Loans and leases receivable disclosure [Text Block] | NOTE 5 : LOANS AND ALLOWANCE FOR LOAN LOSSES September 30, December 31, (In thousands) 2017 2016 Commercial and industrial $ 50,101 $ 49,850 Construction and land development 47,455 41,650 Commercial real estate: Owner occupied 41,633 49,745 Multi-family 47,794 46,998 Other 142,953 123,696 Total commercial real estate 232,380 220,439 Residential real estate: Consumer mortgage 63,056 65,564 Investment property 47,103 45,291 Total residential real estate 110,159 110,855 Consumer installment 9,877 8,712 Total loans 449,972 431,506 Less: unearned income (594) (560) Loans, net of unearned income $ 449,378 $ 430,946 Loans secured by real estate were approximately 86.7% of the Company’s total loan portfolio at September 30, 2017 . At September 30, 2017 , 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 September 30, 2017 and December 31, 2016 . Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (In thousands) Current Past Due 90 days Loans Accrual Loans September 30, 2017: Commercial and industrial $ 50,004 64 — 50,068 33 $ 50,101 Construction and land development 47,280 175 — 47,455 — 47,455 Commercial real estate: Owner occupied 41,633 — — 41,633 — 41,633 Multi-family 47,794 — — 47,794 — 47,794 Other 140,453 — — 140,453 2,500 142,953 Total commercial real estate 229,880 — — 229,880 2,500 232,380 Residential real estate: Consumer mortgage 62,300 403 — 62,703 353 63,056 Investment property 46,993 110 — 47,103 — 47,103 Total residential real estate 109,293 513 — 109,806 353 110,159 Consumer installment 9,823 33 5 9,861 16 9,877 Total $ 446,280 785 5 447,070 2,902 $ 449,972 December 31, 2016: Commercial and industrial $ 49,747 66 — 49,813 37 $ 49,850 Construction and land development 41,223 395 — 41,618 32 41,650 Commercial real estate: Owner occupied 49,564 43 — 49,607 138 49,745 Multi-family 46,998 — — 46,998 — 46,998 Other 121,608 199 — 121,807 1,889 123,696 Total commercial real estate 218,170 242 — 218,412 2,027 220,439 Residential real estate: Consumer mortgage 64,059 1,282 — 65,341 223 65,564 Investment property 45,243 19 — 45,262 29 45,291 Total residential real estate 109,302 1,301 — 110,603 252 110,855 Consumer installment 8,652 38 — 8,690 22 8,712 Total $ 427,094 2,042 — 429,136 2,370 $ 431,506 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 conducted by bank re gulatory 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 pa rt 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 consumer installment. Th e 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 estimates for these l oans are established 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 si milarly graded loans. 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 September 30, 2017 and December 31, 2016 , 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 qualitative 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, prevai ling economic conditions, changes in lending personnel experience, changes in lending policies or procedures, and other 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 factors. The Company regularly re-evaluates its practices in determining the allowance for loan losses. Beginning with the quarter ended Decem ber 31, 2016, the Company implemented cer tain 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. First, the Company increased its look-bac k period for calculating average losses for all loan segments to 31 quarters. Prior to December 31, 2016, the Company calculated average losses for all loan segments using a rolling 20 quarter look-back period. For the quarter ended September 30, 2017 , the Company increased its look-back period to 3 4 quarters to continue to include the losses incurred by the Company beginning with the first quarter of 2009. The Company will likely continue to increase its look-back period to incorporate the effects of at least one economic downturn in its loss history. The Company believes the extension of its look-back period is appropriate due to the risks inherent in the loan portfolio. Absent this extension, the early cycle periods in which the Company experienced significant losses would be excluded from the determination of the allowance for loan losses and its balance would decrease. Second, the Company increased the range of basis point adjustments allowed for qualitative and environmental factors to approximate ly 200 basis points, an increase of 65 basis points, or 48%, compared to the 135 basis point range used prior to December 31, 2016. After performing sensitivity testing of its calculation of the allowance for loan losses, the Company determined that it sho uld increase the range of basis points allowed for qualitative and environmental factors in order to provide sufficient latitude in determining estimated probable credit losses during periods of economic stress. Third, the Company reduced the percentage al location for qualitative and environmental factors on a weighted average basis to 21% of total basis points allocable at December 31, 2016, compared to 25% of total basis points allocable at September 30, 2016. The Company believes a decrease in the percen tage allocation of qualitative environmental factors on a weighted average basis was appropriate due to the extension of its look-back period described above. If the Company did not make the changes described above, the Company’s calculated allowance for l oan loss allocation would have decreased by approximately $0.9 million, or 0.21% of total loans, at December 31, 2016. Other than the changes discussed above, the Company has not made any material changes to its methodology that would impact the calculatio n of the allowance 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 seg ment for the respective periods . September 30, 2017 (In thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 677 874 2,121 1,119 174 $ 4,965 Charge-offs (449) — — (30) (10) (489) Recoveries 39 133 — 20 2 194 Net (charge-offs) recoveries (410) 133 — (10) (8) (295) Provision for loan losses 237 (156) (60) (32) 11 — Ending balance $ 504 851 2,061 1,077 177 $ 4,670 Nine months ended: Beginning balance $ 540 812 2,071 1,107 113 $ 4,643 Charge-offs (449) — — (108) (16) (573) Recoveries 45 347 — 97 11 500 Net (charge-offs) recoveries (404) 347 — (11) (5) (73) Provision for loan losses 368 (308) (10) (19) 69 100 Ending balance $ 504 851 2,061 1,077 177 $ 4,670 September 30, 2016 (In thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 506 744 2,092 1,061 125 $ 4,528 Charge-offs — — — (7) (1) (8) Recoveries 3 5 — 49 1 58 Net recoveries 3 5 — 42 — 50 Provision for loan losses 6 (76) 140 (83) 13 — Ending balance $ 515 673 2,232 1,020 138 $ 4,578 Nine months ended: Beginning balance $ 523 669 1,879 1,059 159 $ 4,289 Charge-offs (83) — (194) (162) (29) (468) Recoveries 26 1,207 — 115 9 1,357 Net (charge-offs) recoveries (57) 1,207 (194) (47) (20) 889 Provision for loan losses 49 (1,203) 547 8 (1) (600) Ending balance $ 515 673 2,232 1,020 138 $ 4,578 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 September 30, 2017 and 2016 . 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 September 30, 2017: Commercial and industrial $ 471 50,068 33 33 504 50,101 Construction and land development 851 47,455 — — 851 47,455 Commercial real estate 2,045 229,700 16 2,680 2,061 232,380 Residential real estate 1,077 110,159 — — 1,077 110,159 Consumer installment 177 9,877 — — 177 9,877 Total $ 4,621 447,259 49 2,713 4,670 449,972 September 30, 2016: Commercial and industrial $ 515 50,858 — 23 515 50,881 Construction and land development 673 43,959 — 45 673 44,004 Commercial real estate 2,196 209,840 36 1,718 2,232 211,558 Residential real estate 1,020 112,303 — — 1,020 112,303 Consumer installment 138 8,996 — — 138 8,996 Total $ 4,542 425,956 36 1,786 4,578 427,742 (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 September 30, 2017: Commercial and industrial $ 49,817 121 130 33 $ 50,101 Construction and land development 46,778 404 273 — 47,455 Commercial real estate: Owner occupied 41,048 244 341 — 41,633 Multi-family 47,794 — — — 47,794 Other 139,671 356 426 2,500 142,953 Total commercial real estate 228,513 600 767 2,500 232,380 Residential real estate: Consumer mortgage 57,087 2,032 3,584 353 63,056 Investment property 46,054 109 940 — 47,103 Total residential real estate 103,141 2,141 4,524 353 110,159 Consumer installment 9,694 71 96 16 9,877 Total $ 437,943 3,337 5,790 2,902 $ 449,972 December 31, 2016: Commercial and industrial $ 49,558 22 233 37 $ 49,850 Construction and land development 41,165 113 340 32 41,650 Commercial real estate: Owner occupied 48,788 414 405 138 49,745 Multi-family 46,998 — — — 46,998 Other 121,326 32 449 1,889 123,696 Total commercial real estate 217,112 446 854 2,027 220,439 Residential real estate: Consumer mortgage 59,450 2,613 3,278 223 65,564 Investment property 44,109 105 1,048 29 45,291 Total residential real estate 103,559 2,718 4,326 252 110,855 Consumer installment 8,580 20 90 22 8,712 Total $ 419,974 3,319 5,843 2,370 $ 431,506 Impaired loans The following tables present details related to the Company’s impaired loans. Loans that have been fully charged-off are not included 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 September 30, 2017 and December 31, 2016 . September 30, 2017 (In thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial real estate: Other $ 3,590 (1,090) 2,500 Total commercial real estate 3,590 (1,090) 2,500 Total $ 3,590 (1,090) 2,500 With allowance recorded: Commercial and industrial $ 53 (20) 33 $ 33 Commercial real estate: Owner occupied 180 — 180 16 Total commercial real estate 180 — 180 16 Total 233 (20) 213 49 Total impaired loans $ 3,823 (1,110) 2,713 $ 49 (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, 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 $ 15 — 15 Construction and land development 140 (108) 32 Commercial real estate: Other 2,874 (984) 1,890 Total commercial real estate 2,874 (984) 1,890 Total $ 3,029 (1,092) 1,937 With allowance recorded: Commercial real estate: Owner occupied $ 193 — 193 $ 31 Total commercial real estate 193 — 193 31 Total 193 — 193 31 Total impaired loans $ 3,222 (1,092) 2,130 $ 31 (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 September 30, 2017 Nine months ended September 30, 2017 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial and industrial $ 126 — 55 — Construction and land development — — 15 — Commercial real estate: Owner occupied 182 2 186 8 Other 2,148 — 1,971 — Total commercial real estate 2,330 2 2,157 8 Total $ 2,456 2 2,227 8 Quarter ended September 30, 2016 Nine months ended September 30, 2016 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial and industrial $ 26 — 36 2 Construction and land development 48 — 111 — Commercial real estate: Owner occupied 465 3 850 29 Other 1,532 — 1,662 — Total commercial real estate 1,997 3 2,512 29 Total $ 2,071 3 2,659 31 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, where due, all amounts owed, 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 September 30, 2017 and December 31, 2016 . TDRs Related (In thousands) Accruing Nonaccrual Total Allowance September 30, 2017 Commercial and industrial $ — 33 33 $ 33 Commercial real estate: Owner occupied 180 — 180 16 Other — 1,693 1,693 — Total commercial real estate 180 1,693 1,873 16 Total $ 180 1,726 1,906 $ 49 December 31, 2016 Commercial and industrial $ 15 — 15 $ — Construction and land development — 32 32 — Commercial real estate: Owner occupied 193 — 193 31 Other — 1,818 1,818 — Total commercial real estate 193 1,818 2,011 31 Total $ 208 1,850 2,058 $ 31 The following table summarizes loans modified in a TDR during the respective periods both before and after their modification . Quarter ended September 30, Nine months ended September 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 2017: Commercial and industrial 1 $ 34 34 1 $ 34 34 Commercial real estate: Other — — — 1 1,275 1,266 Total commercial real estate — — — 1 1,275 1,266 Total 1 $ 34 34 2 $ 1,309 1,300 2016: Commercial real estate: Other — — — 1 $ 1,509 1,509 Total commercial real estate — — — 1 1,509 1,509 Total — — — 1 $ 1,509 1,509 The majority of the loans modified in a TDR during the quarter and nine months ended September 30, 2017 and 2016 , 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. During the three and nine months ended September 30, 2017 and 2016 , there were no loans modified in a TDR within the previous 12 months for which there was a payment default (defined as 90 days or more past due). |