Loans | (3) Loans The segments and classes of loans are as follows (in thousands): At At Real estate mortgage loans: Commercial $ 65,418 57,847 Residential and home equity 86,757 69,817 Construction 21,520 17,493 Total real estate mortgage loans 173,695 145,157 Commercial loans 47,015 40,229 Consumer and other loans 4,581 3,877 Total loans 225,291 189,263 Add (deduct): Net deferred loan costs 340 286 Allowance for loan losses (2,863 ) (2,473 ) Loans, net $ 222,768 187,076 An analysis of the change in the allowance for loan losses follows (in thousands): Real Estate Mortgage Loans Commercial Residential Construction Commercial Consumer Total Three-Month Period Ended September 30, 2016: Beginning balance $ 764 1,017 243 686 65 2,775 Provision (credit) for loan losses 11 28 32 40 (3 ) 108 Net (charge-offs) recoveries 0 0 0 (17 ) (3 ) (20 ) Ending balance $ 775 1,045 275 709 59 2,863 Three-Month Period Ended September 30, 2015: Beginning balance $ 706 797 237 519 48 2,307 Provision (credit) for loan losses (3 ) 47 20 70 (10 ) 124 Net recoveries 0 0 0 0 (2 ) (2 ) Ending balance $ 703 844 257 589 36 2,429 Nine-Month Period Ended September 30, 2016: Beginning balance $ 707 868 246 596 56 2,473 Provision for loan losses 68 177 29 130 8 412 Net (charge-offs) recoveries 0 0 0 (17 ) (5 ) (22 ) Ending balance $ 775 1,045 275 709 59 2,863 Nine-Month Period Ended September 30, 2015: Beginning balance $ 641 594 263 562 38 2,098 Provision (credit) for loan losses 62 250 (6 ) 27 0 333 Net recoveries 0 0 0 0 (2 ) (2 ) Ending balance $ 703 844 257 589 36 2,429 At September 30, 2016: Individually evaluated for impairment: Recorded investment $ 0 1,010 74 77 0 1,161 Balance in allowance for loan losses $ 0 0 0 65 0 65 Collectively evaluated for impairment: Recorded investment $ 65,418 85,747 21,446 46,938 4,581 224,130 Balance in allowance for loan losses $ 775 1,045 275 644 59 2,798 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 September 30, 2016: Real estate mortgage loans: Commercial $ 60,352 5,066 0 0 0 65,418 Residential and home equity 82,546 3,165 1,046 0 0 86,757 Construction 21,255 83 182 0 0 21,520 Commercial loans 46,601 234 180 0 0 47,015 Consumer and other loans 4,527 52 2 0 0 4,581 Total $ 215,281 8,600 1,410 0 0 225,291 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 September 30, 2016, there were six loans on nonaccrual. Age analysis of past-due loans is as follows (in thousands): Accruing Loans 30-59 Days 60-89 Days Greater Total Current Nonaccrual Total At September 30, 2016: Real estate mortgage loans: Commercial $ 0 0 0 0 65,418 0 65,418 Residential and home equity 0 0 0 0 85,747 1,010 86,757 Construction 0 0 0 0 21,446 74 21,520 Commercial loans 0 0 0 0 46,938 77 47,015 Consumer and other loans 0 0 0 0 4,581 0 4,581 Total $ 0 0 0 0 224,130 1,161 225,291 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 Recorded Unpaid Related Recorded Unpaid Related At September 30, 2016: Residential & Home Equity $ 1,010 1,010 0 0 0 1,010 1,010 0 Construction 74 74 0 0 0 74 74 0 Commercial loans 0 0 77 77 65 77 77 65 Total $ 1,084 1,084 77 77 65 1,161 1,161 65 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 September 30, 2016 2015 Average Interest Interest Average Interest Interest Residential & Home Equity $ 361 0 0 0 0 0 Construction 1 0 0 0 0 0 Commercial loans 88 0 0 226 1 1 Consumer & Other 7 0 0 7 0 0 Total $ 457 0 0 233 1 1 Nine Months Ended September 30, 2016 2015 Average Interest Interest Average Interest Interest Residential & Home Equity $ 119 0 0 0 0 0 Commercial loans 91 0 0 273 10 9 Consumer & Other 3 0 0 7 0 0 Total $ 213 0 0 280 10 9 There were no collateral dependent loans measured at fair value on a nonrecurring basis at September 30, 2016 or December 31, 2015. |