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Note 4 - Loans and Allowance for Loan Losses
 12 Months Ended
Dec. 31, 2017
Notes to Financial Statements  
Financing Receivables [Text Block]
4
.
Loans
and Allowance for Loan Losses
 
Major classifications of loans are summarized
in the following table
.
             
December 31, (In thousands)
  
201
7
    
201
6
  
Real Estate
  
 
 
 
  
 
 
 
Real estate
mortgage – construction and land development
   $
129,181
     $
120,230
  
Real estate mortgage
– residential
    
355,304
      
350,295
  
Real estate mortgage
– farmland and other commercial enterprises
    
432,321
      
400,367
  
Commercial
  
 
 
 
  
 
 
 
Commercial and industrial
    
63,417
      
48,607
  
States and political subdivisions
    
27,209
      
18,933
  
Other
    
19,916
      
23,308
  
Consumer
  
 
 
 
  
 
 
 
Secured
    
4,853
      
4,554
  
Unsecured
    
3,062
      
4,681
  
Total loans
    
1,035,263
      
970,975
  
Less unearned income
    
-
      
-
  
Total loans, net of unearned income
   $
1,035,263
     $
970,975
  
 
From time to time the Company
may
purchase a limited amount of loans originated by otherwise nonaffiliated
third
parties. The Company performs its own risk assessment and makes the credit decision on each loan prior to purchase. The Company purchased smal
ler balance commercial loans totaling
$2.8
million and
$2.5
million in the aggregate during
2017
and
2016,
respectively. The average individual balance of the purchased loans was
$123
thousand for
2017
and
$120
thousand for
2016
.
 
Loans to directors, execut
ive officers, and principal shareholders of the Company and its subsidiaries (including loans to affiliated companies of which they are principal owners) and loans to members of the immediate family of such persons were
$13.1
million at
December 31, 2017.
Such loans were made in the normal course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers and did
not
involve more than the normal risk of collectability
. An analysis of the activity with respect to these loans is presented in the table below.
       
(In thousands)
  
Amount
  
Balance at December 31, 201
6
   $
13,499
  
New loans
    
11,549
  
Repayments
    
(5,693
 )
Loans no longer meeting disclosure
requirements, new loans meeting disclosure requirements, and other adjustments, net
    
(6,231
 )
Balance
at December 31, 2017
   $
13,124
  
 
Activity in
the allowance for loan losses by portfolio segment was as follows for each of the
three
years in the period ended
December 31, 2017:
                         
(
In thousands)
  
Real Estate
    
Commercial
    
Consumer
    
Total
  
201
7
                                
Balance at beginning of period
   $
8,205
     $
854
     $
285
     $
9,344
  
Provision for loan losses
    
(537
 )    
237
      
89
      
(211
 )
Recoveries
    
1,386
      
139
      
55
      
1,580
  
Loans charged off
    
(545
 )    
(279
 )    
(106
 )    
(930
 )
Balance
at end of period
   $
8,509
     $
951
     $
323
     $
9,783
  
201
6
                                
Balance at beginning of period
   $
9,173
     $
820
     $
322
     $
10,315
  
Provision for loan losses
    
(702
 )    
50
      
8
      
(644
 )
Recoveries
    
141
      
203
      
69
      
413
  
Loans charged off
    
(407
 )    
(219
 )    
(114
 )    
(740
 )
Balance at end of period
   $
8,205
     $
854
     $
285
     $
9,344
  
201
5
                                
Balance at beginning of period
   $
12,542
     $
1,153
     $
273
     $
13,968
  
Provision for loan losses
    
(3,099
 )    
(449
 )    
119
      
(3,429
 )
Recoveries
    
463
      
210
      
112
      
785
  
Loans charged off
    
(733
 )    
(94
 )    
(182
 )    
(1,009
 )
Balance at end of period
   $
9,173
     $
820
     $
322
     $
10,315
  
 
 
The following table
s present individually impaired loans by class of loans for the dates indicated.
                                                 
As of and for the Year Ended December 31,
2017
(In thousands)
  
Unpaid
Principal
Balance
    
Recorded
Investment
With No
Allowance
    
Recorded
Investment
With
Allowance
    
Total
Recorded
Investment
    
Allowance
for
Loan Losses
Allocated
    
Average
    
Interest
Income
Recognized
    
Cash Basis
Interest
Recognized
  
Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Real estate
mortgage – construction and land development
   $
4,076
     $
1,746
     $
1,955
     $
3,701
     $
402
     $
5,124
     $
239
     $
239
  
Real estate mortgage
– residential
    
10,112
      
3,233
      
6,877
      
10,110
      
1,973
      
10,337
      
525
      
521
  
Real estate mortgage
– farmland and other commercial enterprises
    
8,737
      
2,203
      
6,367
      
8,570
      
319
      
19,139
      
917
      
908
  
Commercial
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
    
448
      
-
      
448
      
448
      
270
      
440
      
25
      
25
  
Other
    
-
      
-
      
-
      
-
      
-
      
6
      
-
      
-
  
Consumer
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Unsecured
    
312
      
-
      
312
      
312
      
218
      
329
      
17
      
17
  
Total
   $
23,685
     $
7,182
     $
15,959
     $
23,141
     $
3,182
     $
35,375
     $
1,723
     $
1,710
  
 
                                                 
As of and for the Year Ended 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
    
Average
    
Interest
Income
Recognized
    
Cash Basis
Interest
Recognized
  
Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Real estate mortgage
– construction and land development
   $
9,076
     $
2,599
     $
3,800
     $
6,399
     $
759
     $
7,706
     $
310
     $
298
  
Real estate mortgage
– residential
    
9,930
      
4,388
      
5,590
      
9,978
      
1,503
      
9,146
      
491
      
465
  
Real
estate mortgage – farmland and other commercial enterprises
    
25,045
      
9,699
      
15,235
      
24,934
      
304
      
25,557
      
1,197
      
1,153
  
Commercial
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
    
435
      
20
      
418
      
438
      
236
      
419
      
23
      
21
  
Consumer
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Unsecured
    
146
      
-
      
146
      
146
      
146
      
151
      
7
      
6
  
Total
   $
44,632
     $
16,706
     $
25,189
     $
41,895
     $
2,948
     $
42,979
     $
2,028
     $
1,943
  
 
 
Year Ended December 31,
2015
(In thousands)
  
Average
    
Interest
Income
Recognized
    
Cash Basis
Interest
Recognized
  
Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
Real estate mortgage
– construction and land development
   $
9,409
     $
343
     $
337
  
Real estate mortgage
– residential
    
9,810
      
448
      
438
  
Real estate mortgage
– farmland and other commercial enterprises
    
22,439
      
890
      
887
  
Commercial
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
    
523
      
16
      
16
  
Consumer
  
 
 
 
  
 
 
 
  
 
 
 
Unsecured
    
127
      
6
      
6
  
Total
   $
42,308
     $
1,703
     $
1,684
  
 
 
The following table
s present the balance of the allowance for loan losses and the recorded investment in loans by portfolio segment based on impairment method as of
December 31, 2017
and
2016.
                         
December 31,
2017 (In thousands)
  
Real Estate
    
Commercial
    
Consumer
    
Total
  
Allowance for Loan Losses
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Ending allowance balance attributable to loans:
                                
Individually evaluated for impairment
   $
2,694
     $
270
     $
218
     $
3,182
  
Collectively evaluated for impairment
    
5,815
      
681
      
105
      
6,601
  
Total ending allowance balance
   $
8,509
     $
951
     $
323
     $
9,783
  
                                 
Loans
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Loans individually evaluated for impairment
   $
22,381
     $
448
     $
312
     $
23,141
  
Loans collectively evaluated for impairment
    
894,425
      
110,094
      
7,603
      
1,012,122
  
Total ending loan balance, net of unearned income
   $
916,806
     $
110,542
     $
7,915
     $
1,035,263
  
 
                         
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 table
s present the recorded investment in nonperforming loans by class of loans as of
December 31, 2017
and
2016
.
 
 
December 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
   $
151
     $
1,955
     $
-
  
Real estate mortgage – residential
    
1,763
      
5,326
      
-
  
Real estate mortgage – farmland and other commercial enterprises
    
1,752
      
3,703
      
-
  
Commercial
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
    
53
      
370
      
-
  
Consumer
  
 
 
 
  
 
 
 
  
 
 
 
Unsecured
    
168
      
128
      
-
  
Total
   $
3,887
     $
11,482
     $
-
  
 
                   
 
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
$1.8
million and
$2.0
million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings and that are in compliance with those terms as of
December 31, 2017
and
2016,
respectively. The Company had
no
commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings at
December 31, 2017
and
2016.
There were
no
loans modified as troubled debt restructurings during
2017
or
2016
.
 
The table
s below present an age analysis of loans past due
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
.
                                           
December 31, 201
7 (In thousands)
  
30-89
Days
Past Due
    
90 Days
or More
Past Due
    
Total
    
Current
    
Total
Loans
    
Loans
Past Due
90 Days
or More
and Still
Accruing
    
Nonaccrual
Loans
  
Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Real estate mortgage – construction and land development
   $
15
     $
87
     $
102
     $
129,079
     $
129,181
     $
-
     $
151
  
Real estate mortgage – residential
    
1,160
      
538
      
1,698
      
353,606
      
355,304
      
-
      
1,763
  
Real estate mortgage – farmland and other commercial enterprises
    
966
      
948
      
1,914
      
430,407
      
432,321
      
-
      
1,752
  
Commercial
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Commercial and industrial
    
62
      
-
      
62
      
63,355
      
63,417
      
-
      
53
  
States and political subdivisions
    
-
      
-
      
-
      
27,209
      
27,209
      
-
      
-
  
Other
    
21
      
-
      
21
      
19,895
      
19,916
      
-
      
-
  
Consumer
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Secured
    
-
      
-
      
-
      
4,853
      
4,853
      
-
      
-
  
Unsecured
    
9
      
-
      
9
      
3,053
      
3,062
      
-
      
168
  
Total
   $
2,233
     $
1,573
     $
3,806
     $
1,031,457
     $
1,035,263
     $
-
     $
3,887
  
 
                                           
December 31, 201
6 (In thousands)
  
30-89
Days
Past Due
    
90 Days
or More
Past Due
    
Total
    
Current
    
Total
Loans
    
Loans Past
Due 90
Days or
More and
Still
Accruing
    
Nonaccrual
Loans
  
Real Estate
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Real estate mortgage – construction and land development
   $
393
     $
227
     $
620
     $
119,610
     $
120,230
     $
-
     $
712
  
Real estate mortgage – residential
    
1,935
      
798
      
2,733
      
347,562
      
350,295
      
-
      
2,316
  
Real estate mortgage – farmland and other commercial enterprises
    
-
      
2,483
      
2,483
      
397,884
      
400,367
      
-
      
3,383
  
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
      
-
      
4
  
Unsecured
    
30
      
8
      
38
      
4,643
      
4,681
      
-
      
8
  
Total
   $
2,395
     $
3,516
     $
5,911
     $
965,064
     $
970,975
     $
-
     $
6,423
  
 
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.
 
   
Real Estate
    
Commercial
  
December 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
   $
124,926
     $
330,401
     $
414,663
     $
62,490
     $
27,209
     $
19,898
  
Special Mention
    
396
      
9,196
      
7,556
      
474
      
-
      
18
  
Substandard
    
3,859
      
15,707
      
10,102
      
453
      
-
      
-
  
Doubtful
    
-
      
-
      
-
      
-
      
-
      
-
  
Total
   $
129,181
     $
355,304
     $
432,321
     $
63,417
     $
27,209
     $
19,916
  
 
   
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 also 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
December 31, 2017
and
2016.
             
   
December 31,
2017
    
December 31,
2016
  
   
Consumer
    
Consumer
  
(In thousands)
  
Secured
    
Unsecured
    
Secured
    
Unsecured
  
Credit risk profile based on payment activity
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Performing
   $
4,853
     $
2,766
     $
4,550
     $
4,538
  
Nonperforming
    
-
      
296
      
4
      
143
  
Total
   $
4,853
     $
3,062
     $
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 prev
ious
twelve
quarters from
sixteen
quarters.
No
other significant changes were made to the loan risk grading system definitions or allowance for loan loss methodology during the past year.