4.	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 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

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

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 primarily 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 farm land.

Comme

rcial 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.

Indirect Sales

– This portfolio segment includes loans secured by collateral that is purchased by consumers at retail stores with whom ALC has an established relationship to provide financing for the retail products sold if applicable underwriting standards are met.

As of

December

31,

2016

and

2015,

the composition of the loan portfolio by reporting

segment and portfolio segment was as follows:

	December 31, 2016
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	23,772	$	—	$	23,772
Secured by 1-4 family residential properties		32,955		13,724		46,679
Secured by multi-family residential properties		16,627		—		16,627
Secured by non-farm, non-residential properties		102,112		—		102,112
Other		234		—		234
Commercial and industrial loans		57,963		—		57,963
Consumer loans:
Consumer		6,206		36,413		42,619
Indirect sales		—		44,775		44,775
Total loans		239,869		94,912		334,781
Less: Unearned interest, fees and deferred cost		218		6,935		7,153
Allowance for loan losses		2,409		2,447		4,856
Net loans	$	237,242	$	85,530	$	322,772

	December 31, 2015
	Bank		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:
Consumer		7,436		38,198		45,634
Indirect sales		—		37,933		37,933
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

The Company makes commercial, real estate and installment loans to its customers. Although the Company has a diversified loan portfolio,

56.6%

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

December

31,

2016

and

2015,

respectively.

Related Party Loans:

In the ordinary course of business, the Bank makes loans to certain officers and directors of the Company, including companies with whic

h 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

December

31,

2016

and

2015

were

$2.7

million and

$2.9

million, respectively. During the year ended

December

31,

2016,

there was

one

new loan to these related parties, and repayments by active related parties was

$0.1

million. 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 follo

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

December

31,

2016

and

2015:

	Bank
	December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi-Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	138		$	29	$	351		$	1	$	659		$	41		$	—	$	1,329
Charge-offs		—		(66	)		—		(40	)		—		(2	)		(43	)		—		(151	)
Recoveries		200		23			—		—			—		73			50			—		346
Provision		225		209			59		592			1		(203	)		2			—		885
Ending balance		535		304			88		903			2		527			50			—		2,409
Ending balance individually evaluated for impairment		423		5			—		107			—		—			—			—		535
Ending balance collectively evaluated for impairment	$	112	$	299		$	88	$	796		$	2	$	527		$	50		$	—	$	1,874
Loan receivables:
Ending balance		23,772		32,955			16,627		102,112			234		57,963			6,206			—		239,869
Ending balance individually evaluated for impairment		1,361		193			—		549			—		—			—			—		2,103
Ending balance collectively evaluated for impairment	$	22,411	$	32,762		$	16,627	$	101,563		$	234	$	57,963		$	6,206		$	—	$	237,766

	ALC
	December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi-Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	250		$	—	$	—	$	—	$	—	$	1,584		$	618		$	2,452
Charge-offs		—		(56	)		—		—		—		—		(2,218	)		(752	)		(3,026	)
Recoveries		—		39			—		—		—		—		451			220			710
Provision		—		(126	)		—		—		—		—		1,900			537			2,311
Ending balance		—		107			—		—		—		—		1,717			623			2,447
Ending balance individually evaluated for impairment		—		—			—		—		—		—		—			—			—
Ending balance collectively evaluated for impairment	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Loan receivables:
Ending balance		—		13,724			—		—		—		—		36,413			44,775			94,912
Ending balance individually evaluated for impairment		—		—			—		—		—		—		—			—			—
Ending balance collectively evaluated for impairment	$	—	$	13,724		$	—	$	—	$	—	$	—	$	36,413		$	44,775		$	94,912

	Bank and ALC
	December 31, 2016
	Construction, Land		1-4 Family			Real Estate Multi-Family		Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	110	$	388		$	29	$	351		$	1	$	659		$	1,625		$	618		$	3,781
Charge-offs		—		(122	)		—		(40	)		—		(2	)		(2,261	)		(752	)		(3,177	)
Recoveries		200		62			—		—			—		73			501			220			1,056
Provision		225		83			59		592			1		(203	)		1,902			537			3,196
Ending balance		535		411			88		903			2		527			1,767			623			4,856
Ending balance individually evaluated for impairment		423		5			—		107			—		—			—			—			535
Ending balance collectively evaluated for impairment	$	112	$	406		$	88	$	798		$	2	$	527		$	1,767		$	623		$	4,321
Loan receivables:
Ending balance		23,772		46,679			16,627		102,112			234		57,963			42,619			44,775			334,781
Ending balance individually evaluated for impairment		1,361		193			—		549			—		—			—			—			2,103
Ending balance collectively evaluated for impairment	$	22,411	$	46,486		$	16,627	$	101,563		$	234	$	57,963		$	42,619		$	44,775		$	332,678

	Bank
	December 31, 2015
	Construction, Land			1-4 Family			Real Estate Multi-Family			Non-Farm Non- Residential			Other		Commercial			Consumer			Indirect Sales		Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	10		$	437		$	1,460		$	1,323		$	1	$	141		$	114		$	—	$	3,486
Charge-offs		(53	)		(53	)		(690	)		(39	)		—		(17	)		—			—		(852	)
Recoveries		—			40			11			45			—		61			97			—		254
Provision		153			(286	)		(752	)		(978	)		—		474			(170	)		—		(1,559	)
Ending balance		110			138			29			351			1		659			41			—		1,329
Ending balance individually evaluated for impairment		95			5			—			130			—		80			—			—		310
Ending balance collectively evaluated for impairment	$	15		$	133		$	29		$	221		$	1	$	579		$	41		$	—	$	1,019
Loan receivables:
Ending balance		11,827			30,730			11,845			83,883			115		29,377			7,436			—		175,213
Ending balance individually evaluated for impairment		1,445			252			—			573			—		444			—			—		2,714
Ending balance collectively evaluated for impairment	$	10,382		$	30,478		$	11,845		$	81,310		$	115	$	28,933		$	7,436		$	—	$	172,499

	ALC
	December 31, 2015
	Construction, Land		1-4 Family			Real Estate Multi-Family		Non-Farm Non-Residential		Other		Commercial		Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	—	$	346		$	—	$	—	$	—	$	—	$	1,962		$	374		$	2,682
Charge-offs		—		(187	)		—		—		—		—		(1,638	)		(914	)		(2,739	)
Recoveries		—		22			—		—		—		—		547			165			734
Provision		—		69			—		—		—		—		713			993			1,775
Ending balance		—		250			—		—		—		—		1,584			618			2,452
Ending balance individually evaluated for impairment		—		—			—		—		—		—		—			—			—
Ending balance collectively evaluated for impairment	$	—	$	250		$	—	$	—	$	—	$	—	$	1,584		$	618		$	2,452
Loan receivables:
Ending balance		—		17,233			—		—		—		—		38,198			37,933			93,364
Ending balance individually evaluated for impairment		—		—			—		—		—		—		—			—			—
Ending balance collectively evaluated for impairment	$	—	$	17,233		$	—	$	—	$	—	$	—	$	38,198		$	37,933		$	93,364

	Bank and ALC
	December 31, 2015
	Construction, Land			1-4 Family			Real Estate Multi-Family			Non-Farm Non-Residential			Other		Commercial			Consumer			Indirect Sales			Total
	(Dollars in Thousands)
Allowance for loan losses:
Beginning balance	$	10		$	783		$	1,460		$	1,323		$	1	$	141		$	2,076		$	374		$	6,168
Charge-offs		(53	)		(240	)		(690	)		(39	)		—		(17	)		(2,039	)		(513	)		(3,591	)
Recoveries		—			62			11			45			—		61			737			72			988
Provision		153			(217	)		(752	)		(978	)		—		474			851			685			216
Ending balance		110			388			29			351			1		659			1,625			618			3,781
Ending balance individually evaluated for impairment		95			5			—			130			—		80			—			—			310
Ending balance collectively evaluated for impairment	$	15		$	383		$	29		$	221		$	1	$	579		$	1,625		$	618		$	3,471
Loan receivables:
Ending balance		11,827			47,963			11,845			83,883			115		29,377			45,634			37,933			268,577
Ending balance individually evaluated for impairment		1,445			252			—			573			—		444			—			—			2,714
Ending balance collectively evaluated for impairment	$	10,382		$	47,711		$	11,845		$	83,310		$	115	$	28,933		$	45,634		$	37,933		$	265,863

Credit Quality Indicators:

The Bank utilizes a credit grading system that provides a uniform framework for establishing and monitoring credit r

isk in the loan portfolio. Under this system, each loan is graded, based on pre-determined risk metrics, and categorized into

one

nine

risk grades. These risk grades can be further 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 sound 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 the weaknesses found in substandard loans, with the added characteristic that the weaknesses make collection of the debt in full, based on currently existing facts, conditions and values, highly questionable and 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 worthless 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

two

risk grades, depending on wh

ether 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 have demonstrated characteristics that indicate a probability of loss.

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

December

31,

2016.

	Bank
	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	$	22,240	$	—	$	1,532	$	—	$	23,772
Secured by 1-4 family residential properties		31,995		213		747		—		32,955
Secured by multi-family residential properties		16,627		—		—		—		16,627
Secured by non-farm, non-residential properties		99,082		2,315		715		—		102,112
Other		234		—		—		—		234
Commercial and industrial loans		55,481		2,227		255		—		57,963
Consumer loans		6,126		—		80		—		6,206
Total	$	231,785	$	4,755	$	3,329	$	—	$	239,869

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	13,507	$	217	$	13,724
Consumer loans:
Consumer		35,278		1,135		36,413
Indirect sales		44,228		547		44,775
Total	$	93,013	$	1,899	$	94,912

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

December

31,

2015.

	Bank
	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		7,284		—		152		—		7,436
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:
Consumer		37,195		1,003		38,198
Indirect sales		37,548		385		37,933
Total	$	91,707	$	1,657	$	93,364

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

December

31,

2016.

	Bank
	As of December 31, 2016
	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	$	23,686	$	23,772	$	—
Secured by 1-4 family residential properties		164		69		145		378		32,577		32,955		—
Secured by multi-family residential properties		—		—		—		—		16,627		16,627		—
Secured by non-farm, non-residential properties		762		—		—		762		101,350		102,112		—
Other		—		—		—		—		234		234		—
Commercial and industrial loans		—		—		14		14		57,949		57,963		—
Consumer loans		—		28		—		28		6,178		6,206		—
Total	$	926	$	97	$	245	$	1,268	$	238,601	$	239,869	$	—

	ALC
	As of December 31, 2016
	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		61		29		213		303		13,421		13,724		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		441		413		1,104		1,958		34,455		36,413		—
Indirect sales		191		139		489		819		43,956		44,775		—
Total	$	693	$	581	$	1,806	$	3,080	$	91,832	$	94,912	$	—

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

December

31,

2015.

	Bank
	As of December 31, 2015
	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		7,300		7,436		—
Total	$	719	$	262	$	677	$	1,658	$	173,555	$	175,213	$	—

	ALC
	As of December 31, 2015
	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:
Consumer		590		438		991		2,019		36,179		38,198		—
Indirect sales		375		129		386		890		37,043		37,933		—
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

December

31,

2016

and

2015.

	Loans on Non-Accrual Status
	December 31, 2016		December 31, 2015
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	86	$	339
Secured by 1-4 family residential properties		570		968
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		53		213
Commercial and industrial loans		32		47
Consumer loans		1,676		1,535
Total loans	$	2,417	$	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 at the Bank.

At management's discretion, additional loans

may

be impaired based on homogeneous factors such as changes in the nature and volume of the portfolio, portfolio quality, adequacy of the underlying collateral value, loan concentrations,

historical charge-off trends, and economic conditions that

may

affect the borrower's ability to pay. At ALC, all real estate loans of

$0.1

million or more are identified for impairment analysis. There are currently no loans at ALC that meet that criteria.

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

December

31,

2016,

the carrying amount of impaired loans consisted of the following:

	December 31, 2016
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		—		—		—
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		—		—		—
Commercial and industrial		—		—		—
Total loans with no related allowance recorded	$	—	$	—	$	—
Impaired loans with an allowance recorded
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423
Secured by 1-4 family residential properties		193		193		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		549		549		107
Commercial and industrial		—		—		—
Total loans with an allowance recorded	$	2,103	$	2,103	$	535
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	1,361	$	1,361	$	423
Secured by 1-4 family residential properties		193		193		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		549		549		107
Commercial and industrial		—		—		—
Total impaired loans	$	2,103	$	2,103	$	535

As of

December

31,

2015,

the carrying amount of impaired loans consisted of the following:

	December 31, 2015
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 as of

December

31,

2016

and

2015

were as follows:

	December 31, 2016
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	1,381	$	41	$	39
Secured by 1-4 family residential properties		232		14		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		557		33		31
Commercial and industrial		—		—		—
Total	$	2,170	$	88	$	84

	December 31, 2015
	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

$2.4

million and

$3.1

million as of

December

31,

2016

and

2015,

respectively. If interest on those loans had been accrued, there would have been

$35

thousand and

$0.1

million of interest accrued as of

December

31,

2016

and

2015,

respectively. Interest income related to these loans as of

December

31,

2016

and

2015

was

thousand and

$0.3

million, respectively.

Troubled Debt Restructurings:

Troubled debt restructurings include loans with respect to which concessions have been gra

nted to borrowers that generally would not have otherwise been considered had the borrowers not been experiencing financial difficulty. The concessions granted

may

include payment schedule modifications, interest rate reductions, maturity date extensions, modifications 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

December

31,

2016

and

2015,

respectively, the Company had

$0.1

million and

$0.5

million of non-accruing loans that were previously restructured and that remained on non-accrual status. During the year ended

December

31,

2016,

the Company had

$0.3

million in restructured loans that were restored to accrual status based on a sustained period of repayment performance. The Company had

such loans in

2015.

The following table provides the number of loans remaining in each loan category as of

December

31,

2016

and

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.

	December 31, 2016						December 31, 2015
	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	$	1,286		3	$	2,220	$	1,698
Secured by 1-4 family residential properties		3		318		249		4		200		103
Secured by non-farm, non-residential properties		1		53		41		2		113		52
Commercial loans		2		116		88		2		116		94
Total		8	$	2,447	$	1,664		11	$	2,649	$	1,947

For those loans as of

December

31,

2016

and

2015

that were previously modified in a troubled debt restructuring, no loans were identified that defaulted subsequent to modification as a troubled de

bt restructuring.

Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were no modifications to principal balances of the loans that were rest

ructured. Accordingly, there was no impact on the Company’s allowance for loan losses resulting from the modifications.

All loans with a principal balance of

$0.5

million or more that have been modified in a troubled debt restructuring are considered impai

red 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

$15

thousand and

thousand as of

December

31,

2016

and

2015,

respectively.