Loans and leases receivable disclosure [Text Block] | NOTE 5 : LOANS AND ALLOWANCE FOR LOAN LOSSES June 30, December 31, (In thousands) 2016 2015 Commercial and industrial $ 50,190 $ 52,479 Construction and land development 49,346 43,694 Commercial real estate: Owner occupied 47,600 46,602 Multi-family 43,279 45,264 Other 117,946 111,987 Total commercial real estate 208,825 203,853 Residential real estate: Consumer mortgage 68,077 70,009 Investment property 45,686 46,664 Total residential real estate 113,763 116,673 Consumer installment 9,125 10,220 Total loans 431,249 426,919 Less: unearned income (555) (509) Loans, net of unearned income $ 430,694 $ 426,410 Loans secured by real estate were approximately 86.2% of the Company’s total loan portfolio at June 30, 2016 . At June 30, 2016 , the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama , and surrounding areas. In accordance with ASC 310, 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 portfoli o 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 and classes . Commercial and i ndustrial (“C&I”) — includes loans to finance business operations, equipment purchases, or other needs for small and medium-sized commercial customers. Also inclu ded in this 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 cr edit lines for the purpose of purchasing, carrying , and developing land into commercial developments or residential subdivisions. Also included are loans and credit lines for construction of residential, multi-family , and commercial buildings. Generally , t he primar y source of repayment is dependent upon the sale or refinance of the real estate collateral. Commercial real estate (“CRE”) — includes loans disaggregated into three classes: (1) owner occupied, (2) multifamily and (3 ) other. Owner occupied – includes loans secured by business facilities 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 oper ations and activities of the borrower, who owns the property. Multi-family – primarily includes loans to finance income-producing multi-family properties . Loans in this class include loans for 5 or more unit residential property and apartments leased to r esidents. Generally , the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates , as well as the financial health of the borrowe r. Other – primarily includes loans to finance income-producing commercial properties that are not owner occupied . Loans in this class include loans for neighborhood retail centers, hotels, medical and professional offices, single retail stores, industrial buildings, and warehouses leased to local businesses . Generally , the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates , as well as the financial health of the borrower. Residential real estate (“RRE”) — includes loans disaggregated into two classes: (1) consumer mortgage and (2) investment property. Consumer mort gage – primarily include s first or second lien mortgages and home equity lines of credit 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 wh ich require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit 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 and property value, as well as the financial health of the borrower. Consumer installment — includes loans to individuals both secured by personal property and unsecured. Loans include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in a ccordance 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 c urrent, accruing past due , and nonaccrual loans by portfolio segment and class as of June 30, 2016 and December 31, 2015 . Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (In thousands) Current Past Due 90 days Loans Accrual Loans June 30, 2016: Commercial and industrial $ 50,125 25 — 50,150 40 $ 50,190 Construction and land development 49,291 — — 49,291 55 49,346 Commercial real estate: Owner occupied 47,600 — — 47,600 — 47,600 Multi-family 43,279 — — 43,279 — 43,279 Other 116,382 — — 116,382 1,564 117,946 Total commercial real estate 207,261 — — 207,261 1,564 208,825 Residential real estate: Consumer mortgage 67,510 557 — 68,067 10 68,077 Investment property 45,598 88 — 45,686 — 45,686 Total residential real estate 113,108 645 — 113,753 10 113,763 Consumer installment 9,074 51 — 9,125 — 9,125 Total $ 428,859 721 — 429,580 1,669 $ 431,249 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 Multi-family 45,264 — — 45,264 — 45,264 Other 110,467 — — 110,467 1,520 111,987 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 Allowance for Loan Losses 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 po rtfolio, 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 c ash flows expected to be received 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-of f after a “confirming event” has 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 due 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 expect ed future cash flows discounted at the loan’s effective interest rate, or if the loan is collateral dependent, the impairment measurement is based on the fair value of the collateral, less estimated disposal costs. The level of allowance maintained is be lieved by management to be adequate to 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 allowance, the Company also considers the results of its ongoing internal and independent loan review processes. The Company’s loan review process assists in determining whether there are loans in the portfolio whose cr edit quality has weakened over time and evaluating 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 c onducted by bank regulatory agencies as part 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 quarterly 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 consu mer installment. 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 each loan segment. The es timates for these loans are established by category and based on the Company’s internal system of credit risk ratings and historical loss data. The Company calculates average losses for all loan segments using a rolling 20 quarter historical period. The e stimated loan loss allocation rate for the Company’s internal system of credit risk grades is based on its experience with similarly graded loans. For loan segments where the Company believes it does not have sufficient historical loss data, the Company ma y make adjustments based, in part, on loss rates of peer bank groups. At June 30, 2016 and December 31, 2015 , and for the periods then ended, the Company 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 estimate of probable losses for several “qualitative and environmental” factors. The allocation for qual itative and environmental factors is particularly subjective and does not lend itself to exact mathematical calculation. This amount represents estimated probable 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, changes in lending personnel experience, changes in lending policies or procedures, and other influencin g factors. These qualitative and environmental factors are considered for each of the five loan segments and the allowance allocation, as determined by the processes noted above, is increased or decreased based on the incremental assessment of these factor s. The following table details the changes in the allowance for loan losses by portfolio segment for the respective periods . June 30, 2016 (In thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 517 695 2,403 1,026 133 $ 4,774 Charge-offs (83) — (194) (37) (2) (316) Recoveries 3 5 — 58 4 70 Net (charge-offs) recoveries (80) 5 (194) 21 2 (246) Provision for loan losses 69 44 (117) 14 (10) — Ending balance $ 506 744 2,092 1,061 125 $ 4,528 Six months ended: Beginning balance $ 523 669 1,879 1,059 159 $ 4,289 Charge-offs (83) — (194) (155) (28) (460) Recoveries 23 1,203 — 65 8 1,299 Net (charge-offs) recoveries (60) 1,203 (194) (90) (20) 839 Provision for loan losses 43 (1,128) 407 92 (14) (600) Ending balance $ 506 744 2,092 1,061 125 $ 4,528 June 30, 2015 (In thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 644 830 1,888 1,153 207 $ 4,722 Charge-offs — — — — (5) (5) Recoveries 3 4 — 151 11 169 Net recoveries (charge-offs) 3 4 — 151 6 164 Provision for loan losses 34 (194) 258 (124) 26 — Ending balance $ 681 640 2,146 1,180 239 $ 4,886 Six months ended: Beginning balance $ 639 974 1,928 1,119 176 $ 4,836 Charge-offs (58) — — (59) (23) (140) Recoveries 4 9 — 165 12 190 Net (charge-offs) recoveries (54) 9 — 106 (11) 50 Provision for loan losses 96 (343) 218 (45) 74 — Ending balance $ 681 640 2,146 1,180 239 $ 4,886 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 June 30, 2016 and 2015 . 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 June 30, 2016: Commercial and industrial $ 506 50,159 — 31 506 50,190 Construction and land development 744 49,291 — 55 744 49,346 Commercial real estate 1,995 206,258 97 2,567 2,092 208,825 Residential real estate 1,061 113,763 — — 1,061 113,763 Consumer installment 125 9,125 — — 125 9,125 Total $ 4,431 428,596 97 2,653 4,528 431,249 June 30, 2015: Commercial and industrial $ 681 57,246 — 64 681 57,310 Construction and land development 640 38,252 — 602 640 38,854 Commercial real estate 1,672 182,465 474 1,659 2,146 184,124 Residential real estate 1,180 115,039 — — 1,180 115,039 Consumer installment 239 13,632 — — 239 13,632 Total $ 4,412 406,634 474 2,325 4,886 408,959 (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 non-impaired 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 protected 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 n ot corrected . Nonaccrual – includes loans where management has determined that full payment of principal and i nterest is not expected. (In thousands) Pass Special Mention Substandard Accruing Nonaccrual Total loans June 30, 2016: Commercial and industrial $ 46,015 3,850 285 40 $ 50,190 Construction and land development 48,873 53 365 55 49,346 Commercial real estate: Owner occupied 46,874 275 451 — 47,600 Multi-family 43,279 — — — 43,279 Other 115,568 354 460 1,564 117,946 Total commercial real estate 205,721 629 911 1,564 208,825 Residential real estate: Consumer mortgage 62,702 2,501 2,864 10 68,077 Investment property 44,588 107 991 — 45,686 Total residential real estate 107,290 2,608 3,855 10 113,763 Consumer installment 9,010 31 84 — 9,125 Total $ 416,909 7,171 5,500 1,669 $ 431,249 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 Multi-family 45,264 — — — 45,264 Other 110,159 36 272 1,520 111,987 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 Impaired loans The following tables present details related to the Company’s impaired loans. Loans that have been fully charged-off do not appear in the following tables. The related allowance generally represents the following components that correspond to impaired loans: Individually evaluated impaired loans equal to or greater than $500,000 secured by real estate (nonaccrual construction and land development, commercial real estate, and residential real estate loans). Individually evaluat ed impaired loans equal to or greater than $250,000 not secured by real estate (nonaccrual commercial and industrial and consumer installment loans). The following tables set forth certain information regarding the Company’s impaired loans that were ind ividually evaluated for impairment at June 30, 2016 and December 31, 2015 . June 30, 2016 (In thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial and industrial $ 31 — 31 Construction and land development 159 (104) 55 Commercial real estate: Other 2,478 (914) 1,564 Total commercial real estate 2,478 (914) 1,564 Total $ 2,668 (1,018) 1,650 With allowance recorded: Commercial real estate: Owner occupied 1,003 — 1,003 97 Total commercial real estate 1,003 — 1,003 97 Total $ 1,003 — 1,003 $ 97 Total impaired loans $ 3,671 (1,018) 2,653 $ 97 (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 subsequent to the loans being placed on nonaccrual status. (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, 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 subsequent to the loans being placed on nonaccrual status. (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 during the respective periods. Quarter ended June 30, 2016 Six months ended June 30, 2016 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial and industrial $ 36 1 40 2 Construction and land development 60 — 138 — Commercial real estate: Owner occupied 1,009 11 1,015 26 Other 1,699 — 1,718 — Total commercial real estate 2,708 11 2,733 26 Total $ 2,804 12 2,911 28 Quarter ended June 30, 2015 Six months ended June 30, 2015 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial and industrial $ 64 1 66 2 Construction and land development 608 — 613 — Commercial real estate: Owner occupied 1,202 9 1,143 21 Other 466 8 538 18 Total commercial real estate 1,668 17 1,681 39 Residential real estate: Consumer mortgages 512 158 648 173 Investment property 100 76 130 76 Total residential real estate 612 234 778 249 Total $ 2,952 252 3,138 290 Interest income recognized for the quarter and six months ended June 30, 2015 included non-routine 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 the quarter and six months ended June 30, 2015 would have been $27 thousand and $65 thousand, respectively. Troubled Debt Restructurings Impaired loans also include troubled debt restructurings (“TDRs”). In the normal course of business, management may grant concessions to borrowers that 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, extension of the maturity date, or reduction of the face amount or maturity a mount 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 rate. A concession may have also been granted if the debtor is not abl e to access funds elsewhere at a market rate for debt with similar risk characteristics as the restructured debt. In making the determination of whether a loan modification is a TDR, the Company considers the individual facts and circumstances surrounding each modification. As part of the credit approval process, the restructured loans are evaluated for adequate collateral protection in determining the appropriate accrual status at the time of restructure. Similar to other impaired loans, TDRs are meas ured 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 loan is collateral dependent. If the recorded investm ent 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 TDR s are individually evaluated for possible impairment. The following is a summary of accruing and nonaccrual TDRs, which are included in the impaired loan totals, and the related allowance for loan losses, by portfolio segment and class as of June 30, 2016 and December 31, 2015 . TDRs Related (In thousands) Accruing Nonaccrual Total Allowance June 30, 2016 Commercial and industrial $ 31 — 31 $ — Construction and land development — 55 55 — Commercial real estate: Owner occupied 1,003 — 1,003 97 Other — 1,564 1,564 — Total commercial real estate 1,003 1,564 2,567 97 Total $ 1,034 1,619 2,653 $ 97 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 The following table summarizes loans modified in a TDR during the respective periods both before and after their modification . Quarter ended June 30, Six months June 30, Pre- Post - Pre- Post - modification modification modification modification Number outstanding outstanding Number outstanding outstanding of recorded recorded of recorded recorded (Dollars in thousands) contracts investment investment contracts investment investment 2016: Commercial real estate: Other 1 $ 1,509 1,509 1 $ 1,509 1,509 Total commercial real estate 1 1,509 1,509 1 1,509 1,509 Total 1 $ 1,509 1,509 1 $ 1,509 1,509 2015: Commercial and industrial 1 $ 61 66 1 $ 61 66 Construction and land development — — — 1 116 113 Commercial real estate: Other — — — 1 592 592 Total commercial real estate — — — 1 592 592 Total 1 $ 61 66 3 $ 769 771 The majority of the loans modified in a TDR during the quarter and six months ended June 30, 2016 and 2015, inc luded permitting 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 considered to be less than a market rate. There were no TDRs with default payments during the quarter and six months ended June 30, 2016. The following table summarizes the recorded investment in loans modified in a TDR with in the previous 12 months for which there was a payment default (defined as 90 days or more past due) during the respective periods. Quarter ended June 30, Six months Ended June 30, Number of Recorded Number of Recorded (Dollars in thousands) Contracts investment (1) Contracts investment (1) 2015: Commercial real estate: Owner occupied — $ — 1 $ 261 Total commercial real estate — — 1 261 Residential real estate: Investment property — — 1 150 Total residential real estate — — 1 150 Total — $ — 2 $ 411 (1) Amount as of applicable month end during the respective period for which there was a payment default. |