3.LOANS

Loans at period-end are as follows:

(in thousands)


	3/31/2020		12/31/2019
Commercial	$	82,793	$	86,552
Real estate construction		34,180		32,219
Real estate mortgage:
1-4 family residential		299,873		291,419
Multi-family residential		55,511		48,622
Non-farm & non-residential		223,208		204,908
Agricultural		60,013		57,166
Consumer		22,598		23,122
Other		151		305
Total	$	778,327	$	744,313

Activity in the allowance for loan losses for the three month period indicated was as follows:


	Three Months Ended March 31, 2020
	(in thousands)
	Beginning								Ending
	Balance		Charge-offs		Recoveries		Provision		Balance
Commercial	$	920	$	(25)	$	6	$	102	$	1,003
Real estate Construction		551		—		—		80		631
Real estate mortgage:
1-4 family residential		2,901		(35)		15		540		3,421
Multi-family residential		807		—		—		217		1,024
Non-farm & non-residential		1,643		—		—		461		2,104
Agricultural		389		—		2		72		463
Consumer		506		(110)		9		128		533
Other		43		(237)		206		19		31
Unallocated		700		—		—		6		706
	$	8,460	$	(407)	$	238	$	1,625	$	9,916


	Three Months Ended March 31, 2019
	(in thousands)
	Beginning								Ending
	Balance		Charge-offs		Recoveries		Provision		Balance
Commercial	$	1,159	$	(191)	$	7	$	(32)	$	943
Real estate Construction		414		—		—		(63)		351
Real estate mortgage:
1-4 family residential		2,605		(99)		8		146		2,660
Multi-family residential		733		—		—		(10)		723
Non-farm & non-residential		1,649		(17)		—		(23)		1,609
Agricultural		420		—		1		(15)		406
Consumer		410		(61)		14		26		389
Other		58		(241)		209		44		70
Unallocated		679		—		—		52		731
	$	8,127	$	(609)	$	239	$	125	$	7,882


	Individually		Collectively
As of March 31, 2020	Evaluated for		Evaluated for
(in thousands)	Impairment		Impairment		Total
Allowance for Loan Losses:
Commercial	$	—	$	1,003	$	1,003
Real estate construction		—		631		631
Real estate mortgage:
1-4 family residential		—		3,421		3,421
Multi-family residential		75		949		1,024
Non-farm & non-residential		—		2,104		2,104
Agricultural		—		463		463
Consumer		—		533		533
Other		—		31		31
Unallocated		—		706		706
	$	75	$	9,841	$	9,916
Loans:
Commercial	$	—	$	82,793	$	82,793
Real estate construction		374		33,806		34,180
Real estate mortgage:
1-4 family residential		519		299,354		299,873
Multi-family residential		1,292		54,219		55,511
Non-farm & non-residential		1,799		221,409		223,208
Agricultural		1,532		58,481		60,013
Consumer		—		22,598		22,598
Other		—		151		151
Total	$	5,516	$	772,811	$	778,327


	Individually		Collectively
As of December 31, 2019	Evaluated for		Evaluated for
(in thousands)	Impairment		Impairment		Total
Allowance for Loan Losses:
Commercial	$	—	$	920	$	920
Real estate construction		—		551		551
Real estate mortgage:
1-4 family residential		2		2,899		2,901
Multi-family residential		50		757		807
Non-farm & non-residential		—		1,643		1,643
Agricultural		—		389		389
Consumer		—		506		506
Other		—		43		43
Unallocated		—		700		700
	$	52	$	8,408	$	8,460
Loans:
Commercial	$	—	$	86,552	$	86,552
Real estate construction		374		31,845		32,219
Real estate mortgage:
1-4 family residential		202		291,217		291,419
Multi-family residential		1,292		47,330		48,622
Non-farm & non-residential		1,799		203,109		204,908
Agricultural		842		56,324		57,166
Consumer		—		23,122		23,122
Other		—		305		305
Total	$	4,509	$	739,804	$	744,313

The following table presents loans individually evaluated for impairment by class of loans as of and for the three months ended March 31, 2020 (in thousands):


	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Real estate construction	$	374	$	374	$	-	$	374	$	-	$	-
Real estate mortgage:
1-4 family residential		519		519		-		361		6		6
Non-farm and non-residential		1,799		1,799		-		1,799		-		-
Agricultural		1,532		1,532		-		1,187		11		11

With an allowance recorded:
Real estate mortgage:
Multi-family residential	$	1,292	$	1,292	$	75	$	1,292	$	-	$	-
Total	$	5,516	$	5,516	$	75	$	5,013	$	17	$	17

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality.

The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 2019 (in thousands):


	Unpaid				Allowance for		Average		Interest		Cash Basis
	Principal		Recorded		Loan Losses		Recorded		Income		Interest
	Balance		Investment		Allocated		Investment		Recognized		Recognized
With no related allowance recorded:
Real-estate construction	$	374	$	374	$	—	$	374	$	—	$	—
Real-estate mortgage:
Non-farm & non-residential		1,799		1,799		—		1,013		17		17
Agricultural		842		842		—		1,003		18		18

With an allowance recorded:
Real estate mortgage
1-4 family residential	$	202	$	202	$	2	$	603	$	35	$	35
Multi-family residential		1,292		1,292		50		646		54		54
Total	$	4,509	$	4,509	$	52	$	3,639	$	124	$	124

The following tables present the recorded investment in nonaccrual, loans past due over 89 days still on accrual and accruing troubled debt restructurings by class of loans as of March 31, 2020 and December 31, 2019:


			Loans Past Due
			Over 89 Days
As of March 31, 2020			Still		Troubled Debt
(in thousands)	Nonaccrual		Accruing		Restructurings
Commercial	$	—	$	267	$	—
Real estate construction		374		—		—
Real estate mortgage:
1-4 family residential		744		126		—
Multi-family residential		1,292		—		—
Non-farm & non-residential		1,799		—		—
Agricultural		—		75		—
Consumer		27		6		—
Total	$	4,236	$	474	$	—


			Loans Past Due
			Over 89 Days
As of December 31, 2019			Still		Troubled Debt
(in thousands)	Nonaccrual		Accruing		Restructurings
Real estate construction	$	374	$	—	$	—
Real estate mortgage:
1-4 family residential		845		47		—
Multi-family residential		—		1,292		—
Non-farm & non-residential		1,799		121		—
Agricultural		—		7		—
Consumer		63		32		—
Total	$	3,081	$	1,499	$	—

Nonaccrual loans secured by real estate make up 98.0% of the total nonaccrual loan balances at March 31, 2020.

Nonaccrual loans and loans past due over 89 days and still accruing include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

A loan is considered impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest payments and the contractual principal payments of a loan will be collected as scheduled in the loan agreement.

Nonaccrual loans are loans for which payments in full of principal or interest is not expected or which principal or interest has been in default for a period of 90 days or more unless the asset is both well secured and in the process of collection. Other impaired loans may be loans showing signs of weakness or interruptions in cash flow, but ultimately are current or less than 90 days past due with respect to principal and interest and for which we anticipate full payment of principal and interest but not in accordance with contractual terms.

Additional factors considered by management in determining impairment and non-accrual status include payment status, collateral value, availability of current financial information, and the probability of collecting all contractual principal and interest payments.

The following tables present the aging of the recorded investment in past due and non-accrual loans as March 31, 2020 and December 31, 2019 by class of loans:


	30–59		60–89		Greater than				Total
As of March 31, 2020	Days		Days		89 Days				Past Due &		Loans Not
(in thousands)	Past Due		Past Due		Past Due		Non-accrual		Non-accrual		Past Due
Commercial	$	655	$	260	$	267	$	—	$	1,182	$	81,611
Real estate construction		31		—		—		374		405		33,775
Real estate mortgage:
1-4 family residential		1,374		346		126		744		2,590		297,283
Multi-family residential		—		—		—		1,292		1,292		54,219
Non-farm & non-residential		1,380		—		—		1,799		3,179		220,029
Agricultural		52		82		75		—		209		59,804
Consumer		170		112		6		27		315		22,283
Other		—		—		—		—		—		151
Total	$	3,662	$	800	$	474	$	4,236	$	9,172	$	769,155


	30–59		60–89		Greater than				Total
As of December 31, 2019	Days		Days		89 Days				Past Due &		Loans Not
(in thousands)	Past Due		Past Due		Past Due		Non-accrual		Non-accrual		Past Due
Commercial	$	326	$	25	$	—	$	—	$	351	$	86,201
Real estate construction		—		—		—		374		374		31,845
Real estate mortgage:
1-4 family residential		2,734		274		47		845		3,900		287,519
Multi-family residential		—		—		1,292		—		1,292		47,330
Non-farm & non-residential		302		19		121		1,799		2,241		202,667
Agricultural		704		—		7		—		711		56,455
Consumer		158		17		32		63		270		22,852
Other		—		—		—		—		—		305
Total	$	4,224	$	335	$	1,499	$	3,081	$	9,139	$	735,174

Troubled Debt Restructurings:

Management periodically reviews renewals and modifications of previously identified troubled debt restructurings (TDR), for which there was no principal forgiveness, to consider if it is appropriate to remove the TDR classification. If the borrower is no longer experiencing financial difficulty and the renewal/modification did not contain a concessionary interest rate or other concessionary terms, management considers the potential removal of the TDR classification. If deemed appropriate based upon current underwriting, the TDR classification is removed as the borrower has complied with the terms of the loan at the date of renewal/modification and there was a reasonable expectation that the borrower will continue to comply with the terms of the loan after the date of the renewal/modification.

Additionally, TDR classification can be removed in circumstances in which the Company performs a non-concessionary re-modification of the loan at terms considered to be at market for loans with comparable risk and management expects the borrower will continue to perform under the re-modified terms based on the borrower's past history of performance.

On March 22, 2020, federal banking regulators issued an interagency statement, which was subsequently clarified and revised by an interagency statement issued on April 7, 2020, that included guidance on their approach for the accounting of loan modifications in light of the economic impact of the Coronavirus Disease 2019 (COVID-19) pandemic. The guidance interprets current accounting standards and indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented. The agencies confirmed in working with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs. The majority of these modifications will involve three to six month forbearance payments which will be added to the end of the note. As of April 30, 2020 we had approved modifications on $105.4 million of loans.

The Company had no loans classified as troubled debt restructurings as of March 31, 2020 or December 31, 2019.

Credit Quality Indicators:

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 analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have one or more potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution'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 and documented 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.

As of March 31, 2020 and December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:


As of March 31, 2020			Special
(in thousands)	Pass		Mention		Substandard		Doubtful
Commercial	$	79,839	$	2,860	$	94	$	—
Real estate construction		32,285		1,501		394		—
Real estate mortgage:
1-4 family residential		291,414		3,037		5,422		—
Multi-family residential		53,605		614		1,292		—
Non-farm & non-residential		214,304		7,086		1,818		—
Agricultural		54,213		3,774		2,026		—
Total	$	725,660	$	18,872	$	11,046	$	—


As of December 31, 2019			Special
(in thousands)	Pass		Mention		Substandard		Doubtful
Commercial	$	83,515	$	2,785	$	252	$	—
Real estate construction		30,462		1,363		394		—
Real estate mortgage:
1-4 family residential		283,048		3,435		4,932		4
Multi-family residential		43,193		4,137		1,292		—
Non-farm & non-residential		195,800		7,169		1,939		—
Agricultural		51,352		4,459		1,355		—
Total	$	687,370	$	23,348	$	10,164	$	4

For consumer loans, the Company evaluates the credit quality based on the aging of the recorded investment in loans, which was previously presented. Non-performing consumer loans are loans which are greater than 89 days past due or on non-accrual status, and total $33 thousand at March 31, 2020 and $95 thousand at December 31, 2019.

Non-consumer loans with an outstanding balance less than $200 thousand are evaluated similarly to consumer loans. Loan performance is evaluated based on delinquency status. Both are reviewed at least quarterly and credit quality grades are updated as needed.