Loans | (3) Loans The segments and classes of loans are as follows (in thousands): At At 2016 2015 Real estate mortgage loans: Commercial $ 63,992 57,847 Residential and home equity 83,208 69,817 Construction 18,691 17,493 Total real estate mortgage loans 165,891 145,157 Commercial loans 45,383 40,229 Consumer and other loans 4,615 3,877 Total loans 215,889 189,263 Add (deduct): Net deferred loan costs 341 286 Allowance for loan losses (2,775 ) (2,473 ) Loans, net $ 213,455 187,076 An analysis of the change in the allowance for loan losses follows (in thousands): Real Estate Mortgage Loans Commercial Residential and Home Equity Construction Commercial Consumer and Other Loans Total Three-Month Period Ended June 30, 2016: Beginning balance $ 701 908 248 690 58 2,605 Provision (credit) for loan losses 63 109 (5 ) (4 ) 7 170 Net (charge-offs) recoveries 0 0 0 0 0 0 Ending balance $ 764 1,017 243 686 65 2,775 Three-Month Period Ended June 30, 2015: Beginning balance $ 630 622 277 537 50 2,116 Provision (credit) for loan losses 76 175 (40 ) (18 ) (2 ) 191 Net recoveries 0 0 0 0 0 0 Ending balance $ 706 797 237 519 48 2,307 Six-Month Period Ended June 30, 2016: Beginning balance $ 707 868 246 596 56 2,473 Provision for loan losses 57 149 (3 ) 90 11 304 Net (charge-offs) recoveries 0 0 0 0 (2 ) (2 ) Ending balance $ 764 1,017 243 686 65 2,775 Six-Month Period Ended June 30, 2015: Beginning balance $ 641 594 263 562 38 2,098 Provision (credit) for loan losses 65 203 (26 ) (43 ) 10 209 Net recoveries 0 0 0 0 0 0 Ending balance $ 706 797 237 519 48 2,307 At June 30, 2016: Individually evaluated for impairment: Recorded investment $ 0 356 0 83 7 446 Balance in allowance for loan losses $ 0 0 0 71 7 78 Collectively evaluated for impairment: Recorded investment $ 63,992 82,852 18,691 45,300 4,608 215,443 Balance in allowance for loan losses $ 764 1,017 243 615 58 2,697 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 June 30, 2016: Real estate mortgage loans: Commercial $ 58,954 5,038 0 0 0 63,992 Residential and home equity 79,646 3,171 391 0 0 83,208 Construction 18,462 85 144 0 0 18,691 Commercial loans 44,975 217 191 0 0 45,383 Consumer and other loans 4,580 32 3 0 0 4,615 Total $ 206,617 8,543 729 0 0 215,889 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 credit worthiness 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 June 30, 2016, there were three loans on nonaccrual. Age analysis of past-due loans is as follows (in thousands): Accruing Loans 30-59 60-89 Greater Than 90 Days Total Past Due Current Nonaccrual Total At June 30, 2016: Real estate mortgage loans: Commercial $ 0 0 0 0 63,992 0 63,992 Residential and home equity 0 0 0 0 82,852 356 83,208 Construction 0 0 0 0 18,691 0 18,691 Commercial loans 0 0 0 0 45,300 83 45,383 Consumer and other loans 0 0 0 0 4,615 0 4,615 Total $ 0 0 0 0 215,450 439 215,889 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 Allowance Recorded With an Allowance Recorded Total Recorded Unpaid Principal Recorded Unpaid Principal Related Recorded Unpaid Related At June 30, 2016: Residential & Home Equity $ 356 356 0 0 0 356 356 0 Commercial loans 0 0 83 83 71 83 83 71 Consumer & other loans 0 0 7 7 7 7 7 7 Total $ 356 356 90 90 78 446 446 78 At December 31, 2015: Commercial loans 0 0 137 137 62 137 137 62 Consumer & 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 June 30, 2016 2015 Average Interest Interest Average Interest Interest Residential & Home Equity $ 4 0 0 0 0 0 Commercial loans 111 2 2 216 3 2 Consumer & Other 7 0 0 7 0 0 Total $ 122 2 2 223 3 2 Six Months Ended June 30, 2016 2015 Average Interest Interest Average Interest Interest Residential & Home Equity $ 2 0 0 0 0 0 Commercial loans 128 2 3 222 7 8 Consumer & Other 7 0 0 7 0 0 Total $ 137 2 3 229 7 8 There were no collateral dependent loans measured at fair value on a nonrecurring basis at June 30, 2016 or December 31, 2015. |