity and second mtg.	21,990	69	45	-	114	22,104	-
Commercial loans	56,096	41	-	1,030	1,071	57,167	-
Consumer loans	332	-	-	-	-	332	-
Commercial equipment	32,457	-	34	694	728	33,185	-
Total	$ 994,707	$ 110	$ 711	$ 9,540	$ 10,361	$ 1,005,068	$ -


	December 31, 2015
(dollars in thousands)	Current	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	Total Loan Receivables	Loans > 90 Days and Accruing
Commercial real estate	$ 536,013	$ -	$ -	$ 2,875	$ 2,875	$ 538,888	$ -
Residential first mortgages	129,154	-	299	1,948	2,247	131,401	-
Residential rentals	92,552	-	-	605	605	93,157
Construction and land dev.	32,634	-	-	3,555	3,555	36,189	-
Home equity and second mtg.	21,603	65	-	48	113	21,716	-
Commercial loans	65,747	-	138	1,361	1,499	67,246	-
Consumer loans	365	-	1	-	1	366	-
Commercial equipment	29,138	152	293	348	793	29,931	-
Total	$ 907,206	$ 217	$ 731	$ 10,740	$ 11,688	$ 918,894	$ -

Impaired Financing Receivables

Impaired Loans and Troubled Debt Restructures (“TDRs”)

Impaired loans, including TDRs, at June 30, 2016 and 2015 and at December 31, 2015 were as follows:


	June 30, 2016
(dollars in thousands)	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Quarter Average Recorded Investment	Quarter Interest Income Recognized	YTD Average Recorded Investment	YTD Interest Income Recognized

Commercial real estate	$ 22,444	$ 20,010	$ 2,404	$ 22,414	$ 582	$ 22,503	$ 243	$ 22,724	$ 420
Residential first mortgages	2,957	2,472	485	2,957	20	2,982	23	2,990	51
Residential rentals	3,987	3,352	239	3,591	53	3,747	42	3,798	67
Construction and land dev.	4,443	3,939	431	4,370	398	4,317	4	4,264	7
Home equity and second mtg.	109	109	-	109	-	109	1	108	2
Commercial loans	4,551	4,222	5	4,227	5	4,237	36	4,238	69
Commercial equipment	839	623	193	816	165	828	5	840	11
Total	$ 39,330	$ 34,727	$ 3,757	$ 38,484	$ 1,223	$ 38,723	$ 354	$ 38,962	$ 627


	December 31, 2015
(dollars in thousands)	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Average Recorded Investment	Interest Income Recognized

Commercial real estate	$ 21,477	$ 19,081	$ 2,367	$ 21,448	$ 601	$ 21,786	$ 774
Residential first mortgages	4,226	3,730	495	4,225	27	4,276	141
Residential rentals	4,473	3,893	181	4,074	40	4,400	170
Construction and land dev.	4,283	3,780	504	4,284	471	4,302	13
Home equity and second mtg.	154	154	-	154	-	163	8
Commercial loans	4,775	4,195	380	4,575	330	4,524	251
Commercial equipment	518	338	139	477	139	491	9
Total	$ 39,906	$ 35,171	$ 4,066	$ 39,237	$ 1,608	$ 39,942	$ 1,366


	June 30, 2015
(dollars in thousands)	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Quarter Average Recorded Investment	Quarter Interest Income Recognized	YTD Average Recorded Investment	YTD Interest Income Recognized

Commercial real estate	$ 20,648	$ 18,519	$ 2,099	$ 20,618	$ 133	$ 20,719	$ 170	$ 20,765	$ 359
Residential first mortgages	3,465	2,960	505	3,465	75	3,473	25	3,480	56
Residential rentals	7,893	7,436	457	7,893	17	7,904	71	7,926	147
Construction and land dev.	4,329	4,329	-	4,329	-	4,382	4	4,285	7
Home equity and second mtg.	488	429	-	429	-	434	2	437	6
Commercial loans	5,184	4,499	581	5,080	227	5,041	44	5,034	96
Commercial equipment	1,462	292	1,097	1,389	1,021	1,401	12	1,407	26
Total	$ 43,469	$ 38,464	$ 4,739	$ 43,203	$ 1,473	$ 43,354	$ 328	$ 43,334	$ 697

Troubled Debt Restructurings on Financing Receivables

TDRs, included in the impaired loan schedules above, as of June 30, 2016 and December 31, 2015 were as follows:


	June 30, 2016		December 31, 2015
(dollars in thousands)	Dollars	Number of Loans	Dollars	Number of Loans

Commercial real estate	$ 9,715	8	$ 9,839	8
Residential first mortgages	556	2	881	3
Residential rentals	230	1	2,058	5
Construction and land development	4,370	4	4,283	4
Commercial loans	1,141	7	1,384	8
Commercial equipment	118	2	123	2
Total TDRs	$ 16,130	24	$ 18,568	30
Less: TDRs included in non-accrual loans	(5,252)	(5)	(5,435)	(7)
Total accrual TDR loans	$ 10,878	19	$ 13,133	23

Allowance for Credit Losses on Financing Receivables

The following tables detail activity in the allowance for loan losses at and for the three and six months ended June 30, 2016 and 2015, respectively. An allocation of the allowance to one category of loans does not prevent the Company from using that allowance to absorb losses in a different category.


	June 30, 2016
(dollars in thousands)	Beginning Balance	Charge-offs	Recoveries	Provisions	Ending Balance
Three Months Ended
Commercial real estate	$ 3,838	$ -	$ 3	$ 539	$ 4,380
Residential first mortgages	591	-	-	344	935
Residential rentals	590	-	-	23	613
Construction and land development	1,129	-	-	(85)	1,044
Home equity and second mortgages	134	-	-	7	141
Commercial loans	1,046	(69)	8	(276)	709
Consumer loans	1	-	-	1	2
Commercial equipment	1,262	-	9	11	1,282
	$ 8,591	$ (69)	$ 20	$ 564	$ 9,106

Six Months Ended
Commercial real estate	$ 3,465	$ -	$ 5	$ 910	$ 4,380
Residential first mortgages	584	-	-	351	935
Residential rentals	538	-	-	75	613
Construction and land development	1,103	(73)	1	13	1,044
Home equity and second mortgages	142	-	5	(6)	141
Commercial loans	1,477	(394)	11	(385)	709
Consumer loans	2	(1)	-	1	2
Commercial equipment	1,229	-	21	32	1,282
	$ 8,540	$ (468)	$ 43	$ 991	$ 9,106


	June 30, 2015
(dollars in thousands)	Beginning Balance	Charge-offs	Recoveries	Provisions	Ending Balance
Three Months Ended
Commercial real estate	$ 3,770	$ -	$ 4	$ (440)	$ 3,334
Residential first mortgages	870	(30)	-	9	849
Residential rentals	612	-	-	(51)	561
Construction and land development	1,099	-	32	74	1,205
Home equity and second mortgages	208	-	-	(2)	206
Commercial loans	1,740	(215)	6	(165)	1,366
Consumer loans	2	-	-	-	2
Commercial equipment	320	(54)	1	967	1,234
	$ 8,621	$ (299)	$ 43	$ 392	$ 8,757

Six Months Ended
Commercial real estate	$ 3,528	$ (46)	$ 7	$ (155)	$ 3,334
Residential first mortgages	1,047	(30)	1	(169)	849
Residential rentals	593	-	-	(32)	561
Construction and land development	1,071	-	32	102	1,205
Home equity and second mortgages	173	-	-	33	206
Commercial loans	1,677	(215)	7	(103)	1,366
Consumer loans	3	-	-	(1)	2
Commercial equipment	389	(54)	4	895	1,234
	$ 8,481	$ (345)	$ 51	$ 570	$ 8,757

The following tables detail loan receivable and allowance balances disaggregated on the basis of the Company’s impairment methodology at June 30, 2016 and 2015 and December 31, 2015.


	June 30, 2016			December 31, 2015			June 30, 2015
(dollars in thousands)	Ending balance: individually evaluated for impairment	Ending balance: collectively evaluated for impairment	Total	Ending balance: individually evaluated for impairment	Ending balance: collectively evaluated for impairment	Total	Ending balance: individually evaluated for impairment	Ending balance: collectively evaluated for impairment	Total
Loan Receivables:
Commercial real estate	$ 22,414	$ 585,966	$ 608,380	$ 21,448	$ 517,440	$ 538,888	$ 20,618	$ 502,207	$ 522,825
Residential first mortgages	2,957	145,181	148,138	4,225	127,176	131,401	3,465	133,974	137,439
Residential rentals	3,591	96,611	100,202	4,074	89,083	93,157	7,893	76,775	84,668
Construction and land development	4,370	31,190	35,560	4,284	31,905	36,189	4,329	34,830	39,159
Home equity and second mortgages	109	21,995	22,104	154	21,562	21,716	429	20,639	21,068
Commercial loans	4,227	52,940	57,167	4,575	62,671	67,246	5,080	58,400	63,480
Consumer loans	-	332	332	-	366	366	-	396	396
Commercial equipment	816	32,369	33,185	477	29,454	29,931	1,389	25,415	26,804
	$ 38,484	$ 966,584	$ 1,005,068	$ 39,237	$ 879,657	$ 918,894	$ 43,203	$ 852,636	$ 895,839

Allowance for loan losses:
Commercial real estate	$ 582	$ 3,798	$ 4,380	$ 601	$ 2,864	$ 3,465	$ 133	$ 3,201	$ 3,334
Residential first mortgages	20	915	935	27	557	584	75	774	849
Residential rentals	53	560	613	40	498	538	17	544	561
Construction and land development	398	646	1,044	471	632	1,103	-	1,205	1,205
Home equity and second mortgages	-	141	141	-	142	142	-	206	206
Commercial loans	5	704	709	330	1,147	1,477	227	1,139	1,366
Consumer loans	-	2	2	-	2	2	-	2	2
Commercial equipment	165	1,117	1,282	139	1,090	1,229	1,021	213	1,234
	$ 1,223	$ 7,883	$ 9,106	$ 1,608	$ 6,932	$ 8,540	$ 1,473	$ 7,284	$ 8,757

Schedule of Financing Receivable Recorded Investment Credit Quality Indicator

Credit quality indicators as of June 30, 2016 and December 31, 2015 were as follows:


Credit Risk Profile by Internally Assigned Grade

	Commercial Real Estate		Construction and Land Dev.		Residential Rentals
(dollars in thousands)	6/30/2016	12/31/2015	6/30/2016	12/31/2015	6/30/2016	12/31/2015

Unrated	$ 50,104	$ 51,924	$ 2,961	$ 4,399	$ 23,209	$ 21,585
Pass	537,078	466,601	28,229	27,507	75,520	67,926
Special mention	-	250	-	-	-	845
Substandard	21,198	20,113	4,005	3,845	1,473	2,801
Doubtful	-	-	365	438	-	-
Loss	-	-	-	-	-	-
Total	$ 608,380	$ 538,888	$ 35,560	$ 36,189	$ 100,202	$ 93,157

	Commercial Loans		Commercial Equipment
(dollars in thousands)	6/30/2016	12/31/2015	6/30/2016	12/31/2015

Unrated	$ 11,373	$ 11,281	$ 10,137	$ 10,074
Pass	41,789	51,569	22,752	19,610
Special mention	-	-	-	-
Substandard	4,005	4,110	159	110
Doubtful	-	286	137	137
Loss	-	-	-	-
Total	$ 57,167	$ 67,246	$ 33,185	$ 29,931


Credit Risk Profile Based on Payment Activity

	Residential First Mortgages		Home Equity and Second Mtg.		Consumer Loans
(dollars in thousands)	6/30/2016	12/31/2015	6/30/2016	12/31/2015	6/30/2016	12/31/2015

Performing	$ 147,068	$ 129,453	$ 22,104	$ 21,668	$ 332	$ 366
Nonperforming	1,070	1,948	-	48	-	-
Total	$ 148,138	$ 131,401	$ 22,104	$ 21,716	$ 332	$ 366

Summary of Total Classified Loans

(dollars in thousands)		6/30/2016	12/31/2015
By Internally Assigned Grade		$ 31,342	$ 31,840
By Payment Activity		594	964
Total Classified		$ 31,936	$ 32,804

Management uses a risk scale to assign grades to commercial real estate, residential rentals, construction and land development, commercial loans and commercial equipment loans. Commercial loan relationships with an aggregate exposure to the Bank of $750,000 or greater are risk rated. Residential first mortgages, home equity and second mortgages and consumer loans are monitored on an ongoing basis based on borrower payment history. Consumer loans and residential real estate loans are classified as unrated unless they are part of a larger commercial relationship that requires grading or are troubled debt restructures or nonperforming loans with an Other Assets Especially Mentioned or higher risk rating due to a delinquent payment history