Loans | NOTE 5 — Loans Major classifications of loans are as follows: December 31, December 31, Commercial Development $ 1,498 $ 2,526 Real estate 53,202 42,276 Commercial and industrial 10,135 7,617 Residential real estate and consumer 1-4 family owner-occupied 47,448 50,284 1-4 family investor-owned 33,658 34,633 Multifamily 31,677 31,905 Consumer 1,613 1,582 Subtotal $ 179,231 $ 170,823 Deferred loan fees (74 ) (88 ) Loans in process (6,002 ) (2,283 ) Allowance for loan losses (1,800 ) (1,478 ) Net loans $ 171,355 $ 166,974 Deposit accounts in an overdraft position and reclassified as loans approximated $2 and $3 at December 31, 2017, and December 31, 2016, respectively. A summary of the activity in the allowance for loan losses by portfolio segment is as follows: Commercial Residential Total December 31, 2017 Beginning balance $ 348 $ 1,130 $ 1,478 Provision for loan losses 312 107 419 Loans charged off — (133 ) (133 ) Recoveries of loans previously charged off — 36 36 Total ending allowance balance $ 660 $ 1,140 $ 1,800 December 31, 2016 Beginning balance $ 497 $ 1,054 $ 1,551 Provision (credit) for loan losses (149 ) 993 844 Loans charged off — (917 ) (917 ) Recoveries of loans previously charged off — — — Total ending allowance balance $ 348 $ 1,130 $ 1,478 Information about how loans were evaluated for impairment and the related allowance for loan losses follows: Commercial Residential Total December 31, 2017 Loans: Individually evaluated for impairment $ 192 $ 2,112 $ 2,304 Collectively evaluated for impairment 64,643 112,284 176,927 Total loans $ 64,835 $ 114,396 $ 179,231 Allowance for loan losses: Individually evaluated for impairment $ — $ 179 $ 179 Collectively evaluated for impairment 660 961 1,621 Total allowance for loan losses $ 660 $ 1,140 $ 1,800 Commercial Residential Total December 31, 2016 Loans: Individually evaluated for impairment $ 140 $ 5,038 $ 5,178 Collectively evaluated for impairment 52,279 113,366 165,645 Total loans $ 52,419 $ 118,404 $ 170,823 Allowance for loan losses: Individually evaluated for impairment $ — $ — $ — Collectively evaluated for impairment 348 1,130 1,478 Total allowance for loan losses $ 348 $ 1,130 $ 1,478 Information regarding impaired loans follows: As of December 31, 2017 Principal Recorded Related Average Interest Loans with related allowance for loan losses: Residential real estate and consumer 1-4 family investor-owned $ 375 $ 330 $ 179 $ 312 $ 8 Loans with no related allowance for loan losses: Commercial Commercial and industrial 198 192 — 204 — Residential real estate and consumer 1-4 family owner-occupied 1,158 1,099 — 1,443 1 1-4 family investor-owned 716 683 — 1,289 24 Total loans with no related allowance 2,072 1,974 — 2,936 25 Total impaired loans $ 2,447 $ 2,304 $ 179 $ 3,248 $ 33 As of December 31, 2016 Principal Recorded Related Average Interest Loans with no related allowance for loan losses: Commercial Real estate $ 14 $ 14 $ — $ 14 $ 1 Commercial and industrial 129 126 — 135 — Residential real estate and consumer 1-4 family owner-occupied 2,363 2,104 — 2,310 20 1-4 family investor-owned 2,707 2,466 — 2,592 73 Multifamily 513 468 — 483 10 Total impaired loans $ 5,726 $ 5,178 $ — $ 5,534 $ 104 As of December 31, 2017, approximately $50 is committed to one impaired loan relationship to finance costs relating to the disposal of several properties. There were no additional funds committed to impaired loans as of December 31, 2016. The Company regularly evaluates various attributes of loans to determine the appropriateness of the allowance for loan losses. The credit quality indicators monitored differ depending on the class of loan. Commercial loans are generally evaluated using the following internally prepared ratings: “Pass” ratings are assigned to loans with adequate collateral and debt service ability such that collectibility of the contractual loan payments is highly probable. “Special mention” ratings are assigned to loans where management has some concern that the collateral or debt service ability may not be adequate, though the collectibility of the contractual loan payments is still probable. “Substandard” ratings are assigned to loans that do not have adequate collateral and/or debt service ability such that collectibility of the contractual loan payments is no longer probable. “Doubtful” ratings are assigned to loans that do not have adequate collateral and/or debt service ability, and collectibility of the contractual loan payments is unlikely. Information regarding the credit quality indicators most closely monitored for commercial loans by class follows: Pass Special Substandard Doubtful Totals December 31, 2017 Development $ 1,498 $ — $ — $ — $ 1,498 Real estate 51,939 1,263 — — 53,202 Commercial and industrial 9,435 586 114 — 10,135 1-4 family investor owned 31,964 1,449 149 96 33,658 Multifamily 31,677 — — — 31,677 Totals $ 126,513 $ 3,298 $ 263 $ 96 $ 130,170 December 31, 2016 Development $ 2,526 $ — $ — $ — $ 2,526 Real estate 42,042 234 — — 42,276 Commercial and industrial 6,895 595 127 — 7,617 1-4 family investor owned 31,114 2,709 720 90 34,633 Multifamily 31,442 220 243 — 31,905 Totals $ 114,019 $ 3,758 $ 1,090 $ 90 $ 118,957 Residential real estate and consumer loans are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loan. Information regarding the credit quality indicators most closely monitored for residential real estate and consumer loans by class follows: Performing Non- Totals December 31, 2017 1-4 family owner-occupied 46,349 1,099 47,448 Consumer 1,613 — 1,613 $ 47,962 $ 1,099 $ 49,061 December 31, 2016 1-4 family owner-occupied 48,180 2,104 50,284 Consumer 1,582 — 1,582 $ 49,762 $ 2,104 $ 51,866 Loan aging information follows: Loans Past Due Nonaccrual Current 30 – 89 90+ Total Loans December 31, 2017 Commercial Development $ 1,498 $ — $ — $ 1,498 $ — Real estate 53,202 — — 53,202 — Commercial and industrial 9,946 75 114 10,135 114 Residential real estate and consumer 1-4 family owner-occupied 46,943 436 69 47,448 580 1-4 family investor-owned 33,209 205 244 33,658 549 Multifamily 31,677 — — 31,677 — Consumer 1,607 6 — 1,613 — Total $ 178,082 $ 722 $ 427 $ 179,231 $ 1,243 December 31, 2016 Commercial Development $ 2,526 $ — $ — $ 2,526 $ — Real estate 42,276 — — 42,276 — Commercial and industrial 7,563 54 — 7,617 126 Residential real estate and consumer 1-4 family owner-occupied 48,134 1,743 407 50,284 1,698 1-4 family investor-owned 33,896 170 567 34,633 827 Multifamily 31,905 — — 31,905 248 Consumer 1,580 2 — 1,582 — Total $ 167,880 $ 1,969 $ 974 $ 170,823 $ 2,899 There are no loans 90 or more days past due and accruing interest as of December 31, 2017 or 2016. Management regularly monitors impaired loan relationships. In the event facts and circumstances change, an additional provision for loan losses may be necessary. Nonperforming loans are as follows: As of December 31 2017 2016 Nonaccrual loans, other than troubled debt restructurings $ 274 $ 12 Nonaccrual loans, troubled debt restructurings 969 2,887 Total nonperforming loans (NPLs) 1,243 2,899 Restructured loans, accruing $ 661 $ 2,279 When, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that the Company would not otherwise consider, the modified loan is classified as a troubled debt-restructuring. Loan modifications may consist of forgiveness of interest and/or principal, a reduction of the interest rate, allowing interest-only payments for a period of time, and/or extending amortization terms. The following presents information regarding new modifications of loans classified as troubled debt restructurings during the years ended December 31, 2017 and 2016. All troubled debt restructurings are classified as impaired loans. The recorded investment presented in the following tables does not include specific reserves for loan losses recognized for these loans, which totaled 0 at December 31, 2017 and December 31, 2016. Number of Pre-Modification Post-Modification December 31, 2017 Commercial: Commercial and industrial 1 $ 88 $ 88 1 $ 88 $ 88 December 31, 2016 Commercial: Real estate 1 $ 14 $ 14 Commercial and industrial 1 127 127 Residential real estate and consumer: 1 – 4 family owner-occupied 3 329 329 1 – 4 family investor-owned 26 1,947 1,947 Multifamily 1 220 220 32 $ 2,637 $ 2,637 The Company considers a troubled debt restructuring in default if it becomes past due more than 90 days. Two 1 – 4 family investor-owned properties totaling $331 defaulted in 2017 that were restructured within twelve months. $82 was charged to the allowance for loan losses relating to these properties. No troubled debt restructurings defaulted within 12 months of their modification date during the year ended December 31, 2016. The Company continues to evaluate purchased loans for impairment in accordance with US GAAP. The purchased loans were considered impaired at the acquisition date if there was evidence of deterioration since origination and if it was probable that not all contractually required principal and interest payments would be collected under the loans. The following table reflects the carrying value of all purchased loans: Contractually Required Carrying Value Credit Non-Credit As of December 31, 2017 Commercial Real estate $ — $ 8,444 $ 8,380 Residential real estate and consumer 1-4 family owner-occupied 146 6,709 6,753 1-4 family investor-owned 149 10,558 10,591 Multifamily — 5,425 5,372 Consumer — — — Totals $ 295 $ 31,136 $ 31,096 Contractually Required Carrying Value Credit Non-Credit As of December 31, 2016 Commercial Real estate $ — $ 9,238 $ 9,113 Residential real estate and consumer 1-4 family owner-occupied 386 9,374 9,546 1-4 family investor-owned 418 13,164 13,294 Multifamily 248 6,463 6,599 Consumer — — — Totals $ 1,052 $ 38,239 $ 38,552 As of December 31, 2017, the estimated contractually-required payments receivable on credit impaired and non-credit impaired loans was $295 and $31,136, respectively. The cash flows expected to be collected related to principal as of December 31, 2017 on all purchased loans is $31,096. As a result, there is approximately $334 of remaining discount on the purchased loans. These amounts are based upon the estimate of the underlying collateral or discounted cash flows as of December 31, 2017. Any excess of cash flows expected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan as the purchased loans pay down, mature, renew or pay off. As of December 31, 2016, the estimated contractually-required payments receivable on credit impaired and non-credit impaired loans was $1,052 and $38,239, respectively. The cash flows expected to be collected related to principal as of December 31, 2016 on all purchased loans is $38,552. As a result, there was approximately $739 of remaining discount on the purchased loans. These amounts are based upon the estimate of the underlying collateral or discounted cash flows as of December 31, 2016. Any excess of cash flows expected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan as the purchased loans pay down, mature, renew or pay off. The change in carrying amount of accretable yield for purchased loans was as follows: For years ended 2017 2016 Beginning Balance $ 739 $ 1,193 Additions — — Accretion (405 ) (454 ) Ending Balance $ 334 $ 739 |