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 June 30, 2019	$	437	$	113	$	162	$	5,867	$	4,514	$	95	$	1,365	$	12,553
Charge-offs		—		—		(120)		(169)		(17)		(27)		—		(333)
Recoveries		1		—		—		1		111		11		—		124
Provision		2		1		138		133		(619)		2		181		(162)
ALL at September 30, 2019	$	440	$	114	$	180	$	5,832	$	3,989	$	81	$	1,546	$	12,182

ALL at December 31, 2018	$	491	$	133	$	108	$	5,698	$	4,511	$	70	$	1,404	$	12,415
Charge-offs		(34)		(1)		(123)		(355)		(92)		(78)		—		(683)
Recoveries		4		1		—		22		162		24		—		213
Provision		(21)		(19)		195		467		(592)		65		142		237
ALL at September 30, 2019	$	440	$	114	$	180	$	5,832	$	3,989	$	81	$	1,546	$	12,182

ALL at June 30, 2018	$	1,022	$	318	$	282	$	7,028	$	2,233	$	107	$	1,492	$	12,482
Charge-offs		-		—		—		—		(208)		(23)		—		(231)
Recoveries		-		—		—		1		19		5		—		25
Provision		(16)		(4)		(4)		242		122		12		(102)		250
ALL at September 30, 2018	$	1,006	$	314	$	278	$	7,271	$	2,166	$	101	$	1,390	$	12,526

ALL at December 31, 2017	$	1,060	$	330	$	224	$	6,526	$	2,110	$	105	$	1,437	$	11,792
Charge-offs		-		—		—		—		(8,944)		(78)		—		(9,022)
Recoveries		1		—		—		17		135		24		—		177
Provision		(55)		(16)		54		728		8,865		50		(47)		9,579
ALL at September 30, 2018	$	1,006	$	314	$	278	$	7,271	$	2,166	$	101	$	1,390	$	12,526

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 September 30, 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

September 30, 2019
Loans evaluated for ALL:
Individually	$	395	$	—	$	525	$	12,139	$	—	$	—	$	—	$	13,059
Collectively		146,938		45,976		12,273		475,668		236,992		6,309		—		924,156
Total	$	147,333	$	45,976	$	12,798	$	487,807	$	236,992	$	6,309	$	—	$	937,215

ALL established for loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively		440		114		180		5,832		3,989		81		1,546		12,182
ALL at September 30, 2019	$	440	$	114	$	180	$	5,832	$	3,989	$	81	$	1,546	$	12,182

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 September 30, 2019 and December 31, 2018:


	Impaired Loans
	With No Allowance				With Allowance
(Dollars in thousands)			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal		Related
September 30, 2019	Investment		Balance		Investment		Balance		Allowance
Residential Real Estate 1-4 Family
First liens	$	395	$	395	$	—	$	—	$	—
Junior liens and lines of credit		—		—		—		—		—
Total		395		395		—		—		—
Residential real estate - construction		525		729		—		—		—
Commercial real estate		12,139		13,060		—		—		—
Commercial		—		—		—		—		—
Total	$	13,059	$	14,184	$	—	$	—	$	—


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 and nine months ended September 30, 2019 and 2018:


	Three Months Ended				Nine Months Ended
	September 30, 2019				September 30, 2019
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	396	$	6	$	399	$	18
Junior liens and lines of credit		—		—		—		—
Total		396		6		399		18
Residential real estate - construction		646		—		650		—
Commercial real estate		12,461		98		12,933		302
Commercial		—		—		—		—
Total	$	13,503	$	104	$	13,982	$	320

	Three Months Ended				Nine Months Ended
	September 30, 2018				September 30, 2018
	Average		Interest		Average		Interest
(Dollars in thousands)	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Residential Real Estate 1-4 Family
First liens	$	1,091	$	10	$	899	$	31
Junior liens and lines of credit		268		2		750		2
Total		1,359		12		1,649		33
Residential real estate - construction		461		—		463		—
Commercial real estate		10,789		107		10,314		316
Commercial		3,465		—		5,284		—
Total	$	16,074	$	119	$	17,710	$	349

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
September 30, 2019
Residential Real Estate 1-4 Family
First liens	$	146,397	$	557	$	278	$	101	$	936	$	—	$	147,333
Junior liens and lines of credit		45,741		126		42		50		218		17		45,976
Total		192,138		683		320		151		1,154		17		193,309
Residential real estate - construction		12,273		—		—		—		—		525		12,798
Commercial real estate		482,107		197		1,409		—		1,606		4,094		487,807
Commercial		236,542		236		88		—		324		126		236,992
Consumer		6,246		46		7		10		63		—		6,309
Total	$	929,306	$	1,162	$	1,824	$	161	$	3,147	$	4,762	$	937,215



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

September 30, 2019
Residential Real Estate 1-4 Family
First liens	$	147,185	$	—	$	148	$	—	$	147,333
Junior liens and lines of credit		45,903		6		67		—		45,976
Total		193,088		6		215		—		193,309
Residential real estate - construction		12,273		—		525		—		12,798
Commercial real estate		475,059		5,221		7,527		—		487,807
Commercial		236,124		20		848		—		236,992
Consumer		6,298		—		11		—		6,309
Total	$	922,842	$	5,247	$	9,126	$	—	$	937,215



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 as of:


								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
September 30, 2019
Residential real estate - construction	1	$	446	$	446	$	—	—	$	—
Residential real estate	4		664		664		—	—		—
Commercial real estate	11		9,467		9,467		—	—		—
Total	16	$	10,577	$	10,577	$	—	—	$	—


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.