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Loans Receivable and Allowance for Loan Losses | 12 Months Ended
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Dec. 31, 2018
Loans Receivable and Allowance for Loan Losses [Abstract] |
Loans Receivable and Allowance for Loan Losses | NOTE 4 - LOANS RECEIVABLE AND ALLOWANCE FOR LOAN LOSSES Set forth below is selected data relating to the composition of the loan portfolio (in thousands): ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |
﻿ | December 31, 2018 |  | December 31, 2017
﻿Real Estate: |  |  |  |  |  |  |  |  |  |  |
﻿Residential | $ | 235,523 |  | 27.7 | % |  | $ | 235,759 |  | 30.8 | %
﻿Commercial |  | 374,790 |  | 44.1 |  |  |  | 342,934 |  | 44.9 |
﻿Construction |  | 17,445 |  | 2.0 |  |  |  | 17,228 |  | 2.3 |
﻿Commercial, financial and agricultural |  | 110,542 |  | 13.0 |  |  |  | 97,461 |  | 12.7 |
﻿Consumer loans to individuals |  | 112,002 |  | 13.2 |  |  |  | 70,953 |  | 9.3 |
﻿Total loans |  | 850,302 |  | 100.0 | % |  |  | 764,335 |  | 100.0 | %
﻿ |  |  |  |  |  |  |  |  |  |  |
﻿Deferred fees, net |  | (120) |  |  |  |  |  | (243) |  |  |
﻿Total loans receivable |  | 850,182 |  |  |  |  |  | 764,092 |  |  |
﻿Allowance for loan losses |  | (8,452) |  |  |  |  |  | (7,634) |  |  |
﻿Net loans receivable | $ | 841,730 |  |  |  |  | $ | 756,458 |  |  |
﻿ ﻿ ﻿ ﻿
﻿ |  |
﻿ |  |
Changes in the accretable yield for purchased credit-impaired loans were as follows for the twelve months ended December 31: ﻿ (In thousands) ﻿ ﻿ ﻿
﻿ |  |  |  |  |
﻿ |  |  |  |  |
﻿ | 2018 |  | 2017
﻿Balance at beginning of period | $ | 108 |  | $ | 208
﻿Additions |  | - |  |  | -
﻿Accretion |  | (56) |  |  | (73)
﻿Reclassification and other |  | (23) |  |  | (27)
﻿Balance at end of period | $ | 29 |  | $ | 108
﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 (in thousands): ﻿ ﻿ ﻿
﻿ |  |  |  |  |
﻿ |  |  |  |  |
﻿ | December 31, 2018 |  | December 31, 2017
﻿ |  |  |  |  |
﻿Outstanding Balance | $ | 1,055 |  | $ | 1,444
﻿Carrying Amount | $ | 886 |  | $ | 1,174
﻿ There were no material increases or decreases in the expected cash flows of these loans since the acquisition date. There has been no allowance for loan losses recorded for acquired loans with specific evidence of deterioration in credit quality. As of December 31, 2018, for loans that were acquired prior to 2018 with or without specific evidence of deterioration in credit quality, adjustments to the allowance for loan losses have been accounted for through the allowance for loan loss adequacy calculation. ﻿ The Company maintains a loan review system, which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans. The system takes into consideration, among other things, delinquency status, size of loans, type and market value of collateral and financial condition of the borrowers. Specific loan loss allowances are established for identified losses based on a review of such information. A loan evaluated for impairment is considered to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. All loans identified as impaired are evaluated independently. The Company does not aggregate such loans for evaluation purposes. Impairment is measured on a loan-by-loan basis for commercial and construction loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral-dependent. ﻿ Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential mortgage loans for impairment disclosures, unless such loans are part of a larger relationship that is impaired, or are classified as a troubled debt restructuring. ﻿ ﻿ The following tables show the amount of loans in each category that were individually and collectively evaluated for impairment at the dates indicated: ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ | Real Estate Loans |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  | Commercial |  | Consumer |  |  |
﻿ | Residential |  | Commercial |  | Construction |  | Loans |  | Loans |  | Total
﻿ | (In thousands)
﻿December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Individually evaluated for impairment | $ | - |  | $ | 1,319 |  | $ | - |  | $ | - |  | $ | - |  | $ | 1,319
﻿Loans acquired with deteriorated credit quality |  | 630 |  |  | 256 |  |  | - |  |  | - |  |  | - |  |  | 886
﻿Collectively evaluated for impairment |  | 234,893 |  |  | 373,215 |  |  | 17,445 |  |  | 110,542 |  |  | 112,002 |  |  | 848,097
﻿Total Loans | $ | 235,523 |  | $ | 374,790 |  | $ | 17,445 |  | $ | 110,542 |  | $ | 112,002 |  | $ | 850,302
﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ | Real Estate Loans |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  | Commercial |  | Consumer |  |  |
﻿ | Residential |  | Commercial |  | Construction |  | Loans |  | Loans |  | Total
﻿ | (In thousands)
﻿December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Individually evaluated for impairment | $ | 23 |  | $ | 1,224 |  | $ | - |  | $ | - |  | $ | - |  | $ | 1,247
﻿Loans acquired with deteriorated credit quality |  | 833 |  |  | 341 |  |  | - |  |  | - |  |  | - |  |  | 1,174
﻿Collectively evaluated for impairment |  | 234,903 |  |  | 341,369 |  |  | 17,228 |  |  | 97,461 |  |  | 70,953 |  |  | 761,914
﻿Total Loans | $ | 235,759 |  | $ | 342,934 |  | $ | 17,228 |  | $ | 97,461 |  | $ | 70,953 |  | $ | 764,335
﻿ ﻿ The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable. ﻿ ﻿
﻿ |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |
﻿ |  |  |  | Unpaid |  |  |
﻿ | Recorded |  | Principal |  | Associated
﻿ | Investment |  | Balance |  | Allowance
﻿December 31, 2018 | (In thousands)
﻿With no related allowance recorded: |  |  |  |  |  |  |  |
﻿Real Estate Loans |  |  |  |  |  |  |  |
﻿ Commercial | $ | 1,319 |  | $ | 1,747 |  | $ | -
﻿ Subtotal |  | 1,319 |  |  | 1,747 |  |  | -
﻿ |  |  |  |  |  |  |  |
﻿Total: |  |  |  |  |  |  |  |
﻿Real Estate Loans |  |  |  |  |  |  |  |
﻿ Commercial |  | 1,319 |  |  | 1,747 |  |  | -
﻿ Total Impaired Loans | $ | 1,319 |  | $ | 1,747 |  | $ | -
﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |
﻿ |  |  |  | Unpaid |  |  |
﻿ | Recorded |  | Principal |  | Associated
﻿ | Investment |  | Balance |  | Allowance
﻿ |  |  |  |  |  |  |  |
﻿December 31, 2017 | (In thousands)
﻿With no related allowance recorded: |  |  |  |  |  |  |  |
﻿Real Estate Loans |  |  |  |  |  |  |  |
﻿ Residential | $ | 23 |  | $ | 28 |  | $ | -
﻿ Commercial |  | 1,224 |  |  | 1,496 |  |  | -
﻿ Subtotal |  | 1,247 |  |  | 1,524 |  |  | -
﻿ |  |  |  |  |  |  |  |
﻿Total: |  |  |  |  |  |  |  |
﻿Real Estate Loans |  |  |  |  |  |  |  |
﻿ Residential |  | 23 |  |  | 28 |  |  | -
﻿ Commercial |  | 1,224 |  |  | 1,496 |  |  | -
﻿ Total Impaired Loans | $ | 1,247 |  | $ | 1,524 |  | $ | -
﻿ |  |  |  |  |  |  |  |
﻿ ﻿ ﻿ ﻿ ﻿ The following information for impaired loans is presented for the years ended December 31, 2018 and 2017: ﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ | Average Recorded | Average Recorded |  | Interest Income
﻿ |  | Investment |  | Recognized
﻿ | 2018 |  | 2017 |  |  |  |  | 2018 |  | 2017 |  |  |
﻿ | (In thousands) |  |  |
﻿Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Real Estate Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Residential | $ | - |  | $ | 23 |  |  |  |  | $ | - |  | $ | - |  |  |
﻿Commercial |  | 1,220 |  |  | 1,209 |  |  |  |  |  | 67 |  |  | 56 |  |  |
﻿Total Loans | $ | 1,220 |  | $ | 1,232 |  |  |  |  | $ | 67 |  | $ | 56 |  |  |
﻿ Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of financial difficulties experienced by the borrower, who could not obtain comparable terms from alternate financing sources. As of December 31, 2018, troubled debt restructured loans totaled $1.1 million and resulted in specific reserves of $0. During 2018, there were no new loan relationships identified as troubled debt restructurings, while one loan identified as a troubled debt restructuring with a balance of $23,000 as of December 31, 2017 was paid in full during 2018. During 2018, there were no charge-offs on loans classified as troubled debt restructurings. As of December 31, 2017, troubled debt restructured loans totaled $1.1 million and resulted in specific reserves of $0. During 2017, there were no new loan relationships identified as troubled debt restructurings, while one loan identified as a troubled debt restructuring with a balance of $322,000 as of December 31, 2016 was paid in full during 2017. During 2017, the Company recognized charge-offs totaling $55,000 on loans classified as troubled debt restructurings. ﻿ ﻿ Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate owned on the Consolidated Balance Sheets. As of December 31, 2018 and 2017, foreclosed real estate owned totaled $1,115,000 and $1,661,000, respectively. As of December 31, 2018, included within foreclosed real estate owned is $36,000 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to year-end. As of December 31, 2018, the Company has initiated formal foreclosure proceedings on three consumer residential mortgage loans with an outstanding balance of $298,000. Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first four categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans greater than 90 days past due are considered Substandard unless full payment is expected. Any portion of a loan that has been charged off is placed in the Loss category. ﻿ To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as nonperformance, repossession, or death occurs to raise awareness of a possible credit event. The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis. Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration. Loan Review also annually reviews relationships of $1,500,000 and over to assign or re-affirm risk ratings. Loans in the Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance. ﻿ The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of December 31, 2018 and December 31, 2017 (in thousands): ﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  | Special |  |  |  |  |  |  |  |  |  |  |  |
﻿ | Pass |  | Mention |  | Substandard |  | Doubtful |  | Loss |  | Total
﻿December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Commercial real estate loans | $ | 360,838 |  | $ | 7,918 |  | $ | 6,034 |  | $ | - |  | $ | - |  | $ | 374,790
﻿Commercial |  | 109,966 |  |  | 82 |  |  | 494 |  |  | - |  |  | - |  |  | 110,542
﻿Total | $ | 470,804 |  | $ | 8,000 |  | $ | 6,528 |  | $ | - |  | $ | - |  | $ | 485,332
﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  | Special |  |  |  |  |  |  |  |  |  |  |  |
﻿ | Pass |  | Mention |  | Substandard |  | Doubtful |  | Loss |  | Total
﻿December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Commercial real estate loans | $ | 329,617 |  | $ | 9,680 |  | $ | 3,637 |  | $ | - |  | $ | - |  | $ | 342,934
﻿Commercial |  | 97,389 |  |  | 16 |  |  | 56 |  |  | - |  |  | - |  |  | 97,461
﻿Total | $ | 427,006 |  | $ | 9,696 |  | $ | 3,693 |  | $ | - |  | $ | - |  | $ | 440,395
﻿ For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits. Nonperforming loans include loans that have been placed on nonaccrual status and loans remaining in accrual status on which the contractual payment of principal and interest has become 90 days past due. ﻿ ﻿ The following table presents the recorded investment in the loan classes based on payment activity as of December 31, 2018 and December 31, 2017 (in thousands): ﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |
﻿ | Performing |  | Nonperforming |  | Total
﻿December 31, 2018 |  |  |  |  |  |  |  |
﻿Residential real estate loans | $ | 234,725 |  | $ | 798 |  | $ | 235,523
﻿Construction |  | 17,445 |  |  | - |  |  | 17,445
﻿Consumer loans to individuals |  | 112,002 |  |  | - |  |  | 112,002
﻿Total | $ | 364,172 |  | $ | 798 |  | $ | 364,970
﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |
﻿ | Performing |  | Nonperforming |  | Total
﻿December 31, 2017 |  |  |  |  |  |  |  |
﻿Residential real estate loans | $ | 233,966 |  | $ | 1,793 |  | $ | 235,759
﻿Construction |  | 17,228 |  |  | - |  |  | 17,228
﻿Consumer loans to individuals |  | 70,953 |  |  | - |  |  | 70,953
﻿Total | $ | 322,147 |  | $ | 1,793 |  | $ | 323,940
﻿ ﻿ ﻿ ﻿ ﻿ ﻿ Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of December 31, 2018 and December 31, 2017 (in thousands): ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ | Current |  | 31-60 Days Past Due |  | 61-90 Days Past Due |  | Greater than 90 Days Past Due and still accruing |  | Non-Accrual |  | Total Past Due and Non-Accrual |  | Total Loans
﻿December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Real Estate loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Residential | $ | 234,201 |  | $ | 373 |  | $ | 151 |  | $ | - |  | $ | 798 |  | $ | 1,322 |  | $ | 235,523
﻿Commercial |  | 372,617 |  |  | 1,043 |  |  | 788 |  |  | - |  |  | 342 |  |  | 2,173 |  |  | 374,790
﻿Construction |  | 17,445 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 17,445
﻿Commercial loans |  | 110,191 |  |  | 320 |  |  | 31 |  |  | - |  |  | - |  |  | 351 |  |  | 110,542
﻿Consumer loans |  | 111,796 |  |  | 171 |  |  | 35 |  |  | - |  |  | - |  |  | 206 |  |  | 112,002
﻿Total | $ | 846,250 |  | $ | 1,907 |  | $ | 1,005 |  | $ | - |  | $ | 1,140 |  | $ | 4,052 |  | $ | 850,302
﻿ ﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ | Current |  | 31-60 Days Past Due |  | 61-90 Days Past Due |  | Greater than 90 Days Past Due and still accruing |  | Non-Accrual |  | Total Past Due and Non-Accrual |  | Total Loans
﻿December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Real Estate loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿Residential | $ | 233,291 |  | $ | 594 |  | $ | 81 |  | $ | 87 |  | $ | 1,706 |  | $ | 2,468 |  | $ | 235,759
﻿Commercial |  | 341,602 |  |  | 646 |  |  | - |  |  | 409 |  |  | 277 |  |  | 1,332 |  |  | 342,934
﻿Construction |  | 17,228 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 17,228
﻿Commercial loans |  | 97,424 |  |  | 10 |  |  | 27 |  |  | - |  |  | - |  |  | 37 |  |  | 97,461
﻿Consumer loans |  | 70,869 |  |  | 60 |  |  | 24 |  |  | - |  |  | - |  |  | 84 |  |  | 70,953
﻿Total | $ | 760,414 |  | $ | 1,310 |  | $ | 132 |  | $ | 496 |  | $ | 1,983 |  | $ | 3,921 |  | $ | 764,335
﻿ ﻿ ﻿ ﻿ The following table presents the allowance for loan losses by the classes of the loan portfolio: ﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿(In thousands) | Residential Real Estate |  | Commercial Real Estate |  | Construction |  | Commercial |  | Consumer |  | Total
﻿Beginning balance, December 31, 2017 | $ | 1,272 |  | $ | 5,265 |  | $ | 90 |  | $ | 463 |  | $ | 544 |  | $ | 7,634
﻿Charge Offs |  | (197) |  |  | (283) |  |  | - |  |  | (246) |  |  | (263) |  |  | (989)
﻿Recoveries |  | 9 |  |  | 33 |  |  | - |  |  | 8 |  |  | 32 |  |  | 82
﻿Provision for loan losses |  | 244 |  |  | 440 |  |  | 3 |  |  | 487 |  |  | 551 |  |  | 1,725
﻿Ending balance, December 31, 2018 | $ | 1,328 |  | $ | 5,455 |  | $ | 93 |  | $ | 712 |  | $ | 864 |  | $ | 8,452
﻿Ending balance individually evaluated for impairment | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | -
﻿Ending balance collectively evaluated for impairment | $ | 1,328 |  | $ | 5,455 |  | $ | 93 |  | $ | 712 |  | $ | 864 |  | $ | 8,452
﻿ ﻿ ﻿ ﻿
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
﻿(In thousands) | Residential Real Estate |  | Commercial Real Estate |  | Construction |  | Commercial |  | Consumer |  | Total
﻿Beginning balance, December 31, 2016 | $ | 1,092 |  | $ | 4,623 |  | $ | 78 |  | $ | 307 |  | $ | 363 |  | $ | 6,463
﻿Charge Offs |  | (83) |  |  | (902) |  |  | (28) |  |  | - |  |  | (207) |  |  | (1,220)
﻿Recoveries |  | 6 |  |  | 159 |  |  | - |  |  | - |  |  | 26 |  |  | 191
﻿Provision for loan losses |  | 257 |  |  | 1,385 |  |  | 40 |  |  | 156 |  |  | 362 |  |  | 2,200
﻿Ending balance, December 31, 2017 | $ | 1,272 |  | $ | 5,265 |  | $ | 90 |  | $ | 463 |  | $ | 544 |  | $ | 7,634
﻿Ending balance individually evaluated for impairment | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | -
﻿Ending balance collectively evaluated for impairment | $ | 1,272 |  | $ | 5,265 |  | $ | 90 |  | $ | 463 |  | $ | 544 |  | $ | 7,634
﻿ ﻿ The recorded investment in impaired loans, not requiring an allowance for loan losses was $1,319,000 (net of charge-offs against the allowance for loan losses of $428,000) and $1,247,000 (net of charge-offs against the allowance for loan losses of $277,000) at December 31, 2018 and 2017, respectively. The recorded investment in impaired loans requiring an allowance for loan losses was $0 at December 31, 2018 and 2017, respectively. The specific reserve related to impaired loans was $0 for 2018 and 2017. For the years ended December 31, 2018 and 2017, the average recorded investment in these impaired loans was $1,220,000, and $1,232,000, respectively, and the interest income recognized on these impaired loans was $67,000 and $56,000, respectively. ﻿ During the period ended December 31, 2018, the allowance for loan losses increased from $7,634,000 to $8,452,000. This $818,000 increase in the required allowance was due primarily to an $86.1 million increase in loan balances and an additional qualitative factor to allocate reserves for potential risk in large balance loans. This increase was partially offset by a reduction in the historical loss factor from 0.41% at December 31, 2017 to 0.26% on December 31, 2018. ﻿ During the period ended December 31, 2017, the allowance for commercial real estate loans increased from $4,623,000 to $5,265,000. This $642,000 increase in the required allowance was due primarily to a $22,747,000 increase in loan balances and an increase in the amount of reserve required for classified loans. This increase was partially offset by a reduction in the historical loss factor from 0.80% at December 31, 2016 to 0.74% on December 31, 2017. ﻿ Interest income that would have been recorded on loans accounted for on a non-accrual basis under the original terms of the loans was $98,000 and $163,000 for 2018 and 2017, respectively. ﻿ As of December 31, 2018 and 2017, the Company considered its concentration of credit risk to be acceptable. As of December 31, 2018, the highest concentrations are in commercial rentals and the hospitality lodging industry, with loans outstanding of $71.8 million, or 68.9% of bank capital, to commercial rentals, and $59.7 million, or 57.3% of bank capital to the hospitality lodging industry. Charge-offs on loans within these concentrations were $0 and $762,000 for the years ended December 31, 2018 and 2017, respectively. ﻿ During 2018, the Company sold residential mortgage loans totaling $752,000. During 2017, the Company did not sell any residential mortgage loans. Gross realized gains and gross realized losses on sales of residential mortgage loans were $15,000 and $0, respectively, in 2018 and $0 and $0, respectively, in 2017. The proceeds from the sales of residential mortgage loans totaled $767,000 and $0 for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018 and 2017, the outstanding value of loans serviced for others totaled $26.8 million and $29.0 million, respectively.

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