Exhibit 99.2
CAPSTONE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| | | Unaudited September 30, 2017 | | | December 31, 2016 | |
| ASSETS | | | | | | |
| CASH AND CASH EQUIVALENTS | | | | | | |
| Cash and due from banks | | $ | 6,278,305 | | | $ | 5,852,711 | |
| Federal funds sold | | | — | | | | 252,580 | |
| TOTAL CASH AND CASH EQUIVALENTS | | | 6,278,305 | | | | 6,105,291 | |
| Securities available-for-sale | | | 52,539,451 | | | | 43,272,056 | |
| Restricted equity securities | | | 1,049,975 | | | | 1,277,075 | |
| Loans held-for-sale | | | 836,250 | | | | 1,133,300 | |
| Loans, net of allowance for loan losses | | | 418,728,691 | | | | 403,749,009 | |
| Premises and equipment, net | | | 12,882,309 | | | | 13,357,380 | |
| Goodwill and other intangible assets | | | 5,666,241 | | | | 5,776,205 | |
| Bank-owned life insurance | | | 10,011,525 | | | | 9,836,278 | |
| Other assets | | | 3,056,232 | | | | 2,829,880 | |
| TOTAL ASSETS | | $ | 511,048,979 | | | $ | 487,336,474 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| DEPOSITS | | $ | 352,361,551 | | | $ | 333,337,175 | |
| Interest-bearing deposits | | | 85,566,268 | | | | 81,177,278 | |
| Noninterest-bearing deposits | | | 437,927,819 | | | | 414,514,453 | |
| TOTAL DEPOSITS | | | 8,988,275 | | | | 12,218,608 | |
| FHLB advances & other borrowings | | | 2,631,999 | | | | 2,703,669 | |
| Accounts payable and accrued liabilities | | | 449,548,093 | | | | 429,436,730 | |
| TOTAL LIABILITIES | | | | | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | | | |
| Common stock, Class A voting, $.01 par value; 30,000,000 shares authorized; 4,349,885 shares issued at September 30, 2017 and 2016; 4,276,726 and 4,261,378 outstanding at September 30, 2017 and 2016, respectively | | | 43,499 | | | | 43,499 | |
| Common stock, Class B nonvoting, $.01 par value; 15,000,000 shares authorized; none issued | | | — | | | | | |
| Common stock, Class C nonvoting, $.01 par value; 15,000,000 shares authorized; none issued | | | — | | | | | |
| Treasury stock, 73,159 shares, at cost at September 30, 2017 and 88,507 shares, at cost at September 30, 2016 | | | (731,590 | ) | | | (874,970 | ) |
| Additional paid-in capital | | | 44,507,259 | | | | 44,500,768 | |
| Retained earnings | | | 17,487,132 | | | | 14,554,780 | |
| Accumulated other comprehensive income (loss) | | | 194,586 | | | | (324,333 | ) |
| TOTAL STOCKHOLDERS’ EQUITY | | | 61,500,886 | | | | 57,899,744 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 511,048,979 | | | $ | 487,336,474 | |
The Notes to Consolidated Financial Statements are an integral part of these statements.
CAPSTONE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
| | | Unaudited Nine Months Ended September 30, | |
| | | 2017 | | | 2016 | |
| INTEREST INCOME | | | | | | |
| Interest and fees on loans | | $ | 14,790,172 | | | $ | 13,212,351 | |
| Taxable investment securities | | | 777,496 | | | | 603,700 | |
| Nontaxable investment securities | | | 71,927 | | | | 65,586 | |
| Interest on federal funds sold and deposits in banks | | | 93,240 | | | | 19,853 | |
| Total interest income | | | 15,732,835 | | | | 13,901,490 | |
| INTEREST EXPENSE | | | | | | | | |
| Interest on deposits | | | 2,100,116 | | | | 1,620,003 | |
| Interest on borrowed funds | | | 72,849 | | | | 96,405 | |
| Total interest expense | | | 2,172,965 | | | | 1,716,408 | |
| PROVISION FOR LOAN LOSSES | | | 862,500 | | | | 785,000 | |
| NET INTEREST INCOME AFTER | | | | | | | | |
| PROVISION FOR LOAN LOSSES | | | 12,697,370 | | | | 11,400,082 | |
| NONINTEREST INCOME | | | | | | | | |
| Service charges on deposit accounts | | | 872,235 | | | | 843,500 | |
| Mortgage loan origination income | | | 670,890 | | | | 724,989 | |
| ATM fee income | | | 302,119 | | | | 259,033 | |
| Income from bank-owned life insurance | | | 175,247 | | | | 177,636 | |
| Other income | | | 111,485 | | | | 162,732 | |
| Total noninterest income | | | 2,131,976 | | | | 2,167,890 | |
| NONINTEREST EXPENSES | | | | | | | | |
| Employee compensation | | | 5,058,378 | | | | 4,754,848 | |
| Occupancy expenses | | | 1,267,313 | | | | 1,297,398 | |
| Employee benefits | | | 1,137,192 | | | | 1,050,064 | |
| Other | | | 3,028,522 | | | | 2,543,212 | |
| Total noninterest expenses | | | 10,491,405 | | | | 9,645,522 | |
| INCOME BEFORE INCOME TAX EXPENSE | | | 4,337,941 | | | | 3,922,450 | |
| INCOME TAX EXPENSE | | | 1,405,589 | | | | 1,265,382 | |
| NET INCOME | | $ | 2,932,352 | | | $ | 2,657,068 | |
The Notes to Consolidated Financial Statements are an integral part of these statements.
CAPSTONE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED
For the Nine Months Ended September 30, 2017
| | | Common Stock | | | Treasury Stock | | | Additional Paid-in Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Income (Loss) | | | Total Stockholders' Equity | |
| | | | | | | | | | | | | | | | | | | |
| BALANCE, December 31, 2016 | | $ | 43,499 | | | $ | (874,970 | ) | | $ | 44,500,768 | | | $ | 14,554,780 | | | $ | (324,333 | ) | | $ | 57,899,744 | |
| Stock-based compensation | | | — | | | | — | | | | 5,436 | | | | — | | | | — | | | | 5,436 | |
| Sale of treasury stock | | | — | | | | 143,380 | | | | 1,055 | | | | — | | | | — | | | | 144,435 | |
| Net income | | | — | | | | — | | | | — | | | | 2,932,352 | | | | — | | | | 2,932,352 | |
| Other comprehensive income | | | — | | | | — | | | | — | | | | — | | | | 518,919 | | | | 518,919 | |
| BALANCE, September 30, 2017 | | $ | 43,499 | | | $ | (731,590 | ) | | $ | 44,507,259 | | | $ | 17,487,132 | | | $ | 194,586 | | | $ | 61,500,886 | |
The Notes to Consolidated Financial Statements are an integral part of these statements.
CAPSTONE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Unaudited Nine Months Ended September 30, | |
| | | 2017 | | | 2016 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net cash provided by operating activities | | $ | 4,168,574 | | | $ | 5,212,954 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
| Purchases of securities available-for-sale | | | (14,127,647 | ) | | | (7,614,654 | ) |
| Proceeds from sales of securities available for sale | | | — | | | | 1,351,381 | |
| Proceeds from maturities and paydowns of securities available-for-sale | | | 5,521,637 | | | | 3,452,813 | |
| Redemption (purchase) of restricted equity securities | | | 227,100 | | | | (395,800 | ) |
| Net increase in loans | | | (15,827,195 | ) | | | (21,515,688 | ) |
| Purchases of premises and equipment | | | (116,923 | ) | | | (129,848 | ) |
| Net cash used in investing activities | | | (24,323,028 | ) | | | (24,851,796 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Net increase in deposits | | | 23,413,366 | | | | 7,683,645 | |
| Sale of treasury stock | | | 144,435 | | | | 11,050 | |
| Net (repayments) proceeds on other borrowings | | | (3,230,333 | ) | | | 11,039,164 | |
| Net cash provided by financing activities | | | 20,327,468 | | | | 18,733,859 | |
| INCREASE IN CASH AND CASH EQUIVALENTS | | | 173,014 | | | | (904,983 | ) |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | | | 6,105,291 | | | | 8,606,470 | |
| CASH AND CASH EQUIVALENTS AT END OF YEAR | | $ | 6,278,305 | | | $ | 7,701,487 | |
The Notes to Consolidated Financial Statements are an integral part of these statements.
| Note 1. | Basis of Presentation and Overview |
Capstone Bancshares, Inc. and Subsidiary (the Bank), is a corporation organized under the laws of the State of Alabama for the purposes of owning 100% of the outstanding common stock of Capstone Bank (the Bank). The Bank is a state-chartered bank with its corporate headquarters, main office and one branch location in Tuscaloosa, Alabama and additional branch locations in Northport, McIntosh, Chatom, Jackson, Thomasville, and Fairhope, Alabama. The Bank provides a full range of banking services in its primary market areas.
Recently Issued Accounting Pronouncements
During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements for the year ended December 31, 2016 as filed with the Securities and Exchange Commission. The following is a summary of recent authoritative pronouncements not yet effective that could impact the accounting, reporting, and/or disclosure of financial information by the Company issued since December 31, 2016.
In January 2017, FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU clarifies the definition of a business to assist with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements.
In January 2017, FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. The Company should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value. The impairment charge is limited to the amount of goodwill allocated to that reporting unit. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect these amendments to have a material effect on its financial statements.
In March 2017, FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium. The premium on individual callable debt securities shall be amortized to the earliest call date. This guidance does not apply to securities for which prepayments are estimated on a large number of similar loans where prepayments are probable and reasonably estimable. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. This update should be adopted on a modified retrospective basis with a cumulative-effect adjustment to retained earnings on the date of adoption. The Company does not expect these amendments to have a material effect on its financial statements.
In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements in Accounting Standards Codification (ASC) 815, Derivatives and Hedging. The goals of the ASU are to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. The Company does not expect these amendments to have a material effect on its financial statements.
| Note 2. | Securities Available for Sale |
This note was omitted as the information it would have provided has been superseded by the subsequent event of the merger with SmartFinancial and the liquidation of the securities portfolio as detailed in Pro Forma Financial information included as Exhibit 99.3 in this filing.
| Note 3. | Loans and Allowance for Loan Losses |
The composition of loans by primary loan classification and by performing and impaired loan status at September 30, 2017 and December 31, 2016, are as follows:
| | | September 30, 2017 | |
| | | Commercial, Financial and Agricultural | | | Real Estate | | | Consumer and Other | | | Subtotal | | | Allowance for Loan Losses | | | Net Loans | |
| Performing loans | | $ | 92,527,069 | | | $ | 306,941,961 | | | $ | 18,390,326 | | | $ | 417,859,356 | | | $ | 3,948,780 | | | $ | 413,910,576 | |
| Impaired loans | | | 759,520 | | | | 3,899,397 | | | | 430,947 | | | | 5,089,864 | | | | 271,749 | | | | 4,818,115 | |
| Total | | $ | 93,286,589 | | | $ | 310,841,358 | | | $ | 18,821,273 | | | $ | 422,949,220 | | | $ | 4,220,529 | | | $ | 418,728,691 | |
| | | December 31, 2016 | |
| | | Commercial, Financial and Agricultural | | | Real Estate | | | Consumer and Other | | | Subtotal | | | Allowance for Loan Losses | | | Net Loans | |
| Performing loans | | $ | 91,849,964 | | | $ | 292,252,202 | | | $ | 19,930,784 | | | $ | 404,032,950 | | | $ | 3,506,232 | | | $ | 400,526,718 | |
| Impaired loans | | | 785,171 | | | | 2,551,625 | | | | 524,742 | | | | 3,861,538 | | | | 639,247 | | | | 3,222,291 | |
| Total loans | | $ | 92,635,135 | | | $ | 294,803,827 | | | $ | 20,455,526 | | | $ | 407,894,488 | | | $ | 4,145,479 | | | $ | 403,749,009 | |
The Bank evaluates all loans over 60 days past due or more for impairment.
The allocation and changes in the allowance for loan losses, by loan classification, as of and for the periods ended September 30, 2017 and December 31, 2016, are as follows:
| | | September 30, 2017 | |
| | | Commercial, Financial and Agricultural | | | Real Estate | | | Consumer and Other | | | Total | |
| Beginning balance | | $ | 870,001 | | | $ | 3,032,884 | | | $ | 242,594 | | | $ | 4,145,479 | |
| Loans charged off | | | (96,000 | ) | | | (693,000 | ) | | | (63,286 | ) | | | (852,286 | ) |
| Recoveries of loans charged off | | | — | | | | 31,000 | | | | 33,836 | | | | 64,836 | |
| Net Charge offs | | | (96,000 | ) | | | (662,000 | ) | | | (29,450 | ) | | | (787,450 | ) |
| Provision (reallocation) charged to operating expense | | | (48,256 | ) | | | 976,941 | | | | (66,185 | ) | | | 862,500 | |
| Ending balance | | $ | 725,745 | | | $ | 3,347,825 | | | $ | 146,959 | | | $ | 4,220,529 | |
| | | December 31, 2016 | |
| | | Commercial, Financial and Agricultural | | | Real Estate | | | Consumer and Other | | | Total | |
| Beginning balance | | $ | 1,197,543 | | | $ | 2,806,664 | | | $ | 204,932 | | | $ | 4,209,139 | |
| Loans charged off | | | (395,973 | ) | | | (804,404 | ) | | | (10,096 | ) | | | (1,210,473 | ) |
| Recoveries of loans charged off | | | 14,912 | | | | 60,414 | | | | 21,487 | | | | 96,813 | |
| Net Charge offs | | | (381,061 | ) | | | (743,990 | ) | | | 11,391 | | | | (1,113,660 | ) |
| Provision (reallocation) charged to operating expense | | | 53,519 | | | | 970,210 | | | | 26,271 | | | | 1,050,000 | |
| Ending balance | | $ | 870,001 | | | $ | 3,032,884 | | | $ | 242,594 | | | $ | 4,145,479 | |
| Note 3. | Loans and Allowance for Loan Losses, Continued |
The level of the allowance is based upon evaluation of the loan portfolio, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, historical loss experience, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations.
In assessing the adequacy of the allowance for loan losses, management analyzes the allowance for loan losses based on the categories of commercial, financial and agricultural; real estate - construction; real estate - mortgage; and consumer and other.
Risk ratings are categorized as pass, special mention, substandard or doubtful. Management believes that the categories follow those outlined by the primary regulator. Pass rated loans include all risk rated credits other than those included in special mention, substandard and doubtful, which are defined as follows:
| • | Special mention loans have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank's credit position at some future date. |
| • | Substandard loans are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Substandard loans have been placed on nonaccrual status unless it was determined that the loan should remain on accrual status. |
| • | Doubtful loans have all the characteristics of substandard loans with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The Bank considers all doubtful loans to be impaired and places all such loans on nonaccrual status. |
The following table outlines the amount of each loan classification based on internally assigned risk ratings as of September 30, 2017 and December 31, 2016:
| | | September 30, 2017 | |
| | | Commercial, Financial and Agricultural | | | Real Estate | | | Consumer and Other | | | Total | |
| Pass | | $ | 92,458,919 | | | $ | 300,583,950 | | | $ | 18,257,769 | | | $ | 411,300,638 | |
| Special mention | | | 68,150 | | | | 6,358,012 | | | | 132,557 | | | | 6,558,719 | |
| Substandard | | | 544,712 | | | | 3,091,284 | | | | 105,556 | | | | 3,741,582 | |
| Substandard - impaired | | | 198,808 | | | | 51,232 | | | | 33,966 | | | | 284,006 | |
| Doubtful - impaired | | | 16,000 | | | | 756,880 | | | | 291,395 | | | | 1,064,275 | |
| Total | | $ | 93,286,589 | | | $ | 310,841,358 | | | $ | 18,821,273 | | | $ | 422,949,220 | |
| | | December 31, 2016 | |
| | | Commercial, Financial and Agricultural | | | Real Estate | | | Consumer and Other | | | Total | |
| Pass | | $ | 91,599,663 | | | $ | 283,372,553 | | | $ | 19,864,984 | | | $ | 394,837,200 | |
| Special mention | | | 15,158 | | | | 6,623,520 | | | | 65,800 | | | | 6,704,478 | |
| Substandard | | | 235,143 | | | | 2,256,129 | | | | — | | | | 2,491,272 | |
| Substandard - impaired | | | 669,157 | | | | 1,400,720 | | | | 222,378 | | | | 2,292,255 | |
| Doubtful - impaired | | | 116,014 | | | | 1,150,905 | | | | 302,364 | | | | 1,569,283 | |
| Total | | $ | 92,635,135 | | | $ | 294,803,827 | | | $ | 20,455,526 | | | $ | 407,894,488 | |
| Note 3. | Loans and Allowance for Loan Losses, Continued |
The following tables detail the recorded investments, unpaid principal balance and the related allowance of impaired loans as of September 30, 2017 and December 31, 2016, and the average recorded investment of impaired loans, as well as the interest income recognized for the periods ended September 30, 2017 and December 31, 2016:
| | | At September 30, 2017 | | | For the nine months ended September 30, 2017 | |
| | | Recorded Investment | | | Unpaid Principal Balance | | | Related Allowance | | | Average Recorded Investment | | | Interest Income Recognized | |
| Impaired loans without a valuation allowance: | | | | | | | | | | | | | | | |
| Commercial, financial and agricultural | | $ | 544,712 | | | $ | 544,712 | | | $ | — | | | $ | 554,657 | | | $ | 19,421 | |
| Real estate | | | 3,470,645 | | | | 3,470,645 | | | | — | | | | 4,163,179 | | | | 104,511 | |
| Consumer | | | 389,815 | | | | 389,815 | | | | — | | | | 394,735 | | | | 4,994 | |
| | | | 4,405,172 | | | | 4,405,172 | | | | — | | | | 5,112,571 | | | | 128,926 | |
| | | | | | | | | | | | | | | | | | | | | |
| Impaired loans with a valuation allowance: | | | | | | | | | | | | | | | | | | | | |
| Commercial, financial and agricultural | | | 214,808 | | | | 214,808 | | | | 138,865 | | | | 234,596 | | | | 9,380 | |
| Real estate | | | 428,752 | | | | 428,752 | | | | 91,752 | | | | 430,002 | | | | 12,000 | |
| Consumer | | | 41,132 | | | | 41,132 | | | | 41,132 | | | | 44,709 | | | | 2,454 | |
| | | | 684,692 | | | | 684,692 | | | | 271,749 | | | | 709,307 | | | | 23,834 | |
| Total impaired loans | | $ | 5,089,864 | | | $ | 5,089,864 | | | $ | 271,749 | | | $ | 2,821,878 | | | $ | 152,760 | |
| | | December 31, 2016 | | | For the Twelve months ended December 31, 2016 | |
| | | Recorded Investment | | | Unpaid Principal Balance | | | Related Allowance | | | Average Recorded Investment | | | Interest Income Recognized | |
| Impaired loans without a valuation allowance: | | | | | | | | | | | | | | | |
| Commercial, financial and agricultural | | $ | 609,776 | | | $ | 609,776 | | | $ | — | | | $ | 710,150 | | | $ | 39,757 | |
| Real estate | | | 802,767 | | | | 802,767 | | | | — | | | | 2,515,705 | | | | 46,241 | |
| Consumer | | | 149,528 | | | | 149,528 | | | | — | | | | 237,802 | | | | 9,125 | |
| | | | 1,562,071 | | | | 1,562,071 | | | | — | | | | 3,463,657 | | | | 95,123 | |
| | | | | | | | | | | | | | | | | | | | | |
| Impaired loans with a valuation allowance: | | | | | | | | | | | | | | | | | | | | |
| Commercial, financial and agricultural | | | 175,395 | | | | 175,395 | | | | 115,177 | | | | 146,931 | | | | 10,564 | |
| Real estate | | | 1,748,858 | | | | 1,748,858 | | | | 451,329 | | | | 1,487,920 | | | | 94,275 | |
| Consumer | | | 416,089 | | | | 375,214 | | | | 72,741 | | | | 190,042 | | | | 23,834 | |
| | | | 2,340,342 | | | | 2,299,467 | | | | 639,247 | | | | 1,824,893 | | | | 128,673 | |
| Total impaired loans | | $ | 3,902,413 | | | $ | 3,861,538 | | | $ | 639,247 | | | $ | 5,288,550 | | | $ | 223,796 | |
| Note 3. | Loans and Allowance for Loan Losses, Continued |
Past due balances and loans on nonaccrual status by loan classification are as follows:
| | | September 30, 2017 | |
| | | 30-89 Days Past Due and Accruing | | | Past Due 90 Days or More and Accruing | | | Total Past Due and Performing | | | Loans on Nonaccrual Status | | | Current Loans | | | Total Loans | |
| Commercial, financial and agricultural | | $ | 127,000 | | | $ | — | | | $ | 127,000 | | | $ | 208,349 | | | $ | 92,951,240 | | | $ | 93,286,589 | |
| Real estate | | | 1,909,000 | | | | 108,000 | | | | 2,017,000 | | | | 1,244,776 | | | | 307,579,582 | | | | 310,841,358 | |
| Consumer | | | 139,000 | | | | — | | | | 139,000 | | | | 315,861 | | | | 18,366,412 | | | | 18,821,273 | |
| Total | | $ | 2,175,000 | | | $ | 108,000 | | | $ | 2,283,000 | | | $ | 1,768,986 | | | $ | 418,897,234 | | | $ | 422,949,220 | |
| | | December 31, 2016 | |
| | | 30-89 Days Past Due and Accruing | | | Past Due 90 Days or More and Accruing | | | Total Past Due and Performing | | | Loans on Nonaccrual Status | | | Current Loans | | | Total Loans | |
| Commercial, financial and agricultural | | $ | 296,640 | | | $ | — | | | $ | 296,640 | | | $ | 368,037 | | | $ | 91,970,458 | | | $ | 92,635,135 | |
| Real estate | | | 3,015,415 | | | | 144,172 | | | | 3,159,587 | | | | 1,828,798 | | | | 289,815,442 | | | | 294,803,827 | |
| Consumer | | | 120,000 | | | | 3,728 | | | | 123,728 | | | | 335,767 | | | | 19,996,031 | | | | 20,455,526 | |
| Total | | $ | 3,432,055 | | | $ | 147,900 | | | $ | 3,579,955 | | | $ | 2,532,602 | | | $ | 401,781,931 | | | $ | 407,894,488 | |
As of September 30, 2017 and December 31, 2016, there were no loans classified as nonaccrual that were not deemed to be impaired, and all impaired loans were on nonaccruing interest status. At the date such loans were placed on nonaccrual status, the Bank reversed all previously accrued interest income against current year earnings. The Bank's policy is that once a loan is classified as impaired and placed on nonaccrual status, future payments of interest will be applied to the principal balance and not to income. There were approximately $108,000 and $148,000 in loans greater than 90 days past due and still accruing interest at September 30, 2017 and December 31, 2016, respectively.
The following table provides details for the troubled debt restructurings by loan classification:
| September 30, 2017 | | Number of Contracts | | | Pre-Modification Outstanding Recorded Investment | | | Post-Modification Outstanding Recorded Investment | |
| Consumer and other | | | — | | | $ | — | | | $ | — | |
| Real estate - mortgage | | | 2 | | | | 126,460 | | | | 126,460 | |
| Commercial, financial and agricultural | | | 1 | | | | 95,008 | | | | 95,008 | |
| Total | | | 3 | | | $ | 221,468 | | | $ | 221,468 | |
There was $49,029 in troubled debt restructurings for 2017 that subsequently defaulted.
| Note 3. | Loans and Allowance for Loan Losses, Continued |
| December 31, 2016 | | Number of Contracts | | | Pre-Modification Outstanding Recorded Investment | | | Post-Modification Outstanding Recorded Investment | |
| Consumer and other | | | 1 | | | $ | 110,328 | | | $ | 110,328 | |
| Real estate - mortgage | | | 3 | | | | 378,661 | | | | 378,661 | |
| Commercial, financial and agricultural | | | 1 | | | | 34,167 | | | | 34,167 | |
| Total | | | 5 | | | $ | 523,156 | | | $ | 523,156 | |
There were no troubled debt restructurings for 2016 that subsequently defaulted.
| Note 4. | Financial Instruments with Off Balance Sheet Risk |
The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The contract or notional amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments.
The outstanding notional amount of off-balance sheet risks at September 30, 2017 and December 31, 2016 is as follows:
| | | 2017 | | | 2016 | |
| Unused commitments and standby letters of credit | | $ | 107,930,000 | | | $ | 98,854,451 | |
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
In the normal course of business, the Bank is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings, other than those noted above, would not have a material effect on the Bank's consolidated financial statements.
| Note 6. | Fair Value Disclosures |
This note was omitted as the information it would have provided has been superseded by the subsequent event of the merger with SmartFinancial and the fair value of the assets and liabilities in accordance with ASC 805 as detailed in the n Pro Forma Financial information included as Exhibit 99.3 in this filing.
