Loans

Loans, excluding loans held for sale, at June 30, 2017 and December 31, 2016, were comprised of the following (dollars in thousands):



	June 30, 2017		December 31, 2016
Commercial	$	236,418	$	208,717
Commercial real estate:
Construction and land development	132,322		114,258
Commercial real estate	590,093		510,960
Residential real estate:
Residential	211,305		215,104
Home equity	113,580		110,751
Consumer	4,975		5,031
Total loans	$	1,288,693	$	1,164,821

Acquired Loans

The outstanding principal balance and the carrying amount of these loans included in the consolidated balance sheets at June 30, 2017 and December 31, 2016 are as follows (dollars in thousands):



	June 30, 2017		December 31, 2016
Outstanding principal balance	$	91,983	$	104,172
Carrying amount	85,283		96,487

The outstanding principal balance and related carrying amount of acquired impaired loans, for which the Company applies FASB Accounting Standards Codification ("ASC") 310-30 to account for interest earned, as of the indicated dates are as follows (dollars in thousands):



	June 30, 2017		December 31, 2016
Outstanding principal balance	$	32,206	$	34,378
Carrying amount	27,040		28,669

The following table presents changes in the accretable yield on acquired impaired loans, for which the Company applies FASB ASC 310-30, for the six months ended June 30, 2017 and the year ended December 31, 2016 (dollars in thousands):



	June 30, 2017			December 31, 2016
Balance at January 1	$	6,103		$	7,299
Accretion	(1,460		)	(3,232		)
Reclassification from nonaccretable difference	374			2,197
Other changes, net*	717			(161		)
	$	5,734		$	6,103

*This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate acquired impaired loans, and discounted payoffs that occurred in the quarter.

Past Due Loans

The following table shows an analysis by portfolio segment of the Company's past due loans at June 30, 2017 (dollars in thousands):



	30- 59 Days Past Due		60-89 Days Past Due		90 Days + Past Due and Still Accruing		Non- Accrual Loans		Total Past Due		Current		Total Loans
Commercial	$	67	$	109	$	140	$	25	$	341	$	236,077	$	236,418
Commercial real estate:
Construction and land development	249		—		241		61		551		131,771		132,322
Commercial real estate	426		—		278		811		1,515		588,578		590,093
Residential:
Residential	942		132		952		1,012		3,038		208,267		211,305
Home equity	71		8		—		201		280		113,300		113,580
Consumer	21		7		—		7		35		4,940		4,975
Total	$	1,776	$	256	$	1,611	$	2,117	$	5,760	$	1,282,933	$	1,288,693

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 2016 (dollars in thousands):



	30- 59 Days Past Due		60-89 Days Past Due		90 Days + Past Due and Still Accruing		Non- Accrual Loans		Total Past Due		Current		Total Loans
Commercial	$	50	$	—	$	—	$	19	$	69	$	208,648	$	208,717
Commercial real estate:
Construction and land development	60		12		—		64		136		114,122		114,258
Commercial real estate	—		127		339		773		1,239		509,721		510,960
Residential:
Residential	1,280		117		248		1,802		3,447		211,657		215,104
Home equity	229		—		—		289		518		110,233		110,751
Consumer	6		5		—		18		29		5,002		5,031
Total	$	1,625	$	261	$	587	$	2,965	$	5,438	$	1,159,383	$	1,164,821

Impaired Loans

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at June 30, 2017 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	18	$	17	$	—	$	17	$	1
Commercial real estate:
Construction and land development	71		71		—		155		4
Commercial real estate	1,067		1,064		—		1,305		38
Residential:
Residential	443		446		—		378		17
Home equity	145		145		—		131		5
Consumer	7		7		—		9		—
	$	1,751	$	1,750	$	—	$	1,995	$	65
With a related allowance recorded:
Commercial	78		77		5		78		2
Commercial real estate:
Construction and land development*	61		62		—		213		—
Commercial real estate*	95		95		—		224		—
Residential
Residential	1,086		1,085		9		1,498		17
Home equity	222		220		1		320		1
Consumer*	7		7		—		13		—
	$	1,549	$	1,546	$	15	$	2,346	$	20
Total:
Commercial	$	96	$	94	$	5	$	95	$	3
Commercial real estate:
Construction and land development	132		133		—		368		4
Commercial real estate	1,162		1,159		—		1,529		38
Residential:
Residential	1,529		1,531		9		1,876		34
Home equity	367		365		1		451		6
Consumer	14		14		—		22		—
	$	3,300	$	3,296	$	15	$	4,341	$	85

*Allowance is reported as zero in the table due to presentation in thousands and rounding.

In the table above, recorded investment may exceed unpaid principal balance due to acquired loans with a premium and loans where unearned costs exceed unearned fees.

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2016 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	24	$	24	$	—	$	12	$	2
Commercial real estate:
Construction and land development	158		157		—		198		16
Commercial real estate	1,916		1,917		—		1,409		107
Residential:
Residential	557		567		—		318		38
Home equity	6		6		—		153		16
Consumer	9		9		—		10		1
	$	2,670	$	2,680	$	—	$	2,100	$	180
With a related allowance recorded:
Commercial*	$	19	$	19	$	—	$	78	$	1
Commercial real estate:
Construction and land development*	64		65		—		272		10
Commercial real estate*	48		48		—		286		7
Residential:
Residential	1,639		1,639		22		1,593		32
Home equity	386		385		1		345		4
Consumer*	18		18		—		14		—
	$	2,174	$	2,174	$	23	$	2,588	$	54
Total:
Commercial	$	43	$	43	$	—	$	90	$	3
Commercial real estate:
Construction and land development	222		222		—		470		26
Commercial real estate	1,964		1,965		—		1,695		114
Residential:
Residential	2,196		2,206		22		1,911		70
Home equity	392		391		1		498		20
Consumer	27		27		—		24		1
	$	4,844	$	4,854	$	23	$	4,688	$	234

*Allowance is reported as zero in the table due to presentation in thousands and rounding.

In the table above, recorded investment may exceed unpaid principal balance due to acquired loans with a premium and loans where unearned costs exceed unearned fees.

The following tables show the detail of loans modified as troubled debt restructurings ("TDRs") during the three and six months ended June 30, 2017 included in the impaired loan balances (dollars in thousands):



	Loans Modified as a TDR for the
	Three Months Ended June 30, 2017
Loan Type	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	1	$	5	$	5
Commercial real estate	—	—		—
Construction and land development	—	—		—
Home Equity	1	36		36
Residential real estate	—	—		—
Consumer	—	—		—
Total	2	$	41	$	41



	Loans Modified as a TDR for the
	Six Months Ended June 30, 2017
Loan Type	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	3	$	73	$	73
Commercial real estate	—	—		—
Construction and land development	—	—		—
Home Equity	2	57		57
Residential real estate	—	—		—
Consumer	—	—		—
Total	5	$	130	$	130

The following tables show the detail of loans modified as TDRs during the three and six months ended June 30, 2016 included in the impaired loan balances (dollars in thousands):



	Loans Modified as a TDR for the
	Three Months Ended June 30, 2016
Loan Type	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	1	$	24	$	24
Commercial real estate	1	937		937
Construction and land development	—	—		—
Home Equity	—	—		—
Residential real estate	1	2		1
Consumer	—	—		—
Total	3	$	963	$	962



	Loans Modified as a TDR for the
	Six Months Ended June 30, 2016
Loan Type	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	1	$	24	$	24
Commercial real estate	2	1,005		1,003
Construction and land development	—	—		—
Home Equity	—	—		—
Residential real estate	1	2		1
Consumer	—	—		—
Total	4	$	1,031	$	1,028

During the three and six months ended June 30, 2017 and 2016, the Company had no loans that subsequently defaulted within twelve months of modification. The Company defines defaults as one or more payments that occur more than 90 days past the due date, charge-off or foreclosure subsequent to modification.

Residential Real Estate in Process of Foreclosure

The Company had $1,127,000 in residential real estate loans in the process of foreclosure at June 30, 2017 and $928,000 and $653,000 in residential OREO at June 30, 2017 and December 31, 2016, respectively.

Risk Grades

The following table shows the Company's loan portfolio broken down by internal risk grading as of June 30, 2017 (dollars in thousands):

Commercial and Consumer Credit Exposure

Credit Risk Profile by Internally Assigned Grade



	Commercial		Construction and Land Development		Commercial Real Estate Other		Residential		Home Equity
Pass	$	235,653	$	128,538	$	580,241	$	198,350	$	111,640
Special Mention	367		2,072		4,126		8,771		1,339
Substandard	398		1,712		5,726		4,184		601
Doubtful	—		—		—		—		—
Total	$	236,418	$	132,322	$	590,093	$	211,305	$	113,580

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer

Performing	$	4,965
Nonperforming	10
Total	$	4,975

The following table shows the Company's loan portfolio broken down by internal risk grading as of December 31, 2016 (dollars in thousands):

Commercial and Consumer Credit Exposure

Credit Risk Profile by Internally Assigned Grade



	Commercial		Construction and Land Development		Commercial Real Estate Other		Residential		Home Equity
Pass	$	208,098	$	112,729	$	501,081	$	199,278	$	108,799
Special Mention	592		902		4,859		10,600		1,257
Substandard	27		627		5,020		5,226		695
Doubtful	—		—		—		—		—
Total	$	208,717	$	114,258	$	510,960	$	215,104	$	110,751

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer

Performing	$	5,003
Nonperforming	28
Total	$	5,031

Loans classified in the Pass category typically are fundamentally sound and risk factors are reasonable and acceptable.

Loans classified in the Special Mention category typically have been criticized internally, by loan review or the loan officer, or by external regulators under the current credit policy regarding risk grades.

Loans classified in the Substandard category typically have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are typically characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Loans classified in the Doubtful category typically have all the weaknesses inherent in loans classified as substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur that may salvage the debt.

Consumer loans are classified as performing or nonperforming. A loan is nonperforming when payments of interest and principal are past due 90 days or more, or payments are less than 90 days past due, but there are other good reasons to doubt that payment will be made in full.