Loans Receivable

v3.6.0.2

Loans Receivable	12 Months Ended
	Dec. 31, 2016
Receivables [Abstract]
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]	NOTE 3 – Loans Receivable Year end loans are summarized below:       (Dollars in thousands)       December 31, 2016     December 31, 2015   Loans secured by real estate:                 Residential real estate, including home equity   $ 205,979     $ 213,951   Commercial real estate, construction & land development, and other dwellings     270,092       259,478   Commercial participations purchased     369       310   Total loans secured by real estate     476,440       473,739   Consumer     522       535   Commercial business     77,513       68,813   Government     29,529       29,062   Subtotal     584,004       572,149   Less:                 Net deferred loan origination fees     (162 )     (174 ) Undisbursed loan funds     (192 )     (77 ) Loans receivable   $ 583,650     $ 571,898     (Dollars in thousands)   Residential Real Estate, Including Home Equity     Consumer     Commercial Real Estate, Construction & Land Development, and Other Dwellings     Commercial Participations Purchased     Commercial Business     Government     Total                                               The Bancorp's activity in the allowance for loan losses, by loan segment, is summarized below for the twelve months ended December 31, 2016:                                             Allowance for loan losses:                                                         Beginning Balance   $ 1,711     $ 38     $ 4,422     $ 14     $ 698     $ 70     $ 6,953   Charge-offs     (529 )     (33 )     -       -       -       -       (562 ) Recoveries     2       9       -       -       28       -       39   Provisions     1,226       20       (120 )     (14 )     170       (14 )     1,268   Ending Balance   $ 2,410     $ 34     $ 4,302     $ -     $ 896     $ 56     $ 7,698                                                             The Bancorp's activity in the allowance for loan losses, by loan segment, is summarized below for the twelve months ended December 31, 2015:                                                           Allowance for loan losses:                                                         Beginning Balance   $ 1,878     $ 17     $ 3,645     $ 13     $ 733     $ 75     $ 6,361   Charge-offs     (239 )     (30 )     (59 )     -       (77 )     -       (405 ) Recoveries     9       2       22       -       10       -       43   Provisions     63       49       814       1       32       (5 )     954   Ending Balance   $ 1,711     $ 38     $ 4,422     $ 14     $ 698     $ 70     $ 6,953     (Dollars in thousands)   Residential Real Estate, Including Home Equity     Consumer     Commercial Real Estate, Construction & Land Development, and Other Dwellings     Commercial Participations Purchased     Commercial Business     Government     Total                                               The Bancorp's allowance for loan losses impairment evaluation and loan receivables are summarized below at December 31, 2016:                                             Ending balance: individually evaluated for impairment   $ 879     $ -     $ 3     $ -     $ 354     $ -     $ 1,236                                                             Ending balance: collectively evaluated for impairment   $ 1,531     $ 34     $ 4,299     $ -     $ 542     $ 56     $ 6,462                                                             LOAN RECEIVABLES                                                         Ending balance   $ 205,837     $ 524     $ 270,092     $ 369     $ 77,299     $ 29,529     $ 583,650                                                             Ending balance: individually evaluated for impairment   $ 1,419     $ -     $ 374     $ 82     $ 687     $ -     $ 2,562                                                             Ending balance: purchased credit impaired individually evaluated for impairment   $ 956     $ -     $ -     $ -     $ -     $ -     $ 956                                                             Ending balance: collectively evaluated for impairment   $ 203,462     $ 524     $ 269,718     $ 287     $ 76,612     $ 29,529     $ 580,132                                                             The Bancorp's allowance for loan losses impairment evaluation and loan receivables are summarized below at December 31, 2015:                                                             Ending balance: individually evaluated for impairment   $ 149     $ -     $ 171     $ 14     $ 22     $ -     $ 356                                                             Ending balance: collectively evaluated for impairment   $ 1,562     $ 38     $ 4,251     $ -     $ 676     $ 70     $ 6,597                                                             LOAN RECEIVABLES                                                         Ending balance   $ 213,755     $ 535     $ 259,479     $ 310     $ 68,757     $ 29,062     $ 571,898                                                             Ending balance: individually evaluated for impairment   $ 227     $ -     $ 5,298     $ 92     $ 96     $ -     $ 5,713                                                             Ending balance: purchased credit impaired individually evaluated for impairment   $ 1,691     $ -     $ -     $ -     $ -     $ -     $ 1,691                                                             Ending balance: collectively evaluated for impairment   $ 211,837     $ 535     $ 254,181     $ 218     $ 68,661     $ 29,062     $ 564,494     The Bancorp has established a standard loan grading system to assist management, lenders and review personnel in their analysis and supervision of the loan portfolio. The use and application of theses grades by the Bancorp is uniform and conforms to regulatory definitions. The loan grading system is as follows:   2 – Moderate risk Borrower consistently internally generates sufficient cash flow to fund debt service, working assets, and some capital expenditures. Risk of default considered low.   3 – Above average acceptable risk Borrower generates sufficient cash flow to fund debt service and some working assets and/or capital expansion needs. Profitability and key balance sheet ratios are at or slightly above peers. Current trends are positive or stable. Earnings may be level or trending down slightly or be erratic; however, positive strengths are offsetting. Risk of default is reasonable but may warrant collateral protection.   4 – Acceptable risk Borrower generates sufficient cash flow to fund debt service, but most working asset and all capital expansion needs are provided from external sources. Profitability ratios and key balance sheet ratios are usually close to peers but one or more ratios (e.g. leverage) may be higher than peer. Earnings may be trending down over the last three years. Borrower may be able to obtain similar financing from other banks with comparable or less favorable terms. Risk of default is acceptable but requires collateral protection.   5 – Marginally acceptable risk Borrower may exhibit excessive growth, declining earnings, strained cash flow, increasing leverage and/or weakening market position that indicate above average risk. Limited additional debt capacity, modest coverage, and average or below average asset quality, margins and market share. Interim losses and/or adverse trends may occur, but not to the level that would affect the Bank’s position. The potential for default is higher than normal but considered marginally acceptable based on prospects for improving financial performance and the strength of the collateral.   6 – Pass/monitor The borrower has significant weaknesses resulting from performance trends or management concerns. The financial condition of the company has taken a negative turn and may be temporarily strained. Cash flow may be weak but cash reserves remain adequate to meet debt service. Management weaknesses are evident. Borrowers in this category will warrant more than the normal level of supervision and more frequent reporting.   7 – Special mention (watch) Special mention credits are considered bankable assets with no apparent loss of principal or interest envisioned but requiring a high level of management attention. Assets in this category are currently protected but are potentially weak. These borrowers are subject to economic, industry, or management factors having an adverse impact upon their prospects for orderly service of debt. The perceived risk in continued lending is considered to have increased beyond the level where such loans would normally be granted. These assets constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of Substandard.   8 – Substandard This classification consists of loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Financial statements normally reveal some or all of the following: poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Loans are still considered collectible, but due to increased risks and defined weaknesses of the credit, some loss could be incurred in collection if the deficiencies are not corrected.   9 – Doubtful 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 reasonably specific pending factors which may strengthen the credit can be exactly determined. These factors may include proposed acquisitions, liquidation procedures, capital injection and receipt of additional collateral, mergers or refinancing plans.   Performing loans are loans that are paying as agreed and are approximately less than ninety days past due on payments of interest and principal.   The Bancorp's credit quality indicators are summarized below at December 31, 2016 and December 31, 2015:       (Dollars in thousands)       Corporate Credit Exposure - Credit Risk Portfolio By Creditworthiness Category       Commercial Real Estate, Construction & Land Development, and Other Dwellings     Commercial Participations Purchased     Commercial Business     Government   Loan Grades   2016     2015     2016     2015     2016     2015     2016     2015   2  Moderate risk   $ 248     $ 270     $ -     $ -     $ 6,315     $ 6,526     $ -     $ -   3  Above average acceptable risk     3,147       7,136       -       -       15,043       4,313       955       -   4  Acceptable risk     121,583       129,353       188       199       24,754       31,735       25,474       29,062   5  Marginally acceptable risk     100,615       74,342       83       -       18,787       12,225       3,100       -   6  Pass/monitor     38,326       38,337       16       19       10,653       11,774       -       -   7  Special mention (watch)     5,799       4,707       -       -       533       601       -       -   8  Substandard     374       5,334       82       92       1,214       1,583       -       -   Total   $ 270,092     $ 259,479     $ 369     $ 310     $ 77,299     $ 68,757     $ 29,529     $ 29,062         (Dollars in thousands)       Consumer Credit Exposure - Credit Risk Profile Based On Payment Activity       Residential Real Estate, Including Home Equity     Consumer       2016     2015     2016     2015   Performing   $ 200,446     $ 209,583     $ 524     $ 535   Non-performing     5,021       4,549       -       -   Total   $ 205,837     $ 213,755     $ 524     $ 535     A single borrower with seventeen investor owned residential real estate properties in the amount of $2.0 million was modified as a troubled debt restructuring during the second quarter of 2016. This borrower subsequently defaulted during the fourth quarter of 2016. No troubled debt restructurings subsequently defaulted during the fourth quarter of 2015. All of the loans classified as troubled debt restructurings are also considered impaired. The valuation basis for the Bancorp’s troubled debt restructurings is based on the present value of cash flows, unless consistent cash flows are not present, then the fair value of the collateral securing the loan is the basis for valuation.   The Bancorp's individually evaluated impaired loans are summarized below:       As of December 31, 2016     For the twelve months ended December 31, 2016   (Dollars in thousands)   Recorded Investment     Unpaid Principal Balance     Related Allowance     Average Recorded Investment     Interest Income Recognized   With no related allowance recorded:                                         Residential real estate, including home equity   $ 1,309     $ 3,293     $ -     $ 2,582     $ 120   Commercial real estate, construction & land development, and other dwellings     356       356       -       1,256       -   Commercial participations purchased     82       82       -       16       6   Commercial business     212       212       -       168       4   With an allowance recorded:                                         Residential real estate, including home equity     1,066       1,066       879       348       6   Commercial real estate, construction & land development, and other dwellings     18       18       3       18       -   Commercial participations purchased     -       -       -       71       -   Commercial business     475       475       354       324       1   Total:                                         Residential real estate, including home equity   $ 2,375     $ 4,359     $ 879     $ 2,930     $ 126   Commercial real estate, construction & land development, and other dwellings   $ 374     $ 374     $ 3     $ 1,274     $ -   Commercial participations purchased   $ 82     $ 82     $ -     $ 87     $ 6   Commercial business   $ 687     $ 687     $ 354     $ 492     $ 5         As of December 31, 2015     For the twelve months ended December 31, 2015   (Dollars in thousands)   Recorded Investment     Unpaid Principal Balance     Related Allowance     Average Recorded Investment     Interest Income Recognized   With no related allowance recorded:                                         Residential real estate, including home equity   $ 1,741     $ 4,737     $ -     $ 1,327     $ 3   Commercial real estate, construction & land development, and other dwellings     5,075       5,075       -       5,040       8   Commercial participations purchased     -       -       -       -       -   Commercial business     74       74       -       80       -   With an allowance recorded:                                         Residential real estate, including home equity     177       177       149       185       -   Commercial real estate, construction & land development, and other dwellings     223       223       171       69       -   Commercial participations purchased     92       92       14       96       -   Commercial business     22       22       22       23       -   Total:                                         Residential real estate, including home equity   $ 1,918     $ 4,914     $ 149     $ 1,512     $ 3   Commercial real estate, construction & land development, and other dwellings   $ 5,298     $ 5,298     $ 171     $ 5,109     $ 8   Commercial participations purchased   $ 92     $ 92     $ 14     $ 96     $ -   Commercial business   $ 96     $ 96     $ 22     $ 103     $ -     As a result of acquisition activity, the Bancorp acquired loans for which there was evidence of credit quality deterioration since origination and it was determined that it was probable that the Bancorp would be unable to collect all contractually required principal and interest payments. At December 31, 2016, purchased credit impaired loans with unpaid principal balances totaled $2.9 million with a recorded investment of $956 thousand. At December 31, 2015, purchased credit impaired loans with unpaid principal balances totaled $4.0 million with a recorded investment of $1.7 million.   The Bancorp's age analysis of past due loans is summarized below:   (Dollars in thousands)     30-59 Days Past Due     60-89 Days Past Due     Greater Than 90 Days Past Due     Total Past Due     Current     Total Loans     Recorded Investments Greater than 90 Days and Accruing   December 31, 2016                                                         Residential real estate, including home equity   $ 3,974     $ 1,775     $ 4,024     $ 9,773     $ 196,064     $ 205,837     $ 500   Consumer     -       -       -       -       524       524       -   Commercial real estate, construction & land development, and other dwellings     396       189       374       959       269,133       270,092       -   Commercial participations purchased     -       -       82       82       287       369       -   Commercial business     171       217       466       854       76,445       77,299       -   Government     -       -       -       -       29,529       29,529       -   Total   $ 4,541     $ 2,181     $ 4,946     $ 11,668     $ 571,982     $ 583,650     $ 500                                                             December 31, 2015                                                         Residential real estate, including home equity   $ 5,559     $ 2,430     $ 3,055     $ 11,044     $ 202,711     $ 213,755     $ 377   Consumer     -       -       -       -       535       535       -   Commercial real estate, construction & land development, and other dwellings     -       211       710       921       258,558       259,479       -   Commercial participations purchased     -       -       92       92       218       310       -   Commercial business     67       177       22       266       68,491       68,757       -   Government     -       -       -       -       29,062       29,062       -   Total   $ 5,626     $ 2,818     $ 3,879     $ 12,323     $ 559,575     $ 571,898     $ 377     The Bancorp's loans on nonaccrual status are summarized below:       (Dollars in thousands)       December 31, 2016     December 31, 2015   Residential real estate, including home equity   $ 4,521     $ 4,172   Consumer     -       -   Commercial real estate, construction & land development, and other dwellings     374       915   Commercial participations purchased     82       92   Commercial business     628       22   Government     -       -   Total   $ 5,605     $ 5,201