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Note 5 - Allowance for Loan Losses, Nonperforming Assets and Impaired Loans | 12 Months Ended
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Dec. 31, 2017
Notes to Financial Statements |
Allowance for Credit Losses [Text Block] | Note 5 : Allowance for Loan Losses, Nonperforming Assets and Impaired Loans The allowance for loan losses methodology incorporates individual evaluation of impaired loans and collective evaluation of groups of non-impaired loans. The Company performs ongoing analysis of the loan portfolio to determine credit quality and to identify impaired loans. Credit quality is rated based on the loan’s payment history, the borrower’s current financial situation and value of the underlying collateral. Impaired Loans Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. Impaired loans are those loans that have been modified in a troubled debt restructure (“TDR” or “restructure”) and larger, non-homogeneous loans that are in nonaccrual or exhibit payment history or financial status that indicate that collection probably will not occur when due according to the loan’s terms. Generally, impaired loans are given risk ratings that indicate higher risk, such as “classified” or “other assets especially mentioned.” Impaired loans are individually evaluated to determine appropriate reserves and are measured at the lower of the invested amount or the fair value. Impaired loans that are not troubled debt restructures and for which fair value measurement indicates an impairment loss are designated nonaccrual. A restructured loan that maintains current status for at least six months may be in accrual status. Please refer to Note 1: Summary of Significant Accounting Policies for additional information on evaluation of impaired loans and associated specific reserves, and policies regarding nonaccruals, past due status and charge-offs. Troubled debt restructurings impact the estimation of the appropriate level of the allowance for loan losses. If the restructuring included forgiveness of a portion of principal or accrued interest, the charge-off is included in the historical charge-off rates applied to the collective evaluation methodology. Restructured loans are individually evaluated for impairment, and the amount of a restructured loan’s book value in excess of its fair value is accrued as a specific allocation in the allowance for loan losses. TDRs that experience a payment default are examined to determine whether the default indicates collateral dependency or cash flows below those that were used in the fair value measurement. TDRs, as well as all impaired loans, that are determined to be collateral dependent are charged down to fair value. Deficiencies indicated by impairment measurements for TDRs that are not collateral dependent may be accrued in the allowance for loan losses or charged off if deemed uncollectible. Collectively-Evaluated Loans The Company evaluated characteristics in the loan portfolio and determined major segments and smaller classes within each segment. These characteristics include collateral type, repayment sources, and (if applicable) the borrower’s business model. The methodology for calculating reserves for collectively-evaluated loans is applied at the class level. Portfolio Segments and Classes The segments and classes used in determining the allowance for loan losses, beginning in 2013 are as follows.
Real Estate Construction Construction, residential Construction, other Consumer Real Estate Equity lines Residential closed-end first liens Residential closed-end junior liens Investor-owned residential real estate Commercial Real Estate Multifamily real estate Commercial real estate, owner-occupied Commercial real estate, other | Commercial Non Real Estate Commercial and Industrial Public Sector and IDA Public sector and IDA Consumer Non Real Estate Credit cards Automobile Other consumer loans
Historical Loss Rates The Company’s allowance methodology for collectively-evaluated loans applies historical loss rates by class to current class balances as part of the process of determining required reserves. Class loss rates are calculated as the net charge-offs for the class as a percentage of average class balance. The Company averages loss rates for the most recent 8 quarters to determine the historical loss rate for each class. Two loss rates for each class are calculated: total net charge-offs for the class as a percentage of average class loan balance (“class loss rate”), and total net charge-offs for the class as a percentage of average classified loans in the class (“classified loss rate”). Classified loans are those with risk ratings of “substandard” or lower. Net charge-offs in both calculations include charge-offs and recoveries of classified and non-classified loans as well as those associated with impaired loans. Class historical loss rates are applied to non-classified loan balances at the reporting date, and classified historical loss rates are applied to classified balances at the reporting date. Risk Factors In addition to historical loss rates, risk factors pertinent to credit risk for each class are analyzed to estimate reserves for collectively-evaluated loans. Factors include changes in national and local economic and business conditions, the nature and volume of classes within the portfolio, loan quality, loan officers’ experience, lending policies and the Company’s loan review system. The analysis of certain factors results in standard allocations to all segments and classes. These factors include the risk from changes in lending policies, loan officers’ average years of experience, unemployment levels, bankruptcy rates, interest rate environment, and competition/legal/regulatory environments. Factors analyzed for each class, with resultant allocations based upon the level of risk assessed for each class, include the risk from changes in loan review, levels of past due loans, levels of nonaccrual loans, current class balance as a percentage of total loans, and the percentage of high risk loans within the class. Additionally, factors specific to each segment are analyzed and result in allocations to the segment. Please refer to Note 1: Summary of Significant Accounting Policies for a discussion of risk factors pertinent to each class. Real estate construction loans are subject to general risks from changing commercial building and housing market trends and economic conditions that may impact demand for completed properties and the costs of completion. These risks are measured by market-area unemployment rates, bankruptcy rates, building market trends, and interest rates. The credit quality of consumer real estate is subject to risks associated with the borrower’s repayment ability and collateral value, measured generally by analyzing local unemployment and bankruptcy trends, local housing market trends, and interest rates. The commercial real estate segment includes loans secured by multifamily residential real estate, commercial real estate occupied by the owner/borrower, and commercial real estate leased to non-owners. Loans in the commercial real estate segment are impacted by economic risks from changing commercial real estate markets, rental markets for multi-family housing and commercial buildings, business bankruptcy rates, local unemployment and interest rate trends that would impact the businesses housed by the commercial real estate. Commercial non real estate loans are secured by collateral other than real estate, or are unsecured. Credit risk for commercial non real estate loans is subject to economic conditions, generally monitored by local business bankruptcy trends, and interest rates. Public sector and IDA loans are extended to municipalities and related entities. Credit risk is based upon the entity’s ability to repay and interest rate trends. Consumer non real estate includes credit cards, automobile and other consumer loans. Credit cards and certain other consumer loans are unsecured, while collateral is obtained for automobile loans and other consumer loans. Credit risk stems primarily from the borrower’s ability to repay, measured by average unemployment, average personal bankruptcy rates and interest rates. Factor allocations applied to each class are increased for loans rated special mention and increased to a greater extent for loans rated classified. The Company allocates additional reserves for “high risk” loans. High risk loans include junior liens, interest only and high loan to value loans. A detailed analysis showing the allowance roll-forward by portfolio segment and related loan balance by segment follows:
|  | Activity in th e Allowance for Loan Losses by S egment for the year ended December 31 , 201 7 |
|  | Real Estate Construction |  |  | Consumer Real Estate |  |  | Commercial Real Estate |  |  | Commercial Non Real Estate |  |  | Public Sector and IDA |  |  | Consumer Non Real Estate |  |  | Unallocated |  |  | Total |
Balance , December 31, 2016 |  | $ | 438 |  |  | $ | 1,830 |  |  | $ | 3,738 |  |  | $ | 1,063 |  |  | $ | 330 |  |  | $ | 644 |  |  | $ | 257 |  |  | $ | 8,300 |
Charge-offs |  |  | --- |  |  |  | (146 | ) |  |  | (139 | ) |  |  | (82 | ) |  |  | --- |  |  |  | (452 | ) |  |  | --- |  |  |  | (819 | )
Recoveries |  |  | --- |  |  |  | 1 |  |  |  | 131 |  |  |  | 23 |  |  |  | --- |  |  |  | 132 |  |  |  | --- |  |  |  | 287 |
Provision for loan losses |  |  | (101 | ) |  |  | 342 |  |  |  | (686 | ) |  |  | 68 |  |  |  | 89 |  |  |  | 383 |  |  |  | 62 |  |  |  | 157 |
Balance, December 31, 201 7 |  | $ | 337 |  |  | $ | 2,027 |  |  | $ | 3,044 |  |  | $ | 1,072 |  |  | $ | 419 |  |  | $ | 707 |  |  | $ | 319 |  |  | $ | 7,925 |
|  | Activity in th e Allowance for Loan Losses by S egment for the year ended December 31 , 201 6 |
|  | Real Estate Construction |  |  | Consumer Real Estate |  |  | Commercial Real Estate |  |  | Commercial Non Real Estate |  |  | Public Sector and IDA |  |  | Consumer Non Real Estate |  |  | Unallocated |  |  | Total |
Balance , December 31, 2015 |  | $ | 576 |  |  | $ | 1,866 |  |  | $ | 4,109 |  |  | $ | 655 |  |  | $ | 436 |  |  | $ | 627 |  |  | $ | 28 |  |  | $ | 8,297 |
Charge-offs |  |  | (29 | ) |  |  | (133 | ) |  |  | (488 | ) |  |  | (883 | ) |  |  | --- |  |  |  | (273 | ) |  |  | --- |  |  |  | (1,806 | )
Recoveries |  |  | --- |  |  |  | 2 |  |  |  | 83 |  |  |  | 10 |  |  |  | --- |  |  |  | 64 |  |  |  | --- |  |  |  | 159 |
Provision for loan losses |  |  | (109 | ) |  |  | 95 |  |  |  | 34 |  |  |  | (1,281 | ) |  |  | (106 | ) |  |  | 226 |  |  |  | 229 |  |  |  | 1,650 |
Balance, December 31, 201 6 |  | $ | 438 |  |  | $ | 1,830 |  |  | $ | 3,738 |  |  | $ | 1,063 |  |  | $ | 330 |  |  | $ | 644 |  |  | $ | 257 |  |  | $ | 8,300 |
|  | Activity in th e Allowance for Loan Losses by S egment for the year ended December 31 , 201 5 |
|  | Real Estate Construction |  |  | Consumer Real Estate |  |  | Commercial Real Estate |  |  | Commercial Non Real Estate |  |  | Public Sector and IDA |  |  | Consumer Non Real Estate |  |  | Unallocated |  |  | Total |
Balance , December 31, 2014 |  | $ | 612 |  |  | $ | 1,662 |  |  | $ | 3,537 |  |  | $ | 1,475 |  |  | $ | 327 |  |  | $ | 602 |  |  | $ | 48 |  |  | $ | 8,263 |
Charge-offs |  |  | --- |  |  |  | (205 | ) |  |  | (1,114 | ) |  |  | (490 | ) |  |  | --- |  |  |  | (311 | ) |  |  | --- |  |  |  | (2,120 | )
Recoveries |  |  | --- |  |  |  | 2 |  |  |  | 49 |  |  |  | 1 |  |  |  | --- |  |  |  | 93 |  |  |  | --- |  |  |  | 145 |
Provision for loan losses |  |  | (36 | ) |  |  | 407 |  |  |  | 1,637 |  |  |  | (331 | ) |  |  | 109 |  |  |  | 243 |  |  |  | (20 | ) |  |  | 2,009 |
Balance, December 31, 201 5 |  | $ | 576 |  |  | $ | 1,866 |  |  | $ | 4,109 |  |  | $ | 655 |  |  | $ | 436 |  |  | $ | 627 |  |  | $ | 28 |  |  | $ | 8,297 |
|  | Allowance for Loan Losses by Segment and Evaluation Method as of |
|  | December 31, 201 7 |
|  | Real Estate Construction |  |  | Consumer Real Estate |  |  | Commercial Real Estate |  |  | Commercial Non Real Estate |  |  | Public Sector and IDA |  |  | Consumer Non Real Estate |  |  | Unallocated |  |  | Total |
Individually evaluated for impairment |  | $ | --- |  |  | $ | 16 |  |  | $ | --- |  |  | $ | 160 |  |  | $ | --- |  |  | $ | 1 |  |  | $ | --- |  |  | $ | 177 |
Collectively evaluated for impairment |  |  | 337 |  |  |  | 2,011 |  |  |  | 3,044 |  |  |  | 912 |  |  |  | 419 |  |  |  | 706 |  |  |  | 319 |  |  |  | 7,748 |
Total |  | $ | 337 |  |  | $ | 2,027 |  |  | $ | 3,044 |  |  | $ | 1,072 |  |  | $ | 419 |  |  | $ | 707 |  |  | $ | 319 |  |  | $ | 7,925 |
|  | Loans by Segment and Evaluation Method as of |
|  | December 31, 201 7 |
|  | Real Estate Construction |  |  | Consumer Real Estate |  |  | Commercial Real Estate |  |  | Commercial Non Real Estate |  |  | Public Sector and IDA |  |  | Consumer Non Real Estate |  |  | Unallocated |  |  | Total |
Individually evaluated for impairment |  | $ | 2,882 |  |  | $ | 1,267 |  |  | $ | 6,516 |  |  | $ | 1,229 |  |  | $ | --- |  |  | $ | 30 |  |  | $ | --- |  |  | $ | 11,924 |
Collectively evaluated for impairment |  |  | 31,812 |  |  |  | 165,698 |  |  |  | 333,898 |  |  |  | 39,289 |  |  |  | 51,443 |  |  |  | 34,618 |  |  |  | --- |  |  |  | 656,758 |
Total |  | $ | 34,694 |  |  | $ | 166,965 |  |  | $ | 340,414 |  |  | $ | 40,518 |  |  | $ | 51,443 |  |  | $ | 34,648 |  |  | $ | --- |  |  | $ | 668,682 |
|  | Allowance for Loan Losses by Segment and Evaluation Method as of |
|  | December 31, 201 6 |
|  | Real Estate Construction |  |  | Consumer Real Estate |  |  | Commercial Real Estate |  |  | Commercial Non Real Estate |  |  | Public Sector and IDA |  |  | Consumer Non Real Estate |  |  | Unallocated |  |  | Total |
Individually evaluated for impairment |  | $ | --- |  |  | $ | 25 |  |  | $ | 1 |  |  | $ | --- |  |  | $ | --- |  |  | $ | --- |  |  | $ | --- |  |  | $ | 26 |
Collectively evaluated for impairment |  |  | 438 |  |  |  | 1,805 |  |  |  | 3,737 |  |  |  | 1,063 |  |  |  | 330 |  |  |  | 644 |  |  |  | 257 |  |  |  | 8,274 |
Total |  | $ | 438 |  |  | $ | 1,830 |  |  | $ | 3,738 |  |  | $ | 1,063 |  |  | $ | 330 |  |  | $ | 644 |  |  | $ | 257 |  |  | $ | 8,300 |
|  | Loans by Segment and Evaluation Method as of |
|  | December 31, 201 6 |
|  | Real Estate Construction |  |  | Consumer Real Estate |  |  | Commercial Real Estate |  |  | Commercial Non Real Estate |  |  | Public Sector and IDA |  |  | Consumer Non Real Estate |  |  | Unallocated |  |  | Total |
Individually evaluated for impairment |  | $ | 270 |  |  | $ | 877 |  |  | $ | 7,782 |  |  | $ | 241 |  |  | $ | --- |  |  | $ | 3 |  |  | $ | --- |  |  | $ | 9,173 |
Collectively evaluated for impairment |  |  | 36,075 |  |  |  | 156,841 |  |  |  | 328,675 |  |  |  | 38,783 |  |  |  | 45,474 |  |  |  | 33,525 |  |  |  | --- |  |  |  | 639,373 |
Total |  | $ | 36,345 |  |  | $ | 157,718 |  |  | $ | 336,457 |  |  | $ | 39,024 |  |  | $ | 45,474 |  |  | $ | 33,528 |  |  | $ | --- |  |  | $ | 648,546 |
A summary of ratios for the allowance for loan losses follows:
|  | December 31, |
|  | 201 7 |  |  | 20 16 |
Ratio of allowance for loan losses to the end of period loans, net of unearned income and deferred fees and costs |  |  | 1.19 | % |  |  | 1.28 | %
Ratio of net charge-offs to average loans, net of unearned income and deferred fees and costs |  |  | 0.08 | % |  |  | 0.26 | %
A summary of nonperforming assets follows:
|  | December 31, |
|  | 201 7 |  |  | 20 16 |
Nonperforming assets: |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 6 |  |  | $ | 1,168 |
Restructured loans in nonaccrual |  |  | 2,763 |  |  |  | 4,687 |
Total nonperforming loans |  |  | 2,769 |  |  |  | 5,855 |
Other real estate owned, net |  |  | 2,817 |  |  |  | 3,156 |
Total nonperforming assets |  | $ | 5,586 |  |  | $ | 9,011 |
Ratio of nonperforming assets to loans, net of unearned income and deferred fees and costs, plus other real estate owned |  |  | 0.83 | % |  |  | 1.38 | %
Ratio of allowance for loan losses to nonperforming loans ( 1 ) |  |  | 286.20 | % |  |  | 141.76 | %
| ( 1 ) | The Company defines nonperforming loans as total nonaccrual and restructured loans that are nonaccrual. Loans 90 days past due and still accruing and accruing restructured loans are excluded.
A summary of loans past due 90 days or more and impaired loans follows:
|  | December 31, |
|  | 201 7 |  |  | 20 16 |
Loans past due 90 days or more and still accruing |  | $ | 51 |  |  | $ | 63 |
Ratio of loans past due 90 days or more and still accruing to loans, net of unearned income and deferred fees and costs |  |  | 0.01 | % |  |  | 0.01 | %
Accruing restructured loans |  | $ | 5,134 |  |  | $ | 3,769 |
Impaired loans : |  |  |  |  |  |  |  |
Impaired loans with no valuation allowance |  | $ | 10,444 |  |  | $ | 8,269 |
Impaired loans with a valuation allowance |  |  | 1,480 |  |  |  | 904 |
Total impaired loans |  | $ | 11,924 |  |  | $ | 9,173 |
Valuation allowance |  | $ | (177 | ) |  | $ | (26 | )
Impaired loans, net of allowance |  | $ | 11,747 |  |  | $ | 9,147 |
Average recorded investment in impaired loans (1) |  | $ | 13,344 |  |  | $ | 11,585 |
Income recognized on impaired loans , after designation as impaired |  | $ | 528 |  |  | $ | 553 |
Amount of income recognized on a cash basis |  | $ | --- |  |  | $ | --- |
| ( 1 ) | Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
No interest income was recognized on nonaccrual loans for the years ended December 31, 2017, 2016 or 2015. Nonaccrual loans that meet the Company’s balance thresholds are designated as impaired. A detailed analysis of investment in impaired loans, associated reserves and interest income recognized, by loan class follows:
|  | Impaired Loans as of December 31, 201 7 |
|  | Principal Balance |  |  | (A) Total Recorded Investment (1) |  |  | Recorded Investment (1) in (A) for Which There is No Related Allowance |  |  | Recorded Investment (1) in (A) for Which There is a Related Allowance |  |  | Related Allowance |
Real Estate Construction (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction other |  | $ | 2,882 |  |  | $ | 2,882 |  |  | $ | 2,882 |  |  | $ | --- |  |  | $ | --- |
Co nsumer Real Estate (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential closed-end first liens |  |  | 807 |  |  |  | 768 |  |  |  | 590 |  |  |  | 178 |  |  |  | 10 |
Residential closed-end junior liens |  |  | 174 |  |  |  | 174 |  |  |  | --- |  |  |  | 174 |  |  |  | 6 |
Investor-owned residential real estate |  |  | 347 |  |  |  | 325 |  |  |  | 325 |  |  |  | --- |  |  |  | --- |
Commercial Real Estate (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multifamily real estate |  |  | 303 |  |  |  | 303 |  |  |  | 303 |  |  |  | --- |  |  |  | --- |
Commercial real estate, owner occupied |  |  | 3,619 |  |  |  | 3,611 |  |  |  | 3,611 |  |  |  | --- |  |  |  | --- |
Commercial real estate, other |  |  | 2,921 |  |  |  | 2,602 |  |  |  | 2,602 |  |  |  | --- |  |  |  | --- |
Commercial Non Real Estate (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 1,236 |  |  |  | 1,229 |  |  |  | 126 |  |  |  | 1,103 |  |  |  | 160 |
Consumer Non Real Estate (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | 30 |  |  |  | 30 |  |  |  | 5 |  |  |  | 25 |  |  |  | 1 |
Total |  | $ | 12,319 |  |  | $ | 11,924 |  |  | $ | 10,444 |  |  | $ | 1,480 |  |  | $ | 177 |
|  | Impaired Loans as of December 31, 201 6 |
|  | Principal Balance |  |  | (A) Total Recorded Investment (1) |  |  | Recorded Investment (1) in (A) for Which There is No Related Allowance |  |  | Recorded Investment (1) in (A) for Which There is a Related Allowance |  |  | Related Allowance |
Real Estate Construction (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction 1-4 family residential |  | $ | 280 |  |  | $ | 270 |  |  | $ | 270 |  |  | $ | --- |  |  | $ | --- |
Co nsumer Real Estate (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential closed-end first liens |  |  | 648 |  |  |  | 609 |  |  |  | 267 |  |  |  | 342 |  |  |  | 14 |
Residential closed-end junior liens |  |  | 195 |  |  |  | 195 |  |  |  | --- |  |  |  | 195 |  |  |  | 7 |
Investor-owned residential real estate |  |  | 73 |  |  |  | 73 |  |  |  | --- |  |  |  | 73 |  |  |  | 4 |
Commercial Real Estate (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multifamily real estate |  |  | 1,364 |  |  |  | 1,091 |  |  |  | 1,091 |  |  |  | --- |  |  |  | --- |
Commercial real estate, owner occupied |  |  | 4,005 |  |  |  | 3,957 |  |  |  | 3,663 |  |  |  | 294 |  |  |  | 1 |
Commercial real estate, other |  |  | 2,997 |  |  |  | 2,734 |  |  |  | 2,734 |  |  |  | --- |  |  |  | --- |
Commercial Non Real Estate (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 255 |  |  |  | 241 |  |  |  | 241 |  |  |  | --- |  |  |  | --- |
Consumer Non Real Estate (2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | 3 |  |  |  | 3 |  |  |  | 3 |  |  |  | --- |  |  |  | --- |
Total |  | $ | 9,820 |  |  | $ | 9,173 |  |  | $ | 8,269 |  |  | $ | 904 |  |  | $ | 26 |
| ( 1 ) | Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
| ( 2 ) | Only classes with impaired loans are shown.
|  | Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 201 7 |
|  | Average Recorded Investment (1) |  |  | Interest Income Recognized |
Real Estate Construction (2) |  |  |  |  |  |  |  |
Construction other |  | $ | 3,298 |  |  | $ | 177 |
Consumer Real Estate (2) |  |  |  |  |  |  |  |
Residential closed-end first liens |  |  | 781 |  |  |  | 57 |
Residential closed-end junior liens |  |  | 185 |  |  |  | 11 |
Investor-owned residential real estate |  |  | 329 |  |  |  | 1 |
Commercial Real Estate (2) |  |  |  |  |  |  |  |
Multifamily real estate |  |  | 748 |  |  |  | 16 |
Commercial real estate, owner occupied |  |  | 4,047 |  |  |  | 200 |
Commercial real estate, other |  |  | 2,638 |  |  |  | --- |
Commercial Non Real Estate (2) |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 1,282 |  |  |  | 64 |
Consumer Non Real Estate (2) |  |  |  |  |  |  |  |
Automobile |  |  | 36 |  |  |  | 2 |
Total |  | $ | 13,344 |  |  | $ | 528 |
( 1 ) Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status. ( 2 ) Only classes with impaired loans are shown.
|  | Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 201 6 |
|  | Average Recorded Investment (1) |  |  | Interest Income Recognized |
Real Estate Construction (2) |  |  |  |  |  |  |  |
Construction 1-4 family residential |  | $ | 462 |  |  | $ | 10 |
Consumer Real Estate (2) |  |  |  |  |  |  |  |
Residential closed-end first liens |  |  | 642 |  |  |  | 38 |
Residential closed-end junior liens |  |  | 207 |  |  |  | 13 |
Investor-owned residential real estate |  |  | 74 |  |  |  | 4 |
Commercial Real Estate (2) |  |  |  |  |  |  |  |
Multifamily real estate |  |  | 1,366 |  |  |  | 12 |
Commercial real estate, owner occupied |  |  | 4,342 |  |  |  | 206 |
Commercial real estate, other |  |  | 3,947 |  |  |  | 263 |
Commercial Non Real Estate (2) |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 541 |  |  |  | 7 |
Consumer Non Real Estate (2) |  |  |  |  |  |  |  |
Automobile |  |  | 4 |  |  |  | --- |
Total |  | $ | 11,585 |  |  | $ | 553 |
| ( 1 ) | Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
| ( 2 ) | Only classes with impaired loans are shown.
|  | Average Investment and Interest Income for Impaired Loans For the Year Ended December 31, 201 5 |
|  | Average Recorded Investment (1) |  |  | Interest Income Recognized |
Real Estate Construction (2) |  |  |  |  |  |  |  |
Construction 1-4 family residential |  | $ | 612 |  |  | $ | 23 |
Consumer Real Estate (2) |  |  |  |  |  |  |  |
Residential closed-end first liens |  |  | 681 |  |  |  | 43 |
Residential closed-end junior liens |  |  | 228 |  |  |  | 15 |
Investor-owned residential real estate |  |  | 76 |  |  |  | 5 |
Commercial Real Estate (2) |  |  |  |  |  |  |  |
Multifamily real estate |  |  | 2,581 |  |  |  | 84 |
Commercial real estate, owner occupied |  |  | 6,141 |  |  |  | 251 |
Commercial real estate, other |  |  | 5,888 |  |  |  | 308 |
Commercial Non Real Estate (2) |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 1,090 |  |  |  | 40 |
Total |  | $ | 17,297 |  |  | $ | 769 |
| ( 1 ) | Recorded investment is net of charge-offs and interest paid while a loan is in nonaccrual status.
| ( 2 ) | Only classes with impaired loans are shown.
An analysis of past due and nonaccrual loans follows:
December 31, 201 7 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 3 0 – 89 Days Past Due |  |  | 90 or M ore Days Past Due |  |  | 90 or More Days Past Due and Still Accruing |  |  | Nonaccruals (I ncluding Impaired Nonaccruals) |
Real Estate Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, residential |  | $ | --- |  |  | $ | --- |  |  | $ | --- |  |  | $ | --- |
Construction, other |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Consumer Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity lines |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Residential closed-end first liens |  |  | 637 |  |  |  | 16 |  |  |  | 11 |  |  |  | 145 |
Residential closed-end junior liens |  |  | 188 |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Investor-owned residential real estate |  |  | 66 |  |  |  | --- |  |  |  | --- |  |  |  | 6 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multifamily real estate |  |  | 303 |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Commercial real estate, owner occupied |  |  | 402 |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Commercial real estate, other |  |  | --- |  |  |  | 2,602 |  |  |  | --- |  |  |  | 2,602 |
Commercial Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 131 |  |  |  | --- |  |  |  | --- |  |  |  | 15 |
Public Sector and IDA |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Public sector and IDA |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Consumer Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit cards |  |  | 7 |  |  |  | 12 |  |  |  | 12 |  |  |  | --- |
Automobile |  |  | 375 |  |  |  | 22 |  |  |  | 22 |  |  |  | 1 |
Other consumer loans |  |  | 154 |  |  |  | 6 |  |  |  | 6 |  |  |  | --- |
Total |  | $ | 2,263 |  |  | $ | 2,658 |  |  | $ | 51 |  |  | $ | 2,769 |
December 31, 201 6 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 3 0 – 89 Days Past Due |  |  | 90 or M ore Days Past Due |  |  | 90 or More Days Past Due and Still Accruing |  |  | Nonaccruals (I ncluding Impaired Nonaccruals) |
Real Estate Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, residential |  | $ | --- |  |  | $ | --- |  |  | $ | --- |  |  | $ | 270 |
Construction, other |  |  | 25 |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Consumer Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity lines |  |  | 10 |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Residential closed-end first liens |  |  | 1,498 |  |  |  | 6 |  |  |  | 6 |  |  |  | --- |
Residential closed-end junior liens |  |  | 114 |  |  |  | 36 |  |  |  | 36 |  |  |  | --- |
Investor-owned residential real estate |  |  | 56 |  |  |  | 234 |  |  |  | --- |  |  |  | 253 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multifamily real estate |  |  | 132 |  |  |  | 1,091 |  |  |  | --- |  |  |  | 1,091 |
Commercial real estate, owner occupied |  |  | 339 |  |  |  | 202 |  |  |  | --- |  |  |  | 1,183 |
Commercial real estate, other |  |  | --- |  |  |  | 80 |  |  |  | --- |  |  |  | 2,814 |
Commercial Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 6 |  |  |  | 218 |  |  |  | --- |  |  |  | 241 |
Public Sector and IDA |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Public sector and IDA |  |  | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- |
Consumer Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Credit cards |  |  | 8 |  |  |  | 5 |  |  |  | 5 |  |  |  | --- |
Automobile |  |  | 234 |  |  |  | 12 |  |  |  | 12 |  |  |  | 3 |
Other consumer loans |  |  | 131 |  |  |  | 4 |  |  |  | 4 |  |  |  | --- |
Total |  | $ | 2,553 |  |  | $ | 1,888 |  |  | $ | 63 |  |  | $ | 5,855 |
The estimate of credit risk for non-impaired loans is obtained by applying allocations for internal and external factors. The allocations are increased for loans that exhibit greater credit quality risk. Credit quality indicators, which the Company terms risk grades, are assigned through the Company’s credit review function for larger loans and selective review of loans that fall below credit review thresholds. Loans that do not indicate heightened risk are graded as “pass.” Loans that appear to have elevated credit risk because of frequent or persistent past due status, which is less than 75 days, or that show weakness in the borrower’s financial condition are risk graded “special mention.” Loans with frequent or persistent delinquency exceeding 75 days or that have a higher level of weakness in the borrower’s financial condition are graded “classified.” Classified loans have regulatory risk ratings of “substandard” and “doubtful.” Allocations are increased by 50% and by 100% for loans with grades of “special mention” and “classified,” respectively. Determination of risk grades was completed for the portfolio as of December 31, 2017 and 2016. The following displays non-impaired gross loans by credit quality indicator:
December 31, 201 7 |  |  |  |  |  |  |  |  |  |  |  |
|  | Pass |  |  | Special Mention (Excluding Impaired) |  |  | Classified (Excluding Impaired) |
Real Estate Construction |  |  |  |  |  |  |  |  |  |  |  |
Construction, 1-4 family residential |  | $ | 10,396 |  |  | $ | --- |  |  | $ | --- |
Construction, other |  |  | 21,416 |  |  |  | --- |  |  |  | --- |
Consumer Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Equity lines |  |  | 16,673 |  |  |  | 39 |  |  |  | --- |
Closed-end first liens |  |  | 85,975 |  |  |  | 2,400 |  |  |  | 355 |
Closed-end junior liens |  |  | 4,483 |  |  |  | 29 |  |  |  | 12 |
Investor-owned residential real estate |  |  | 55,410 |  |  |  | 66 |  |  |  | 256 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Multifamily residential real estate |  |  | 95,894 |  |  |  | 127 |  |  |  | --- |
Commercial real estate owner-occupied |  |  | 130,256 |  |  |  | 246 |  |  |  | 763 |
Commercial real estate, other |  |  | 106,612 |  |  |  | --- |  |  |  | -- |
Commercial Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 38,904 |  |  |  | 220 |  |  |  | 165 |
Public Sector and IDA |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  |  | 51,443 |  |  |  | --- |  |  |  | --- |
Consumer Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Credit cards |  |  | 5,493 |  |  |  | --- |  |  |  | --- |
Automobile |  |  | 16,059 |  |  |  | 218 |  |  |  | 116 |
Other consumer |  |  | 12,692 |  |  |  | 16 |  |  |  | 24 |
Total |  | $ | 651,706 |  |  | $ | 3,361 |  |  | $ | 1,691 |
December 31, 201 6 |  |  |  |  |  |  |  |  |  |  |  |
|  | Pass |  |  | Special Mention (Excluding Impaired) |  |  | Classified (Excluding Impaired) |
Real Estate Construction |  |  |  |  |  |  |  |  |  |  |  |
Construction, 1-4 family residential |  | $ | 11,635 |  |  | $ | 3,648 |  |  | $ | --- |
Construction, other |  |  | 20,972 |  |  |  | --- |  |  |  | --- |
Consumer Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Equity lines |  |  | 17,034 |  |  |  | 82 |  |  |  | --- |
Closed-end first liens |  |  | 83,658 |  |  |  | 1,267 |  |  |  | 580 |
Closed-end junior liens |  |  | 4,861 |  |  |  | 15 |  |  |  | 151 |
Investor-owned residential real estate |  |  | 48,277 |  |  |  | 333 |  |  |  | 583 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Multifamily residential real estate |  |  | 99,002 |  |  |  | 1,733 |  |  |  | --- |
Commercial real estate owner-occupied |  |  | 120,170 |  |  |  | 1,188 |  |  |  | 1,425 |
Commercial real estate, other |  |  | 103,534 |  |  |  | 1,543 |  |  |  | 80 |
Commercial Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial |  |  | 35,521 |  |  |  | 3,229 |  |  |  | 33 |
Public Sector and IDA |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  |  | 45,474 |  |  |  | --- |  |  |  | --- |
Consumer Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Credit cards |  |  | 5,978 |  |  |  | --- |  |  |  | --- |
Automobile |  |  | 14,457 |  |  |  | 25 |  |  |  | 192 |
Other consumer |  |  | 12,229 |  |  |  | 636 |  |  |  | 8 |
Total |  | $ | 622,802 |  |  | $ | 13,519 |  |  | $ | 3,052 |
Sales, Purchases and Reclassification of Loans The Company finances mortgages under “best efforts” contracts with mortgage purchasers. The mortgages are designated as held for sale upon initiation. There have been no major reclassifications from portfolio loans to held for sale. Occasionally, the Company purchases or sells participations in loans. All participation loans purchased met the Company’s normal underwriting standards at the time the participation was entered. Participation loans are included in the appropriate portfolio balances to which the allowance methodology is applied. Troubled Debt Restructurings From time to time the Company modifies loans in troubled debt restructurings (“TDRs”). The following tables present restructurings by class that occurred during the years ended December 31, 2017, 2016 and 2015. Note: Only classes with restructured loans are presented.
|  | Restructurings that occurred during the year ended December 31, 201 7 |
|  | Number of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment (1) |
Consumer Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Closed-end first lien |  |  | 1 |  |  | $ | 8 |  |  | $ | 8 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate, other |  |  | 1 |  |  |  | 132 |  |  |  | 132 |
Commercial Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 4 |  |  |  | 1,221 |  |  |  | 1,221 |
Co nsumer N on R eal E state |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | 4 |  |  |  | 26 |  |  |  | 26 |
Total |  |  | 10 |  |  | $ | 1,387 |  |  | $ | 1,387 |
| ( 1 ) | Post-modification outstanding recorded investment considers amounts immediate ly following the modification. Amounts do not reflect balances at the end of the period.
Each of the restructurings completed during the twelve months ended December 31, 2017 provided payment relief to the borrowers. The consumer real estate loan was modified to provide payment relief by extending the term. Impairment measurement was based on the present value of cash flows and did not result in a specific allocation. The commercial real estate loan was restructured to reduce monthly debt service by lowering the interest rate slightly and changing the interest method from variable to fixed. Interest was capitalized and the loan was re-amortized over a longer term. Impairment measurement, based on the present value of cash flows, did not result in a specific allocation. The loan is in nonaccrual status and all payments made during the nonaccrual period are credited fully to principal, reducing the book balance below the present value of cash flows. The four commercial non-real estate loans were restructured to reduce monthly debt service by increasing the amortization period. Three of the commercial non-real estate loans received rate reductions, and on one commercial non-real estate loan, the interest method was changed from variable to fixed. Impairment measurement, based on the present value of cash flows, indicated a specific reserve for two of the commercial non-real estate loans. The four automobile loans were restructured pursuant to Chapter 13 bankruptcy requirements, reducing the interest rate and re-amortizing over a longer term to provide monthly debt service relief. One automobile loan restructuring included forgiveness of a small amount of principal to comply with the bankruptcy plan. Impairment measurement for all the restructured automobile loans was based on the present value of cash flows method and resulted in small specific allocations for each loan which totaled $1.
|  | Restructurings that occurred during the year ended December 31, 201 6 |
|  | Number of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment (1) |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate, other |  |  | 2 |  |  | $ | 3,008 |  |  | $ | 3,008 |
Commercial Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 1 |  |  |  | 29 |  |  |  | 30 |
Consumer N on R eal E state |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | 1 |  |  |  | 5 |  |  |  | 5 |
Total |  |  | 4 |  |  | $ | 3,042 |  |  | $ | 3,043 |
| ( 1 ) | Post-modification outstanding recorded investment considers amounts immediate ly following the modification. Amounts do not reflect balances at the end of the period.
During the twelve -month period ended December 31, 2016, the Company identified four loans as troubled debt restructurings. Two commercial real estate loans were originally modified in troubled debt restructurings in 2014 to provide payment relief by lowering the interest rate and allowing interest-only payments. The restructurings completed in 2016 lowered the interest rate from the 2014 restructured terms and returned the loans to amortization with payments of principal and interest. The loans were in nonaccrual status prior to the 2016 restructuring and will remain in nonaccrual until they have met the Company's policy to return to accrual status. The Company also identified during the year ended December 31, 2016 one commercial non-real estate loan and one automobile loan modified in troubled debt restructurings. The modifications provided payment relief by extending the maturity date and capitalizing interest. The loans are in nonaccrual status. Each of the four troubled debt restructurings are collateral dependent and the fair value is measured using the collateral method. Impairment measurement did not result in any specific allocations.
|  | Restructurings that occurred during the year ended December 31, 201 5 |
|  | Number of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment (1) |
Real Estate Construction |  |  |  |  |  |  |  |  |  |  |  |
Construction, 1-4 family residential |  |  | 2 |  |  | $ | 718 |  |  | $ | 718 |
Commercial Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate owner-occupied |  |  | 3 |  |  |  | 2,710 |  |  |  | 2,623 |
Commercial Non Real Estate |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 1 |  |  |  | 200 |  |  |  | 200 |
Total |  |  | 6 |  |  | $ | 3,628 |  |  | $ | 3,541 |
| ( 1 ) | Post-modification outstanding recorded investment considers amounts immediate ly following the modification. Amounts do not reflect balances at the end of the period.
During the twelve -month period ended December 31, 2015, the Company modified six loans in troubled debt restructurings in order to provide payment relief. One commercial real estate owner-occupied loan was restructured to forgive principal of $100, reduce the interest rate, capitalize interest and re-amortize payments. The fair value measurement of the restructured loan as of December 31, 2015 resulted in no specific allocation to the allowance for loan losses. Two commercial real estate owner-occupied loans were modified during the fourth quarter of 2015 to require payments of interest only. As of December 31, 2015, the impairment analysis determined a combined allocation to the allowance for loan losses of $23. Two construction loans were modified during the fourth quarter of 2015 to become non-revolving and require payments of interest only. The fair value measurement of the restructured loans as of December 31, 2015 resulted in no specific allocation to the allowance for loan losses. One commercial loan was restructured during the fourth quarter of 2015 to extend the maturity date. The fair value measurement of the restructured loan as of December 31, 2015 resulted in no specific allocation to the allowance for loan losses. Of the Company’s TDR’s that defaulted in 2017, 2016 and 2015, none were modified within 12 months prior to default. The company defines default as one or more payments that occur more than 90 days past the due date, charge-off or foreclosure.

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