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Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2016
Allowance for Loan Losses

Note 7. Allowance for Loan Losses

A disaggregation of and an analysis of the change in the allowance for loan losses by segment is shown below.

 

(Dollars in thousands)

For the Twelve Months Ended December 31, 2016

    Mortgage
Loans on
Real Estate		     Commercial
and
Industrial		     Consumer
and other
Loans		     Total  
        
        
        

Beginning Balance

    $ 3,502     $ 599     $ 122     $ 4,223  

Reclassification of allowance related to sold loans

      —         —         (27 )      (27 ) 

(Charge-offs)

      (735 )      (158 )      (53 )      (946 ) 

Recoveries

      254       61       11       326  

Provision (recovery)

      297       (9 )      (1 )      287  
  

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

    $ 3,318     $ 493     $ 52     $ 3,863  
  

 

 

    

 

 

    

 

 

    

 

 

  

Individually evaluated for impairment

    $ 803     $ 92     $ —       $ 895  

Collectively evaluated for impairment

      2,515       401       52       2,968  

 

(Dollars in thousands)

For the Twelve Months Ended December 31, 2015

    Mortgage
Loans on
Real Estate		     Commercial
and
Industrial		     Consumer
and Other
Loans		     Total  
        
        
        

Beginning Balance

    $ 2,778     $ 323     $ 104     $ 3,205  

(Charge-offs)

      (521 )      (9 )      (128 )      (658 ) 

Recoveries

      27       —         52       79  

Provision

      1,218       285       94       1,597  
  

 

 

    

 

 

    

 

 

    

 

 

  

Ending Balance

    $ 3,502     $ 599     $ 122     $ 4,223  
  

 

 

    

 

 

    

 

 

    

 

 

  

Individually evaluated for impairment

    $ 1,256     $ 278     $ —       $ 1,534  

Collectively evaluated for impairment

      2,246       321       122       2,689  

 

Loan receivables evaluated for impairment individually and collectively by segment as of December 31, 2016 and 2015 are as follows:

 

     Mortgage      Commercial      Consumer         
(Dollars in thousands)    Loans      and      and Other         

As of December 31, 2016

    on Real Estate      Industrial      Loans      Total  

Individually evaluated for impairment

    $ 10,323      $ 92      $ —        $ 10,415  

Collectively evaluated for impairment

      328,118        42,932        3,544        374,594  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Gross Loans

    $ 338,441      $ 43,024      $ 3,544      $ 385,009  
  

 

 

     

 

 

     

 

 

     

 

 

  

As of December 31, 2015

                            

Individually evaluated for impairment

    $ 10,542      $ 284      $ —        $ 10,826  

Collectively evaluated for impairment

      296,561        34,820        5,015        336,396  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Gross Loans

    $ 307,103      $ 35,104      $ 5,015      $ 347,222  
  

 

 

     

 

 

     

 

 

     

 

 

  

Internal risk rating grades are shown in the following table.

 

     Construction,             Commercial      Commercial                
     Land and             Mortgages      Mortgages      Commercial         
(Dollars in thousands)    Land             (Non-Owner      (Owner      and         
As of December 31, 2016    Development      Farmland      Occupied)      Occupied)      Industrial      Total  

Grade:

                  

Pass

    $ 32,009      $ 1,023      $ 30,639      $ 31,191      $ 40,841      $ 135,703  

Watch

      5,795        —          4,184        6,652        1,891        18,522  

Special mention

      180        —          272        1,453        125        2,030  

Substandard

      1,834        —          248        2,529        167        4,778  

Doubtful

      —          —          —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 39,818      $ 1,023      $ 35,343      $ 41,825      $ 43,024      $ 161,033  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     Construction,             Commercial      Commercial                
     Land and             Mortgages      Mortgages      Commercial         
     Land             (Non-Owner      (Owner      and         
As of December 31, 2015    Development      Farmland      Occupied)      Occupied)      Industrial      Total  

Grade:

                  

Pass

    $ 34,692      $ 1,030      $ 24,258      $ 33,023      $ 29,383      $ 122,386  

Watch

      5,337        —          4,564        4,968        5,202        20,071  

Special mention

      1,119        —          —          2,687        148        3,954  

Substandard

      981        —          264        3,278        371        4,894  

Doubtful

      —          —          —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 42,129      $ 1,030      $ 29,086      $ 43,956      $ 35,104      $ 151,305  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Loans not assigned internal risk rating grades are comprised of smaller residential mortgages and smaller consumer loans. Payment activity of these loans is reviewed monthly by management. However, some of these loans are graded when the borrower’s total exposure to the Bank exceeds the limits noted above. Loans are considered to be nonperforming when they are delinquent by 90 days or more or non-accruing and credit risk is primarily evaluated by delinquency status, as shown in the table below.

 

            Residential                
(Dollars in thousands)    Residential      Revolving                
As of December 31, 2016    First      and Junior      Consumer         

PAYMENT ACTIVITY STATUS

    Mortgages (1)      Mortgages (2)      Loans (3)      Total  

Performing

    $ 191,852      $ 26,265      $ 3,544      $ 221,661  

Nonperforming

      2,155        160        —          2,315  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 194,007      $ 26,425      $ 3,544      $ 223,976  
  

 

 

     

 

 

     

 

 

     

 

 

  
            Residential                
     Residential      Revolving                
As of December 31, 2015    First      and Junior      Consumer         

PAYMENT ACTIVITY STATUS

    Mortgages (4)      Mortgages (5)      Loans (6)      Total  

Performing

    $ 161,564      $ 26,220      $ 4,996      $ 192,780  

Nonperforming

      2,841        277        19        3,137  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 164,405      $ 26,497      $ 5,015      $ 195,917  
  

 

 

     

 

 

     

 

 

     

 

 

  

Notes:

(1) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.3 million as of December 31, 2016.
(2) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.1 million as of December 31, 2016.
(3) No Consumer Loans have been assigned a risk rating grade of Substandard as of December 31, 2016.
(4) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.9 million as of December 31, 2015.
(5) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $372 thousand as of December 31, 2015.
(6) No Consumer Loans had been assigned a risk rating grade of Substandard as of December 31, 2015.

 

The following tables show the Company’s recorded investment and the customers’ unpaid principal balances for impaired loans, with the associated allowance amount, if applicable, as of December 31, 2016 and 2015, along with the average recorded investment and interest income recognized for the years ended December 31, 2016 and 2015.

 

(Dollars in thousands)

    As of December 31, 2016      As of December 31, 2015  

IMPAIRED LOANS

                                          

With no related allowance:

    Recorded
Investment		      Customers’ Unpaid
Principal Balance		      Related
Allowance		      Recorded
Investment		      Customers’ Unpaid
Principal Balance		      Related
Allowance		  

Construction, Land and Land Development

    $ 1,531      $ 1,539      $ —        $ 445      $ 451      $ —    

Residential First Mortgages

      2,112        2,176        —          3,130        3,166        —    

Residential Revolving and Junior Mortgages (1)

      995        999        —          233        233        —    

Commercial Mortgages (Non-owner occupied)

      248        248        —          264        264        —    

Commercial Mortgages (Owner occupied)

      1,860        2,178        —          1,352        1,390        —    

Commercial and Industrial

      —          —          —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     6,746        7,140        —          5,424        5,504        —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

                                          

Construction, Land and Land Development

      243        286        145        262        290        120  

Residential First Mortgages

      1,951        1,951        367        2,507        2,507        308  

Residential Revolving and Junior Mortgages (1)

      544        546        199        258        259        150  

Commercial Mortgages (Non-owner occupied)

      —          —          —          —          —          —    

Commercial Mortgages (Owner occupied)

      839        854        92        2,091        2,348        678  

Commercial and Industrial

      92        101        92        284        285        278  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     3,669        3,738        895        5,402        5,689        1,534  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total Impaired Loans:

                                          

Construction, Land and Land Development

      1,774        1,825        145        707        741        120  

Residential First Mortgages

      4,063        4,127        367        5,637        5,673        308  

Residential Revolving and Junior Mortgages (1)

      1,539        1,545        199        491        492        150  

Commercial Mortgages (Non-owner occupied)

      248        248        —          264        264        —    

Commercial Mortgages (Owner occupied)

      2,699        3,032        92        3,443        3,738        678  

Commercial and Industrial

      92        101        92        284        285        278  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ 10,415      $ 10,878      $ 895      $ 10,826      $ 11,193      $ 1,534  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Notes:

(1) Junior mortgages include equity lines.

 

     For the Year Ended      For the Year Ended  
     December 31, 2016      December 31, 2015  

(Dollars in thousands)

With no related allowance:

    Average
Recorded
Investment		      Interest
Income
Recognized		      Average
Recorded
Investment		      Interest
Income
Recognized		  

Construction, Land and Land Development

    $ 1,316      $ 55      $ 448      $ —    

Residential First Mortgages

      1,956        14        2,077        74  

Residential Revolving and Junior Mortgages (1)

      808        38        87        5  

Commercial Mortgages (Non-owner occupied)

      251        15        264        16  

Commercial Mortgages (Owner occupied)

      1,858        27        1,099        28  

Commercial and Industrial

      —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

  
     6,189        149        3,975        123  
  

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

                            

Construction, Land and Land Development

      253        5        270        5  

Residential First Mortgages

      1,956        90        1,900        90  

Residential Revolving and Junior Mortgages (1)

      218        9        204        11  

Commercial Mortgages (Non-owner occupied)

      —          —          —          —    

Commercial Mortgages (Owner occupied)

      819        22        1,343        39  

Commercial and Industrial

      103        1        130        2  
  

 

 

     

 

 

     

 

 

     

 

 

  
     3,349        127        3,847        147  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

                            

Construction, Land and Land Development

      1,569        60        718        5  

Residential First Mortgages

      3,912        104        3,977        164  

Residential Revolving and Junior Mortgages (1)

      1,026        47        291        16  

Commercial Mortgages (Non-owner occupied)

      251        15        264        16  

Commercial Mortgages (Owner occupied)

      2,677        49        2,442        67  

Commercial and Industrial

      103        1        130        2  
  

 

 

     

 

 

     

 

 

     

 

 

  
   $ 9,538      $ 276      $ 7,822      $ 270  
  

 

 

     

 

 

     

 

 

     

 

 

  

Notes:

(1) Junior mortgages include equity lines.

Smaller non-accruing loans and non-accruing loans that are not graded because they are included in homogenous pools generally do not meet the criteria for impairment testing, and are therefore excluded from impaired loan disclosures. At December 31, 2016 and 2015, non-accruing loans excluded from impaired loan disclosure totaled $465 thousand and $95 thousand, respectively. If interest on these non-accruing loans had been accrued, such income would have approximated $5 thousand and $5 thousand during the years ended December 31, 2016 and 2015, respectively.

 

Loans modified as TDRs are considered impaired and are individually evaluated for the amount of impairment in the ALL. The following table presents, by segments of loans, information related to loans modified as TDRs during the years ended December 31, 2016 and 2015.

 

     For the Year Ended      For the Year Ended  
     December 31, 2016      December 31, 2015  

(Dollars in thousands)

TROUBLED DEBT RESTRUCTURINGS

    Number of
Loans		      Pre-Modification
Outstanding
Recorded
Investment		      Post-Modification
Outstanding
Recorded
Investment		      Number of
Loans		      Pre-Modification
Outstanding
Recorded
Investment		      Post-Modification
Outstanding
Recorded
Investment		  
                 
                 
                 

Residenital first mortages (2)(1)

      1      $ 244      $ 244        2      $ 988      $ 986  

Commercial mortgages (Owner occupied) (2)

      —          —          —          1        105        124  

Notes:    

(1) Modifications were an extention of the loan terms.    
(2) Modifications were capitalization of the interest.    

 

     For the Year Ended
December 31, 2016		      For the Year Ended
December 31, 2015		  

TROUBLED DEBT RESTRUCTURINGS

THAT SUBSEQUENTLY DEFAULTED

    Number of
Loans		      Recorded
Investment		      Number of
Loans		      Recorded
Investment		  

Commerical mortgages (Owner occupied)

      —          —          1      $ 124  

Of the TDRs restructured in 2016 and 2015 which did not subsequently default, all are performing. The loan that defaulted in 2015 was charged-off. There were 16 TDRs with an aggregate balance of $3.2 million and 16 TDRs with an aggregate balance of $3.5 million outstanding as of December 31, 2016 and December 31, 2015, respectively.