LOANS | NOTE 4. LOANS The Company’s loan portfolio, excluding loans held for sale, consists of the following categories of loans as of the dates presented (dollars in thousands). March 31, 2016 December 31, 2015 Construction and development $ 95,353 $ 81,863 1-4 Family 162,312 156,300 Multifamily 33,609 29,694 Farmland 6,366 2,955 Commercial real estate 315,759 288,583 Total mortgage loans on real estate 613,399 559,395 Commercial and industrial 74,990 69,961 Consumer 109,233 116,085 Total loans $ 797,622 $ 745,441 The table below provides an analysis of the aging of loans as of the dates presented (dollars in thousands). March 31, 2016 Past Due and Accruing Total Past 90 or more Due & 30-59 days 60-89 days days Nonaccrual Nonaccrual Current Total Loans Construction and development $ 99 $ - $ - $ 1,040 $ 1,139 $ 94,214 $ 95,353 1-4 Family 1,044 - - 494 1,538 160,774 162,312 Multifamily - - - - - 33,609 33,609 Farmland - - - - - 6,366 6,366 Commercial real estate - - - - - 315,759 315,759 Total mortgage loans on real estate 1,143 - - 1,534 2,677 610,722 613,399 Commercial and industrial 17 25 - 18 60 74,930 74,990 Consumer 279 97 - 758 1,134 108,099 109,233 Total loans $ 1,439 $ 122 $ - $ 2,310 $ 3,871 $ 793,751 $ 797,622 December 31, 2015 Past Due and Accruing Total Past 90 or more Due & 30-59 days 60-89 days days Nonaccrual Nonaccrual Current Total Loans Construction and development $ 129 $ - $ - $ 1,061 $ 1,190 $ 80,673 $ 81,863 1-4 Family 222 - - 538 760 155,540 156,300 Multifamily - - - - - 29,694 29,694 Farmland - - - - - 2,955 2,955 Commercial real estate - - - 97 97 288,486 288,583 Total mortgage loans on real estate 351 - - 1,696 2,047 557,348 559,395 Commercial and industrial 26 1,779 - - 1,805 68,156 69,961 Consumer 292 179 - 715 1,186 114,899 116,085 Total loans $ 669 $ 1,958 $ - $ 2,411 $ 5,038 $ 740,403 $ 745,441 The total March 31, 2016 balance in the table above includes approximately $33.9 million of loans acquired in acquisitions (“acquired loans”) that were recorded at fair value as of the acquisition dates. Included in the acquired loan balances as of March 31, 2016 were approximately $1.0 million in loans 30-59 days past due and $1.0 million in nonaccrual loans. The total December 31, 2015 balance in the table above includes approximately $37.0 million of acquired loans that were recorded at fair value as of the acquisition dates. Included in the acquired loan balances as of December 31, 2015 were approximately $0.2 million in loans 30-59 days past due and $1.1 million in nonaccrual loans. Credit Quality Indicators Loans are categorized 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, among other factors. The following definitions are utilized for risk ratings, which are consistent with the definitions used in supervisory guidance: Pass – Loans not meeting the criteria below are considered pass. These loans have the highest credit characteristics and financial strength. Borrowers possess characteristics that are highly profitable, with low to negligible leverage, and demonstrate significant net worth and liquidity. Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date. Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss – Loans classified as loss are considered uncollectible and of such little value that their continuance as recorded assets is not warranted. This classification does not mean that the assets have absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off these assets. The table below presents the Company’s loan portfolio by category and credit quality indicator as of the dates presented (dollars in thousands). March 31, 2016 Special Pass Mention Substandard Total Construction and development $ 94,287 $ - $ 1,066 $ 95,353 1-4 Family 160,752 716 844 162,312 Multifamily 33,609 - - 33,609 Farmland 6,366 - - 6,366 Commercial real estate 315,034 - 725 315,759 Total mortgage loans on real estate 610,048 716 2,635 613,399 Commercial and industrial 71,897 - 3,093 74,990 Consumer 107,742 696 795 109,233 Total loans $ 789,687 $ 1,412 $ 6,523 $ 797,622 December 31, 2015 Special Pass Mention Substandard Total Construction and development $ 80,759 $ 15 $ 1,089 $ 81,863 1-4 Family 154,741 719 840 156,300 Multifamily 29,694 - - 29,694 Farmland 2,955 - - 2,955 Commercial real estate 287,853 - 730 288,583 Total mortgage loans on real estate 556,002 734 2,659 559,395 Commercial and industrial 66,694 - 3,267 69,961 Consumer 114,684 647 754 116,085 Total loans $ 737,380 $ 1,381 $ 6,680 $ 745,441 The Company had no loans that were classified as doubtful or loss as of March 31, 2016 or December 31, 2015. Loan participations and whole loans sold to and serviced for others are not included in the accompanying consolidated balance sheets. The balances of the participations and whole loans sold were $371.8 million and $383.7 million as of March 31, 2016 and December 31, 2015, respectively. The unpaid principal balances of these loans were approximately $415.5 million and $426.9 million as of March 31, 2016 and December 31, 2015, respectively. In the ordinary course of business, the Company makes loans to its executive officers, principal stockholders, directors and to companies in which these individuals are principal owners. Loans outstanding to such borrowers (including companies in which they are principal owners) amounted to approximately $18.4 million and $18.0 million as of March 31, 2016 and December 31, 2015, respectively. These loans are all current and performing according to the original terms. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the Company or the Bank and did not involve more than normal risk of collectability or present other unfavorable features. The table below shows the aggregate amount of loans to such related parties as of the dates presented (dollars in thousands). March 31, 2016 December 31, 2015 Balance, beginning of period $ 17,992 $ 14,631 New loans 1,193 6,600 Repayments (753 ) (3,239 ) Balance, end of period $ 18,432 $ 17,992 Loans Acquired with Deteriorated Credit Quality The Company elected to account for certain loans acquired as acquired impaired loans under ASC 310-30 due to evidence of credit deterioration at acquisition and the probability that the Company will be unable to collect all contractually required payments. The following table presents changes in the carrying value, net of allowance for loan losses, of acquired impaired loans, or loans accounted for under ASC 310-30, for the periods presented (dollars in thousands). Acquired Impaired Carrying value, net at December 31, 2014 $ 2,778 Accretion to interest income 140 Net transfers from (to) nonaccretable difference to (from) accretable yield 110 Payments received, net (232 ) Charge-offs (61 ) Transfers to other real estate owned (45 ) Carrying value, net at December 31, 2015 $ 2,690 Accretion to interest income 35 Net transfers from (to) nonaccretable difference to (from) accretable yield 1 Payments received, net (106 ) Charge-offs (37 ) Carrying value, net at March 31, 2016 $ 2,583 The table below shows the changes in the accretable yield on acquired impaired loans for the periods presented (dollars in thousands). Acquired Impaired Balance, period ended December 31, 2014 $ 425 Net transfers from (to) nonaccretable difference to (from) accretable yield 110 Accretion to interest income (140 ) Balance, period ended December 31, 2015 $ 395 Net transfers from (to) nonaccretable difference to (from) accretable yield 1 Accretion to interest income (35 ) Balance, period ended March 31, 2016 $ 361 |