Note 3 - Loans Receivable

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

 

Note 3. Loans Receivable

The major classifications of loans in the consolidated balance sheets at June 30, 2016 and December 31, 2015 were as follows:

(Dollars In Thousands)	June 30, 2016			December 31, 2015
Construction loans:
Residential	$	12,472		$	11,779
Land acquisition, development & commercial		21,057			27,440
Real estate:
Residential		106,622			100,268
Commercial		160,901			140,952
Commercial, industrial & agricultural		55,719			53,012
Equity lines		29,235			26,376
Consumer		7,662			7,531
Total		393,668			367,358
Less allowance for loan losses		(3,449	)		(3,298	)
Loans, net	$	390,219		$	364,060

The past due and nonaccrual status of loans as of June 30, 2016 was as follows:

(Dollars In Thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		Nonaccrual Loans
Construction loans:
Residential	$	−	$	−	$	−	$	−	$	12,472	$	12,472	$	−
Land acquisition, development & commercial		−		−		8		8		21,049		21,057		8
Real estate:
Residential		-		225		577		802		105,820		106,622		577
Commercial		571		1,298		−		1,869		159,032		160,901		1,652
Commercial, industrial & agricultural		33		−		−		33		55,686		55,719		11
Equity lines		−		106		−		106		29,129		29,235		−
Consumer		26		2		−		28		7,634		7,662		−
Total	$	630	$	1,631	$	585	$	2,846	$	390,822	$	393,668	$	2,248

The past-due and nonaccrual status of loans as of December 31, 2015 was as follows:

(Dollars In Thousands)	30-59 Days Past-Due		60-89 Days Past-Due		90 Days or More Past- Due		Total Past-Due		Current		Total Loans		Nonaccrual Loans
Construction:
Residential	$	−	$	−	$	−	$	−	$	11,779	$	11,779	$	−
Land acquisition, development & commercial		−		−		11		11		27,429		27,440		11
Real Estate:
Residential		297		−		50		347		99,921		100,268		−
Commercial		44		−		792		836		140,116		140,952		368
Commercial, industrial & agricultural		52		84		35		171		52,841		53,012		47
Equity lines		105		−		−		105		26,271		26,376		−
Consumer		−		−		−		−		7,531		7,531		−
Total	$	498	$	84	$	888	$	1,470	$	365,888	$	367,358	$	426

There were no loans past due ninety days or more and still accruing interest as of June 30, 2016. There were two loans, totaling $842 thousand, which were past due ninety days or more and still accruing interest at December 31, 2015.

Impaired loans, which include TDR’s of $6.6 million, and the related allowance at June 30, 2016, were as follows:

June 30, 2016 With no related allowance: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction loans:
Residential	$	−	$	−	$	−	$	−	$	−
Land acquisition, development & commercial		−		−		−		−		−
Real estate:
Residential		771		771		−		494		(17	)
Commercial		8,707		9,488		−		8,412		173
Commercial, industrial & agricultural		12		12		−		12		−
Equity lines		−		−		−		−		−
Consumer		−		−		−		−		−
Total loans with no allowance	$	9,490	$	10,271	$	−	$	8,918	$	156

June 30, 2016 With an allowance recorded: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction loans:
Residential	$	−	$	−	$	−	$	−	$	−
Land acquisition, development & commercial		−		−		−		−		−
Real estate:
Residential		−		−		−		−		−
Commercial		122		122		17		125		−
Commercial, industrial & agricultural		−		−		−		−		−
Equity lines		−		−		−		−		−
Consumer		−		−		−		−		−
Total loans with an allowance	$	122	$	122	$	17	$	125	$	−

Impaired loans, which include TDRs of $6.7 million, and the related allowance at December 31, 2015, were as follows:

December 31, 2015 With no related allowance: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction:
Residential	$	−	$	−	$	–	$	−	$	−
Land acquisition, development & commercial		−		−		–		−		−
Real Estate:
Residential		247		247		–		255		13
Commercial		7,451		7,627		–		7,623		291
Commercial, industrial & agricultural		12		12		–		12		−
Equity lines		−		−		–		−		−
Consumer		−		−		–		−		−
Total loans with no allowance	$	7,710	$	7,886	$	–	$	7,890	$	304

December 31, 2015 With an allowance recorded: (Dollars In Thousands)	Recorded Investment in Loans		Unpaid Principal Balance		Related Allowance		Average Balance Total Loans		Interest Income Recognized
Construction:
Residential	$	−	$	−	$	−	$	−	$	−
Land acquisition, development & commercial		−		−		−		−		−
Real Estate:
Residential		−		−		−		−		−
Commercial		127		127		17		135		−
Commercial, industrial & agricultural		−		−		−		−		−
Equity lines		−		−		−		−		−
Consumer		−		−		−		−		−
Total loans with an allowance	$	127	$	127	$	17	$	135	$	−

Troubled Debt Restructurings

Troubled debt restructurings (“TDR’s”) were comprised of six loans totaling $6.6 million at June 30, 2016.  This compares with $6.7 million in total restructured loans at December 31, 2015. Four of the six loans totaling $6.3 million were not on nonaccrual status at June 30, 2016. The other two loans totaling $244 thousand were on nonaccrual status at the end of the second quarter of 2016.  There is one TDR in the amount of $564 thousand past due 46 days at June 30, 2016. The other five TDR’s were current with their restructured terms at June 30, 2016.

No loans were modified in a TDR during the first six months of 2016.

The following table presents by class of loan, information related to the loan modified in a TDR during 2015:

	Loans modified as TDR's For the six months ended June 3 0 , 2015
Class of Loan	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
			(Dollars in Thousands)
Construction loans:
Residential		—	$	—	$	—
Land acquisition, development & commercial		—		—		—
Real estate loans:
Residential		—		—		—
Commercial		1		260		255
Commercial, industrial, agricultural		—		—		12
Equity lines		—		—		—
Consumer		—		—		—
Total Loans		1	$	260	$	267

The loan identified above in the table restructured into two TDR’s during the six months ended June 30, 2015. It was included in substandard nonaccrual loans and impaired loans at the end of 2014.

Management considers troubled debt restructurings and subsequent defaults in restructured loans in the determination of the adequacy of the Company’s allowance for loan losses. When identified as a TDR, a loan is evaluated for potential loss based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs if the loan is collateral dependent. Loans identified as TDRs frequently are on non-accrual status at the time of the restructuring and, in some cases, partial charge-offs may have already been taken against the loan and a specific allowance may have already been established for the loan. As a result of any modification as a TDR, if a specific reserve is associated with the loan it may be increased. Additionally, loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future defaults. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. As a result, any specific allowance may be increased, adjustments may be made in the allocation of the total allowance balance, or partial charge-offs may be taken to further write-down the carrying value of the loan. Management exercises significant judgment in developing estimates for potential losses associated with TDRs.