| Loans and Allowance for Loan Losses | Loans and Allowance for Loan Losses The composition of net loans is as follows: December 31, 2018 December 31, 2017 Real estate secured: Residential 1-4 family $ 165,109 $ 174,889 Multifamily 18,378 19,469 Construction and land loans 21,029 15,907 Commercial, owner occupied 96,224 82,121 Commercial, non-owner occupied 39,869 33,748 Second mortgages 4,054 4,684 Equity lines of credit 30,221 34,378 Farmland 12,149 13,188 Total real estate secured 387,033 378,384 Non-real estate secured: Personal 12,754 14,192 Commercial 46,202 36,785 Agricultural 2,830 2,950 Total non-real estate secured 61,786 53,927 Gross loans 448,819 432,311 Less: Allowance for loan losses 4,373 3,954 Net deferred fees 698 737 Loans, net $ 443,748 $ 427,620 As of December 31, 2018 , loans totaling $144,525 were pledged to the Federal Home Loan Bank of Atlanta to secure existing debt obligations and to provide additional borrowing capacity, compared to $130,773 at December 31, 2017 . The following table is an analysis of past due loans as of December 31, 2018 : Past Due 30-89 days 90 days and over Total Current Total > 90 Days and Accruing Real estate secured Residential 1-4 family $ 1,481 $ 819 $ 2,300 $ 162,809 $ 165,109 $ 105 Equity lines of credit 218 75 293 29,928 30,221 — Multifamily 402 — 402 17,976 18,378 — Farmland 754 — 754 11,395 12,149 — Construction, land development, other land loans 16 — 16 21,013 21,029 — Commercial real estate: Owner-occupied 9 756 765 95,459 96,224 — Non-owner-occupied — 1,859 1,859 38,010 39,869 — Second mortgages — — — 4,054 4,054 — Non-real estate secured Personal 186 4 190 12,564 12,754 — Commercial 82 114 196 46,006 46,202 2 Agricultural — — — 2,830 2,830 — Total $ 3,148 $ 3,627 $ 6,775 $ 442,044 $ 448,819 $ 107 The following table is an analysis of past due loans as of December 31, 2017 : Past Due 30-89 days 90 days and over Total Current Total > 90 Days and Accruing Real estate secured Residential 1-4 family $ 1,092 $ 566 $ 1,658 $ 173,231 $ 174,889 $ — Equity lines of credit — — — 34,378 34,378 — Multifamily — — — 19,469 19,469 — Farmland 234 50 284 12,904 13,188 — Construction, land development, other land loans — — — 15,907 15,907 — Commercial real estate: Owner-occupied 11 708 719 81,402 82,121 — Non-owner-occupied — — — 33,748 33,748 — Second mortgages — — — 4,684 4,684 — Non-real estate secured Personal 211 23 234 13,958 14,192 — Commercial 502 279 781 36,004 36,785 26 Agricultural 49 — 49 2,901 2,950 — Total $ 2,099 $ 1,626 $ 3,725 $ 428,586 $ 432,311 $ 26 Loans are considered delinquent when payments have not been made according to the terms of the contract. The accrual of interest on loans is generally discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Additionally, in certain instances, loans that have been restructured or modified may also be classified as non-accrual per regulatory guidance until a satisfactory payment history has been established. Credit card loans and other personal loans are typically charged off no later than 180 days past due. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. The following is a summary of non-accrual loans at December 31, 2018 and December 31, 2017 : December 31, 2018 December 31, 2017 Real estate secured Residential 1-4 family $ 1,196 $ 887 Construction and land loans 8 — Commercial real estate: Owner-occupied 2,038 708 Non-owner-occupied 2,004 — Equity lines of credit 75 — Farmland 142 193 Non-real estate secured Personal 26 23 Commercial 431 254 Total $ 5,920 $ 2,065 The following is a summary of residential real estate currently in the process of foreclosure as well as foreclosed residential real estate as of December 31, 2018 . Number Balance Residential real estate in the process of foreclosure 7 $ 1,304 Foreclosed residential real estate 9 785 The following tables represent a summary of credit quality indicators of the Company's loan portfolio at December 31, 2018 and December 31, 2017 . The grades are assigned and/or modified by the Company's credit review and credit analysis departments based on the creditworthiness of the borrower and the overall strength of the loan. The following tables provide the credit risk profile by internally assigned grade as of December 31, 2018 and December 31, 2017 : December 31, 2018 Residential 1-4 Family Multifamily Farmland Construction, Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate Non-Owner Occupied Quality $ 12,991 $ — $ — $ 724 $ 1,632 $ 131 Satisfactory 107,925 4,276 2,736 5,314 39,679 13,046 Acceptable 37,036 13,700 3,617 13,349 47,963 21,073 Special Mention 1,696 402 — 1,565 2,720 3,615 Substandard 5,461 — 5,796 77 4,230 2,004 Doubtful — — — — — — Total $ 165,109 $ 18,378 $ 12,149 $ 21,029 $ 96,224 $ 39,869 December 31, 2017 Residential 1-4 Family Multifamily Farmland Construction, Land Loans Commercial Real Estate- Owner Occupied Commercial Real Estate Non-Owner Occupied Quality $ 33,107 $ — $ 13 $ 2,870 $ 3,535 $ 295 Satisfactory 95,659 10,653 4,419 5,445 45,906 13,602 Acceptable 40,487 8,816 3,333 5,906 28,344 15,609 Special Mention 388 — 3,206 1,565 2,542 2,226 Substandard 5,248 — 2,217 121 1,661 2,016 Doubtful — — — — 133 — Total $ 174,889 $ 19,469 $ 13,188 $ 15,907 $ 82,121 $ 33,748 Explanation of credit grades: Quality - This grade is reserved for the Bank's top quality loans. These loans have excellent sources of repayment, with no significant identifiable risk of collection. Generally, loans assigned this rating will demonstrate the following characteristics: • Conformity in all respects with Bank policy, guidelines, underwriting standards, and Federal and State regulations (no exceptions of any kind). • Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources. • Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor. For existing loans, all of the requirements above apply plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are either stable or improving. Satisfactory - This grade is given to performing loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this rating will demonstrate the following characteristics: • General conformity to the Bank's policy requirements, product guidelines and underwriting standards. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors. • Documented historical cash flow that meets or exceeds required minimum Bank guidelines, or that can be supplemented with verifiable cash flow from other sources. • Adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor. For existing loans, all of the requirements outlined above will apply, plus all payments have been made as agreed, current financial information on all borrowers and guarantors has been obtained and analyzed, and overall business operating trends are stable with any declines considered minor and temporary. Acceptable - This grade is given to loans that show signs of weakness in either adequate sources of repayment or collateral, but have demonstrated mitigating factors that minimize the risk of delinquency or loss. Loans assigned this rating may demonstrate some or all of the following characteristics: • Additional exceptions to the Bank's policy requirements, product guidelines or underwriting standards that present a higher degree of risk to the Bank. Although the combination and/or severity of identified exceptions is greater, all exceptions have been properly mitigated by other factors. • Unproved, insufficient or marginal primary sources of repayment that appear sufficient to service the debt at this time. Repayment weaknesses may be due to minor operational issues, financial trends, or reliance on projected (not historic) performance. • Marginal or unproven secondary sources to liquidate the debt, including combinations of liquidation of collateral and liquidation value to the net worth of the borrower or guarantor. For existing loans, payments have generally been made as agreed with only minor and isolated delinquencies. Special Mention -This grade is given to Watch List loans that include the following characteristics: • Loans with underwriting guideline tolerances and/or exceptions with no identifiable mitigating factors. • Extending loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank's position at some future date. Potential weaknesses are the result of deviations from prudent lending practices. • Loans where adverse economic conditions that develop subsequent to the loan origination do not jeopardize liquidation of the debt, but do substantially increase the level of risk may also warrant this rating. Substandard - Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. The weaknesses may include, but are not limited to: • High debt to worth ratios and or declining or negative earnings trends • Declining or inadequate liquidity • Improper loan structure or questionable repayment sources • Lack of well-defined secondary repayment source, and • Unfavorable competitive comparisons. Such loans are no longer considered to be adequately protected due to the borrower's declining net worth, lack of earnings capacity, declining collateral margins and/or unperfected collateral positions. A possibility of loss of a portion of the loan balance cannot be ruled out. The repayment ability of the borrower is marginal or weak and the loan may have exhibited excessive overdue status or extensions and/or renewals. Doubtful - Loans classified Doubtful have all the weaknesses inherent in loans classified 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. The ability of the borrower to service the debt is extremely weak, overdue status is constant, the debt has been placed on non-accrual status, and no definite repayment schedule exists. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. Among these events are: • Injection of capital • Alternative financing • Liquidation of assets or the pledging of additional collateral. The credit risk profile based on payment activity as of December 31, 2018 : Consumer - Non Real Estate Equity Line of Credit /Second Mortgages Commercial - Non Real Estate Agricultural - Non Real Estate Performing $ 12,750 $ 34,200 $ 46,088 $ 2,830 Nonperforming (>90 days past due) 4 75 114 — Total $ 12,754 $ 34,275 $ 46,202 $ 2,830 The credit risk profile based on payment activity as of December 31, 2017 : Consumer - Non Real Estate Equity Line of Credit /Second Mortgages Commercial - Non Real Estate Agricultural - Non Real Estate Performing $ 14,169 $ 39,062 $ 36,506 $ 2,950 Nonperforming (>90 days past due) 23 — 279 — Total $ 14,192 $ 39,062 $ 36,785 $ 2,950 The following tables reflect the Bank's impaired loans at December 31, 2018 : December 31, 2018 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance Real estate secured Residential 1-4 family $ 4,325 $ 4,325 $ — $ 5,862 $ 134 Equity lines of credit 7 7 — 28 — Multifamily 402 402 — 201 — Farmland 5,681 5,681 — 3,084 10 Construction, land development, other land loans 1,635 1,635 — 1,700 2 Commercial real estate- owner occupied 5,332 5,332 — 3,442 9 Commercial real estate- non owner occupied — — — 32 — Second mortgages 100 100 — 155 — Non-real estate secured Personal — — — 48 9 Commercial 317 317 — 411 20 Agricultural — — — — — Total $ 17,799 $ 17,799 $ — $ 14,963 $ 184 December 31, 2018 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With an allowance recorded Real estate secured Residential 1-4 family $ 631 $ 631 $ 191 $ 353 $ 307 Equity lines of credit 105 105 80 53 6 Multifamily — — — — — Farmland 122 122 2 927 — Construction, land development, other land loans — — — — — Commercial real estate- owner occupied 1,704 1,704 351 1,789 — Commercial real estate- non owner occupied 3,686 3,686 844 3,789 45 Second mortgages 35 35 7 18 — Non-real estate secured Personal 18 18 7 10 — Commercial 1,161 1,161 880 832 — Agricultural — — — — — Total $ 7,462 $ 7,462 $ 2,362 $ 7,771 $ 358 The following tables reflect the Bank's impaired loans at December 31, 2017 : December 31, 2017 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance Real estate secured Residential 1-4 family $ 7,398 $ 7,398 $ — $ 6,123 $ 279 Equity lines of credit 49 49 — 37 — Multifamily — — — 495 56 Farmland 486 486 — 586 42 Construction, land development, other land loans 1,765 1,765 — 1,753 67 Commercial real estate- owner occupied 1,552 1,552 — 3,677 22 Commercial real estate- non owner occupied 63 63 — 973 19 Second mortgages 209 209 — 198 3 Non real estate secured Personal 95 95 — 55 — Commercial and agricultural 504 504 — 274 — Total $ 12,121 $ 12,121 $ — $ 14,171 $ 488 December 31, 2017 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With an allowance recorded Real estate secured Residential 1-4 family $ 74 $ 74 $ 11 $ 267 $ 24 Equity lines of credit — — — — — Multifamily — — — — — Farmland 1,731 1,731 257 962 13 Construction, land development, other land loans — — — 183 24 Commercial real estate- owner occupied 1,873 1,873 465 1,506 — Commercial real estate- non owner occupied 3,892 3,892 955 2,951 141 Second mortgages — — — 9 — Non real estate secured Personal 2 2 2 27 — Commercial and agricultural 502 502 418 568 4 Total $ 8,074 $ 8,074 $ 2,108 $ 6,473 $ 402 The following tables present the balance in the allowance for loan losses and the recorded investment in loans by loan category and is segregated by impairment evaluation method as of and for the years ended December 31, 2018 and December 31, 2017 . Year ended December 31, 2018 Residential 1-4 Family Multifamily Construction and Land Loans Commercial Owner Occupied Commercial Non-Owner Occupied Second Mortgages Equity Line of Credit Farmland Personal and Overdrafts Commercial and Agricultural Unallocated Total Allowance for Loan Losses: Balance at December 31, 2017 $ 133 — $ 1 $ 1,636 $ 955 $ 12 $ — $ 54 $ 265 $ 383 $ 515 $ 3,954 Provision for credit losses 434 25 18 (510 ) (60 ) (26 ) 127 (44 ) (115 ) 714 175 738 Charge-offs 117 — — 123 — 5 — 1 197 347 — 790 Recoveries (42 ) — (8 ) (19 ) — (32 ) — (2 ) (161 ) (207 ) — (471 ) Net charge-offs 75 — (8 ) 104 — (27 ) — (1 ) 36 140 — 319 Balance at December 31, 2018 $ 492 $ 25 $ 27 $ 1,022 $ 895 $ 13 $ 127 $ 11 $ 114 $ 957 $ 690 $ 4,373 Allowance allocated by impairment method: Individually evaluated $ 191 $ — $ — $ 351 $ 844 $ 7 $ 80 $ 2 $ 7 $ 880 $ — $ 2,362 Collectively evaluated 301 25 27 671 51 6 47 9 107 77 690 2,011 Loan balances by impairment method used: Individually evaluated $ 5,026 $ 412 $ 1,676 $ 7,066 $ 3,466 $ 135 $ 108 $ 5,938 $ 17 $ 1,417 $ — $ 25,261 Collectively evaluated 160,083 17,966 19,353 89,158 36,403 3,919 30,113 6,211 12,737 47,615 — 423,558 Balance at December 31, 2018 $ 165,109 $ 18,378 $ 21,029 $ 96,224 $ 39,869 $ 4,054 $ 30,221 $ 12,149 $ 12,754 $ 49,032 — $ 448,819 Year ended December 31, 2017 Residential 1-4 Family Multifamily Construction and Land Loans Commercial Owner Occupied Commercial Non-Owner Occupied Second Mortgages Equity Line of Credit Farmland Personal and Overdrafts Commercial and Agricultural Unallocated Total Allowance for Loan Losses: Balance at December 31, 2016 $ 371 — $ 21 $ 1,339 $ 445 $ 15 $ 27 $ 16 $ 802 $ 535 $ 1,258 $ 4,829 Provision for credit losses (220 ) — (24 ) 1,025 509 (4 ) (28 ) 36 (398 ) (130 ) (646 ) 120 Charge-offs 57 — — 755 — — — — 321 470 — 1,603 Recoveries (39 ) — (4 ) (27 ) (1 ) (1 ) (1 ) (2 ) (182 ) (448 ) — (705 ) Net charge-offs 18 — (4 ) 728 (1 ) (1 ) (1 ) (2 ) 139 22 — 898 Reclassification of reserve for unfunded commitments — — — — — — — — — — (97 ) (97 ) Balance at December 31, 2017 $ 133 $ — $ 1 $ 1,636 $ 955 $ 12 $ — $ 54 $ 265 $ 383 $ 515 $ 3,954 Allowance allocated by impairment method: Individually evaluated $ 11 $ — $ — $ 772 $ 955 $ — $ — $ — $ 2 $ 368 $ — $ 2,108 Collectively evaluated 122 — 1 864 — 12 — 54 263 15 515 1,846 Loan balances by impairment method used: Individually evaluated $ 7,472 $ — $ 1,766 $ 3,425 $ 3,954 $ 209 $ 49 $ 2,217 $ 97 $ 1,006 $ — $ 20,195 Collectively evaluated 167,417 19,469 14,141 78,696 29,794 4,475 34,329 10,971 14,095 38,729 — 412,116 Balance at December 31, 2017 $ 174,889 $ 19,469 $ 15,907 $ 82,121 $ 33,748 $ 4,684 $ 34,378 $ 13,188 $ 14,192 $ 39,735 — $ 432,311 The Company's credit administration personnel and senior financial officers are responsible for tracking, coding, and monitoring troubled debt restructurings ("TDRs"). Concessions are made to existing borrowers in the form of modified interest rates and / or payment terms. The loans are segregated for regulatory and external reporting. Each specific TDR is reviewed to determine if the accrual of interest should be discontinued and also reviewed for impairment. The Company's senior credit officer performs this analysis on a quarterly basis in addition to determining any other loans that are impaired within the loan portfolio. The Company had a total of $11,546 and $8,005 of loans categorized as TDRs as of December 31, 2018 and December 31, 2017 , respectively. Interest is accrued on TDRs if the loan is not otherwise impaired and the full collection of principal and interest under the modified terms is deemed probable. In the determination of the allowance for loan losses, management considers subsequent TDR defaults by adjusting the TDR loan risk grades. Defaults resulting in charge-offs affect the historical loss experience ratios which are a component of the allowance calculation. Additionally, specific reserves may be established on restructured loans evaluated individually. The following table summarizes new TDRs during December 31, 2018 . There were no new TDRs in the year ended December 31, 2017 . December 31, 2018 Number Pre-Modification Recorded Investment Post-Modification Recorded Investment Below Market Rate Residential 1-4 family 4 $ 639 $ 639 Farmland 4 768 768 Commercial real estate-owner occupied 3 1,107 1,107 Commercial real estate-non owner occupied 1 1,462 1,462 Commercial 1 120 120 Total below market rate 13 4,096 4,096 Total restructurings 13 $ 4,096 $ 4,096 There were no defaults of loans restructured in the previous 12 months in the years ended December 31, 2018 or December 31, 2017 . The Bank has engaged an external third party to perform its loan review function in order to identify weaknesses within the loan portfolio. The review, which seeks to cover 40 percent of loan balances each year, considers collateral, repayment history, guarantor strength, debt service coverage, and other relevant information on an individual and global level. These reviews consider borrower cash flow capacity, using financial statements, income tax returns and internally prepared interim statements for borrowers and guarantors. Debt service coverage (DSC) is calculated on each individual customer, or guarantor, as well as the aggregate or global DSC. Collateral evaluation includes an inspection of the collateral file to determine if the Bank is properly secured. Collateral is discounted, when appropriate, to determine a stressed loan to value (LTV) ratio. The Company also seeks to identify potential problem relationships through watch list reviews, which include reviews of past due data and other information that might be helpful in evaluating a particular loan relationship that is exhibiting stress. Watch list relationships display distinct characteristics including, but not limited to, late payments greater than 60 days , a low DSC calculation, bankruptcy filings, casualty losses, or other issues that would cause a perceived increase in the risk of loss to the Bank. The segments of the Company's loan portfolio are disaggregated to a level that allows management to monitor risk and performance. In reviewing risk, management has determined there to be several different risk categories within the loan portfolio. The allowance for loan losses consists of amounts applicable to: (i) the commercial loan portfolio; (ii) the commercial real estate loan portfolio; (iii) the construction loan portfolio; (iv) the consumer loan portfolio; and, (v) the residential loan portfolio. The commercial real estate ("CRE") loan segment is further disaggregated into two classes. Non-owner occupied CRE loans, which include loans secured by non-owner occupied nonfarm nonresidential properties, generally have a greater risk profile than all other CRE loans, which include multifamily structures and owner-occupied commercial structures. The construction loan segment is further disaggregated into two classes. One-to-four family residential construction loans are generally made to individuals for the acquisition of and/or construction on a lot or lots on which a residential dwelling is to be built. Commercial construction loans are generally made to developers or investors for the purpose of acquiring, developing and constructing residential or commercial structures. Construction lending is generally considered to involve a higher degree of credit risk than long-term permanent financing. The following describes the Company's basic methodology for computing its ALLL. On a quarterly basis, the ALLL methodology begins with the identification of loans subject to ASC 310. All loans that are rated "7" (Doubtful) are assessed as impaired based on the expectation that the full collection of principal and interest is in doubt. All loans that are rated "6" (Substandard) or are expected to be downgraded to "6", require additional analysis to determine whether they may be impaired under ASC 310. All loans that are rated "5" (Special Mention) are presumed not to be impaired. However, "5" rated loans, together with any Troubled Debt Restructured (TDR) loan, may warrant further analysis before completing an assessment of impairment. A loan is considered impaired and an allowance for loan losses is established on loans for which it is probable that the full collection of principal and interest is in doubt. Once a loan is identified as individually impaired, management measures impairment using one of several methods, including collateral value based on a recent appraisal, liquidation value and/or discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At December 31, 2018 and December 31, 2017 , all of the total impaired loans were evaluated based on either the fair value of the collateral or the discounted cash flows. For ASC 310 loans that are individually evaluated and found to be impaired (primarily those designated as Substandard and Doubtful), the associated ALLL will be based upon one of the three impairment measurement methods specified within ASC 310: (1) Present value of expected future cash flows discounted at the loan's effective interest rate; (2) Loan's observable market price; or (3) Fair value of the collateral. To determine the amount of loan loss exposure for the impaired ASC 310 loans, the value of collateral for secured loans is evaluated to determine the current value and potential exposure. The collateral value is adjusted for its age and condition, and, for real estate, adjusted for condition, location, and age of the most current appraisal. If the adjusted value of the collateral is less than the current principal balance, the difference is designated as direct exposure for loan loss calculations. The total balance of unsecured loans is considered as direct exposure. For all other loans, including individual loans determined not to be impaired under ASC 310, the associated ALLL is calculated in accordance with ASC 450 that provides for estimated credit losses likely to be realized on groups of loans with similar risk characteristics. The Company uses standard call report categories to segregate loans into groups with similar risk characteristics. Estimated credit losses reflect significant factors that affect the collectability of the portfolio as of the evaluation date. Key factors that influence risk within the Company's loan portfolio are divided into three major categories: (1) Historical Loss Factor: To calculate the anticipated loan loss in each call report category for ASC 450 loans, the Company begins with the net loss in each category for each of the last twelve quarters. The Company uses a rolling twelve quarter weighted historical loss average where the most recent quarters are weighted heavier than the earlier quarters so that the calculation reflects current risk trends within the portfolio. The weighting used by the Company is similar to the Rule of 78's with the net losses of the most recent quarter weighted at 12/78ths and those in the first quarter in the twelve quarter period weighted at 1/78th. Therefore, the net losses of the most recent year represent approximately 54% of the calculation compared with 33% if a simple average of losses over the three -year period was used. The total of weighted factors for each call report category is applied to the current outstanding loan balance in each category to calculate expected loss based on historical data for a group of loans with similar risk characteristics. The same weighting is applied to all loan types . (2)External economic factors: Economic conditions have a significant impact on Company's loan portfolio because deteriorating conditions can adversely impact both collateral values and the customer's ability to service debt. Management has selected the following external factors as indicators of economic conditions: a. National GDP growth rate b. Local unemployment rates c. Prime interest rate The values for external factors are updated on a quarterly basis based on current data. (3)Internal process factors: Internal factors that influence loss rates as a result of risk management and control practices include the following: d. Past-due loans e. Non-accrual loans f. Commercial real estate concentrations f. Loan volume g. Level and trend of classified loans The values for internal factors are updated on a quarterly basis based on current portfolio metrics. Once the quarterly ALLL is computed, the calculations are reviewed by the Company's management. The ALLL is then reviewed and approved by the Board of Directors. Loans Held for Sale The Company's mortgage division, Highlands Home Mortgage, originates certain single family, residential first mortgage loans for sale on a presold basis. Loan sale activity is summarized below. This division began operations in the second quarter of 2016. Loans are typically sold to one of the various investors within 20 days of closing. Management believes that, for each period presented, the carrying amount approximates the fair value of loans held for sale. Year ended December 31, 2018 2017 Loans held for sale at end of period $ 265 $ 4,808 Proceeds from sales of mortgage loans originated for sale 21,920 15,497 Gain on sales of mortgage loans originated for sale 315 1,942 |
