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Note 7 - Loans and Allowance for Loan Losses
 3 Months Ended
Mar. 31, 2017
Notes to Financial Statements  
Financing Receivables [Text Block]
7.
Loans and Allowance for Loan Losses
 
Major classifications of loans outstanding are summarized as follows:
 
(In thousands)
  
March 31,
2017
    
December 31,
2016
  
                 
Real Estate
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land development
   $
121,021
     $
120,230
  
Real estate mortgage – residential
   
343,992
      
350,295
  
Real estate mortgage – farmland and other commercial enterprises
    
421,912
      
400,367
  
Commercial
 
 
 
 
 
 
 
 
Commercial and industrial
    
55,320
      
48,607
  
States and political subdivisions
    
18,384
      
18,933
  
Other
    
20,724
      
23,308
  
Consumer
 
 
 
 
 
 
 
 
Secured
    
4,354
      
4,554
  
Unsecured
    
4,126
      
4,681
  
Total loans
    
989,833
      
970,975
  
Less unearned income
    
-
      
-
  
Total loans, net of unearned income
  $
989,833
     $
970,975
  
 
Activity in the allowance for loan losses by portfolio segment was as follows for the periods indicated:
 
Three months ended March 31, 2017
(In thousands)
  
Real Estate
    
Commercial
    
Consumer
    
Total
  
                                 
Balance, beginning of period
   $
8,205
     $
854
     $
285
     $
9,344
  
Provision for loan losses
    
396
      
(7
 )    
191
      
580
  
Recoveries
    
17
      
49
      
11
      
77
  
Loans charged off
    
(434
 )    
(32
 )    
(28
 )    
(494
 )
Balance, end of period
   $
8,184
     $
864
     $
459
     $
9,507
  
 
Three months ended March 31, 2016
(In thousands)
  
Real Estate
    
Commercial
    
Consumer
    
Total
  
                                 
Balance, beginning of period
   $
9,173
     $
820
     $
322
     $
10,315
  
Provision for loan losses
    
(453
 )    
(6
 )    
(14
 )    
(473
 )
Recoveries
    
52
      
36
      
32
      
120
  
Loans charged off
    
(63
 )    
(11
 )    
(60
 )    
(134
 )
Balance, end of period
   $
8,709
     $
839
     $
280
     $
9,828
  
 
The following tables present individually impaired loans by class of loans for the dates indicated.
 

March 31, 2017 (In thousands)
  
Unpaid
Principal
Balance
    
Recorded
Investment With No Allowance
    
Recorded
Investment With Allowance
    
Total Recorded Investment
    
Allowance for
Loan Losses
Allocated
  
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land
development
   $
8,092
     $
2,251
     $
3,793
     $
6,044
     $
731
  
Real estate mortgage – residential
    
9,714
      
3,862
      
5,826
      
9,688
      
1,499
  
Real estate mortgage – farmland and other commercial enterprises
    
23,271
      
8,468
      
14,697
      
23,165
      
337
  
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
    
496
      
-
      
498
      
498
      
252
  
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured
    
334
      
-
      
337
      
337
      
334
  
Total
   $
41,907
     $
14,581
     $
25,151
     $
39,732
     $
3,153
  
 
 

December 31, 2016 (In thousands)
  
Unpaid
Principal
Balance
    
Recorded
Investment With No Allowance
    
Recorded
Investment With Allowance
    
Total Recorded Investment
    
Allowance for
Loan Losses
Allocated
  
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land development
   $
9,076
     $
2,599
     $
3,800
     $
6,399
     $
759
  
Real estate mortgage – residential
    
9,930
      
4,388
      
5,590
      
9,978
      
1,503
  
Real estate mortgage – farmland and other commercial enterprises
    
25,045
      
9,699
      
15,235
      
24,934
      
304
  
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
    
435
      
20
      
418
      
438
      
236
  
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured
    
146
      
-
      
146
      
146
      
146
  
Total
   $
44,632
     $
16,706
     $
25,189
     $
41,895
     $
2,948
  
 
Three Months Ended March 31, 2017 (In thousands)
  
Average
    
Interest Income Recognized
    
Cash Basis Interest Recognized
  
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land development
   $
6,247
     $
76
     $
52
  
Real estate mortgage – residential
    
9,702
      
118
      
117
  
Real estate mortgage – farmland and other commercial enterprises
    
24,089
      
302
      
291
  
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
    
499
      
7
      
6
  
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured
    
335
      
5
      
2
  
Total
   $
40,872
     $
508
     $
468
  
 
 
Three Months Ended March 31, 2016 (In thousands)
  
Average
    
Interest Income Recognized
    
Cash Basis Interest Recognized
  
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land development
   $
8,292
     $
47
     $
47
  
Real estate mortgage – residential
    
9,035
      
103
      
99
  
Real estate mortgage – farmland and other commercial enterprises
    
23,791
      
269
      
263
  
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
    
420
      
4
      
4
  
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured
    
156
      
2
      
1
  
Total
   $
41,694
     $
425
     $
414
  
 
The following tables present the balance of the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of
March
31,
2017
and
December
31,
2016.
 
March 31, 2017 (In thousands)
  
Real Estate
    
Commercial
    
Consumer
    
Total
  
Allowance for Loan Losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributable to loans:
                                
Individually evaluated for impairment
   $
2,567
     $
252
     $
334
     $
3,153
  
Collectively evaluated for impairment
    
5,617
      
612
      
125
      
6,354
  
Total ending allowance balance
   $
8,184
     $
864
     $
459
     $
9,507
  
                                 
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
   $
38,897
     $
498
     $
337
     $
39,732
  
Loans collectively evaluated for impairment
    
848,028
      
93,930
      
8,143
      
950,101
  
Total ending loan balance, net of unearned income
   $
886,925
     $
94,428
     $
8,480
     $
989,833
  
 
 
December 31, 2016 (In thousands)
  
Real Estate
    
Commercial
    
Consumer
    
Total
  
Allowance for Loan Losses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributable to loans:
                                
Individually evaluated for impairment
   $
2,566
     $
236
     $
146
     $
2,948
  
Collectively evaluated for impairment
    
5,639
      
618
      
139
      
6,396
  
Total ending allowance balance
   $
8,205
     $
854
     $
285
     $
9,344
  
                                 
Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
   $
41,311
     $
438
     $
146
     $
41,895
  
Loans collectively evaluated for impairment
    
829,581
      
90,410
      
9,089
      
929,080
  
Total ending loan balance, net of unearned income
   $
870,892
     $
90,848
     $
9,235
     $
970,975
  
 
The following tables present the recorded investment in nonperforming loans by class of loans as of
March
31,
2017
and
December
31,
2016.
 
March 31, 2017 (In thousands)
  
Nonaccrual
    
Restructured Loans
    
Loans Past Due 90 Days or More and Still Accruing
  
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land development
   $
475
     $
3,627
     $
-
  
Real estate mortgage – residential
    
2,343
      
3,774
      
3
  
Real estate mortgage – farmland and other commercial enterprises
    
2,361
      
14,641
      
-
  
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
    
-
      
376
      
-
  
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
Secured
    
1
      
-
      
-
  
Unsecured
    
2
      
133
      
-
  
Total
   $
5,182
     $
22,551
     $
3
  
 
 
December 31, 2016 (In thousands)
  
Nonaccrual
    
Restructured Loans
    
Loans Past Due 90 Days or More and Still Accruing
  
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land development
   $
712
     $
3,637
     $
-
  
Real estate mortgage – residential
    
2,316
      
4,006
      
-
  
Real estate mortgage – farmland and other commercial enterprises
    
3,383
      
14,787
      
-
  
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
    
-
      
377
      
-
  
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
Secured
    
4
      
-
      
-
  
Unsecured
    
8
      
135
      
-
  
Total
   $
6,423
     $
22,942
     $
-
  
 
The Company has allocated
$2.0
million of specific reserves as of
March
31,
2017
and
December
31,
2016
to customers whose loan terms have been modified in troubled debt restructurings and that are in compliance with those terms. The Company had no commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings at
March
31,
2017
and
December
31,
2016.
The Company had no credits during the
first
three
months of
2017
or
2016
that were modified as troubled debt restructurings.
 
The tables below present an age analysis of past due loans
30
days or more by class of loans as of the dates indicated. Past due loans that are also classified as nonaccrual are included in their respective past due category
.
 
March 31, 2017 (In thousands)
  
30-89
Days
Past Due
    
90 Days
or More
Past Due
    
Total
   
Current
    
Total Loans
  
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land development
   $
16
     $
314
     $
330
     $
120,691
     $
121,021
  
Real estate mortgage – residential
    
1,441
      
774
      
2,215
      
341,777
      
343,992
  
Real estate mortgage – farmland and other commercial enterprises
    
-
      
1,517
      
1,517
      
420,395
      
421,912
  
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
    
127
      
-
      
127
      
55,193
      
55,320
  
States and political subdivisions
    
-
      
-
      
-
      
18,384
      
18,384
  
Other
    
102
      
-
      
102
      
20,622
      
20,724
  
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
    
-
      
1
      
1
      
4,353
      
4,354
  
Unsecured
    
184
      
2
      
186
      
3,940
      
4,126
  
Total
   $
1,870
     $
2,608
     $
4,478
     $
985,355
     $
989,833
  
 
 
December 31, 2016 (In thousands)
  
30-89 Days
Past Due
    
90 Days
or More
Past Due
    
Total
   
Current
    
Total Loans
  
Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate mortgage – construction and land development
   $
393
     $
227
     $
620
     $
119,610
     $
120,230
  
Real estate mortgage – residential
    
1,935
      
798
      
2,733
      
347,562
      
350,295
  
Real estate mortgage – farmland and other commercial enterprises
    
-
      
2,483
      
2,483
      
397,884
      
400,367
  
Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
    
-
      
-
      
-
      
48,607
      
48,607
  
States and political subdivisions
    
-
      
-
      
-
      
18,933
      
18,933
  
Other
    
24
      
-
      
24
      
23,284
      
23,308
  
Consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
    
13
      
-
      
13
      
4,541
      
4,554
  
Unsecured
    
30
      
8
      
38
      
4,643
      
4,681
  
Total
   $
2,395
     $
3,516
     $
5,911
     $
965,064
     $
970,975
  
 
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 and conditions. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes large-balance loans and non-homogeneous loans, such as commercial real estate and certain residential real estate loans. Loan rating grades, as described further below, are assigned based on a continuous process. The amount and adequacy of the allowance for loan loss is determined on a quarterly basis. The Company uses the following definitions for its risk ratings:
 
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 borrower’s repayment ability, weaken the collateral or inadequately protect the Company’s credit position at some future date. These credits pose elevated risk, but their weaknesses do not yet justify a substandard classification.
 
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 Company will sustain some loss if the deficiencies are not corrected.
 
Doubtful.
Loans classified as doubtful have all the weaknesses inherent of 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 which are analyzed individually as part of the above described process are considered to be pass rated loans and are considered to have a low risk of loss. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows for the dates indicated. Each of the following tables excludes immaterial amounts attributed to accrued interest receivable.
 
   
Real Estate
    
Commercial
  
March 31, 2017

(In thousands)
  
Real Estate Mortgage – Construction and Land Development
    
Real Estate Mortgage – Residential
    
Real Estate Mortgage –Farmland and Other Commercial Enterprises
    
Commercial and Industrial
    
States and Political Subdivisions
    
Other
  
Credit risk profile by internally assigned rating grades
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
   $
114,397
     $
318,555
     $
388,228
     $
53,943
     $
18,384
     $
20,701
  
Special Mention
    
523
      
10,980
      
19,020
      
744
  
 
 
-
 
    
23
  
Substandard
    
6,101
      
14,457
      
14,664
      
633
  
 
 
-
 
    
-
  
Doubtful
    
-
      
-
      
-
      
-
  
 
 
-
 
 
 
-
 
Total
   $
121,021
     $
343,992
     $
421,912
     $
55,320
     $
18,384
     $
20,724
  
 
 
   
Real Estate
    
Commercial
  
December 31, 2016
(In thousands)
  
Real Estate Mortgage –Construction and Land Development
    
Real Estate Mortgage –Residential
    
Real Estate Mortgage –Farmland and Other Commercial Enterprises
    
Commercial and Industrial
    
States and Political Subdivisions
    
Other
  
Credit risk profile by internally assigned rating grades
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass
   $
112,435
     $
323,300
     $
363,448
     $
47,254
     $
18,933
     $
23,308
  
Special Mention
    
1,413
      
12,147
      
21,088
      
764
      
-
      
-
  
Substandard
    
6,382
      
14,806
      
15,831
      
589
      
-
      
-
  
Doubtful
    
-
      
42
      
-
      
-
      
-
      
-
  
Total
   $
120,230
     $
350,295
     $
400,367
     $
48,607
     $
18,933
     $
23,308
  
 
 
The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the consumer loans outstanding based on payment activity as of
March
31,
2017
and
December
31,
2016.
 
   
March 31, 2017
    
December 31, 2016
  
   
Consumer
    
Consumer
  
(In thousands)
  
Secured
    
Unsecured
    
Secured
    
Unsecured
  
Credit risk profile based on payment activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Performing
   $
4,353
     $
3,991
     $
4,550
     $
4,538
  
Nonperforming
    
1
      
135
      
4
      
143
  
Total
   $
4,354
     $
4,126
     $
4,554
     $
4,681
  
 
The Company evaluates the loan risk grading system definitions and allowance for loan loss methodology on an ongoing basis. During the
first
quarter of
2017,
the Company shortened the look-back period it uses to determine historical loss rates to the previous
twelve
quarters from
sixteen
quarters. No other significant changes were made to the loan risk grading system definitions and allowance for loan loss methodology during the past year.