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 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.

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 retail products sold, if applicable underwriting standards are met.

As of

December 31, 2017

and

2016,

the composition of the loan portfolio by reporting

segment and portfolio segment was as follows:

	December 31, 2017
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	26,143	$	—	$	26,143
Secured by 1-4 family residential properties		34,272		10,801		45,073
Secured by multi-family residential properties		16,579		—		16,579
Secured by non-farm, non-residential properties		105,133		—		105,133
Other		190		—		190
Commercial and industrial loans		69,969		—		69,969
Consumer loans:
Consumer		5,217		34,083		39,300
Indirect sales		—		55,071		55,071
Total loans		257,503		99,955		357,458
Less: Unearned interest, fees and deferred cost		374		6,189		6,563
Allowance for loan losses		2,447		2,327		4,774
Net loans	$	254,682	$	91,439	$	346,121

	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

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

54.0%

and

56.6%

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, 2017

and

2016,

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,

2017

and

2016

were

$0.5

million and

$2.7

million, respectively. During the year ended

December 31, 2017,

there were

new loans to these parties, and repayments by active related parties were

$11

thousand. In addition, during the year ended

December 31, 2017,

approximately

$2.5

million in related party loans were reclassified as unrelated party loans due to the retirement of certain members of the Company’s Board of Directors. During the year ended

December 31, 2016,

there was

one

new loan to a related party, and repayments by active related parties totaled

$0.1

million.

Allowance for Loan Losses

The follo

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

December 31, 2017

and

2016.

	Bank
	December 31, 2017
	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	$	535		$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409
Charge-offs		—			—			—		—			—		(16	)		(63	)		—		(79	)
Recoveries		—			103			—		69			—		19			56			—		247
Provision		(332	)		(169	)		28		(195	)		—		519			19			—		(130	)
Ending balance	$	203		$	238		$	116	$	777		$	2	$	1,049		$	62		$	—	$	2,447

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—		$	5		$	—	$	21		$	—	$	72		$	—		$	—	$	98
Collectively evaluated for impairment		203			233			116		756			2		977			62			—		2,349
Total allowance for loan losses	$	203		$	238		$	116	$	777		$	2	$	1,049		$	62		$	—	$	2,447
Ending balance of loans receivable:
Individually evaluated for impairment	$	—		$	187		$	—	$	532		$	—	$	72		$	—		$	—	$	791
Collectively evaluated for impairment		26,143			34,085			16,579		104,601			190		69,897			5,217			—		256,712
Total loans receivable	$	26,143		$	34,272		$	16,579	$	105,133		$	190	$	69,969		$	5,217		$		$	257,503

	ALC
	December 31, 2017
	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	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Charge-offs		—		(28	)		—		—		—		—		(2,297	)		(587	)		(2,912	)
Recoveries		—		32			—		—		—		—		545			98			675
Provision		—		(59	)		—		—		—		—		1,688			488			2,117
Ending balance	$	—	$	52		$	—	$	—	$	—	$	—	$	1,653		$	622		$	2,327

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		52			—		—		—		—		1,653			622			2,327
Total allowance for loan losses	$	—	$	52		$	—	$	—	$	—	$	—	$	1,653		$	622		$	2,327
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—			—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		10,801			—		—		—		—		34,083			55,071			99,955
Total loans receivable	$	—	$	10,801		$	—	$	—	$	—	$	—	$	34,083		$	55,071		$	99,955

	Bank and ALC
	December 31, 2017
	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	$	535		$	411		$	88	$	903		$	2	$	527		$	1,767		$	623		$	4,856
Charge-offs		—			(28	)		—		—			—		(16	)		(2,360	)		(587	)		(2,991	)
Recoveries		—			135			—		69			—		19			601			98			922
Provision		(332	)		(228	)		28		(195	)		—		519			1,707			488			1,987
Ending balance	$	203		$	290		$	116	$	777		$	2	$	1,049		$	1,715		$	622		$	4,774

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—		$	5		$	—	$	21		$	—	$	72		$	—		$	—		$	98
Collectively evaluated for impairment		203			285			116		756			2		977			1,715			622			4,676
Total allowance for loan losses	$	203		$	290		$	116	$	777		$	2	$	1,049		$	1,715		$	622		$	4,774
Ending balance of loans receivable:
Individually evaluated for impairment	$	—		$	187		$	—	$	532		$	—	$	72		$	—		$	—		$	791
Collectively evaluated for impairment		26,143			44,886			16,579		104,601			190		69,897			39,300			55,071			356,667
Total loans receivable	$	26,143		$	45,073		$	16,579	$	105,133		$	190	$	69,969		$	39,300		$	55,071		$	357,458

	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 of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—	$	535
Collectively evaluated for impairment		112		299			88		796			2		527			50			—		1,874
Total allowance for loan losses	$	535	$	304		$	88	$	903		$	2	$	527		$	50		$	—	$	2,409
Ending balance of loans receivable:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—	$	2,103
Collectively evaluated for impairment		22,411		32,762			16,627		101,563			234		57,963			6,206			—		237,766
Total loans receivable	$	23,772	$	32,955		$	16,627	$	102,112		$	234	$	57,963		$	6,206		$	—	$	239,869

	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 of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		107			—		—		—		—		1,717			623			2,447
Total allowance for loan losses	$	—	$	107		$	—	$	—	$	—	$	—	$	1,717		$	623		$	2,447
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		13,724			—		—		—		—		36,413			44,775			94,912
Total loans receivable	$	—	$	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 of allowance attributable to loans:
Individually evaluated for impairment	$	423	$	5		$	—	$	107		$	—	$	—		$	—		$	—		$	535
Collectively evaluated for impairment		112		406			88		796			2		527			1,767			623			4,321
Total allowance for loan losses	$	535	$	411		$	88	$	903		$	2	$	527		$	1,767		$	623		$	4,856
Ending balance of loan receivables:
Individually evaluated for impairment	$	1,361	$	193		$	—	$	549		$	—	$	—		$	—		$	—		$	2,103
Collectively evaluated for impairment		22,411		46,486			16,627		101,563			234		57,963			42,619			44,775			332,678
Total loans receivable	$	23,772	$	46,679		$	16,627	$	102,112		$	234	$	57,963		$	42,619		$	44,775		$	334,781

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 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

): 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

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 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

): 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

recovery or salvage value, but rather that it is

not

prudent to defer writing off these worthless assets, even though partial recovery

may

occur 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, 2017.

	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	$	25,872	$	84	$	187	$	—	$	26,143
Secured by 1-4 family residential properties		33,278		339		655		—		34,272
Secured by multi-family residential properties		16,579		—		—		—		16,579
Secured by non-farm, non-residential properties		99,847		4,766		520		—		105,133
Other		190		—		—		—		190
Commercial and industrial loans		67,689		2,066		214		—		69,969
Consumer loans		5,155		—		62		—		5,217
Total	$	248,610	$	7,255	$	1,638	$	—	$	257,503

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	10,495	$	306	$	10,801
Consumer loans:
Consumer		32,933		1,150		34,083
Indirect sales		54,611		460		55,071
Total	$	98,039	$	1,916	$	99,955

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

December 31,

2017.

	Bank
	As of December 31, 2017
	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	$	—	$	—	$	—	$	—	$	26,143	$	26,143	$	—
Secured by 1-4 family residential properties		227		—		52		279		33,993		34,272		—
Secured by multi-family residential properties		—		—		—		—		16,579		16,579		—
Secured by non-farm, non-residential properties		13		—		—		13		105,120		105,133		—
Other		—		—		—		—		190		190		—
Commercial and industrial loans		70		—		—		70		69,899		69,969		—
Consumer loans		42		—		—		42		5,175		5,217		—
Total	$	352	$	—	$	52	$	404	$	257,099	$	257,503	$	—

	ALC
	As of December 31, 2017
	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		23		290		374		10,427		10,801		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		490		323		1,111		1,924		32,159		34,083		—
Indirect sales		281		230		433		944		54,127		55,071		—
Total	$	832	$	576	$	1,834	$	3,242	$	96,713	$	99,955	$	—

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

December 31, 2017

and

2016.

	Loans on Non-Accrual Status
	December 31, 2017		December 31, 2016
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	86
Secured by 1-4 family residential properties		501		570
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		29		53
Commercial and industrial loans		12		32
Consumer loans:
Consumer		1,173		1,676
Indirect sales		433		—
Total loans	$	2,148	$	2,417

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 a 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

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, 2017,

the carrying amount of impaired loans consisted of the following:

	December 31, 2017
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	$	—	$	—	$	—
Secured by 1-4 family residential properties		187		187		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		532		532		21
Commercial and industrial		72		72		72
Total loans with an allowance recorded	$	791	$	791	$	98
Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		187		187		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		532		532		21
Commercial and industrial		72		72		72
Total impaired loans	$	791	$	791	$	98

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

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

December 31, 2017

and

2016

were as follows:

	December 31, 2017
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	902	$	—	$	—
Secured by 1-4 family residential properties		190		13		14
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		537		35		35
Commercial and industrial		59		7		5
Total	$	1,688	$	55	$	54

	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

Loans on which the

accrual of interest has been discontinued amounted to

$2.1

million and

$2.4

million as of

December

31,

2017

and

2016,

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

$19

thousand and

$35

thousand of interest accrued as of

December 31, 2017

and

2016,

respectively. Interest income related to these loans as of

December 31, 2017

and

2016

was

thousand and

thousand, 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. There were

loans modified with concessions granted during the year ended

December 31, 2017.

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 both

December 31, 2017

and

2016,

the Company had

$0.1

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

December 31, 2017,

the Company had

loans that were restored to accrual status based on a sustained period of repayment performance. 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 following table provides the number of loans remaining in each loan category as of

December

31,

2017

and

2016

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, 2017						December 31, 2016
	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		1	$	107	$	82		2	$	1,960	$	1,286
Secured by 1-4 family residential properties		3		318		165		3		318		249
Secured by non-farm, non-residential properties		1		53		37		1		53		41
Commercial loans		2		116		81		2		116		88
Total		7	$	594	$	365		8	$	2,447	$	1,664

As of

December 31, 2017

and

2016,

loans that previously had been modified in a troubled debt restructuring had defaulted subsequent to modification.

Restructured loan modifications primarily included maturity date extensions and payment schedule modifications. There were

modifications to principal balances of the loans that were rest

ructured. Accordingly, there was

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

thousand and

$15

thousand as of

December 31, 2017

and

2016,

respectively.