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Loans (Tables)

12 Months Ended

Dec. 31, 2016

Loans consist of the following:


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

Commercial real estate	$ 667,105	61.25%	$ 538,888	58.64%
Residential first mortgages	171,004	15.70%	131,401	14.30%
Residential rentals	101,897	9.36%	93,157	10.14%
Construction and land development	36,934	3.39%	36,189	3.94%
Home equity and second mortgages	21,399	1.97%	21,716	2.36%
Commercial loans	50,484	4.64%	67,246	7.32%
Consumer loans	422	0.04%	366	0.04%
Commercial equipment	39,737	3.65%	29,931	3.26%
	1,088,982	100.00%	918,894	100.00%
Less:
Deferred loan fees and premiums	(397)	-0.04%	1,154	0.13%
Allowance for loan losses	9,860	0.91%	8,540	0.93%
	9,463		9,694
	$ 1,079,519		$ 909,200

Non-accrual loans

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


	December 31, 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	$ 2,371	7	$ -	-	$ 2,371	7
Residential first mortgages	623	4	-	-	623	4
Residential rentals	577	4	-	-	577	4
Construction and land development	3,048	2	-	-	3,048	2
Home equity and second mortgages	61	2	-	-	61	2
Commercial loans	375	3	669	2	1,044	5
Commercial equipment	650	5	-	-	650	5
	$ 7,705	27	$ 669	2	$ 8,374	29


	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

An analysis of past due loans as of December 31, 2016 and 2015 was as follows:


	December 31, 2016
(dollars in thousands)	Current	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	Total Loan Receivables
Commercial real estate	$ 664,250	$ -	$ 484	$ 2,371	$ 2,855	$ 667,105
Residential first mortgages	170,381	-	-	623	623	171,004
Residential rentals	101,309	-	11	577	588	101,897
Construction and land dev.	33,886	-	-	3,048	3,048	36,934
Home equity and second mtg.	21,175	130	33	61	224	21,399
Commercial loans	49,778	331	-	375	706	50,484
Consumer loans	420	-	2	-	2	422
Commercial equipment	39,044	42	1	650	693	39,737
Total	$ 1,080,243	$ 503	$ 531	$ 7,705	$ 8,739	$ 1,088,982


	December 31, 2015
(dollars in thousands)	Current	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	Total Loan Receivables
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

There were no loans greater than 90 days still accruing interest at December 31, 2016 and 2015, respectively.

Impaired Loans, Including TDRs

Impaired Loans and Troubled Debt Restructures (“TDRs”)

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


	December 31, 2016
(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	$ 22,195	$ 14,896	$ 7,081	$ 21,977	$ 806	$ 22,303	$ 908
Residential first mortgages	2,436	1,938	475	2,413	7	2,445	90
Residential rentals	3,440	2,850	178	3,028	36	3,486	134
Construction and land dev.	4,304	2,926	851	3,777	178	3,867	16
Home equity and second mtg.	170	170	-	170	-	176	7
Commercial loans	3,285	3,004	200	3,204	123	3,442	137
Commercial equipment	855	652	139	791	139	815	17
Total	$ 36,685	$ 26,436	$ 8,924	$ 35,360	$ 1,289	$ 36,534	$ 1,309


	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

TDRs, Included in Impaired Loans Schedule

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


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

Commercial real estate	$ 9,587	8	$ 9,839	8
Residential first mortgages	545	2	881	3
Residential rentals	227	1	2,058	5
Construction and land development	3,777	4	4,283	4
Commercial loans	872	5	1,384	8
Commercial equipment	113	2	123	2
Total TDRs	$ 15,121	22	$ 18,568	30
Less: TDRs included in non-accrual loans	(4,673)	(6)	(5,435)	(7)
Total accrual TDR loans	$ 10,448	16	$ 13,133	23

Allowance for Credit Losses on Financing Receivables

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses at and for the years ended December 31, 2016, 2015 and 2014, 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.


Year Ended	December 31, 2016
(dollars in thousands)	Beginning Balance	Charge-offs	Recoveries	Provisions	Ending Balance
Commercial real estate	$ 3,465	$ -	$ 58	$ 1,689	$ 5,212
Residential first mortgages	584	-	-	822	1,406
Residential rentals	538	(14)	-	(162)	362
Construction and land development	1,103	(526)	1	363	941
Home equity and second mortgages	142	-	5	(9)	138
Commercial loans	1,477	(594)	18	(107)	794
Consumer loans	2	(1)	-	2	3
Commercial equipment	1,229	(34)	48	(239)	1,004
	$ 8,540	$ (1,169)	$ 130	$ 2,359	$ 9,860

Year Ended	December 31, 2015
(dollars in thousands)	Beginning Balance	Charge-offs	Recoveries	Provisions	Ending Balance
Commercial real estate	$ 3,528	$ (78)	$ 17	$ (2)	$ 3,465
Residential first mortgages	1,047	(30)	1	(434)	584
Residential rentals	593	-	-	(55)	538
Construction and land development	1,071	-	32	-	1,103
Home equity and second mortgages	173	(100)	-	69	142
Commercial loans	1,677	(432)	11	221	1,477
Consumer loans	3	-	-	(1)	2
Commercial equipment	389	(818)	23	1,635	1,229
	$ 8,481	$ (1,458)	$ 84	$ 1,433	$ 8,540

Year Ended	December 31, 2014
(dollars in thousands)	Beginning Balance	Charge-offs	Recoveries	Provisions	Ending Balance
Commercial real estate	$ 3,051	$ (195)	$ 11	$ 661	$ 3,528
Residential first mortgages	1,343	(94)	186	(388)	1,047
Residential rentals	532	(155)	-	216	593
Construction and land development	584	(992)	84	1,395	1,071
Home equity and second mortgages	249	(59)	10	(27)	173
Commercial loans	1,916	(1,134)	5	890	1,677
Consumer loans	10	(3)	11	(15)	3
Commercial equipment	453	(10)	25	(79)	389
	$ 8,138	$ (2,642)	$ 332	$ 2,653	$ 8,481

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


	December 31, 2016			December 31, 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
Loan Receivables:
Commercial real estate	$ 21,977	$ 645,128	$ 667,105	$ 21,448	$ 517,440	$ 538,888
Residential first mortgages	2,413	168,591	171,004	4,225	127,176	131,401
Residential rentals	3,028	98,869	101,897	4,074	89,083	93,157
Construction and land development	3,777	33,157	36,934	4,284	31,905	36,189
Home equity and second mortgages	170	21,229	21,399	154	21,562	21,716
Commercial loans	3,204	47,280	50,484	4,575	62,671	67,246
Consumer loans	-	422	422	-	366	366
Commercial equipment	791	38,946	39,737	477	29,454	29,931
	$ 35,360	$ 1,053,622	$ 1,088,982	$ 39,237	$ 879,657	$ 918,894

Allowance for loan losses:
Commercial real estate	$ 806	$ 4,406	$ 5,212	$ 601	$ 2,864	$ 3,465
Residential first mortgages	7	1,399	1,406	27	557	584
Residential rentals	36	326	362	40	498	538
Construction and land development	178	763	941	471	632	1,103
Home equity and second mortgages	-	138	138	-	142	142
Commercial loans	123	671	794	330	1,147	1,477
Consumer loans	-	3	3	-	2	2
Commercial equipment	139	865	1,004	139	1,090	1,229
	$ 1,289	$ 8,571	$ 9,860	$ 1,608	$ 6,932	$ 8,540

Credit Quality Indicators

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


Credit Risk Profile by Internally Assigned Grade

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

Unrated	$ 51,503	$ 51,924	$ 1,632	$ 4,399	$ 25,563	$ 21,585
Pass	594,768	466,601	31,525	27,507	74,989	67,926
Special mention	-	250	-	-	-	845
Substandard	20,834	20,113	3,777	3,845	1,345	2,801
Doubtful	-	-	-	438	-	-
Loss	-	-	-	-	-	-
Total	$ 667,105	$ 538,888	$ 36,934	$ 36,189	$ 101,897	$ 93,157

	Commercial Loans		Commercial Equipment		Total Commercial Porttfolios
(dollars in thousands)	12/31/2016	12/31/2015	12/31/2016	12/31/2015	12/31/2016	12/31/2015

Unrated	$ 11,266	$ 11,281	$ 11,769	$ 10,074	$ 101,733	$ 99,263
Pass	36,221	51,569	27,290	19,610	764,793	633,213
Special mention	-	-	-	-	-	1,095
Substandard	2,997	4,110	541	110	29,494	30,979
Doubtful	-	286	137	137	137	861
Loss	-	-	-	-	-	-
Total	$ 50,484	$ 67,246	$ 39,737	$ 29,931	$ 896,157	$ 765,411

Credit Risk Profile Based on Payment Activity

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

Performing	$ 170,381	$ 129,453	$ 21,338	$ 21,668	$ 422	$ 366
Nonperforming	623	1,948	61	48	-	-
Total	$ 171,004	$ 131,401	$ 21,399	$ 21,716	$ 422	$ 366

Schedule of Loans Contractual Terms to Maturity

The following table sets forth certain information at December 31, 2016 and 2015 regarding the dollar amount of loans maturing in the Bank’s portfolio based on their contractual terms to maturity. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less.


December 31, 2016	Due within one	Due after one year	Due more than
(dollars in thousands)	year after	through five years from	five years from
Description of Asset	December 31, 2016	December 31, 2016	December 31, 2016
Real Estate Loans
Commercial	$ 86,782	$ 128,431	$ 451,892
Residential first mortgage	8,501	34,592	127,911
Residential rentals	3,847	17,911	80,139
Construction and land development	23,674	10,212	3,048
Home equity and second mortgage	296	877	20,226
Commercial loans	50,484	-	-
Consumer loans	163	164	95
Commercial equipment	10,049	18,812	10,876
Total loans	$ 183,796	$ 210,999	$ 694,187


December 31, 2015	Due within one	Due after one year	Due more than
(dollars in thousands)	year after	through five years from	five years from
Description of Asset	December 31, 2015	December 31, 2015	December 31, 2015
Real Estate Loans
Commercial	$ 50,413	$ 109,037	$ 379,438
Residential first mortgage	6,989	28,245	96,167
Residential rentals	3,517	16,375	73,265
Construction and land development	27,609	5,025	3,555
Home equity and second mortgage	330	1,134	20,252
Commercial loans	67,246	-	-
Consumer loans	200	150	16
Commercial equipment	7,899	17,635	4,397
Total loans	$ 164,203	$ 177,601	$ 577,090

Schedule of Loans Due After One Year

The following table sets forth the dollar amount of all loans due after one year from December 31, 2016 and 2015, which have predetermined interest rates and have floating or adjustable interest rates.


December 31, 2016
(dollars in thousands)		Floating or
Description of Asset	Fixed Rates	Adjustable Rates	Total
Real Estate Loans
Commercial	$ 124,549	$ 455,774	$ 580,323
Residential first mortgage	118,205	44,298	162,503
Residential rentals	17,499	80,551	98,050
Construction and land development	4,533	8,727	13,260
Home equity and second mortgage	1,454	19,649	21,103
Commercial loans	-	-	-
Consumer loans	259	-	259
Commercial equipment	24,635	5,053	29,688
	$ 291,134	$ 614,052	$ 905,186


December 31, 2015
(dollars in thousands)		Floating or
Description of Asset	Fixed Rates	Adjustable Rates	Total
Real Estate Loans
Commercial	111,557	376,918	488,475
Residential first mortgage	96,056	28,356	124,412
Residential rentals	15,998	73,642	89,640
Construction and land development	3,555	5,025	8,580
Home equity and second mortgage	1,806	19,580	21,386
Commercial loans	-	-	-
Consumer loans	166	-	166
Commercial equipment	20,145	1,887	22,032
	$ 249,283	$ 505,408	$ 754,691

Related Party Loans


	At and For the Years Ended December 31,
(dollars in thousands)	2016	2015	2014

Balance, beginning of period	$ 28,105	$ 24,403	$ 16,601
Loans and additions	2,547	6,822	407
Change in Directors' status	2,299	(642)	8,953
Repayments	(6,487)	(2,478)	(1,558)
Balance, end of period	$ 26,464	$ 28,105	$ 24,403