LOANS | NOTE 11 LOANS Loans typically provide higher yields than the other types of earning assets, and, thus, one of the Company's goals is for loans to be the largest category of the Company's earning assets. For the quarters ended March 31, 2017 and December 31, 2016, average loans accounted for 74.2 73.8 March 31, 2017 ($ In thousands) Past Due Total 90 Days Past Due Past Due or More and 30 to 89 and Still Non- Non- Total Days Accruing Accrual Accrual Loans Real Estate-construction $ 319 $ - $ 1,024 $ 1,343 $ 163,249 Real Estate-mortgage 2,347 340 2,354 5,041 360,964 Real Estate-non farm non-residential - - 1,382 1,382 426,151 Commercial 480 - 19 499 156,786 Lease Financing Rec. - - - - 2,196 Obligations of states and subdivisions - - - - 5,383 Consumer 66 5 176 247 25,258 Total $ 3,212 $ 345 $ 4,955 $ 8,512 $ 1,139,987 December 31, 2016 ($ In Thousands) Past Due 90 Days Total or More Past Due Past Due and and 30 to 89 Still Non- Non- Total Days Accruing Accrual Accrual Loans Real Estate-construction $ 204 $ 96 $ 658 $ 958 $ 109,394 Real Estate-mortgage 2,745 102 1,662 4,509 289,640 Real Estate-non farm non residential 269 - 909 1,178 314,359 Commercial 9 - 2 11 129,423 Lease Financing Rec. - - - - 2,204 Obligations of states and subdivisions - - - - 6,698 Consumer 22 - 33 55 15,336 Total $ 3,249 $ 198 $ 3,264 $ 6,711 $ 867,054 Loans acquired with deteriorated credit quality are those purchased in the BCB Holding Company, Inc. acquisition. These loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated as of the acquisition date between those considered to be performing (acquired non-impaired loans) and those with evidence of credit deterioration (acquired impaired loans). Acquired loans are considered impaired if there is evidence of credit deterioration and if it is probable, at acquisition, all contractually required payments will not be collected. ($ In Thousands) Commercial, financial and Mortgage- Mortgage- Commercial agricultural Commercial Residential and other Total Contractually required payments $ 1,519 $ 29,648 $ 7,933 $ 976 $ 40,076 Cash flows expected to be collected 1,570 37,869 9,697 1,032 50,168 Fair value of loans acquired 1,513 28,875 7,048 957 38,393 Total outstanding acquired impaired loans were $ 2.1 2.2 ($ In Thousands) March 31, 2017 December 31, 2016 Carrying Carrying Accretable Amount of Accretable Amount of Yield Loans Yield Loans Balance at beginning of period $ 894 $ 1,305 $ 1,219 $ 1,821 Accretion (16) 16 (325) 325 Payments received, net - (81) - (841) Balance at end of period $ 878 $ 1,240 $ 894 $ 1,305 March 31, 2017 ($ In Thousands) Average Interest Recorded Income Recorded Unpaid Related Investment Recognized Investment Balance Allowance YTD YTD ($ In thousands) Impaired loans with no related allowance: Commercial installment $ 162 $ 162 $ - $ 81 $ - Commercial real estate 4,121 4,159 - 3,223 20 Consumer real estate 2,556 2,571 - 1,442 45 Consumer installment 13 13 - 13 - Total $ 6,852 $ 6,905 $ - $ 4,759 $ 65 Impaired loans with a related allowance: Commercial installment $ - $ - $ - $ 76 $ - Commercial real estate 2,936 2,936 322 2,831 31 Consumer real estate 388 388 108 472 4 Consumer installment 25 25 20 26 - Total $ 3,349 $ 3,349 $ 450 $ 3,405 $ 35 Total Impaired Loans: Commercial installment $ 162 $ 162 $ - $ 157 $ - Commercial real estate 7,057 7,095 322 6,054 51 Consumer real estate 2,944 2,959 108 1,914 49 Consumer installment 38 38 20 39 - Total Impaired Loans $ 10,201 $ 10,254 $ 450 $ 8,164 $ 100 As of March 31, 2017, the Company had $ 1.2 0.3 December 31, 2016 ($ In Thousands) Average Interest Recorded Income Recorded Unpaid Related Investment Recognized Investment Balance Allowance YTD YTD ($ In thousands) Impaired loans with no related allowance: Commercial installment $ - $ - $ - $ - $ - Commercial real estate 2,324 2,570 - 4,368 37 Consumer real estate 329 329 - 291 1 Consumer installment 14 14 - 9 - Total $ 2,667 $ 2,913 $ - $ 4,668 $ 38 Impaired loans with a related allowance: Commercial installment $ 153 $ 153 $ 10 $ 244 $ 9 Commercial real estate 2,726 2,726 343 2,832 127 Consumer real estate 556 669 308 733 14 Consumer installment 26 27 21 32 - Total $ 3,461 $ 3,575 $ 682 $ 3,841 $ 150 Total Impaired Loans: Commercial installment $ 153 $ 153 $ 10 $ 244 $ 9 Commercial real estate 5,050 5,296 343 7,200 164 Consumer real estate 885 998 308 1,024 15 Consumer installment 40 41 21 41 - Total Impaired Loans $ 6,128 $ 6,488 $ 682 $ 8,509 $ 188 March 31, December 31, 2017 2016 ($ In Thousands) Impaired Loans: Impaired loans without a valuation allowance $ 6,852 $ 2,667 Impaired loans with a valuation allowance 3,349 3,461 Total impaired loans $ 10,201 $ 6,128 Allowance for loan losses on impaired loans at period 450 682 Total nonaccrual loans 4,955 3,264 Past due 90 days or more and still accruing 345 198 Average investment in impaired loans 8,164 8,509 Three Months Three Months Ended Ended March 31, 2017 March 31, 2016 ($ In Thousands) Interest income recognized during impairment $ 100 $ 45 Cash-basis interest income recognized 100 45 The gross interest income that would have been recorded in the period that ended if the nonaccrual loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination, if held for part of the three months ended March 31, 2017 and March 31, 2016 was $ 87,000 98,000 For the Three Months Ending March 31, 2017 ($ In Thousands) Outstanding Outstanding Recorded Recorded Investment Interest Investment Post- Number of Income Pre-Modification Modification Loans Recognized Commercial installment $ - $ - - $ - Commercial real estate - - - - Consumer real estate - - - - Consumer installment $ - $ - - $ - Total $ - $ - - $ - There were no TDRs modified during the three month period ended March 31, 2017. The balance of troubled debt restructurings (TDRs) was $ 7.2 4.1 148,000 ($ In Thousands) March 31, 2017 Past Due 90 days Current Past Due and still Non- Loans 30-89 accruing accrual Total Commercial installment $ - $ - $ - $ 143 $ 143 Commercial real estate 3,796 - - 739 4,535 Consumer real estate 1,354 90 - 1,074 2,518 Consumer installment 5 - - 23 28 Total $ 5,155 $ 90 $ - $ 1,979 $ 7,224 Allowance for loan losses $ 118 $ 4 $ - $ 26 $ 148 ($ In Thousands) December 31, 2016 Past Due 90 days Current Past Due and still Non- Loans 30-89 accruing accrual Total Commercial installment $ 151 $ - $ - $ - $ 151 Commercial real estate 2,463 - - 1,101 3,565 Consumer real estate 154 90 - 122 366 Consumer installment 6 - - 24 29 Total $ 2,774 $ 90 $ - $ 1,247 $ 4,111 Allowance for loan losses $ 125 $ - $ - $ 40 $ 165 Internal Risk Ratings The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company uses the following definitions for risk ratings, which are consistent with the definitions used in supervisory guidance: Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date. Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. March 31, 2017 ($ In Thousands) Commercial, Real Installment Financial Real Estate Estate and and Commercial Mortgage Other Agriculture Total Pass $ 696,858 $ 213,956 $ 26,293 $ 161,296 $ 1,098,403 Special Mention 14,902 3,819 28 1,679 20,428 Substandard 15,313 5,195 100 1,200 21,808 Doubtful - 154 - 39 193 Subtotal 727,073 223,124 26,421 164,214 1,140,832 Less: Unearned discount 513 68 21 243 845 Loans, net of unearned discount $ 726,560 $ 223,056 $ 26,400 $ 163,971 $ 1,139,987 December 31, 2016 ($ In Thousands) Commercial, Real Installment Financial Real Estate Estate and and Commercial Mortgage Other Agriculture Total Pass $ 522,949 $ 174,325 $ 21,278 $ 134,235 $ 852,787 Special Mention 376 237 - 618 1,231 Substandard 11,873 1,336 79 208 13,496 Doubtful - 200 - 40 240 Subtotal 535,198 176,098 21,357 135,101 867,754 Less: Unearned discount 378 60 - 262 700 Loans, net of unearned discount $ 534,820 $ 176,038 $ 21,357 $ 134,839 $ 867,054 ($ In Thousands) Three Months Ended March 31, 2017 Balance at beginning of period $ 7,510 Loans charged-off: Real Estate (65) Installment and Other (8) Commercial, Financial and Agriculture (1) Total (74) Recoveries on loans previously charged-off: Real Estate 301 Installment and Other 13 Commercial, Financial and Agriculture 17 Total 331 Net recoveries 257 Provision for Loan Losses 46 Balance at end of period $ 7,813 Allocation of the Allowance for Loan Losses March 31, 2017 ($ In Thousands) % of loans Amount in each category to total loans Commercial Non Real Estate $ 1,212 14.4 % Commercial Real Estate 4,174 63.9 Consumer Real Estate 1,368 19.6 Consumer 157 2.1 Secondary market reserve 180 - Unallocated 722 - Total $ 7,813 100 % December 31, 2016 ($ In Thousands) % of loans Amount in each category to total loans Commercial Non Real Estate $ 1,118 15.6 % Commercial Real Estate 4,071 61.6 Consumer Real Estate 1,589 20.3 Consumer 155 2.4 Unallocated 577 0.1 Total $ 7,510 100 % March 31, 2017 Commercial, Installment Financial Real And And Estate Other Agriculture Total ($ In Thousands) Loans Individually evaluated $ 10,001 $ 38 $ 162 $ 10,201 Collectively evaluated 939,615 26,362 163,809 1,129,786 Total $ 949,616 $ 26,400 $ 163,971 $ 1,139,987 Allowance for Loan Losses Individually evaluated $ 430 $ 20 $ - $ 450 Collectively evaluated 5,292 859 1,212 7,363 Total $ 5,722 $ 879 $ 1,212 $ 7,813 December 31, 2016 Commercial, Installment Financial Real And And Estate Other Agriculture Total (In thousands) Loans Individually evaluated $ 5,935 $ 40 $ 153 $ 6,128 Collectively evaluated 704,923 21,317 134,686 860,926 Total $ 710,858 $ 21,357 $ 134,839 $ 867,054 Allowance for Loan Losses Individually evaluated $ 651 $ 21 $ 10 $ 682 Collectively evaluated 5,009 711 1,108 6,828 Total $ 5,660 $ 732 $ 1,118 $ 7,510 |