6.	LOANS AND ALLOWANCE FOR LOAN LOSSES

Portfolio Segments

The Company has divided the loan portfolio into eight portfolio segments, each with different risk characteristics described as follows:

Construction, land development and other land loans

– Commercial construction, land and land development loans include loans for the development of residential housing projects, loans for the development of commercial and industrial use property and loans for the purchase and improvement of raw land. These loans are secured in whole or in part by the underlying real estate collateral and are generally guaranteed by the principals of the borrowing entity.

Secured by 1-4 family residential properties

– These loans include conventional mortgage loans on one-to-four family residential properties. These properties may serve as the borrower’s primary residence, vacation home or investment property. Also included in this portfolio are home equity loans and lines of credit. This type of lending, which is secured by a first or second mortgage on the borrower’s residence, allows customers to borrow against the equity in their home.

Secured by multi-family residential properties

– This portfolio segment includes mortgage loans secured by apartment buildings.

Secured by non-farm, non-residential properties

– This portfolio segment includes real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers or other commercial property. These loans are generally guaranteed by the principals of the borrowing entity.

Other real estate loans

– Other real estate loans are loans primarily for agricultural production, secured by mortgages on farmland.

Commercial and industrial loans

– This portfolio segment includes loans to commercial customers for use in the normal course of business. These credits may be loans and lines of credit to financially strong borrowers, secured by inventories, equipment or receivables, and are generally guaranteed by the principals of the borrowing entity.

Consumer loans

– This portfolio segment includes a variety of secured and unsecured personal loans, including automobile loans, loans for household and personal purposes and all other direct consumer installment loans.

Other loans

– Other loans include credit cards, overdrawn checking accounts reclassified to loans and overdraft lines of credit.

As of

June 30, 2016 and December 31, 2015, the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

	June 30 , 201 6
	FUSB		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	24,306	$	—	$	24,306
Secured by 1-4 family residential properties		33,326		15,430		48,756
Secured by multi-family residential properties		5,972		—		5,972
Secured by non-farm, non-residential properties		105,541		—		105,541
Other		190		—		190
Commercial and industrial loans		38,160		—		38,160
Consumer loans		6,366		80,886		87,252
Other loans		364		—		364
Total loans		214,225		96,316		310,541
Less: Unearned interest, fees and deferred cost		192		7,857		8,049
Allowance for loan losses		1,138		2,453		3,591
Net loans	$	212,895	$	86,006	$	298,901

	December 31, 201 5
	FUSB		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	11,827	$	—	$	11,827
Secured by 1-4 family residential properties		30,730		17,233		47,963
Secured by multi-family residential properties		11,845		—		11,845
Secured by non-farm, non-residential properties		83,883		—		83,883
Other		115		—		115
Commercial and industrial loans		29,377		—		29,377
Consumer loans		7,057		76,131		83,188
Other loans		379		—		379
Total loans		175,213		93,364		268,577
Less: Unearned interest, fees and deferred cost		149		9,215		9,364
Allowance for loan losses		1,329		2,452		3,781
Net loans	$	173,735	$	81,697	$	255,432

Although the Company has a diversified loan portfolio,

59.5% and 58.0% of the portfolio was concentrated in loans secured by real estate located primarily within a single geographic region of the United States as of June 30, 2016 and December 31, 2015, respectively.

As of June 30, 2016, loans with variable interest rate payment terms represented 56.1% of the Bank

’s loan portfolio, while loans with fixed interest rate payment terms represented 43.9% of the portfolio. As of December 31, 2015, variable rate loans represented 52.1% of the Bank’s portfolio, while fixed rate loans represented 47.9%. At ALC, all loans are originated under fixed interest rate payment terms.

Related Party Loans

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with

non-related parties. Management believes that such loans do not represent more than a normal risk of collectability, nor do they present other unfavorable features. The aggregate balances of such related party loans and commitments as of both June 30, 2016 and December 31, 2015 were $2.9 million. During the six months ended June 30, 2016, there was one new loan to these parties, and repayments by active related parties were $71 thousand. During the year ended December 31, 2015, there were no new loans to these related parties, and repayments by active related parties were $0.2 million.

Allowance for Loan Losses

The following tables present changes in the allowance for loan losses by loan portfolio segment and loan type as of

June 30, 2016 and December 31, 2015. While no portion of the allowance is in any way restricted to any individual loan or group of loans and the entire allowance is available to absorb losses from any and all loans, these tables represent management's allocation of the allowance for loan losses to specific loan categories as of the dates indicated.

	FUSB
	Six M onths Ended June 30 , 201 6
	Commercial & Industrial		Commercial Real Estate			Consumer			Residential Real Estate			Other			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	133	$	1,118		$	28		$	36		$	14		$	1,329
Charge-offs		—		—			(27	)		(7	)		—			(34	)
Recoveries		19		230			34			10			—			293
Provision		57		(577	)		(18	)		96			(8	)		(450	)
Ending balance		209		771			17			135			6			1,138
Ending balance individually evaluated for impairment		64		291			—			5			—			360
Ending balance collectively evaluated for impairment	$	145	$	480		$	17		$	130		$	6		$	778
Loan receivables:
Ending balance		38,160		136,009			6,366			33,326			364			214,225
Ending balance individually evaluated for impairment		427		1,934			—			251			—			2,612
Ending balance collectively evaluated for impairment	$	37,733	$	134,075		$	6,366		$	33,075		$	364		$	211,613

	ALC
	Six Months Ended June 30 , 201 6
	Commercial & Industrial		Commercial Real Estate		Consumer			Residential Real Estate			Other		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	—	$	2,202		$	250		$	—	$	2,452
Charge-offs		—		—		(1,511	)		(21	)		—		(1,532	)
Recoveries		—		—		351			29			—		380
Provision		—		—		1,229			(76	)		—		1,153
Ending balance		—		—		2,271			182			—		2,453
Ending balance individually evaluated for impairment		—		—		—			—			—		—
Ending balance collectively evaluated for impairment	$	—	$	—	$	2,271		$	182		$	—	$	2,453
Loan receivables:
Ending balance		—		—		80,886			15,430			—		96,316
Ending balance individually evaluated for impairment		—		—		—			—			—		—
Ending balance collectively evaluated for impairment	$	—	$	—	$	80,886		$	15,430		$	—	$	96,316

	FUSB & ALC
	Six Months Ended June 30 , 201 6
	Commercial & Industrial		Commercial Real Estate			Consumer			Residential Real Estate			Other			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	133	$	1,118		$	2,230		$	286		$	14		$	3,781
Charge-offs		—		—			(1,538	)		(28	)		—			(1,566	)
Recoveries		19		230			385			39			—			673
Provision		57		(577	)		1,211			20			(8	)		703
Ending balance		209		771			2,288			317			6			3,591
Ending balance individually evaluated for impairment		64		291			—			5			—			360
Ending balance collectively evaluated for impairment	$	145	$	480		$	2,288		$	312		$	6		$	3,231
Loan receivables:
Ending balance		38,160		136,009			87,252			48,756			364			310,541
Ending balance individually evaluated for impairment		427		1,934			—			251			—			2,612
Ending balance collectively evaluated for impairment	$	37,733	$	134,075		$	87,252		$	48,505		$	364		$	307,929

	FUSB
	Year Ended December 31, 201 5
	Commercial & Industrial			Commercial Real Estate			Consumer			Residential Real Estate			Other		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	141		$	2,810		$	114		$	421		$	—	$	3,486
Charge-offs		—			(767	)		(17	)		(68	)		—		(852	)
Recoveries		61			12			70			111			—		254
Provision		(69	)		(937	)		(139	)		(428	)		14		(1,559	)
Ending balance		133			1,118			28			36			—		1,329
Ending balance individually evaluated for impairment		80			230			—			—			—		310
Ending balance collectively evaluated for impairment	$	53		$	888		$	28		$	36		$	14	$	1,019
Loan receivables:
Ending balance		29,377			107,670			7,057			30,730			379		175,213
Ending balance individually evaluated for impairment		444			2,018			—			252			—		2,714
Ending balance collectively evaluated for impairment	$	28,933		$	105,652		$	7,057		$	30,478		$	379	$	172,499

	ALC
	Year Ended December 31, 201 5
	Commercial & Industrial		Commercial Real Estate		Consumer			Residential Real Estate			Other		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	—	$	2,336		$	346		$	—	$	2,682
Charge-offs		—		—		(2,552	)		(187	)		—		(2,739	)
Recoveries		—		—		712			22			—		734
Provision		—		—		1,706			69			—		1,775
Ending balance		—		—		2,202			250			—		2,452
Ending balance individually evaluated for impairment		—		—		—			—			—		—
Ending balance collectively evaluated for impairment	$	—	$	—	$	2,202		$	250		$	—	$	2,452
Loan receivables:
Ending balance		—		—		76,131			17,233			—		93,364
Ending balance individually evaluated for impairment		—		—		—			—			—		—
Ending balance collectively evaluated for impairment	$	—	$	—	$	76,131		$	17,233		$	—	$	93,364

	FUSB & ALC
	Year Ended December 31, 201 5
	Commercial & Industrial			Commercial Real Estate			Consumer			Residential Real Estate			Other		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	141		$	2,810		$	2,450		$	767		$	—	$	6,168
Charge-offs		—			(767	)		(2,569	)		(255	)		—		(3,591	)
Recoveries		61			12			782			133			—		988
Provision		(69	)		(937	)		1,567			(359	)		14		216
Ending balance		133			1,118			2,230			286			—		3,781
Ending balance individually evaluated for impairment		80			230			—			—			—		310
Ending balance collectively evaluated for impairment	$	53		$	888		$	2,230		$	286		$	14	$	3,471
Loan receivables:
Ending balance		29,377			107,670			83,188			47,963			379		268,577
Ending balance individually evaluated for impairment		444			2,018			—			252			—		2,714
Ending balance collectively evaluated for impairment	$	28,933		$	105,652		$	83,188		$	47,711		$	379	$	265,863

Credit Quality

The Bank utilizes a

credit grading system that provides a uniform framework for establishing and monitoring credit risk in the loan portfolio. Under this system, each loan is graded based on pre-determined risk metrics and categorized into one of nine risk grades. These risk grades can be summarized into categories described as pass, special mention, substandard, doubtful and loss, as described in further detail below.

●

Pass (Risk Grades 1-5): Loans in this category include obligations

in which the probability of default is considered low.

●

Special Mention (Risk Grade 6):

Loans in this category exhibit potential credit weaknesses or downward trends deserving Bank management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Although a special mention asset has a higher probability of default than pass-rated categories, its default is not imminent.

●

Substandard (Risk Grade 7):

Loans in this category have defined weaknesses that jeopardize the orderly liquidation of debt. A substandard loan is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. There is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified as substandard.

●

Doubtful (Risk Grade 8):

Loans classified as doubtful have all of the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of debt in full, based on currently existing facts, conditions and values, highly questionable or improbable. Serious problems exist such that partial loss of principal is likely; however, because of certain important, reasonably specific pending factors that may work to strengthen the assets, the loans’ classification as estimated losses is deferred until a more exact status may be determined. Such pending factors may include proposed merger, acquisition or liquidation procedures, capital injection, perfection of liens on additional collateral and refinancing plans. Loans classified as doubtful may include loans to borrowers that have demonstrated a history of failing to live up to agreements.

●

Loss (Risk Grade 9):

Loans are classified in this category when borrowers are deemed incapable of repayment of unsecured debt. Loans to such borrowers are considered uncollectable and of such little value that continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not prudent to defer writing off these assets, even though partial recovery may be effected in the future.

At ALC, because the loan portfolio is more uniform in nature, each loan is categorized into one of two risk grades, depending on whether the loan is considered to be performing or nonperforming. Performing loans are loans that are paying principal and interest in accordance with

a contractual agreement. Nonperforming loans are loans that are either not paying as contractually agreed or that have demonstrated characteristics that indicate a probability of loss.

The tables below illustrate the carrying amount of loans by credit quality indicator as of June

30, 2016.

	FUSB
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	22,679	$	—	$	1,627	$	—	$	24,306
Secured by 1-4 family residential properties		31,787		221		1,318		—		33,326
Secured by multi-family residential properties		5,972		—		—		—		5,972
Secured by non-farm, non-residential properties		100,898		3,841		802		—		105,541
Other		190		—		—		—		190
Commercial and industrial loans		36,998		470		692		—		38,160
Consumer loans		6,250		—		116		—		6,366
Other loans		364		—		—		—		364
Total	$	205,138	$	4,532	$	4,555	$	—	$	214,225

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	15,094	$	336	$	15,430
Consumer loans		79,689		1,197		80,886
Total	$	94,783	$	1,533	$	96,316

The tables below illustrate the carrying amount of loans by credit quality indicator as of December

31, 2015.

	FUSB
	Pass 1-5		Special Mention 6		Substandard 7		Doubtful 8		Total
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	9,862	$	—	$	1,965	$	—	$	11,827
Secured by 1-4 family residential properties		29,252		228		1,250		—		30,730
Secured by multi-family residential properties		11,845		—		—		—		11,845
Secured by non-farm, non-residential properties		78,647		4,315		921		—		83,883
Other		115		—		—		—		115
Commercial and industrial loans		28,170		482		725		—		29,377
Consumer loans		6,905		—		152		—		7,057
Other loans		379		—		—		—		379
Total	$	165,175	$	5,025	$	5,013	$	—	$	175,213

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	16,964	$	269	$	17,233
Consumer loans		74,743		1,388		76,131
Total	$	91,707	$	1,657	$	93,364

The following tables provide an aging analysis of past due loans by class as of June

30, 2016.

	FUSB
	As of June 30 , 201 6
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	65	$	—	$	126	$	191	$	24,115	$	24,306	$	—
Secured by 1-4 family residential properties		272		40		353		665		32,661		33,326		—
Secured by multi-family residential properties		—		—		—		—		5,972		5,972		—
Secured by non-farm, non-residential properties		—		—		—		—		105,541		105,541		—
Other		—		—		—		—		190		190		—
Commercial and industrial loans		55		24		—		79		38,081		38,160		—
Consumer loans		5		42		16		63		6,303		6,366		—
Other loans		—		—		—		—		364		364		—
Total	$	397	$	106	$	495	$	998	$	213,227	$	214,225	$	—

	ALC
	As of June 30 , 201 6
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		130		53		332		515		14,915		15,430		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans		822		438		1,190		2,450		78,436		80,886		—
Other loans		—		—		—		—		—		—		—
Total	$	952	$	491	$	1,522	$	2,965	$	93,351	$	96,316	$	—

The following tables provide an aging analysis of past due loans by class as of December 31, 201

	FUSB
	As of December 31, 201 5
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	86	$	86	$	11,741	$	11,827	$	—
Secured by 1-4 family residential properties		118		206		360		684		30,046		30,730		—
Secured by multi-family residential properties		—		—		—		—		11,845		11,845		—
Secured by non-farm, non-residential properties		530		—		148		678		83,205		83,883		—
Other		—		—		—		—		115		115		—
Commercial and industrial loans		22		52		—		74		29,303		29,377		—
Consumer loans		49		4		83		136		6,921		7,057		—
Other loans		—		—		—		—		379		379		—
Total	$	719	$	262	$	677	$	1,658	$	173,555	$	175,213	$	—

	ALC
	As of December 31, 201 5
	30-59 Days Past Due		60-89 Days Past Due		90 Days Or Greater		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days And Accruing
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Secured by 1-4 family residential properties		91		206		252		549		16,684		17,233		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans		965		567		1,377		2,909		73,222		76,131		—
Other loans		—		—		—		—		—		—		—
Total	$	1,056	$	773	$	1,629	$	3,458	$	89,906	$	93,364	$	—

The following table provides an analysis of non-accruing loans by class as of June

30, 2016 and December 31, 2015.

	Loans on Non-Accrual Status
	June 30 , 201 6		December 31, 201 5
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	126	$	339
Secured by 1-4 family residential properties		1,032		968
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		70		213
Commercial and industrial loans		82		47
Consumer loans		1,309		1,535
Total loans	$	2,619	$	3,102

Impaired Loans

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the related loan agreement. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported at the present value of estimated future cash flows using the loan

’s existing rate or at the fair value of collateral if repayment is expected solely from the liquidation of the collateral. All loans of $0.5 million or more that have a credit quality risk grade of seven or above are identified for impairment analysis. Impaired loans, or portions thereof, are charged off when deemed uncollectable.

As of

June 30, 2016, the carrying amount of impaired loans consisted of the following:

	June 30 , 201 6
Impaired loans with no related allowance recorded	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		54		54		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	54	$	54	$	—

Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,377	$	1,377	$	177
Secured by 1-4 family residential properties		197		197		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		557		557		114
Commercial and industrial		427		427		64
Total loans with an allowance recorded	$	2,558	$	2,558	$	360

Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,377	$	1,377	$	177
Secured by 1-4 family residential properties		251		251		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		557		557		114
Commercial and industrial		427		427		64
Total impaired loans	$	2,612	$	2,612	$	360

As of December

31, 2015, the carrying amount of impaired loans consisted of the following:

	December 31, 201 5
Impaired loans with no related allowance recorded	Carrying Amount		Unpaid Principal Balance		Related Allowances
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		54		54		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	54	$	54	$	—

Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,445	$	1,445	$	95
Secured by 1-4 family residential properties		198		198		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		573		573		130
Commercial and industrial		444		444		80
Total loans with an allowance recorded	$	2,660	$	2,660	$	310

Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,445	$	1,445	$	95
Secured by 1-4 family residential properties		252		252		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		573		573		130
Commercial and industrial		444		444		80
Total impaired loans	$	2,714	$	2,714	$	310

The average net investment in impaired loans and interest income recognized and received on impaired loans

during the six months ended June 30, 2016 and the year ended December 31, 2015 were as follows:

	June 30 , 201 6
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,405	$	21	$	22
Secured by 1-4 family residential properties		251		7		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		562		16		16
Commercial and industrial		435		12		12
Total	$	2,653	$	56	$	55

	December 31, 201 5
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,493	$	44	$	46
Secured by 1-4 family residential properties		139		14		14
Secured by multi-family residential properties		1,892		—		—
Secured by non-farm, non-residential properties		3,329		35		36
Commercial and industrial		264		26		26
Total	$	7,117	$	119	$	122

Loans on which the accrual of interest has been discontinued amounted to $2.6

million and $3.1 million as of June 30, 2016 and December 31, 2015, respectively. If interest on those loans had been accrued, there would have been $16 thousand and $0.1 million of interest accrued for the six-month period ended June 30, 2016 and year ended December 31, 2015, respectively. Interest income related to these loans as of June 30, 2016 and December 31, 2015 was $10 thousand and $0.3 million, respectively.

Troubled Debt Restructurings

Troubled debt restructurings include loans with respect to which concessions have been granted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions may include payment schedule modifications, interest rate reductions, maturity date extensions, modification

s of note structure, principal balance reductions or some combination of these concessions. Restructured loans may involve loans remaining on non-accrual, moving to non-accrual or continuing on accrual status, depending on the individual facts and circumstances of the borrower. Non-accrual restructured loans are included with all other non-accrual loans. In addition, all accruing restructured loans are reported as troubled debt restructurings. Generally, restructured loans remain on non-accrual until the customer has attained a sustained period of repayment performance under the modified loan terms (generally a minimum of six months). However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can meet the new terms and whether the loan should be returned to or maintained on non-accrual status. If the borrower’s ability to meet the revised payment schedule is not reasonably assured, then the loan remains on non-accrual. As of June 30, 2016 and December 31, 2015, respectively, the Company had $0.5 million and $1.5 million of non-accruing loans that were previously restructured and that remained on non-accrual status. For the six months ended June 30, 2016, the Company had $37 thousand in restructured loans that were restored to accrual status based on a sustained period of repayment performance. For the year ended December 31, 2015, the Company had no restructured loans that were restored to accrual status based on a sustained period of repayment performance.

The following table provides the number of loans

remaining in each loan category, as of June 30, 2016 and December 31, 2015, that the Bank had previously modified in a troubled debt restructuring, as well as the pre- and post-modification principal balance as of each date.

	June 30 , 201 6						December 31, 201 5
	Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance		Number of Loans		Pre- Modification Outstanding Principal Balance		Post- Modification Principal Balance
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans		2	$	1,960	$	1,446		3	$	2,220	$	1,698
Secured by 1-4 family residential properties		5		459		325		4		200		103
Secured by non-farm, non-residential properties		2		113		47		2		113		52
Commercial loans		2		116		93		2		116		94
Total		11	$	2,648	$	1,911		11	$	2,649	$	1,947

Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were no modifications to principal balances of the loans that were restructured. Accordingly, there was no impact on the Company

’s allowance for loan losses resulting from the modifications. None of the loans that were previously modified in a troubled debt restructuring as of June 30, 2016 and December 31, 2015 have defaulted subsequent to modification.

All loans with a principal balance of $0.5 million or more that have been modified in a troubled debt restructuring are considered impaired and evaluated individually for impairment. The nature and extent of impairment of restructured loans, including those that have experienced a subsequent payment default, are considered in the determination of an appropriate level of allowance for loan losses. This evaluation resulted in an allowance for loan losses attributable to such restructured loans of

$6 thousand and $1 thousand as of June 30, 2016 and December 31, 2015, respectively.