Loans

6 Months Ended

Jun. 30, 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 effective 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 the loan qualifies 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 the process of collection.

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

	June 30, 2019			December 31, 2018
Mortgage loans on real estate:
Construction, land and land development	$	110,598		$	109,475
Commercial mortgages (non-owner occupied)		178,532			180,074
Commercial mortgages (owner occupied)		82,990			87,241
Residential first mortgages		305,252			298,894
Residential revolving and junior mortgages		35,875			38,313
Commercial and industrial		187,531			164,608
Consumer		16,889			23,740
Total loans		917,667			902,345
Net unamortized deferred loan fees		(275	)		(252	)
Allowance for loan losses		(7,479	)		(7,902	)
Loans receivable, net	$	909,913		$	894,191

As of June 30, 2019 and December 31, 2018, the Company had $261.7 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.

June 30, 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	$	225	$	—	$	698	$	923	$	109,675	$	110,598
Commercial mortgages (non-owner occupied)		—		—		434		434		178,098		178,532
Commercial mortgages (owner occupied)		144		—		238		382		82,608		82,990
Residential first mortgages		1,063		156		1,984		3,203		302,049		305,252
Residential revolving and junior mortgages		99		—		936		1,035		34,840		35,875
Commercial and industrial		—		—		—		—		187,531		187,531
Consumer		279		—		287		566		16,323		16,889
Total loans	$	1,810	$	156	$	4,577	$	6,543	$	911,124	$	917,667

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

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

June 30, 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	$	16	$	—	$	—	$	16	$	1,360	$	1,376
Commercial mortgages (non-owner occupied)		—		—		—		—		129		129
Commercial mortgages (owner occupied)		—		—		—		—		274		274
Residential first mortgages		30		156		—		186		3,088		3,274
Residential revolving and junior mortgages		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		—		—		—		—		45		45
Total purchased credit-impaired loans	$	46	$	156	$	—	$	202	$	4,896	$	5,098

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 Six Months Ended
	June 30, 2019
Balance as of December 31, 2018	$	1,083
Accretion of acquisition accounting adjustment		(184	)
Reclassifications from nonaccretable balance, net		55
Other changes, net		(96	)
Balance as of June 30, 2019	$	858

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 – Several pass credit grades comprise loans in this category, which are assigned based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to management attention credits that have all characteristics of an acceptable credit risk but warrant more than the normal level of monitoring.

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 loan. 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.

June 30, 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
Rating:
Pass	$	108,524	$	177,969	$	82,423	$	301,753	$	34,552	$	180,375	$	16,598	$	902,194
Special mention		—		—		154		478		63		5,951		—		6,646
Substandard		2,074		563		413		3,021		1,260		1,205		291		8,827
Doubtful		—		—		—		—		—		—		—		—
Total loans	$	110,598	$	178,532	$	82,990	$	305,252	$	35,875	$	187,531	$	16,889	$	917,667

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
Rating:
Pass	$	107,306	$	178,936	$	85,897	$	295,372	$	37,206	$	162,392	$	23,389	$	890,498
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