Loans and leases receivable disclosure [Text Block] | NOTE 5 : LOANS AND ALLOWANCE FOR LOAN LOSSES December 31 (In thousands) 2018 2017 Commercial and industrial $ 63,467 $ 59,086 Construction and land development 40,222 39,607 Commercial real estate: Owner occupied 56,413 44,192 Multifamily 40,455 52,167 Other 165,028 142,674 Total commercial real estate 261,896 239,033 Residential real estate: Consumer mortgage 56,223 59,540 Investment property 46,374 47,323 Total residential real estate 102,597 106,863 Consumer installment 9,295 9,588 Total loans 477,477 454,177 Less: unearned income (569) (526) Loans, net of unearned income $ 476,908 $ 453,651 Loans secured by real estate were approximately 84.9% of the total loan portfolio at December 31, 2018 . At December 31, 2018 , 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 three classes: (1) owner occupied (2) multi-family and (3) other. Owner occupied – includes loans secur ed 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 operations 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 residents. 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. Other – primarily includes loans to finance income-producing commercial properties. Loans in this class include loans for neighborhood retail centers, hotels, medical and professional offices, single retail stores, industrial buildings, and warehouses 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 consideration the occupancy and rental rates as well as the financial h ealth of the borrower. Residential real estate (“RRE”) — includes loans disaggregated into two classes: (1) consumer mortgage and (2) investment property. Consumer mortgage – primarily include s first or second lien mortgages and home equity lines to con sumers 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, s atisfactory 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 prop erty securing the loan. The underwriting of these loans takes into consideration the rental rates as well as the fi nancial 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 accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financi al 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, 2018 and 2017 . Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (In thousands) Current Past Due 90 days Loans Accrual Loans December 31, 2018: Commercial and industrial $ 63,367 100 — 63,467 — $ 63,467 Construction and land development 39,997 225 — 40,222 — 40,222 Commercial real estate: Owner occupied 56,413 — — 56,413 — 56,413 Multifamily 40,455 — — 40,455 — 40,455 Other 165,028 — — 165,028 — 165,028 Total commercial real estate 261,896 — — 261,896 — 261,896 Residential real estate: Consumer mortgage 54,446 1,599 — 56,045 178 56,223 Investment property 46,233 141 — 46,374 — 46,374 Total residential real estate 100,679 1,740 — 102,419 178 102,597 Consumer installment 9,254 41 — 9,295 — 9,295 Total $ 475,193 2,106 — 477,299 178 $ 477,477 December 31, 2017: Commercial and industrial $ 59,047 8 — 59,055 31 $ 59,086 Construction and land development 39,607 — — 39,607 — 39,607 Commercial real estate: Owner occupied 44,192 — — 44,192 — 44,192 Multifamily 52,167 — — 52,167 — 52,167 Other 140,486 — — 140,486 2,188 142,674 Total commercial real estate 236,845 — — 236,845 2,188 239,033 Residential real estate: Consumer mortgage 58,195 746 — 58,941 599 59,540 Investment property 46,871 312 — 47,183 140 47,323 Total residential real estate 105,066 1,058 — 106,124 739 106,863 Consumer installment 9,517 57 — 9,574 14 9,588 Total $ 450,082 1,123 — 451,205 2,972 $ 454,177 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 $12 thousand and $140 thousand for the years ended December 31, 2018 and 2017 , respectively. Allowance for Loan Losses The allowance for loan losses as of and for the years ended December 31, 2018 and 2017 , is presented below. Year ended December 31 (In thousands) 2018 2017 Beginning balance $ 4,757 $ 4,643 Charged-off loans (168) (596) Recovery of previously charged-off loans 201 1,010 Net recoveries 33 414 Provision for loan losses — (300) Ending balance $ 4,790 $ 4,757 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 du e 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 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, 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 e valuating 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 p art 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 qu arterly 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 analyz es 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 esta blished 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 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 December 31, 2018 and 2017 , and for the years then ended, th e 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 esti mate 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 pr obable 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, chan ges 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 p rocesses 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. Since the fourth quarter of 2016, the Company has increase d its look-back period each quarter 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 ext ension, 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. For the year ended December 31, 2018, the Company increased its lo ok-back period to 39 quarters to continue to include 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. Other than expanding the look-back period each quarter, the Company has not made any material changes to its methodology that would impact the calculation of the allowance for loan losses or provision for loan losses for the periods inclu ded 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, 2018 and 2017 . (in thousands) Commercial and industrial Construction and land Development Commercial Real Estate Residential Real Estate Consumer Installment Total Balance, December 31, 2016 $ 540 812 2,071 1,107 113 $ 4,643 Charge-offs (449) — — (107) (40) (596) Recoveries 461 347 — 115 87 1,010 Net recoveries 12 347 — 8 47 414 Provision 101 (425) 55 (44) 13 (300) Balance, December 31, 2017 $ 653 734 2,126 1,071 173 $ 4,757 Charge-offs (52) — (38) (26) (52) (168) Recoveries 70 — 19 79 33 201 Net recoveries 18 — (19) 53 (19) 33 Provision 107 (34) 111 (178) (6) — Balance, December 31, 2018 $ 778 700 2,218 946 148 $ 4,790 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, 2018 and 2017 . 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, 2018: Commercial and industrial $ 778 63,467 — — 778 63,467 Construction and land development 700 40,222 — — 700 40,222 Commercial real estate 2,218 261,739 — 157 2,218 261,896 Residential real estate 946 102,597 — — 946 102,597 Consumer installment 148 9,295 — — 148 9,295 Total $ 4,790 477,320 — 157 4,790 477,477 December 31, 2017: Commercial and industrial $ 622 59,055 31 31 653 59,086 Construction and land development 734 39,607 — — 734 39,607 Commercial real estate 2,115 236,322 11 2,711 2,126 239,033 Residential real estate 1,071 106,863 — — 1,071 106,863 Consumer installment 173 9,588 — — 173 9,588 Total $ 4,715 451,435 42 2,742 4,757 454,177 (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 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 corrected, 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 – loa ns 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, 2018 Commercial and industrial $ 61,568 1,377 522 — $ 63,467 Construction and land development 39,481 — 741 — 40,222 Commercial real estate: Owner occupied 55,942 154 317 — 56,413 Multifamily 40,455 — — — 40,455 Other 163,449 1,208 371 — 165,028 Total commercial real estate 259,846 1,362 688 — 261,896 Residential real estate: Consumer mortgage 50,903 1,374 3,768 178 56,223 Investment property 45,463 173 738 — 46,374 Total residential real estate 96,366 1,547 4,506 178 102,597 Consumer installment 9,149 75 71 — 9,295 Total $ 466,410 4,361 6,528 178 $ 477,477 December 31, 2017 Commercial and industrial $ 58,842 94 119 31 $ 59,086 Construction and land development 39,049 90 468 — 39,607 Commercial real estate: Owner occupied 43,615 240 337 — 44,192 Multifamily 52,167 — — — 52,167 Other 139,695 395 396 2,188 142,674 Total commercial real estate 235,477 635 733 2,188 239,033 Residential real estate: Consumer mortgage 54,101 1,254 3,586 599 59,540 Investment property 46,463 53 667 140 47,323 Total residential real estate 100,564 1,307 4,253 739 106,863 Consumer installment 9,430 66 78 14 9,588 Total $ 443,362 2,192 5,651 2,972 $ 454,177 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 evaluated 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 individually evaluated for impairment at December 31, 2018 and 2017 . December 31, 2018 (In thousands) Unpaid principal balance (1) Charge-offs and payments applied (2) Recorded investment (3) Related allowance With no allowance recorded: Commercial real estate: Owner occupied $ 157 — 157 Total commercial real estate 157 — 157 Total impaired loans $ 157 — 157 $ — (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, 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 $ 3,630 (1,094) 2,536 Total commercial real estate 3,630 (1,094) 2,536 Total $ 3,630 (1,094) 2,536 With allowance recorded: Commercial and industrial $ 52 (21) 31 $ 31 Commercial real estate: Owner occupied 175 — 175 11 Total commercial real estate 175 — 175 11 Total $ 227 (21) 206 $ 42 Total impaired loans $ 3,857 (1,115) 2,742 $ 42 (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, 2018 Year ended December 31, 2017 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial and industrial $ 9 — $ 50 — Construction and land development — — 11 — Commercial real estate: Owner occupied 166 9 184 10 Other 1,145 — 2,096 1 Total commercial real estate 1,311 9 2,280 11 Total $ 1,320 9 $ 2,341 11 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, extension of the maturity date or reduction of the face amount or maturity amou nt 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 able t o 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 considers 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 bas ed 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 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 individ ually, 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 segment and class. TDRs Related (In thousands) Accruing Nonaccrual Total Allowance December 31, 2018 Commercial real estate: Owner occupied $ 157 — 157 $ — Total commercial real estate 157 — 157 — Total $ 157 — 157 $ — December 31, 2017 Commercial and industrial $ — 31 31 $ 31 Commercial real estate: Owner occupied 175 — 175 11 Other 287 1,431 1,718 — Total commercial real estate 462 1,431 1,893 11 Total $ 462 1,462 1,924 $ 42 At December 31, 2018 , 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, 2018 Commercial real estate: Other 2 $ 1,447 1,447 Total commercial real estate 2 1,447 1,447 Total 2 $ 1,447 1,447 December 31, 2017 Commercial and industrial 1 $ 34 34 Commercial real estate: Other 1 $ 1,275 1,266 Total commercial real estate 1 1,275 1,266 Total 2 $ 1,309 1,300 The majority of the loans modified in a TDR during the years ended December 31, 2018 and 2017 , 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 modified 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 year ended December 31, 2018 . During the year ended December 31, 2017, the Company had no loans modified in a TDR within the previous 12 months for which there was a payment default. Number of Recorded ($ in thousands) Contracts investment (1) December 31, 2018 Commercial real estate: Other 1 $ 1,259 Total commercial real estate 1 1,259 Total 1 $ 1,259 (1) Amount as of applicable month end during the respective year for which there was a payment default. |