Loans and Allowance for Loan Losses | Note 5: Loans and Allowance for Loan Losses A summary of loans at December 31, 2018 and 2017 are as follows (dollars in thousands): December 31, 2018 December 31, 2017 Construction & development $ 87,267 $ 103,787 1-4 family commercial 33,278 31,778 Commercial real estate - other 156,396 137,534 Total commercial real estate 276,941 273,099 Commercial & industrial 248,394 204,976 Agricultural 62,844 74,871 Consumer 13,723 11,631 Gross loans 601,902 564,577 Less allowance for loan losses (7,832 ) (7,654 ) Less deferred loan fees (1,992 ) (1,576 ) Net loans $ 592,078 $ 555,347 The following table presents, by portfolio segment, the activity in the allowance for loan losses for the years ended December 31, 2018, 2017, and 2016 (dollars in thousands): Construction & Development 1 - 4 Family Commercial Commercial Real Estate - Other Commercial & Industrial Agricultural Consumer Total December 31, 2018 Balance, beginning of period $ 1,407 $ 431 $ 1,865 $ 2,779 $ 1,015 $ 157 $ 7,654 Charge-offs - (25 ) - (73 ) - - (98 ) Recoveries - 3 - 71 1 1 76 Net charge-offs - (22 ) - (2 ) 1 1 (22 ) Provision (credit) for loan losses (271 ) 24 170 454 (198 ) 21 200 Balance, end of period $ 1,136 $ 433 $ 2,035 $ 3,231 $ 818 $ 179 $ 7,832 Construction & Development 1 - 4 Family Commercial Commercial Real Estate - Other Commercial & Industrial Agricultural Consumer Total December 31, 2017 Balance, beginning of period $ 1,565 $ 287 $ 1,193 $ 2,523 $ 1,074 $ 231 $ 6,873 Charge-offs - - (224 ) (242 ) - (46 ) (512 ) Recoveries - 23 6 6 - 12 47 Net charge-offs - 23 (218 ) (236 ) - (34 ) (465 ) Provision (credit) for loan losses (158 ) 121 890 492 (59 ) (40 ) 1,246 Balance, end of period $ 1,407 $ 431 $ 1,865 $ 2,779 $ 1,015 $ 157 $ 7,654 Construction & Development 1 - 4 Family Commercial Commercial Real Estate - Other Commercial & Industrial Agricultural Consumer Total December 31, 2016 Balance, beginning of period $ 847 $ 245 $ 739 $ 2,567 $ 986 $ 293 $ 5,677 Charge-offs (1 ) (104 ) (10 ) (305 ) (75 ) (93 ) (588 ) Recoveries - 60 - 151 - 19 230 Net charge-offs (1 ) (44 ) (10 ) (154 ) (75 ) (74 ) (358 ) Provision (credit) for loan losses 719 86 464 110 163 12 1,554 Balance, end of period $ 1,565 $ 287 $ 1,193 $ 2,523 $ 1,074 $ 231 $ 6,873 The following table presents, by portfolio segment, the balance in allowance for loan losses and the gross loans based upon portfolio segment and impairment method as of December 31, 2018 and December 31, 2017 (dollars in thousands). Construction & Development 1 - 4 Family Commercial Commercial Real Estate - Other Commercial & Industrial Agricultural Consumer Total December 31, 2018 Allowance Balance Ending balance Individually evaluated for impairment $ - $ - $ 32 $ 14 $ - $ - $ 46 Collectively evaluated for impairment 1,136 433 2,003 3,217 818 179 7,786 Total $ 1,136 $ 433 $ 2,035 $ 3,231 $ 818 $ 179 $ 7,832 Gross Loans Ending balance Individually evaluated for impairment $ - $ 115 $ 484 $ 7,381 $ 1,097 $ - $ 9,077 Collectively evaluated for impairment 87,267 33,163 155,912 241,013 61,747 13,723 592,825 Total $ 87,267 $ 33,278 $ 156,396 $ 248,394 $ 62,844 $ 13,723 $ 601,902 Construction & Development 1 - 4 Family Commercial Commercial Real Estate - Other Commercial & Industrial Agricultural Consumer Total December 31, 2017 Allowance Balance Ending balance Individually evaluated for impairment $ - $ - $ 300 $ 22 $ 64 $ 10 $ 396 Collectively evaluated for impairment 1,407 431 1,565 2,757 951 147 7,258 Total $ 1,407 $ 431 $ 1,865 $ 2,779 $ 1,015 $ 157 $ 7,654 Gross Loans Ending balance Individually evaluated for impairment $ - $ 111 $ 675 $ 1,031 $ 2,563 $ 76 $ 4,456 Collectively evaluated for impairment 103,787 31,667 136,859 203,945 72,308 11,555 560,121 Total $ 103,787 $ 31,778 $ 137,534 $ 204,976 $ 74,871 $ 11,631 $ 564,577 Internal Risk Categories Certain loan segments were reclassified during the year. Each loan segment is made up of loan categories possessing similar risk characteristics. The Company’s re-alignment of the segments primarily consisted of reclassifying consumer-related and agricultural-related real estate loans from the real estate category to the consumer and agricultural categories, respectively. Management believes this accurately represents the risk profile of each loan segment. In addition, the real estate segment was renamed to commercial real estate, and the commercial segment was renamed to commercial & industrial. The prior period amounts have been revised to conform to the current period presentation. These reclassifications did not have a significant impact on the allowance for loan losses. Risk characteristics applicable to each segment of the loan portfolio are described as follows: Real Estate Commercial & Industrial Agricultural Consumer Loan grades are numbered 1 through 4. Grade 1 is considered satisfactory. The grades of 2 and 3, or Watch and Special Mention, respectively, represent loans of lower quality and are considered criticized. Grade of 4, or Substandard, refers to loans that are classified. · Grade 1 (Pass) · Grade 2 (Watch) · Grade 3 (Special Mention) · Grade 4 (Substandard) The Company evaluates the definitions of loan grades and the allowance for loan losses methodology on an ongoing basis. No changes were made to either during the year ended December 31, 2018. The following table presents the credit risk profile of the Company’s loan portfolio based on internal rating category as of December 31, 2018 and 2017 (dollars in thousands): Construction & Development 1 - 4 Family Commercial Commercial Real Estate - Other Commercial & Industrial Agricultural Consumer Total December 31, 2018 Grade 1 (Pass) $ 84,485 $ 29,942 $ 154,353 $ 204,671 $ 57,782 $ 13,723 $ 544,956 2 (Watch) 2,782 3,221 1,559 36,342 758 - 44,662 3 (Special Mention) - - - - 3,207 - 3,207 4 (Substandard) - 115 484 7,381 1,097 - 9,077 Total $ 87,267 $ 33,278 $ 156,396 $ 248,394 $ 62,844 $ 13,723 $ 601,902 Construction & Development 1 - 4 Family Commercial Commercial Real Estate - Other Commercial & Industrial Agricultural Consumer Total December 31, 2017 Grade 1 (Pass) $ 103,787 $ 23,011 $ 127,771 $ 192,035 $ 64,990 $ 11,555 $ 523,149 2 (Watch) - 8,656 9,088 7,764 90 - 25,598 3 (Special Mention) - - - 4,146 7,228 - 11,374 4 (Substandard) - 111 675 1,031 2,563 76 4,456 Total $ 103,787 $ 31,778 $ 137,534 $ 204,976 $ 74,871 $ 11,631 $ 564,577 The following table presents the Company’s loan portfolio aging analysis of the recorded investment in loans as of December 31, 2018 and 2017 (dollars in thousands): Past Due Total Loans 30–59 Days 60–89 Days Greater than 90 Days Total Current Total Loans > 90 Days & Accruing December 31, 2018 Construction & development $ - $ - $ - $ - $ 87,267 $ 87,267 $ - 1 - 4 Family Real Estate 8 - - 8 33,270 33,278 - Commercial Real Estate - other - - - - 156,396 156,396 - Commercial & industrial - 5 - 5 248,389 248,394 - Agricultural - - - - 62,844 62,844 - Consumer 41 - - 41 13,682 13,723 - Total $ 49 $ 5 $ - $ 54 $ 601,848 $ 601,902 $ - December 31, 2017 Construction & development $ - $ - $ - $ - $ 103,787 $ 103,787 $ - 1 - 4 Family Real Estate - - 111 111 31,667 31,778 - Commercial Real Estate - other - - - - 137,534 137,534 - Commercial & industrial 2 - - 2 204,974 204,976 - Agricultural - - - - 74,871 74,871 - Consumer 54 - - 54 11,577 11,631 - Total $ 56 $ - $ 111 $ 167 $ 564,410 $ 564,577 $ - The following table presents impaired loans as of December 31, 2018 and 2017 (dollars in thousands): Unpaid Principal Balance Recorded Investment with No Allowance Recorded Investment with an Allowance Total Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized December 31, 2018 Construction & development $ - $ - $ - $ - $ - $ - $ - 1 - 4 Family Real Estate 115 115 - 115 - 82 4 Commercial Real Estate - other 1,990 1,506 484 1,990 32 440 148 Commercial & industrial 7,614 7,359 22 7,381 14 7,049 560 Agricultural 1,097 1,097 - 1,097 - 1,313 82 Consumer 5 - - - - 28 1 Total $ 10,821 $ 10,077 $ 506 $ 10,583 $ 46 $ 8,912 $ 795 December 31, 2017 Construction & development $ - $ - $ - $ - $ - $ 8 $ - 1 - 4 Family Real Estate - 111 - 111 - 111 - Commercial Real Estate - other 787 - 675 675 300 1,615 50 Commercial & industrial 1,207 990 41 1,031 22 3,645 109 Agricultural 2,578 2,273 290 2,563 64 2,042 178 Consumer 88 61 15 76 10 219 5 Total $ 4,660 $ 3,435 $ 1,021 $ 4,456 $ 396 $ 7,640 $ 342 Impaired loans include nonperforming loans and also include loans modified in troubled-debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired. At December 31, 2018, the Company had $501,000 of commercial & industrial loans that were modified in troubled-debt restructurings and impaired. At December 31, 2017, the Company had $675,000 of commercial real estate loans and $861,000 of commercial & industrial loans that were modified in troubled-debt restructurings and impaired . There were no newly modified troubled-debt restructurings during the years ended December 31, 2018 and 2017. There were no troubled-debt restructurings modified in the past twelve months that subsequently defaulted for the year ended December 31, 2018. The following table represents information regarding nonperforming assets as of the year ended December 31, 2018 and 2017 (dollars in thousands): As of December 31, 2018 2017 Nonaccrual loans $ 2,615 $ 1,217 Troubled-debt restructurings (1) - 675 Accruing loans 90 or more days past due - - Total nonperforming loans $ 2,615 $ 1,892 (1) $501,000 and $861,000 of TDRs as of December 31, 2018 and 2017, respectively, are included in the nonaccrual loans balance in the line above |