Loans

Loans, excluding loans held for sale, at September 30, 2019 and December 31, 2018, were comprised of the following (dollars in thousands):



	September 30, 2019		December 31, 2018
Commercial	$	324,508	$	285,972
Commercial real estate:
Construction and land development	143,788		97,240
Commercial real estate	883,219		655,800
Residential real estate:
Residential	318,833		209,438
Home equity	122,074		103,933
Consumer	12,025		5,093
Total loans	$	1,804,447	$	1,357,476

Acquired Loans

The outstanding principal balance and the carrying amount of these loans, including loans accounted for under ASC 310-30, included in the consolidated balance sheets at September 30, 2019 and December 31, 2018 are as follows (dollars in thousands):



	September 30, 2019		December 31, 2018
Outstanding principal balance	$	437,461	$	63,619
Carrying amount	420,066		58,886

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, 2019		December 31, 2018
Outstanding principal balance	$	59,353	$	24,500
Carrying amount	48,733		20,611

The following table presents changes in the accretable yield on acquired impaired loans, for which the Company applies ASC 310-30, for the nine months ended September 30, 2019 and the year ended December 31, 2018 (dollars in thousands):



	September 30, 2019			December 31, 2018
Balance at January 1	$	4,633		$	4,890
Additions from merger with HomeTown	4,410			—
Accretion	(2,436		)	(2,362		)
Reclassification from nonaccretable difference	389			956
Other changes, net*	506			1,149
	$	7,502		$	4,633

* 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, 2019 (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	$	776	$	121	$	39	$	110	$	1,046	$	323,462	$	324,508
Commercial real estate:
Construction and land development	—		—		—		21		21		143,767		143,788
Commercial real estate	865		483		136		299		1,783		881,436		883,219
Residential:
Residential	976		5		648		845		2,474		316,359		318,833
Home equity	321		95		51		171		638		121,436		122,074
Consumer	70		14		—		—		84		11,941		12,025
Total	$	3,008	$	718	$	874	$	1,446	$	6,046	$	1,798,401	$	1,804,447

The following table shows an analysis by portfolio segment of the Company's past due loans at December 31, 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	$	20	$	—	$	—	$	83	$	103	$	285,869	$	285,972
Commercial real estate:
Construction and land development	—		—		—		27		27		97,213		97,240
Commercial real estate	42		—		—		197		239		655,561		655,800
Residential:
Residential	456		157		72		659		1,344		208,094		209,438
Home equity	126		—		—		124		250		103,683		103,933
Consumer	21		3		—		—		24		5,069		5,093
Total	$	665	$	160	$	72	$	1,090	$	1,987	$	1,355,489	$	1,357,476

Impaired Loans

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at September 30, 2019 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	—	$	—	$	—	$	8	$	—
Commercial real estate:
Construction and land development	—		—		—		—		—
Commercial real estate	530		527		—		404		29
Residential:
Residential	731		734		—		663		32
Home equity	43		43		—		46		4
Consumer	—		—		—		—		—
	$	1,304	$	1,304	$	—	$	1,121	$	65
With a related allowance recorded:
Commercial	$	52	$	47	$	47	$	55	$	2
Commercial real estate:
Construction and land development	—		—		—		—		—
Commercial real estate	—		—		—		—		—
Residential
Residential	259		259		27		218		13
Home equity	—		—		—		—		—
Consumer	—		—		—		—		—
	$	311	$	306	$	74	$	273	$	15
Total:
Commercial	$	52	$	47	$	47	$	63	$	2
Commercial real estate:
Construction and land development	—		—		—		—		—
Commercial real estate	530		527		—		404		29
Residential:
Residential	990		993		27		881		45
Home equity	43		43		—		46		4
Consumer	—		—		—		—		—
	$	1,615	$	1,610	$	74	$	1,394	$	80

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

The following table presents the Company's impaired loan balances by portfolio segment, excluding acquired impaired loans, at December 31, 2018 (dollars in thousands):



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial	$	28	$	28	$	—	$	44	$	14
Commercial real estate:
Construction and land development	—		—		—		—		—
Commercial real estate	376		373		—		542		36
Residential:
Residential	646		646		—		875		29
Home equity	49		49		—		108		10
Consumer	—		—		—		2		—
	$	1,099	$	1,096	$	—	$	1,571	$	89
With a related allowance recorded:
Commercial	$	62	$	58	$	55	$	354	$	40
Commercial real estate:
Construction and land development	—		—		—		21		—
Commercial real estate	—		—		—		18		—
Residential:
Residential	173		173		9		342		9
Home equity	—		—		—		128		1
Consumer	—		—		—		—		—
	$	235	$	231	$	64	$	863	$	50
Total:
Commercial	$	90	$	86	$	55	$	398	$	54
Commercial real estate:
Construction and land development	—		—		—		21		—
Commercial real estate	376		373		—		560		36
Residential:
Residential	819		819		9		1,217		38
Home equity	49		49		—		236		11
Consumer	—		—		—		2		—
	$	1,334	$	1,327	$	64	$	2,434	$	139

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

There were no loans modified as troubled debt restructurings ("TDRs") during the three months ended September 30, 2019 and 2018. During each of the nine months ended September 30, 2019 and 2018, there was one residential real estate loan modified as a TDR. These were included in the impaired loan balances and were extensions of the loan maturity with a pre- and post-modification outstanding recorded investment of $207,000 for 2019 and $11,000 for 2018.

During the three and nine months ended September 30, 2019 and 2018, the Company had no loans that subsequently defaulted within 12 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 $73,000 and $112,000 in residential real estate loans in the process of foreclosure at September 30, 2019 and December 31, 2018, respectively. The Company had $301,000 and $719,000 in residential OREO at September 30, 2019 and December 31, 2018, respectively.

Risk Grades

The following table shows the Company's loan portfolio broken down by internal risk grading as of September 30, 2019 (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	$	310,172	$	135,296	$	835,255	$	304,644	$	121,531
Special Mention	12,614		5,851		35,415		9,189		—
Substandard	1,722		2,641		12,549		5,000		543
Doubtful	—		—		—		—		—
Total	$	324,508	$	143,788	$	883,219	$	318,833	$	122,074

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer
Performing	$	12,025
Nonperforming	—
Total	$	12,025

The following table shows the Company's loan portfolio broken down by internal risk grading as of December 31, 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	$	285,092	$	93,000	$	647,519	$	204,261	$	103,541
Special Mention	154		1,840		4,403		1,685		—
Substandard	726		2,400		3,878		3,492		392
Doubtful	—		—		—		—		—
Total	$	285,972	$	97,240	$	655,800	$	209,438	$	103,933

Consumer Credit Exposure

Credit Risk Profile Based on Payment Activity



	Consumer
Performing	$	5,093
Nonperforming	—
Total	$	5,093

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.