Loan Portfolio | Note 4. Loan Portfolio The following table sets forth the composition of the Company’s loan portfolio in dollar amounts and as a percentage of the Company’s total gross loans at the dates indicated: December 31, 2015 December 31, 2014 (dollars in thousands) Amount Percent Amount Percent Commercial, industrial and agricultural $ 98,828 11.22% $ 85,119 10.37% Real estate - one to four family residential: Closed end first and seconds 232,826 26.43% 236,761 28.86% Home equity lines 116,309 13.20% 110,100 13.42% Total real estate - one to four family residential 349,135 39.63% 346,861 42.28% Real estate - multifamily residential 29,672 3.37% 25,157 3.07% Real estate - construction: One to four family residential 19,495 2.21% 19,698 2.40% Other construction, land development and other land 46,877 5.32% 35,591 4.34% Total real estate - construction 66,372 7.53% 55,289 6.74% Real estate - farmland 11,418 1.30% 9,471 1.15% Real estate - non-farm, non-residential: Owner occupied 187,224 21.27% 157,745 19.22% Non-owner occupied 104,456 11.86% 104,827 12.77% Total real estate - non-farm, non-residential 291,680 33.13% 262,572 31.99% Consumer 19,993 2.27% 15,919 1.94% Other 13,680 1.55% 20,181 2.46% Total loans 880,778 100.00% 820,569 100.00% Less allowance for loan losses (11,327) (13,021) Loans, net $ 869,451 $ 807,548 Deferred fees and costs, net are included in the table above and totaled $1.6 mi llion and $1.4 million for December 31, 2015 and 201 4, respectively . The following table presents the aging of the recorded investment in past due loans as of December 31, 2015 by class of loans: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Over 90 Days Past Due Total Past Due Total Current* Total Loans Commercial, industrial and agricultural $ 149 $ - $ 193 $ 342 $ 98,486 $ 98,828 Real estate - one to four family residential: Closed end first and seconds 2,748 1,322 4,647 8,717 224,109 232,826 Home equity lines 1,166 - 250 1,416 114,893 116,309 Total real estate - one to four family residential 3,914 1,322 4,897 10,133 339,002 349,135 Real estate - multifamily residential - - - - 29,672 29,672 Real estate - construction: One to four family residential 11 - 89 100 19,395 19,495 Other construction, land development and other land - - - - 46,877 46,877 Total real estate - construction 11 - 89 100 66,272 66,372 Real estate - farmland - - - - 11,418 11,418 Real estate - non-farm, non-residential: Owner occupied 1,637 - 624 2,261 184,963 187,224 Non-owner occupied - - 676 676 103,780 104,456 Total real estate - non-farm, non-residential 1,637 - 1,300 2,937 288,743 291,680 Consumer 377 4 - 381 19,612 19,993 Other - - - - 13,680 13,680 Total loans $ 6,088 $ 1,326 $ 6,479 $ 13,893 $ 866,885 $ 880,778 * For purposes of this table only, the "Total Current" column includes loans that are 1-29 days past due. The following table presents the aging of the recorded investment in past due loans as of December 31, 2014 by class of loans: (dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Over 90 Days Past Due Total Past Due Total Current* Total Loans Commercial, industrial and agricultural $ 278 $ 6 $ 373 $ 657 $ 84,462 $ 85,119 Real estate - one to four family residential: Closed end first and seconds 5,515 1,123 1,247 7,885 228,876 236,761 Home equity lines 366 - 360 726 109,374 110,100 Total real estate - one to four family residential 5,881 1,123 1,607 8,611 338,250 346,861 Real estate - multifamily residential - - - - 25,157 25,157 Real estate - construction: One to four family residential 150 - 221 371 19,327 19,698 Other construction, land development and other land 5 - - 5 35,586 35,591 Total real estate - construction 155 - 221 376 54,913 55,289 Real estate - farmland - - 590 590 8,881 9,471 Real estate - non-farm, non-residential: Owner occupied 1,873 158 1,738 3,769 153,976 157,745 Non-owner occupied - - - - 104,827 104,827 Total real estate - non-farm, non-residential 1,873 158 1,738 3,769 258,803 262,572 Consumer 157 32 - 189 15,730 15,919 Other - - - - 20,181 20,181 Total loans $ 8,344 $ 1,319 $ 4,529 $ 14,192 $ 806,377 $ 820,569 *For purposes of this table only, the "Total Current" column includes loans that are 1-29 days past due. The following table presents nonaccrual loans, loans past due 90 days and accruing interest, and troubled debt restructurings (accruing) at December 31: (dollars in thousands) December 31, 2015 December 31, 2014 Nonaccrual loans $ 6,175 $ 6,622 Loans past due 90 days and accruing interest 1,117 53 Troubled debt restructurings (accruing) 15,535 15,223 At December 31, 201 5 and 201 4 , there were approximately $1.3 million and $3.4 million, respectively, in troubled debt restructurings (“TDRs”) included in nonaccrual loans. The past due status of a loan is based on the contractual due date of the most delinquent payment due. Loans, including impaired loans, are generally classified as nonaccrual if they are past due as to maturity or payment of principal or interest for a period of more than 90 days, unless such loans are well-secured and in the process of collection. Loans greater than 90 days past due may remain on an accrual status if management determines it has adequate collateral to cover the principal and interest. If a loan or a portion of a loan is adversely classified, or is partially charged off, the loan is generally classified as nonaccrual. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on loans, it is management’s practice to place such loans on a nonaccrual status immediately, rather than delaying such action until the loans become 90 days past due. When a loan is placed on nonaccrual status, previously accrued and uncollected interest is reversed, and the amortization of related deferred loan fees or costs is suspended. While a loan is classified as nonaccrual and the future collectability of the recorded loan balance is doubtful, collections of interest and principal are generally applied as a reduction to principal outstanding. When the future collectability of the recorded loan balance is expected, interest income may be recognized on a cash basis. In the case where a nonaccrual loan has been partially charged off, recognition of interest on a cash basis is limited to that which would have been recognized on the recorded loan balance at the contractual interest rate. Cash interest receipts in excess of that amount are recorded as recoveries to the allowance for loan losses until prior charge-offs have been fully recovered. These policies are applied consistently across our loan portfolio. A loan (including a TDR) may be returned to accrual status if the borrower has demonstrated a sustained period of repayment performance (typically six months) in accordance with the contractual terms of the loan and there is reasonable assurance the borrower will continue to make payments as agreed. Outstanding principal balance and the carrying amount of loans acquired pursuant to the Company’s acquisition of VCB (or “Acquired Loans”) that were recorded at fair value at the acquisition date and are included in the consolidated balance sheet at December 31, 201 5 and 2014 were as follows: December 31, 2015 December 31, 2014 Acquired Acquired Loans - Acquired Loans - Acquired Purchased Loans - Acquired Purchased Loans - Acquired Credit Purchased Loans - Credit Purchased Loans - (dollars in thousands) Impaired Performing Total Impaired Performing Total Commercial, industrial and agricultural $ 549 $ 3,476 $ 4,025 $ 1,023 $ 15,673 $ 16,696 Real estate - one to four family residential: Closed end first and seconds 1,116 6,290 7,406 1,374 6,475 7,849 Home equity lines 32 9,955 9,987 33 11,858 11,891 Total real estate - one to four family residential 1,148 16,245 17,393 1,407 18,333 19,740 Real estate - multifamily residential - 1,988 1,988 - 3,539 3,539 Real estate - construction: One to four family residential - 515 515 - 3,206 3,206 Other construction, land development and other land 275 1,910 2,185 79 3,674 3,753 Total real estate - construction 275 2,425 2,700 79 6,880 6,959 Real estate - farmland - - - - - - Real estate - non-farm, non-residential: Owner occupied 4,296 16,528 20,824 1,841 21,037 22,878 Non-owner occupied 1,600 10,847 12,447 3,472 20,762 24,234 Total real estate - non-farm, non-residential 5,896 27,375 33,271 5,313 41,799 47,112 Consumer - 276 276 - 1,462 1,462 Other - 800 800 - - - Total loans $ 7,868 $ 52,585 $ 60,453 $ 7,822 $ 87,686 $ 95,508 The following table presents the recorded investment in nonaccrual loans and loans past due 90 days and accruing interest by class at December 31, 201 5 and 201 4 : Over 90 Days Past Nonaccrual Due and Accruing December 31, December 31, December 31, December 31, (dollars in thousands) 2015 2014 2015 2014 Commercial, industrial and agricultural $ 193 $ 334 $ - $ 53 Real estate - one to four family residential: Closed end first and seconds 4,153 3,364 1,117 - Home equity lines 425 564 - - Total real estate - one to four family residential 4,578 3,928 1,117 - Real estate - construction: One to four family residential 89 221 - - Total real estate - construction 89 221 - - Real estate - farmland - 590 - - Real estate - non-farm, non-residential: Owner occupied 624 1,521 - - Non-owner occupied 676 - - - Total real estate - non-farm, non-residential 1,300 1,521 - - Consumer 15 28 - - Total loans $ 6,175 $ 6,622 $ 1,117 $ 53 If interest income had been recognized on nonaccrual loans at their stated rates during years 201 5 , 201 4 and 201 3 , interest income would have increased by approximately $290 thousand, $124 thousand and $413 thousand, respectively. The following table presents commercial loans by credit qualit y indicator at December 31, 2015 : Acquired Loans - Purchased Special Credit (dollars in thousands) Pass Mention Substandard Doubtful Impaired Impaired Total Commercial, industrial and agricultural $ 95,440 $ 1,709 $ 291 $ - $ 839 $ 549 $ 98,828 Real estate - multifamily residential 29,672 - - - - - 29,672 Real estate - construction: One to four family residential 19,000 220 89 - 186 - 19,495 Other construction, land development and other land 38,013 1,785 1,242 - 5,562 275 46,877 Total real estate - construction 57,013 2,005 1,331 - 5,748 275 66,372 Real estate - farmland 10,396 318 165 - 539 - 11,418 Real estate - non-farm, non-residential: Owner occupied 162,103 12,206 2,283 - 6,336 4,296 187,224 Non-owner occupied 86,894 2,130 1,040 - 12,792 1,600 104,456 Total real estate - non-farm, non-residential 248,997 14,336 3,323 - 19,128 5,896 291,680 Total commercial loans $ 441,518 $ 18,368 $ 5,110 $ - $ 26,254 $ 6,720 $ 497,970 The following table presents commercial loans by credit quality indicator at December 31, 201 4 : Acquired Loans - Purchased Special Credit (dollars in thousands) Pass Mention Substandard Doubtful Impaired Impaired Total Commercial, industrial and agricultural $ 79,191 $ 2,779 $ 675 $ - $ 1,451 $ 1,023 $ 85,119 Real estate - multifamily residential 25,157 - - - - - 25,157 Real estate - construction: One to four family residential 18,978 300 244 - 176 - 19,698 Other construction, land development and other land 26,916 1,791 1,144 - 5,661 79 35,591 Total real estate - construction 45,894 2,091 1,388 - 5,837 79 55,289 Real estate - farmland 9,471 - - - - - 9,471 Real estate - non-farm, non-residential: Owner occupied 132,266 11,339 2,253 - 10,046 1,841 157,745 Non-owner occupied 84,951 4,771 1,817 - 9,816 3,472 104,827 Total real estate - non-farm, non-residential 217,217 16,110 4,070 - 19,862 5,313 262,572 Total commercial loans $ 376,930 $ 20,980 $ 6,133 $ - $ 27,150 $ 6,415 $ 437,608 At December 31, 201 5 and 201 4 , the Company did not have any loans classified as Loss. The following table presents consumer loans, including one to four family residential first and seconds and home equity lines, by payment activity at December 31, 201 5 : (dollars in thousands) Performing Nonperforming Total Real estate - one to four family residential: Closed end first and seconds $ 220,016 $ 12,810 $ 232,826 Home equity lines 115,434 875 116,309 Total real estate - one to four family residential 335,450 13,685 349,135 Consumer 19,655 338 19,993 Other 13,678 2 13,680 Total consumer loans $ 368,783 $ 14,025 $ 382,808 The following table presents consumer loans, including one to four family residential first and seconds and home equity lines, by payment activity at December 31, 201 4 : (dollars in thousands) Performing Nonperforming Total Real estate - one to four family residential: Closed end first and seconds $ 226,801 $ 9,960 $ 236,761 Home equity lines 109,565 535 110,100 Total real estate - one to four family residential 336,366 10,495 346,861 Consumer 15,548 371 15,919 Other 20,175 6 20,181 Total consumer loans $ 372,089 $ 10,872 $ 382,961 The following table presents a rollforward of the Company’s allowance for loan losses for the year ended December 31, 201 5 : Beginning Ending Balance Balance (dollars in thousands) January 1, 2015 Charge-offs Recoveries Provision December 31, 2015 Commercial, industrial and agricultural $ 1,168 $ (336) $ 51 $ 1,011 $ 1,894 Real estate - one to four family residential: Closed end first and seconds 1,884 (1,113) 116 722 1,609 Home equity lines 1,678 (160) 31 (754) 795 Total real estate - one to four family residential 3,562 (1,273) 147 (32) 2,404 Real estate - multifamily residential 89 - - (11) 78 Real estate - construction: One to four family residential 235 (129) 4 185 295 Other construction, land development and other land 2,670 - 1 (248) 2,423 Total real estate - construction 2,905 (129) 5 (63) 2,718 Real estate - farmland 144 - - 128 272 Real estate - non-farm, non-residential: Owner occupied 2,416 (139) 1 (314) 1,964 Non-owner occupied 1,908 - - (667) 1,241 Total real estate - non-farm, non-residential 4,324 (139) 1 (981) 3,205 Consumer 305 (33) 49 (34) 287 Other 524 (68) 31 (18) 469 Total $ 13,021 $ (1,978) $ 284 $ - $ 11,327 The following table presents a rollforward of the Company’s allowance for loan losses for the year ended December 31, 201 4 : Beginning Ending Balance Balance (dollars in thousands) January 1, 2014 Charge-offs Recoveries Provision December 31, 2014 Commercial, industrial and agricultural $ 1,787 $ (340) $ 75 $ (354) $ 1,168 Real estate - one to four family residential: Closed end first and seconds 2,859 (483) 265 (757) 1,884 Home equity lines 1,642 (444) 15 465 1,678 Total real estate - one to four family residential 4,501 (927) 280 (292) 3,562 Real estate - multifamily residential 79 - - 10 89 Real estate - construction: One to four family residential 364 (118) 7 (18) 235 Other construction, land development and other land 1,989 - 9 672 2,670 Total real estate - construction 2,353 (118) 16 654 2,905 Real estate - farmland 116 - - 28 144 Real estate - non-farm, non-residential: Owner occupied 3,236 (292) 27 (555) 2,416 Non-owner occupied 1,770 (389) 13 514 1,908 Total real estate - non-farm, non-residential 5,006 (681) 40 (41) 4,324 Consumer 387 (190) 96 12 305 Other 538 (293) 46 233 524 Total $ 14,767 $ (2,549) $ 553 $ 250 $ 13,021 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class based on impairment method as of December 31, 201 5 : Allowance allocated to loans: Total Loans: Acquired Acquired Individually Collectively loans - Individually Collectively loans - evaluated evaluated purchased evaluated evaluated purchased for for credit for for credit (dollars in thousands) impairment impairment impaired Total impairment impairment impaired Total Commercial, industrial and agricultural $ 562 $ 1,332 $ - $ 1,894 $ 839 $ 97,440 $ 549 $ 98,828 Real estate - one to four family residential: Closed end first and seconds 517 1,092 - 1,609 8,163 223,547 1,116 232,826 Home equity lines 265 530 - 795 625 115,652 32 116,309 Total real estate - one to four family residential 782 1,622 - 2,404 8,788 339,199 1,148 349,135 Real estate - multifamily residential - 78 - 78 - 29,672 - 29,672 Real estate - construction: One to four family residential 67 228 - 295 186 19,309 - 19,495 Other construction, land development and other land 1,263 1,160 - 2,423 5,562 41,040 275 46,877 Total real estate - construction 1,330 1,388 - 2,718 5,748 60,349 275 66,372 Real estate - farmland 210 62 - 272 539 10,879 - 11,418 Real estate - non-farm, non-residential: Owner occupied 824 1,140 - 1,964 6,336 176,592 4,296 187,224 Non-owner occupied 810 431 - 1,241 12,792 90,064 1,600 104,456 Total real estate - non-farm, non-residential 1,634 1,571 - 3,205 19,128 266,656 5,896 291,680 Consumer 88 199 - 287 338 19,655 - 19,993 Other - 469 - 469 2 13,678 - 13,680 Total $ 4,606 $ 6,721 $ - $ 11,327 $ 35,382 $ 837,528 $ 7,868 $ 880,778 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio class based on impairment method as of December 31, 201 4 : Allowance allocated to loans: Total Loans: Acquired Acquired Individually Collectively loans - Individually Collectively loans - evaluated evaluated purchased evaluated evaluated purchased for for credit for for credit (dollars in thousands) impairment impairment impaired Total impairment impairment impaired Total Commercial, industrial and agricultural $ - $ 1,168 $ - $ 1,168 $ 1,451 $ 82,645 $ 1,023 $ 85,119 Real estate - one to four family residential: Closed end first and seconds 1,006 878 - 1,884 8,713 226,674 1,374 236,761 Home equity lines - 1,678 - 1,678 175 109,892 33 110,100 Total real estate - one to four family residential 1,006 2,556 - 3,562 8,888 336,566 1,407 346,861 Real estate - multifamily residential - 89 - 89 - 25,157 - 25,157 Real estate - construction: One to four family residential 78 157 - 235 176 19,522 - 19,698 Other construction, land development and other land 1,632 1,038 - 2,670 5,661 29,851 79 35,591 Total real estate - construction 1,710 1,195 - 2,905 5,837 49,373 79 55,289 Real estate - farmland - 144 - 144 - 9,471 - 9,471 Real estate - non-farm, non-residential: Owner occupied 1,240 1,176 - 2,416 10,046 145,858 1,841 157,745 Non-owner occupied 1,262 646 - 1,908 9,816 91,539 3,472 104,827 Total real estate - non-farm, non-residential 2,502 1,822 - 4,324 19,862 237,397 5,313 262,572 Consumer 106 199 - 305 371 15,548 - 15,919 Other - 524 - 524 6 20,175 - 20,181 Total $ 5,324 $ 7,697 $ - $ 13,021 $ 36,415 $ 776,332 $ 7,822 $ 820,569 The following table presents loans individually evaluated for impairment by class of loans as of December 31, 201 5 : Recorded Recorded Unpaid Investment Investment Average Interest Recorded Principal With No With Related Recorded Income (dollars in thousands) Investment Balance Allowance Allowance Allowance Investment Recognized Commercial, industrial and agricultural $ 839 $ 839 $ - $ 839 $ 562 $ 753 $ 49 Real estate - one to four family residential: Closed end first and seconds 8,163 8,530 3,981 4,182 517 8,386 416 Home equity lines 625 625 175 450 265 521 16 Total real estate - one to four family residential 8,788 9,155 4,156 4,632 782 8,907 432 Real estate - construction: One to four family residential 186 186 20 166 67 235 8 Other construction, land development and other land 5,562 5,562 - 5,562 1,263 5,611 260 Total real estate - construction 5,748 5,748 20 5,728 1,330 5,846 268 Real estate - farmland 539 541 - 539 210 167 36 Real estate - non-farm, non-residential: Owner occupied 6,336 6,336 3,506 2,830 824 8,995 292 Non-owner occupied 12,792 12,792 7,686 5,106 810 11,312 595 Total real estate - non-farm, non-residential 19,128 19,128 11,192 7,936 1,634 20,307 887 Consumer 338 350 12 326 88 352 19 Other 2 2 2 - - 4 - Total loans* $ 35,382 $ 35,763 $ 15,382 $ 20,000 $ 4,606 $ 36,336 $ 1,691 * PCI Loans are excluded from this table . The following table presents loans individually evaluated for impairment by class of loans as of December 31, 201 4 : Recorded Recorded Unpaid Investment Investment Average Interest Recorded Principal With No With Related Recorded Income (dollars in thousands) Investment Balance Allowance Allowance Allowance Investment Recognized Commercial, industrial and agricultural $ 1,451 $ 1,451 $ 1,451 $ - $ - $ 2,010 $ 128 Real estate - one to four family residential: Closed end first and seconds 8,713 8,813 3,611 5,102 1,006 9,800 474 Home equity lines 175 175 175 - - 289 - Total real estate - one to four family residential 8,888 8,988 3,786 5,102 1,006 10,089 474 Real estate - construction: One to four family residential 176 176 - 176 78 312 7 Other construction, land development and other land 5,661 5,661 - 5,661 1,632 5,399 256 Total real estate - construction 5,837 5,837 - 5,837 1,710 5,711 263 Real estate - farmland - - - - - - - Real estate - non-farm, non-residential: Owner occupied 10,046 10,146 3,734 6,312 1,240 12,056 534 Non-owner occupied 9,816 9,816 4,262 5,554 1,262 9,356 456 Total real estate - non-farm, non-residential 19,862 19,962 7,996 11,866 2,502 21,412 990 Consumer 371 371 - 371 106 420 21 Other 6 6 6 - - 328 - Total loans* $ 36,415 $ 36,615 $ 13,239 $ 23,176 $ 5,324 $ 39,970 $ 1,876 *PCI Loans are excluded from this table. Determining the fair value of PCI loans at November 14, 2014 required the Company to estimate cash flows expected to result from those loans and to discount those cash flows at appropriate rates of interest. For such loans, the excess of the cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans and is called the accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is the nonaccretable difference and is not recorded. In accordance with U.S. GAAP, the Company did not “carry over” any allowances for loan losses that were reserved for the VCB loan portfolio prior to the Company’s acquisition of VCB. PCI loans had unpaid principal balances of $8.8 million and $8.8 million and recorded carrying values of $7.9 million and $7.8 million at December 31, 2015 and 2014, respectively. Loans acquired from VCB that constituted PCI loans were recorded by the Company at fair value on the date of acquisition as follows: November 14, (dollars in thousands) 2014 Contractual principal and interest at acquisition $ 9,977 Nonaccretable difference 937 Accretable yield 1,185 PCI loans at acquisition, at fair value $ 7,855 The following table presents a summary of the changes in the accretable yield of the PCI loan portfolio , which was acquired at November 14, 2014, for the years ended December 31, 2015 and 201 4 : Year Ended Year Ended December 31, 2015 December 31, 2014 (dollars in thousands) Accretable Yield Accretable Yield Balance at beginning of period $ 1,131 $ 1,185 Accretion (445) (54) Reclassification of nonaccretable difference due to improvement in expected cash flows 294 - Other changes, net 300 - Balance at end of period $ 1,280 $ 1,131 The following table presents, by class of loans, information related to loans modified as TDRs during the years ended December 31, 201 5 and 201 4 : Year Ended December 31, 2015 Year Ended December 31, 2014 Pre- Post- Pre- Post- Modification Modification Modification Modification Number of Recorded Recorded Number of Recorded Recorded (dollars in thousands) Loans Balance Balance* Loans Balance Balance* Real estate - one to four family residential: Closed end first and seconds 2 $ 355 $ 355 3 $ 570 $ 569 Consumer - - - 2 385 377 Total 2 $ 355 $ 355 5 $ 955 $ 946 * The period end balances are inclusive of all partial paydowns and charge-offs since the modification date. Loans modified as TDRs that were fully paid down, charged-off, or foreclosed upon by period end are not reported. The Company has no obligation to fund additional advances on its impaired loans. The following table presents, by class of loans, information related to loans modified as TDRs that subsequently defaulted (i.e., 90 days or more past due following a modification) during the years ended December 31, 201 5 and 201 4 and were modified as TDRs within the 12 months prior to default: Year Ended Year Ended December 31, 2015 December 31, 2014 Number of Recorded Number of Recorded (dollars in thousands) Loans Balance Loans Balance Real estate - one to four family residential: Closed end first and seconds 1 $ 68 - $ - Real estate - non-farm, non-residential: Non-owner occupied - - 1 855 Total 1 $ 68 1 $ 855 At December 3 1, 2015, $423 thousand in foreclosed residential real estate properties were included in OREO, and $2.0 million in residential real estate loans were in the process of foreclosure. |