LOANS AND ALLOWANCE FOR CREDIT LOSSES (Table)

12 Months Ended

Dec. 31, 2017

The following table provides information about the principal classes of the loan portfolio at December 31, 2017 and 2016.


(Dollars in thousands)	2017		2016
Construction	$	125,746	$	84,002
Residential real estate		399,190		325,768
Commercial real estate		464,887		382,681
Commercial		97,284		72,435
Consumer		6,407		6,639
Total loans		1,093,514		871,525
Allowance for credit losses		(9,781)		(8,726)
Total loans, net	$	1,083,733	$	862,799

Allowance for Credit Losses on Financing Receivables

The following tables include impairment information relating to loans and the allowance for credit losses as of December 31, 2017 and 2016.


			Residential		Commercial
(Dollars in thousands)	Construction		real estate		real estate		Commercial		Consumer		Total
December 31, 2017
Loans individually
evaluated for impairment	$	6,975	$	6,018	$	4,967	$	337	$	-	$	18,297
Loans collectively
evaluated for impairment		118,771		393,172		459,920		96,947		6,407		1,075,217
Total loans	$	125,746	$	399,190	$	464,887	$	97,284	$	6,407	$	1,093,514

Allowance for credit
losses allocated to:
Loans individually
evaluated for impairment	$	500	$	239	$	33	$	33	$	-	$	805
Loans collectively
evaluated for impairment		1,960		2,045		2,561		2,208		202		8,976
Total loans	$	2,460	$	2,284	$	2,594	$	2,241	$	202	$	9,781


			Residential		Commercial
(Dollars in thousands)	Construction		real estate		real estate		Commercial		Consumer		Total
December 31, 2016
Loans individually
evaluated for impairment	$	8,007	$	7,778	$	6,088	$	-	$	99	$	21,972
Loans collectively
evaluated for impairment		75,995		317,990		376,593		72,435		6,540		849,553
Total loans	$	84,002	$	325,768	$	382,681	$	72,435	$	6,639	$	871,525

Allowance for credit
losses allocated to:
Loans individually
evaluated for impairment	$	1,639	$	317	$	185	$	-	$	-	$	2,141
Loans collectively
evaluated for impairment		1,148		1,636		2,425		1,145		231		6,585
Total loans	$	2,787	$	1,953	$	2,610	$	1,145	$	231	$	8,726

The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for 2017 and 2016.

Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes.


			Residential		Commercial
(Dollars in thousands)	Construction		real estate		real estate		Commercial		Consumer		Unallocated		Total
2017
Allowance for credit losses:
Beginning Balance	$	2,787	$	1,953	$	2,610	$	1,145	$	231	$	-	$	8,726

Charge-offs		(54)		(445)		(100)		(946)		(32)		-		(1,577)
Recoveries		30		40		31		215		25		-		341
Net charge-offs		(24)		(405)		(69)		(731)		(7)		-		(1,236)

Provision		(303)		736		53		1,827		(22)		-		2,291
Ending Balance	$	2,460	$	2,284	$	2,594	$	2,241	$	202	$	-	$	9,781


			Residential		Commercial
(Dollars in thousands)	Construction		real estate		real estate		Commercial		Consumer		Unallocated		Total
2016
Allowance for credit losses:
Beginning Balance	$	1,646	$	2,181	$	2,999	$	558	$	156	$	776	$	8,316

Charge-offs		(615)		(580)		(503)		(497)		(45)		-		(2,240)
Recoveries		35		298		25		428		16		-		802
Net charge-offs		(580)		(282)		(478)		(69)		(29)		-		(1,438)

Provision		1,721		54		89		656		104		(776)		1,848
Ending Balance	$	2,787	$	1,953	$	2,610	$	1,145	$	231	$	-	$	8,726

Effect on the Loan Loss Provision as Result of change in Methodology

The following table represents the effect on the loan loss provision as a result of these changes in methodology. It compares the methodology actually used for the year ended December 31, 2017to that used in prior periods.


	Calculated Provision		Calculated Provision
	Based on Current		Based on Prior
(Dollars in thousands)	Methodology		Methodology		Difference
Construction	$	(303)	$	(653)	$	350
Residential real estate		736		753		(17)
Commercial real estate		53		(439)		492
Commercial		1,827		1,217		610
Consumer		(22)		(9)		(13)
Total	$	2,291	$	869	$	1,422

Impaired Financing Receivables

The following tables provide information on impaired loans and any related allowance by loan class as of December 31, 2017 and 2016. The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken.


				Recorded		Recorded
	Unpaid			investment		investment			Average		Interest
	principal			with no		with an	Related		recorded		income
(Dollars in thousands)	balance			allowance		allowance	allowance		investment		recognized
December 31, 2017
Impaired nonaccrual loans:
Construction	$	3,100	$	182	$	2,821	$	459	$	3,181	$	-
Residential real estate		1,620		1,482		-		-		3,191		-
Commercial real estate		795		149		-		-		542		-
Commercial		425		-		337		33		200		-
Consumer		-		-		-		-		41		-
Total	$	5,940	$	1,813	$	3,158	$	492	$	7,155	$	-

Impaired accruing TDRs:
Construction	$	3,972	$	3,038	$	934	$	41	$	4,067	$	101
Residential real estate		4,536		2,042		2,494		239		3,831		161
Commercial real estate		4,818		4,084		734		33		4,860		185
Commercial		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total	$	13,326	$	9,164	$	4,162	$	313	$	12,758	$	447

Total impaired loans:
Construction	$	7,072	$	3,220	$	3,755	$	500	$	7,248	$	101
Residential real estate		6,156		3,524		2,494		239		7,022		161
Commercial real estate		5,613		4,233		734		33		5,402		185
Commercial		425		-		337		33		200		-
Consumer		-		-		-		-		41		-
Total	$	19,266	$	10,977	$	7,320	$	805	$	19,913	$	447



				Recorded		Recorded
	Unpaid			investment		investment			Average		Interest
	principal			with no		with an	Related		recorded		income
(Dollars in thousands)	balance			allowance		allowance	allowance		investment		recognized
December 31, 2016
Impaired nonaccrual loans:
Construction	$	7,247	$	-	$	3,818	$	1,621	$	5,707	$	-
Residential real estate		4,013		1,957		1,946		166		3,500		-
Commercial real estate		1,801		959		193		117		2,144		-
Commercial		-		-		-		-		108		-
Consumer		99		99		-		-		106		-
Total	$	13,160	$	3,015	$	5,957	$	1,904	$	11,565	$	-

Impaired accruing TDRs:
Construction	$	4,189	$	3,479	$	710	$	18	$	4,172	$	96
Residential real estate		3,875		2,829		1,046		151		4,663		195
Commercial real estate		4,936		1,573		3,363		68		5,090		174
Commercial		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Total	$	13,000	$	7,881	$	5,119	$	237	$	13,925	$	465

Total impaired loans:
Construction	$	11,436	$	3,479	$	4,528	$	1,639	$	9,879	$	96
Residential real estate		7,888		4,786		2,992		317		8,163		195
Commercial real estate		6,737		2,532		3,556		185		7,234		174
Commercial		-		-		-		-		108		-
Consumer		99		99		-		-		106		-
Total	$	26,160	$	10,896	$	11,076	$	2,141	$	25,490	$	465

Troubled Debt Restructurings on Financing Receivables

The following tables provide a roll-forward for troubled debt restructurings as of December 31, 2017 and December 31, 2016.


	1/1/2017												12/31/2017
	TDR		New		Disbursements		Charge		Reclassifications/				TDR		Related
(Dollars in thousands)	Balance		TDRs		(Payments)		offs		Transfer In/(Out)		Payoffs		Balance		Allowance
For the year ended
December 31, 2017
Accruing TDRs
Construction	$	4,189	$	-	$	(25)	$	-	$	(58)	$	(134)	$	3,972	$	41
Residential real estate		3,875		-		(333)		(89)		1,535		(452)		4,536		239
Commercial real estate		4,936		-		(118)		-		-		-		4,818		33
Commercial		-		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-		-
Total	$	13,000	$	-	$	(476)	$	(89)	$	1,477	$	(586)	$	13,326	$	313

Nonaccrual TDRs
Construction	$	3,818	$	-	$	(890)	$	-	$	(50)	$	-	$	2,878	$	459
Residential real estate		1,603		-		(68)		-		(1,535)		-		-		-
Commercial real estate		83		-		-		-		-		-		83		-
Commercial		-		345		(8)		-		-		-		337		33
Consumer		-		-		-		-		-		-		-		-
Total	$	5,504	$	345	$	(966)	$	-	$	(1,585)	$	-	$	3,298	$	492

Total	$	18,504	$	345	$	(1,442)	$	(89)	$	(108)	$	(586)	$	16,624	$	805


	1/1/2016												12/31/16
	TDR		New		Disbursements		Charge		Reclassifications/				TDR		Related
(Dollars in thousands)	Balance		TDRs		(Payments)		offs		Transfer In/(Out)		Payoffs		Balance		Allowance
For the year ended
December 31, 2016
Accruing TDRs
Construction	$	4,069	$	-	$	120	$	-	$	-	$	-	$	4,189	$	18
Residential real estate		5,686		565		(405)		-		(1,595)		(376)		3,875		151
Commercial real estate		5,740		495		(724)		(117)		(458)		-		4,936		68
Commercial		-		-		-		-		-		-		-		-
Consumer		-		-		-		-		-		-		-		-
Total	$	15,495	$	1,060	$	(1,009)	$	(117)	$	(2,053)	$	(376)	$	13,000	$	237

Nonaccrual TDRs
Construction	$	4,960	$	2,570	$	(2,022)	$	(590)	$	(1,100)	$	-	$	3,818	$	1,621
Residential real estate		445		117		(531)		(23)		1,595		-		1,603		156
Commercial real estate		-		-		(117)		(258)		458		-		83		-
Commercial		-		-		-		-		-		-		-		-
Consumer		23		-		(23)		-		-		-		-		-
Total	$	5,428	$	2,687	$	(2,693)	$	(871)	$	953	$	-	$	5,504	$	1,777

Total	$	20,923	$	3,747	$	(3,702)	$	(988)	$	(1,100)	$	(376)	$	18,504	$	2,014

The following tables provide information on loans that were modified and considered TDRs during 2017 and 2016.


		Premodification		Postmodification
		outstanding		outstanding
	Number of	recorded		recorded		Related
(Dollars in thousands)	contracts	investment		investment		allowance
TDRs:
For the year ended
December 31, 2017
Construction	-	$	-	$	-	$	-
Residential real estate	-		-		-		-
Commercial real estate	1		760		755		-
Commercial	1		462		345		-
Consumer	-		-		-		-
Total	2	$	1,222	$	1,100	$	-

For the year ended
December 31, 2016
Construction	-	$	-	$	-	$	-
Residential real estate	3		667		688		-
Commercial real estate	2		695		572		-
Commercial	-		-		-		-
Consumer	-		-		-		-
Total	5	$	1,362	$	1,260	$	-

Troubled Debt Restructurings That Defaulted On Financing Receivables

During the year ended December 31, 2017, there was one new TDR and one previously recorded TDR which was modified. The new TDR consisted of a reduction in principal, whereas, the previously recorded TDR consisted of a change in maturity date.

The following tables provide information on TDRs that defaulted during 2017 and 2016. Generally, a loan is considered in default when principal or interest is past due 90 days or more, the loan is placed on nonaccrual, charged-off, or foreclosure proceedings have commenced.


	Number of	Recorded		Related
(Dollars in thousands)	contracts	investment		allowance
TDRs that subsequently defaulted:
For the year ended
December 31, 2017
Construction	-	$	-	$	-
Residential real estate	1		89		-
Commercial real estate	-		-		-
Commercial	-		-		-
Consumer	-		-		-
Total	1	$	89	$	-

For the year ended
December 31, 2016
Construction	2	$	590	$	-
Residential real estate	1		23		-
Commercial real estate	2		375		-
Commercial	-		-		-
Consumer	-		-		-
Total	5	$	988	$	-

Financing Receivable Credit Quality Indicators

The following tables provide information on loan risk ratings as of December 31, 2017 and 2016.


					Special
(Dollars in thousands)	Pass/Performing		Pass/Watch		Mention		Substandard		Doubtful		Total
December 31, 2017
Construction	$	88,836	$	30,674	$	-	$	6,236	$	-	$	125,746
Residential real estate		355,575		34,973		4,456		4,186		-		399,190
Commercial real estate		342,051		109,041		7,420		6,375		-		464,887
Commercial		72,440		24,102		308		434		-		97,284
Consumer		5,260		1,147		-		-		-		6,407
Total	$	864,162	$	199,937	$	12,184	$	17,231	$	-	$	1,093,514


					Special
(Dollars in thousands)	Pass/Performing		Pass/Watch		Mention		Substandard		Doubtful		Total
December 31, 2016
Construction	$	45,126	$	27,515	$	4,195	$	7,166	$	-	$	84,002
Residential real estate		280,215		32,027		6,646		6,880		-		325,768
Commercial real estate		260,935		102,526		10,939		8,281		-		382,681
Commercial		49,697		21,616		857		265		-		72,435
Consumer		6,406		134		-		99		-		6,639
Total	$	642,379	$	183,818	$	22,637	$	22,691	$	-	$	871,525

Past Due Financing Receivables

The following tables provide information on the aging of the loan portfolio as of December 31, 2017 and 2016.


		Accruing
				30-59 days			60-89 days			Greater than			Total
(Dollars in thousands)	Current			past due			past due			90 days			past due			Nonaccrual			Total
December 31, 2017
Construction	$	122,475		$	268		$	-		$	-		$	268		$	3,003		$	125,746
Residential real estate		394,653			1,589			1,045			421			3,055			1,482			399,190
Commercial real estate		460,998			1,061			2,461			218			3,740			149			464,887
Commercial		96,774			173			-			-			173			337			97,284
Consumer		6,395			6			6			-			12			-			6,407
Total	$	1,081,295		$	3,097		$	3,512		$	639		$	7,248		$	4,971		$	1,093,514
Percent of total loans		98.8	%		0.3	%		0.3	%		0.1	%		0.7	%		0.5	%		100.0	%


		Accruing
				30-59 days			60-89 days			Greater than			Total
(Dollars in thousands)	Current			past due			past due			90 days			past due			Nonaccrual			Total
December 31, 2016
Construction	$	80,079		$	-		$	105		$	-		$	105		$	3,818		$	84,002
Residential real estate		317,992			1,778			2,095			-			3,873			3,903			325,768
Commercial real estate		375,552			3,219			2,758			-			5,977			1,152			382,681
Commercial		72,272			19			134			10			163			-			72,435
Consumer		6,515			13			2			10			25			99			6,639
Total	$	852,410		$	5,029		$	5,094		$	20		$	10,143		$	8,972		$	871,525
Percent of total loans		97.8	%		0.6	%		0.6	%		-	%		1.2	%		1.0	%		100.0	%