Loans | (3) Loans The segments and classes of loans are as follows (in thousands): At March 31, At December 31, 2016 2015 Real estate mortgage loans: Commercial $ 58,239 57,847 Residential and home equity 73,439 69,817 Construction 17,559 17,493 Total real estate mortgage loans 149,237 145,157 Commercial loans 45,703 40,229 Consumer and other loans 4,605 3,877 Total loans 199,545 189,263 Add (deduct): Net deferred loan costs 313 286 Allowance for loan losses (2,605 ) (2,473 ) Loans, net $ 197,253 187,076 An analysis of the change in the allowance for loan losses follows (in thousands): Real Estate Mortgage Loans Total Commercial Residential Construction Commercial Loans Consumer and Other Loans Three-Month Period Ended March 31, 2016: Beginning balance $ 707 868 246 596 56 2,473 (Credit) Provision for loan losses (6 ) 40 2 94 4 134 Net (charge-offs) 0 0 0 0 (2 ) (2 ) Ending balance $ 701 908 248 690 58 2,605 Three-Month Period Ended March 31, 2015: Beginning balance $ 702 691 211 453 41 2,098 Provision for loan losses 0 5 0 4 9 18 Net (charge-offs) recoveries 0 0 0 0 0 0 Ending balance $ 702 696 211 457 50 2,116 At March 31, 2016: Individually evaluated for impairment: Recorded investment $ 0 0 0 133 0 133 Balance in allowance for loan losses $ 0 0 0 73 0 73 Collectively evaluated for impairment: Recorded investment $ 58,239 73,439 17,559 45,570 4,605 199,412 Balance in allowance for loan losses $ 701 908 248 617 58 2,532 At December 31, 2015: Individually evaluated for impairment: Recorded investment $ 0 0 0 137 7 144 Balance in allowance for loan losses $ 0 0 0 62 7 69 Collectively evaluated for impairment: Recorded investment $ 57,847 69,817 17,493 40,092 3,870 189,119 Balance in allowance for loan losses $ 707 868 246 534 49 2,404 The Company has divided the loan portfolio into three portfolio segments and five portfolio classes, each with different risk characteristics and methodologies for assessing risk. All loans are underwritten based upon standards set forth in the policies approved by the Company’s Board of Directors. The Company identifies the portfolio segments and classes as follows: Real Estate Mortgage Loans. Commercial. Residential and Home Equity. Construction. Commercial Loans. Additionally, there may be refinancing risk if a commercial loan includes a balloon payment which must be refinanced or paid off at loan maturity. In reference to our risk management process, our commercial loan portfolio presents a higher risk profile than our consumer real estate and consumer loan portfolios. Therefore, we require that all loans to businesses must have a clearly stated and reasonable payment plan to allow for timely retirement of debt, unless secured by liquid collateral or as otherwise justified. Consumer and Other Loans. The following summarizes the loan credit quality (in thousands): Pass Special Substandard Doubtful Loss Total At March 31, 2016: Real estate mortgage loans: Commercial $ 52,895 5,344 0 0 0 58,239 Residential and home equity 69,008 3,385 1,046 0 0 73,439 Construction 17,264 151 144 0 0 17,559 Commercial loans 45,366 192 145 0 0 45,703 Consumer and other loans 4,570 32 3 0 0 4,605 Total $ 189,103 9,104 1,338 0 0 199,545 At December 31, 2015: Real estate mortgage loans: Commercial $ 52,097 5,750 0 0 0 57,847 Residential and home equity 65,367 3,396 1,054 0 0 69,817 Construction 17,204 163 126 0 0 17,493 Commercial loans 39,607 461 161 0 0 40,229 Consumer and other loans 3,836 32 9 0 0 3,877 Total $ 178,111 9,802 1,350 0 0 189,263 The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if they are appropriately classified and whether there is any impairment. All loans are graded upon initial issuance. Furthermore, construction loans, non-owner occupied commercial real estate loans, and commercial loan relationships in excess of $500,000 are reviewed at least annually. The Company determines the appropriate loan grade during the renewal process and reevaluates the loan grade in situations when a loan becomes past due. Loans excluded from the review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of deterioration in the creditworthiness of the borrower; or (c) the client contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even charged-off. The Company uses the following definitions for risk ratings: Pass Special Mention Substandard Doubtful Loss At March 31, 2016, there was one loan past due thirty days or more but still accruing and two loans on nonaccrual. Age analysis of past-due loans is as follows (in thousands): 30-59 60-89 Days Past Due Accruing Loans Days Past Due Total Past Current Nonaccrual Total At March 31, 2016: Real estate mortgage loans: Commercial $ 659 0 0 0 57,580 0 58,239 Residential and home equity 0 0 0 0 73,439 0 73,439 Construction 0 0 0 0 17,559 0 17,559 Commercial loans 0 0 0 0 45,570 133 45,703 Consumer and other loans 0 0 0 0 4,605 0 4,605 Total $ 659 0 0 0 198,753 133 199,545 At December 31, 2015: Real estate mortgage loans: Commercial $ 0 0 0 0 57,847 0 57,847 Residential and home equity 0 0 0 0 69,817 0 69,817 Construction 0 0 0 0 17,493 0 17,493 Commercial loans 0 0 0 0 40,092 137 40,229 Consumer and other loans 0 0 0 0 3,877 0 3,877 Total $ 0 0 0 0 189,126 137 189,263 The following summarizes the amount of impaired loans (in thousands): With No Related With an Allowance Recorded Total Recorded Unpaid Principal Recorded Unpaid Principal Related Recorded Unpaid Related At March 31, 2016: Commercial loans $ 0 0 133 133 73 133 133 73 At December 31, 2015: Commercial loans $ 0 0 137 137 62 137 137 62 Consumer and other loans 0 0 7 7 7 7 7 7 Total $ 0 0 144 144 69 144 144 69 The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands): Three Months Ended March 31, 2016 2015 Average Interest Interest Average Interest Interest Commercial loans $ 146 1 1 221 1 1 Consumer & Other 0 0 0 11 0 0 Total $ 146 1 1 232 1 1 There were no collateral dependent loans measured at fair value on a nonrecurring basis at March 31, 2016 or December 31, 2015. |