6. ALLOWANCE FOR LOAN LOSSES (Tables)

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Schdule of allowance for loan losses

A summary of changes in the allowance for loan losses (in thousands) for the years ended December 31, 2016 and 2015 is as follows:

December 31, 2016	Beginning Balance		Charge-offs		Recoveries		Provision for Loan Losses			Ending Balance		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Allowance for loan losses:
Construction/Land Development	$	4,442	$	356	$	7	$	(712	)	$	3,381	$	1,853	$	1,528
Farmland		95		-		-		(61	)		34		-		34
Real Estate		806		23		4		56			843		221		622
Multi-Family		71		-		-		(48	)		23		-		23
Commercial Real Estate		445		19		135		144			705		-		705
Home Equity – closed end		174		8		-		(91	)		75		-		75
Home Equity – open end		634		370		120		86			470		60		410
Commercial & Industrial – Non-Real Estate		1,055		293		267		(443	)		586		-		586
Consumer		108		37		19		(12	)		78		-		78
Dealer Finance		836		1,081		417		1,117			1,289		20		1,269
Credit Cards		115		74		54		(36	)		59		-		59
Total	$	8,781	$	2,261	$	1,023	$	-		$	7,543	$	2,154	$	5,389

December 31, 2015	Beginning Balance		Charge-offs		Recoveries		Provision for Loan Losses			Ending Balance		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Allowance for loan losses:
Construction/Land Development	$	4,738	$	156	$	85	$	(225	)	$	4,442	$	2,373	$	2,069
Farmland		-		-		-		95			95		-		95
Real Estate		623		25		37		171			806		238		568
Multi-Family		-		-		-		71			71		-		71
Commercial Real Estate		126		-		65		254			445		18		427
Home Equity – closed end		188		26		6		6			174		-		174
Home Equity – open end		154		51		-		531			634		269		365
Commercial & Industrial – Non-Real Estate		1,211		-		62		(218	)		1,055		-		1,055
Consumer		214		32		32		(106	)		108		-		108
Dealer Finance		1,336		251		24		(273	)		836		17		819
Credit Cards		135		60		46		(6	)		115		-		115
Total	$	8,725	$	601	$	357	$	300		$	8,781	$	2,915	$	5,866

Investment in loans based on impairment method

The following table presents the recorded investment in loans (in thousands) based on impairment method as of December 31, 2016 and 2015:

December 31, 2016	Loan Receivable		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Construction/Land Development	$	76,172	$	9,888	$	66,284
Farmland		12,901		-		12,901
Real Estate		172,758		1,974		170,784
Multi-Family		7,605		-		7,605
Commercial Real Estate		150,061		2,910		147,151
Home Equity – closed end		11,453		-		11,453
Home Equity –open end		54,420		-		54,420
Commercial & Industrial – Non-Real Estate		31,306		170		31,136
Consumer		6,643		13		6,630
Dealer Finance		65,495		87		65,408
Credit Cards		2,822		-		2,822
	$	591,636	$	15,042	$	576,594
Total

December 31, 2015	Loan Receivable		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Construction/Land Development	$	69,759	$	12,895	$	56,864
Farmland		13,378		-		13,378
Real Estate		166,587		1,421		165,167
Multi-Family		7,559		-		7,559
Commercial Real Estate		128,032		1,197		126,835
Home Equity – closed end		9,135		-		9,135
Home Equity –open end		56,599		2,573		54,026
Commercial & Industrial – Non-Real Estate		27,954		181		27,773
Consumer		8,219		18		8,201
Dealer Finance		54,086		72		54,013
Credit Cards		2,745		-		2,745
	$	544,053	$	18,357	$	525,696
Total

Schedule of Loan Portfolio by internal loan grade

The following table shows the Company’s loan portfolio broken down by internal loan grade (in thousands) as of December 31, 2016, and 2015:

December 31, 2016	Grade 1 Minimal Risk		Grade 2 Modest Risk		Grade 3 Average Risk		Grade 4 Acceptable Risk		Grade 5 Marginally Acceptable		Grade 6 Watch		Grade 7 Substandard		Grade 8 Doubtful		Total
Construction/Land Development	$	-	$	1,478	$	10,870	$	43,863	$	8,399	$	2,473	$	9,089	$	-	$	76,172
Farmland		65		-		3,073		3,456		4,446		1,861		-		-		12,901
Real Estate		-		1,149		62,168		74,242		28,266		4,680		2,253		-		172,758
Multi-Family		-		311		3,009		4,099		186		-		-		-		7,605
Commercial Real Estate		-		2,793		32,986		91,157		19,181		1,840		2,104		-		150,061
Home Equity – closed end		-		150		3,966		4,139		1,746		1,414		38		-		11,453
Home Equity – open end		124		1,724		16,415		30,974		4,547		125		511		-		54,420
Commercial & Industrial (Non-Real Estate)		1,375		1,267		6,827		19,530		2,198		39		70		-		31,306
Consumer (excluding dealer)		67		174		1,837		607		1,242		2,252		466		-		6,643
Total	$	1,631	$	9,046	$	141,151	$	272,065	$	70,211	$	14,684	$	14,531	$	-	$	523,319

	Credit Cards		Dealer Finance
Performing	$	2,822	$	65,291
Non performing		-		204
Total	$	2,822	$	65,495

December 31, 2015	Grade 1 Minimal Risk		Grade 2 Modest Risk		Grade 3 Average Risk		Grade 4 Acceptable Risk		Grade 5 Marginally Acceptable		Grade 6 Watch		Grade 7 Substandard		Grade 8 Doubtful		Total
Construction/Land Development	$	-	$	485	$	8,410	$	31,783	$	14,260	$	3,216	$	11,605	$	-	$	69,759
Farmland		66		-		2,615		3,768		4,952		1,977		-		-		13,378
Real Estate		-		955		54,400		76,545		23,695		8,334		2,658		-		166,587
Multi-Family		-		391		3,925		3,046		197		-		-		-		7,559
Commercial Real Estate		-		2,087		25,889		74,337		20,271		4,149		1,299		-		128,032
Home Equity – closed end		-		-		3,549		3,792		1,661		114		19		-		9,135
Home Equity – open end		-		1,657		15,043		31,455		4,827		398		3,219		-		56,599
Commercial & Industrial (Non-Real Estate)		896		646		6,423		17,053		2,281		517		138		-		27,954
Consumer (excluding dealer)		83		215		2,273		750		1,536		2,786		576		-		8,219
Total	$	1,045	$	6,436	$	122,527	$	242,529	$	73,680	$	21,491	$	19,514	$	-	$	487,222

	Credit Cards		Dealer Finance
Performing	$	2,730	$	53,826
Non performing		15		260
Total	$	2,745	$	54,086