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, 2016 December 31, 2015 (dollars in thousands) Amount Percent Amount Percent Commercial, industrial and agricultural $ 148,963 14.42% $ 98,828 11.22% Real estate - one to four family residential: Closed end first and seconds 215,462 20.85% 232,826 26.43% Home equity lines 122,506 11.85% 116,309 13.20% Total real estate - one to four family residential 337,968 32.70% 349,135 39.63% Real estate - multifamily residential 32,400 3.14% 29,672 3.37% Real estate - construction: One to four family residential 16,204 1.57% 19,495 2.21% Other construction, land development and other land 92,466 8.95% 46,877 5.32% Total real estate - construction 108,670 10.52% 66,372 7.53% Real estate - farmland 11,289 1.09% 11,418 1.30% Real estate - non-farm, non-residential: Owner occupied 201,284 19.48% 187,224 21.27% Non-owner occupied 139,649 13.52% 104,456 11.86% Total real estate - non-farm, non-residential 340,933 33.00% 291,680 33.13% Consumer 42,403 4.10% 19,993 2.27% Other 10,605 1.03% 13,680 1.55% Total loans 1,033,231 100.00% 880,778 100.00% Less allowance for loan losses (11,270) (11,327) Loans, net $ 1,021,961 $ 869,451 Deferred fees and costs, net are included in the table above and totaled $1.8 million and $1.6 million for December 31, 2016 and 2015 , respectively. The following table presents the aging of the recorded investment in past due loans as of December 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 $ 118 $ 89 $ 166 $ 373 $ 148,590 $ 148,963 Real estate - one to four family residential: Closed end first and seconds 3,408 1,472 3,505 8,385 207,077 215,462 Home equity lines 92 219 369 680 121,826 122,506 Total real estate - one to four family residential 3,500 1,691 3,874 9,065 328,903 337,968 Real estate - multifamily residential - - - - 32,400 32,400 Real estate - construction: One to four family residential 240 - 15 255 15,949 16,204 Other construction, land development and other land - - - - 92,466 92,466 Total real estate - construction 240 - 15 255 108,415 108,670 Real estate - farmland - - - - 11,289 11,289 Real estate - non-farm, non-residential: Owner occupied 61 - 225 286 200,998 201,284 Non-owner occupied - - - - 139,649 139,649 Total real estate - non-farm, non-residential 61 - 225 286 340,647 340,933 Consumer 77 7 17 101 42,302 42,403 Other - - - - 10,605 10,605 Total loans $ 3,996 $ 1,787 $ 4,297 $ 10,080 $ 1,023,151 $ 1,033,231 * 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 December 31: (dollars in thousands) December 31, 2016 December 31, 2015 Nonaccrual loans $ 5,181 $ 6,175 Loans past due 90 days and accruing interest 1,341 1,117 Troubled debt restructurings (accruing) 10,441 15,535 At December 31, 2016 and 2015 , there were approximately $2.2 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 December 31, 2016 and 2015 were as follows: December 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 $ 420 $ 2,452 $ 2,872 $ 549 $ 3,476 $ 4,025 Real estate - one to four family residential: Closed end first and seconds 1,135 4,914 6,049 1,116 6,290 7,406 Home equity lines 32 8,417 8,449 32 9,955 9,987 Total real estate - one to four family residential 1,167 13,331 14,498 1,148 16,245 17,393 Real estate - multifamily residential - 1,652 1,652 - 1,988 1,988 Real estate - construction: One to four family residential - 360 360 - 515 515 Other construction, land development and other land 252 2,182 2,434 275 1,910 2,185 Total real estate - construction 252 2,542 2,794 275 2,425 2,700 Real estate - farmland - - - - - - Real estate - non-farm, non-residential: Owner occupied 2,988 12,298 15,286 4,296 16,528 20,824 Non-owner occupied 1,475 6,639 8,114 1,600 10,847 12,447 Total real estate - non-farm, non-residential 4,463 18,937 23,400 5,896 27,375 33,271 Consumer - 148 148 - 276 276 Other - 642 642 - 800 800 Total loans $ 6,302 $ 39,704 $ 46,006 $ 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 December 31, 2016 and 2015 : Over 90 Days Past Nonaccrual Due and Accruing December 31, December 31, December 31, December 31, (dollars in thousands) 2016 2015 2016 2015 Commercial, industrial and agricultural $ 784 $ 193 $ - $ - Real estate - one to four family residential: Closed end first and seconds 3,240 4,153 1,135 1,117 Home equity lines 543 425 - - Total real estate - one to four family residential 3,783 4,578 1,135 1,117 Real estate - construction: One to four family residential 15 89 - - Total real estate - construction 15 89 - - Real estate - non-farm, non-residential: Owner occupied 578 624 206 - Non-owner occupied - 676 - - Total real estate - non-farm, non-residential 578 1,300 206 - Consumer 21 15 - - Total loans $ 5,181 $ 6,175 $ 1,341 $ 1,117 If interest income had been recognized on nonaccrual loans at their stated rates during years 2016 , 2015 and 2014 , interest income would have increased by approximately $383 thousand , $290 thousand and $124 thousand, respectively. The following table presents commercial loans by credit quality indicator at December 31, 2016 : Acquired Loans - Purchased Special Credit (dollars in thousands) Pass Mention Substandard Impaired Impaired Total Commercial, industrial and agricultural $ 136,533 $ 9,839 $ 531 $ 1,640 $ 420 $ 148,963 Real estate - multifamily residential 32,400 - - - - 32,400 Real estate - construction: One to four family residential 15,624 319 91 170 - 16,204 Other construction, land development and other land 84,832 - 212 7,170 252 92,466 Total real estate - construction 100,456 319 303 7,340 252 108,670 Real estate - farmland 7,270 3,504 - 515 - 11,289 Real estate - non-farm, non-residential: Owner occupied 179,400 9,359 1,892 7,645 2,988 201,284 Non-owner occupied 127,817 2,222 689 7,446 1,475 139,649 Total real estate - non-farm, non-residential 307,217 11,581 2,581 15,091 4,463 340,933 Total commercial loans $ 583,876 $ 25,243 $ 3,415 $ 24,586 $ 5,135 $ 642,255 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 December 31, 2016 and 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 December 31, 2016 : (dollars in thousands) Performing Nonperforming Total Real estate - one to four family residential: Closed end first and seconds $ 204,847 $ 10,615 $ 215,462 Home equity lines 121,912 594 122,506 Total real estate - one to four family residential 326,759 11,209 337,968 Consumer 42,077 326 42,403 Other 10,605 - 10,605 Total consumer loans $ 379,441 $ 11,535 $ 390,976 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 The following table presents a rollforward of the Company’s allowance for loan losses for the year ended December 31, 2016 : Beginning Ending Balance Balance (dollars in thousands) January 1, 2016 Charge-offs Recoveries Provision December 31, 2016 Commercial, industrial and agricultural $ 1,894 $ (96) $ 98 $ 1,139 $ 3,035 Real estate - one to four family residential: Closed end first and seconds 1,609 (1,042) 477 443 1,487 Home equity lines 795 (497) 24 331 653 Total real estate - one to four family residential 2,404 (1,539) 501 774 2,140 Real estate - multifamily residential 78 - - (7) 71 Real estate - construction: One to four family residential 295 - 6 (104) 197 Other construction, land development and other land 2,423 - 7 202 2,632 Total real estate - construction 2,718 - 13 98 2,829 Real estate - farmland 272 - - (115) 157 Real estate - non-farm, non-residential: Owner occupied 1,964 (353) 63 (407) 1,267 Non-owner occupied 1,241 (90) 1,432 (1,999) 584 Total real estate - non-farm, non-residential 3,205 (443) 1,495 (2,406) 1,851 Consumer 287 (151) 95 228 459 Other 469 (84) 37 306 728 Total $ 11,327 $ (2,313) $ 2,239 $ 17 $ 11,270 The following table presents a rollforward of the Company’s allowance for loan losses for the year ended December 31, 2015 : 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 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, 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 $ 865 $ 2,170 $ - $ 3,035 $ 1,640 $ 146,903 $ 420 $ 148,963 Real estate - one to four family residential: Closed end first and seconds 416 1,054 17 1,487 7,110 207,217 1,135 215,462 Home equity lines 50 603 - 653 225 122,249 32 122,506 Total real estate - one to four family residential 466 1,657 17 2,140 7,335 329,466 1,167 337,968 Real estate - multifamily residential - 71 - 71 - 32,400 - 32,400 Real estate - construction: One to four family residential 55 142 - 197 170 16,034 - 16,204 Other construction, land development and other land 1,368 1,264 - 2,632 7,170 85,044 252 92,466 Total real estate - construction 1,423 1,406 - 2,829 7,340 101,078 252 108,670 Real estate - farmland 40 117 - 157 515 10,774 - 11,289 Real estate - non-farm, non-residential: Owner occupied 321 946 - 1,267 7,645 190,651 2,988 201,284 Non-owner occupied 177 407 - 584 7,446 130,728 1,475 139,649 Total real estate - non-farm, non-residential 498 1,353 - 1,851 15,091 321,379 4,463 340,933 Consumer 63 396 - 459 309 42,094 - 42,403 Other - 728 - 728 - 10,605 - 10,605 Total $ 3,355 $ 7,898 $ 17 $ 11,270 $ 32,230 $ 994,699 $ 6,302 $ 1,033,231 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 December 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 $ 1,640 $ 1,640 $ 668 $ 972 $ 865 $ 1,094 $ 70 Real estate - one to four family residential: Closed end first and seconds 7,110 7,712 3,760 3,350 416 6,893 393 Home equity lines 225 225 175 50 50 453 2 Total real estate - one to four family residential 7,335 7,937 3,935 3,400 466 7,346 395 Real estate - construction: One to four family residential 170 170 17 153 55 178 8 Other construction, land development and other land 7,170 7,170 1,745 5,425 1,368 5,885 317 Total real estate - construction 7,340 7,340 1,762 5,578 1,423 6,063 325 Real estate - farmland 515 517 261 254 40 525 34 Real estate - non-farm, non-residential: Owner occupied 7,645 7,647 6,195 1,450 321 6,176 407 Non-owner occupied 7,446 7,446 6,166 1,280 177 11,509 380 Total real estate - non-farm, non-residential 15,091 15,093 12,361 2,730 498 17,685 787 Consumer 309 322 3 306 63 323 17 Total loans* $ 32,230 $ 32,849 $ 18,990 $ 13,240 $ 3,355 $ 33,036 $ 1,628 * 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 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 $7.1 million and $8.8 million and recorded carrying values of $6.3 million and $7.9 million at December 31, 2016 and 2015 , 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, 2016, 2015 and 2014 : Year Ended Year Ended Year Ended December 31, 2016 December 31, 2015 December 31, 2014 (dollars in thousands) Accretable Yield Accretable Yield Accretable Yield Balance at beginning of period $ 1,280 $ 1,131 $ 1,185 Accretion (505) (445) (54) Reclassification of nonaccretable difference due to improvement in expected cash flows 65 294 - Other changes, net 63 300 - Balance at end of period $ 903 $ 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, 2016 and 2015 : Year Ended December 31, 2016 Year Ended December 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 2 $ 145 $ 145 - $ - $ - Real estate - one to four family residential: Closed end first and seconds 7 1,224 1,224 2 355 355 Real estate - non-farm, non-residential: Owner occupied 2 554 554 - - - Total 11 $ 1,923 $ 1,923 2 $ 355 $ 355 * 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, 2016 and 2015 and were modified as TDRs within the 12 months prior to default: Year Ended Year Ended December 31, 2016 December 31, 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 2 $ 389 1 $ 68 Total 2 $ 389 1 $ 68 At December 31, 2016 , $869 thousand in foreclosed residential real estate properties were included in OREO, and $229 thousand in residential real estate loans were in the process of foreclosure. |