Loans | Note 4 – Loans Loans were as follows: June 30, 2015 December 31, 2014 (in thousands) Commercial $ 78,742 $ 60,936 Commercial Real Estate: Construction 39,014 33,173 Farmland 77,935 77,419 Nonfarm nonresidential 160,518 175,452 Residential Real Estate: Multi-family 44,702 41,891 1-4 Family 206,564 197,278 Consumer 9,958 11,347 Agriculture 30,391 26,966 Other 497 537 Subtotal 648,321 624,999 Less: Allowance for loan losses (16,809 ) (19,364 ) Loans, net $ 631,512 $ 605,635 The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended June 30, 2015 and 2014: Commercial Commercial Real Estate Residential Real Estate Consumer Agriculture Other Total (in thousands) June 30, 2015: Beginning balance $ 2,046 $ 10,680 $ 5,221 $ 244 $ 391 $ 15 $ 18,597 Provision for loan losses (296 ) (330 ) 604 10 3 9 — Loans charged off (99 ) (1,224 ) (809 ) (62 ) (37 ) (33 ) (2,264 ) Recoveries 295 87 44 34 2 14 476 Ending balance $ 1,946 $ 9,213 $ 5,060 $ 226 $ 359 $ 5 $ 16,809 June 30, 2014: Beginning balance $ 3,608 $ 13,929 $ 7,071 $ 383 $ 415 $ 9 $ 25,415 Provision for loan losses (329 ) 6,074 560 (28 ) 38 (15 ) 6,300 Loans charged off (308 ) (6,894 ) (1,048 ) (51 ) (21 ) (1 ) (8,323 ) Recoveries 144 1,250 290 35 3 19 1,741 Ending balance $ 3,115 $ 14,359 $ 6,873 $ 339 $ 435 $ 12 $ 25,133 The following table presents the activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2015 and 2014: Commercial Commercial Real Estate Residential Real Estate Consumer Agriculture Other Total (in thousands) June 30, 2015: Beginning balance $ 2,046 $ 10,931 $ 5,787 $ 274 $ 319 $ 7 $ 19,364 Provision for loan losses (27 ) (323 ) 220 22 107 1 — Loans charged off (474 ) (1,593 ) (1,291 ) (130 ) (70 ) (33 ) (3,591 ) Recoveries 401 198 344 60 3 30 1,036 Ending balance $ 1,946 $ 9,213 $ 5,060 $ 226 $ 359 $ 5 $ 16,809 June 30, 2014: Beginning balance $ 3,221 $ 16,414 $ 7,762 $ 416 $ 305 $ 6 $ 28,124 Provision for loan losses 116 4,947 1,094 (9 ) 151 1 6,300 Loans charged off (454 ) (8,368 ) (2,356 ) (179 ) (30 ) (18 ) (11,405 ) Recoveries 232 1,366 373 111 9 23 2,114 Ending balance $ 3,115 $ 14,359 $ 6,873 $ 339 $ 435 $ 12 $ 25,133 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of June 30, 2015: Commercial Commercial Real Estate Residential Real Estate Consumer Agriculture Other Total (in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 1 $ 671 $ 170 $ — $ — $ — $ 842 Collectively evaluated for impairment 1,945 8,542 4,890 226 359 5 15,967 Total ending allowance balance $ 1,946 $ 9,213 $ 5,060 $ 226 $ 359 $ 5 $ 16,809 Loans: Loans individually evaluated for impairment $ 1,555 $ 27,478 $ 19,728 $ 20 $ 230 $ — $ 49,011 Loans collectively evaluated for impairment 77,187 249,989 231,538 9,938 30,161 497 599,310 Total ending loans balance $ 78,742 $ 277,467 $ 251,266 $ 9,958 $ 30,391 $ 497 $ 648,321 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on the impairment method as of December 31, 2014: Commercial Commercial Real Estate Residential Real Estate Consumer Agriculture Other Total (in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 33 $ 491 $ 227 $ 1 $ — $ — $ 752 Collectively evaluated for impairment 2,013 10,440 5,560 273 319 7 18,612 Total ending allowance balance $ 2,046 $ 10,931 $ 5,787 $ 274 $ 319 $ 7 $ 19,364 Loans: Loans individually evaluated for impairment $ 2,022 $ 48,141 $ 21,384 $ 61 $ 263 $ 122 $ 71,993 Loans collectively evaluated for impairment 58,914 237,903 217,785 11,286 26,703 415 553,006 Total ending loans balance $ 60,936 $ 286,044 $ 239,169 $ 11,347 $ 26,966 $ 537 $ 624,999 Impaired Loans Impaired loans include restructured loans and loans on nonaccrual or classified as doubtful, whereby collection of the total amount is improbable, or loss, whereby all or a portion of the loan has been written off or a specific allowance for loss has been provided. The following tables present information related to loans individually evaluated for impairment by class of loans as of June 30, 2015 and December 31, 2014 and for the three and six months ended June 30, 2015 and 2014: Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Unpaid Principal Balance Recorded Investment Allowance For Loan Losses Allocated Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (in thousands) With No Related Allowance Recorded: Commercial $ 1,792 $ 1,548 $ — $ 1,605 $ 5 $ 1,730 $ 5 Commercial real estate: Construction 1,599 1,012 — 2,475 4 3,016 8 Farmland 6,893 4,447 — 4,659 3 4,685 26 Nonfarm nonresidential 25,674 17,291 — 20,356 72 21,043 137 Residential real estate: Multi-family 34 34 — 17 — 38 — 1-4 Family 16,616 13,900 — 14,235 110 14,579 244 Consumer 85 20 — 22 — 25 — Agriculture 297 230 — 231 — 241 — Other — — — 62 2 82 4 Subtotal 52,990 38,482 — 43,662 196 45,439 424 With An Allowance Recorded: Commercial 7 7 1 10 — 22 — Commercial real estate: Construction — — — — — — — Farmland — — — — — 105 — Nonfarm nonresidential 8,150 4,728 671 2,615 6 7,266 12 Residential real estate: Multi-family 4,221 4,221 64 4,235 55 4,246 102 1-4 Family 1,573 1,573 106 1,628 14 1,676 39 Consumer — — — 4 — 13 — Agriculture — — — — — — — Other — — — — — — — Subtotal 13,951 10,529 842 8,492 75 13,328 153 Total $ 66,941 $ 49,011 $ 842 $ 52,154 $ 271 $ 58,767 $ 577 As of December 31, 2014 Three Months Ended June 30, 2014 Six Months Ended June 30, 2014 Unpaid Principal Balance Recorded Investment Allowance For Loan Losses Allocated Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (in thousands) With No Related Allowance Recorded: Commercial $ 2,546 $ 1,978 $ — $ 2,359 $ 54 $ 2,447 $ 55 Commercial real estate: Construction 4,714 4,100 — 5,488 3 6,340 6 Farmland 6,636 4,739 — 6,403 31 6,899 48 Nonfarm nonresidential 34,437 22,418 — 42,897 275 47,731 458 Residential real estate: Multi-family 81 81 — 323 — 2,719 — 1-4 Family 18,496 15,266 — 21,844 131 26,156 417 Consumer 93 29 — 10 — 9 — Agriculture 276 263 — 264 — 283 3 Other 367 122 — 180 2 330 9 Subtotal 67,646 48,996 — 79,768 496 92,914 996 With An Allowance Recorded: Commercial 145 44 33 1,115 2 1,534 20 Commercial real estate: Construction — — — 665 5 863 11 Farmland 658 315 38 — — 82 — Nonfarm nonresidential 19,454 16,569 453 13,308 63 15,370 171 Residential real estate: Multi-family 4,266 4,266 91 4,301 39 4,533 76 1-4 Family 1,791 1,771 136 1,749 19 1,907 38 Consumer 32 32 1 44 — 58 1 Agriculture — — — — — — — Other — — — — — — — Subtotal 26,346 22,997 752 21,182 128 24,347 317 Total $ 93,992 $ 71,993 $ 752 $ 100,950 $ 624 $ 117,261 $ 1,313 Cash basis income recognized for the three and six months ended June 30, 2015 was $29,000 and $102,000, respectively, compared to $225,000 and $422,000 for the three and six months ended June 30, 2014. Troubled Debt Restructuring A troubled debt restructuring (TDR) occurs when the Company has agreed to a loan modification in the form of a concession for a borrower who is experiencing financial difficulty. The majority of the Company’s TDRs involve a reduction in interest rate, a deferral of principal for a stated period of time, or an interest only period. All TDRs are considered impaired and the Company has allocated reserves for these loans to reflect the present value of the concessionary terms granted to the borrower. The following table presents the types of TDR loan modifications by portfolio segment outstanding as of June 30, 2015 and December 31, 2014: TDRs Performing to Modified TDRs Not Performing to Modified Total TDRs (in thousands) June 30, 2015 Commercial Rate reduction $ 8 $ 69 $ 77 Principal deferral — 869 869 Commercial Real Estate: Construction Rate reduction 265 337 602 Farmland Principal deferral — 2,365 2,365 Nonfarm nonresidential Rate reduction 5,504 11,366 16,870 Principal deferral 655 — 655 Residential Real Estate: Multi-family Rate reduction 4,221 — 4,221 1-4 Family Rate reduction 7,895 — 7,895 Total TDRs $ 18,548 $ 15,006 $ 33,554 TDRs Performing to Modified Terms TDRs Not Performing to Modified Terms Total TDRs (in thousands) December 31, 2014 Commercial Rate reduction $ 14 $ — $ 14 Principal deferral — 869 869 Commercial Real Estate: Construction Rate reduction 268 3,379 3,647 Farmland Principal deferral — 2,365 2,365 Other Rate reduction 8,622 13,894 22,516 Principal deferral 671 — 671 Residential Real Estate: Multi-family Rate reduction 4,266 — 4,266 1-4 Family Rate reduction 8,112 — 8,112 Consumer Rate reduction 32 — 32 Total TDRs $ 21,985 $ 20,507 $ 42,492 At June 30, 2015 and December 31, 2014, 55% and 52%, respectively, of the Company’s TDRs were performing according to their modified terms. The Company allocated $824,000 and $579,000 in reserves to borrowers whose loan terms have been modified in TDRs as of June 30, 2015, and December 31, 2014, respectively. The Company has committed to lend no additional amounts to customers as of June 30, 2015 and December 31, 2014 to borrowers with outstanding loans classified as TDRs. Management periodically reviews renewals/modifications of previously identified TDRs, for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower would continue to comply with the terms of the loan subsequent to the date of the renewal/modification. In this instance, the TDR was originally considered a restructuring in a prior year as a result of a modification with an interest rate that was not commensurate with the risk of the underlying loan. Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms that were considered to be at market for loans with comparable risk. Management expects the borrower will continue to perform under the re-modified terms based on the borrower’s past history of performance. No TDR loan modifications occurred during the three or six months ended June 30, 2015 or June 30, 2014. During the first six months of 2015 and 2014, no TDRs defaulted on their restructured loan within the 12 month period following the loan modification. A default is considered to have occurred once the TDR is past due 90 days or more or it has been placed on nonaccrual. Nonperforming Loans Nonperforming loans include impaired loans not on accrual and smaller balance homogeneous loans, such as residential mortgage and consumer loans, that are collectively evaluated for impairment. The following table presents the recorded investment in nonaccrual and loans past due 90 days and still on accrual by class of loan as of June 30, 2015, and December 31, 2014: Nonaccrual Loans Past Due 90 Days And Over Still Accruing June 30, 2015 December 31, 2014 June 30, 2015 December 31, 2014 (in thousands) Commercial $ 1,548 $ 1,978 $ — $ — Commercial Real Estate: Construction 747 3,831 — — Farmland 4,447 5,054 — — Nonfarm nonresidential 15,859 26,892 — — Residential Real Estate: Multi-family 34 80 — — 1-4 Family 7,330 8,925 92 151 Consumer 20 30 — — Agriculture 230 263 — — Other — 122 — — Total $ 30,215 $ 47,175 $ 92 $ 151 The following table presents the aging of the recorded investment in past due loans as of June 30, 2015 and December 31, 2014: 30 – 59 Days Past Due 60 – 89 Days Past Due 90 Days And Over Past Due Nonaccrual Total Past Due And Nonaccrual (in thousands) June 30, 2015 Commercial $ 28 $ — $ — $ 1,548 $ 1,576 Commercial Real Estate: Construction — — — 747 747 Farmland 267 61 — 4,447 4,775 Nonfarm nonresidential 152 238 — 15,859 16,249 Residential Real Estate: Multi-family — — — 34 34 1-4 Family 1,442 335 92 7,330 9,199 Consumer 52 4 — 20 76 Agriculture — 12 — 230 242 Other — — — — — Total $ 1,941 $ 650 $ 92 $ 30,215 $ 32,898 30 – 59 Days Past Due 60 – 89 Days Past Due 90 Days And Over Past Due Nonaccrual Total Past Due And Nonaccrual (in thousands) December 31, 2014 Commercial $ 86 $ — $ — $ 1,978 $ 2,064 Commercial Real Estate: Construction — — — 3,831 3,831 Farmland 400 14 — 5,054 5,468 Nonfarm nonresidential 241 318 — 26,892 27,451 Residential Real Estate: Multi-family — — — 80 80 1-4 Family 3,124 601 151 8,925 12,801 Consumer 109 47 — 30 186 Agriculture — — — 263 263 Other — — — 122 122 Total $ 3,960 $ 980 $ 151 $ 47,175 $ 52,266 Credit Quality Indicators We categorize all loans into risk categories at origination based upon original underwriting. Thereafter, we categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends. Additionally, loans are analyzed continuously through our internal and external loan review processes. Borrower relationships in excess of $500,000 are routinely analyzed through our credit administration processes which classify the loans as to credit risk. The following definitions are used for risk ratings: Watch – Special Mention – Substandard – Doubtful Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be “Pass” rated loans. As of June 30, 2015, and December 31, 2014, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: Pass Watch Special Mention Substandard Doubtful Total (in thousands) June 30, 2015 Commercial $ 68,226 $ 4,266 $ — $ 6,250 $ — $ 78,742 Commercial Real Estate: Construction 31,715 5,582 — 1,717 — 39,014 Farmland 65,245 5,768 — 6,922 — 77,935 Nonfarm nonresidential 114,410 20,813 1,351 23,944 — 160,518 Residential Real Estate: Multi-family 35,769 4,958 — 3,975 — 44,702 1-4 Family 162,179 18,719 69 25,597 — 206,564 Consumer 9,095 307 298 258 — 9,958 Agriculture 22,707 7,299 — 385 — 30,391 Other 497 — — — — 497 Total $ 509,843 $ 67,712 $ 1,718 $ 69,048 $ — $ 648,321 Pass Watch Special Mention Substandard Doubtful Total (in thousands) December 31, 2014 Commercial $ 49,440 $ 5,063 $ — $ 6,433 $ — $ 60,936 Commercial Real Estate: Construction 25,266 2,990 — 4,917 — 33,173 Farmland 61,672 7,922 — 7,825 — 77,419 Nonfarm nonresidential 111,426 21,017 3,747 39,262 — 175,452 Residential Real Estate: Multi-family 31,526 6,039 — 4,326 — 41,891 1-4 Family 145,450 23,928 131 27,769 — 197,278 Consumer 10,115 537 311 384 — 11,347 Agriculture 25,816 704 — 446 — 26,966 Other 415 — — 122 — 537 Total $ 461,126 $ 68,200 $ 4,189 $ 91,484 $ — $ 624,999 |