6. LOANS

9 Months Ended

Sep. 30, 2016

Receivables [Abstract]

6. LOANS

NOTE 6 LOANS:

Loans receivable outstanding are summarized as follows:

(Dollars are in thousands)	September 30, 2016		December 31, 2015
Real estate secured:
Commercial	$	102,997	$	98,569
Construction and land development		22,749		14,672
Residential 1-4 family		248,042		242,916
Multifamily		13,205		12,954
Farmland		23,828		22,174
Total real estate loans		410,821		391,285
Commercial		26,246		21,469
Agriculture		4,459		3,793
Consumer installment loans		23,177		24,568
All other loans		18		54
Total loans	$	464,721	$	441,169

Loans receivable on nonaccrual status are summarized as follows:

(Dollars are in thousands)	September 30, 2016		December 31, 2015
Real estate secured:
Commercial	$	3,671	$	4,358
Construction and land development		354		436
Residential 1-4 family		8,145		8,338
Multifamily		169		430
Farmland		930		1,170
Total real estate loans		13,269		14,732
Commercial		3		65
Agriculture		83		9
Consumer installment loans		93		41
All other loans		—		—
Total loans receivable on nonaccrual status	$	13,448	$	14,847

Total interest income not recognized on nonaccrual loans for the nine months ended September 30, 2016 and 2015 was $397 thousand and $486 thousand, respectively.

The following table presents information concerning the Company’s investment in loans considered impaired as of September 30, 2016 and December 31, 2015:

As of September 30, 2016 (Dollars are in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial		3,533	$	3,959	$	—
Construction and land development		7		7		—
Residential 1-4 family		3,590		3,888		—
Multifamily		305		346		—
Farmland		4,358		5,050		—
Commercial		—		—		—
Agriculture		19		19		—
Consumer installment loans		—		—		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,589		1,680		172
Construction and land development		253		477		119
Residential 1-4 family		644		652		88
Multifamily		—		—		—
Farmland		502		512		293
Commercial		67		67		19
Agriculture		8		8		8
Consumer installment loans		53		53		20
All other loans		—		—		—
Total		14,928	$	16,718	$	719
As of December 31, 2015 (Dollars are in thousands)		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Real estate secured:
Commercial		4,212	$	5,173	$	—
Construction and land development		10		10		—
Residential 1-4 family		3,037		3,150		—
Multifamily		430		471		—
Farmland		3,983		4,620		—
Commercial		—		—		—
Agriculture		36		36		—
Consumer installment loans		11		11		—
All other loans		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		2,503		2,849		288
Construction and land development		289		499		155
Residential 1-4 family		1,920		2,121		168
Multifamily		—		—		—
Farmland		761		778		328
Commercial		69		69		24
Agriculture		18		18		18
Consumer installment loans		45		45		2
All other loans		—		—		—
Total		17,324	$	19,850	$	983

The following table presents information concerning the Company’s average impaired loans and interest recognized on those impaired loans, for the periods indicated:

	Nine Months Ended
	September 30, 2016				September 30, 2015
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	4,222	$	77	$	4,615	$	102
Construction and land development		89		—		13		1
Residential 1-4 family		3,716		140		3,623		140
Multifamily		288		14		543		5
Farmland		4,211		163		5,346		94
Commercial		—		—		333		—
Agriculture		29		2		44		3
Consumer installment loans		24		—		36		4
All other loans		—		—		—		—
With an allowance recorded:
Real estate secured:
Commercial		1,539		6		3,043		58
Construction and land development		271		—		394		—
Residential 1-4 family		939		18		2,294		84
Multifamily		100		—		28		—
Farmland		572		18		942		28
Commercial		71		2		83		3
Agriculture		107		1		26		1
Consumer installment loans		30		1		13		—
All other loans		—		—		—		—
Total	$	16,208	$	442	$	21,376	$	523

	Three Months Ended
	September 30, 2016					September 30, 2015
(Dollars are in thousands)	Average Recorded Investment		Interest Income Recognized			Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Real estate secured:
Commercial	$	3,965	$	4		$	4,916	$	43
Construction and land development		7		—			12		1
Residential 1-4 family		3,833		37			3,674		47
Multifamily		307		3			434		3
Farmland		4,274		61			4,963		42
Commercial		—		—			105		(2	)
Agriculture		23		—			36		—
Consumer installment loans		22		(2	)		59		1
All other loans		—		—			—		—
With an allowance recorded:
Real estate secured:
Commercial		1,309		6			2,411		18
Construction and land development		259		—			407		—
Residential 1-4 family		606		7			2,162		31
Multifamily		83		(4	)		—		—
Farmland		504		6			781		9
Commercial		68		—			82		1
Agriculture		97		3			23		—
Consumer installment loans		32		1			—		—
All other loans		—		—			—		—
Total	$	15,389	$	122		$	20,065	$	194

An age analysis of past due loans receivable was as follows:

As of September 30, 2016 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Real estate secured:
Commercial	$	747	$	305	$	1,819	$	2,871	$	100,126	$	102,997	$	—
Construction and land development		100		—		64		164		22,585		22,749		—
Residential 1-4 family		4,099		1,312		1,669		7,080		240,962		248,042		—
Multifamily		1,720		—		67		1,787		11,418		13,205		—
Farmland		82		—		—		82		23,746		23,828		—
Total real estate loans		6,748		1,617		3,619		11,984		398,837		410,821		—
Commercial		—		—		—		—		26,246		26,246		—
Agriculture		15		—		79		94		4,365		4,459		—
Consumer installment Loans		91		—		68		159		23,018		23,177		—
All other loans		—		—		—		—		18		18		—
Total loans	$	6,854	$	1,617	$	3,766	$	12,237	$	452,484	$	464,721	$	—

As of December 31, 2015 (Dollars are in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans		Accruing Loans 90 or More Days Past Due
Real estate secured:
Commercial	$	311	$	105	$	2,534	$	2,950	$	95,619	$	98,569	$	—
Construction and land development		144		—		17		161		14,511		14,672		—
Residential 1-4 family		4,694		1,487		2,891		9,072		233,844		242,916		—
Multifamily		47		—		320		367		12,587		12,954		—
Farmland		363		—		251		614		21,560		22,174		—
Total real estate loans		5,559		1,592		6,013		13,164		378,121		391,285		—
Commercial		18		1		64		83		21,386		21,469		—
Agriculture		—		—		—		—		3,793		3,793		—
Consumer installment Loans		113		1		27		141		24,427		24,568		—
All other loans		6		—		—		6		48		54		—
Total loans	$	5,696	$	1,594	$	6,104	$	13,394	$	427,775	$	441,169	$	—

The Company categorizes loans receivable 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 receivable as to credit risk. The Company uses the following definitions for risk ratings:

Pass - Loans in this category are considered to have a low likelihood of loss based on relevant information analyzed about the ability of the borrowers to service their debt and other factors.

Special Mention - Loans in this category are currently protected but are potentially weak, including adverse trends in borrower’s operations, credit quality or financial strength. Those loans constitute an undue and unwarranted credit risk but not to the point of justifying a substandard classification. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances.  Special mention loans have potential weaknesses which may, if not checked or corrected, weaken the loan or inadequately protect the Company’s credit position at some future date.

Substandard - A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must 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 Doubtful have all the weaknesses inherent in loans classified as Substandard, plus 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.

Based on the most recent analysis performed, the risk category of loans receivable was as follows:

As of September 30, 2016 (Dollars are in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	91,708	$	7,165	$	4,124	$	—	$	102,997
Construction and land development		20,885		1,539		325		—		22,749
Residential 1-4 family		237,338		2,054		8,650		—		248,042
Multifamily		12,831		—		374		—		13,205
Farmland		17,847		3,531		2,450		—		23,828
Total real estate loans		380,609		14,289		15,923		—		410,821
Commercial		25,483		696		67		—		26,246
Agriculture		4,368		—		91		—		4,459
Consumer installment loans		23,016		—		161		—		23,177
All other loans		18		—		—		—		18
Total	$	433,494	$	14,985	$	16,242	$	—	$	464,721
As of December 31, 2015 (Dollars are in thousands)		Pass		Special Mention		Substandard		Doubtful		Total
Real estate secured:
Commercial	$	85,255	$	7,543	$	5,771	$	—	$	98,569
Construction and land development		12,262		1,974		436		—		14,672
Residential 1-4 family		229,182		3,572		10,162		—		242,916
Multifamily		12,264		187		503		—		12,954
Farmland		16,663		2,923		2,588		—		22,174
Total real estate loans		355,626		16,199		19,460		—		391,285
Commercial		20,641		724		104		—		21,469
Agriculture		3,767		—		26		—		3,793
Consumer installment loans		24,478		—		90		—		24,568
All other loans		54		—		—		—		54
Total	$	404,566	$	16,923		19,680	$	—	$	441,169