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EX-21 - EXHIBIT 21 - SURREY BANCORPex21.htm
EX-23 - EXHIBIT 23 - SURREY BANCORPex23.htm
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10-K - SURREY BANCORP 10-K 12-31-2015 - SURREY BANCORPform10k.htm

Exhibit 13.1
 
2015 Annual Report
 
Table of Contents

Letter to Stockholders
1
   
Financial Highlights Summary
2
   
Consolidated Balance Sheets
3
   
Consolidated Statements of Income
4
   
Consolidated Statements of Comprehensive Income
5
   
Consolidated Statements of Changes in Stockholders’ Equity
6
   
Consolidated Statements of Cash Flows
7
   
Notes to Consolidated Financial Statements
9
   
Report of Independent Registered Public Accounting Firm
39
   
Management’s Discussion and Analysis
40
   
Board of Directors and Officers
58
   
Stockholder Information
59
 

Dear Shareholder:

I am pleased to report another good year for our organization. Surrey Bancorp recorded a return on average assets of 1.17 percent and a return on average equity of 8.01 percent.  As in previous years, we continue to rank among the most profitable and highly capitalized banks in North Carolina. Based on our strong and consistent financial performance, the Board of Directors declared a special dividend of $.27 per common share prior to year-end, which was paid in January of 2016.  The dividend payout totaled 33.3 percent of 2015 earnings.
 
The Company reported net income of $3,061,110 or $.73 per fully diluted common share in 2015. Net income declined $382,459 or 11.1 percent versus 2014 due to a reduction in non-interest income.  In 2014, we received life insurance proceeds totaling $419,150 plus a gain of $127,362 on the sale of a government guaranteed loan.  These gains are not reoccurring events.  Net interest income for the year totaled $9,968,598, an increase of $502,180, or 5.3 percent compared to 2014.  The increase was the result of loan growth and generally stable net asset yields.  The 2015 provision for loan loss reserves totaled $242,445, an increase of 14.4 percent versus the prior year and was attributable to loan growth.  Non-interest expense of $7,658,670 increased 4.7 percent during the year due to expenses associated with improvements to foreclosed assets and costs associated with opening a full service branch in the fourth quarter of 2015.
 
Our total assets as of December 31, 2015 were $257,776,555, an increase of 1.8 percent over 2014. Total deposits increased 2.9 percent to $212,687,961. Loans, net of the allowance for losses, increased 4.4 percent to $197,904,895. The allowance for loan losses ended the year at $3,626,908. The reserve equals 1.80 percent of total loans versus 1.84 at the end of 2014. Non-performing asset totaled 0.61 percent of total assets at year-end, a meaningful improvement over 1.31 percent of total assets reported at the end of 2014.  The percentage of outstanding loans enhanced with government guarantees totaled 24.7 percent at year-end 2015, up 1.3 percent over the previous year.
 
 Management and the Board of Directors have taken note of the rapid pace of consolidation in the banking industry, particularly in our market area. It is our belief consolidation creates opportunity for profitable growth at community banks, such as Surrey Bancorp, that embrace a strong service culture and managed growth.  In the second quarter of 2015, we opened a Loan Production Office in Wilkes County, which is similar to Surry County in most all socio-economic measurements. We are pleased with the initial success of this office and hope to establish a full service branch within the next twelve to eighteen months. In the fourth quarter of 2015, we converted our Elkin Loan Production Office into a full service branch.  We are confident the branch will further improve our market share of banking activity in Surry County.  In 2016, we will invest in numerous technology platforms that will enhance customer experience in opening deposit accounts, performing teller transactions, online and mobile banking, including mobile deposits and commercial cash management. Investment in branching activity and technology has negative short-term effects on our profitability but provides opportunity for profitable growth essential to our future.
 
Management and the Board of Directors are continuously looking for efficiencies in our operation to improve profitability.  The costs associated with regulatory reporting for our organization is excessive, based on our size and the complexity of our operations.  We have determined the company could realize substantial cost saving by taking advantage of the “Jumpstart Our Business Startup Act (JOBS Act)”.  This law would allow us to de-register from the Security and Exchange Commission (SEC) and focus our money, time and resources on activities that will improve shareholder value. Numerous banking organizations in our state have already taken advantage of this opportunity.  Briefly, by approving our proposal to reclassify less than 2.9 percent of the common stock currently outstanding, we can de-register with the SEC. The Board of Directors has a deep level of respect and appreciation for the support of our shareholder base, large and small alike. The shareholders who will be affected by the proposed reclassification will receive attractive benefits if they wish to maintain ownership in their company or have an option to sell their shares back to the company at a fair price.  Please carefully review our proxy statement for detailed information on the reclassification proposal.  I encourage you to approve the proposal.  We believe, and think you will agree, it is simply a “good deal” for everyone.
 
On behalf of the employees, management and Board of Directors, thank you for your continued support.
 
Edward C. Ashby, III
President & CEO
 
1

Financial Highlights Summary1

 
   
2015
   
2014
   
2013
   
2012
   
2011
 
                               
Summary of Operations
                             
                               
Interest income
 
$
11,104
   
$
10,816
   
$
10,539
   
$
10,954
   
$
10,936
 
Interest expense
   
1,135
     
1,350
     
1,505
     
1,671
     
2,116
 
Net interest income
   
9,969
     
9,466
     
9,034
     
9,283
     
8,820
 
Provision for loan losses
   
242
     
212
     
320
     
471
     
744
 
Other income
   
2,718
     
3,255
     
2,907
     
2,614
     
2,571
 
Other expense
   
7,659
     
7,315
     
6,972
     
6,922
     
7,031
 
Income taxes
   
1,725
     
1,751
     
1,760
     
1,721
     
1,369
 
Net income
   
3,061
     
3,443
     
2,889
     
2,783
     
2,247
 
Preferred stock dividends declared
   
(183
)
   
(183
)
   
(183
)
   
(183
)
   
(183
)
Net income available to common stockholders
 
$
2,878
   
$
3,260
   
$
2,706
   
$
2,600
   
$
2,064
 
                                         
Per Common Share Data
                                       
                                         
Net income:
                                       
Basic
 
$
0.81
   
$
0.92
   
$
0.76
   
$
0.73
   
$
0.58
 
Diluted
   
0.73
     
0.82
     
0.69
     
0.67
     
0.54
 
Cash dividends declared
   
0.27
     
0.22
     
0.21
     
0.18
     
0.15
 
Book value per common share
   
9.80
     
9.27
     
8.57
     
8.01
     
7.45
 
                                         
Balance Sheet
                                       
                                         
Loans, net
 
$
197,905
   
$
189,549
   
$
179,909
   
$
173,578
   
$
175,446
 
Investment securities available for sale
   
5,341
     
4,364
     
4,550
     
3,503
     
2,506
 
Total assets
   
257,777
     
253,201
     
240,919
     
229,912
     
224,728
 
Deposits
   
212,688
     
206,667
     
195,801
     
187,823
     
183,938
 
Stockholders’ equity
   
38,671
     
36,771
     
34,218
     
32,237
     
30,227
 
Interest-earning assets
   
237,385
     
232,441
     
223,497
     
213,560
     
213,301
 
Interest-bearing liabilities
   
160,819
     
159,947
     
160,838
     
158,594
     
161,287
 
                                         
Selected Ratios
                                       
                                         
Return on average assets
   
1.17
%
   
1.38
%
   
1.22
%
   
1.23
%
   
1.00
%
Return on average equity
   
8.01
%
   
9.65
%
   
8.59
%
   
8.86
%
   
7.53
%
Dividends declared on common stock as a percent of net income available to common stockholders
   
33.30
%
   
23.95
%
   
27.50
%
   
24.53
%
   
25.70
%
 

1. In thousands of dollars, except for per share data
 
2

Consolidated Balance Sheets
December 31, 2015 and 2014

   
2015
   
2014
 
             
Assets
           
             
Cash and due from banks
 
$
5,874,561
   
$
6,236,749
 
Interest-bearing deposits with banks
   
32,921,125
     
37,315,779
 
Federal funds sold
   
1,217,801
     
1,212,776
 
Investment securities available for sale
   
5,340,743
     
4,363,805
 
Restricted equity securities
   
397,599
     
618,109
 
Loans, net of allowance for loan losses of $3,626,908 in 2015 and $3,554,664 in 2014
   
197,904,895
     
189,549,072
 
Property and equipment, net
   
5,333,066
     
4,368,589
 
Foreclosed assets
   
384,452
     
280,821
 
Accrued interest and other income
   
1,084,164
     
997,681
 
Goodwill
   
120,000
     
120,000
 
Bank owned life insurance
   
5,125,339
     
5,623,087
 
Other assets
   
2,072,810
     
2,514,855
 
Total assets
 
$
257,776,555
   
$
253,201,323
 
                 
Liabilities and Stockholders’ Equity
               
                 
Liabilities
               
Deposits:
               
Noninterest-bearing
 
$
54,619,375
   
$
52,969,691
 
Interest-bearing
   
158,068,586
     
153,696,890
 
Total deposits
   
212,687,961
     
206,666,581
 
                 
Federal Home Loan Bank advances
   
2,750,000
     
6,250,000
 
Dividends payable
   
1,004,642
     
827,159
 
Accrued interest payable
   
91,632
     
110,261
 
Other liabilities
   
2,571,350
     
2,576,668
 
Total liabilities
   
219,105,585
     
216,430,669
 
                 
Commitments and contingencies – Note 16
               
                 
Stockholders’ equity
               
Preferred stock, 1,000,000 shares authorized,                
189,356 shares of Series A, issued and outstanding with no par value, 4.5% convertible non-cumulative, perpetual; with a liquidation value of $14 per share;
   
2,620,325
     
2,620,325
 
181,154 shares of Series D, issued and outstanding with no par value, 5.0% convertible non-cumulative, perpetual; with a liquidation value of $7.08 per share;
   
1,248,482
     
1,248,482
 
Common stock, 10,000,000 shares authorized at no par value; 3,549,665 shares issued and outstanding
   
12,101,480
     
12,101,480
 
Retained earnings
   
22,727,587
     
20,808,309
 
Accumulated other comprehensive loss
   
(26,904
)
   
(7,942
)
Total stockholders’ equity
   
38,670,970
     
36,770,654
 
Total liabilities and stockholders’ equity
 
$
257,776,555
   
$
253,201,323
 
 
See Notes to Consolidated Financial Statements
3

Consolidated Statements of Income
For the years ended December 31, 2015 and 2014

   
2015
   
2014
 
             
Interest income
           
Loans and fees on loans
 
$
10,890,990
   
$
10,634,674
 
Federal funds sold
   
2,816
     
2,720
 
Investment securities, taxable
   
74,337
     
60,427
 
Investment securities, dividends
   
24,864
     
24,419
 
Deposits with banks
   
110,592
     
93,744
 
Total interest income
   
11,103,599
     
10,815,984
 
                 
Interest expense
               
Deposits
   
930,320
     
1,067,116
 
Federal funds purchased and securities sold under agreements to repurchase
   
3
     
19
 
Federal Home Loan Bank advances
   
204,678
     
282,431
 
Total interest expense
   
1,135,001
     
1,349,566
 
Net interest income
   
9,968,598
     
9,466,418
 
                 
Provision for loan losses
   
242,445
     
211,863
 
Net interest income after provision for loan losses
   
9,726,153
     
9,254,555
 
               
Noninterest income
               
Service charges on deposit accounts
   
767,785
     
795,832
 
Gain on the sale of government guaranteed loans
   
-
     
127,362
 
Fees on loans delivered to correspondents
   
95,396
     
30,650
 
Other service charges and fees
   
727,610
     
678,053
 
Loss on sale of investment securities
   
(8,993
)
   
(1,670
)
Income from bank owned life insurance
   
149,157
     
160,752
 
Insurance commissions
   
737,561
     
766,855
 
Brokerage commissions
   
153,167
     
173,071
 
Other operating income
   
96,472
     
105,294
 
Life insurance proceeds
   
-
     
419,150
 
Total noninterest income
   
2,718,155
     
3,255,349
 
                 
Noninterest expense
               
Salaries and employee benefits
   
3,992,623
     
3,931,262
 
Occupancy expense
   
482,486
     
442,858
 
Equipment expense
   
291,229
     
269,221
 
Data processing
   
464,400
     
453,417
 
Foreclosed assets, net
   
137,934
     
3,331
 
Postage, printing and supplies
   
202,944
     
189,646
 
Professional fees
   
478,309
     
463,844
 
FDIC insurance premiums
   
119,494
     
119,794
 
Other expense
   
1,489,251
     
1,441,848
 
Total noninterest expense
   
7,658,670
     
7,315,221
 
Net income before income taxes
   
4,785,638
     
5,194,683
 
                 
Income tax expense
   
1,724,528
     
1,751,114
 
Net income
   
3,061,110
     
3,443,569
 
Preferred stock dividends
   
(183,423
)
   
(183,423
)
Net income available to common stockholders
 
$
2,877,687
   
$
3,260,146
 
                 
Basic earnings per common share
 
$
0.81
   
$
0.92
 
Diluted earnings per common share
 
$
0.73
   
$
0.82
 
Basic weighted average common shares outstanding
   
3,549,665
     
3,544,057
 
Diluted weighted average common shares outstanding
   
4,183,600
     
4,179,908
 
Dividends declared per common share
 
$
0.27
   
$
0.22
 
 
See Notes to Consolidated Financial Statements
 
4

Consolidated Statements of Comprehensive Income
For the years ended December 31, 2015 and 2014
 
   
2015
   
2014
 
             
Net income
 
$
3,061,110
   
$
3,443,569
 
                 
Other comprehensive income (loss):
               
Investment securities available for sale
               
Unrealized holding gains (losses)
   
(35,609
)
   
51,631
 
Tax effect
   
10,712
     
(19,252
)
Reclassification of losses recognized in net income
   
8,993
     
1,670
 
Tax effect
   
(3,058
)
   
(568
)
     
(18,962
)
   
33,481
 
Comprehensive income
 
$
3,042,148
   
$
3,477,050
 
 
See Notes to Consolidated Financial Statements
 
5

Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2015 and 2014

   
Preferred
Stock
   
Common Stock
   
Retained
   
Accumulated
Other
Comprehensive
     
   
Amount
   
Shares
   
Amount
   
Earnings
   
Income (Loss)
   
Total
 
Balance, January 1, 2014
 
$
3,868,807
     
3,542,984
   
$
12,061,153
   
$
18,329,089
   
$
(41,423
)
 
$
34,217,626
 
                                                 
Net income
   
-
     
-
     
-
     
3,443,569
     
-
     
3,443,569
 
Other comprehensive income
   
-
     
-
     
-
     
-
     
33,481
     
33,481
 
                                                 
Common stock options exercised, net of  shares surrendered in cashless exchange
   
-
     
6,681
     
40,327
     
-
     
-
     
40,327
 
                                                 
Dividends declared on Series A convertible preferred stock ($.63 per share)
   
-
     
-
     
-
     
(119,294
)
   
-
     
(119,294
)
Dividends declared on Series D convertible preferred stock ($.35 per share)
   
-
     
-
     
-
     
(64,129
)
   
-
     
(64,129
)
                                                 
Dividends declared on common stock ($.22 per share)
   
-
     
-
     
-
     
(780,926
)
   
-
     
(780,926
)
                                                 
Balance, December 31, 2014
   
3,868,807
     
3,549,665
     
12,101,480
     
20,808,309
     
(7,942
)
   
36,770,654
 
                                                 
Net income
   
-
     
-
     
-
     
3,061,110
     
-
     
3,061,110
 
Other comprehensive income (loss)
   
-
     
-
     
-
     
-
     
(18,962
)
   
(18,962
)
                                                 
Dividends declared on Series A convertible preferred stock ($.63 per share)
   
-
     
-
     
-
     
(119,294
)
   
-
     
(119,294
)
Dividends declared on Series D convertible preferred stock ($.35 per share)
   
-
     
-
     
-
     
(64,129
)
   
-
     
(64,129
)
                                                 
Dividends declared on common stock ($.27 per share)
   
-
     
-
     
-
     
(958,409
)
   
-
     
(958,409
)
                                                 
Balance, December 31, 2015
 
$
3,868,807
     
3,549,665
   
$
12,101,480
   
$
22,727,587
   
$
(26,904
)
 
$
38,670,970
 
 
See Notes to Consolidated Financial Statements
 
6

Consolidated Statements of Cash Flows
For the years ended December 31, 2015 and 2014

   
2015
   
2014
 
             
Cash flows from operating activities
           
Net income
 
$
3,061,110
   
$
3,443,569
 
Adjustments to reconcile net income to net cash provided by operations:
               
Depreciation and amortization
   
287,543
     
271,024
 
Provision for loan losses
   
242,445
     
211,863
 
(Gain) loss on the sale of foreclosed assets
   
21,523
     
(39,610
)
Write down of foreclosed assets
   
17,065
     
-
 
Gain on the sale of government guaranteed loans
   
-
     
(127,362
)
Loss on the sale of investments
   
8,993
     
1,670
 
Gain on disposal of property and equipment
   
(100
)
   
(3,867
)
Deferred income taxes
   
72,172
     
(186,258
)
Amortization of premiums on securities, net of accretion of discounts
   
(708
)
   
27
 
Changes in assets and liabilities:
               
Accrued interest and other income
   
(86,483
)
   
(31,639
)
Increase in cash surrender value of life insurance
   
(149,157
)
   
(160,751
)
Life insurance proceeds
   
1,001,320
     
-
 
Other assets
   
(41,623
)
   
(641,098
)
Accrued interest payable
   
(18,629
)
   
(13,297
)
Other liabilities
   
59,417
     
340,095
 
Net cash provided by operating activities
   
4,474,888
     
3,064,366
 
                 
Cash flows from investing activities
               
Net (increase) decrease in interest-bearing deposits with banks
   
4,394,654
     
(2,964,274
)
Net (increase) decrease in federal funds sold
   
(5,025
)
   
98,865
 
Purchases of investment securities
   
(3,370,410
)
   
(2,150,382
)
Maturities of investment securities
   
2,005,340
     
2,256,480
 
Purchases of restricted equity securities
   
(11,390
)
   
(310
)
Redemption of restricted equity securities
   
231,900
     
59,000
 
Net increase in loans
   
(9,092,112
)
   
(10,126,482
)
Proceeds from the sale of investment securities
   
353,231
     
131,403
 
Proceeds from the sale of foreclosed assets
   
351,625
     
160,523
 
Proceeds from sale of property and equipment
   
100
     
5,575
 
Purchases of property and equipment
   
(1,252,020
)
   
(201,106
)
Net cash used in investing activities
   
(6,394,107
)
   
(12,730,708
)
                 
Cash flows from financing activities
               
Net increase in deposits
   
6,021,380
     
10,865,620
 
Maturities of long-term debt
   
(3,500,000
)
   
(1,500,000
)
Dividends paid on preferred stock
   
(183,423
)
   
(183,423
)
Dividends paid on common stock
   
(780,926
)
   
(744,026
)
Common stock options exercised
   
-
     
40,327
 
Net cash provided by financing activities
   
1,557,031
     
8,478,498
 
Net decrease in cash and due from banks
   
(362,188
)
   
(1,187,844
)
                 
Cash and due from banks, beginning
   
6,236,749
     
7,424,593
 
Cash and due from banks, ending
 
$
5,874,561
   
$
6,236,749
 
 
See Notes to Consolidated Financial Statements
7

Consolidated Statements of Cash Flows, continued
For the years ended December 31, 2015 and 2014
 
   
2015
   
2014
 
             
Supplemental disclosures
           
Interest paid
 
$
1,153,630
   
$
1,362,863
 
Income taxes paid
 
$
1,681,479
   
$
2,009,722
 
Loans transferred to foreclosed properties
 
$
493,844
   
$
401,734
 
Cash dividends declared but not paid
 
$
1,004,642
   
$
827,159
 
Change in unrealized losses on investment securities available for sale, net
 
$
(18,962
)
 
$
33,481
 
 
See Notes to Consolidated Financial Statements
8

Notes to Consolidated Financial Statements
 
Note 1. Organization and Summary of Significant Accounting Policies

Organization

Surrey Bancorp (the “Company”) began operation on May 1, 2003, and was created for the purpose of acquiring all the outstanding shares of common stock of Surrey Bank & Trust. Shareholders of the Bank received six shares of Surrey Bancorp common shares for every five shares of Surrey Bank & Trust common shares owned.  The Company is subject to regulation by the Federal Reserve.

Surrey Bank & Trust (the “Bank”) was organized and incorporated under the laws of the State of North Carolina on July 15, 1996, and commenced operations on July 22, 1996.  The Bank currently serves Surry County, North Carolina and Patrick County, Virginia and surrounding areas through six banking offices.  As a state chartered bank, which is not a member of the Federal Reserve, the Bank is subject to regulation by the State of North Carolina Banking Commission and the Federal Deposit Insurance Corporation.

Surrey Investment Services, Inc. (“Subsidiary”) was organized and incorporated under the laws of the State of North Carolina on February 10, 1998.  The subsidiary provides insurance services through SB&T Insurance and investment advice and brokerage services through LPL Financial.

On July 31, 2000, Surrey Bank & Trust formed Freedom Finance, LLC (originally named Friendly Finance, LLC) a subsidiary operation specializing in the purchase of sales finance contracts from local automobile dealers.

The accounting and reporting policies of the Company and subsidiaries follow U.S. generally accepted accounting principles and general practices within the financial services industry.  Following is a summary of the more significant policies.

Critical Accounting Policies

Management believes the policies with respect to the methodology for the determination of the allowance for loan losses, and asset impairment judgments, including the recoverability of intangible assets involve a higher degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters.  Changes in these judgments, assumptions or estimates could cause reported results to differ materially.  These critical policies and their application are periodically reviewed with the Audit Committee and the Board of Directors.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Bank, and Subsidiaries.  All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans.  In connection with the determination of the allowances for loan and foreclosed real estate losses, management obtains independent appraisals for significant properties.

Substantially, all of the Company’s loan portfolio consists of loans in its market area.  Accordingly, the ultimate collectability of a substantial portion of the Company’s loan portfolio and the recovery of a substantial portion of the carrying amount of foreclosed real estate are susceptible to changes in local market conditions.  The regional economy is diverse, but influenced to an extent by the manufacturing and agricultural segments.
 
9

Notes to Consolidated Financial Statements
 
Note 1. Organization and Summary of Significant Accounting Policies, continued

Use of Estimates, continued

While management uses available information to recognize loan and foreclosed real estate losses, future additions to the allowances may be necessary based on changes in local economic conditions.  In addition, regulatory agencies, as a part of their routine examination process, periodically review the Company’s allowances for loan and foreclosed real estate losses.  Such agencies may require the Company to recognize additions to the allowances based on their judgments about information available to them at the time of their examinations.  Because of these factors, it is reasonably possible that the allowances for loan and foreclosed real estate losses may change materially in the near term.

Cash and Due from Banks

For the purpose of presentation in the statement of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption “cash and due from banks.” The Company maintains due from accounts with correspondent banks. During the normal course of business, the Company may have cash deposits with these banks that are in excess of federally insured limits.

Interest-bearing Deposits with Banks

Interest-bearing deposits with banks mature within one year and are carried at cost.  These deposits are primarily at the Federal Home Loan Bank of Atlanta, which sweeps excess funds out nightly and invests the funds in accounts that pay a daily rate that mirrors the federal funds rate, and the Federal Reserve Bank. Other deposits included in this category are money market accounts and short-term certificates of deposit issued through the Certificate of Deposit Account Registry Service (“CDARS”).

Securities Held to Maturity

Bonds, notes, and debentures for which the Company has the positive intent and ability to hold to maturity are reported at cost, adjusted for premiums and discounts that are recognized in interest income using the interest method over the period to maturity or to call dates.  No securities held by the Company for the periods presented were classified as held to maturity.

Securities Available for Sale

Available for sale securities are reported at fair value and consist of bonds, notes, debentures, and certain equity securities not classified as trading securities or as held to maturity securities.

Unrealized holding gains and losses, net of tax, on available for sale securities are reported as a net amount in a separate component of stockholders’ equity.  Realized gains and losses on the sale of available for sale securities are determined using the specific-identification method and are recorded on a trade-date basis.  Premiums and discounts are recognized in interest income using the interest method over the period to maturity or to call dates. Declines in the fair value of individual held to maturity and available for sale securities below cost that are other than temporary are reflected as write-downs of the individual securities to fair value.

Related write-downs are included in earnings as realized losses. In determining whether other than temporary impairment exists, management considers many factors, including (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and the ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans Held for Sale

Government guaranteed loans originated in the normal course of business are sometimes sold into the secondary market. These sales are of the guaranteed portion of the loans only. Loans that carry variable rates, which eliminate the market risk to the Bank, are carried at cost. Fixed rate loans are carried the lower of cost or market. There were no loans held for sale at December 31, 2015 and 2014.
 
10

Notes to Consolidated Financial Statements
 
Note 1. Organization and Summary of Significant Accounting Policies, continued

Loans Receivable

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are reported at their outstanding principal amount adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan using the interest method.  Discounts and premiums on any purchased residential real estate loans are amortized to income using the interest method over the remaining period to contractual maturity, adjusted for anticipated prepayments.  Discounts and premiums on any purchased consumer loans are recognized over the expected lives of the loans using methods that approximate the interest method.

Interest is accrued and credited to income based on the principal amount outstanding.  The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.  When the interest accrual is discontinued, all unpaid accrued interest is reversed.  Interest income is subsequently recognized only to the extent cash payments are received.  Payments received on nonaccrual loans are first applied to principal and any residual amounts are then applied to interest.  When facts and circumstances indicate the borrower has regained the ability to meet the required payments, the loan is returned to accrual status.  Past due loans are determined on the basis of contractual terms.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings.  Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed.  Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.  This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and qualitative components.  The specific component relates to loans that are classified as impaired.  For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan.  The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors.  A qualitative component is maintained to cover uncertainties that could affect management’s estimate of probable losses.  The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

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 loan agreement.  Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.  Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.  Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.  Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.
 
11

Notes to Consolidated Financial Statements
 
Note 1. Organization and Summary of Significant Accounting Policies, continued

Allowance for Loan Losses, continued

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment.  Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.

Property and Equipment

Land is carried at cost.  Premises, furniture and equipment, and leasehold improvements are carried at cost, less accumulated depreciation and amortization computed principally by the straight-line method over the following estimated useful lives:

   
Years
 
       
Buildings and improvements
   
10-40
 
Furniture and equipment
   
3-25
 

Foreclosed Assets

Assets acquired through, or in lieu of, loan foreclosure are to be sold and are initially recorded at the lower of the investment in the loan or fair value less anticipated cost to sell at the date of foreclosure establishing a new cost basis.  After foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value less cost to sell.  Revenue and expenses from operations and changes in the valuation allowance are included in foreclosed asset expense.

Goodwill

Goodwill consists of premiums paid on acquisitions of insurance agencies.  Goodwill is evaluated for impairment on an annual basis.  Any impairment is charged against income in the period of impairment.

Employee Benefit Plans

The Company has a defined contribution plan qualifying under IRS Code Section 401(k). Employee contributions are matched by the Company up to the first six percent of an employee’s contribution. The Company match is expensed as incurred.

The Company has a noncontributory, nonqualified supplemental executive retirement plan (“SERP”) covering certain executive employees. The plan calls for monthly payments payable for the life of the executive, generally beginning at the age of 65. The SERP costs, which are actuarially determined and recorded on an unfunded basis, are charged to current operations and credited to a liability account on the consolidated balance sheets.

The Company has a deferred compensation plan under which directors may elect to defer their directors’ fees. Participating directors receive an additional 30% matching contribution from the Company. Benefit payments are paid for a specific number of years, generally beginning at age 65. The deferred compensation cost, including the Company’s matching contribution, are charged to current operations and credited to a liability account on the consolidated balance sheets.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of Financial Accounting Standards Board (“FASB”) ASC (“Accounting Standards Codification”) 718, Compensation – Stock Compensation. Under the fair value recognition provisions of this statement, stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period, which is the vesting period.
 
12

Notes to Consolidated Financial Statements

Note 1. Organization and Summary of Significant Accounting Policies, continued

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.  Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Income Taxes

Income tax expense is based on amounts reported in the statements of income (after exclusion of non-taxable income such as interest on state and municipal securities) and consists of taxes currently due plus deferred taxes on temporary differences in the recognition of income and expense for tax and financial statement purposes.  Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled.  As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through income tax expense.

Deferred income tax liability relating to unrealized appreciation (or the deferred tax asset in the case of unrealized depreciation) on investment securities available for sale is recorded in other liabilities (assets).  Such unrealized appreciation or depreciation is recorded as an adjustment to equity in the financial statements and not included in income determination until realized.  Accordingly, the resulting deferred income tax liability or asset is also recorded as an adjustment to equity.

Basic Earnings per Common Share

Basic earnings per common share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period, after giving retroactive effect to stock splits and dividends.

Diluted Earnings per Common Share

The computation of diluted earnings per common share is similar to the computation of basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued.  The numerator is adjusted for any changes in income that would result from the assumed conversion of those potential common shares.

Comprehensive Income

Comprehensive income consists of net income plus certain other changes in assets and liabilities that are reported as separate components of stockholders’ equity rather than as income or expense. The Company’s other comprehensive income only consist of adjustments for unrealized gains or losses on investment securities available-for-sale.

Advertising Cost

The Company incurred marketing and advertising cost of $125,879 and $111,891 for the years ended December 31, 2015 and 2014, respectively.  The amounts are expensed as incurred and included in the statements of income under other expense.

Off-Balance Sheet Credit Related Financial Instruments

In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under line of credit arrangements, commercial letters of credit, and standby letters of credit.  Such financial instruments are recorded when they are funded.
 
13

Notes to Consolidated Financial Statements

 
Note 1. Organization and Summary of Significant Accounting Policies, continued

Fair Value of Financial Instruments

FASB ASC 820, “Fair Value Measurement and Disclosure”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet.  In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.  Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows.  In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.  Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements.  Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

Reclassification

Certain reclassifications have been made to the prior years' financial statements to place them on a comparable basis with the current year.  Net income and stockholders’ equity previously reported were not affected by these reclassifications.

Recent Accounting Pronouncements

The following is a summary of recent authoritative pronouncements:

In February 2015, the FASB issued guidance which amends the consolidation requirements and significantly changes the consolidation analysis required under U.S. GAAP. Although the amendments are expected to result in the deconsolidation of many entities, the Company will need to reevaluate all its previous consolidation conclusions. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015, with early adoption permitted (including during an interim period), provided that the guidance is applied as of the beginning of the annual period containing the adoption date. The Company does not expect these amendments to have a material effect on its financial statements.

In August 2015, the FASB issued amendments to the Interest topic of the Accounting Standards Codification to clarify the SEC staff’s position on presenting and measuring debt issuance costs incurred in connection with line-of-credit arrangements. The amendments were effective upon issuance. The Company does not expect these amendments to have a material effect on its financial statements.

In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.

In February 2016, the FASB issued new guidance to change accounting for leases and that will generally require most leases to be recognized on the balance sheet. The new lease standard only contains targeted changes to accounting by lessors, however, lessees will be required to recognize most leases in their balance sheets as lease liabilities for lease payments and right-of-use assets representing the lessee's rights to use the underlying assets for the lease terms for lease arrangements longer than 12 months. Under this approach, a lessee will account for most existing capital/finance leases as Type A leases and most existing operating leases as Type B leases. Type A and Type B leases have unique accounting and disclosure requirements. Existing sale-leaseback guidance, including guidance for real estate, will be replaced with a new model applicable to both lessees and lessors. The new guidance will be effective for fiscal years (and interim periods within those fiscal years) beginning after December 15, 2018. Early adoption is permitted for all companies and organizations. Management is currently analyzing the impact of the adoption of this guidance on the Company's financial statements, including assessing changes that might be necessary to information technology systems, processes and internal controls to capture new data and address changes in financial reporting.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.
 
14

Notes to Consolidated Financial Statements

Note 2. Restrictions on Cash

To comply with banking regulations, the Company is required to maintain certain average cash reserve balances.  The daily average cash reserve requirement was approximately $3,169,000 and $1,809,000 for the periods including December 31, 2015 and 2014, respectively.

Note 3. Securities

Debt and equity securities have been classified in the balance sheets according to management’s intent.  The amortized costs of securities available for sale and their approximate fair values at December 31, 2015 and 2014 follow:

   
Amortized
 Cost
   
Unrealized
Gains
   
Unrealized
 Losses
   
Fair
Value
 
                         
2015
                       
Government-sponsored enterprises
 
$
4,498,227
   
$
3,130
   
$
10,117
   
$
4,491,240
 
Mortgage-backed securities
   
20,233
     
446
     
-
     
20,679
 
Corporate bonds
   
300,000
     
-
     
300
     
299,700
 
Equities and mutual funds
   
563,321
     
14,644
     
48,841
     
529,124
 
   
$
5,381,781
   
$
18,220
   
$
59,258
   
$
5,340,743
 

   
Amortized
Cost
   
Unrealized
Gains
   
Unrealized
 Losses
   
Fair
Value
 
                         
2014
                       
Government-sponsored enterprises
 
$
3,500,000
   
$
1,170
   
$
4,640
   
$
3,496,530
 
Mortgage-backed securities
   
25,592
     
715
     
-
     
26,307
 
Corporate bonds
   
300,000
     
-
     
45,000
     
255,000
 
Equities and mutual funds
   
552,635
     
42,900
     
9,567
     
585,968
 
   
$
4,378,227
   
$
44,785
   
$
59,207
   
$
4,363,805
 

Restricted equity securities were $397,599 and $618,109 at December 31, 2015 and 2014, respectively.  Restricted equity securities primarily consist of investments in stock of the Federal Home Loan Bank of Atlanta (“FHLB”) and Community Bankers Bank (“CBB”). These investments are carried at cost.  The FHLB requires financial institutions to make equity investments in the FHLB in order to borrow money.  The Company is required to own the stock so long as it borrows from the FHLB.  CBB stock is classified as restricted due to the transfer restrictions placed on the ownership of the stock by the issuer.

At December 31, 2015 and 2014, substantially all government-sponsored enterprises securities were pledged as collateral on public deposits and for other purposes as required or permitted by law.  The mortgage-backed securities were pledged to the FHLB.

Maturities of mortgage-backed bonds are stated based on contractual maturities.  Actual maturities of these bonds may vary as the underlying mortgages are prepaid. The investment in equities and mutual funds by nature have no maturity date and are classified as due in one year or less.

The scheduled maturities of securities (all available for sale) at December 31, 2015, were as follows:

   
Amortized
Cost
   
Fair
Value
 
             
Due in one year or less
 
$
563,321
   
$
529,124
 
Due after one year through five years
   
4,810,181
     
4,803,109
 
Due after five years through ten years
   
-
     
-
 
Due after ten years
   
8,279
     
8,510
 
   
$
5,381,781
   
$
5,340,743
 

The Company had realized losses of $8,993 and $1,670 from the sales of equity and mutual fund investment securities for the years ended December 31, 2015 and 2014, respectively. Total proceeds from the sales amounted to $353,231 and $131,403 in 2015 and 2014, respectively.
 
15

Notes to Consolidated Financial Statements

 
Note 3. Securities, continued

The following tables show investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2015 and 2014. These unrealized losses on investment securities are a result of volatility in interest rates and market fluctuations and relate to government-sponsored enterprises, corporate bonds issued by other banks and equities and mutual funds at December 31, 2015 and 2014.

   
Less Than 12 Months
   
12 Months or More
   
Total
 
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
   
Fair
Value
   
Unrealized
Losses
 
2015
                                   
Government-sponsored enterprises
 
$
2,488,110
   
$
10,117
   
$
-
   
$
-
   
$
2,488,110
   
$
10,117
 
Corporate bonds
   
-
     
-
     
299,700
     
300
     
299,700
     
300
 
Equities and mutual funds
   
63,865
     
22,785
     
41,140
     
26,056
     
105,005
     
48,841
 
   
$
2,551,975
   
$
32,902
   
$
340,840
   
$
26,356
   
$
2,892,815
   
$
59,258
 
                                                 
2014
                                               
Government-sponsored enterprises
 
$
1,995,360
   
$
4,640
   
$
-
   
$
-
   
$
1,995,360
   
$
4,640
 
Corporate bonds
   
-
     
-
     
255,000
     
45,000
     
255,000
     
45,000
 
Equities and mutual funds
   
69,129
     
5,592
     
107,999
     
3,975
     
177,128
     
9,567
 
   
$
2,064,489
   
$
10,232
   
$
362,999
   
$
48,975
   
$
2,427,488
   
$
59,207
 

Management considers the nature of the investment, the underlying causes of the decline in the market value and the severity and duration of the decline in market value in determining if impairment is other than temporary. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Based upon this evaluation, there are two securities in the portfolio with unrealized losses for a period greater than 12 months. We have analyzed each individual security for Other Than Temporary Impairment (“OTTI”) purposes by reviewing delinquencies, loan-to-value ratios, and credit quality and concluded that all unrealized losses presented in the tables above are not related to an issuer’s financial condition but are due to changes in the level of interest rates and market volatility. No declines are deemed to be other than temporary in nature.

Note 4. Loans Receivable

The major components of loans in the balance sheets at December 31, 2015 and 2014 are below.

   
2015
   
2014
 
             
Commercial and industrial
 
$
51,930,870
   
$
56,602,425
 
Real estate:
               
Construction and land development
   
9,669,380
     
10,061,249
 
Residential, 1-4 families
   
43,830,689
     
41,824,806
 
Residential, 5 or more families
   
1,155,535
     
1,109,586
 
Farmland
   
6,043,944
     
3,486,002
 
Nonfarm, nonresidential
   
82,595,636
     
74,275,793
 
Agricultural
   
1,609,150
     
675,474
 
Consumer, net of discounts of $16,079 in 2015 and $11,950 in 2014
   
4,532,179
     
4,997,023
 
     
201,367,383
     
193,032,358
 
Net, deferred loan origination costs (fees)
   
164,420
     
71,378
 
     
201,531,803
     
193,103,736
 
Allowance for loan losses
   
(3,626,908
)
   
(3,554,664
)
   
$
197,904,895
   
$
189,549,072
 

Residential, 1-4 family loans pledged as collateral against FHLB advances approximated $12,691,000 and $18,124,000 at December 31, 2015 and 2014, respectively.
 
16

Notes to Consolidated Financial Statements

 
Note 5. Allowance for Loan Losses

The allocation of the allowance for loan losses by loan components at December 31, 2015 and 2014 was as follows:

   
Construction
&
Development
   
1-4 Family
 Residential
   
Nonfarm,
Nonresidential
   
Commercial
and
Industrial
   
Consumer
   
Other
   
Total
 
                                           
2015
                                         
                                           
Allowance for credit losses:
                                         
Beginning balance
 
$
160,100
   
$
798,199
   
$
1,067,315
   
$
1,301,900
   
$
158,750
   
$
68,400
   
$
3,554,664
 
Charge-offs
   
-
     
(224,524
)
   
(8,481
)
   
(198,523
)
   
(134,133
)
   
-
     
(565,661
)
Recoveries
   
-
     
3,437
     
1,230
     
357,067
     
33,726
     
-
     
395,460
 
Provision
   
(9,700
)
   
213,088
     
(39,664
)
   
(98,630
)
   
119,551
     
57,800
     
242,445
 
Ending balance
 
$
150,400
   
$
790,200
   
$
1,020,400
   
$
1,361,814
   
$
177,894
   
$
126,200
   
$
3,626,908
 
                                                         
Ending balance: individually evaluated for impairment
 
$
-
   
$
-
   
$
-
   
$
45,014
   
$
-
   
$
-
   
$
45,014
 
Ending balance: collectively evaluated for impairment
 
$
150,400
   
$
790,200
   
$
1,020,400
   
$
1,316,800
   
$
177,894
   
$
126,200
   
$
3,581,894
 
                                                         
Loans Receivable:
                                                       
Ending balance
 
$
9,669,380
   
$
43,830,689
   
$
82,595,636
   
$
51,930,870
   
$
4,532,179
   
$
8,808,629
   
$
201,367,383
 
                                                         
Ending balance: individually evaluated for impairment
 
$
11,061
   
$
966,420
   
$
2,640,143
   
$
2,268,676
   
$
-
   
$
11,085
   
$
5,897,385
 
Ending balance: collectively evaluated for impairment
 
$
9,658,319
   
$
42,864,269
   
$
79,955,493
   
$
49,662,194
   
$
4,532,179
   
$
8,797,544
   
$
195,469,998
 
                                                         
2014
                                                       
                                                         
Allowance for credit losses:
                                                       
Beginning balance
 
$
73,000
   
$
617,629
   
$
753,050
   
$
1,708,962
   
$
181,309
   
$
41,400
   
$
3,375,350
 
Charge-offs
   
-
     
(102,168
)
   
(1,778
)
   
(146,444
)
   
(66,581
)
   
-
     
(316,971
)
Recoveries
   
-
     
1,463
     
80,630
     
160,418
     
41,911
     
-
     
284,422
 
Provision
   
87,100
     
281,275
     
235,413
     
(421,036
)
   
2,111
     
27,000
     
211,863
 
Ending balance
 
$
160,100
   
$
798,199
   
$
1,067,315
   
$
1,301,900
   
$
158,750
   
$
68,400
   
$
3,554,664
 
                                                         
Ending balance: individually evaluated for impairment
 
$
-
   
$
97,799
   
$
117,215
   
$
162,900
   
$
-
   
$
-
   
$
377,914
 
Ending balance: collectively evaluated for impairment
 
$
160,100
   
$
700,400
   
$
950,100
   
$
1,139,000
   
$
158,750
   
$
68,400
   
$
3,176,750
 
                                                         
Loans Receivable:
                                                       
Ending balance
 
$
10,061,249
   
$
41,824,806
   
$
74,275,793
   
$
56,602,425
   
$
4,997,023
   
$
5,271,062
   
$
193,032,358
 
                                                         
Ending balance: individually evaluated for impairment
 
$
13,536
   
$
574,078
   
$
2,658,938
   
$
1,399,469
   
$
-
   
$
228,111
   
$
4,874,132
 
Ending balance: collectively evaluated for impairment
 
$
10,047,713
   
$
41,250,728
   
$
71,616,855
   
$
55,202,956
   
$
4,997,023
   
$
5,042,951
   
$
188,158,226
 
 
17

Notes to Consolidated Financial Statements

Note 5. Allowance for Loan Losses, continued

The following table presents loans individually evaluated for impairment by class of loan as of December 31, 2015 and 2014:

   
Recorded
Investment
   
Unpaid
Principal
Balance
   
Related
 Allowance
   
Average
 Recorded
 Investment
   
Interest
 Income
 Recognized
 
                               
2015
                             
With no related allowance recorded:
                             
Construction and development
 
$
11,061
   
$
11,061
   
$
-
   
$
11,408
   
$
1,005
 
1-4 family residential
   
966,420
     
975,909
     
-
     
966,971
     
47,320
 
Nonfarm, nonresidential
   
2,640,143
     
2,640,143
     
-
     
2,542,346
     
99,820
 
Commercial and industrial
   
1,676,119
     
1,676,119
     
-
     
1,647,548
     
86,843
 
Consumer
   
-
     
-
     
-
     
-
     
-
 
Other loans
   
11,085
     
11,085
     
-
     
11,085
     
591
 
     
5,304,828
     
5,314,317
     
-
     
5,179,358
     
235,579
 
                                         
With an allowance recorded:
                                       
Construction and development
 
$
-
   
$
-
   
$
-
   
$
-
   
$
-
 
1-4 family residential
   
-
     
-
     
-
     
-
     
-
 
Nonfarm, nonresidential
   
-
     
-
     
-
     
-
     
-
 
Commercial and industrial
   
592,557
     
592,557
     
45,014
     
592,557
     
37,304
 
Consumer
   
-
     
-
     
-
     
-
     
-
 
Other loans
   
-
     
-
     
-
     
-
     
-
 
     
592,557
     
592,557
     
45,014
     
592,557
     
37,304
 
                                         
Combined:
                                       
Construction and development
 
$
11,061
   
$
11,061
   
$
-
   
$
11,408
   
$
1,005
 
1-4 family residential
   
966,420
     
975,909
     
-
     
966,971
     
47,320
 
Nonfarm, nonresidential
   
2,640,143
     
2,640,143
     
45,014
     
2,542,346
     
99,820
 
Commercial and industrial
   
2,268,676
     
2,268,676
     
-
     
2,240,105
     
124,147
 
Consumer
   
-
     
-
     
-
     
-
     
-
 
Other loans
   
11,085
     
11,085
     
-
     
11,085
     
591
 
   
$
5,897,385
   
$
5,906,874
   
$
45,014
   
$
5,771,915
   
$
272,883
 
                                         
2014
                                       
With no related allowance recorded:
                                       
Construction and development
 
$
13,536
   
$
13,536
   
$
-
   
$
13,788
   
$
2,710
 
1-4 family residential
   
174,314
     
174,314
     
-
     
174,882
     
7,269
 
Nonfarm, nonresidential
   
1,806,013
     
1,806,013
     
-
     
1,826,306
     
94,953
 
Commercial and industrial
   
844,682
     
844,682
     
-
     
986,462
     
9,452
 
Consumer
   
-
     
-
     
-
     
-
     
-
 
Other loans
   
228,111
     
228,111
     
-
     
228,884
     
15,244
 
     
3,066,656
     
3,066,656
     
-
     
3,230,322
     
129,628
 
                                         
With an allowance recorded:
                                       
Construction and development
 
$
-
   
$
-
   
$
-
   
$
-
   
$
-
 
1-4 family residential
   
399,764
     
399,764
     
97,799
     
402,691
     
8,141
 
Nonfarm, nonresidential
   
852,925
     
852,925
     
117,215
     
852,872
     
358
 
Commercial and industrial
   
554,787
     
554,787
     
162,900
     
552,865
     
72
 
Consumer
   
-
     
-
     
-
     
-
     
-
 
Other loans
   
-
     
-
     
-
     
-
     
-
 
     
1,807,476
     
1,807,476
     
377,914
     
1,808,428
     
8,571
 
                                         
Combined:
                                       
Construction and development
 
$
13,536
   
$
13,536
   
$
-
   
$
13,788
   
$
2,710
 
1-4 family residential
   
574,078
     
574,078
     
97,799
     
577,573
     
15,410
 
Nonfarm, nonresidential
   
2,658,938
     
2,658,938
     
117,215
     
2,679,178
     
95,311
 
Commercial and industrial
   
1,399,469
     
1,399,469
     
162,900
     
1,539,327
     
9,524
 
Consumer
   
-
     
-
     
-
     
-
     
-
 
Other loans
   
228,111
     
228,111
     
-
     
228,884
     
15,244
 
   
$
4,874,132
   
$
4,874,132
   
$
377,914
   
$
5,038,750
   
$
138,199
 
 
18

Notes to Consolidated Financial Statements

Note 5. Allowance for Loan Losses, continued

Nonperforming loans and impaired loans are defined differently. As such, some loans may be included in both categories, whereas other loans may only be included in one category.  The following presents by class, an aging analysis of the recorded investment in loans.

The following table presents an age analysis of past due loans as of December 31, 2015 and 2014:
 
   
30-59 Days
Past Due
   
60-89 Days
Past Due
   
90 Days Plus
 Past Due
   
Total
Past Due
   
Current
   
Total
   
Recorded
Investment
> 90 Days
and
Accruing
 
                                           
2015
                                         
                                           
Construction and development
 
$
-
   
$
-
   
$
-
   
$
-
   
$
9,669,380
   
$
9,669,380
   
$
-
 
1-4 family residential
   
412,158
     
395,682
     
277,572
     
1,085,412
     
42,745,277
     
43,830,689
     
-
 
Nonfarm, nonresidential
   
487,300
     
120,590
     
320,924
     
928,814
     
81,666,822
     
82,595,636
     
3,502
 
Commercial and industrial
   
72,259
     
748,958
     
193,165
     
1,014,382
     
50,916,488
     
51,930,870
     
7,866
 
Consumer
   
62,137
     
72,140
     
27,242
     
161,519
     
4,370,660
     
4,532,179
     
26,120
 
Other loans
   
-
     
11,085
     
-
     
11,085
     
8,797,544
     
8,808,629
     
-
 
Total
 
$
1,033,854
   
$
1,348,455
   
$
818,903
   
$
3,201,212
   
$
198,166,171
   
$
201,367,383
   
$
37,488
 
Per