Note 6. Loan Quality and Allowance for Loan Losses

The following table presents, by class, the activity in the Allowance for Loan Losses (ALL) for the periods shown:


	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total

ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415
Charge-offs		(33)		(1)		(3)		(63)		(61)		(26)		—		(187)
Recoveries		1		—		—		1		42		10		—		54
Provision		28		—		47		270		70		18		(34)		399
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681

ALL at December 31, 2017	$	1,060	$	330	$	224	$	6,526	$	2,110	$	105	$	1,437	$	11,792
Charge-offs		-		—		—		—		—		(26)		—		(26)
Recoveries		1		—		—		—		8		14		—		23
Provision		(18)		(10)		36		172		(45)		11		54		200
ALL at March 31, 2018	$	1,043	$	320	$	260	$	6,698	$	2,073	$	104	$	1,491	$	11,989

The following table presents, by class, loans that were evaluated for the ALL under the specific reserve (individually) and those that were evaluated under the general reserve (collectively) and the amount of the ALL established in each class as of March 31, 2019 and December 31, 2018:



	Residential Real Estate 1-4 Family
	First		Junior Liens &				Commercial
(Dollars in thousands)	Liens		Lines of Credit		Construction		Real Estate		Commercial		Consumer		Unallocated		Total

March 31, 2019
Loans evaluated for ALL:
Individually	$	401	$	—	$	652	$	13,247	$	—	$	—	$	—	$	14,300
Collectively		147,021		46,690		13,329		484,727		269,243		5,156		—		966,166
Total	$	147,422	$	46,690	$	13,981	$	497,974	$	269,243	$	5,156	$	—	$	980,466

ALL established for loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		487		132		152		5,906		4,562		72		1,370		12,681
ALL at March 31, 2019	$	487	$	132	$	152	$	5,906	$	4,562	$	72	$	1,370	$	12,681

December 31, 2018
Loans evaluated for ALL:
Individually	$	405	$	—	$	455	$	10,099	$	181	$	—	$	—	$	11,140
Collectively		148,495		47,220		9,770		477,881		273,873		4,996		—		962,235
Total	$	148,900	$	47,220	$	10,225	$	487,980	$	274,054	$	4,996	$	—	$	973,375

ALL established for loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		491		133		108		5,698		4,511		70		1,404		12,415
ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415

The following table shows additional information about those loans considered to be impaired at March 31, 2019 and December 31, 2018:


	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal		Related
March 31, 2019	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	889	$	889	$	—	$	—	$	—
Junior liens and lines of credit		44		44		—		—		—
Total		933		933		—		—		—
Residential real estate - construction		652		729		—		—		—
Commercial real estate		13,446		14,022		—		—		—
Commercial		129		146		—		—		—
Total	$	15,160	$	15,830	$	—	$	—	$	—


December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	871	$	958	$	—	$	—	$	—
Junior liens and lines of credit		49		49		—		—		—
Total		920		1,007		—		—		—
Residential real estate - construction		455		531		—		—		—
Commercial real estate		10,236		10,808		—		—		—
Commercial		315		9,763		—		—		—
Total	$	11,926	$	22,109	$	—	$	—	$	—

The following table shows the average of impaired loans and related interest income for the three months ended March 31, 2019 and 2018:


	Three Months Ended				Three Months Ended
	March 31, 2019				March 31, 2018
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	893	$	11	$	805	$	11
Junior liens and lines of credit		44		—		—		—
Total		937		11		805		11
Residential real estate - construction		653		—		466		—
Commercial real estate		13,494		102		10,994		105
Commercial		129		—		185		—
Total	$	15,213	$	113	$	12,450	$	116

The following table presents the aging of payments of the loan portfolio:



(Dollars in thousands)			Loans Past Due and Still Accruing										Total
	Current		30-59 Days		60-89 Days		90 Days+		Total		Non-Accrual		Loans
March 31, 2019
Residential Real Estate 1-4 Family
First liens	$	146,866	$	309	$	30	$	137	$	476	$	80	$	147,422
Junior liens and lines of credit		46,588		29		29		18		76		26		46,690
Total		193,454		338		59		155		552		106		194,112
Residential real estate - construction		13,329		—		—		—		—		652		13,981
Commercial real estate		491,462		438		1,331		—		1,769		4,743		497,974
Commercial		268,527		273		262		52		587		129		269,243
Consumer		5,135		21		—		—		21		—		5,156
Total	$	971,907	$	1,070	$	1,652	$	207	$	2,929	$	5,630	$	980,466



December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	148,183	$	322	$	202	$	113	$	637	$	80	$	148,900
Junior liens and lines of credit		47,040		131		—		26		157		23		47,220
Total		195,223		453		202		139		794		103		196,120
Residential real estate - construction		9,572		—		198		—		198		455		10,225
Commercial real estate		481,774		1,343		3,323		113		4,779		1,427		487,980
Commercial		273,534		65		40		100		205		315		274,054
Consumer		4,933		46		12		5		63		—		4,996
Total	$	965,036	$	1,907	$	3,775	$	357	$	6,039	$	2,300	$	973,375

The following table reports the risk rating for those loans in the portfolio that are assigned an individual risk rating. Consumer purpose loans are assigned a rating of either pass or substandard based on the performance status of the loans. Substandard consumer loans are comprised of loans 90 days or more past due and still accruing, and nonaccrual loans. Commercial purpose loans may be assigned any rating in accordance with the Bank’s internal risk rating system.



	Pass		Special Mention		Substandard		Doubtful
(Dollars in thousands)	(1-5)		(6)		(7)		(8)		Total

March 31, 2019
Residential Real Estate 1-4 Family
First liens	$	146,986	$	—	$	436	$	—	$	147,422
Junior liens and lines of credit		46,646		—		44		—		46,690
Total		193,632		—		480		—		194,112
Residential real estate - construction		13,329		—		652		—		13,981
Commercial real estate		490,057		655		7,262		—		497,974
Commercial		268,345		—		898		—		269,243
Consumer		5,156		—		—		—		5,156
Total	$	970,519	$	655	$	9,292	$	—	$	980,466



December 31, 2018
Residential Real Estate 1-4 Family
First liens	$	148,453	$	—	$	447	$	—	$	148,900
Junior liens and lines of credit		47,171		—		49		—		47,220
Total		195,624		—		496		—		196,120
Residential real estate - construction		9,572		—		653		—		10,225
Commercial real estate		479,969		660		7,351		—		487,980
Commercial		272,959		—		1,095		—		274,054
Consumer		4,991		—		5		—		4,996
Total	$	963,115	$	660	$	9,600	$	—	$	973,375

The following table presents information on the Bank’s Troubled Debt Restructuring (TDR) loans:


								Troubled Debt Restructurings
								Within the Last 12 Months
								That Have Defaulted
(Dollars in thousands)	Troubled Debt Restructurings							On Modified Terms
	Number of	Recorded						Number of	Recorded
	Contracts	Investment		Performing*		Nonperforming*		Contracts	Investment
March 31, 2019
Residential real estate - construction	1	$	454	$	—	$	454	—	$	—
Residential real estate	4		673		673		—	—		—
Commercial real estate	11		9,982		8,703		1,279	—		—
Total	16	$	11,109	$	9,376	$	1,733	—	$	—


December 31, 2018
Residential real estate - construction	1	$	455	$	—	$	455	—	$	—
Residential real estate	4		678		678		—	—		—
Commercial real estate	11		10,099		8,809		1,290	—		—
Total	16	$	11,232	$	9,487	$	1,745	—	$	—

*The performing status is determined by the loan’s compliance with the modified terms.

There were no new TDR loans during 2019 and 2018.