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 June 30, 2017 and December 31, 2016, average loans accounted for 73.3 73.8 June 30, 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 $ 73 $ 105 $ 191 $ 369 $ 169,971 Real Estate-mortgage 1,738 637 2,299 4,674 372,815 Real Estate-non farm non-residential 766 18 1,337 2,121 448,218 Commercial 1,502 - 131 1,633 167,799 Lease Financing Rec. - - - - 2,189 Obligations of states and subdivisions - - - - 5,775 Consumer 42 - 21 63 21,169 Total $ 4,121 $ 760 $ 3,979 $ 8,860 $ 1,187,936 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) June 30, 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 (30) 30 (325) 325 Payments received, net - (110) - (841) Balance at end of period $ 864 $ 1,225 $ 894 $ 1,305 June 30, 2017 Average Interest ($ In Thousands) Recorded Income Recorded Unpaid Related Investment Recognized Investment Balance Allowance YTD YTD ($ In thousands) Impaired loans with no related allowance: Commercial installment $ 18 $ 18 $ - $ 53 $ - Commercial real estate 3,136 3,258 - 3,017 42 Consumer real estate 2,216 2,417 - 1,689 58 Consumer installment 3 3 - 10 - Total $ 5,373 $ 5,696 $ - $ 4,769 $ 100 Impaired loans with a related allowance: Commercial installment $ 113 $ 113 $ 19 $ 89 $ - Commercial real estate 2,982 2,982 342 2,881 65 Consumer real estate 512 512 147 485 7 Consumer installment 23 23 18 25 - Total $ 3,630 $ 3,630 $ 526 $ 3,480 $ 72 Total Impaired Loans: Commercial installment $ 131 $ 131 $ 19 $ 142 $ - Commercial real estate 6,118 6,240 342 5,898 107 Consumer real estate 2,728 2,929 147 2,174 65 Consumer installment 26 26 18 35 - Total Impaired Loans $ 9,003 $ 9,326 $ 526 $ 8,249 $ 172 As of June 30, 2017, the Company had $ 1.0 0.7 December 31, 2016 Average Interest ($ In Thousands) 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 June 30, December 31, 2017 2016 ($ In Thousands) Impaired Loans: Impaired loans without a valuation allowance $ 5,373 $ 2,667 Impaired loans with a valuation allowance 3,630 3,461 Total impaired loans $ 9,003 $ 6,128 Allowance for loan losses on impaired loans at period end 526 682 Total nonaccrual loans 3,979 3,264 Past due 90 days or more and still accruing 760 198 Average investment in impaired loans 8,249 8,509 Three Months Six Months Ended Ended June 30, 2017 June 30, 2017 ($ In Thousands) Interest income recognized during impairment $ - $ - Cash-basis interest income recognized 74 172 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 and six months ended June 30, 2017 was $ 78,000 152,000 For the Three Months Ending June 30, 2017 Outstanding ($ In Thousands) Outstanding Recorded Recorded Investment Interest Investment Post- Number of Income Pre-Modification Modification Loans Recognized Commercial installment $ 116 $ 115 1 $ - Commercial real estate 324 324 2 - Consumer real estate 152 151 2 2 Consumer installment - - - - Total $ 592 $ 590 5 $ 2 For the Six Months Ending June 30, 2017 Outstanding ($ In Thousands) Outstanding Recorded Recorded Investment Interest Investment Post- Number of Income Pre-Modification Modification Loans Recognized Commercial installment $ 116 $ 115 1 $ - Commercial real estate 324 324 2 - Consumer real estate 152 151 2 2 Consumer installment - - - - Total $ 592 $ 590 5 $ 2 There were 5 TDRs modified during the three month period ended June 30, 2017. The balance of troubled debt restructurings (TDRs)was $ 7.4 4.1 216,000 ($ In Thousands) June 30, 2017 Past Due 90 days Current Past Due and still Non- Loans 30-89 accruing accrual Total Commercial installment $ - $ - $ - $ 228 $ 228 Commercial real estate 3,826 - - 1,046 4,872 Consumer real estate 1,104 89 - 1,044 2,237 Consumer installment 6 - - 20 26 Total $ 4,936 $ 89 $ - $ 2,338 $ 7,363 Allowance for loan losses $ - $ - $ - $ 216 $ 216 ($ 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 - - 1,102 3,565 Consumer real estate 154 90 - 122 366 Consumer installment 6 - - 23 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. June 30, 2017 Commercial, ($ In Thousands) Real Installment Financial Real Estate Estate and and Commercial Mortgage Other Agriculture Total Pass $ 733,632 $ 218,365 $ 28,852 $ 170,386 $ 1,151,235 Special Mention 11,939 1,196 - 1,582 14,717 Substandard 16,811 4,287 102 1,781 22,981 Doubtful 97 - - - 97 Subtotal 762,479 223,848 28,954 173,749 1,189,030 Less: Unearned discount 789 56 - 249 1,094 Loans, net of unearned discount $ 761,690 $ 223,792 $ 28,954 $ 173,500 $ 1,187,936 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 Six Months Ended Ended June 30, 2017 June 30, 2017 Balance at beginning of period $ 7,813 $ 7,510 Loans charged-off: Real Estate (155) (220) Installment and Other (34) (42) Commercial, Financial and Agriculture (-) (1) Total (189) (263) Recoveries on loans previously charged-off: Real Estate 152 453 Installment and Other 31 44 Commercial, Financial and Agriculture 15 32 Total 198 529 Net recoveries 9 266 Provision for Loan Losses 248 294 Balance at end of period $ 8,070 $ 8,070 Allocation of the Allowance for Loan Losses June 30, 2017 ($ In Thousands) % of loans in each category Amount to total loans Commercial Non Real Estate $ 1,406 14.6 % Commercial Real Estate 4,597 64.1 Consumer Real Estate 1,475 18.8 Consumer 163 2.4 Secondary market reserve 180 - Unallocated 249 .1 Total $ 8,070 100 % December 31, 2016 ($ In Thousands) % of loans in each category Amount 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 % June 30, 2017 Commercial, Installment Financial Real and and Estate Other Agriculture Total ($ In Thousands) Loans Individually evaluated $ 8,846 $ 26 $ 131 $ 9,003 Collectively evaluated 976,636 28,928 173,369 1,178,933 Total $ 985,482 $ 28,954 $ 173,500 $ 1,187,936 Allowance for Loan Losses Individually evaluated $ 489 $ 18 $ 19 $ 526 Collectively evaluated 5,762 395 1,387 7,544 Total $ 6,251 $ 413 $ 1,406 $ 8,070 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 |