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Loans (Tables)

12 Months Ended

Dec. 31, 2017

Loans consist of the following:



(dollars in thousands)	December 31, 2017	%	December 31, 2016	%

Commercial real estate	$ 727,314	63.25%	$ 667,105	61.25%
Residential first mortgages	170,374	14.81%	171,004	15.70%
Residential rentals	110,228	9.58%	101,897	9.36%
Construction and land development	27,871	2.42%	36,934	3.39%
Home equity and second mortgages	21,351	1.86%	21,399	1.97%
Commercial loans	56,417	4.91%	50,484	4.64%
Consumer loans	573	0.05%	422	0.04%
Commercial equipment	35,916	3.12%	39,737	3.65%
	1,150,044	100.00%	1,088,982	100.00%
Less:
Deferred loan fees and premiums	(1,086)	-0.09%	(397)	-0.04%
Allowance for loan losses	10,515	0.91%	9,860	0.91%
	9,429		9,463
	$ 1,140,615		$ 1,079,519

Non-accrual loans

Non-accrual loans as of December 31, 2017 and December 31, 2016 were as follows:



	December 31, 2017
(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	$ 1,148	4	$ 839	3	$ 1,987	7
Residential first mortgages	478	3	507	1	985	4
Residential rentals	84	1	741	3	825	4
Home equity and second mortgages	134	3	123	1	257	4
Commercial loans	172	2	-	-	172	2
Commercial equipment	467	3	-	-	467	3
	$ 2,483	16	$ 2,210	8	$ 4,693	24



	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

Past Due Financing Receivables

An analysis of past due loans as of December 31, 2017 and 2016 was as follows:


	December 31, 2017
(dollars in thousands)	Current	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	Total Loan Receivables
Commercial real estate	$ 719,455	$ -	$ 6,711	$ 1,148	$ 7,859	$ 727,314
Residential first mortgages	169,828	-	68	478	546	170,374
Residential rentals	109,937	-	207	84	291	110,228
Construction and land dev.	27,871	-	-	-	-	27,871
Home equity and second mtg.	21,180	19	18	134	171	21,351
Commercial loans	55,054	892	299	172	1,363	56,417
Consumer loans	572	-	1	-	1	573
Commercial equipment	34,437	1,012	-	467	1,479	35,916
Total	$ 1,138,334	$ 1,923	$ 7,304	$ 2,483	$ 11,710	$ 1,150,044


	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

Impaired Loans, Including TDRs

Impaired loans, including TDRs, at December 31, 2017 and 2016 were as follows:



	December 31, 2017
(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	$ 33,180	$ 30,921	$ 2,008	$ 32,929	$ 370	$ 33,575	$ 1,379
Residential first mortgages	2,455	1,978	459	2,437	2	2,479	91
Residential rentals	2,389	1,981	395	2,376	18	2,432	111
Construction and land dev.	729	-	729	729	163	729	26
Home equity and second mtg.	317	317	-	317	-	318	12
Commercial loans	3,010	2,783	168	2,951	168	3,048	137
Commercial equipment	1,538	1,048	467	1,515	303	1,578	73
Total	$ 43,618	$ 39,028	$ 4,226	$ 43,254	$ 1,024	$ 44,159	$ 1,829


	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

TDRs, Included in Impaired Loans Schedule


	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

TDRs, included in the impaired loan schedules above, as of December 31, 2017 and 2016 were as follows:


	December 31, 2017		December 31, 2016
(dollars in thousands)	Dollars	Number of Loans	Dollars	Number of Loans

Commercial real estate	$ 9,273	9	$ 9,587	8
Residential first mortgages	527	2	545	2
Residential rentals	221	1	227	1
Construction and land development	729	2	3,777	4
Commercial loans	4	1	872	5
Commercial equipment	36	1	113	2
Total TDRs	$ 10,790	16	$ 15,121	22
Less: TDRs included in non-accrual loans	(769)	(1)	(4,673)	(6)
Total accrual TDR loans	$ 10,021	15	$ 10,448	16

Allowance for Credit Losses on Financing Receivables

The following tables detail activity in the allowance for loan losses at and for the years ended December 31, 2017, 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.


Year Ended	December 31, 2017
(dollars in thousands)	Beginning Balance	Charge-offs	Recoveries	Provisions	Ending Balance
Commercial real estate	$ 5,212	$ (217)	$ 63	$ 1,393	$ 6,451
Residential first mortgages	1,406	-	-	(262)	1,144
Residential rentals	362	(42)	-	192	512
Construction and land development	941	(26)	-	(453)	462
Home equity and second mortgages	138	(14)	1	37	162
Commercial loans	794	(13)	1	231	1,013
Consumer loans	3	(2)	-	6	7
Commercial equipment	1,004	(168)	62	(134)	764
	$ 9,860	$ (482)	$ 127	$ 1,010	$ 10,515


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

Loan receivable and allowance balances disaggregated on basis of Company's impairment methodology

The following tables detail loan receivable and allowance balances disaggregated on the basis of the Company’s impairment methodology at December 31, 2017 and 2016, respectively.


	December 31, 2017			December 31, 2016
(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	$ 32,929	$ 694,385	$ 727,314	$ 21,977	$ 645,128	$ 667,105
Residential first mortgages	2,437	167,937	170,374	2,413	168,591	171,004
Residential rentals	2,376	107,852	110,228	3,028	98,869	101,897
Construction and land development	729	27,142	27,871	3,777	33,157	36,934
Home equity and second mortgages	317	21,034	21,351	170	21,229	21,399
Commercial loans	2,951	53,466	56,417	3,204	47,280	50,484
Consumer loans	-	573	573	-	422	422
Commercial equipment	1,515	34,401	35,916	791	38,946	39,737
	$ 43,254	$ 1,106,790	$ 1,150,044	$ 35,360	$ 1,053,622	$ 1,088,982

Allowance for loan losses:
Commercial real estate	$ 370	$ 6,081	$ 6,451	$ 806	$ 4,406	$ 5,212
Residential first mortgages	2	1,142	1,144	7	1,399	1,406
Residential rentals	18	494	512	36	326	362
Construction and land development	163	299	462	178	763	941
Home equity and second mortgages	-	162	162	-	138	138
Commercial loans	168	845	1,013	123	671	794
Consumer loans	-	7	7	-	3	3
Commercial equipment	303	461	764	139	865	1,004
	$ 1,024	$ 9,491	$ 10,515	$ 1,289	$ 8,571	$ 9,860

Credit Quality Indicators

Credit quality indicators as of December 31, 2017 and 2016 were as follows:


Credit Risk Profile by Internally Assigned Grade

	Commercial Real Estate		Construction and Land Dev.		Residential Rentals
(dollars in thousands)	12/31/2017	12/31/2016	12/31/2017	12/31/2016	12/31/2017	12/31/2016

Unrated	$ 75,581	$ 51,503	$ 1,775	$ 1,632	$ 28,428	$ 25,563
Pass	619,604	594,768	25,367	31,525	80,279	74,989
Special mention	-	-	-	-	-	-
Substandard	32,129	20,834	729	3,777	1,521	1,345
Doubtful	-	-	-	-	-	-
Loss	-	-	-	-	-	-
Total	$ 727,314	$ 667,105	$ 27,871	$ 36,934	$ 110,228	$ 101,897

	Commercial Loans		Commercial Equipment		Total Commercial Portfolios
(dollars in thousands)	12/31/2017	12/31/2016	12/31/2017	12/31/2016	12/31/2017	12/31/2016

Unrated	$ 14,356	$ 11,266	$ 10,856	$ 11,769	$ 130,996	$ 101,733
Pass	39,118	36,221	23,581	27,290	787,949	764,793
Special mention	-	-	-	-	-	-
Substandard	2,943	2,997	1,479	541	38,801	29,494
Doubtful	-	-	-	137	-	137
Loss	-	-	-	-	-	-
Total	$ 56,417	$ 50,484	$ 35,916	$ 39,737	$ 957,746	$ 896,157

Credit Risk Profile Based on Payment Activity

	Residential First Mortgages		Home Equity and Second Mtg.		Consumer Loans
(dollars in thousands)	12/31/2017	12/31/2016	12/31/2017	12/31/2016	12/31/2017	12/31/2016

Performing	$ 169,896	$ 170,381	$ 21,217	$ 21,338	$ 573	$ 422
Nonperforming	478	623	134	61	-	-
Total	$ 170,374	$ 171,004	$ 21,351	$ 21,399	$ 573	$ 422

Schedule of Loans Contractual Terms to Maturity

The following table sets forth certain information at December 31, 2017 and 2016 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, 2017	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, 2017	December 31, 2017	December 31, 2017
Real Estate Loans
Commercial	$ 67,951	$ 150,075	$ 509,288
Residential first mortgage	8,596	35,208	126,570
Residential rentals	4,288	21,627	84,313
Construction and land development	21,226	6,645	-
Home equity and second mortgage	242	811	20,298
Commercial loans	56,417	-	-
Consumer loans	200	307	66
Commercial equipment	12,113	18,051	5,752
Total loans	$ 171,033	$ 232,724	$ 746,287


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

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, 2017 and 2016, which have predetermined interest rates and have floating or adjustable interest rates.


December 31, 2017
(dollars in thousands)		Floating or
Description of Asset	Fixed Rates	Adjustable Rates	Total
Real Estate Loans
Commercial	$ 157,667	$ 501,696	$ 659,363
Residential first mortgage	106,792	54,986	161,778
Residential rentals	16,974	88,966	105,940
Construction and land development	3,521	3,124	6,645
Home equity and second mortgage	1,285	19,824	21,109
Commercial loans	-	-	-
Consumer loans	373	-	373
Commercial equipment	21,924	1,879	23,803
	$ 308,536	$ 670,475	$ 979,011


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

Related Party Loans

Included in loans receivable were loans made to executive officers and directors of the Bank. These loans were made in the ordinary course of business at substantially the same terms and conditions as those prevailing at the time for comparable transactions with persons not affiliated with the Bank and are not considered to involve more than the normal risk of collectability. For the years ended December 31, 2017, 2016 and 2015, all loans to directors and executive officers of the Bank performed according to original loan terms. Activity in loans outstanding to executive officers and directors are summarized as follows:


	At and For the Years Ended December 31,
(dollars in thousands)	2017	2016	2015

Balance, beginning of period	$ 26,464	$ 28,105	$ 24,403
Loans and additions	3,699	2,547	6,822
Change in Directors' status	-	2,299	(642)
Repayments	(3,687)	(6,487)	(2,478)
Balance, end of period	$ 26,476	$ 26,464	$ 28,105