Loans

Loans, excluding loans held for sale, at September 30, 2018 and December 31, 2017, were comprised of the following (dollars in thousands):



	September 30, 2018		December 31, 2017
Commercial	$	284,176	$	251,666
Commercial real estate:
Construction and land development	99,546		123,147
Commercial real estate	632,022		637,701
Residential real estate:
Residential	205,277		209,326
Home equity	104,873		109,857
Consumer	5,259		4,428
Total loans	$	1,331,153	$	1,336,125

Acquired Loans

The outstanding principal balance and the carrying amount of these loans, including FASB Accounting Standards Codification ("ASC") 310-30, included in the consolidated balance sheets at September 30, 2018 and December 31, 2017 are as follows (dollars in thousands):



	September 30, 2018		December 31, 2017
Outstanding principal balance	$	66,544	$	79,523
Carrying amount	61,537		73,796

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



	September 30, 2018		December 31, 2017
Outstanding principal balance	$	25,285	$	27,876
Carrying amount	21,221		23,430

The following table presents changes in the accretable yield on acquired impaired loans, for which the Company applies FASB ASC 310-30, for the nine months ended September 30, 2018 and the year ended December 31, 2017 (dollars in thousands):



	September 30, 2018			December 31, 2017
Balance at January 1	$	4,890		$	6,103
Accretion	(1,816		)	(3,117		)
Reclassification from nonaccretable difference	769			1,006
Other changes, net*	715			898
	$	4,558		$	4,890

* 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 period.

Past Due Loans

The following table shows an analysis by portfolio segment of the Company's past due loans at September 30, 2018 (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	$	7	$	—	$	—	$	1,054	$	1,061	$	283,115	$	284,176
Commercial real estate:
Construction and land development	—		—		—		30		30		99,516		99,546
Commercial real estate	45		—		—		215		260		631,762		632,022
Residential:
Residential	69		427		74		795		1,365		203,912		205,277
Home equity	129		—		—		144		273		104,600		104,873
Consumer	15		—		—		—		15		5,244		5,259
Total	$	265	$	427	$	74	$	2,238	$	3,004	$	1,328,149	$	1,331,153

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 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	$	92	$	—	$	—	$	90	$	182	$	251,484	$	251,666
Commercial real estate:
Construction and land development	—		—		—		36		36		123,111		123,147
Commercial real estate	86		—		280		489		855		636,846		637,701
Residential:
Residential	282		71		79		1,343		1,775		207,551		209,326
Home equity	141		16		—		243		400		109,457		109,857
Consumer	21		5		—		—		26		4,402		4,428
Total	$	622	$	92	$	359	$	2,201	$	3,274	$	1,332,851	$	1,336,125

Impaired Loans

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at September 30, 2018 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	32	$	32	$	—	$	48	$	4
Commercial real estate:
Construction and land development	—		—		—		—		—
Commercial real estate	496		492		—		583		29
Residential:
Residential	658		658		—		932		21
Home equity	51		51		—		123		9
Consumer	—		—		—		2		—
	$	1,237	$	1,233	$	—	$	1,688	$	63
With a related allowance recorded:
Commercial	$	1,002	$	1,000	$	791	$	427	$	49
Commercial real estate:
Construction and land development*	—		—		—		26		—
Commercial real estate*	—		—		—		23		—
Residential
Residential	176		176		9		384		7
Home equity*	—		—		—		160		1
Consumer*	—		—		—		—		—
	$	1,178	$	1,176	$	800	$	1,020	$	57
Total:
Commercial	$	1,034	$	1,032	$	791	$	475	$	53
Commercial real estate:
Construction and land development	—		—		—		26		—
Commercial real estate	496		492		—		606		29
Residential:
Residential	834		834		9		1,316		28
Home equity	51		51		—		283		10
Consumer	—		—		—		2		—
	$	2,415	$	2,409	$	800	$	2,708	$	120

* 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 with 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, 2017 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	4	$	4	$	—	$	19	$	1
Commercial real estate:
Construction and land development	—		—		—		56		4
Commercial real estate	791		789		—		1,069		66
Residential:
Residential	717		719		—		575		41
Home equity	142		142		—		109		10
Consumer	5		5		—		6		1
	$	1,659	$	1,659	$	—	$	1,834	$	123
With a related allowance recorded:
Commercial	$	202	$	201	$	154	$	150	$	16
Commercial real estate:
Construction and land development*	37		37		—		56		—
Commercial real estate*	34		32		—		126		11
Residential:
Residential	1,022		1,022		12		1,174		27
Home equity	263		261		1		251		1
Consumer*	—		—		—		5		—
	$	1,558	$	1,553	$	167	$	1,762	$	55
Total:
Commercial	$	206	$	205	$	154	$	169	$	17
Commercial real estate:
Construction and land development	37		37		—		112		4
Commercial real estate	825		821		—		1,195		77
Residential:
Residential	1,739		1,741		12		1,749		68
Home equity	405		403		1		360		11
Consumer	5		5		—		11		1
	$	3,217	$	3,212	$	167	$	3,596	$	178

* 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 with unearned costs exceed unearned fees.

The following tables show the detail of loans modified as troubled debt restructurings ("TDRs") during the three and nine months ended September 30, 2018 included in the impaired loan balances (dollars in thousands):



	Loans Modified as a TDR for the
	Three Months Ended September 30, 2018
Loan Type	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	—	$	—	$	—
Commercial real estate	—	—		—
Construction and land development	—	—		—
Home Equity	—	—		—
Residential real estate	—	—		—
Consumer	—	—		—
Total	—	$	—	$	—



	Loans Modified as a TDR for the
	Nine Months Ended September 30, 2018
Loan Type	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	—	$	—	$	—
Commercial real estate	—	—		—
Construction and land development	—	—		—
Home Equity	—	—		—
Residential real estate	1	11		11
Consumer	—	—		—
Total	1	$	11	$	11

The following tables show the detail of loans modified as TDRs during the three and nine months ended September 30, 2017 included in the impaired loan balances (dollars in thousands):



	Loans Modified as a TDR for the
	Three Months Ended September 30, 2017
Loan Type	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	1	$	45	$	45
Commercial real estate	—	—		—
Construction and land development	—	—		—
Home Equity	—	—		—
Residential real estate	—	—		—
Consumer	—	—		—
Total	1	$	45	$	45



	Loans Modified as a TDR for the
	Nine Months Ended September 30, 2017
Loan Type	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	4	$	118	$	118
Commercial real estate	—	—		—
Construction and land development	—	—		—
Home Equity	2	57		57
Residential real estate	—	—		—
Consumer	—	—		—
Total	6	$	175	$	175

During the three and nine months ended September 30, 2018 and 2017, 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 $178,000 in residential real estate loans in the process of foreclosure at September 30, 2018 and $766,000 and $629,000 in residential OREO at September 30, 2018 and December 31, 2017, respectively.

Risk Grades

The following table shows the Company's loan portfolio broken down by internal risk grading as of September 30, 2018 (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	$	281,211	$	95,662	$	623,317	$	199,205	$	104,313
Special Mention	1,588		1,870		4,333		2,046		—
Substandard	1,377		2,014		4,372		4,026		560
Doubtful	—		—		—		—		—
Total	$	284,176	$	99,546	$	632,022	$	205,277	$	104,873

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer
Performing	$	5,259
Nonperforming	—
Total	$	5,259

The following table shows the Company's loan portfolio broken down by internal risk grading as of December 31, 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	$	248,714	$	114,502	$	625,861	$	200,405	$	107,705
Special Mention	1,763		7,114		6,914		4,438		1,325
Substandard	1,189		1,531		4,926		4,483		827
Doubtful	—		—		—		—		—
Total	$	251,666	$	123,147	$	637,701	$	209,326	$	109,857

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer
Performing	$	4,415
Nonperforming	13
Total	$	4,428

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.