3. Loans & Leases and Allowance for Credit Losses

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

September 30, 2015	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated			Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2015	$	7,842		$	4,185	$	1,669	$	1,022		$	2,426		$	6,104		$	8,195		$	218		$	2,211	$	1,529		$	35,401
Charge-Offs		-			-		-		-			-			-			(12	)		(55	)		-		-			(67	)
Recoveries		2,939			-		-		4			85			3			24			51			-		-			3,106
Provision		(1,536	)		3,295		719		(274	)		(356	)		(969	)		38			2			860		(1,129	)		650
Ending Balance- September 30, 2015	$	9,245		$	7,480	$	2,388	$	752		$	2,155		$	5,138		$	8,245		$	216		$	3,071	$	400		$	39,090
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2015	$	8,591		$	7,272	$	2,177	$	731		$	2,073		$	5,046		$	8,878		$	217		$	2,532	$	1,520		$	39,037
Charge-Offs		-			-		-		-			-			-			-			(21	)		-		-			(21	)
Recoveries		-			-		-		3			37			1			20			13			-		-			74
Provision		654			208		211		18			45			91			(653	)		7			539		(1,120	)		-
Ending Balance- September 30, 2015	$	9,245		$	7,480	$	2,388	$	752		$	2,155		$	5,138		$	8,245		$	216		$	3,071	$	400		$	39,090
Ending Balance Individually Evaluated for Impairment		61			-		-		70			35			120			879			31			-		-			1,196
Ending Balance Collectively Evaluated for Impairment		9,184			7,480		2,388		682			2,120			5,018			7,366			185			3,071		400			37,894
Loans & Leases:
Ending Balance	$	558,743		$	432,610	$	161,762	$	196,893		$	31,833		$	249,783		$	210,491		$	6,735		$	61,420	$	-		$	1,910,270
Ending Balance Individually Evaluated for Impairment		4,120			-		4,307		2,036			1,264			630			4,797			37			-		-			17,191
Ending Balance Collectively Evaluated for Impairment	$	554,623		$	432,610	$	157,455	$	194,857		$	30,569		$	249,153		$	205,694		$	6,698		$	61,420	$	-		$	1,893,079

December 31, 2014	Commercial Real Estate		Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated			Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2014	$	5,178	$	3,576	$	654	$	1,108		$	2,767		$	12,205		$	5,697		$	176		$	639	$	2,274		$	34,274
Charge-Offs		-		-		-		(73	)		(70	)		-			(1	)		(132	)		-		-			(276	)
Recoveries		11		-		-		-			58			8			86			65			-		-			228
Provision		2,653		609		1,015		(13	)		(329	)		(6,109	)		2,413			109			1,572		(745	)		1,175
Ending Balance- December 31, 2014	$	7,842	$	4,185	$	1,669	$	1,022		$	2,426		$	6,104		$	8,195		$	218		$	2,211	$	1,529		$	35,401
Ending Balance Individually Evaluated for Impairment		377		-		-		422			329			114			914			41			-		-			2,197
Ending Balance Collectively Evaluated for Impairment		7,465		4,185		1,669		600			2,097			5,990			7,281			177			2,211		1,529			33,204
Loans & Leases:
Ending Balance	$	491,903	$	357,207	$	96,519	$	171,880		$	33,017		$	281,963		$	230,819		$	4,719		$	44,217	$	-		$	1,712,244
Ending Balance Individually Evaluated for Impairment		20,066		-		4,386		2,108			1,643			461			4,874			46			-		-			33,584
Ending Balance Collectively Evaluated for Impairment	$	471,837	$	357,207	$	92,133	$	169,772		$	31,374		$	281,502		$	225,945		$	4,673		$	44,217	$	-		$	1,678,660

September 30, 2014	Commercial Real Estate		Agricultural Real Estate		Real Estate Construction		Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial		Consumer & Other			Leases		Unallocated			Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2014	$	5,178	$	3,576	$	654	$	1,108		$	2,767		$	12,205		$	5,697	$	176		$	639	$	2,274		$	34,274
Charge-Offs		-		-		-		(58	)		(70	)		-			-		(76	)		-		-			(204	)
Recoveries		12		-		-		-			54			3			83		45			-		-			197
Provision		2,608		370		1,026		92			(76	)		(6,426	)		2,135		76			1,206		(1,011	)		-
Ending Balance- September 30, 2014	$	7,798	$	3,946	$	1,680	$	1,142		$	2,675		$	5,782		$	7,915	$	221		$	1,845	$	1,263		$	34,267
Third Quarter Allowance for Credit Losses:
Beginning Balance- July 1, 2014	$	6,991	$	3,677	$	1,290	$	1,094		$	2,737		$	8,291		$	7,377	$	193		$	1,108	$	1,532		$	34,290
Charge-Offs		-		-		-		(25	)		(5	)		-			-		(31	)		-		-			(61	)
Recoveries		12		-		-		-			3			1			6		16			-		-			38
Provision		795		269		390		73			(60	)		(2,510	)		532		43			737		(269	)		-
Ending Balance- September 30, 2014	$	7,798	$	3,946	$	1,680	$	1,142		$	2,675		$	5,782		$	7,915	$	221		$	1,845	$	1,263		$	34,267
Ending Balance Individually Evaluated for Impairment		190		-		239		370			328			120			912		42			-		-			2,201
Ending Balance Collectively Evaluated for Impairment		7,608		3,946		1,441		772			2,347			5,662			7,003		179			1,845		1,263			32,066
Loans & Leases:
Ending Balance	$	473,505	$	364,161	$	104,463	$	168,310		$	33,283		$	237,521		$	192,804	$	4,816		$	36,908	$	-		$	1,615,771
Ending Balance Individually Evaluated for Impairment		20,175		-		4,419		1,847			1,658			518			4,877		42			-		-			33,536
Ending Balance Collectively Evaluated for Impairment		453,330		364,161		100,044		166,463			31,625			237,003			187,927		4,774			36,908		-			1,582,235

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $9.3 million at September 30, 2015, $26.4 million at December 31, 2014 and $26.6 million at September 30, 2014, which are no longer disclosed or classified as TDR’s.

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

September 30, 2015	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	550,011	$	8,038	$	694	$	558,743
Agricultural Real Estate		432,610		-		-		432,610
Real Estate Construction		160,133		1,629		-		161,762
Residential 1st Mortgages		195,477		733		683		196,893
Home Equity Lines & Loans		31,149		78		606		31,833
Agricultural		249,116		437		230		249,783
Commercial		197,193		9,752		3,546		210,491
Consumer & Other		6,461		-		274		6,735
Leases		61,420		-		-		61,420
Total	$	1,883,570	$	20,667	$	6,033	$	1,910,270

December 31, 2014	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	483,146	$	8,651	$	106	$	491,903
Agricultural Real Estate		357,207		-		-		357,207
Real Estate Construction		94,887		1,632		-		96,519
Residential 1st Mortgages		170,462		744		674		171,880
Home Equity Lines and Loans		32,054		85		878		33,017
Agricultural		281,232		679		52		281,963
Commercial		211,036		18,143		1,640		230,819
Consumer & Other		4,449		-		270		4,719
Leases		44,217		-		-		44,217
Total	$	1,678,690	$	29,934	$	3,620	$	1,712,244

September 30, 2014	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	464,714	$	8,683	$	108	$	473,505
Agricultural Real Estate		364,161		-		-		364,161
Real Estate Construction		102,831		1,632		-		104,463
Residential 1st Mortgages		166,884		752		674		168,310
Home Equity Lines & Loans		32,309		88		886		33,283
Agricultural		236,760		695		66		237,521
Commercial		168,215		22,929		1,660		192,804
Consumer & Other		4,520		-		296		4,816
Leases		36,908		-		-		36,908
Total	$	1,577,302	$	34,779	$	3,690	$	1,615,771

See “Note 1. Significant Accounting Policies - Allowance for Credit Losses” for a description of the internal risk ratings used by the Company. There were no loans or leases outstanding rated doubtful or loss at September 30, 2015, December 31, 2014, and September 30, 2014.

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated

(in thousands):

September 30, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	696	$	696	$	558,047	$	558,743
Agricultural Real Estate		-		-		-		-		-		432,610		432,610
Real Estate Construction		-		-		-		-		-		161,762		161,762
Residential 1st Mortgages		74		196		-		68		338		196,555		196,893
Home Equity Lines & Loans		150		-		-		576		726		31,107		31,833
Agricultural		-		-		-		8		8		249,775		249,783
Commercial		-		-		-		1,545		1,545		208,946		210,491
Consumer & Other		6		-		-		11		17		6,718		6,735
Leases		-		-		-		-		-		61,420		61,420
Total	$	230	$	196	$	-	$	2,904	$	3,330	$	1,906,940	$	1,910,270

December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	491,903	$	491,903
Agricultural Real Estate		-		-		-		-		-		357,207		357,207
Real Estate Construction		-		-		-		-		-		96,519		96,519
Residential 1st Mortgages		-		-		-		77		77		171,803		171,880
Home Equity Lines and Loans		79		-		-		576		655		32,362		33,017
Agricultural		-		-		-		18		18		281,945		281,963
Commercial		-		-		-		1,586		1,586		229,233		230,819
Consumer & Other		10		-		-		13		23		4,696		4,719
Leases		-		-		-		-		-		44,217		44,217
Total	$	89	$	-	$	-	$	2,270	$	2,359	$	1,709,885	$	1,712,244

September 30, 2014	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	473,505	$	473,505
Agricultural Real Estate		-		-		-		-		-		364,161		364,161
Real Estate Construction		-		-		-		-		-		104,463		104,463
Residential 1st Mortgages		-		-		-		283		283		168,027		168,310
Home Equity Lines & Loans		92		-		-		575		667		32,616		33,283
Agricultural		-		-		-		25		25		237,496		237,521
Commercial		-		-		-		1,600		1,600		191,204		192,804
Consumer & Other		12		-		-		14		26		4,790		4,816
Leases		-		-		-		-		-		36,908		36,908
Total	$	104	$	-	$	-	$	2,497	$	2,601	$	1,613,170	$	1,615,771

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

							Three Months Ended September 30, 2015				Nine Months Ended September 30, 2015
September 30, 2015	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	821	$	821	$	-	$	812	$	2	$	468	$	6
Residential 1st Mortgages		557		623		-		561		4		471		12
Home Equity Lines & Loans		619		659		-		620		1		531		2
Agricultural		203		216		-		107		-		42		-
Commercial		3,118		3,118		-		3,122		26		1,578		54
	$	5,318	$	5,437	$	-	$	5,222	$	33	$	3,090	$	74
With an allowance recorded:
Residential 1st Mortgages	$	352	$	424	$	17	$	354	$	4	$	453		12
Home Equity Lines & Loans		135		153		7		136		2		273		4
Agricultural		427		427		120		435		7		443		21
Commercial		1,679		1,803		879		1,687		2		3,233		29
Consumer & Other		37		43		31		39		-		42		2
	$	2,630	$	2,850	$	1,054	$	2,651	$	15	$	4,444	$	68
Total	$	7,948	$	8,287	$	1,054	$	7,873	$	48	$	7,534	$	142

December 31, 2014	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	-	$	-	$	-	$	49	$	4
Home Equity Lines and Loans		-		-		-		169		-
Agricultural		-		-		-		15		-
Commercial		-		-		-		1,620		54
	$	-	$	-	$	-	$	1,853	$	58
With an allowance recorded:
Commercial Real Estate	$	92	$	92	$	2	$	47	$	4
Residential 1st Mortgages		937		1,069		187		612		9
Home Equity Lines and Loans		951		1,020		190		803		10
Agricultural		461		473		114		473		28
Commercial		4,742		4,813		910		3,182		54
Consumer & Other		46		51		41		46		2
	$	7,229	$	7,518	$	1,444	$	5,163	$	107
Total	$	7,229	$	7,518	$	1,444	$	7,016	$	165

							Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
September 30, 2014	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	-	$	-	$	-	$	49	$	-	$	82	$	4
Home Equity Lines & Loans		-		-		-		-		-		226		-
Agricultural		-		-		-		14		-		26		-
Commercial		-		-		-		1,575		-		2,740		54
	$	-	$	-	$	-	$	1,638	$	-	$	3,074	$	58
With an allowance recorded:
Commercial Real Estate	$	94	$	94	$	2	$	47	$	2	$	16	$	2
Residential 1st Mortgages		658		771		131		550		1		522		3
Home Equity Lines & Loans		955		1,008		191		934		3		710		6
Agricultural		483		493		119		478		7		477		21
Commercial		4,744		4,801		908		3,179		27		2,144		27
Consumer & Other		43		47		43		44		1		47		2
	$	6,977	$	7,214	$	1,394	$	5,232	$	41	$	3,916	$	61
Total	$	6,977	$	7,214	$	1,394	$	6,870	$	41	$	6,990	$	119

Total recorded investment shown in the prior tables will not equal the total ending balance of loans & leases individually evaluated for impairment on the allocation of allowance tables. This is because the calculation of recorded investment takes into account charge-offs, net unamortized loan & lease fees & costs, unamortized premium or discount, and accrued interest. This table also excludes impaired loans that were previously modified in a troubled debt restructuring, are currently performing and are no longer disclosed or classified as TDR’s.

At September 30, 2015, the Company allocated $1.1 million of specific reserves to $6.6 million of troubled debt restructured loans & leases, of which $5.0 million were performing. The Company had no commitments at September 30, 2015 to lend additional amounts to customers with outstanding loans or leases that are classified as troubled debt restructurings.

During the three and nine month period ending September 30, 2015, the terms of certain loans & leases were modified as troubled debt restructurings. The modification of the terms of such loans & leases can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate were from 5 to 10 years. Modifications involving an extension of the maturity date were from 5 to 10 years.

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and nine-month periods ended September 30, 2015 (in thousands):

	Three Months Ended September 30, 2015						Nine Months Ended September 30, 2015
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Agricultural		1	$	194	$	194		1	$	194	$	194
Commercial		-		-		-		1		131		119
Total		1	$	194	$	194		2	$	325	$	313

The TDRs described above increased the allowance for credit losses by $0 and $70,000 for the three and nine-month periods ending September 30, 2015, and resulted in charge-offs of $0 and $12,000 for the three and nine-month periods ended September 30, 2015.

During the three and nine-months ended September 30, 2015, there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

At December 31, 2014, the Company allocated $1.3 million of specific reserves to $6.6 million of troubled debt restructured loans, of which $5.0 million were performing. The Company had no commitments at December 31, 2014 to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ending December 31, 2014, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 4 to 30 years. Modifications involving an extension of the maturity date were for periods ranging from 6 months to 30 years.

The following table presents loans or leases by class modified as TDRs for the period ended December 31, 2014 (in thousands):

	December 31, 2014
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		5	$	857	$	804
Home Equity Lines and Loans		3		98		89
Agricultural		1		32		32
Commercial		1		18		18
Consumer & Other		1		7		7
Total		11	$	1,012	$	950

The troubled debt restructurings described above increased the allowance for credit losses by $28,000 and resulted in charge-offs of $63,000 for the twelve months ended December 31, 2014.

During the period ended December 31, 2014, there were no payment defaults on loans modified as troubled debt restructurings within twelve months following the modification.

At September 30, 2014, the Company allocated $1.3 million of specific reserves to $6.4 million of troubled debt restructured loans & leases, of which $4.5 million were performing. The Company had no commitments at September 30, 2014 to lend additional amounts to customers with outstanding loans or leases that are classified as troubled debt restructurings.

During the three and nine month periods ending September 30, 2014, the terms of certain loans & leases were modified as troubled debt restructurings. The modification of the terms of such loans & leases can include one or a combination of the following: a reduction of the stated interest rate; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate were for periods ranging from 5 years to 30 years. Modifications involving an extension of the maturity date were for periods ranging from 5 years to 30 years.

The following table presents loans or leases by class modified as troubled debt restructured loans or leases during the three and nine-month periods ended September 30, 2014 (in thousands):

	Three Months Ended September 30, 2014						Nine Months Ended September 30, 2014
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	248	$	222		4	$	565	$	528
Home Equity Lines & Loans		1		51		47		3		98		89
Agricultural		-		-		-		1		32		32
Total		2	$	299	$	269		8	$	695	$	649

The TDRs described above increased the allowance for credit losses by $51,000 and $50,000 and resulted in charge-offs of $30,000 and $46,000 for the three and nine-month periods ended September 30, 2014.

During the three and nine-months ended September 30, 2014, there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification.