Loans | (3) Loans The segments and classes of loans are as follows (in thousands): At December 31, 2016 2015 Real estate mortgage loans: Commercial $ 65,805 57,847 Residential and home equity 88,883 69,817 Construction 19,991 17,493 Total real estate mortgage loans 174,679 145,157 Commercial loans 46,340 40,229 Consumer and other loans 4,275 3,877 Total loans 225,294 189,263 Add (Less): Net deferred loan costs 350 286 Allowance for loan losses (2,876 ) (2,473 ) Loans, net $ 222,768 187,076 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 portfolio segments and classes are identified by the Company as follows: Real Estate Mortgage Loans. Commercial. mixed-use Residential and Home Equity. one-to-four 1-year, 3-year, 5-year, 7-year 15-year 30-year Construction. Commercial Loans. Small-to-medium Consumer and Other Loans. An analysis of the change in the allowance for loan losses follows (in thousands): Real Estate Mortgage Loans Commercial Residential Home Construction Commercial Consumer Other Total Year Ended December 31, 2016: Beginning balance $ 707 868 246 596 56 2,473 Provision for loan losses 68 206 12 135 3 424 Net (charge-offs) recoveries 0 0 0 (17 ) (4 ) (21 ) Ending balance $ 775 1,074 258 714 55 2,876 At December 31, 2016: Individually evaluated for impairment: Recorded investment $ 0 662 73 76 0 811 Balance in allowance for loan losses $ 0 0 0 76 0 76 Collectively evaluated for impairment: Recorded investment $ 65,805 88,221 19,918 46,264 4,275 224,483 Balance in allowance for loan losses $ 775 1,074 258 638 55 2,800 Year Ended December 31, 2015: Beginning balance 641 594 263 562 38 2,098 Provision for loan losses 66 274 (17 ) 86 24 433 Net (charge-offs) recoveries 0 0 0 (52 ) (6 ) (58 ) Ending balance $ 707 868 246 596 56 2,473 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 following summarizes the loan credit quality (in thousands): Real Estate Mortgage Loans Commercial Residential Home Construction Commercial Consumer Other Total At December 31, 2016: Grade: Pass $ 61,734 84,695 19,485 45,623 4,227 215,764 Special mention 4,071 3,152 333 250 46 7,852 Substandard 0 1,036 173 467 2 1,678 Doubtful 0 0 0 0 0 0 Loss 0 0 0 0 0 0 Total $ 65,805 88,883 19,991 46,340 4,275 225,294 At December 31, 2015: Grade: Pass 52,097 65,367 17,204 39,607 3,836 178,111 Special mention 5,750 3,396 163 461 32 9,802 Substandard 0 1,054 126 161 9 1,350 Doubtful 0 0 0 0 0 0 Loss 0 0 0 0 0 0 Total $ 57,847 69,817 17,493 40,229 3,877 189,263 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. Further, construction and nonowner-occupied commercial real estate loans and commercial 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. Pass Special Mention Substandard Doubtful Loss At December 31, 2016, there was one loan over thirty days past due, no loans past due ninety days or more but still accruing and four loans on nonaccrual. Age analysis of past-due Accruing Loans 30-59 60-89 Greater Total Current Nonaccrual Total At December 31, 2016: Real estate mortgage: Commercial $ 0 0 0 0 65,805 0 65,805 Residential and home equity 371 0 0 371 87,850 662 88,883 Construction 0 0 0 0 19,918 73 19,991 Commercial 0 0 0 0 46,264 76 46,340 Consumer/other 0 0 0 0 4,275 0 4,275 Total $ 371 0 0 371 224,112 811 225,294 At December 31, 2015: Real estate mortgage: 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 0 0 0 0 40,092 137 40,229 Consumer/other 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 Recorded Unpaid Related Recorded Unpaid Related Allowance At December 31, 2016: Residential & Home Equity $ 662 662 0 0 0 662 662 0 Construction 73 73 0 0 0 73 73 0 Commercial 0 0 76 76 76 76 76 76 Total $ 735 735 76 76 76 811 811 76 At December 31, 2015: Commercial loans 0 0 137 137 62 137 137 62 Consumer 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 by loan class is as follows (in thousands): Average Interest Interest Year Ended December 31, 2016: Residential & Home Equity $ 354 0 14 Construction 19 0 0 Commercial 107 7 6 Total $ 480 7 20 Year Ended December 31, 2015: Commercial 270 12 12 Consumer 7 1 1 Total $ 277 13 13 There were no collateral dependent impaired loans measured at fair value on a nonrecurring basis at December 31, 2016 or 2015. The Company did not enter into any new troubled debt restructured loans in the years ended December 31, 2016 or 2015. The Company grants the majority of its loans to borrowers throughout Leon County, Florida. Although the Company has a diversified loan portfolio, a significant portion of its borrowers’ ability to honor their contracts is dependent upon the economy of this area. The Company does not have any significant concentrations to any one industry or client. |