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: June 30, 2016 December 31, 2015 (dollars in thousands) Amount Percent Amount Percent Commercial, industrial and agricultural $ 111,782 12.29% $ 98,828 11.22% Real estate - one to four family residential: Closed end first and seconds 221,580 24.36% 232,826 26.43% Home equity lines 117,238 12.89% 116,309 13.20% Total real estate - one to four family residential 338,818 37.25% 349,135 39.63% Real estate - multifamily residential 32,833 3.61% 29,672 3.37% Real estate - construction: One to four family residential 19,133 2.10% 19,495 2.21% Other construction, land development and other land 64,477 7.09% 46,877 5.32% Total real estate - construction 83,610 9.19% 66,372 7.53% Real estate - farmland 11,313 1.24% 11,418 1.30% Real estate - non-farm, non-residential: Owner occupied 181,853 20.01% 187,224 21.27% Non-owner occupied 112,081 12.32% 104,456 11.86% Total real estate - non-farm, non-residential 293,934 32.33% 291,680 33.13% Consumer 21,420 2.36% 19,993 2.27% Other 15,712 1.73% 13,680 1.55% Total loans 909,422 100.00% 880,778 100.00% Less allowance for loan losses (10,467) (11,327) Loans, net $ 898,955 $ 869,451 Deferred costs and (fees), net are included in the table above and totaled $1.7 million and $1.6 million for June 30, 2016 and December 31, 2015, respectively. The following table presents the aging of the recorded investment in past due loans as of June 30, 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 $ 65 $ - $ - $ 65 $ 111,717 $ 111,782 Real estate - one to four family residential: Closed end first and seconds 2,180 366 3,849 6,395 215,185 221,580 Home equity lines - 66 428 494 116,744 117,238 Total real estate - one to four family residential 2,180 432 4,277 6,889 331,929 338,818 Real estate - multifamily residential - - - - 32,833 32,833 Real estate - construction: One to four family residential 5 - - 5 19,128 19,133 Other construction, land development and other land - - - - 64,477 64,477 Total real estate - construction 5 - - 5 83,605 83,610 Real estate - farmland - - - - 11,313 11,313 Real estate - non-farm, non-residential: Owner occupied - - 1,633 1,633 180,220 181,853 Non-owner occupied 263 - 676 939 111,142 112,081 Total real estate - non-farm, non-residential 263 - 2,309 2,572 291,362 293,934 Consumer 32 70 - 102 21,318 21,420 Other - - - - 15,712 15,712 Total loans $ 2,545 $ 502 $ 6,586 $ 9,633 $ 899,789 $ 909,422 * 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) June 30, 2016 December 31, 2015 Nonaccrual loans $ 5,797 $ 6,175 Loans past due 90 days and accruing interest 2,571 1,117 Troubled debt restructurings (accruing) 14,224 15,535 At June 30, 2016 and December 31, 2015, there were approximately $1.8 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 June 30, 2016 and December 31, 2015 were as follows: June 30, 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 $ 481 $ 2,760 $ 3,241 $ 549 $ 3,476 $ 4,025 Real estate - one to four family residential: Closed end first and seconds 1,132 6,086 7,218 1,116 6,290 7,406 Home equity lines 32 8,961 8,993 32 9,955 9,987 Total real estate - one to four family residential 1,164 15,047 16,211 1,148 16,245 17,393 Real estate - multifamily residential - 1,822 1,822 - 1,988 1,988 Real estate - construction: One to four family residential - 442 442 - 515 515 Other construction, land development and other land 264 2,013 2,277 275 1,910 2,185 Total real estate - construction 264 2,455 2,719 275 2,425 2,700 Real estate - non-farm, non-residential: Owner occupied 4,237 15,042 19,279 4,296 16,528 20,824 Non-owner occupied 1,512 9,436 10,948 1,600 10,847 12,447 Total real estate - non-farm, non-residential 5,749 24,478 30,227 5,896 27,375 33,271 Consumer - 172 172 - 276 276 Other - 647 647 - 800 800 Total loans $ 7,658 $ 47,381 $ 55,039 $ 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 June 30, 2016 and December 31, 2015: Over 90 Days Past Nonaccrual Due and Accruing June 30, December 31, June 30, December 31, (dollars in thousands) 2016 2015 2016 2015 Commercial, industrial and agricultural $ 131 $ 193 $ - $ - Real estate - one to four family residential: Closed end first and seconds 4,061 4,153 1,131 1,117 Home equity lines 727 425 - - Total real estate - one to four family residential 4,788 4,578 1,131 1,117 Real estate - construction: One to four family residential - 89 - - Total real estate - construction - 89 - - Real estate - non-farm, non-residential: Owner occupied 194 624 1,440 - Non-owner occupied 677 676 - - Total real estate - non-farm, non-residential 871 1,300 1,440 - Consumer 7 15 - - Total loans $ 5,797 $ 6,175 $ 2,571 $ 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, are greater than 90 days past due and accruing interest or considered impaired . 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 June 30, 2016: Acquired Loans - Purchased Special Credit (dollars in thousands) Pass Mention Substandard Impaired Impaired Total Commercial, industrial and agricultural $ 107,943 $ 2,644 $ 57 $ 657 $ 481 $ 111,782 Real estate - multifamily residential 32,833 - - - - 32,833 Real estate - construction: One to four family residential 18,664 213 79 177 - 19,133 Other construction, land development and other land 55,893 2,639 188 5,493 264 64,477 Total real estate - construction 74,557 2,852 267 5,670 264 83,610 Real estate - farmland 10,060 731 - 522 - 11,313 Real estate - non-farm, non-residential: Owner occupied 158,980 12,254 1,848 4,534 4,237 181,853 Non-owner occupied 95,769 1,286 972 12,542 1,512 112,081 Total real estate - non-farm, non-residential 254,749 13,540 2,820 17,076 5,749 293,934 Total commercial loans $ 480,142 $ 19,767 $ 3,144 $ 23,925 $ 6,494 $ 533,472 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 June 30, 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 June 30, 2016: (dollars in thousands) Performing Nonperforming Total Real estate - one to four family residential: Closed end first and seconds $ 211,643 $ 9,937 $ 221,580 Home equity lines 116,635 603 117,238 Total real estate - one to four family residential 328,278 10,540 338,818 Consumer 21,099 321 21,420 Other 15,712 - 15,712 Total consumer loans $ 365,089 $ 10,861 $ 375,950 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 six months ended June 30, 2016: Beginning Ending Balance Balance (dollars in thousands) January 1, 2016 Charge-offs Recoveries Provision June 30, 2016 Commercial, industrial and agricultural $ 1,894 $ (68) $ 49 $ 61 $ 1,936 Real estate - one to four family residential: Closed end first and seconds 1,609 (578) 200 136 1,367 Home equity lines 795 (401) 29 196 619 Total real estate - one to four family residential 2,404 (979) 229 332 1,986 Real estate - multifamily residential 78 - - 7 85 Real estate - construction: One to four family residential 295 - 3 3 301 Other construction, land development and other land 2,423 - 1 294 2,718 Total real estate - construction 2,718 - 4 297 3,019 Real estate - farmland 272 - - (20) 252 Real estate - non-farm, non-residential: Owner occupied 1,964 (208) 63 (566) 1,253 Non-owner occupied 1,241 - 61 (232) 1,070 Total real estate - non-farm, non-residential 3,205 (208) 124 (798) 2,323 Consumer 287 (34) 24 61 338 Other 469 (32) 14 77 528 Total $ 11,327 $ (1,321) $ 444 $ 17 $ 10,467 The following table presents a rollforward of the Company’s allowance for loan losses for the six months ended June 30, 2015: Beginning Ending Balance Balance (dollars in thousands) January 1, 2015 Charge-offs Recoveries Provision June 30, 2015 Commercial, industrial and agricultural $ 1,168 $ (80) $ 21 $ 510 $ 1,619 Real estate - one to four family residential: Closed end first and seconds 1,884 (332) 13 134 1,699 Home equity lines 1,678 (137) 5 467 2,013 Total real estate - one to four family residential 3,562 (469) 18 601 3,712 Real estate - multifamily residential 89 - - 13 102 Real estate - construction: One to four family residential 235 (102) 1 123 257 Other construction, land development and other land 2,670 - - (80) 2,590 Total real estate - construction 2,905 (102) 1 43 2,847 Real estate - farmland 144 - - (65) 79 Real estate - non-farm, non-residential: Owner occupied 2,416 (139) 1 (440) 1,838 Non-owner occupied 1,908 - - (740) 1,168 Total real estate - non-farm, non-residential 4,324 (139) 1 (1,180) 3,006 Consumer 305 (7) 34 (75) 257 Other 524 (24) 12 153 665 Total $ 13,021 $ (821) $ 87 $ - $ 12,287 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 June 30, 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 $ 455 $ 1,481 $ - $ 1,936 $ 657 $ 110,644 $ 481 $ 111,782 Real estate - one to four family residential: Closed end first and seconds 200 1,150 17 1,367 6,088 214,360 1,132 221,580 Home equity lines - 619 - 619 175 117,031 32 117,238 Total real estate - one to four family residential 200 1,769 17 1,986 6,263 331,391 1,164 338,818 Real estate - multifamily residential - 85 - 85 - 32,833 - 32,833 Real estate - construction: One to four family residential 61 240 - 301 177 18,956 - 19,133 Other construction, land development and other land 1,436 1,282 - 2,718 5,493 58,720 264 64,477 Total real estate - construction 1,497 1,522 - 3,019 5,670 77,676 264 83,610 Real estate - farmland 203 49 - 252 522 10,791 - 11,313 Real estate - non-farm, non-residential: Owner occupied 178 1,075 - 1,253 4,534 173,082 4,237 181,853 Non-owner occupied 651 419 - 1,070 12,542 98,027 1,512 112,081 Total real estate - non-farm, non-residential 829 1,494 - 2,323 17,076 271,109 5,749 293,934 Consumer 76 262 - 338 321 21,099 - 21,420 Other - 528 - 528 - 15,712 - 15,712 Total $ 3,260 $ 7,190 $ 17 $ 10,467 $ 30,509 $ 871,255 $ 7,658 $ 909,422 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 June 30, 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 $ 657 $ 657 $ 68 $ 589 $ 455 $ 848 $ 9 Real estate - one to four family residential: Closed end first and seconds 6,088 6,416 3,131 2,957 200 7,447 184 Home equity lines 175 175 175 - - 648 - Total real estate - one to four family residential 6,263 6,591 3,306 2,957 200 8,095 184 Real estate - construction: One to four family residential 177 177 18 159 61 181 4 Other construction, land development and other land 5,493 5,493 - 5,493 1,436 5,517 129 Total real estate - construction 5,670 5,670 18 5,652 1,497 5,698 133 Real estate - farmland 522 525 - 522 203 532 17 Real estate - non-farm, non-residential: Owner occupied 4,534 4,534 3,448 1,086 178 5,015 118 Non-owner occupied 12,542 12,542 8,901 3,641 651 12,742 288 Total real estate - non-farm, non-residential 17,076 17,076 12,349 4,727 829 17,757 406 Consumer 321 333 6 315 76 330 11 Other - - - - - 1 - Total loans* $ 30,509 $ 30,852 $ 15,747 $ 14,762 $ 3,260 $ 33,261 $ 760 * 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 $8.6 million and $8.8 million and recorded carrying values of $7.7 million and $7.9 million at June 30, 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 s indicated: Three months ended Six months ended June 30, 2016 June 30, 2016 (dollars in thousands) Accretable Yield Accretable Yield Balance at beginning of period $ 1,221 $ 1,280 Accretion (125) (254) Reclassification of nonaccretable difference due to improvement in expected cash flows 8 32 Other changes, net 10 56 Balance at end of period $ 1,114 $ 1,114 Three months ended Six months ended June 30, 2015 June 30, 2015 (dollars in thousands) Accretable Yield Accretable Yield Balance at beginning of period $ 1,029 $ 1,131 Accretion (104) (206) Reclassification of nonaccretable difference due to improvement in expected cash flows - - Other changes, net - - Balance at end of period $ 925 $ 925 The following table presents, by loan class, information related to loans modified as TDRs during the three months ended June 30, 2016 and 2015: Three Months Ended June 30, 2016 Three Months Ended June 30, 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* Real estate - one to four family residential: Closed end first and seconds 4 $ 599 $ 599 - $ - $ - Total 4 $ 599 $ 599 - $ - $ - * 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 following table presents, by loan class, information related to loans modified as TDRs during the six months ended June 30, 2016 and 2015: Six Months Ended June 30, 2016 Six Months Ended June 30, 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 5 640 640 - - - Total 6 $ 708 $ 708 - $ - $ - *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 following tables present, by loan class, information related to the loans modified as TDRs that subsequently defaulted (i.e., 90 days or more past due following a modification) during the three and six months ended June 30, 2016 and 2015 and were modified as TDRs within the 12 months prior to default: Three Months Ended Three Months Ended June 30, 2016 June 30, 2015 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 $ 350 1 $ 68 Total 1 $ 350 1 $ 68 Six Months Ended Six Months Ended June 30, 2016 June 30, 2015 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 $ 350 1 $ 68 Total 1 $ 350 1 $ 68 At June 30, 2016, $2.2 million in foreclosed residential real estate properties were included in OREO, and $569 thousand in residential real estate loans were in the process of foreclosure. |