XML 22 R11.htm IDEA: XBRL DOCUMENT

Loans and the Allowance for Loan Losses

9 Months Ended

Sep. 30, 2020

Loans and the Allowance for Loan Losses [Abstract]

Note 3. Loans and the Allowance for Loan Losses

The following is a summary of the balances in each class of the Company’s portfolio of loans held for investment as of the dates indicated:

(dollars in thousands)	September 30, 2020		December 31, 2019
Mortgage loans on real estate:
Residential 1-4 family	$	126,546	$	118,561
Commercial - owner occupied		150,490		141,743
Commercial - non-owner occupied		166,165		135,798
Multifamily		22,735		25,865
Construction		39,256		40,716
Second mortgages		11,647		13,941
Equity lines of credit		49,218		52,286
Total mortgage loans on real estate		566,057		528,910
Commercial and industrial loans		171,235		75,383
Consumer automobile loans		82,494		97,294
Other consumer loans		39,363		39,713
Other		12,741		6,565
Total loans, net of deferred fees		871,890		747,865
Less: Allowance for loan losses		9,920		9,660
Loans, net of allowance and deferred fees ⁽¹⁾	$	861,970	$	738,205

(1)	Net deferred loan fees totaled $2.4 million and $557 thousand at September 30, 2020 and December 31, 2019, respectively.

Overdrawn deposit accounts are reclassified as loans and included in the Other category in the table above. Overdrawn deposit accounts, excluding internal use accounts, totaled $284 thousand and $449 thousand at September 30, 2020 and December 31, 2019, respectively.

Acquired Loans

The outstanding principal balance and the carrying amount of total acquired loans included in the consolidated balance sheets as of September 30, 2020 and December 31, 2019 are as follows:

(dollars in thousands)	September 30, 2020		December 31, 2019
Outstanding principal balance	$	10,475	$	16,850
Carrying amount		10,271		16,561

The outstanding principal balance and related carrying amount of purchased credit-impaired loans, for which the Company applies FASB ASC 310-30 to account for interest earned, as of September 30, 2020 and December 31, 2019 are as follows:

(dollars in thousands)	September 30, 2020		December 31, 2019
Outstanding principal balance	$	213	$	227
Carrying amount		88		85

The following table presents changes in the accretable yield on purchased credit-impaired loans, for which the Company applies FASB ASC 310-30, at September 30, 2020 and 2019:

(dollars in thousands)	September 30, 2020			September 30, 2019
Balance at January 1	$	72		$	12
Accretion		(29	)		5
Balance at end of period		43			17

CREDIT QUALITY INFORMATION

The Company uses internally-assigned risk grades to estimate the capability of borrowers to repay the contractual obligations of their loan agreements as scheduled or at all. The Company’s internal risk grade system is based on experiences with similarly graded loans. Credit risk grades are updated at least quarterly as additional information becomes available, at which time management analyzes the resulting scores to track loan performance.

The Company’s internally assigned risk grades are as follows:

•

Pass: Loans are of acceptable risk.

•

Other Assets Especially Mentioned (OAEM): Loans have potential weaknesses that deserve management’s close attention.

•

Substandard: Loans reflect significant deficiencies due to several adverse trends of a financial, economic or managerial nature.

•

Doubtful: Loans have all the weaknesses inherent in a substandard loan with added characteristics that make collection or liquidation in full based on currently existing facts, conditions and values highly questionable or improbable.

•

Loss: Loans have been identified for charge-off because they are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.

The following tables present credit quality exposures by internally assigned risk ratings as of the dates indicated:

Credit Quality Information As of September 30, 2020
(dollars in thousands)	Pass		OAEM		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential 1-4 family	$	125,324	$	-	$	1,222	$	-	$	126,546
Commercial - owner occupied		143,807		2,851		3,832		-		150,490
Commercial - non-owner occupied		165,405		760		-		-		166,165
Multifamily		22,735		-		-		-		22,735
Construction		38,258		998		-		-		39,256
Second mortgages		11,543		-		104		-		11,647
Equity lines of credit		49,218		-		-		-		49,218
Total mortgage loans on real estate	$	556,290	$	4,609	$	5,158	$	-	$	566,057
Commercial and industrial		170,430		403		402		-		171,235
Consumer automobile		82,100		-		394		-		82,494
Other consumer		39,363		-		-		-		39,363
Other		12,741		-		-		-		12,741
Total	$	860,924	$	5,012	$	5,954	$	-	$	871,890

Credit Quality Information As of December 31, 2019
(dollars in thousands)	Pass		OAEM		Substandard		Doubtful		Total
Mortgage loans on real estate:
Residential 1-4 family	$	116,380	$	-	$	2,181	$	-	$	118,561
Commercial - owner occupied		134,570		1,618		5,555		-		141,743
Commercial - non-owner occupied		132,851		1,622		1,325		-		135,798
Multifamily		25,865		-		-		-		25,865
Construction		40,716		-		-		-		40,716
Second mortgages		13,837		-		104		-		13,941
Equity lines of credit		52,286		-		-		-		52,286
Total mortgage loans on real estate	$	516,505	$	3,240	$	9,165	$	-	$	528,910
Commercial and industrial		74,963		66		354		-		75,383
Consumer automobile		96,907		-		387		-		97,294
Other consumer		39,713		-		-		-		39,713
Other		6,565		-		-		-		6,565
Total	$	734,653	$	3,306	$	9,906	$	-	$	747,865

AGE ANALYSIS OF PAST DUE LOANS BY CLASS

All classes of loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Interest and fees continue to accrue on past due loans until the date the loan is placed in nonaccrual status, if applicable. The following table includes an aging analysis of the recorded investment in past due loans as of the dates indicated. Also included in the table below are loans that are 90 days or more past due as to interest and principal and still accruing interest, because they are well-secured and in the process of collection.

Age Analysis of Past Due Loans as of September 30, 2020
(dollars in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due and still Accruing		PCI		Nonaccrual		Total Current Loans ⁽¹⁾		Total Loans
Mortgage loans on real estate:
Residential 1-4 family	$	304	$	130	$	86	$	-	$	609	$	125,417	$	126,546
Commercial - owner occupied		298		-		-		88		3,619		146,485		150,490
Commercial - non-owner occupied		-		-		-		-		-		166,165		166,165
Multifamily		123		-		-		-		-		22,612		22,735
Construction		-		-		-		-		-		39,256		39,256
Second mortgages		46		-		-		-		104		11,497		11,647
Equity lines of credit		232		-		-		-		-		48,986		49,218
Total mortgage loans on real estate	$	1,003	$	130	$	86	$	88	$	4,332	$	560,418	$	566,057
Commercial and industrial		56		-		90		-		226		170,863		171,235
Consumer automobile		730		236		38		-		-		81,490		82,494
Other consumer		428		389		663		-		-		37,883		39,363
Other		45		2		-		-		-		12,694		12,741
Total	$	2,262	$	757	$	877	$	88	$	4,558	$	863,348	$	871,890

(1)	For purposes of this table, Total Current Loans includes loans that are 1 - 29 days past due.

In the table above, the past due totals include student loans with principal and interest amounts that are 97 - 98% guaranteed by the federal government. The past due principal portion of these guaranteed loans totaled $1.0 million at September 30, 2020.

Age Analysis of Past Due Loans as of December 31, 2019
(dollars in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		90 or More Days Past Due and still Accruing		PCI		Nonaccrual		Total Current Loans ⁽¹⁾		Total Loans
Mortgage loans on real estate:
Residential 1-4 family	$	891	$	-	$	-	$	-	$	1,459	$	116,211	$	118,561
Commercial - owner occupied		-		319		-		85		2,795		138,544		141,743
Commercial - non-owner occupied		-		-		-		-		1,422		134,376		135,798
Multifamily		-		-		-		-		-		25,865		25,865
Construction		100		-		-		-		-		40,616		40,716
Second mortgages		49		-		-		-		104		13,788		13,941
Equity lines of credit		25		-		-		-		-		52,261		52,286
Total mortgage loans on real estate	$	1,065	$	319	$	-	$	85	$	5,780	$	521,661	$	528,910
Commercial and industrial		211		-		-		-		257		74,915		75,383
Consumer automobile		1,115		299		203		-		-		95,677		97,294
Other consumer		1,032		891		888		-		-		36,902		39,713
Other		81		9		-		-		-		6,475		6,565
Total	$	3,504	$	1,518	$	1,091	$	85	$	6,037	$	735,630	$	747,865

(1)	For purposes of this table, Total Current Loans includes loans that are 1 - 29 days past due.

In the table above, the other consumer loans category includes student and small business loans with principal and interest amounts that are 97 - 100% guaranteed by the federal government. The past due principal portion of these guaranteed loans totaled $1.8 million at December 31, 2019.

Although the portions of the student and small business loan portfolios that are 90 days or more past due would normally be considered impaired, the Company does not include these loans in its impairment analysis. Because the federal government has provided guarantees of repayment of these student and small business loans in an amount ranging from 97% to 100% of the total principal and interest of the loans as of September 30, 2020, management does not expect significant increases in delinquencies of these loans to have a material effect on the Company.

Under the CARES Act, borrowers who were making payments as required and were not considered past due prior to becoming affected by COVID-19 and then received payment accommodations as a result of the effects of COVID-19 generally would not be reported as past due. If the Company agreed to a payment deferral for a borrower under the CARES Act, this may result in no contractual payments being past due, and the loans are not considered past due during the period of the deferral.

NONACCRUAL LOANS

The Company generally places commercial and industrial loans (including construction loans and commercial loans secured and not secured by real estate) in nonaccrual status when the full and timely collection of interest or principal becomes uncertain, part of the principal balance has been charged off and no restructuring has occurred or the loan reaches 90 days past due, unless the credit is well-secured and in the process of collection.

Under regulatory rules, consumer loans, which are loans to individuals for household, family and other personal expenditures, and consumer loans secured by real estate (including residential 1 - 4 family mortgages, second mortgages, and equity lines of credit) are not required to be placed in nonaccrual status. Although consumer loans and consumer loans secured by real estate are not required to be placed in nonaccrual status, the Company may elect to place these loans in nonaccrual status, if necessary to avoid a material overstatement of interest income. Generally, consumer loans secured by real estate are placed in nonaccrual status only when payments are 120 days past due.

Generally, consumer loans not secured by real estate are placed in nonaccrual status only when part of the principal has been charged off. If a charge-off has not occurred sooner for other reasons, a consumer loan not secured by real estate will generally be placed in nonaccrual status when payments are 120 days past due. These loans are charged off or written down to the net realizable value of the collateral when deemed uncollectible, when classified as a “loss,” when repayment is unreasonably protracted, when bankruptcy has been initiated, or when the loan is 120 days or more past due unless the credit is well-secured and in the process of collection.

When management places a loan in nonaccrual status, the accrued unpaid interest receivable is reversed against interest income and the loan is accounted for by the cost recovery method, until it qualifies for return to accrual status or is charged off. Generally, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured, or when the borrower has resumed paying the full amount of the scheduled contractual interest and principal payments for at least six months.

The following table presents loans in nonaccrual status by class of loan as of the dates indicated:

Nonaccrual Loans by Class

(dollars in thousands)	September 30, 2020		December 31, 2019
Mortgage loans on real estate:
Residential 1-4 family	$	609	$	1,459
Commercial - owner occupied		3,619		2,795
Commercial - non-owner occupied		-		1,422
Second mortgages		104		104
Total mortgage loans on real estate	$	4,332	$	5,780
Commercial and industrial		226		257
Total	$	4,558	$	6,037

No purchased credit-impaired loans were on nonaccrual status at September 30, 2020.

The following table presents the interest income that the Company would have earned under the original terms of its nonaccrual loans and the actual interest recorded by the Company on nonaccrual loans for the periods presented:

	Nine Months Ended September 30,
(dollars in thousand)	2020		2019
Interest income that would have been recorded under original loan terms	$	145	$	198
Actual interest income recorded for the period		34		101
Reduction in interest income on nonaccrual loans	$	111	$	97

TROUBLED DEBT RESTRUCTURINGS

The Company’s loan portfolio includes certain loans that have been modified in a TDR, where economic concessions have been granted to borrowers who are experiencing financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reduction in the interest rate below current market rates for borrowers with similar risk profiles, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The Company defines a TDR as nonperforming if the TDR is in nonaccrual status or is 90 days or more past due and still accruing interest at the report date.

When the Company modifies a loan, management evaluates any possible impairment as stated in the impaired loan section below.

There was one new TDR in the nine months ended September 30, 2020. The outstanding principal balance pre- and post-modification was $177 thousand and the borrower was provided with an extended repayment schedule of interest only. There were three new TDRs in the nine months ended September 30, 2019.

At September 30, 2020 and 2019, the Company had no outstanding commitments to disburse additional funds on any TDR. The Company had no loans secured by residential 1 - 4 family real estate in the process of foreclosure at September 30, 2020. At December 31, 2019, the Company had $272 thousand in loans secured by 1-4 family residential real estate in process of foreclosure.

In the three and nine months ended September 30, 2020 and 2019, there were no defaulting TDRs where the default occurred within twelve months of restructuring. The Company considers a TDR in default when any of the following occurs: the loan, as restructured, becomes 90 days or more past due; the loan is moved to nonaccrual status following the restructure; the loan is restructured again under terms that would qualify it as a TDR if it were not already so classified; or any portion of the loan is charged off.

All TDRs are factored into the determination of the allowance for loan losses and included in the impaired loan analysis, as discussed below.

Under Section 4013 of the CARES Act, banks may elect not to categorize loan modifications as TDRs if the modifications are related to the COVID-19 pandemic, executed on a loan that was not more than 30 days past due as of December 31, 2019, and executed between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the date of termination of the National Emergency by the President. All short term loan modifications made on a good faith basis in response to the COVID-19 pandemic to borrowers who were current prior to any relief are not considered TDRs. The Company has examined the payment accommodations granted to borrowers in response to COVID-19 and found that all borrowers were current prior to relief and were not experiencing financial difficulty prior to the COVID-19 pandemic. As of September 30, 2020, the Company had loan modifications on $7.5 million, or 0.9%, of the loan portfolio, granting primarily 60- or 90- day principal and interest payment deferrals. Loan modifications under the CARES Act are being monitored for indications of credit softening, at which time the credit will be analyzed under current underwriting standards for appropriate action and designation. The Company recognizes interest income as earned and management expects that the deferred interest will be repaid by the borrower in a future period.

IMPAIRED LOANS

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts when due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans and loans modified in a TDR. When management identifies a loan as impaired, the impairment is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole or remaining source of repayment for the loan is the operation or liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs, when foreclosure is probable, instead of the discounted cash flows. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through a specific allocation in the allowance or a charge-off to the allowance.

When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is in nonaccrual status, all payments are applied to principal under the cost-recovery method. For financial statement purposes, the recorded investment in the loan is the actual principal balance reduced by partial charge-offs and payments that would otherwise have been applied to interest. When reporting information on these loans to the applicable customers, the unpaid principal balance is reported as if these partial charge-offs did not occur and as if payments were applied to principal and interest under the original terms of the loan agreements. Therefore, the unpaid principal balance reported to the customer would be higher than the recorded investment in the loan for financial statement purposes.

The following table includes the recorded investment and unpaid principal balances (a portion of which may have been charged off) for impaired loans, exclusive of purchased credit-impaired loans, with the associated allowance amount, if applicable, as of the dates presented. Also presented are the average recorded investments in the impaired loans and the related amount of interest recognized for the periods presented. The average balances are calculated based on daily average balances.

Impaired Loans by Class
									For the nine months ended
	As of September 30, 2020								September 30, 2020
(Dollars in thousands)	Unpaid Principal Balance		Without Valuation Allowance		With Valuation Allowance		Associated Allowance		Average Recorded Investment		Interest Income Recognized
Mortgage loans on real estate:
Residential 1-4 family	$	788	$	665	$	87	$	37	$	759	$	6
Commercial		6,184		761		3,314		200		5,052		54
Construction		85		-		84		10		85		3
Second mortgages		241		-		239		134		240		4
Total mortgage loans on real estate		7,298		1,426		3,724		381		6,136		67
Commercial and industrial		294		96		138		84		250		-
Other consumer loans		17		15		-		-		16		1
Total	$	7,609	$	1,537	$	3,862	$	465	$	6,402	$	68

Impaired Loans by Class
									For the Year Ended
	As of December 31, 2019								December 31, 2019
(Dollars in thousands)	Unpaid Principal Balance		Without Valuation Allowance		With Valuation Allowance		Associated Allowance		Average Recorded Investment		Interest Income Recognized
Mortgage loans on real estate:
Residential 1-4 family	$	1,542	$	1,519	$	89	$	39	$	1,416	$	11
Commercial		9,333		4,538		1,611		317		6,822		123
Construction		89		-		88		14		88		4
Second mortgages		247		-		245		111		246		6
Total mortgage loans on real estate		11,211		6,057		2,033		481		8,572		144
Commercial and industrial		362		354		-		-		273		4
Other consumer loans		22		-		-		-		21		1
Total	$	11,595	$	6,411	$	2,033	$	481	$	8,866	$	149

ALLOWANCE FOR LOAN LOSSES

Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and probable losses inherent in the loan portfolio. The Company segments the loan portfolio into categories as defined by Schedule RC-C of the Federal Financial Institutions Examination Council Consolidated Reports of Condition and Income Form 041 (Call Report). Loans are segmented into the following pools: commercial, real estate-construction, real estate-mortgage, consumer and other loans. The Company also sub-segments the real estate-mortgage segment into six classes: residential 1-4 family, commercial real estate - owner occupied, commercial real estate - non-owner occupied, multifamily, second mortgages and equity lines of credit.

The Company uses an internally developed risk evaluation model in the estimation of the credit risk process. The model and assumptions used to determine the allowance are independently validated and reviewed to ensure that the theoretical foundation, assumptions, data integrity, computational processes and reporting practices are appropriate and properly documented.

Each portfolio segment has risk characteristics as follows:

•

Commercial and industrial: Commercial and industrial loans carry risks associated with the successful operation of a business or project, in addition to other risks associated with the ownership of a business. The repayment of these loans may be dependent upon the profitability and cash flows of the business. In addition, there is risk associated with the value of collateral other than real estate which may depreciate over time and cannot be appraised with as much precision.

•

Real estate-construction: Construction loans carry risks that the project will not be finished according to schedule, the project will not be finished according to budget and the value of the collateral may at any point in time be less than the principal amount of the loan. Construction loans also bear the risk that the general contractor, who may or may not be the loan customer, may be unable to finish the construction project as planned because of financial pressure unrelated to the project.

•

Real estate-mortgage: Residential mortgage loans and equity lines of credit carry risks associated with the continued credit-worthiness of the borrower and changes in the value of the collateral. Commercial real estate loans carry risks associated with the successful operation of a business if owner occupied. If non-owner occupied, the repayment of these loans may be dependent upon the profitability and cash flow from rent receipts.

•

Consumer loans: Consumer loans carry risks associated with the continued credit-worthiness of the borrowers and the value of the collateral. Consumer loans are more likely than real estate loans to be immediately adversely affected by job loss, divorce, illness or personal bankruptcy.

•

Other loans: Other loans are loans to mortgage companies, loans for purchasing or carrying securities, and loans to insurance, investment and finance companies. These loans carry risks associated with the successful operation of a business. In addition, there is risk associated with the value of collateral other than real estate which may depreciate over time, depend on interest rates or fluctuate in active trading markets.

Each segment of the portfolio is pooled by risk grade or by days past due. Consumer loans not secured by real estate and made to individuals for household, family and other personal expenditures are segmented into pools based on days past due, while all other loans, including loans to consumers that are secured by real estate, are segmented by risk grades. A historical loss percentage is then calculated by migration analysis and applied to each pool. The migration analysis applied to all pools is able to track the risk grading and historical performance of individual loans throughout a number of periods set by management, which provides management with information regarding trends (or migrations) in a particular loan segment. At September 30, 2020 and December 31, 2019 management used eight twelve-quarter migration periods.

Management also provides an allocated component of the allowance for loans that are specifically identified as impaired, and are individually analyzed for impairment. An allocated allowance is established when the present value of expected future cash flows from the impaired loan (or the collateral value or observable market price of the impaired loan) is lower than the carrying value of that loan.

Based on credit risk assessments and management’s analysis of qualitative factors, additional loss factors are applied to loan balances. These additional qualitative factors include: economic conditions (including uncertainties associated with the COVID-19 pandemic), trends in growth, loan concentrations, changes in certain loans, changes in underwriting, changes in management and changes in the legal and regulatory environment.

Given the timing of the outbreak in the United States of the COVID-19 pandemic, management does not believe that the Company’s performance in relation to credit quality during the first nine months of 2020 was significantly impacted. The COVID-19 pandemic represents an unprecedented challenge to the global economy in general and the financial services sector in particular. However, there is still significant uncertainty regarding the overall length of the pandemic and the aggregate impact that it will have on global and regional economies, including uncertainties regarding the potential positive effects of governmental actions taken in response to the pandemic during the latter portion of the first quarter of 2020 and into the subsequent quarters. With so much uncertainty, it is impossible for the Company to accurately predict the impact that the pandemic will have on the Company’s primary market and the overall extent to which it will affect the Company’s financial condition and results of operations during the remainder of the current fiscal year. At a minimum, the actions taken by the Company to assist its customers experiencing challenges from the pandemic will likely have a material impact on the Company’s performance for 2020. The Company’s credit administration is closely monitoring and analyzing the higher risk segments within the loan portfolio, tracking loan payment deferrals, customer liquidity and providing timely reports to senior management and the Board of Directors. Based on capital levels, stress testing indications, prudent underwriting policies, watch credit processes, and loan concentration diversification, the Company currently expects to be able to manage the economic risks and uncertainties associated with the pandemic which may include additional increases in the provision for loan losses.

Acquired loans are recorded at their fair value at acquisition date without carryover of the acquiree’s previously established ALL, as credit discounts are included in the determination of fair value. The fair value of the loans is determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and then applying a market-based discount rate to those cash flows. During evaluation upon acquisition, acquired loans are also classified as either purchased credit-impaired or purchased performing.

Purchased credit-impaired loans reflect credit quality deterioration since origination, as it is probable at acquisition that the Company will not be able to collect all contractually required payments. These purchased credit-impaired loans are accounted for under ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality. The purchased credit-impaired loans are segregated into pools based on loan type and credit risk. Loan type is determined based on collateral type, purpose, and lien position. Credit risk characteristics include risk rating groups, nonaccrual status, and past due status. For valuation purposes, these pools are further disaggregated by maturity, pricing characteristics, and re-payment structure. Purchased credit-impaired loans are written down at acquisition to fair value using an estimate of cash flows deemed to be collectible. Accordingly, such loans are no longer classified as nonaccrual even though they may be contractually past due because the Company expects to fully collect the new carrying values of such loans, which is the new cost basis arising from purchase accounting.

Purchased performing loans are accounted for under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs. The difference between the fair value and unpaid principal balance of the loan at acquisition date (premium or discount) is amortized or accreted into interest income over the life of the loans. If the purchased performing loan has revolving privileges, it is accounted for using the straight-line method; otherwise, the effective interest method is used.

ALLOWANCE FOR LOAN LOSSES BY SEGMENT

The total allowance reflects management’s estimate of losses inherent in the loan portfolio at the balance sheet date. The Company considers the allowance for loan losses of $9.9 million adequate to cover probable loan losses inherent in the loan portfolio at September 30, 2020.

The following tables present, by portfolio segment, the changes in the allowance for loan losses and the recorded investment in loans for the periods presented. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

ALLOWANCE FOR LOAN LOSSES AND RECORDED INVESTMENT IN LOANS

	For the nine months ended September 30, 2020

(Dollars in thousands)	Commercial and Industrial			Real Estate Construction		Real Estate - Mortgage ⁽¹⁾			Consumer ⁽²⁾			Other			Unallocated		Total
Allowance for loan losses:
Balance, beginning	$	1,244		$	258	$	6,168		$	1,694		$	296		$	-	$	9,660
Charge-offs		(9	)		-		(389	)		(701	)		(278	)		-		(1,377	)
Recoveries		9			-		352			321			55			-		737
Provision for loan losses		(300	)		41		989			12			124			34		900
Ending Balance	$	944		$	299	$	7,120		$	1,326		$	197		$	34	$	9,920

Individually evaluated for impairment	$	84		$	10	$	371		$	-		$	-		$	-	$	465
Collectively evaluated for impairment		860			289		6,749			1,326			197			34		9,455
Purchased credit-impaired loans		-			-		-			-			-					-

Ending Balance	$	944		$	299	$	7,120		$	1,326		$	197		$	34	$	9,920

Loans Balances:
Individually evaluated for impairment		234			84		5,066			15			-			-		5,399
Collectively evaluated for impairment		171,001			39,172		521,647			121,842			12,741			-		866,403
Purchased credit-impaired loans		-			-		88			-			-					88
Ending Balance	$	171,235		$	39,256	$	526,801		$	121,857		$	12,741		$	-	$	871,890

⁽¹⁾	The real estate-mortgage segment includes residential 1 – 4 family, commercial real estate, second mortgages and equity lines of credit.

⁽²⁾	The consumer segment includes consumer automobile loans.

	For the Year ended December 31, 2019

(Dollars in thousands)	Commercial and Industrial			Real Estate Construction		Real Estate - Mortgage ⁽¹⁾			Consumer ⁽²⁾			Other			Unallocated		Total
Allowance for loan losses:
Balance, beginning	$	2,340		$	156	$	5,956		$	1,354		$	305		$	-	$	10,111
Charge-offs		-			-		(197	)		(776	)		(425	)		-		(1,398	)
Recoveries		10			-		200			351			68			-		629
Provision for loan losses		(1,106	)		102		209			765			348			-		318
Ending Balance	$	1,244		$	258	$	6,168		$	1,694		$	296		$	-	$	9,660

Individually evaluated for impairment	$	-		$	14	$	467		$	-		$	-		$	-	$	481
Collectively evaluated for impairment		1,244			244		5,701			1,694			296			-		9,179
Purchased credit-impaired loans		-			-		-			-			-					-

Ending Balance	$	1,244		$	258	$	6,168		$	1,694		$	296		$	-	$	9,660

Loans Balances:
Individually evaluated for impairment		354			88		8,002			-			-			-		8,444
Collectively evaluated for impairment		75,029			40,628		480,107			137,007			6,565			-		739,336
Purchased credit-impaired loans		-			-		85			-			-					85
Ending Balance	$	75,383		$	40,716	$	488,194		$	137,007		$	6,565		$	-	$	747,865

⁽¹⁾	The real estate-mortgage segment includes residential 1 – 4 family, commercial real estate, second mortgages and equity lines of credit.

⁽²⁾	The consumer segment includes consumer automobile loans.