Loans and leases receivable disclosure [Text Block] | NOTE 4 : LOANS AND ALLOWANCE FOR LOAN LOSSES June 30, December 31, (In thousands) 2019 2018 Commercial and industrial $ 54,307 $ 63,467 Construction and land development 45,395 40,222 Commercial real estate: Owner occupied 61,187 56,413 Multi-family 44,022 40,455 Other 163,291 165,028 Total commercial real estate 268,500 261,896 Residential real estate: Consumer mortgage 53,680 56,223 Investment property 45,612 46,374 Total residential real estate 99,292 102,597 Consumer installment 9,091 9,295 Total loans 476,585 477,477 Less: unearned income (524) (569) Loans, net of unearned income $ 476,061 $ 476,908 Loans secured by real estate were approximately 86.7% of the Company’s total loan portfolio at June 30, 2019 . At June 30, 2019 , 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 portfolio 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 r isk 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 includ ed 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 cre dit 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 , th e 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 – i ncludes 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 opera tions 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 re sidents. 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 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 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, an d , if applicable, property value. The following is a summary of current, accruing past due , and nonaccrual loans by portfolio segment and class as of June 30, 2019 and December 31, 2018 . Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (In thousands) Current Past Due 90 days Loans Accrual Loans June 30, 2019: Commercial and industrial $ 54,198 109 — 54,307 — $ 54,307 Construction and land development 45,044 351 — 45,395 — 45,395 Commercial real estate: Owner occupied 61,187 — — 61,187 — 61,187 Multi-family 44,022 — — 44,022 — 44,022 Other 163,291 — — 163,291 — 163,291 Total commercial real estate 268,500 — — 268,500 — 268,500 Residential real estate: Consumer mortgage 53,335 214 — 53,549 131 53,680 Investment property 45,612 — — 45,612 — 45,612 Total residential real estate 98,947 214 — 99,161 131 99,292 Consumer installment 9,083 8 — 9,091 — 9,091 Total $ 475,772 682 — 476,454 131 $ 476,585 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 Multi-family 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 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 June 30, 2019 and December 31, 2018 , 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. Since the fourth quarter of 2016, the Company has increased 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 portfo lio. 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. For the quarter ended June 30, 2019 , the Company increased its look-back period to 41 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 l osses 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 respective periods . June 30, 2019 (In thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 686 773 2,251 930 168 $ 4,808 Charge-offs — — — — (1) (1) Recoveries 6 — 1 33 4 44 Net recoveries 6 — 1 33 3 43 Provision for loan losses 34 8 35 (59) (18) — Ending balance $ 726 781 2,287 904 153 $ 4,851 Six months ended: Beginning balance $ 778 700 2,218 946 148 $ 4,790 Charge-offs — — — — (16) (16) Recoveries 24 — 1 47 5 77 Net recoveries (charge-offs) 24 — 1 47 (11) 61 Provision for loan losses (76) 81 68 (89) 16 — Ending balance $ 726 781 2,287 904 153 $ 4,851 June 30, 2018 (In thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended: Beginning balance $ 724 670 2,119 1,053 166 $ 4,732 Charge-offs — — (39) — — (39) Recoveries 32 — — 17 8 57 Net recoveries (charge-offs) 32 — (39) 17 8 18 Provision for loan losses (156) 117 117 (53) (25) — Ending balance $ 600 787 2,197 1,017 149 $ 4,750 Six months ended: Beginning balance $ 653 734 2,126 1,071 173 $ 4,757 Charge-offs (52) — (39) (4) (2) (97) Recoveries 46 — — 33 11 90 Net (charge-offs) recoveries (6) — (39) 29 9 (7) Provision for loan losses (47) 53 110 (83) (33) — Ending balance $ 600 787 2,197 1,017 149 $ 4,750 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, 2019 and 2018 . 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, 2019: Commercial and industrial $ 726 54,307 — — 726 54,307 Construction and land development 781 45,395 — — 781 45,395 Commercial real estate 2,287 268,500 — — 2,287 268,500 Residential real estate 904 99,292 — — 904 99,292 Consumer installment 153 9,091 — — 153 9,091 Total $ 4,851 476,585 — — 4,851 476,585 June 30, 2018: Commercial and industrial $ 600 52,921 — — 600 52,921 Construction and land development 787 42,675 — — 787 42,675 Commercial real estate 2,194 245,252 3 877 2,197 246,129 Residential real estate 1,017 105,705 — — 1,017 105,705 Consumer installment 149 9,824 — — 149 9,824 Total $ 4,747 456,377 3 877 4,750 457,254 (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, 2019: Commercial and industrial $ 50,485 3,232 590 — $ 54,307 Construction and land development 44,566 148 681 — 45,395 Commercial real estate: Owner occupied 60,325 781 81 — 61,187 Multi-family 44,022 — — — 44,022 Other 162,149 1,118 24 — 163,291 Total commercial real estate 266,496 1,899 105 — 268,500 Residential real estate: Consumer mortgage 49,036 1,527 2,986 131 53,680 Investment property 44,812 165 635 — 45,612 Total residential real estate 93,848 1,692 3,621 131 99,292 Consumer installment 8,934 106 51 — 9,091 Total $ 464,329 7,077 5,048 131 $ 476,585 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 Multi-family 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 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 Company had no impaired loans at June 30, 2019 . The following tables set forth certain informat ion regarding the Company’s impaired loans that were individually evaluated for impairment at December 31, 2018 . 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 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, 2019 Six months ended June 30, 2019 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial real estate: Owner occupied $ — — 45 9 Total commercial real estate — — 45 9 Total $ — — 45 9 Quarter ended June 30, 2018 Six months ended June 30, 2018 Average Total interest Average Total interest recorded income recorded income (In thousands) investment recognized investment recognized Impaired loans: Commercial and industrial $ 7 — 17 — Commercial real estate: Owner occupied 168 2 170 5 Other 1,392 — 1,827 — Total commercial real estate 1,560 2 1,997 5 Total $ 1,567 2 2,014 5 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 debt or is not able 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 circumstance s 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 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 loan is collateral dependent. If the rec orded 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 modifica tion, all TDRs are individually evaluated for possible impairment. The Company had no TDRs as of June 30, 2019 . The following is a summary of accruing and nonaccrual TDRs, which are included in the impaired loan totals, and the related allowance for lo an losses, by portfolio segment and class as of December 31, 2018 . 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 $ — At June 30, 2019 , 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 periods both before and after their modification . Quarter ended June 30, Six months ended 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 2018: Commercial real estate: Other — $ — — 1 $ 737 737 Total commercial real estate — — — 1 737 737 Total — $ — — 1 $ 737 737 There were no loans modified in a TDR during the quarter and six months ended June 30, 2019 . One loan was modified in a TDR during the six months ended June 30, 2018 . The only concession granted by the Company was a delay in the required payment of interest. The following table summarizes the recorded investment in 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) during the respective periods. During the quarter an d six months ended June 30, 2019 , 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). Quarter ended June 30, Six months ended June 30, Number of Recorded Number of Recorded (Dollars in thousands) Contracts investment (1) Contracts investment (1) 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 period for which there was a payment default. |