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Credit Quality and Nonperforming Assets | 6 Months Ended
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Jun. 30, 2016
Credit Quality and Nonperforming Assets [Abstract] |
Credit Quality and Nonperforming Assets | Note 11 – Credit Quality and Nonperforming Assets Credit Quality Classifications The Company monitors the credit quality of loans on a continuous basis using the regulatory and accounting classifications of pass, special mention, substandard and impaired to characterize the associated credit risk. Balances classified as “loss” are immediately charged off. The Company conforms to the following definitions for risk classifications utilized:
| ⋅ | Pass: Larger non-homogeneous loans not meeting the risk rating definitions below, and smaller homogeneous loans that are not assessed on an individual basis.
| ⋅ | Special mention: Loans which have potential issues that deserve the close attention of Management. If left uncorrected, those potential weaknesses could eventually diminish the prospects for full repayment of principal and interest according to the contractual terms of the loan agreement, or could result in deterioration of the Company’s credit position at some future date.
| ⋅ | Substandard: Loans that have at least one clear and well-defined weakness that could jeopardize the ultimate recoverability of all principal and interest, such as a borrower displaying a highly leveraged position, unfavorable financial operating results and/or trends, uncertain repayment sources or a deteriorated financial condition.
| ⋅ | Impaired: A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include all nonperforming loans, restructured troubled debt (“TDRs”), and certain other loans that are still being maintained on accrual status. A TDR may be nonperforming or performing, depending on its accrual status and the demonstrated ability of the borrower to comply with restructured terms (see “Troubled Debt Restructurings” section below for additional information on TDRs).
Credit quality classifications for the Company’s loan balances were as follows, as of the dates indicated: Credit Quality Classifications (dollars in thousands, unaudited)
|  | June 30, 2016 |
|  | Pass |  | Special Mention |  | Substandard |  | Impaired |  | Total |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family residential construction |  | $ | 16,939 |  | $ | - |  | $ | - |  | $ | - |  | $ | 16,939 |
Other construction/land |  |  | 32,065 |  |  | 5,356 |  |  | - |  |  | 969 |  |  | 38,390 |
1-4 family - closed end |  |  | 127,637 |  |  | 774 |  |  | 935 |  |  | 6,112 |  |  | 135,458 |
Equity lines |  |  | 34,599 |  |  | 1,700 |  |  | 748 |  |  | 3,777 |  |  | 40,824 |
Multi-family residential |  |  | 31,017 |  |  | - |  |  | - |  |  | 417 |  |  | 31,434 |
Commercial real estate - owner occupied |  |  | 201,868 |  |  | 3,984 |  |  | 3,045 |  |  | 3,302 |  |  | 212,199 |
Commercial real estate - non-owner occupied |  |  | 164,128 |  |  | 5,378 |  |  | 167 |  |  | 5,103 |  |  | 174,776 |
Farmland |  |  | 129,053 |  |  | 560 |  |  | 2,484 |  |  | 43 |  |  | 132,140 |
Total real estate |  |  | 737,306 |  |  | 17,752 |  |  | 7,379 |  |  | 19,723 |  |  | 782,160 |
Agricultural |  |  | 49,775 |  |  | 159 |  |  | 24 |  |  | 65 |  |  | 50,023 |
Commercial and industrial |  |  | 86,649 |  |  | 22,143 |  |  | 661 |  |  | 2,293 |  |  | 111,746 |
Mortgage Warehouse |  |  | 197,715 |  |  | - |  |  | - |  |  | - |  |  | 197,715 |
Consumer loans |  |  | 11,485 |  |  | 148 |  |  | 23 |  |  | 1,962 |  |  | 13,618 |
Total gross loans and leases |  | $ | 1,082,930 |  | $ | 40,202 |  | $ | 8,087 |  | $ | 24,043 |  | $ | 1,155,262 |
|  | December 31, 2015 |
|  | Pass |  | Special Mention |  | Substandard |  | Impaired |  | Total |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family residential construction |  | $ | 13,784 |  | $ | 1,157 |  | $ | - |  | $ | - |  | $ | 14,941 |
Other construction/land |  |  | 35,901 |  |  | 135 |  |  | - |  |  | 1,323 |  |  | 37,359 |
1-4 family - closed end |  |  | 127,972 |  |  | 2,498 |  |  | 387 |  |  | 6,499 |  |  | 137,356 |
Equity lines |  |  | 39,966 |  |  | 199 |  |  | 957 |  |  | 3,111 |  |  | 44,233 |
Multi-family residential |  |  | 26,178 |  |  | - |  |  | - |  |  | 1,044 |  |  | 27,222 |
Commercial real estate - owner occupied |  |  | 196,211 |  |  | 12,075 |  |  | 7,322 |  |  | 3,100 |  |  | 218,708 |
Commercial real estate - non-owner occupied |  |  | 155,223 |  |  | 4,505 |  |  | 170 |  |  | 5,209 |  |  | 165,107 |
Farmland |  |  | 130,285 |  |  | 1,563 |  |  | 724 |  |  | 610 |  |  | 133,182 |
Total real estate |  |  | 725,520 |  |  | 22,132 |  |  | 9,560 |  |  | 20,896 |  |  | 778,108 |
Agricultural |  |  | 46,197 |  |  | 40 |  |  | - |  |  | - |  |  | 46,237 |
Commercial and industrial |  |  | 108,931 |  |  | 933 |  |  | 755 |  |  | 2,588 |  |  | 113,207 |
Mortgage Warehouse |  |  | 180,355 |  |  | - |  |  | - |  |  | - |  |  | 180,355 |
Consumer loans |  |  | 12,718 |  |  | 178 |  |  | 16 |  |  | 2,037 |  |  | 14,949 |
Total gross loans and leases |  | $ | 1,073,721 |  | $ | 23,283 |  | $ | 10,331 |  | $ | 25,521 |  | $ | 1,132,856 |
Past Due and Nonperforming Assets Nonperforming assets are comprised of loans for which the Company is no longer accruing interest, and foreclosed assets, including mobile homes and OREO. OREO consists of real properties acquired by foreclosure or similar means, which the Company is offering or will offer for sale. Nonperforming loans and leases result when reasonable doubt surfaces with regard to the ability of the Company to collect all principal and interest. At that point, we stop accruing interest on the loan or lease in question and reverse any previously-recognized interest to the extent that it is uncollected or associated with interest-reserve loans. Any asset for which principal or interest has been in default for 90 days or more is also placed on non-accrual status even if interest is still being received, unless the asset is both well secured and in the process of collection. An aging of the Company’s loan balances is presented in the following tables, by number of days past due as of the indicated dates:
Loan Portfolio Aging (dollars in thousands, unaudited)
|  | June 30, 2016 |
|  | 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90 Days Or More Past Due(1) |  | Total Past Due |  | Current |  | Total Financing Receivables |  | Non-Accrual Loans(2) |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family residential construction |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | 16,939 |  | $ | 16,939 |  | $ | - |
Other construction/land |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 38,390 |  |  | 38,390 |  |  | 257 |
1-4 family - closed end |  |  | 75 |  |  | - |  |  | - |  |  | 75 |  |  | 135,383 |  |  | 135,458 |  |  | 446 |
Equity lines |  |  | 298 |  |  | 78 |  |  | 197 |  |  | 573 |  |  | 40,251 |  |  | 40,824 |  |  | 1,630 |
Multi-family residential |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 31,434 |  |  | 31,434 |  |  | - |
Commercial real estate - owner occupied |  |  | 198 |  |  | - |  |  | 358 |  |  | 556 |  |  | 211,643 |  |  | 212,199 |  |  | 2,276 |
Commercial real estate - non-owner occupied |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 174,776 |  |  | 174,776 |  |  | 235 |
Farmland |  |  | - |  |  | 43 |  |  | - |  |  | 43 |  |  | 132,097 |  |  | 132,140 |  |  | 43 |
Total real estate |  |  | 571 |  |  | 121 |  |  | 555 |  |  | 1,247 |  |  | 780,913 |  |  | 782,160 |  |  | 4,887 |
Agricultural |  |  | - |  |  | - |  |  | 64 |  |  | 64 |  |  | 49,959 |  |  | 50,023 |  |  | 65 |
Commercial and industrial |  |  | 32 |  |  | 1 |  |  | 112 |  |  | 145 |  |  | 111,601 |  |  | 111,746 |  |  | 529 |
Mortgage warehouse lines |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 197,715 |  |  | 197,715 |  |  | - |
Consumer |  |  | 99 |  |  | 13 |  |  | - |  |  | 112 |  |  | 13,506 |  |  | 13,618 |  |  | 463 |
Total gross loans and leases |  | $ | 702 |  | $ | 135 |  | $ | 731 |  | $ | 1,568 |  | $ | 1,153,694 |  | $ | 1,155,262 |  | $ | 5,944 |
(1) As of June 30, 2016 there were no loans over 90 days past due and still acrruing. (2) Included in total financing receivables
|  | December 31, 2015 |
|  | 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90 Days Or More Past Due(1) |  | Total Past Due |  | Current |  | Total Financing Receivables |  | Non-Accrual Loans(2) |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family residential construction |  | $ | 612 |  | $ | 545 |  | $ | - |  | $ | 1,157 |  | $ | 13,784 |  | $ | 14,941 |  | $ | - |
Other construction/land |  |  | 18 |  |  | 129 |  |  | 63 |  |  | 210 |  |  | 37,149 |  |  | 37,359 |  |  | 457 |
1-4 family - closed end |  |  | 1,065 |  |  | 917 |  |  | 566 |  |  | 2,548 |  |  | 134,808 |  |  | 137,356 |  |  | 2,298 |
Equity lines |  |  | 199 |  |  | 247 |  |  | 484 |  |  | 930 |  |  | 43,303 |  |  | 44,233 |  |  | 1,770 |
Multi-family residential |  |  | - |  |  | 630 |  |  | - |  |  | 630 |  |  | 26,592 |  |  | 27,222 |  |  | 630 |
Commercial real estate - owner occupied |  |  | 232 |  |  | 129 |  |  | 260 |  |  | 621 |  |  | 218,087 |  |  | 218,708 |  |  | 2,325 |
Commercial real estate - non-owner occupied |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 165,107 |  |  | 165,107 |  |  | 262 |
Farmland |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 133,182 |  |  | 133,182 |  |  | 610 |
Total real estate |  |  | 2,126 |  |  | 2,597 |  |  | 1,373 |  |  | 6,096 |  |  | 772,012 |  |  | 778,108 |  |  | 8,352 |
Agricultural |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 46,237 |  |  | 46,237 |  |  | - |
Commercial and industrial |  |  | 127 |  |  | 153 |  |  | 86 |  |  | 366 |  |  | 112,841 |  |  | 113,207 |  |  | 710 |
Mortgage warehouse lines |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 180,355 |  |  | 180,355 |  |  | - |
Consumer |  |  | 98 |  |  | 9 |  |  | 45 |  |  | 152 |  |  | 14,797 |  |  | 14,949 |  |  | 572 |
Total gross loans and leases |  | $ | 2,351 |  | $ | 2,759 |  | $ | 1,504 |  | $ | 6,614 |  | $ | 1,126,242 |  | $ | 1,132,856 |  | $ | 9,634 |
(1) As of December 31, 2015 there were no loans over 90 days past due and still accruing. (2) Included in total financing receivables
Troubled Debt Restructurings A loan that is modified for a borrower who is experiencing financial difficulty is classified as a troubled debt restructuring if the modification constitutes a concession. At June 30, 2016, the Company had a total of $17.2 million in TDRs, including $2.5 million in TDRs that were on non-accrual status. Generally, a non-accrual loan that has been modified as a TDR remains on non-accrual status for a period of at least six months to demonstrate the borrower’s ability to comply with the modified terms. However, performance prior to the modification, or significant events that coincide with the modification, could result in a loan’s return to accrual status after a shorter performance period or even at the time of loan modification. Regardless of the period of time that has elapsed, if the borrower’s ability to meet the revised payment schedule is uncertain then the loan will be kept on non-accrual status. Moreover, a TDR is generally considered to be in default when it appears that the customer will not likely be able to repay all principal and interest pursuant to restructured terms. The Company may agree to different types of concessions when modifying a loan or lease. The tables below summarize TDRs which were modified during the noted periods, by type of concession: Troubled Debt Restructurings, by Type of Loan Modification (dollars in thousands, unaudited)
|  | Three months ended June 30, 2016 |
|  | Rate Modification |  | Term Modification |  | Interest Only Modification |  | Rate & Term Modification |  | Total |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other construction/land |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |
1-4 family - closed-end |  |  | - |  |  | - |  |  | 547 |  |  | 259 |  |  | 806 |
Equity lines |  |  | - |  |  | 1,051 |  |  | - |  |  | - |  |  | 1,051 |
Multi-family residential |  |  | - |  |  | - |  |  | - |  |  | 132 |  |  | 132 |
Commercial real estate - owner occupied |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total real estate loans |  |  | - |  |  | 1,051 |  |  | 547 |  |  | 391 |  |  | 1,989 |
Commercial and industrial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer loans |  |  | - |  |  | - |  |  | - |  |  | 10 |  |  | 10 |
|  | $ | - |  | $ | 1,051 |  | $ | 547 |  | $ | 401 |  | $ | 1,999 |
|  | Three months ended June 30, 2015 |
|  | Rate Modification |  | Term Modification |  | Interest Only Modification |  | Rate & Term Modification |  | Total |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other construction/land |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |
1-4 family - closed-end |  |  | - |  |  | - |  |  | - |  |  | 226 |  |  | 226 |
Equity lines |  |  | - |  |  | 146 |  |  | - |  |  | 290 |  |  | 436 |
Multi-family residential |  |  | - |  |  | 418 |  |  | - |  |  | - |  |  | 418 |
Commercial real estate - owner occupied |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total real estate loans |  |  | - |  |  | 564 |  |  | - |  |  | 516 |  |  | 1,080 |
Commercial and industrial |  |  | - |  |  | 25 |  |  | - |  |  | - |  |  | 25 |
Consumer loans |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
|  | $ | - |  | $ | 589 |  | $ | - |  | $ | 516 |  | $ | 1,105 |
Troubled Debt Restructurings, by Type of Loan Modification
(dollars in thousands, unaudited)
|  | Six months ended June 30, 2016 |
|  | Rate Modification |  | Term Modification |  | Interest Only Modification |  | Rate & Term Modification |  | Total |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other construction/land |  | $ | - |  | $ | 17 |  | $ | - |  | $ | - |  | $ | 17 |
1-4 family - closed-end |  |  | - |  |  | - |  |  | 547 |  |  | 259 |  |  | 806 |
Equity lines |  |  | - |  |  | 1,280 |  |  | - |  |  | - |  |  | 1,280 |
Multi-family residential |  |  | - |  |  | - |  |  |  |  |  | 132 |  |  | 132 |
Commercial real estate - owner occupied |  |  | - |  |  | - |  |  | - |  |  | 266 |  |  | 266 |
Total real estate loans |  |  | - |  |  | 1,297 |  |  | 547 |  |  | 657 |  |  | 2,501 |
Commercial and industrial |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer loans |  |  | - |  |  | 20 |  |  | - |  |  | 60 |  |  | 80 |
|  | $ | - |  | $ | 1,317 |  | $ | 547 |  | $ | 717 |  | $ | 2,581 |
|  | Six months ended June 30, 2015 |
|  | Rate Modification |  | Term Modification |  | Interest Only Modification |  | Rate & Term Modification |  | Total |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other construction/land |  | $ | - |  | $ | 111 |  | $ | - |  | $ | - |  | $ | 111 |
1-4 family - closed-end |  |  | - |  |  | - |  |  | - |  |  | 226 |  |  | 226 |
Equity lines |  |  | - |  |  | 351 |  |  | - |  |  | 290 |  |  | 641 |
Multi-family residential |  |  | - |  |  | 418 |  |  | - |  |  | - |  |  | 418 |
Commercial real estate - owner occupied |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Total real estate loans |  |  | - |  |  | 880 |  |  | - |  |  | 516 |  |  | 1,396 |
Commercial and industrial |  |  | - |  |  | 68 |  |  | - |  |  | - |  |  | 68 |
Consumer loans |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
|  | $ | - |  | $ | 948 |  | $ | - |  | $ | 516 |  | $ | 1,464 |
The following tables present, by class, additional details related to loans classified as TDRs during the referenced periods, including the recorded investment in the loan both before and after modification and balances that were modified during the period:
Troubled Debt Restructurings (dollars in thousands, unaudited)
|  | Three months ended June 30, 2016 |
|  |  |  |  | Pre- Modification |  | Post- Modification |  |  |  |  |  |  |
|  | Number of Loans |  | Outstanding Recorded Investment |  | Outstanding Recorded Investment |  | Reserve Difference(1) |  | Reserve |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other Construction/Land |  |  | 0 |  | $ | - |  | $ | - |  | $ | - |  | $ | - |
1-4 family - closed-end |  |  | 5 |  |  | 806 |  |  | 806 |  |  | 75 |  |  | 139 |
Equity Lines |  |  | 8 |  |  | 1,051 |  |  | 1,051 |  |  | 1 |  |  | 22 |
Multi-family residential |  |  | 1 |  |  | 132 |  |  | 132 |  |  | - |  |  | 7 |
Commercial RE- owner occupied |  |  | 0 |  |  | - |  |  | - |  |  | - |  |  | - |
Total Real Estate Loans |  |  |  |  |  | 1,989 |  |  | 1,989 |  |  | 76 |  |  | 168 |
Commercial and Industrial |  |  | 0 |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer loans |  |  | 1 |  |  | 10 |  |  | 10 |  |  | - |  |  | 1 |
|  |  |  |  | $ | 1,999 |  | $ | 1,999 |  | $ | 76 |  | $ | 169 |
(1) This represents the change in the ALLL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.
|  | Three months ended June 30, 2015 |
|  |  |  |  | Pre- Modification |  | Post- Modification |  |  |  |  |  |  |
|  | Number of Loans |  | Outstanding Recorded Investment |  | Outstanding Recorded Investment |  | Reserve Difference(1) |  | Reserve |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other Construction/Land |  |  | 0 |  | $ | - |  | $ | - |  | $ | - |  | $ | - |
1-4 family - closed-end |  |  | 2 |  |  | 226 |  |  | 226 |  |  | 6 |  |  | 7 |
Equity Lines |  |  | 5 |  |  | 436 |  |  | 436 |  |  | 142 |  |  | 157 |
Multi-family residential |  |  | 1 |  |  | 418 |  |  | 418 |  |  | - |  |  | 1 |
Commercial RE- owner occupied |  |  | 0 |  |  | - |  |  | - |  |  | - |  |  | - |
Total Real Estate Loans |  |  |  |  |  | 1,080 |  |  | 1,080 |  |  | 148 |  |  | 165 |
Commercial and Industrial |  |  | 1 |  |  | 25 |  |  | 25 |  |  | - |  |  | 11 |
Consumer loans |  |  | 0 |  |  | - |  |  | - |  |  | - |  |  | - |
|  |  |  |  | $ | 1,105 |  | $ | 1,105 |  | $ | 148 |  | $ | 176 |
(1) This represents the change in the ALLL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.
|  | Six months ended June 30, 2016 |
|  |  |  |  | Pre- Modification |  | Post- Modification |  |  |  |  |  |  |
|  | Number of Loans |  | Outstanding Recorded Investment |  | Outstanding Recorded Investment |  | Reserve Difference(1) |  | Reserve |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other Construction/Land |  |  | 1 |  | $ | 17 |  | $ | 17 |  | $ | - |  | $ | 2 |
1-4 family - closed-end |  |  | 5 |  |  | 806 |  |  | 806 |  |  | 75 |  |  | 139 |
Equity Lines |  |  | 10 |  |  | 1,280 |  |  | 1,280 |  |  | - |  |  | 30 |
Multi-family residential |  |  | 1 |  |  | 132 |  |  | 132 |  |  | - |  |  | 7 |
Commercial RE- owner occupied |  |  | 1 |  |  | 266 |  |  | 266 |  |  | - |  |  | 4 |
Total Real Estate Loans |  |  |  |  |  | 2,501 |  |  | 2,501 |  |  | 75 |  |  | 182 |
Commercial and Industrial |  |  | 0 |  |  | - |  |  | - |  |  | - |  |  | - |
Consumer loans |  |  | 3 |  |  | 80 |  |  | 80 |  |  | - |  |  | 6 |
|  |  |  |  | $ | 2,581 |  | $ | 2,581 |  | $ | 75 |  | $ | 188 |
(1) This represents the change in the ALLL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.
|  | Six months ended June 30, 2015 |
|  |  |  |  | Pre- Modification |  | Post- Modification |  |  |  |  |  |  |
|  | Number of Loans |  | Outstanding Recorded Investment |  | Outstanding Recorded Investment |  | Reserve Difference(1) |  | Reserve |
Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other Construction/Land |  |  | 2 |  | $ | 111 |  | $ | 111 |  | $ | 4 |  | $ | 2 |
1-4 family - closed-end |  |  | 2 |  |  | 226 |  |  | 226 |  |  | 6 |  |  | 7 |
Equity Lines |  |  | 7 |  |  | 641 |  |  | 641 |  |  | 142 |  |  | 218 |
Multi-family residential |  |  | 1 |  |  | 418 |  |  | 418 |  |  | - |  |  | 1 |
Commercial RE- owner occupied |  |  | 0 |  |  | - |  |  | - |  |  | - |  |  | - |
Total Real Estate Loans |  |  |  |  |  | 1,396 |  |  | 1,396 |  |  | 152 |  |  | 228 |
Commercial and Industrial |  |  | 3 |  |  | 68 |  |  | 68 |  |  | (19) |  |  | 23 |
Consumer loans |  |  | 0 |  |  | - |  |  | - |  |  | - |  |  | - |
|  |  |  |  | $ | 1,464 |  | $ | 1,464 |  | $ | 133 |  | $ | 251 |
(1) This represents the change in the ALLL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.
The company had no finance receivables modified as TDRs within the previous twelve months that defaulted or were charged off during the three month or six month periods ended June 30, 2016 and 2015 respectively. Purchased Credit Impaired Loans The Company may acquire loans which show evidence of credit deterioration since origination. These purchased credit impaired (“PCI”) loans are recorded at the amount paid, since there is no carryover of the seller’s allowance for loan losses. Potential losses on PCI loans subsequent to acquisition are recognized by an increase in the allowance for loan losses. PCI loans are accounted for individually or are aggregated into pools of loans based on common risk characteristics. The Company estimates the amount and timing of expected cash flows, and expected cash receipts in excess of the amount paid for the loan(s) are recorded as interest income over the remaining life of the loan or pool of loans (accretable yield). The excess of contractual principal and interest over expected cash flows is not recorded (nonaccretable difference). Expected cash flows are periodically re-evaluated throughout the life of the loan or pool of loans. If the present value of the expected cash flows is determined at any time to be less than the carrying amount, a reserve is recorded. If the present value of the expected cash flows is greater than the carrying amount, it is recognized as part of future interest income. Our acquisition of Santa Clara Valley Bank in the fourth quarter of 2014 included a portfolio of loans, some of which have shown evidence of credit deterioration since origination and for which it was probable at acquisition that all contractually required payments would not be collected. The carrying amount and unpaid principal balance of those PCI loans was as follows, as of the dates indicated (dollars in thousands): Purchased Credit Impaired Loans: (dollars in thousands, unaudited)
|  | June 30, 2016 |
|  | Unpaid Principal Balance |  | Carrying Value |
Real estate secured |  | $ | 1,124 |  | $ | 171 |
Commercial and industrial |  |  | 19 |  |  | - |
Consumer |  |  | - |  |  | - |
Total purchased credit impaired loans |  | $ | 1,143 |  | $ | 171 |
|  | December 31, 2015 |
|  | Unpaid Principal Balance |  | Carrying Value |
Real estate secured |  | $ | 1,158 |  | $ | 188 |
Commercial and industrial |  |  | 38 |  |  | - |
Consumer |  |  | 1 |  |  | - |
Total purchased credit impaired loans |  | $ | 1,197 |  | $ | 188 |
An allowance for loan losses totaling $117,000 was allocated for PCI loans as of June 30, 2016, as compared to $121,000 at December 31, 2015. We also recorded approximately $70,000 in discount accretion on PCI loans during the six months ended June 30, 2016.

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