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.

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.

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

June 30, 2018

and

December 31, 2017,

the composition of the loan portfolio by reporting segment and portfolio segment was as follows:

	June 30 , 201 8
	Bank		ALC		Total
	(Dollars in Thousands)
Real estate loans:
Construction, land development and other land loans	$	22,878	$	—	$	22,878
Secured by 1-4 family residential properties		38,968		9,176		48,144
Secured by multi-family residential properties		18,374		—		18,374
Secured by non-farm, non-residential properties		112,461		—		112,461
Other		187		—		187
Commercial and industrial loans		59,320		—		59,320
Consumer loans:
Consumer		5,420		32,902		38,322
Indirect sales		—		67,429		67,429
Total loans		257,608		109,507		367,115
Less: Unearned interest, fees and deferred cost		351		6,283		6,634
Allowance for loan losses		2,520		2,432		4,952
Net loans	$	254,737	$	100,792	$	355,529

	December 31, 201 7
	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

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

55.0%

and

54.0%

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, 2018

and

December 31, 2017,

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 which they are associated. These loans are made on the same terms as those prevailing for comparable transactions with unrelated 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

June 30, 2018

and

December

31,

2017

were

$0.4

million and

$0.5

million, respectively. During the

six

months ended

June 30, 2018,

there were

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

$0.2

million. During the year ended

December 31, 2017,

there were

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

$11

thousand

Allowance for Loan Losses

The following tables present changes in the allowance for loan losses during the

six

months ended

June 30, 2018

and the year ended

December 31, 2017

and the related loan balances by loan portfolio segment and loan type as of

June 30, 2018

and

December 31, 2017:

	Bank
	Six M onths Ended June 30, 2018
	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	$	203		$	238		$	116	$	777	$	2	$	1,049		$	62		$	—	$	2,447
Charge-offs		—			(9	)		—		—		—		(2	)		—			—		(11	)
Recoveries		—			27			—		3		—		7			8			—		45
Provision		(37	)		15			12		28		—		44			(23	)		—		39
Ending balance	$	166		$	271		$	128	$	808	$	2	$	1,098		$	47		$	—	$	2,520

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—		$	5		$	—	$	17	$	—	$	68		$	—		$	—	$	90
Collectively evaluated for impairment		166			266			128		791		2		1,030			47			—		2,430
Total allowance for loan losses	$	166		$	271		$	128	$	808	$	2	$	1,098		$	47		$	—	$	2,520
Ending balance of loans receivable:
Individually evaluated for impairment	$	—		$	185		$	—	$	524	$	—	$	68		$	—		$	—	$	777
Collectively evaluated for impairment		22,878			38,783			18,374		111,937		187		59,252			5,420			—		256,831
Total loans receivable	$	22,878		$	38,968		$	18,374	$	112,461	$	187	$	59,320		$	5,420		$	—	$	257,608

	ALC
	Six Months Ended June 30, 2018
	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	$	—	$	52		$	—	$	—	$	—	$	—	$	1,653		$	622		$	2,327
Charge-offs		—		(32	)		—		—		—		—		(1,213	)		(278	)		(1,523	)
Recoveries		—		8			—		—		—		—		245			54			307
Provision		—		(4	)		—		—		—		—		1,038			287			1,321
Ending balance	$	—	$	24		$	—	$	—	$	—	$	—	$	1,723		$	685		$	2,432

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		24			—		—		—		—		1,723			685			2,432
Total allowance for loan losses	$	—	$	24		$	—	$	—	$	—	$	—	$	1,723		$	685		$	2,432
Ending balance of loans receivable:
Individually evaluated for impairment	$	—	$	—		$	—	$	—	$	—	$	—	$	—		$	—		$	—
Collectively evaluated for impairment		—		9,176			—		—		—		—		32,902			67,429			109,507
Total loans receivable	$	—	$	9,176		$	—	$	—	$	—	$	—	$	32,902		$	67,429		$	109,507

	Bank and ALC
	Six Months Ended June 30, 2018
	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	$	203		$	290		$	116	$	777	$	2	$	1,049		$	1,715		$	622		$	4,774
Charge-offs		—			(41	)		—		—		—		(2	)		(1,213	)		(278	)		(1,534	)
Recoveries		—			35			—		3		—		7			253			54			352
Provision		(37	)		11			12		28		—		44			1,015			287			1,360
Ending balance	$	166		$	295		$	128	$	808	$	2	$	1,098		$	1,770		$	685		$	4,952

Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	—		$	5		$	—	$	17	$	—	$	68		$	—		$	—		$	90
Collectively evaluated for impairment		166			290			128		791		2		1,030			1,770			685			4,862
Total allowance for loan losses	$	166		$	295		$	128	$	808	$	2	$	1,098		$	1,770		$	685		$	4,952
Ending balance of loans receivable:
Individually evaluated for impairment	$	—		$	185		$	—	$	524	$	—	$	68		$	—		$	—		$	777
Collectively evaluated for impairment		22,878			47,959			18,374		111,937		187		59,252			38,322			67,429			366,338
Total loans receivable	$	22,878		$	48,144		$	18,374	$	112,461	$	187	$	59,320		$	38,322		$	67,429		$	367,115

	Bank
	Year Ended 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
	Year Ended 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
	Year Ended 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

Credit Quality Indicators

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

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

): Loans in this category include obligations

in which the probability of default is considered low.

●

Special Mention (Risk Grade

): 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 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

): 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

): 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 assets, even though partial recovery

may

be affected 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 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 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,

2018.

	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	$	22,614	$	83	$	181	$	—	$	22,878
Secured by 1-4 family residential properties		37,831		345		792		—		38,968
Secured by multi-family residential properties		18,374		—		—		—		18,374
Secured by non-farm, non-residential properties		109,454		2,069		938		—		112,461
Other		187		—		—		—		187
Commercial and industrial loans		56,935		2,047		338		—		59,320
Consumer loans		5,334		—		86		—		5,420
Total	$	250,729	$	4,544	$	2,335	$	—	$	257,608

	ALC
	Performing		Nonperforming		Total
	(Dollars in Thousands)
Loans secured by real estate:
Secured by 1-4 family residential properties	$	8,994	$	182	$	9,176
Consumer loans:
Consumer		32,082		820		32,902
Indirect sales		67,078		351		67,429
Total	$	108,154	$	1,353	$	109,507

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

June

30,

2018.

	Bank
	As of June 30 , 2018
	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	$	—	$	—	$	—	$	—	$	22,878	$	22,878	$	—
Secured by 1-4 family residential properties		246		36		82		364		38,604		38,968		—
Secured by multi-family residential properties		—		—		—		—		18,374		18,374		—
Secured by non-farm, non-residential properties		483		113		—		596		111,865		112,461		—
Other		—		—		—		—		187		187		—
Commercial and industrial loans		204		19		—		223		59,097		59,320		—
Consumer loans		4		16		—		20		5,400		5,420		—
Total	$	937	$	184	$	82	$	1,203	$	256,405	$	257,608	$	—

	ALC
	As of June 30 , 2018
	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		69		24		182		275		8,901		9,176		—
Secured by multi-family residential properties		—		—		—		—		—		—		—
Secured by non-farm, non-residential properties		—		—		—		—		—		—		—
Other		—		—		—		—		—		—		—
Commercial and industrial loans		—		—		—		—		—		—		—
Consumer loans:
Consumer		571		362		820		1,753		31,149		32,902		—
Indirect sales		323		137		351		811		66,618		67,429		—
Total	$	963	$	523	$	1,353	$	2,839	$	106,668	$	109,507	$	—

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

June

30,

2018

and

December 31, 2017.

	Loans on Non-Accrual Status
	June 30 , 2018		December 31, 2017
	(Dollars in Thousands)
Loans secured by real estate:
Construction, land development and other land loans	$	—	$	—
Secured by 1-4 family residential properties		444		501
Secured by multi-family residential properties		—		—
Secured by non-farm, non-residential properties		20		29
Commercial and industrial loans		24		12
Consumer loans:
Consumer		874		1,173
Indirect sales		351		433
Total loans	$	1,713	$	2,148

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. All loans of

$0.5

million or more that have a credit quality risk grade of

seven

or above are identified for impairment analysis. 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

loans at ALC that meet that criteria. Impaired loans, or portions thereof, are charged off when deemed uncollectable

As of

June 30, 2018,

the carrying amount of impaired loans at the Bank consisted of the following:

	June 30 , 2018
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		185		185		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		524		524		17
Commercial and industrial		68		68		68
Total loans with an allowance recorded	$	777	$	777	$	90

Total impaired loans
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		185		185		5
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		524		524		17
Commercial and industrial		68		68		68
Total impaired loans	$	777	$	777	$	90

As of

December

31,

2017,

the carrying amount of impaired loans at the Bank 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

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

the

six

months ended

June 30,

2018

and the year ended

December 31,

2017

were as follows:

	June 30 , 2018
	Average Recorded Investment		Interest Income Recognized		Interest Income Received
	(Dollars in Thousands)
Loans secured by real estate
Construction, land development and other land loans	$	—	$	—	$	—
Secured by 1-4 family residential properties		186		6		3
Secured by multi-family residential properties		—		—		—
Secured by non-farm, non-residential properties		526		17		9
Commercial and industrial		68		2		2
Total	$	780	$	25	$	14

	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

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

$1.7

million and

$2.1

million as of

June 30,

2018

and

December

31,

2017,

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

$10

thousand and

$19

thousand of interest accrued for the periods ended

June 30,

2018

and

December 31, 2017,

respectively. Interest income related to these loans as of

June 30,

2018

and

December 31,

2017

was

thousand and

thousand, 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 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

six

-month period ended

June 30, 2018.

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

June 30, 2018

and

December 31, 2017,

the Company had

$0.1

million of non-accruing loans that were previously restructured and that remained on non-accrual status. For both the

six

months ended

June 30, 2018

and the year ended

December 31, 2017,

the Company had

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,

2018

and

December 31, 2017,

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 , 2018						December 31, 2017
	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	$	78		1	$	107	$	82
Secured by 1-4 family residential properties		3		318		132		3		318		165
Secured by non-farm, non-residential properties		1		53		36		1		53		37
Commercial loans		2		116		78		2		116		81
Total		7	$	594	$	324		7	$	594	$	365

As of

June 30, 2018

and

December 31, 2017,

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 restructured. 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 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

thousand as of both

June 30, 2018

and

December 31, 2017.