Loans and leases receivable disclosure [Text Block] | NOTE 6 : LOANS AND ALLOWANCE FOR LOAN LOSSES December 31 (In thousands) 2015 2014 Commercial and industrial $ 52,479 $ 54,329 Construction and land development 43,694 37,298 Commercial real estate: Owner occupied 46,602 52,296 Other 157,251 139,710 Total commercial real estate 203,853 192,006 Residential real estate: Consumer mortgage 70,009 66,489 Investment property 46,664 41,152 Total residential real estate 116,673 107,641 Consumer installment 10,220 12,335 Total loans 426,919 403,609 Less: unearned income (509) (655) Loans, net of unearned income $ 426,410 $ 402,954 Loans secured by real estate were approximately 85.3% of the total loan portfolio at December 31, 2015 . At December 31, 2015 , the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama and surrounding areas. In accordance with ASC 310, Receivables , a portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for loan losses. As part of the Company’s quarterly assessment of the allowance , the loan portfolio is disaggregated into the following portfolio segments: commercial and industrial, construction and land development, commercial real estate, residential real estate and consumer installment. Where appropriate, the Company’s loan port folio segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute, risk characteristics of the loan, and an entity’s method for monitoring and determining credit risk. The following describe the risk characteristics relevant to each of the portfolio segments. Commercial and industrial (“C&I”) — includes loans to finance business operations, equipment purchases, or other needs for small and medium-sized commercial customers. Also included in t his category are loans to finance agricultural production. Generally the primary source of repayment is the cash flow from business operations and activities of the borrower. Construction and land development (“C&D”) — includes both loans and credit line s for the purpose of purchasing, carrying and developing land into commercial developments or residential subdivisions. Also included are loans and lines for construction of residential, multi-family and commercial buildings. Generally the primary source o f repayment is dependent upon the sale or refinance of the real estate collateral. Commercial real estate (“CRE”) — includes loans disaggregated into two classes: (1) owner occupied and (2) other. Owner occupied – includes loans secured by business faci lities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized commercial customers. Generally the primary source of repayment is the cash flow from business operations and activities of the borrower, w ho owns the property. Other – primarily includes loans to finance income-producing commercial and multi-family properties. Loans in this class include loans for neighborhood retail centers, hotels, medical and professional offices, single retail stores, in dustrial buildings, warehouses and apartments leased generally to local businesses and residents. Generally the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consi deration the occupancy and rental rates as well as the financial health of the borrower. R esidential real estate (“RRE”) — includes loans disaggregated into two classes: (1) consumer mortgage and (2) investment property. Consumer mortgage – primaril y i nclude s first or second lien mortgages and home equity lines to consumers that are secured by a primary residence or second home. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory cre dit history and property value. Investment property – primarily includes loans to finance income-producing 1-4 family residential properties. Generally the primary source of repayment is dependent upon income generated from leasing the property securing the loan. The underwriting of these loans takes into consideration the rental rates as well as the financial health of the borrower. Consumer installment — includes loans to indivi duals both secured by personal property and unsecured. Loans include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and if applicable, property value. The following is a summary of current, accruing past due and nonaccrual loans by portfolio class as of December 31, 2015 and 2014 . Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (In thousands) Current Past Due 90 days Loans Accrual Loans December 31, 2015: Commercial and industrial $ 52,387 49 — 52,436 43 $ 52,479 Construction and land development 43,111 — — 43,111 583 43,694 Commercial real estate: Owner occupied 46,372 — — 46,372 230 46,602 Other 155,731 — — 155,731 1,520 157,251 Total commercial real estate 202,103 — — 202,103 1,750 203,853 Residential real estate: Consumer mortgage 68,579 1,105 — 69,684 325 70,009 Investment property 46,435 229 — 46,664 — 46,664 Total residential real estate 115,014 1,334 — 116,348 325 116,673 Consumer installment 10,179 28 — 10,207 13 10,220 Total $ 422,794 1,411 — 424,205 2,714 $ 426,919 December 31, 2014: Commercial and industrial $ 54,106 168 — 54,274 55 $ 54,329 Construction and land development 36,483 210 — 36,693 605 37,298 Commercial real estate: Owner occupied 51,832 201 — 52,033 263 52,296 Other 139,710 — — 139,710 — 139,710 Total commercial real estate 191,542 201 — 191,743 263 192,006 Residential real estate: Consumer mortgage 64,713 1,736 — 66,449 40 66,489 Investment property 40,503 495 — 40,998 154 41,152 Total residential real estate 105,216 2,231 — 107,447 194 107,641 Consumer installment 12,290 45 — 12,335 — 12,335 Total $ 399,637 2,855 — 402,492 1,117 $ 403,609 The gross interest income which would have been recorded under the original terms of those nonaccrual loans had they been accruing interest, amounted to approximately $133 thousand and $102 thousand for the years ended December 31, 2015 and 2014 , respectively. Allowance for Loan Losses The allowance for loan losses as of and for the years ended December 31, 2015 and 2014 , is presented below. Year ended December 31 (In thousands) 2015 2014 Beginning balance $ 4,836 $ 5,268 Charged-off loans (1,114) (808) Recovery of previously charged-off loans 367 326 Net charge-offs (747) (482) Provision for loan losses 200 50 Ending balance $ 4,289 $ 4,836 The Company assesses the adequacy of its allowance for loan losses prior to the end of each calendar quarter. The level of the allowance is based upon management’s evaluation of the loan portfolio, past loan loss experience, current asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect a borrower’s ability to repay (including the timing of future payment), the estimated value of any underlying collateral, composition of the loan portfolio, economic conditions, industry and peer bank loan loss rates and other pertinent factors, including regulatory recommendations. This evaluation is inherently subjective as it requires material estimates including the amounts and timing of future cash flows expected to be receiv ed on impaired loans that may be susceptible to significant change. Loans are charged off, in whole or in part, when management believes that the full collectability of the loan is unlikely. A loan may be partially charged-off after a “confirming event” ha s occurred which serves to validate that full repayment pursuant to the terms of the loan is unlikely. The Company deems loans impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts d ue according to the contractual terms of the loan agreement. Collection of all amounts due according to the contractual terms means that both the interest and principal payments of a loan will be collected as scheduled in the loan agreement. An impairment allowance is recognized if the fair value of the loan is less than the recorded investment in the loan. The impairment is recognized through the allowance. Loans that are impaired are recorded at the present value of expected future cash flows discounted at the loan’s effective interest rate, or if the loan is collateral dependent, impairment measurement is based on the fair value of the collateral, less estimated disposal costs. The level of allowance maintained is believed by management to be adequate t o absorb probable losses inherent in the portfolio at the balance sheet date. The allowance is increased by provisions charged to expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. In assessing the adequacy of the a llowance, the Company also considers the results of its ongoing internal, independent loan review process. The Company’s loan review process assists in determining whether there are loans in the portfolio whose credit quality has weakened over time and eva luating the risk characteristics of the entire loan portfolio. The Company’s loan review process includes the judgment of management, the input from our independent loan reviewers, and reviews that may have been conducted by bank regulatory agencies as par t of their examination process. The Company incorporates loan review results in the determination of whether or not it is probable that it will be able to collect all amounts due according to the contractual terms of a loan. As part of the Company’s quart erly assessment of the allowance, management divides the loan portfolio into five segments: commercial and industrial, construction and land development, commercial real estate, residential real estate, and consumer installment loans. The Company analyzes each segment and estimates an allowance allocation for each loan segment. The allocation of the allowance for loan losses begins with a process of estimating the probable losses inherent for these types of loans. The estimates for these loans are establis hed by category and based on the Company’s internal system of credit risk ratings and historical loss data. The estimated loan loss allocation rate for the Company’s internal system of credit risk grades is based on its experience with similarly graded loa ns. For loan segments where the Company believes it does not have sufficient historical loss data, the Company may make adjustments based, in part, on loss rates of peer bank groups. At December 31, 2015 and 2014 , and for the years then ended, the Co mpany adjusted its historical loss rates for the commercial real estate portfolio segment based, in part, on loss rates of peer bank groups. The estimated loan loss allocation for all five loan portfolio segments is then adjusted for management’s estim ate of probable losses for several “qualitative and environmental” factors. The allocation for qualitative and environmental factors is particularly subjective and does not lend itself to exact mathematical calculation. This amount represents estimated pro bable inherent credit losses which exist, but have not yet been identified, as of the balance sheet date, and are based upon quarterly trend assessments in delinquent and nonaccrual loans, credit concentration changes, prevailing economic conditions, chang es in lending personnel experience, changes in lending policies or procedures and other influencing factors. These qualitative and environmental factors are considered for each of the five loan segments and the allowance allocation, as determined by the pr ocesses noted above, is increased or decreased based on the incremental assessment of these factors. The Company regularly re-evaluates its practices in determining the allowance for loan losses. During 2014, the Company implemented certain refinements to its allowance for loan losses methodology in order to better capture the effects of the most recent economic cycle on the Company’s loan loss experience. Beginning with the quarter ended June 30, 2014, the Company began calculating average losses for all loan segments using a rolling 20 quarter historical period and continued this methodology through December 31, 2015. Prior to June 30, 2014 the Company calculated average losses for all loan segments using a rolling 8 quarter historical period (except fo r commercial real estate loan segment which used a 6 quarter historic period). If the Company continued to calculate average losses for all loan segments other than commercial real estate using a rolling 8 quarter historical period and for the commercial real estate segment using a rolling 6 quarter historical period, the Company’s calculated allowance for loan loss allocation would have decreased by approximately $ 1.0 million at June 30, 2014. Other than the changes discussed above, the Company has not made any material changes to its calculation of historical loss periods that would impact the calculation of the all owance for loan losses or provision for loan losses for the periods included in the accompanying consolidated balance sheets and statements of earnings. The following table details the changes in the allowance for loan losses by portfolio segment for the years ended December 31, 2015 and 2014 . (in thousands) Commercial and industrial Construction and land Development Commercial Real Estate Residential Real Estate Consumer Installment Total Balance, December 31, 2013 $ 386 366 3,186 1,114 216 $ 5,268 Charge-offs (46) (235) — (438) (89) (808) Recoveries 71 8 119 112 16 326 Net recoveries (charge-offs) 25 (227) 119 (326) (73) (482) Provision 228 835 (1,377) 331 33 50 Balance, December 31, 2014 $ 639 974 1,928 1,119 176 $ 4,836 Charge-offs (100) — (866) (89) (59) (1,114) Recoveries 22 17 — 313 15 367 Net (charge-offs) recoveries (78) 17 (866) 224 (44) (747) Provision (38) (322) 817 (284) 27 200 Balance, December 31, 2015 $ 523 669 1,879 1,059 159 $ 4,289 The following table presents an analysis of the allowance for loan losses and recorded investment in loans by portfolio segment and impairment methodology as of December 31, 2015 and 2014 . Collectively evaluated (1) Individually evaluated (2) Total Allowance Recorded Allowance Recorded Allowance Recorded for loan investment for loan investment for loan investment (In thousands) losses in loans losses in loans losses in loans December 31, 2015: Commercial and industrial $ 523 52,431 — 48 523 52,479 Construction and land development 669 43,111 — 583 669 43,694 Commercial real estate 1,758 201,077 121 2,776 1,879 203,853 Residential real estate 1,059 116,673 — — 1,059 116,673 Consumer installment 159 10,220 — — 159 10,220 Total $ 4,168 423,512 121 3,407 4,289 426,919 December 31, 2014: Commercial and industrial $ 639 54,259 — 70 639 54,329 Construction and land development 974 36,693 — 605 974 37,298 Commercial real estate 1,734 190,306 194 1,700 1,928 192,006 Residential real estate 1,119 106,745 — 896 1,119 107,641 Consumer installment 176 12,335 — — 176 12,335 Total $ 4,642 400,338 194 3,271 4,836 403,609 (1) Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans. (2) Represents loans individually evaluated for impairment in accordance with ASC 310-30, Receivables (formerly FAS 114), and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans. Credit Quality Indicators The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for qualitative and environmental factors and are defined as follows: Pass – loans which are well p rotected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral. Special Mention – loans with potential weakness that may, if not reversed or c orrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification. Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes debt repayment, even though they are currently performing. These loans are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected. Nonaccrual – includes loans where management has determined that full payment of principal and interest is in doubt. (In thousands) Pass Special Mention Substandard Accruing Nonaccrual Total loans December 31, 2015 Commercial and industrial $ 48,038 4,075 323 43 $ 52,479 Construction and land development 42,458 60 593 583 43,694 Commercial real estate: Owner occupied 45,772 381 219 230 46,602 Other 155,423 36 272 1,520 157,251 Total commercial real estate 201,195 417 491 1,750 203,853 Residential real estate: Consumer mortgage 64,502 1,964 3,218 325 70,009 Investment property 45,399 112 1,153 — 46,664 Total residential real estate 109,901 2,076 4,371 325 116,673 Consumer installment 10,038 55 114 13 10,220 Total $ 411,630 6,683 5,892 2,714 $ 426,919 December 31, 2014 Commercial and industrial $ 49,550 4,348 376 55 $ 54,329 Construction and land development 35,911 226 556 605 37,298 Commercial real estate: Owner occupied 49,900 1,905 228 263 52,296 Other 136,801 2,253 656 — 139,710 Total commercial real estate 186,701 4,158 884 263 192,006 Residential real estate: Consumer mortgage 59,646 1,912 4,891 40 66,489 Investment property 39,348 624 1,026 154 41,152 Total residential real estate 98,994 2,536 5,917 194 107,641 Consumer installment 12,200 21 114 — 12,335 Total $ 383,356 11,289 7,847 1,117 $ 403,609 Impaired loans The following table presents details related to the Company’s impaired loans. Loans which have been fully charged-off do not appear in the following table. The related allowance generally represents the following components which correspond to impaired loans: Individually evaluated impaired loans equal to or greater than $500 thousand secured by real estate (nonaccrual construction and land development, commercial real estate, and residential real estate). Individually evaluate d impaired loans equal to or greater than $250 thousand not secured by real estate (nonaccrual commercial and industrial and consumer loans). The following table sets forth certain information regarding the Company’s impaired loans that were individuall y evaluated for impairment at December 31, 2015 and 2014 . December 31, 2015 (In thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial and industrial $ 48 — 48 Construction and land development 2,582 (1,999) 583 Commercial real estate: Owner occupied 308 (78) 230 Other 2,136 (617) 1,519 Total commercial real estate 2,444 (695) 1,749 Total $ 5,074 (2,694) 2,380 With allowance recorded: Commercial real estate: Owner occupied 1,027 — 1,027 121 Total commercial real estate 1,027 — 1,027 121 Total $ 1,027 — 1,027 $ 121 Total impaired loans $ 6,101 (2,694) 3,407 $ 121 (1) Unpaid principal balance represents the contractual obligation due from the customer. (2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been applied against the outstanding principal balance. (3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before any related allowance for loan losses. December 31, 2014 (In thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial and industrial $ 70 — 70 Construction and land development 2,822 (2,217) 605 Commercial real estate: Owner occupied 331 (68) 263 Total commercial real estate 331 (68) 263 Residential real estate: Consumer mortgages 934 (192) 742 Investment property 180 (26) 154 Total residential real estate 1,114 (218) 896 Total $ 4,337 (2,503) 1,834 With allowance recorded: Commercial real estate: Owner occupied $ 846 — 846 $ 102 Other 591 — 591 92 Total commercial real estate 1,437 — 1,437 194 Total $ 1,437 — 1,437 $ 194 Total impaired loans $ 5,774 (2,503) 3,271 $ 194 (1) Unpaid principal balance represents the contractual obligation due from the customer. (2) Charge-offs and payments applied represents cumulative charge-offs taken, as well as interest payments that have been applied against the outstanding principal balance. (3) Recorded investment represents the unpaid principal balance less charge-offs and payments applied; it is shown before any related allowance for loan losses. The following table provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class. Year ended December 31, 2015 Year ended December 31, 2014 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial and industrial $ 60 4 $ 98 7 Construction and land development 603 — 1,032 — Commercial real estate: Owner occupied 1,328 62 1,308 40 Other 911 18 872 29 Total commercial real estate 2,239 80 2,180 69 Residential real estate: Consumer mortgages 349 173 731 43 Investment property 70 76 164 — Total residential real estate 419 249 895 43 Total $ 3,321 333 $ 4,205 119 Interest income recognized for 2015 included interest recoveries of $225 thousand related to two impaired residential real estate loans that paid off in June 2015. Excluding the interest recoveries on these two loans, interest income recognized on impaired loans for 2015 would have been $108 thousand. Troubled Debt Restructurings Impaired loans also include troubled debt restructurings (“TDRs”). In the normal course of business, management may grant concessions to borrowers who are experiencing financial difficulty. A concession may include, but is not limited to, delays in required payments of principal and interest for a specified period, reduction of the stated interest rate of the loan, reduction of accrued interest, extens ion of the maturity date or reduction of the face amount or maturity amount of the debt. A concession has been granted when, as a result of the restructuring, the Bank does not expect to collect all amounts due, including interest at the original stated r ate. A concession may have also been granted if the debtor is not able to access funds elsewhere at a market rate for debt with similar risk characteristics as the restructured debt. In determining whether a loan modification is a TDR, the Company consid ers the individual facts and circumstances surrounding each modification. In determining the appropriate accrual status at the time of restructure, the Company evaluates whether a restructured loan has adequate collateral protection, among other factors. Similar to other impaired loans, TDRs are measured for impairment based on the present value of expected payments using the loan’s original effective interest rate as the discount rate, or the fair value of the collateral, less selling costs if the loa n is collateral dependent. If the recorded investment in the loan exceeds the measure of fair value, impairment is recognized by establishing a valuation allowance as part of the allowance for loan losses or a charge-off to the allowance for loan losses. In periods subsequent to the modification, all TDRs are evaluated individually, including those that have payment defaults, for possible impairment. The following is a summary of accruing and nonaccrual TDRs and the related loan losses, by portfolio segme nt and class. TDRs Related (In thousands) Accruing Nonaccrual Total Allowance December 31, 2015 Commercial and industrial $ 48 — 48 $ — Construction and land development — 582 582 — Commercial real estate: Owner occupied 1,027 230 1,257 121 Total commercial real estate 1,027 230 1,257 121 Total $ 1,075 812 1,887 $ 121 December 31, 2014 Commercial and industrial $ 70 — 70 $ — Construction and land development — 605 605 — Commercial real estate: Owner occupied 846 263 1,109 102 Other 591 — 591 92 Total commercial real estate 1,437 263 1,700 194 Residential real estate: Consumer mortgages 742 — 742 — Investment property — 154 154 — Total residential real estate 742 154 896 — Total $ 2,249 1,022 3,271 $ 194 At December 31, 2015 , there were no significant outstanding commitments to advance additional funds to customers whose loans had been restructured. The following table summarizes loans modified in a TDR during the respective years both before and after modification. Pre- Post- modification modification outstanding outstanding Number of recorded recorded ($ in thousands) contracts investment investment December 31, 2015 Commercial and industrial 1 $ 61 66 Construction and land development 1 116 113 Commercial real estate: Owner occupied 1 216 218 Other 1 592 592 Total commercial real estate 2 808 810 Total 4 $ 985 989 December 31, 2014 Commercial real estate: Other 1 $ 590 592 Total commercial real estate 1 590 592 Residential real estate: Consumer mortgages 1 712 712 Total residential real estate 1 712 712 Total 2 $ 1,302 1,304 The majority of the loans modified in a TDR during the years ended December 31, 2015 and 2014 , respectively, included delays in required payments of principal and/or interest or where the only concession granted by the Company was that the interest rate at renewal was not considered to be a market rate. The following table summarizes the recorded investment in loans modifi ed in a TDR within the previous twelve months for which there was a payment default (defined as 90 days or more past due) during the respective years. Number of Recorded ($ in thousands) Contracts investment (1) December 31, 2015 Commercial real estate: Owner occupied 1 $ 262 Total commercial real estate 1 262 Residential real estate: Investment property 1 150 Total residential real estate 1 150 Total 2 $ 412 December 31, 2014 Commercial real estate: Owner occupied 1 $ 272 Total commercial real estate 1 272 Total 1 $ 272 (1) Amount as of applicable month end during the respective year for which there was a payment default. |