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: March 31, 2016 December 31, 2015 (dollars in thousands) Amount Percent Amount Percent Commercial, industrial and agricultural $ 116,470 12.81% $ 98,828 11.22% Real estate - one to four family residential: Closed end first and seconds 230,507 25.35% 232,826 26.43% Home equity lines 115,633 12.72% 116,309 13.20% Total real estate - one to four family residential 346,140 38.07% 349,135 39.63% Real estate - multifamily residential 33,363 3.67% 29,672 3.37% Real estate - construction: One to four family residential 17,866 1.97% 19,495 2.21% Other construction, land development and other land 49,648 5.46% 46,877 5.32% Total real estate - construction 67,514 7.43% 66,372 7.53% Real estate - farmland 11,431 1.26% 11,418 1.30% Real estate - non-farm, non-residential: Owner occupied 186,507 20.53% 187,224 21.27% Non-owner occupied 111,592 12.28% 104,456 11.86% Total real estate - non-farm, non-residential 298,099 32.81% 291,680 33.13% Consumer 20,964 2.31% 19,993 2.27% Other 14,969 1.64% 13,680 1.55% Total loans 908,950 100.00% 880,778 100.00% Less allowance for loan losses (10,936) (11,327) Loans, net $ 898,014 $ 869,451 Deferred costs and (fees) , net are included in the table above and totaled $1.6 million for both March 31, 2016 and December 31, 2015, respectively. The following table presents the aging of the recorded investment in past due loans as of March 31, 2016 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 $ - $ - $ 105 $ 105 $ 116,365 $ 116,470 Real estate - one to four family residential: Closed end first and seconds 2,646 952 4,167 7,765 222,742 230,507 Home equity lines 127 - 1,469 1,596 114,037 115,633 Total real estate - one to four family residential 2,773 952 5,636 9,361 336,779 346,140 Real estate - multifamily residential - - - - 33,363 33,363 Real estate - construction: One to four family residential 38 - - 38 17,828 17,866 Other construction, land development and other land - - - - 49,648 49,648 Total real estate - construction 38 - - 38 67,476 67,514 Real estate - farmland - 102 - 102 11,329 11,431 Real estate - non-farm, non-residential: Owner occupied 182 1,260 - 1,442 185,065 186,507 Non-owner occupied 264 - 676 940 110,652 111,592 Total real estate - non-farm, non-residential 446 1,260 676 2,382 295,717 298,099 Consumer 1 11 - 12 20,952 20,964 Other - - - - 14,969 14,969 Total loans $ 3,258 $ 2,325 $ 6,417 $ 12,000 $ 896,950 $ 908,950 * 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, 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 nonaccrual loans, loans past due 90 days and accruing interest, and troubled debt restructurings (accruing) at the dates indicated: (dollars in thousands) March 31, 2016 December 31, 2015 Nonaccrual loans $ 6,616 $ 6,175 Loans past due 90 days and accruing interest 1,127 1,117 Troubled debt restructurings (accruing) 15,158 15,535 At March 31, 2016 and December 31, 2015, there were approximately $1.2 million and $1.3 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 March 31, 2016 and December 31, 2015 were as follows: March 31, 2016 December 31, 2015 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 $ 513 $ 3,235 $ 3,748 $ 549 $ 3,476 $ 4,025 Real estate - one to four family residential: Closed end first and seconds 1,127 6,209 7,336 1,116 6,290 7,406 Home equity lines 32 9,570 9,602 32 9,955 9,987 Total real estate - one to four family residential 1,159 15,779 16,938 1,148 16,245 17,393 Real estate - multifamily residential - 1,905 1,905 - 1,988 1,988 Real estate - construction: One to four family residential - 451 451 - 515 515 Other construction, land development and other land 270 2,049 2,319 275 1,910 2,185 Total real estate - construction 270 2,500 2,770 275 2,425 2,700 Real estate - farmland - - - - - - Real estate - non-farm, non-residential: Owner occupied 4,258 16,216 20,474 4,296 16,528 20,824 Non-owner occupied 1,562 10,318 11,880 1,600 10,847 12,447 Total real estate - non-farm, non-residential 5,820 26,534 32,354 5,896 27,375 33,271 Consumer - 216 216 - 276 276 Other - 649 649 - 800 800 Total loans $ 7,762 $ 50,818 $ 58,580 $ 7,868 $ 52,585 $ 60,453 The following table presents the recorded investment in nonaccrual loans and loans past due 90 days and accruing interest by class at March 31, 2016 and December 31, 2015: Over 90 Days Past Nonaccrual Due and Accruing March 31, December 31, March 31, December 31, (dollars in thousands) 2016 2015 2016 2015 Commercial, industrial and agricultural $ 173 $ 193 $ - $ - Real estate - one to four family residential: Closed end first and seconds 4,099 4,153 1,127 1,117 Home equity lines 1,657 425 - - Total real estate - one to four family residential 5,756 4,578 1,127 1,117 Real estate - construction: One to four family residential - 89 - - Total real estate - construction - 89 - - Real estate - non-farm, non-residential: Owner occupied - 624 - - Non-owner occupied 676 676 - - Total real estate - non-farm, non-residential 676 1,300 - - Consumer 11 15 - - Total loans $ 6,616 $ 6,175 $ 1,127 $ 1,117 The Company uses a risk grading system for real estate (including multifamily residential, construction, farmland and non-farm, non-residential) and commercial loans. Loans are graded on a scale from 1 to 9. Non-impaired real estate and commercial loans are assigned an allowance factor which increases with the severity of risk grading. A general description of the characteristics of the risk grades is as follows: Pass Grades · Risk Grade 1 loans have little or no risk and are generally secured by cash or cash equivalents; · Risk Grade 2 loans have minimal risk to well qualified borrowers and no significant questions as to safety; · Risk Grade 3 loans are satisfactory loans with strong borrowers and secondary sources of repayment; · Risk Grade 4 loans are satisfactory loans with borrowers not as strong as risk grade 3 loans but may exhibit a higher degree of financial risk based on the type of business supporting the loan; and · Risk Grade 5 loans are loans that warrant more than the normal level of supervision and have the possibility of an event occurring that may weaken the borrower’s ability to repay. Special Mention · Risk Grade 6 loans have increasing potential weaknesses beyond those at which the loan originally was granted and if not addressed could lead to inadequately protecting the Company’s credit position. Classified Grades · Risk Grade 7 loans are substandard loans and are inadequately protected by the current sound worth or paying capacity of the obligor or the collateral pledged. These have well defined weaknesses that jeopardize the liquidation of the debt with the distinct possibility the Company will sustain some loss if the deficiencies are not corrected; · Risk Grade 8 loans are doubtful of collection and the possibility of loss is high but pending specific borrower plans for recovery, its classification as a loss is deferred until its more exact status is determined; and · Risk Grade 9 loans are loss loans which are considered uncollectable and of such little value that their continuance as a bank asset is not warranted. The Company uses a past due grading system for consumer loans, including one to four family residential first and seconds and home equity lines. The past due status of a loan is based on the contractual due date of the most delinquent payment due. The past due grading of consumer loans is based on the following categories: current, 1-29 days past due, 30-59 days past due, 60-89 days past due and over 90 days past due. The consumer loans are segregated between performing and nonperforming loans. Performing loans are those that have made timely payments in accordance with the terms of the loan agreement and are not past due 90 days or more. Nonperforming loans are those that do not accrue interest, or are greater than 90 days past due and accruing interest. Non-impaired consumer loans are assigned an allowance factor which increases with the severity of past due status. This component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the loan portfolio. The allocation methodology applied by the Company includes management’s ongoing review and grading of the loan portfolio into criticized loan categories (defined as specific loans warranting either specific allocation, or a classified status of substandard, doubtful or loss). The allocation methodology focuses on evaluation of several factors, including but not limited to: evaluation of facts and issues related to specific loans, management’s ongoing review and grading of the loan portfolio, consideration of migration analysis tracking movement of loans through past due classifications and delinquency experience on each portfolio category, trends in past due and nonaccrual loans, the level of classified loans, the risk characteristics of the various classifications of loans, changes in the size and character of the loan portfolio, concentrations of loans to specific borrowers or industries, existing economic conditions, the fair value of underlying collateral, and other qualitative and quantitative factors which could affect potential credit losses. Because each of the criteria used is subject to change, the allocation of the allowance for loan losses is made for analytical purposes and is not necessarily indicative of the trend of future loan losses in any particular loan category. The total allowance is available to absorb losses from any segment of the portfolio. In determining the allowance for loan losses, the Company considers its portfolio segments and loan classes to be the same. The following table presents commercial loans by credit quality indicator at March 31, 2016: Acquired Loans - Purchased Special Credit (dollars in thousands) Pass Mention Substandard Impaired Impaired Total Commercial, industrial and agricultural $ 112,952 $ 1,739 $ 263 $ 1,003 $ 513 $ 116,470 Real estate - multifamily residential 33,363 - - - - 33,363 Real estate - construction: One to four family residential 17,390 216 79 181 - 17,866 Other construction, land development and other land 42,760 - 1,092 5,526 270 49,648 Total real estate - construction 60,150 216 1,171 5,707 270 67,514 Real estate - farmland 10,416 316 166 533 - 11,431 Real estate - non-farm, non-residential: Owner occupied 165,754 9,431 2,171 4,893 4,258 186,507 Non-owner occupied 95,021 1,314 1,026 12,669 1,562 111,592 Total real estate - non-farm, non-residential 260,775 10,745 3,197 17,562 5,820 298,099 Total commercial loans $ 477,656 $ 13,016 $ 4,797 $ 24,805 $ 6,603 $ 526,877 The following table presents commercial loans by credit quality indicator at December 31, 2015: Acquired Loans - Purchased Special Credit (dollars in thousands) Pass Mention Substandard 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 At March 31, 2016 and December 31, 2015, the Company did not have any loans classified as Doubtful or Loss. The following table presents consumer loans, including one to four family residential first and seconds and home equity lines, by payment activity at March 31, 2016: (dollars in thousands) Performing Nonperforming Total Real estate - one to four family residential: Closed end first and seconds $ 218,266 $ 12,241 $ 230,507 Home equity lines 113,334 2,299 115,633 Total real estate - one to four family residential 331,600 14,540 346,140 Consumer 20,634 330 20,964 Other 14,969 - 14,969 Total consumer loans $ 367,203 $ 14,870 $ 382,073 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, 2015: (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 A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreement. The Company measures impaired loans based on the present value of expected future cash flows discounted at the effective interest rate of the loan or, as a practical expedient, at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. The Company maintains a valuation allowance to the extent that the measure of the impaired loan is less than the recorded investment. TDRs are considered impaired loans. TDRs occur when we agree to modify the original terms of a loan by granting a concession due to the deterioration in the financial condition of the borrower. These concessions can be temporary and are made in an attempt to avoid foreclosure and with the intent to restore the loan to a performing status once sufficient payment history can be demonstrated. These concessions could include, without limitation, rate reductions to below market rates, payment deferrals, forbearance, and, in some cases, forgiveness of principal or interest. At the time of a TDR, the loan is placed on nonaccrual status. 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. The following table presents a rollforward of the Company’s allowance for loan losses for the three months ended March 31, 2016: Beginning Ending Balance Balance (dollars in thousands) January 1, 2016 Charge-offs Recoveries Provision March 31, 2016 Commercial, industrial and agricultural $ 1,894 $ (46) $ 26 $ 348 $ 2,222 Real estate - one to four family residential: Closed end first and seconds 1,609 (373) 81 320 1,637 Home equity lines 795 - 12 312 1,119 Total real estate - one to four family residential 2,404 (373) 93 632 2,756 Real estate - multifamily residential 78 - - 11 89 Real estate - construction: One to four family residential 295 - 1 (9) 287 Other construction, land development and other land 2,423 - - (116) 2,307 Total real estate - construction 2,718 - 1 (125) 2,594 Real estate - farmland 272 - - 4 276 Real estate - non-farm, non-residential: Owner occupied 1,964 (208) 63 (470) 1,349 Non-owner occupied 1,241 - 61 (428) 874 Total real estate - non-farm, non-residential 3,205 (208) 124 (898) 2,223 Consumer 287 (33) 15 37 306 Other 469 (15) 8 8 470 Total $ 11,327 $ (675) $ 267 $ 17 $ 10,936 The following table presents a rollforward of the Company’s allowance for loan losses for the three months ended March 31, 2015: Beginning Ending Balance Balance (dollars in thousands) January 1, 2015 Charge-offs Recoveries Provision March 31, 2015 Commercial, industrial and agricultural $ 1,168 $ - $ 9 $ 91 $ 1,268 Real estate - one to four family residential: Closed end first and seconds 1,884 (285) 7 114 1,720 Home equity lines 1,678 (108) 4 442 2,016 Total real estate - one to four family residential 3,562 (393) 11 556 3,736 Real estate - multifamily residential 89 - - (5) 84 Real estate - construction: One to four family residential 235 (1) 1 23 258 Other construction, land development and other land 2,670 - - 11 2,681 Total real estate - construction 2,905 (1) 1 34 2,939 Real estate - farmland 144 - - (18) 126 Real estate - non-farm, non-residential: Owner occupied 2,416 - - (381) 2,035 Non-owner occupied 1,908 - - (230) 1,678 Total real estate - non-farm, non-residential 4,324 - - (611) 3,713 Consumer 305 (1) 18 (59) 263 Other 524 (12) 5 12 529 Total $ 13,021 $ (407) $ 44 $ - $ 12,658 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 March 31, 2016: 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 $ 576 $ 1,646 $ - $ 2,222 $ 1,003 $ 114,954 $ 513 $ 116,470 Real estate - one to four family residential: Closed end first and seconds 463 1,157 17 1,637 8,074 221,306 1,127 230,507 Home equity lines 316 803 - 1,119 830 114,771 32 115,633 Total real estate - one to four family residential 779 1,960 17 2,756 8,904 336,077 1,159 346,140 Real estate - multifamily residential - 89 - 89 - 33,363 - 33,363 Real estate - construction: One to four family residential 64 223 - 287 181 17,685 - 17,866 Other construction, land development and other land 1,228 1,079 - 2,307 5,526 43,852 270 49,648 Total real estate - construction 1,292 1,302 - 2,594 5,707 61,537 270 67,514 Real estate - farmland 214 62 - 276 533 10,898 - 11,431 Real estate - non-farm, non-residential: Owner occupied 289 1,060 - 1,349 4,893 177,356 4,258 186,507 Non-owner occupied 450 424 - 874 12,669 97,361 1,562 111,592 Total real estate - non-farm, non-residential 739 1,484 - 2,223 17,562 274,717 5,820 298,099 Consumer 81 225 - 306 330 20,634 - 20,964 Other - 470 - 470 - 14,969 - 14,969 Total $ 3,681 $ 7,238 $ 17 $ 10,936 $ 34,039 $ 867,149 $ 7,762 $ 908,950 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, 2015: 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 loans individually evaluated for impairment by class of loans as of March 31, 2016: 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 $ 1,003 $ 1,003 $ 368 $ 635 $ 576 $ 986 $ 13 Real estate - one to four family residential: Closed end first and seconds 8,074 8,438 4,385 3,689 463 8,009 97 Home equity lines 830 830 380 450 316 728 1 Total real estate - one to four family residential 8,904 9,268 4,765 4,139 779 8,737 98 Real estate - construction: One to four family residential 181 181 19 162 64 183 2 Other construction, land development and other land 5,526 5,526 - 5,526 1,228 5,535 64 Total real estate - construction 5,707 5,707 19 5,688 1,292 5,718 66 Real estate - farmland 533 535 - 533 214 535 7 Real estate - non-farm, non-residential: Owner occupied 4,893 4,893 3,481 1,412 289 5,419 56 Non-owner occupied 12,669 12,669 8,456 4,213 450 12,807 145 Total real estate - non-farm, non-residential 17,562 17,562 11,937 5,625 739 18,226 201 Consumer 330 341 11 319 81 334 4 Other - - - - - 1 - Total loans* $ 34,039 $ 34,416 $ 17,100 $ 16,939 $ 3,681 $ 34,537 $ 389 * PCI loans are excluded from this table. The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2015: 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. Determining the fair value of purchased credit-impaired (“PCI”) loans 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 $8.7 million and $8.8 million and recorded carrying values of $7.8 million and $7.9 million at March 31, 2016 and December 31, 2015, respectively. The following table presents a summary of the changes in the accretable yield of the PCI loan portfolio for the period indicated: Three months ended Three months ended March 31, 2016 March 31, 2015 (dollars in thousands) Accretable Yield Accretable Yield Balance at beginning of period $ 1,280 $ 1,131 Accretion (129) (102) Reclassification of nonaccretable difference due to improvement in expected cash flows 24 - Other changes, net 46 - Balance at end of period $ 1,221 $ 1,029 The following table presents, by loan class, information related to loans modified as TDRs during the three months ended March 31, 2016 and 2015: Three Months Ended March 31, 2016 Three Months Ended March 31, 2015 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* Commercial, industrial and agricultural 1 $ 68 $ 68 - $ - $ - Real estate - one to four family residential: Closed end first and seconds 1 41 41 - - - Total 2 $ 109 $ 109 - $ - $ - * 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. During the three months ended March 31, 2016 and 2015, there were no defaults (i.e., 90 days or more past due) on loans modified as TDRs within the prior 12 months. At March 31, 2016, $761 thousand in foreclosed residential real estate properties were included in OREO, and $2.4 million in residential real estate loans were in the process of foreclosure. |