Loans (Tables)

9 Months Ended

Sep. 30, 2020

Loans consist of the following:

(Dollars in thousands)	September 30, 2020			December 31, 2019
Commercial ¹	$	211,647		$	137,114
Commercial real estate		194,493			196,748
Residential real estate		176,256			174,259
Construction & land development		28,875			23,960
Consumer		18,337			19,052
Total loans before deferred costs		629,608			551,133
Deferred loan (fees) costs		(1,524	)		500
Total Loans	$	628,084		$	551,633

¹ Includes $92.1 million of Paycheck Protection Program loans on September 30, 2020.

Summary of Allowance for Loan Losses

(Dollars in thousands)	Commercial			Commercial Real Estate		Residential Real Estate			Construction & Land Development			Consumer			Unallocated		Total
Three Months Ended September 30, 2020
Beginning balance	$	2,266		$	2,781	$	1,585		$	337		$	516		$	350	$	7,835
Provision for loan losses		(512	)		500		(390	)		229			(112	)		662		377
Charge-offs		(26	)		—		—			—			(2	)				(28	)
Recoveries		118			40		1			—			12					171
Net recoveries		92			40		1			—			10					143
Ending balance	$	1,846		$	3,321	$	1,196		$	566		$	414		$	1,012	$	8,355
Nine Months Ended September 30, 2020
Beginning balance	$	2,408		$	2,153	$	1,152		$	203		$	481		$	620	$	7,017
Provision for loan losses		(643	)		1,127		56			363			(23	)		392		1,272
Charge-offs		(45	)		—		(15	)		—			(71	)				(131	)
Recoveries		126			41		3			—			27					197
Net (charge-offs) recoveries		81			41		(12	)		—			(44	)				66
Ending balance	$	1,846		$	3,321	$	1,196		$	566		$	414		$	1,012	$	8,355
Three Months Ended September 30, 2019
Beginning balance	$	2,267		$	1,946	$	1,229		$	104		$	341		$	650	$	6,537
Provision for loan losses		91			91		(74	)		12			26			139		285
Charge-offs		(20	)		—		—			—			(55	)				(75	)
Recoveries		5			1		2			—			21					29
Net (charge-offs) recoveries		(15	)		1		2			—			(34	)				(46	)
Ending balance	$	2,343		$	2,038	$	1,157		$	116		$	333		$	789	$	6,776
Nine Months Ended September 30, 2019
Beginning balance	$	2,178		$	1,791	$	1,245		$	258		$	306		$	129	$	5,907
Provision for loan losses		29			246		(93	)		(142	)		155			660		855
Charge-offs		(36	)		—		—			—			(163	)				(199	)
Recoveries		172			1		5			—			35					213
Net (charge-offs) recoveries		136			1		5			—			(128	)				14
Ending balance	$	2,343		$	2,038	$	1,157		$	116		$	333		$	789	$	6,776

Allowances for Loan Losses and Ending Balances by Portfolio Class and Based on Impairment Method

The following table presents the balance in the allowance for loan losses and the ending loan balances by portfolio class, based on the impairment method as of September 30, 2020 and December 31, 2019:

(Dollars in thousands)	Commercial		Commercial Real Estate		Residential Real Estate		Construction		Consumer		Unallocated		Total
September 30, 2020
Allowance for loan losses:
Individually evaluated for impairment	$	6	$	20	$	1	$	—	$	5	$	—	$	32
Collectively evaluated for impairment		1,840		3,301		1,195		566		409		1,012		8,323
Total ending allowance balance	$	1,846	$	3,321	$	1,196	$	566	$	414	$	1,012	$	8,355
Loans:
Loans individually evaluated for impairment	$	1,944	$	2,394	$	643	$	—	$	144			$	5,125
Loans collectively evaluated for impairment		209,703		192,099		175,613		28,875		18,193				624,483
Total ending loans balance	$	211,647	$	194,493	$	176,256	$	28,875	$	18,337			$	629,608
December 31, 2019
Allowance for loan losses:
Individually evaluated for impairment	$	16	$	17	$	1	$	—	$	—	$	—	$	34
Collectively evaluated for impairment		2,392		2,136		1,151		203		481		620		6,983
Total ending allowance balance	$	2,408	$	2,153	$	1,152	$	203	$	481	$	620	$	7,017
Loans:
Loans individually evaluated for impairment	$	2,555	$	2,637	$	853	$	—	$	14			$	6,059
Loans collectively evaluated for impairment		134,559		194,111		173,406		23,960		19,038				545,074
Total ending loans balance	$	137,114	$	196,748	$	174,259	$	23,960	$	19,052			$	551,133

Schedule of Impairment by Class of Loans

The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2020 and December 31, 2019:

(Dollars in thousands)	Unpaid Principal Balance		Recorded Investment with no Allowance		Recorded Investment with Allowance		Total recorded investment¹		Related Allowance
September 30, 2020
Commercial	$	1,992	$	1,794	$	150	$	1,944	$	6
Commercial real estate		2,797		2,162		235		2,397		20
Residential real estate		838		447		196		643		1
Consumer		146		—		148		148		5
Total impaired loans	$	5,773	$	4,403	$	729	$	5,132	$	32
December 31, 2019
Commercial	$	2,982	$	2,541	$	16	$	2,557	$	16
Commercial real estate		2,952		2,471		176		2,647		17
Residential real estate		1,024		457		396		853		1
Consumer		14		14		—		14		—
Total impaired loans	$	6,972	$	5,483	$	588	$	6,071	$	34

¹	includes principal, accrued interest, unearned fees, and origination costs

Schedule of Average Recorded Investment in Impaired Loans and Related Interest Income Recognized

The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated.

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2020		2019		2020		2019
Average recorded investment:
Commercial	$	2,220	$	3,035	$	2,398	$	1,837
Commercial real estate		2,553		2,767		2,553		2,413
Residential real estate		759		1,538		808		1,172
Consumer		192		15		99		11
Average recorded investment in impaired loans	$	5,723	$	7,355	$	5,858	$	5,433
Interest income recognized:
Commercial	$	14	$	12	$	51	$	49
Commercial real estate		3		3		9		9
Residential real estate		7		20		26		43
Consumer		4		1		5		1
Interest income recognized on a cash basis on impaired loans	$	28	$	36	$	91	$	102

Schedule of Aging of Past Due and Nonaccrual Loans

The following table presents the aging of past due loans and nonaccrual loans as of September 30, 2020 and December 31, 2019 by class of loans:

			Accruing Loans
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Non- Accrual		Total Past Due and Non- Accrual		Total Loans
September 30, 2020
Commercial	$	210,202	$	125	$	25	$	—	$	1,295	$	1,445	$	211,647
Commercial real estate		192,344		36		—		—		2,113		2,149		194,493
Residential real estate		175,507		67		18		45		619		749		176,256
Construction & land development		28,875		—		—		—		—		—		28,875
Consumer		18,219		61		28		—		29		118		18,337
Total Loans	$	625,147	$	289	$	71	$	45	$	4,056	$	4,461	$	629,608
December 31, 2019
Commercial	$	135,707	$	15	$	—	$	67	$	1,325	$	1,407	$	137,114
Commercial real estate		194,157		186		—		—		2,405		2,591		196,748
Residential real estate		173,023		264		277		174		521		1,236		174,259
Construction & land development		23,960		—		—		—		—		—		23,960
Consumer		18,640		365		—		—		47		412		19,052
Total Loans	$	545,487	$	830	$	277	$	241	$	4,298	$	5,646	$	551,133

Summary of Deferral Activity Related to Loan Modification Programs to Customers

The table below summarizes the Company’s deferral activity at September 30, 2020 under the COVID-19 related loan modification program to customers. Loan modifications consist of three to four months deferral of principal and interest payments, and extension of maturity date. All loans provided modifications were performing in accordance with their terms as of December 31, 2019. In accordance with the CARES Act, these loans are not required to be evaluated as TDR’s. As of September 30, 2020, there was one loan in the amount of $34 thousand that has been granted a second deferral.

(Dollars in thousands)	Total loan balances		Deferred # of Loans	Total COVID Loan Deferrals		Percent of Portfolio Modified			Remaining Balance in Deferment		Remaining # of loans in Deferment
September 30, 2020
Commercial:
Commercial	$	211,647	64	$	9,995		5	%	$	119	2
Commercial real estate		194,493	73		56,789		29			12,341	3
Construction		28,875	3		462		2			—		—
Total Commercial		435,015	140		67,246		15			12,460	5
Consumer:
Residential real estate		176,256	34		3,674		2			499	6
RV		9,118	14		316		3			68	2
Other consumer		9,219	16		208		2			12	1
Total Consumer		194,593	64		4,198		2			579	9
Total Loans	$	629,608	204	$	71,444		11	%	$	13,039	14

Summary of Troubled Debt Restructurings

(Dollars in thousands)	Number of loans restructured	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Nine Months Ended September 30, 2020
Commercial	5	$	181	$	181
Commercial real estate	1		80		80
Residential real estate	1		66		66
Consumer	6		146		146
Total Restructured Loans	13	$	473	$	473
Nine Months Ended September 30, 2019
Consumer	1	$	17	$	17
Total Restructured Loans	1	$	17	$	17

Summary of Loans by Credit Quality Indicator

Based on the most recent analysis performed, the risk category of loans by class is as follows as of September 30, 2020 and December 31, 2019:

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
September 30, 2020
Commercial	$	194,344	$	2,820	$	12,946	$	—	$	1,537	$	211,647
Commercial real estate		171,173		3,682		17,876		—		1,762		194,493
Residential real estate		177		—		66		—		176,013		176,256
Construction & land development		22,288		88		592		—		5,907		28,875
Consumer		—		—		56		—		18,281		18,337
Total	$	387,982	$	6,590	$	31,536	$	—	$	203,500	$	629,608
December 31, 2019
Commercial	$	110,731	$	15,040	$	10,295	$	—	$	1,048	$	137,114
Commercial real estate		174,045		11,546		9,994		—		1,163		196,748
Residential real estate		183		—		237		—		173,839		174,259
Construction & land development		19,423		104		—		—		4,433		23,960
Consumer		—		—		73		—		18,979		19,052
Total	$	304,382	$	26,690	$	20,599	$	—	$	199,462	$	551,133

Schedule of Loans Not Rated by Class of Loans

The following table presents loans that are not rated by class of loans as of September 30, 2020 and December 31, 2019. Nonperforming loans include loans past due 90 days or more and loans on nonaccrual of interest status.

(Dollars in thousands)	Performing		Non- Performing		Total
September 30, 2020
Commercial	$	1,537	$	—	$	1,537
Commercial real estate		1,762		—		1,762
Residential real estate		175,493		520		176,013
Construction & land development		5,907		—		5,907
Consumer		18,252		29		18,281
Total	$	202,951	$	549	$	203,500
December 31, 2019
Commercial	$	1,048	$	—	$	1,048
Commercial real estate		1,163		—		1,163
Residential real estate		173,407		432		173,839
Construction & land development		4,433		—		4,433
Consumer		18,979		—		18,979
Total	$	199,030	$	432	$	199,462