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Note 4 - Loans and Allowance for Loan Losses | 6 Months Ended
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Jun. 30, 2017
Notes to Financial Statements |
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | N OTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans are comprised of the following: |  | June 30, |  |  | December 31, |
|  | 2017 |  |  | 2016 |
Residential real estate |  | $ | 304,537 |  |  | $ | 286,022 |
Commercial real estate: |  |  |  |  |  |  |  |
Owner-occupied |  |  | 75,829 |  |  |  | 77,605 |
Nonowner-occupied |  |  | 93,083 |  |  |  | 90,532 |
Construction |  |  | 43,215 |  |  |  | 45,870 |
Commercial and industrial |  |  | 102,950 |  |  |  | 100,589 |
Consumer: |  |  |  |  |  |  |  |
Automobile |  |  | 64,540 |  |  |  | 59,772 |
Home equity |  |  | 21,300 |  |  |  | 20,861 |
Other |  |  | 51,451 |  |  |  | 53,650 |
|  |  | 756,905 |  |  |  | 734,901 |
Less: Allowance for loan losses |  |  | (6,952 | ) |  |  | (7,699 | )
Loans, net |  | $ | 749,953 |  |  | $ | 727,202 |
The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2017 and 2016:
June 30, 2017 |  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,392 |  |  | $ | 2,729 |  |  | $ | 1,360 |  |  | $ | 1,834 |  |  | $ | 7,315 |
Provision for loan losses |  |  | (68 | ) |  |  | (89 | ) |  |  | (35 | ) |  |  | 367 |  |  |  | 175 |
Loans charged off |  |  | (73 | ) |  |  | (53 | ) |  |  | (399 | ) |  |  | (384 | ) |  |  | (909 | )
Recoveries |  |  | 49 |  |  |  | 226 |  |  |  | 6 |  |  |  | 90 |  |  |  | 371 |
Total ending allowance balance |  | $ | 1,300 |  |  | $ | 2,813 |  |  | $ | 932 |  |  | $ | 1,907 |  |  | $ | 6,952 |
June 30, 2016 |  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,185 |  |  | $ | 1,995 |  |  | $ | 2,672 |  |  | $ | 1,094 |  |  | $ | 6,946 |
Provision for loan losses |  |  | (258 | ) |  |  | 1,445 |  |  |  | (1,266 | ) |  |  | 220 |  |  |  | 141 |
Loans charged-off |  |  | (67 | ) |  |  | (52 | ) |  |  | ---- |  |  |  | (353 | ) |  |  | (472 | )
Recoveries |  |  | 46 |  |  |  | 76 |  |  |  | 10 |  |  |  | 187 |  |  |  | 319 |
Total ending allowance balance |  | $ | 906 |  |  | $ | 3,464 |  |  | $ | 1,416 |  |  | $ | 1,148 |  |  | $ | 6,934 |
The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2017 and 2016:
June 30, 2017 |  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 939 |  |  | $ | 4,315 |  |  | $ | 907 |  |  | $ | 1,538 |  |  | $ | 7,699 |
Provision for loan losses |  |  | 377 |  |  |  | (1,176 | ) |  |  | 350 |  |  |  | 769 |  |  |  | 320 |
Loans charged off |  |  | (146 | ) |  |  | (612 | ) |  |  | (403 | ) |  |  | (705 | ) |  |  | (1,866 | )
Recoveries |  |  | 130 |  |  |  | 286 |  |  |  | 78 |  |  |  | 305 |  |  |  | 799 |
Total ending allowance balance |  | $ | 1,300 |  |  | $ | 2,813 |  |  | $ | 932 |  |  | $ | 1,907 |  |  | $ | 6,952 |
June 30, 2016 |  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 1,087 |  |  | $ | 1,959 |  |  | $ | 2,589 |  |  | $ | 1,013 |  |  | $ | 6,648 |
Provision for loan losses |  |  | (218 | ) |  |  | 1,462 |  |  |  | (1,184 | ) |  |  | 560 |  |  |  | 620 |
Loans charged-off |  |  | (171 | ) |  |  | (52 | ) |  |  | ---- |  |  |  | (836 | ) |  |  | (1,059 | )
Recoveries |  |  | 208 |  |  |  | 95 |  |  |  | 11 |  |  |  | 411 |  |  |  | 725 |
Total ending allowance balance |  | $ | 906 |  |  | $ | 3,464 |  |  | $ | 1,416 |  |  | $ | 1,148 |  |  | $ | 6,934 |
The following table presents the balance in the allowance for loan losses and the recorded investment of loans by portfolio segment and based on impairment method as of June 30, 2017 and December 31, 2016:
June 30, 2017 |  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributable to loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | ---- |  |  | $ | 97 |  |  | $ | ---- |  |  | $ | 1 |  |  | $ | 98 |
Collectively evaluated for impairment |  |  | 1,300 |  |  |  | 2,716 |  |  |  | 932 |  |  |  | 1,906 |  |  |  | 6,854 |
Total ending allowance balance |  | $ | 1,300 |  |  | $ | 2,813 |  |  | $ | 932 |  |  | $ | 1,907 |  |  | $ | 6,952 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 1,141 |  |  | $ | 7,262 |  |  | $ | 9,077 |  |  | $ | 209 |  |  | $ | 17,689 |
Loans collectively evaluated for impairment |  |  | 303,396 |  |  |  | 204,865 |  |  |  | 93,873 |  |  |  | 137,082 |  |  |  | 739,216 |
Total ending loans balance |  | $ | 304,537 |  |  | $ | 212,127 |  |  | $ | 102,950 |  |  | $ | 137,291 |  |  | $ | 756,905 |
December 31, 2016 |  | Residential Real Estate |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributable to loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | ---- |  |  | $ | 2,535 |  |  | $ | 241 |  |  | $ | 205 |  |  | $ | 2,981 |
Collectively evaluated for impairment |  |  | 939 |  |  |  | 1,780 |  |  |  | 666 |  |  |  | 1,333 |  |  |  | 4,718 |
Total ending allowance balance |  | $ | 939 |  |  | $ | 4,315 |  |  | $ | 907 |  |  | $ | 1,538 |  |  | $ | 7,699 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment |  | $ | 717 |  |  | $ | 13,111 |  |  | $ | 8,465 |  |  | $ | 416 |  |  | $ | 22,709 |
Loans collectively evaluated for impairment |  |  | 285,305 |  |  |  | 200,896 |  |  |  | 92,124 |  |  |  | 133,867 |  |  |  | 712,192 |
Total ending loans balance |  | $ | 286,022 |  |  | $ | 214,007 |  |  | $ | 100,589 |  |  | $ | 134,283 |  |  | $ | 734,901 |
The following tables present information related to loans individually evaluated for impairment by class of loans as of June 30, 2017 and December 31, 2016:
June 30, 2017 |  | Unpaid Principal Balance |  |  | Recorded Investment |  |  | Allowance for Loan Losses Allocated |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Nonowner-occupied |  | $ | 377 |  |  | $ | 377 |  |  | $ | 97 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Home equity |  |  | 209 |  |  |  | 209 |  |  |  | 1 |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  | 1,141 |  |  |  | 1,141 |  |  |  | ---- |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 3,164 |  |  |  | 2,665 |  |  |  | ---- |
Nonowner-occupied |  |  | 5,229 |  |  |  | 3,773 |  |  |  | ---- |
Construction |  |  | 993 |  |  |  | 447 |  |  |  | ---- |
Commercial and industrial |  |  | 9,390 |  |  |  | 9,077 |  |  |  | ---- |
Total |  | $ | 20,503 |  |  | $ | 17,689 |  |  | $ | 98 |
December 31, 2016 |  | Unpaid Principal Balance |  |  | Recorded Investment |  |  | Allowance for Loan Losses Allocated |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  | $ | 5,477 |  |  | $ | 5,477 |  |  | $ | 2,435 |
Nonowner-occupied |  |  | 384 |  |  |  | 384 |  |  |  | 100 |
Commercial and industrial |  |  | 392 |  |  |  | 392 |  |  |  | 241 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Home equity |  |  | 416 |  |  |  | 416 |  |  |  | 205 |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  | 717 |  |  |  | 717 |  |  |  | ---- |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 3,638 |  |  |  | 3,091 |  |  |  | ---- |
Nonowner-occupied |  |  | 5,078 |  |  |  | 3,632 |  |  |  | ---- |
Construction |  |  | 1,001 |  |  |  | 527 |  |  |  | ---- |
Commercial and industrial |  |  | 8,073 |  |  |  | 8,073 |  |  |  | ---- |
Total |  | $ | 25,176 |  |  | $ | 22,709 |  |  | $ | 2,981 |
The following tables present information related to loans individually evaluated for impairment by class of loans for the three and six months ended June 30, 2017 and 2016:
|  | Three months ended June 30, 2017 |  |  | Six months ended June 30, 2017 |
|  | Average Impaired Loans |  |  | Interest Income Recognized |  |  | Cash Basis Interest Recognized |  |  | Average Impaired Loans |  |  | Interest Income Recognized |  |  | Cash Basis Interest Recognized |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonowner-occupied |  | $ | 379 |  |  | $ | 5 |  |  | $ | 5 |  |  | $ | 380 |  |  | $ | 14 |  |  | $ | 14 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity |  |  | 209 |  |  |  | 2 |  |  |  | 2 |  |  |  | 210 |  |  |  | 5 |  |  |  | 5 |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  | 1,028 |  |  |  | 12 |  |  |  | 12 |  |  |  | 992 |  |  |  | 20 |  |  |  | 20 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 2,836 |  |  |  | 36 |  |  |  | 36 |  |  |  | 2,921 |  |  |  | 120 |  |  |  | 120 |
Nonowner-occupied |  |  | 3,779 |  |  |  | 21 |  |  |  | 21 |  |  |  | 3,730 |  |  |  | 74 |  |  |  | 74 |
Construction |  |  | 487 |  |  |  | 5 |  |  |  | 5 |  |  |  | 501 |  |  |  | 108 |  |  |  | 108 |
Commercial and industrial |  |  | 8,990 |  |  |  | 100 |  |  |  | 100 |  |  |  | 8,815 |  |  |  | 290 |  |  |  | 290 |
Total |  | $ | 17,708 |  |  | $ | 181 |  |  | $ | 181 |  |  | $ | 17,549 |  |  | $ | 631 |  |  | $ | 631 |
|  | Three months ended June 30, 2016 |  |  | Six months ended June 30, 2016 |
|  | Average Impaired Loans |  |  | Interest Income Recognized |  |  | Cash Basis Interest Recognized |  |  | Average Impaired Loans |  |  | Interest Income Recognized |  |  | Cash Basis Interest Recognized |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  | $ | 2,570 |  |  | $ | 143 |  |  | $ | 143 |  |  | $ | 1,781 |  |  | $ | 147 |  |  | $ | 147 |
Nonowner-occupied |  |  | 392 |  |  |  | 5 |  |  |  | 5 |  |  |  | 393 |  |  |  | 10 |  |  |  | 10 |
Commercial and industrial |  |  | 887 |  |  |  | ---- |  |  |  | ---- |  |  |  | 887 |  |  |  | ---- |  |  |  | ---- |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity |  |  | 218 |  |  |  | 2 |  |  |  | 2 |  |  |  | 218 |  |  |  | 4 |  |  |  | 4 |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential real estate |  |  | 728 |  |  |  | 7 |  |  |  | 7 |  |  |  | 730 |  |  |  | 16 |  |  |  | 16 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 3,197 |  |  |  | 40 |  |  |  | 40 |  |  |  | 3,220 |  |  |  | 83 |  |  |  | 83 |
Nonowner-occupied |  |  | 3,378 |  |  |  | 29 |  |  |  | 29 |  |  |  | 3,176 |  |  |  | 42 |  |  |  | 42 |
Construction |  |  | 431 |  |  |  | 97 |  |  |  | 97 |  |  |  | 514 |  |  |  | 97 |  |  |  | 97 |
Commercial and industrial |  |  | 8,212 |  |  |  | 95 |  |  |  | 95 |  |  |  | 8,076 |  |  |  | 187 |  |  |  | 187 |
Total |  | $ | 20,013 |  |  | $ | 418 |  |  | $ | 418 |  |  | $ | 18,995 |  |  | $ | 586 |  |  | $ | 586 |
The recorded investment of a loan is its carrying value excluding accrued interest and deferred loan fees. Nonaccrual loans and loans past due 90 days or more and still accruing include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified as impaired loans. The Company transfers loans to other real estate owned, at fair value less cost to sell, in the period the Company obtains physical possession of the property (through legal title or through a deed in lieu). As of June 30, 2017 and December 31, 2016, other real estate owned secured by residential real estate totaled $564 and $938, respectively. In addition, nonaccrual residential mortgage loans that are in the process of foreclosure had a recorded investment of $1,812 and $1,492 as of June 30, 2017 and December 31, 2016, respectively. The following table presents the recorded investment of nonaccrual loans and loans past due 90 days or more and still accruing by class of loans as of June 30, 2017 and December 31, 2016:
June 30, 2017 |  | Loans Past Due 90 Days And Still Accruing |  |  | Nonaccrual |
Residential real estate |  | $ | 185 |  |  | $ | 3,366 |
Commercial real estate: |  |  |  |  |  |  |  |
Owner-occupied |  |  | ---- |  |  |  | 384 |
Nonowner-occupied |  |  | ---- |  |  |  | 2,713 |
Construction |  |  | ---- |  |  |  | 447 |
Commercial and industrial |  |  | 70 |  |  |  | 468 |
Consumer: |  |  |  |  |  |  |  |
Automobile |  |  | 110 |  |  |  | 30 |
Home equity |  |  | 235 |  |  |  | 17 |
Other |  |  | 141 |  |  |  | 58 |
Total |  | $ | 741 |  |  | $ | 7,483 |
December 31, 2016 |  | Loans Past Due 90 Days And Still Accruing |  |  | Nonaccrual |
Residential real estate |  | $ | 132 |  |  | $ | 3,445 |
Commercial real estate: |  |  |  |  |  |  |  |
Owner-occupied |  |  | 28 |  |  |  | 1,571 |
Nonowner-occupied |  |  | ---- |  |  |  | 2,506 |
Construction |  |  | ---- |  |  |  | 527 |
Commercial and industrial |  |  | ---- |  |  |  | 867 |
Consumer: |  |  |  |  |  |  |  |
Automobile |  |  | 121 |  |  |  | 5 |
Home equity |  |  | ---- |  |  |  | 34 |
Other |  |  | 46 |  |  |  | 6 |
Total |  | $ | 327 |  |  | $ | 8,961 |
The following table presents the aging of the recorded investment of past due loans by class of loans as of June 30, 2017 and December 31, 2016:
June 30, 2017 |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90 Days Or More Past Due |  |  | Total Past Due |  |  | Loans Not Past Due |  |  | Total |
Residential real estate |  | $ | 4,312 |  |  | $ | 1,017 |  |  | $ | 2,207 |  |  | $ | 7,536 |  |  | $ | 297,001 |  |  | $ | 304,537 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 1,870 |  |  |  | 512 |  |  |  | 234 |  |  |  | 2,616 |  |  |  | 73,213 |  |  |  | 75,829 |
Nonowner-occupied |  |  | 83 |  |  |  | 235 |  |  |  | 2,478 |  |  |  | 2,796 |  |  |  | 90,287 |  |  |  | 93,083 |
Construction |  |  | 191 |  |  |  | 62 |  |  |  | 447 |  |  |  | 700 |  |  |  | 42,515 |  |  |  | 43,215 |
Commercial and industrial |  |  | 1,075 |  |  |  | 234 |  |  |  | 475 |  |  |  | 1,784 |  |  |  | 101,166 |  |  |  | 102,950 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | 850 |  |  |  | 225 |  |  |  | 140 |  |  |  | 1,215 |  |  |  | 63,325 |  |  |  | 64,540 |
Home equity |  |  | 136 |  |  |  | 232 |  |  |  | 235 |  |  |  | 603 |  |  |  | 20,697 |  |  |  | 21,300 |
Other |  |  | 547 |  |  |  | 128 |  |  |  | 200 |  |  |  | 875 |  |  |  | 50,576 |  |  |  | 51,451 |
Total |  | $ | 9,064 |  |  | $ | 2,645 |  |  | $ | 6,416 |  |  | $ | 18,125 |  |  | $ | 738,780 |  |  | $ | 756,905 |
December 31, 2016 |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | 90 Days Or More Past Due |  |  | Total Past Due |  |  | Loans Not Past Due |  |  | Total |
Residential real estate |  | $ | 3,728 |  |  | $ | 953 |  |  | $ | 2,201 |  |  | $ | 6,882 |  |  | $ | 279,140 |  |  | $ | 286,022 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  | 134 |  |  |  | 366 |  |  |  | 1,325 |  |  |  | 1,825 |  |  |  | 75,780 |  |  |  | 77,605 |
Nonowner-occupied |  |  | 261 |  |  |  | 18 |  |  |  | 2,506 |  |  |  | 2,785 |  |  |  | 87,747 |  |  |  | 90,532 |
Construction |  |  | 66 |  |  |  | 52 |  |  |  | 182 |  |  |  | 300 |  |  |  | 45,570 |  |  |  | 45,870 |
Commercial and industrial |  |  | 1,283 |  |  |  | 483 |  |  |  | 800 |  |  |  | 2,566 |  |  |  | 98,023 |  |  |  | 100,589 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Automobile |  |  | 1,091 |  |  |  | 221 |  |  |  | 126 |  |  |  | 1,438 |  |  |  | 58,334 |  |  |  | 59,772 |
Home equity |  |  | 349 |  |  |  | 45 |  |  |  | ---- |  |  |  | 394 |  |  |  | 20,467 |  |  |  | 20,861 |
Other |  |  | 685 |  |  |  | 155 |  |  |  | 46 |  |  |  | 886 |  |  |  | 52,764 |  |  |  | 53,650 |
Total |  | $ | 7,597 |  |  | $ | 2,293 |  |  | $ | 7,186 |  |  | $ | 17,076 |  |  | $ | 717,825 |  |  | $ | 734,901 |
Troubled Debt Restructurings: A troubled debt restructuring (“TDR”) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. All TDR’s are considered to be impaired. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; a reduction in the contractual principal and interest payments of the loan; or short-term interest-only payment terms. The Company has allocated reserves for a portion of its TDR’s to reflect the fair values of the underlying collateral or the present value of the concessionary terms granted to the customer. The following table presents the types of TDR loan modifications by class of loans as of June 30, 2017 and December 31, 2016:
June 30, 2017 |  | TDR’s Performing to Modified Terms |  |  | TDR’s Not Performing to Modified Terms |  |  | Total TDR’s |
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  | $ | 706 |  |  | $ | ---- |  |  | $ | 706 |
Maturity extension at lower stated rate than market rate |  |  | 231 |  |  |  |  |  |  |  | 231 |
Credit extension at lower stated rate than market rate |  |  | ---- |  |  |  | 204 |  |  |  | 204 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 164 |  |  |  | ---- |  |  |  | 164 |
Reduction of principal and interest payments |  |  | 566 |  |  |  | ---- |  |  |  | 566 |
Maturity extension at lower stated rate than market rate |  |  | 1,525 |  |  |  | ---- |  |  |  | 1,525 |
Nonowner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 560 |  |  |  | 2,179 |  |  |  | 2,739 |
Rate reduction |  |  | 377 |  |  |  | ---- |  |  |  | 377 |
Credit extension at lower stated rate than market rate |  |  | 572 |  |  |  | ---- |  |  |  | 572 |
Commercial and industrial: |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 8,229 |  |  |  | ---- |  |  |  | 8,229 |
Maturity extension at lower stated rate than market rate |  |  | 770 |  |  |  | ---- |  |  |  | 770 |
Credit extension at lower stated rate than market rate |  |  | ---- |  |  |  | 78 |  |  |  | 78 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Home equity |  |  |  |  |  |  |  |  |  |  |  |
Maturity extension at lower stated rate than market rate |  |  | 208 |  |  |  | ---- |  |  |  | 208 |
Total TDR’s |  | $ | 13,908 |  |  | $ | 2,461 |  |  | $ | 16,369 |
December 31, 2016 |  | TDR’s Performing to Modified Terms |  |  | TDR’s Not Performing to Modified Terms |  |  | Total TDR’s |
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  | $ | 717 |  |  | $ | ---- |  |  | $ | 717 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 284 |  |  |  | ---- |  |  |  | 284 |
Rate reduction |  |  | ---- |  |  |  | 232 |  |  |  | 232 |
Reduction of principal and interest payments |  |  | 579 |  |  |  | ---- |  |  |  | 579 |
Maturity extension at lower stated rate than market rate |  |  | 1,582 |  |  |  | ---- |  |  |  | 1,582 |
Nonowner-occupied |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 600 |  |  |  | 2,210 |  |  |  | 2,810 |
Rate reduction |  |  | 384 |  |  |  | ---- |  |  |  | 384 |
Credit extension at lower stated rate than market rate |  |  | 574 |  |  |  | ---- |  |  |  | 574 |
Commercial and industrial: |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 8,074 |  |  |  | ---- |  |  |  | 8,074 |
Credit extension at lower stated rate than market rate |  |  | ---- |  |  |  | 391 |  |  |  | 391 |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |
Home equity |  |  |  |  |  |  |  |  |  |  |  |
Maturity extension at lower stated rate than market rate |  |  | 213 |  |  |  | ---- |  |  |  | 213 |
Credit extension at lower stated rate than market rate |  |  | 203 |  |  |  | ---- |  |  |  | 203 |
Total TDR’s |  | $ | 13,210 |  |  | $ | 2,833 |  |  | $ | 16,043 |
During the three and six months ended June 30, 2017, the TDR's described above decreased the provision expense and the allowance for loan losses by $79 and $135, respectively, with corresponding charge-offs of $313. This is compared to a decrease of $1,167 and $1,119 in the provision expense and the allowance for loan losses during the three and six months ended June 30, 2016, respectively, with no corresponding charge-offs. During the year ended December 31, 2016, the TDR's described above decreased the allowance for loan losses and provision expense by $1,112 with corresponding charge-offs of $11. At June 30, 2017, the balance in TDR loans increased $326, or 2.0%, from year-end 2016. The Company had 85% of its TDR's performing according to their modified terms at June 30, 2017, as compared to 82% at December 31, 2016. The Company's specific allocations in reserves to customers whose loan terms have been modified in TDR’s totaled $98 at June 30, 2017, as compared to $546 in reserves at December 31, 2016. At June 30, 2017, the Company had $2,271 in commitments to lend additional amounts to customers with outstanding loans that are classified as TDR’s, as compared to $2,427 at December 31, 2016. There were no TDR loan modifications or defaults during the three months ended June 30, 2016. The following table presents the pre- and post-modification balances of TDR loan modifications by class of loans that occurred during the three months ended June 30, 2017:
|  |  |  |  |  | TDR’s Performing to Modified Terms |  |  | TDR’s Not Performing to Modified Terms |
Three months ended June 30, 2017 |  | Number of Loans |  |  | Pre- Modification Recorded Investment |  |  | Post- Modification Recorded Investment |  |  | Pre- Modification Recorded Investment |  |  | Post- Modification Recorded Investment |
Residential real estate |  |  | 1 |  |  | $ | 231 |  |  | $ | 231 |  |  | $ | ---- |  |  | $ | ---- |
Commercial and industrial |  |  | 2 |  |  |  | 770 |  |  |  | 770 |  |  |  | ---- |  |  |  | ---- |
Total TDR’s |  |  | 3 |  |  | $ | 1,001 |  |  | $ | 1,001 |  |  | $ | ---- |  |  | $ | ---- |
The following table presents the pre- and post-modification balances of TDR loan modifications by class of loans that occurred during the six months ended June 30, 2017 and 2016:
|  |  |  |  |  | TDR’s Performing to Modified Terms |  |  | TDR’s Not Performing to Modified Terms |
Six months ended June 30, 2017 |  | Number of Loans |  |  | Pre- Modification Recorded Investment |  |  | Post- Modification Recorded Investment |  |  | Pre- Modification Recorded Investment |  |  | Post- Modification Recorded Investment |
Residential real estate |  |  | 1 |  |  | $ | 231 |  |  | $ | 231 |  |  | $ | ---- |  |  | $ | ---- |
Commercial and industrial |  |  | 2 |  |  |  | 770 |  |  |  | 770 |  |  |  | ---- |  |  |  | ---- |
Total TDR’s |  |  | 3 |  |  | $ | 1,001 |  |  | $ | 1,001 |  |  | $ | ---- |  |  | $ | ---- |
|  |  |  |  |  | TDR’s Performing to Modified Terms |  |  | TDR’s Not Performing to Modified Terms |
Six months ended June 30, 2016 |  | Number of Loans |  |  | Pre- Modification Recorded Investment |  |  | Post- Modification Recorded Investment |  |  | Pre- Modification Recorded Investment |  |  | Post- Modification Recorded Investment |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonowner-occupied |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest only payments |  |  | 1 |  |  | $ | 238 |  |  | $ | 238 |  |  | $ | ---- |  |  | $ | ---- |
Credit extension at lower stated rate than market rate |  |  | 1 |  |  |  | 575 |  |  |  | 575 |  |  |  | ---- |  |  |  | ---- |
Total TDR’s |  |  | 2 |  |  | $ | 813 |  |  | $ | 813 |  |  | $ | ---- |  |  | $ | ---- |
All of the Company’s loans that were restructured during the six months ended June 30, 2017 were performing in accordance with their modified terms and have not experienced any payment defaults within twelve months following their loan modification. The Company’s loans that were restructured during the six months ended June 30, 2016 included a loan for $238 that experienced a payment default within twelve months following the loan modification and is not performing in accordance with the modified loan terms as of June 30, 2017. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. TDR loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. The loans modified during the six months ended June 30, 2017 had no impact on the provision expense or the allowance for loan losses. As of June 30, 2017, the Company had no allocation of reserves to customers whose loan terms were modified during the first six months of 2017. The loans modified during the six months ended June 30, 2016 had no impact on the provision expense or the allowance for loan losses. As of June 30, 2016, the Company had no allocation of reserves to customers whose loan terms were modified during the first six months of 2016. Credit Quality Indicators: 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. These risk categories are represented by a loan grading scale from 1 through 10. The Company analyzes loans individually with a higher credit risk rating and groups these loans into categories called “criticized” and ”classified” assets. The Company considers its criticized assets to be loans that are graded 8 and its classified assets to be loans that are graded 9 through 11. The Company’s risk categories are reviewed at least annually on loans that have aggregate borrowing amounts that meet or exceed $500. The Company uses the following definitions for its criticized loan risk ratings:
Special Mention. Loans classified as special mention indicate considerable risk due to deterioration of repayment (in the earliest stages) due to potential weak primary repayment source, or payment delinquency. These loans will be under constant supervision, are not classified and do not expose the institution to sufficient risks to warrant classification. These deficiencies should be correctable within the normal course of business, although significant changes in company structure or policy may be necessary to correct the deficiencies. These loans are considered bankable assets with no apparent loss of principal or interest envisioned. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. Credits that are defined as a troubled debt restructuring should be graded no higher than special mention until they have been reported as performing over one year after restructuring.
The Company uses the following definitions for its classified loan risk ratings:
Substandard. Loans classified as substandard represent very high risk, serious delinquency, nonaccrual, or unacceptable credit. Repayment through the primary source of repayment is in jeopardy due to the existence of one or more well defined weaknesses and the collateral pledged may inadequately protect collection of the loans. Loss of principal is not likely if weaknesses are corrected, although financial statements normally reveal significant weakness. Loans are still considered collectible, although loss of principal is more likely than with special mention loan grade 8 loans. Collateral liquidation considered likely to satisfy debt.
Doubtful. Loans classified as doubtful display a high probability of loss, although the amount of actual loss at the time of classification is undetermined. This should be a temporary category until such time that actual loss can be identified, or improvements made to reduce the seriousness of the classification. These loans exhibit all substandard characteristics with the addition that weaknesses make collection or liquidation in full highly questionable and improbable. This classification consists of loans where the possibility of loss is high after collateral liquidation based upon existing facts, market conditions, and value. Loss is deferred until certain important and reasonable specific pending factors which may strengthen the credit can be more accurately determined. These factors may include proposed acquisitions, liquidation procedures, capital injection, receipt of additional collateral, mergers, or refinancing plans. A doubtful classification for an entire credit should be avoided when collection of a specific portion appears highly probable with the adequately secured portion graded substandard.
Loss . Loans classified as loss are considered uncollectible and are of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the credit has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this asset yielding such a minimum value even though partial recovery may be affected in the future. Amounts classified as loss should be promptly charged off.
Criticized and classified loans will mostly consist of commercial and industrial and commercial real estate loans. The Company considers its loans that do not meet the criteria for a criticized and classified asset rating as pass rated loans, which will include loans graded from 1 (Prime) to 7 (Watch). All commercial loans are categorized into a risk category either at the time of origination or reevaluation date. As of June 30, 2017 and December 31, 2016, and based on the most recent analysis performed, the risk category of commercial loans by class of loans was as follows:
June 30, 2017 |  | Pass |  |  | Criticized |  |  | Classified |  |  | Total |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  | $ | 64,378 |  |  | $ | 2,124 |  |  | $ | 9,327 |  |  | $ | 75,829 |
Nonowner-occupied |  |  | 86,284 |  |  |  | 2,240 |  |  |  | 4,559 |  |  |  | 93,083 |
Construction |  |  | 42,504 |  |  |  | ---- |  |  |  | 711 |  |  |  | 43,215 |
Commercial and industrial |  |  | 96,611 |  |  |  | 1,355 |  |  |  | 4,984 |  |  |  | 102,950 |
Total |  | $ | 289,777 |  |  | $ | 5,719 |  |  | $ | 19,581 |  |  | $ | 315,077 |
December 31, 2016 |  | Pass |  |  | Criticized |  |  | Classified |  |  | Total |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner-occupied |  | $ | 66,495 |  |  | $ | 428 |  |  | $ | 10,682 |  |  | $ | 77,605 |
Nonowner-occupied |  |  | 83,103 |  |  |  | 2,364 |  |  |  | 5,065 |  |  |  | 90,532 |
Construction |  |  | 45,325 |  |  |  | ---- |  |  |  | 545 |  |  |  | 45,870 |
Commercial and industrial |  |  | 94,091 |  |  |  | 188 |  |  |  | 6,310 |  |  |  | 100,589 |
Total |  | $ | 289,014 |  |  | $ | 2,980 |  |  | $ | 22,602 |  |  | $ | 314,596 |
The Company also obtains the credit scores of its borrowers upon origination (if available by the credit bureau), but the scores are not updated. The Company focuses mostly on the performance and repayment ability of the borrower as an indicator of credit risk and does not consider a borrower's credit score to be a significant influence in the determination of a loan's credit risk grading. For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment of residential and consumer loans by class of loans based on repayment activity as of June 30, 2017 and December 31, 2016:
June 30, 2017 |  | Consumer |  |  |  |  |  |  |  |  |
|  | Automobile |  |  | Home Equity |  |  | Other |  |  | Residential Real Estate |  |  | Total |
Performing |  | $ | 64,400 |  |  | $ | 21,048 |  |  | $ | 51,252 |  |  | $ | 300,986 |  |  | $ | 437,686 |
Nonperforming |  |  | 140 |  |  |  | 252 |  |  |  | 199 |  |  |  | 3,551 |  |  |  | 4,142 |
Total |  | $ | 64,540 |  |  | $ | 21,300 |  |  | $ | 51,451 |  |  | $ | 304,537 |  |  | $ | 441,828 |
December 31, 2016 |  | Consumer |  |  |  |  |  |  |  |  |
|  | Automobile |  |  | Home Equity |  |  | Other |  |  | Residential Real Estate |  |  | Total |
Performing |  | $ | 59,646 |  |  | $ | 20,827 |  |  | $ | 53,598 |  |  | $ | 282,445 |  |  | $ | 416,516 |
Nonperforming |  |  | 126 |  |  |  | 34 |  |  |  | 52 |  |  |  | 3,577 |  |  |  | 3,789 |
Total |  | $ | 59,772 |  |  | $ | 20,861 |  |  | $ | 53,650 |  |  | $ | 286,022 |  |  | $ | 420,305 |
The Company, through its subsidiaries, originates residential, consumer, and commercial loans to customers located primarily in the southeastern areas of Ohio as well as the western counties of West Virginia. Approximately 5.12% of total loans were unsecured at June 30, 2017, down from 5.61% at December 31, 2016.

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