Loans

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Loans

Note 4: Loans

Loans are reported at their recorded investment, which is the outstanding principal balance net of any unearned income and costs, such as deferred fees and costs, charge-offs, and discounts or premiums on acquired or purchased loans. Interest on loans is recognized in earnings over the contractual term of the loan and is calculated using the interest method on principal amounts outstanding. Loan fees and certain direct origination costs are deferred and recognized as an adjustment of the related loan yield over the contractual term of the loan, adjusted for early pay-offs or principal curtailments, as applicable.

All interest accrued but not collected for loans that are placed on nonaccrual or charged-off are reversed against interest income at the time the loans are placed in nonaccrual or charged off. Any subsequent interest received on these loans is recognized as interest income under the cash basis method of accounting until qualifying for return to accrual status. Generally, a loan is returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured, or the loan becomes well-secured and in process of collection.

The following table presents a summary of loans as of the dates stated.

	March 31, 2019			December 31, 2018
Mortgage loans on real estate:
Construction, land and land development	$	117,502		$	109,475
Commercial mortgages (non-owner occupied)		180,007			180,074
Commercial mortgages (owner occupied)		88,644			87,241
Residential first mortgages		303,090			298,894
Residential revolving and junior mortgages		36,251			38,313
Commercial and industrial		173,360			164,608
Consumer		20,095			23,740
Total loans		918,949			902,345
Net unamortized deferred loan (fees)		(329	)		(252	)
Allowance for loan losses		(7,858	)		(7,902	)
Loans receivable, net	$	910,762		$	894,191

As of March 31, 2019 and December 31, 2018, the Company had $234.3 million and $229.1 million, respectively, of loans pledged to the FHLB as collateral for borrowings.

The following tables present the recorded investment for past due, based upon contractual terms, and nonaccrual loans as of the dates stated. A loan past due 90 days or more is generally placed on nonaccrual unless it is both well secured and in the process of collection. Loans presented below as 90 days or more past due and still accruing include purchased credit-impaired (“PCI”) loans.

March 31, 2019	30-89 Days Past Due		90 Days or More Past Due and Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Current		Total Loans
Mortgage loans on real estate:
Construction, land and land development	$	137	$	—	$	914	$	1,051	$	116,451	$	117,502
Commercial mortgages (non-owner occupied)		—		—		435		435		179,572		180,007
Commercial mortgages (owner occupied)		1,573		23		1,060		2,656		85,988		88,644
Residential first mortgages		2,735		24		1,846		4,605		298,485		303,090
Residential revolving and junior mortgages		179		—		803		982		35,269		36,251
Commercial and industrial		—		—		—		—		173,360		173,360
Consumer		310		—		326		636		19,459		20,095
Total loans	$	4,934	$	47	$	5,384	$	10,365	$	908,584	$	918,949

December 31, 2018	30-89 Days Past Due		90 Days or More Past Due and Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Current		Total Loans
Mortgage loans on real estate:
Construction, land and land development	$	552	$	—	$	740	$	1,292	$	108,183	$	109,475
Commercial mortgages (non-owner occupied)		50		—		996		1,046		179,028		180,074
Commercial mortgages (owner occupied)		—		56		1,064		1,120		86,121		87,241
Residential first mortgages		1,341		55		1,361		2,757		296,137		298,894
Residential revolving and junior mortgages		115		—		782		897		37,416		38,313
Commercial and industrial		—		—		48		48		164,560		164,608
Consumer		329		—		215		544		23,196		23,740
Total loans	$	2,387	$	111	$	5,206	$	7,704	$	894,641	$	902,345

Approximately $2.2 million of the $4.9 million of loans 30-89 days past due as of March 31, 2019 was attributable to four loans (two relationships) that were brought current in the second quarter of 2019.

The following tables include an aging analysis, based upon contractual terms, of the recorded investment of PCI loans as of the dates stated, included in the tables above.

March 31, 2019	30-89 Days Past Due		90 Days or More Past Due and Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Current		Total PCI Loans
Mortgage loans on real estate:
Construction, land and land development	$	23	$	—	$	—	$	23	$	1,348	$	1,371
Commercial mortgages (non-owner occupied)		—		—		—		—		135		135
Commercial mortgages (owner occupied)		26		23		—		49		232		281
Residential first mortgages		257		24		—		281		3,154		3,435
Residential revolving and junior mortgages		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		48		48
Total purchased credit-impaired loans	$	306	$	47	$	—	$	353	$	4,917	$	5,270

December 31, 2018	30-89 Days Past Due		90 Days or More Past Due and Still Accruing		Nonaccrual		Total Past Due and Nonaccrual		Current		Total PCI Loans
Mortgage loans on real estate:
Construction, land and land development	$	23	$	—	$	—	$	23	$	1,355	$	1,378
Commercial mortgages (non-owner occupied)		—		—		—		—		142		142
Commercial mortgages (owner occupied)		—		56		—		56		237		293
Residential first mortgages		92		55		—		147		3,317		3,464
Residential revolving and junior mortgages		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		46		46
Total purchased credit-impaired loans	$	115	$	111	$	—	$	226	$	5,097	$	5,323

The following table presents the changes in accretable yield for PCI loans for the period stated.

	For the Three Months Ended
	March 31, 2019
Balance as of December 31, 2018	$	1,083
Accretion of acquisition accounting adjustment		(86	)
Reclassifications from nonaccretable balance, net		45
Other changes, net		65
Balance as of March 31, 2019	$	1,107

Internal Risk Rating Grades

Loans in the Company’s loan portfolio are risk rated on a periodic basis by experienced credit personnel.

  Risk rating categories are as follows:

Pass – Borrower is strong or sound, and collateral securing the loan, if any, is adequate.

Watch – Borrower exhibits some signs of financial stress but is generally believed to be a satisfactory customer, and collateral, if any, may be in excess of 90% of the loan balance.

Special Mention – Adverse trends in the borrower’s financial position are evident and warrant management’s close attention. Any collateral may not be fully adequate to secure the loan balance.

Substandard – A loan in this category has a well-defined weakness in the primary repayment source that jeopardizes the timely collection of the debt. There is a distinct possibility that a loss may result if the weakness is not corrected.

Doubtful – Default has already occurred and it is likely that foreclosure or repossession procedures have begun or will begin in the near future. Weaknesses make collection or liquidation in full, based on currently existing information, highly questionable and improbable.

Loss – Uncollectible and of such little value that continuance as an asset is not warranted.

The following tables present the Company’s risk rating of loans by loan type as of the dates stated.

March 31, 2019	Construction, Land and Land Development		Commercial Mortgages (Non-Owner Occupied)		Commercial Mortgages (Owner Occupied)		Residential First Mortgages		Residential Revolving and Junior Mortgages		Commercial and Industrial		Consumer		Total Loans
Grade:
Pass	$	108,907	$	176,780	$	78,620	$	285,717	$	34,218	$	167,408	$	6,306	$	857,956
Watch		6,236		2,657		8,644		14,049		905		4,587		13,447		50,525
Special mention		67		—		158		454		—		—		—		679
Substandard		2,292		570		1,222		2,870		1,128		1,365		342		9,789
Doubtful		—		—		—		—		—		—		—		—
Total loans	$	117,502	$	180,007	$	88,644	$	303,090	$	36,251	$	173,360	$	20,095	$	918,949

December 31, 2018	Construction, Land and Land Development		Commercial Mortgages (Non-Owner Occupied)		Commercial Mortgages (Owner Occupied)		Residential First Mortgages		Residential Revolving and Junior Mortgages		Commercial and Industrial		Consumer		Total Loans
Grade:
Pass	$	101,007	$	174,661	$	79,375	$	280,663	$	35,900	$	158,590	$	8,144	$	838,340
Watch		6,299		4,275		6,522		14,709		1,306		3,802		15,245		52,158
Special mention		68		—		107		1,071		—		893		121		2,260
Substandard		2,101		1,138		1,237		2,451		1,107		1,323		230		9,587
Doubtful		—		—		—		—		—		—		—		—
Total loans	$	109,475	$	180,074	$	87,241	$	298,894	$	38,313	$	164,608	$	23,740	$	902,345