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Allowance for Loan Losses (Tables)
 6 Months Ended
Jun. 30, 2017
Loan Receivables Evaluated for Impairment Individually and Collectively by Segment

Loan receivables evaluated for impairment individually and collectively by segment as of June 30, 2017 and December 31, 2016 are as follows:

 

(Dollars in thousands)

As of June 30, 2017

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

Loans individually evaluated for impairment

    $ 9,511      $ 92      $ —        $ 9,603  

Loans collectively evaluated for impairment

      507,035        85,847        41,151        634,033  

Loans acquired with deteriorated credit quality

      5,912        —          78        5,990  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total Gross Loans

    $ 522,458      $ 85,939      $ 41,229      $ 649,626  
  

 

 

     

 

 

     

 

 

     

 

 

  

As of December 31, 2016

            

Loans individually evaluated for impairment

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

Loans collectively evaluated for impairment

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

 

 

     

 

 

     

 

 

     

 

 

  

Total Gross Loans

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

 

 

     

 

 

     

 

 

     

 

 

  
Allowance for Loan Losses by Portfolio Segment

Allowance for Loan Losses

The allowance for loan losses disaggregated based on loan receivables evaluated for impairment individually and collectively by segment as of June 30, 2017 and December 31, 2016 are as follows:

 

(Dollars in thousands)

As of June 30, 2017

    Mortgage
Loans
on Real Estate		      Commercial
and
Industrial		      Consumer
Loans		      Total  

Loans individually evaluated for impairment

    $ 851      $ 92      $ —        $ 943  

Loans collectively evaluated for impairment

      2,835        364        99        3,298  

Loans acquired with deteriorated credit quality

      —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

  

Total allowance for loan losses

    $ 3,686      $ 456      $ 99      $ 4,241  
  

 

 

     

 

 

     

 

 

     

 

 

  

As of December 31, 2016

    Mortgage
Loans
on Real Estate		      Commercial
and
Industrial		      Consumer
Loans		      Total  

Loans individually evaluated for impairment

    $ 803      $ 92      $ —        $ 895  

Loans collectively evaluated for impairment

      2,515        401        52        2,968  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total allowance for loan losses

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

 

 

     

 

 

     

 

 

     

 

 

  

 

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

 

(Dollars in thousands)    Mortgage
Loans on
Real Estate		      Commercial
and
Industrial		      Consumer
Loans		      Total  

For the Three Months Ended June 30, 2017

            

ALLOWANCE FOR LOAN LOSSES:

            

Beginning Balance

    $ 3,421      $ 528      $ 44      $ 3,993  

(Charge-offs)

      (141 )       —          (193 )       (334 ) 

Recoveries

      10        1        3        14  

Provision (recovery)

      396        (73 )       245        568  
  

 

 

     

 

 

     

 

 

     

 

 

  

Ending Balance

    $ 3,686      $ 456      $ 99      $ 4,241  
  

 

 

     

 

 

     

 

 

     

 

 

  
     Mortgage
Loans on
Real Estate		      Commercial
and
Industrial		      Consumer
Loans		      Total  

For the Three Months Ended June 30, 2016

            

ALLOWANCE FOR LOAN LOSSES:

            

Beginning Balance

    $ 3,410      $ 579      $ 118      $ 4,107  

(Charge-offs)

      (573 )       (158 )       (20 )       (751 ) 

Recoveries

      4        —          4        8  

Provision

      154        14        15        183  
  

 

 

     

 

 

     

 

 

     

 

 

  

Ending Balance

    $ 2,995      $ 435      $ 117      $ 3,547  
  

 

 

     

 

 

     

 

 

     

 

 

  
(Dollars in thousands)    Mortgage
Loans on
Real Estate		      Commercial
and
Industrial		      Consumer
Loans		      Total  

For the Six Months Ended June 30, 2017

            

ALLOWANCE FOR LOAN LOSSES:

            

Beginning Balance

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

(Charge-offs)

      (273 )       —          (201 )       (474 ) 

Recoveries

      88        1        5        94  

Provision (recovery)

      553        (38 )       243        758  
  

 

 

     

 

 

     

 

 

     

 

 

  

Ending Balance

    $ 3,686      $ 456      $ 99      $ 4,241  
  

 

 

     

 

 

     

 

 

     

 

 

  
     Mortgage
Loans on
Real Estate		      Commercial
and
Industrial		      Consumer
Loans		      Total  

For the Six Months Ended June 30, 2016

            

ALLOWANCE FOR LOAN LOSSES:

            

Beginning Balance

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

(Charge-offs)

      (656 )       (158 )       (31 )       (845 ) 

Recoveries

      10        5        6        21  

Provision (recovery)

      139        (11 )       20        148  
  

 

 

     

 

 

     

 

 

     

 

 

  

Ending Balance

    $ 2,995      $ 435      $ 117      $ 3,547  
  

 

 

     

 

 

     

 

 

     

 

 

  

 
Schedule of Changes in Accretable Yield for Purchased Impaired Loans

The following table presents the changes in the accretable yield for purchased impaired loans (refer to Note 3) since acquisition on April 1, 2017 through June 30, 2017 (in thousands):

 

     June 30,
2017		  

Balance at acquisition, April 1, 2017

    $ 1,354  

Accretion

      (90 ) 

Reclassifications from nonaccretable balance, net

      —    

Other changes, net

      —    
  

 

 

  

Balance as of June 30, 2017

    $ 1,264  
  

 

 

  
Internal Risk Rating Grades

Internal Risk Rating Grades

Internal risk rating grades are generally assigned to commercial loans not secured by real estate, commercial mortgages, residential mortgages greater than $1 million, smaller residential mortgages which are impaired, loans to real estate developers and contractors, consumer loans greater than $250,000 with chronic delinquency, and TDRs, as shown in the following table. The grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled. Risk grades (refer to Note 3) are evaluated as new information becomes available for each borrowing relationship or at least quarterly. All loan portfolios acquired in the merger are risk graded using loan risk grading software that employs a variety of algorithms based on detailed account characteristics to include borrower’s payment history on a total relationship basis as well as loan to value exposure. For non-homogenous loans, management reviews these resulting grade assignments and makes adjustments to the final grade where appropriate based on an assessment of additional external information that may affect a particular loan. The Bank is in the process of adopting the new risk grading system over its entire loan portfolio including the Bank’s legacy loans and expects to fully utilize it after core system conversion.

 

(Dollars in thousands)    Construction,
Land and
Land		             Residential
First		      Residential
Revolving
and Junior		      Commercial
Mortgages
(Non-Owner		      Commercial
Mortgages
(Owner		      Commercial
and		                
As of June 30, 2017    Development      Farmland      Mortgage      Mortgage      Occupied)      Occupied)      Industrial      Consumer      Total  

Grade:

                           

Pass

    $ 46,344      $ 966      $ 42,984      $ 22,924      $ 75,168      $ 60,261      $ 84,483      $ 37,698      $ 370,828  

Watch

      7,958        —          1,252        33        4,345        11,058        1,230        77        25,953  

Special mention

      270        —          —          —          269        254        40        —          833  

Substandard

      3,319        —          1,482        50        458        2,408        186        165        8,068  

Doubtful

      —          —          —          —          —          —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 57,891      $ 966      $ 45,718      $ 23,007      $ 80,240      $ 73,981      $ 85,939      $ 37,940      $ 405,682  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

 

As of December 31, 2016    Construction,
Land and
Land
Development		      Farmland      Commercial
Mortgages
(Non-Owner
Occupied)		      Commercial
Mortgages
(Owner
Occupied)		      Commercial
and
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  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
Performing and Non Performing Loans

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.

 

(Dollars in thousands)    Residential      Residential
Revolving		                
As of June 30, 2017    First      and Junior      Consumer         

PAYMENT ACTIVITY STATUS

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

Performing

    $ 212,467      $ 25,342      $ 3,289      $ 241,098  

Nonperforming

      1,889        957        —          2,846  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

    $ 214,356      $ 26,299      $ 3,289      $ 243,944  
  

 

 

     

 

 

     

 

 

     

 

 

  
     Residential      Residential
Revolving		                
As of December 31, 2016    First      and Junior      Consumer         
PAYMENT ACTIVITY STATUS    Mortgages (4)      Mortgages (5)      Loans (6)      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  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(1) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $2.3 million as of June 30, 2017.
(2) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.0 million as of June 30, 2017.
(3) Consumer Loans had been assigned a risk rating grade of Substandard as of June 30, 2017 totaled $85 thousand as of June 30, 2017.
(4) Residential First Mortgages which have been assigned a risk rating grade of Substandard totaled $3.3 million as of December 31, 2016.
(5) Residential Revolving and Junior Mortgages which have been assigned a risk rating grade of Substandard totaled $1.1 million as of December 31, 2016.
(6) No Consumer Loans had been assigned a risk rating grade of Substandard as of December 31, 2016.
Company's Recorded Investment and Customers Unpaid Principal Balances for Impaired Loans, with Associated Allowance Amount

The following tables show the Company’s recorded investment and the customers’ unpaid principal balances for impaired loans, excluding purchased impaired loans, with the associated allowance amount, if applicable, as of June 30, 2017 and December 31, 2016, along with the average recorded investment and interest income recognized for the three and six months ended June 30, 2017 and 2016, respectively.

 

(Dollars in thousands)    As of June 30, 2017      As of December 31, 2016  

IMPAIRED LOANS

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

With no related allowance:

                  

Construction, Land and Land Development

    $ 1,451      $ 1,532      $ —        $ 1,531      $ 1,539      $ —    

Residential First Mortgages

      1,765        1,836        —          2,112        2,176        —    

Residential Revolving and Junior Mortgages (1)

      160        166        —          995        999        —    

Commercial Mortgages (Non-owner occupied)

      248        248        —          248        248        —    

Commercial Mortgages (Owner occupied)

      1,682        1,997        —          1,860        2,178        —    

Commercial and Industrial

      —          —          —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     5,306        5,779        —          6,746        7,140        —    
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

                  

Construction, Land and Land Development

      233        283        142        243        286        145  

Residential First Mortgages

      1,934        1,934        408        1,951        1,951        367  

Residential Revolving and Junior Mortgages (1)

      1,299        1,302        159        544        546        199  

Commercial Mortgages (Non-owner occupied)

      —          —          —          —          —          —    

Commercial Mortgages (Owner occupied)

      739        764        142        839        854        92  

Commercial and Industrial

      92        101        92        92        101        92  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
     4,297        4,384        943        3,669        3,738        895  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Total Impaired Loans:

                  

Construction, Land and Land Development

      1,684        1,815        142        1,774        1,825        145  

Residential First Mortgages

      3,699        3,770        408        4,063        4,127        367  

Residential Revolving and Junior Mortgages (1)

      1,459        1,468        159        1,539        1,545        199  

Commercial Mortgages (Non-owner occupied)

      248        248        —          248        248        —    

Commercial Mortgages (Owner occupied)

      2,421        2,761        142        2,699        3,032        92  

Commercial and Industrial

      92        101        92        92        101        92  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  
   $ 9,603      $ 10,163      $ 943      $ 10,415      $ 10,878      $ 895  
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

  

Notes:

(1) Junior mortgages include equity lines.

 

     For the three months ended     For the six months ended  
     June 30, 2017      June 30, 2016     June 30, 2017      June 30, 2016  
(Dollars in thousands)    Average
Recorded
Investment		      Interest
Income
Recognized		      Average
Recorded
Investment		      Interest
Income
Recognized		     Average
Recorded
Investment		      Interest
Income
Recognized		      Average
Recorded
Investment		      Interest
Income
Recognized		  

With no related allowance:

                       

Construction, land and land development

    $ 1,453      $ 14      $ 1,535      $ 14     $ 1,479      $ 27      $ 1,172      $ 27  

Residential First Mortgages

      1,769        2        2,728        (2 )      1,774        7        2,231        14  

Residential Revolving and Junior Mortgages (1)

      162        —          988        8       162        1        675        19  

Commercial Mortgages (Non-owner occupied)

      247        5        248        4       248        8        253        8  

Commercial Mortgages (Owner occupied)

      1,689        4        1,393        1       1,777        11        1,190        17  

Commercial and Industrial

      —          —          —          —         —          —          —          —    
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  
     5,320        25        6,892        25       5,440        54        5,521        85  
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

With an allowance recorded:

                       

Construction, land and land development

      236        1        255        1       238        2        257        2  

Residential First Mortgages

      1,938        23        2,370        21       1,942        47        2,416        42  

Residential Revolving and Junior Mortgages (1)

      1,300        5        196        2       1,301        18        195        4  

Commercial Mortgages (Non-owner occupied)

      —          —          —          —         —          —          —          —    

Commercial Mortgages (Owner occupied)

      737        —          1,460        6       739        —          1,462        11  

Commercial and Industrial

      92        —          105        1       92        —          109        1  
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  
     4,303        29        4,386        31       4,312        67        4,439        60  
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

Total

                       

Construction, land and land development

      1,689        15        1,790        15       1,717        29        1,429        29  

Residential First Mortgages

      3,707        25        5,098        19       3,716        54        4,647        56  

Residential Revolving and Junior Mortgages (1)

      1,462        5        1,184        10       1,463        19        870        23  

Commercial Mortgages (Non-owner occupied)

      247        5        248        4       248        8        253        8  

Commercial Mortgages (Owner occupied)

      2,426        4        2,853        7       2,516        11        2,652        28  

Commercial and Industrial

      92        —          105        1       92        —          109        1  
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  
   $ 9,623      $ 54      $ 11,278      $ 56     $ 9,752      $ 121      $ 9,960      $ 145  
  

 

 

     

 

 

     

 

 

     

 

 

    

 

 

     

 

 

     

 

 

     

 

 

  

 

(1) Junior mortgages include equity lines.

 
Summary of Troubled Debt Restructurings

The following table presents, by segments of loans, information related to loans modified as TDRs.

 

     For the three months ended      For the three months ended  
     June 30, 2017      June 30, 2016  

(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		  

Residential first mortgages (1)

      —        $ —        $ —          1      $ 244      $ 244  

 

(1) Modification was a capitalization of interest.

 

     For the six months ended      For the six months ended  
     June 30, 2017      June 30, 2016  

(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		  

Residential first mortgages (1)

      —        $ —        $ —          1      $ 244      $ 244  

 

(1) Modification was a capitalization of interest.
Summary of Properties Included in Other Real Estate Owned (OREO)

The table below details the properties included in other real estate owned (“OREO”) as of June 30, 2017 and December 31, 2016. There were two collateralized consumer residential mortgage loans from two borrowers valued at $127 thousand in the process of foreclosure as of June 30, 2017.

 

     As of June 30, 2017      As of December 31, 2016  
(Dollars in thousands)    No. of
Properties		      Carrying
Value		      No. of
Properties		      Carrying
Value		  

Residential

      5      $ 979        2      $ 891  

Land lots

      18        3,196        7        547  

Convenience store

      1        59        1        59  

Restaurant

      1        55        1        55  

Commerical properties

      5        1,071        3        942  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

      30      $ 5,360        14      $ 2,494