NOTE 3: Loans

Major classifications of loans are summarized as follows:


	March 31,		December 31,
(Dollars in thousands)	2016		2015
Real estate – residential mortgage	$	184,860	$	186,763
Real estate – construction 1		27,214		7,759
Commercial, financial and agricultural 2		364,708		356,062
Equity lines		49,901		50,111
Consumer		9,139		9,011
Consumer finance		289,188		291,755
		925,010		901,461
Less allowance for loan losses		(35,838)		(35,569)
Loans, net	$	889,172	$	865,892

Includes the Corporation's real estate construction lending and consumer real estate lot lending.

Includes the Corporation’s commercial real estate lending, land acquisition and development lending, builder line lending and commercial business lending.

Consumer loans included $243,000 and $266,000 of demand deposit overdrafts at March 31, 2016 and December 31, 2015, respectively.

The outstanding principal balance and the carrying amount of loans acquired pursuant to the Corporation's acquisition of Central Virginia Bank (CVB) on October 1, 2013 (or acquired loans) that were recorded at fair value at the acquisition date and are included in the consolidated balance sheet at March 31, 2016 and December 31, 2015 were as follows:


	March 31, 2016						December 31, 2015
	Acquired Loans -		Acquired Loans -				Acquired Loans -		Acquired Loans -
	Purchased		Purchased		Acquired Loans -		Purchased		Purchased		Acquired Loans -
(Dollars in thousands)	Credit Impaired		Performing		Total		Credit Impaired		Performing		Total
Outstanding principal balance	$	24,420	$	67,033	$	91,453	$	25,701	$	70,993	$	96,694
Carrying amount
Real estate – residential mortgage	$	1,188	$	15,055	$	16,243	$	1,305	$	15,478	$	16,783
Commercial, financial and agricultural1		11,304		34,315		45,619		12,317		37,287		49,604
Equity lines		278		13,765		14,043		286		13,969		14,255
Consumer		—		227		227		—		288		288
Total acquired loans	$	12,770	$	63,362	$	76,132	$	13,908	$	67,022	$	80,930

Includes acquired loans classified by the Corporation as commercial real estate lending, land acquisition and development lending, builder line lending and commercial business lending.

Loans on nonaccrual status were as follows:


	March 31,		December 31,
(Dollars in thousands)	2016		2015
Real estate – residential mortgage	$	2,293	$	2,297
Real estate – construction:
Construction lending		—		—
Consumer lot lending		—		—
Commercial, financial and agricultural:
Commercial real estate lending		2,446		2,515
Land acquisition and development lending		—		—
Builder line lending		—		359
Commercial business lending		155		86
Equity lines		750		881
Consumer		4		19
Consumer finance		184		830
Total loans on nonaccrual status	$	5,832	$	6,987

The past due status of loans as of March 31, 2016 was as follows:


															90+ Days
	30 - 59 Days		60 - 89 Days		90+ Days		Total								Past Due and
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		PCI		Current1		Total Loans		Accruing 2
Real estate – residential mortgage	$	988	$	411	$	380	$	1,779	$	1,188	$	181,893	$	184,860	$	203
Real estate – construction:
Construction lending		—		—		—		—		—		22,915		22,915		—
Consumer lot lending		—		—		—		—		—		4,299		4,299		—
Commercial, financial and agricultural:
Commercial real estate lending3		94		4,841		661		5,596		9,421		195,872		210,889		32
Land acquisition and development lending		—		—		—		—		—		49,918		49,918		—
Builder line lending		—		—		—		—		—		25,900		25,900		—
Commercial business lending		14		82		—		96		1,883		76,021		78,001		—
Equity lines		133		—		—		133		278		49,490		49,901		—
Consumer		26		5		4		35		—		9,104		9,139		2
Consumer finance		7,293		699		184		8,176		—		281,012		289,188		—
Total	$	8,548	$	6,038	$	1,229	$	15,815	$	12,770	$	896,424	$	925,010	$	237

For the purposes of the table above, “Current” includes loans that are 1-29 days past due.

Includes purchased credit impaired (PCI) loans of $235,000.

Commercial real estate loans past due 60-89 days at March 31, 2016 consist of loans to one borrower which were 60 days past due.

The table above includes the following:

nonaccrual loans that are current of $3.82 million, 30-59 days past due of $288,000, 60-89 days past due of $493,000 and 90+ days past due of $1.23 million.

performing loans purchased in the acquisition of CVB that are current of $62.95 million, 30-59 days past due of $165,000, 60-89 past dues of $155,000 and 90+ days past due of $89,000.

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


															90+ Days
	30 - 59 Days		60 - 89 Days		90+ Days		Total								Past Due and
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		PCI		Current1		Total Loans		Accruing2
Real estate – residential mortgage	$	737	$	146	$	574	$	1,457	$	1,305	$	184,001	$	186,763	$	268
Real estate – construction:
Construction lending		—		—		—		—		—		5,996		5,996		—
Consumer lot lending		—		—		—		—		—		1,763		1,763		—
Commercial, financial and agricultural:
Commercial real estate lending		1,475		1,280		423		3,178		10,359		204,079		217,616		172
Land acquisition and development lending		—		—		—		—		—		46,311		46,311		—
Builder line lending		—		—		359		359		—		20,612		20,971		—
Commercial business lending		20		86		321		427		1,958		68,779		71,164		321
Equity lines		378		—		612		990		286		48,835		50,111		—
Consumer		84		2		19		105		—		8,906		9,011		—
Consumer finance		15,046		2,264		830		18,140		—		273,615		291,755		—
Total	$	17,740	$	3,778	$	3,138	$	24,656	$	13,908	$	862,897	$	901,461	$	761

For the purposes of the table above, “Current” includes loans that are 1-29 days past due.

Includes PCI loans of $172,000.

The table above includes the following:

nonaccrual loans that are current of $3.17 million, 30-59 days past due of $377,000, 60‑89 days past due of $887,000 and 90+ days past due of $2.55 million.

performing loans purchased in the acquisition of CVB that are current of $66.37 million, 30-59 days past due of $270,000, 60-89 days past due of $0 and 90+ days past due of $378,000.

Loan modifications that were classified as TDRs during the three months ended March 31, 2016 and 2015 were as follows:


	Three Months Ended March 31,
	2016					2015
		Pre-		Post-			Pre-		Post-
		Modification		Modification			Modification		Modification
	Number of	Recorded		Recorded		Number of	Recorded		Recorded
(Dollars in thousands)	Loans	Investment		Investment		Loans	Investment		Investment
Real estate – residential mortgage – interest rate concession	1	$	57	$	57	1	$	239	$	239
Commercial, financial and agricultural:
Commercial real estate lending – interest rate concession	—		—		—	1		15		15
Commercial business lending – interest rate concession	1		100		100	1		17		17
Consumer – interest rate concession	1		291		291	—		—		—
Total	3	$	448	$	448	3	$	271	$	271

A TDR payment default occurs when, within 12 months of the original TDR modification, either a full or partial charge-off occurs or a TDR becomes 90 days or more past due. There were no TDR defaults during the three months ended March 31, 2016 or 2015.

Impaired loans, which consisted solely of TDRs, and the related allowance at March 31, 2016 were as follows:



			Recorded		Recorded
			Investment		Investment				Average
	Unpaid		in Loans		in Loans				Balance-		Interest
	Principal		without		with		Related		Impaired		Income
(Dollars in thousands)	Balance		Specific Reserve		Specific Reserve		Allowance		Loans		Recognized
Real estate – residential mortgage	$	2,811	$	172	$	2,528	$	344	$	2,708	$	26
Commercial, financial and agricultural:
Commercial real estate lending		2,475		58		2,190		435		2,265		8
Commercial business lending		189		—		186		39		191		2
Equity lines		32		30		—		—		30		—
Consumer		498		—		498		74		498		4
Total	$	6,005	$	260	$	5,402	$	892	$	5,692	$	40

Impaired loans, which consisted solely of TDRs, and the related allowance at December 31, 2015 were as follows:



			Recorded		Recorded
			Investment		Investment				Average
	Unpaid		in Loans		in Loans				Balance-		Interest
	Principal		without		with		Related		Impaired		Income
(Dollars in thousands)	Balance		Specific Reserve		Specific Reserve		Allowance		Loans		Recognized
Real estate – residential mortgage	$	2,828	$	173	$	2,516	$	360	$	2,718	$	97
Commercial, financial and agricultural:
Commercial real estate lending		2,522		61		2,258		438		2,361		35
Commercial business lending		99		—		99		28		108		1
Equity lines		32		30		—		—		30		1
Consumer		207		—		207		23		208		7
Total	$	5,688	$	264	$	5,080	$	849	$	5,425	$	141

PCI loans had an unpaid principal balance of $24.4 million and a carrying value of $12.8 million at March 31, 2016. Determining the fair value of purchased credit impaired loans required the Corporation to estimate cash flows expected to result from those loans and to discount those cash flows at appropriate rates of interest. For such loans, the excess of the cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans and is called the accretable yield. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the effect of estimated credit losses and is called the nonaccretable difference, and is not recorded. In accordance with U.S. GAAP, there was no carry-over of previously established allowance for loan losses for acquired loans.

The following table presents a summary of the change in the accretable yield of the PCI loan portfolio for the three months ended March 31, 2016 and 2015:


	March 31,
(Dollars in thousands)	2016		2015
Accretable yield, balance at beginning of period	$	10,419	$	13,488
Accretion		(462)		(753)
Reclassification of nonaccretable difference due to improvement in expected cash flows		441		3
Other changes, net		(263)		(362)
Accretable yield, balance at end of period	$	10,135	$	12,376