5. Loans, Allowance for Loan Losses and Credit Quality

3 Months Ended

Mar. 31, 2016

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Note 5. Loans, Allowance for Loan Losses and Credit Quality

The composition of net loans as of the balance sheet dates was as follows:

	March 31,			December 31,			March 31,
	2016			2015			2015
Commercial & industrial	$	63,540,340		$	65,191,124		$	67,447,337
Commercial real estate		178,205,320			178,206,542			171,453,104
Residential real estate - 1st lien		162,594,375			162,760,273			161,594,311
Residential real estate - Jr lien		43,917,725			44,720,266			44,678,956
Consumer		6,790,425			7,241,224			7,399,886
		455,048,185			458,119,429			452,573,594
Deduct (add):
Allowance for loan losses		5,109,488			5,011,878			5,003,049
Deferred net loan costs		(315,050	)		(316,491	)		(303,949	)
		4,794,438			4,695,387			4,699,100
Net Loans	$	450,253,747		$	453,424,042		$	447,874,494

The following is an age analysis of past due loans (including non-accrual), by portfolio segment:

													90 Days or
			90 Days		Total						Non-Accrual		More
March 31, 2016	30-89 Days		or More		Past Due		Current		Total Loans		Loans		and Accruing
Commercial & industrial	$	37,333	$	204,354	$	241,687	$	63,298,653	$	63,540,340	$	256,456	$	0
Commercial real estate		3,825,884		428,545		4,254,429		173,950,891		178,205,320		966,071		19,810
Residential real estate
- 1st lien		3,950,062		991,614		4,941,676		157,652,699		162,594,375		1,467,171		764,031
- Jr lien		228,117		122,183		350,300		43,567,425		43,917,725		377,911		122,183
Consumer		152,546		0		152,546		6,637,879		6,790,425		0		0
Total	$	8,193,942	$	1,746,696	$	9,940,638	$	445,107,547	$	455,048,185	$	3,067,609	$	906,024

													90 Days or
			90 Days		Total						Non-Accrual		More
December 31, 2015	30-89 Days		or More		Past Due		Current		Total Loans		Loans		and Accruing
Commercial & industrial	$	224,997	$	168,244	$	393,241	$	64,797,883	$	65,191,124	$	441,103	$	13,556
Commercial real estate		888,994		560,439		1,449,433		176,757,109		178,206,542		2,400,757		45,356
Residential real estate
- 1st lien		2,875,768		1,408,551		4,284,319		158,475,954		162,760,273		2,009,079		801,241
- Jr lien		521,373		63,031		584,404		44,135,862		44,720,266		386,132		63,031
Consumer		83,343		0		83,343		7,157,881		7,241,224		0		0
Total	$	4,594,475	$	2,200,265	$	6,794,740	$	451,324,689	$	458,119,429	$	5,237,071	$	923,184

													90 Days or
			90 Days		Total						Non-Accrual		More
March 31, 2015	30-89 Days		or More		Past Due		Current		Total Loans		Loans		and Accruing
Commercial & industrial	$	368,737	$	385,212	$	753,949	$	66,693,388	$	67,447,337	$	945,226	$	0
Commercial real estate		840,817		5,313		846,130		170,606,974		171,453,104		2,174,472		5,313
Residential real estate
- 1st lien		4,663,341		681,381		5,344,722		156,249,589		161,594,311		1,420,371		316,165
- Jr lien		420,073		13,375		433,448		44,245,508		44,678,956		382,451		13,375
Consumer		72,479		7,580		80,059		7,319,827		7,399,886		0		7,580
Total	$	6,365,447	$	1,092,861	$	7,458,308	$	445,115,286	$	452,573,594	$	4,922,520	$	342,433

For all loan segments, loans over 30 days past due are considered delinquent.

As of March 31, 2016, there were five residential mortgage loans in process of foreclosure totaling $230,171, compared to five residential mortgage loans totaling $400,905 as of December 31, 2015, and four residential mortgages loans totaling $416,901 as of March 31, 2015.

Allowance for loan losses

The allowance for loan losses is established through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is probable. Subsequent recoveries, if any, are credited to the allowance.

Unsecured loans, primarily consumer loans, are charged off when they become uncollectible and no later than 120 days past due.  Unsecured loans to customers who subsequently file bankruptcy are charged off within 30 days of receipt of the notification of filing or by the end of the month in which the loans become 120 days past due, whichever occurs first.  For secured loans, both residential and commercial, the potential loss on impaired loans is carried as a loan loss reserve specific allocation; the loss portion is charged off when collection of the full loan appears unlikely.  The unsecured portion of a real estate loan is that portion of the loan exceeding the "fair value" of the collateral less the estimated cost to sell. Value of the collateral is determined in accordance with the Company’s appraisal policy.  The unsecured portion of an impaired real estate secured loan is charged off by the end of the month in which the loan becomes 180 days past due.

As described below, the allowance consists of general, specific and unallocated components.  However, the entire allowance is available to absorb losses in the loan portfolio, regardless of specific, general and unallocated components considered in determining the amount of the allowance.

General component

The general component of the allowance for loan losses is based on historical loss experience, adjusted for qualitative factors and stratified by the following loan segments: commercial and industrial, commercial real estate, residential real estate first (“1st”) lien, residential real estate junior (“Jr”) lien and consumer loans. The Company does not disaggregate its portfolio segments further into classes.  Loss ratios are calculated by loan segment for one year, two year, three year, four year and five year look back periods.  The highest loss ratio among these look-back periods is then applied against the respective segment.  Management uses an average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment. This historical loss factor is adjusted for the following qualitative factors: levels of and trends in delinquencies and non-performing loans, levels of and trends in loan risk groups, trends in volumes and terms of loans, effects of any changes in loan related policies, experience, ability and the depth of management, documentation and credit data exception levels, national and local economic trends, external factors such as competition and regulation and lastly, concentrations of credit risk in a variety of areas, including portfolio product mix, the level of loans to individual borrowers and their related interests, loans to industry segments, and the geographic distribution of commercial real estate loans. This evaluation is inherently subjective as it requires estimates that are susceptible to revision as more information becomes available.

The qualitative factors are determined based on the various risk characteristics of each loan segment. The Company has policies, procedures and internal controls that management believes are commensurate with the risk profile of each of these segments.  Major risk characteristics relevant to each portfolio segment are as follows:

Commercial & Industrial – Loans in this segment include commercial and industrial loans and to a lesser extent loans to finance agricultural production. Commercial loans are made to businesses and are generally secured by assets of the business, including trade assets and equipment. While not the primary collateral, in many cases these loans may also be secured by the real estate of the business. Repayment is expected from the cash flows of the business. A weakened economy, soft consumer spending, unfavorable foreign trade conditions and the rising cost of labor or raw materials are examples of issues that can impact the credit quality in this segment.

Commercial Real Estate – Loans in this segment are principally made to businesses and are generally secured by either owner-occupied, or non-owner occupied commercial real estate. A relatively small portion of this segment includes farm loans secured by farm land and buildings.  As with commercial and industrial loans, repayment of owner-occupied commercial real estate loans is expected from the cash flows of the business and the segment would be impacted by the same risk factors as commercial and industrial loans. The non-owner occupied commercial real estate portion includes both residential and commercial construction loans, vacant land and real estate development loans, multi-family dwelling loans and commercial rental property loans. Repayment of construction loans is expected from permanent financing takeout; the Company generally requires a commitment or eligibility for the take-out financing prior to construction loan origination. Real estate development loans are generally repaid from the sale of the subject real property as the project progresses. Construction and development lending entail additional risks, including the project exceeding budget, not being constructed according to plans, not receiving permits, or the pre-leasing or occupancy rate not meeting expectations. Repayment of multi-family loans and commercial rental property loans is expected from the cash flow generated by rental payments received from the individuals or businesses occupying the real estate. Commercial real estate loans are impacted by factors such as competitive market forces, vacancy rates, cap rates, net operating incomes, lease renewals and overall economic demand. In addition, loans in the recreational and tourism sector can be affected by weather conditions, such as unseasonably low winter snowfalls. Commercial real estate lending also carries a higher degree of environmental risk than other real estate lending.

Residential Real Estate - 1st Lien – All loans in this segment are collateralized by first mortgages on 1 – 4 family owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment.

Residential Real Estate – Jr Lien – All loans in this segment are collateralized by junior lien mortgages on 1 – 4 family residential real estate and repayment is primarily dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment.

Consumer – Loans in this segment are made to individuals for consumer and household purposes.  This segment includes both loans secured by automobiles and other consumer goods, as well as loans that are unsecured.  This segment also includes overdrafts, which are extensions of credit made to both individuals and businesses to cover temporary shortages in their deposit accounts and are generally unsecured.  The Company maintains policies restricting the size and term of these extensions of credit.  The overall health of the economy, including unemployment rates, has an impact on the credit quality of this segment.

Specific component

The specific component of the allowance for loan losses relates to loans that are impaired.  Impaired loans are loan(s) to a borrower that in the aggregate are greater than $100,000 and that are in non-accrual status or are troubled debt restructurings (“TDR”) regardless of amount.  A specific allowance is established for an impaired loan when its estimated impaired basis is less than the carrying value of the loan.  For all loan segments, except consumer loans, a loan is considered impaired when, based on current information and events, in management’s estimation 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 probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant or temporary payment delays and payment shortfalls generally are not classified as impaired. Management evaluates 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 and frequency 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, 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.

Impaired loans also include troubled loans that are restructured. A TDR occurs when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that would otherwise not be granted. TDRs may include the transfer of assets to the Company in partial satisfaction of a troubled loan, a modification of a loan’s terms, or a combination of the two.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer loans for impairment evaluation, unless such loans are subject to a restructuring agreement.

Unallocated component

An unallocated component of the allowance for loan losses is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component reflects management’s estimate of the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.  While unallocated reserves have increased year over year, they are considered by management to be appropriate in light of the Company’s continued growth strategy and shift in the portfolio from residential loans to commercial and commercial real estate loans and the risk associated with the relatively new, unseasoned loans in those portfolios.

The tables below summarize changes in the allowance for loan losses and select loan information, by portfolio segment, for the periods indicated.  The amounts shown below as of March 31, 2016 and December 31, 2015 and for the respective three and twelve month periods then ended reflect certain changes to the Company’s reserve methodology adopted during the second quarter of 2015, which were described in the Company’s 2015 Annual Report on Form 10-K.

As of or for the three months ended March 31, 2016

						Residential			Residential
	Commercial			Commercial		Real Estate			Real Estate
	& Industrial			Real Estate		1st Lien			Jr Lien		Consumer			Unallocated			Total
Allowance for loan losses
Beginning balance	$	712,902		$	2,152,678	$	1,368,028		$	422,822	$	75,689		$	279,759		$	5,011,878
Charge-offs		(10,836	)		0		(312	)		0		(16,675	)		0			(27,823	)
Recoveries		19,295			0		312			60		5,766			0			25,433
Provision (credit)		9,014			142,625		(29,101	)		143		(6,324	)		(16,357	)		100,000
Ending balance	$	730,375		$	2,295,303	$	1,338,927		$	423,025	$	58,456		$	263,402		$	5,109,488
Allowance for loan losses
Evaluated for impairment
Individually	$	0		$	0	$	0		$	117,700	$	0		$	0		$	117,700
Collectively		730,375			2,295,303		1,338,927			305,325		58,456			263,402			4,991,788
Total	$	730,375		$	2,295,303	$	1,338,927		$	423,025	$	58,456		$	263,402		$	5,109,488
Loans evaluated for impairment
Individually	$	204,354		$	907,309	$	717,673		$	231,591	$	0					$	2,060,927
Collectively		63,335,986			177,298,011		161,876,702			43,686,134		6,790,425						452,987,258
Total	$	63,540,340		$	178,205,320	$	162,594,375		$	43,917,725	$	6,790,425					$	455,048,185

As of or for the year ended December 31, 2015

							Residential			Residential
	Commercial			Commercial			Real Estate			Real Estate
	& Industrial			Real Estate			1st Lien			Jr Lien			Consumer			Unallocated		Total
Allowance for loan losses
Beginning balance	$	646,719		$	2,311,936		$	1,270,766		$	321,099		$	118,819		$	236,535	$	4,905,874
Charge-offs		(200,900	)		(14,783	)		(150,947	)		(66,104	)		(69,632	)		0		(502,366	)
Recoveries		59,264			0			6,042			240			32,824			0		98,370
Provision (credit)		207,819			(144,475	)		242,167			167,587			(6,322	)		43,224		510,000
Ending balance	$	712,902		$	2,152,678		$	1,368,028		$	422,822		$	75,689		$	279,759	$	5,011,878
Allowance for loan losses
Evaluated for impairment
Individually	$	0		$	0		$	25,100		$	114,600		$	0		$	0	$	139,700
Collectively		712,902			2,152,678			1,342,928			308,222			75,689			279,759		4,872,178
Total	$	712,902		$	2,152,678		$	1,368,028		$	422,822		$	75,689		$	279,759	$	5,011,878
Loans evaluated for impairment
Individually	$	286,436		$	2,551,748		$	1,419,808		$	234,004		$	0				$	4,491,996
Collectively		64,904,688			175,654,794			161,340,465			44,486,262			7,241,224					453,627,433
Total	$	65,191,124		$	178,206,542		$	162,760,273		$	44,720,266		$	7,241,224				$	458,119,429

As of or for the three months ended March 31, 2015

						Residential			Residential
	Commercial			Commercial		Real Estate			Real Estate
	& Industrial			Real Estate		1st Lien			Jr Lien			Consumer			Unallocated			Total
Allowance for loan losses
Beginning balance	$	646,719		$	2,311,936	$	1,270,766		$	321,099		$	118,819		$	236,535		$	4,905,874
Charge-offs		(35,059	)		0		(15,874	)		(20,199	)		(5,290	)		0			(76,422	)
Recoveries		5,607			0		6,042			60			11,888			0			23,597
Provision (credit)		133,224			13,175		61,083			20,447			(39,333	)		(38,596	)		150,000
Ending balance	$	750,491		$	2,325,111	$	1,322,017		$	321,407		$	86,084		$	197,939		$	5,003,049
Allowance for loan losses
Evaluated for impairment
Individually	$	70,200		$	0	$	59,100		$	10,900		$	0		$	0		$	140,200
Collectively		680,291			2,325,111		1,262,917			310,507			86,084			197,939			4,862,849
Total	$	750,491		$	2,325,111	$	1,322,017		$	321,407		$	86,084		$	197,939		$	5,003,049
Loans evaluated for impairment
Individually	$	702,732		$	2,107,787	$	820,565		$	308,036		$	0					$	3,939,120
Collectively		66,744,605			169,345,317		160,773,746			44,370,920			7,399,886						448,634,474
Total	$	67,447,337		$	171,453,104	$	161,594,311		$	44,678,956		$	7,399,886					$	452,573,594

Impaired loans, by portfolio segment, were as follows:

	As of March 31, 2016
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment(1)
With an allowance recorded
Residential real estate - 1st lien	$	0	$	0	$	0	$	86,894
Residential real estate - Jr lien		231,591		284,287		117,700		232,798
		231,591		284,287		117,700		319,692
With no related allowance recorded
Commercial & industrial		204,354		272,017				245,395
Commercial real estate		907,309		957,229				1,729,529
Residential real estate - 1st lien		717,673		803,505				981,847
		1,829,336		2,032,751				2,956,771
Total	$	2,060,927	$	2,317,038	$	117,700	$	3,276,463

(1) For the three months ended March 31, 2016

	As of December 31, 2015						2015
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment
With an allowance recorded
Commercial & industrial	$	0	$	0	$	0	$	37,359
Commercial real estate		0		0		0		40,902
Residential real estate - 1st lien		173,788		182,251		25,100		228,273
Residential real estate - Jr lien		234,004		284,227		114,600		155,207
		407,792		466,478		139,700		461,741
With no related allowance recorded
Commercial & industrial		286,436		366,387				446,817
Commercial real estate		2,551,748		2,776,729				2,151,713
Residential real estate - 1st lien		1,246,020		1,460,402				973,572
Residential real estate - Jr lien		0		0				113,964
		4,084,204		4,603,518				3,686,066
Total	$	4,491,996	$	5,069,996	$	139,700	$	4,147,807

	As of March 31, 2015
			Unpaid				Average
	Recorded		Principal		Related		Recorded
	Investment		Balance		Allowance		Investment(1)
With an allowance recorded
Commercial & industrial	$	94,855	$	94,855	$	70,200	$	47,428
Commercial real estate		0		0		0		102,256
Residential real estate - 1st lien		355,885		383,523		59,100		235,497
Residential real estate - Jr lien		67,106		76,631		10,900		33,553
	$	517,846	$	555,009	$	140,200	$	418,734
With no related allowance recorded
Commercial & industrial	$	607,877	$	657,443			$	499,241
Commercial real estate		2,107,787		2,296,957				1,917,135
Residential real estate - 1st lien		464,680		531,386				535,407
Residential real estate - Jr lien		240,930		284,202				284,910
	$	3,421,274	$	3,769,988			$	3,236,693
Total	$	3,939,120	$	4,324,997	$	140,200	$	3,655,427

(1) For the three months ended March 31, 2015

Interest income recognized on impaired loans was immaterial for all periods presented.

For all loan segments, the accrual of interest is discontinued when a loan is specifically determined to be impaired or when the loan is delinquent 90 days and management believes, after considering collection efforts and other factors, that the borrower's financial condition is such that collection of interest is considered by management to be doubtful.  Any unpaid interest previously accrued on those loans is reversed from income.  Interest income is generally not recognized on specific impaired loans unless the likelihood of further loss is considered by management to be remote.  Interest payments received on impaired loans are generally applied as a reduction of the loan principal balance.  Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are considered by management to be reasonably assured.

As of the balance sheet dates, the Company was not contractually committed to lend additional funds to debtors with impaired, non-accrual or restructured loans.

Credit Quality Grouping

In developing the allowance for loan losses, management uses credit quality grouping to help evaluate trends in credit quality. The Company groups credit risk into Groups A, B and C. The manner the Company utilizes to assign risk grouping is driven by loan purpose. Commercial purpose loans are individually risk graded while the retail portion of the portfolio is generally grouped by delinquency pool.

Group A loans - Acceptable Risk – are loans that are expected to perform as agreed under their respective terms.  Such loans carry a normal level of risk that does not require management attention beyond that warranted by the loan or loan relationship characteristics, such as loan size or relationship size. Group A loans include commercial purpose loans that are individually risk rated and retail loans that are rated by pool. Group A retail loans include both performing consumer and residential real estate loans. Residential real estate loans are loans to individuals secured by 1-4 family homes, including first mortgages, home equity and home improvement loans. Loan balances fully secured by deposit accounts or that are fully guaranteed by the Federal Government are considered acceptable risk.

Group B loans – Management Involved - are loans that require greater attention than the acceptable loans in Group A. Characteristics of such loans may include, but are not limited to, borrowers that are experiencing negative operating trends such as reduced sales or margins, borrowers that have exposure to adverse market conditions such as increased competition or regulatory burden, or borrowers that have had unexpected or adverse changes in management. These loans have a greater likelihood of migrating to an unacceptable risk level if these characteristics are left unchecked. Group B is limited to commercial purpose loans that are individually risk rated.

Group C loans – Unacceptable Risk – are loans that have distinct shortcomings that require a greater degree of management attention.  Examples of these shortcomings include a borrower's inadequate capacity to service debt, poor operating performance, or insolvency.  These loans are more likely to result in repayment through collateral liquidation. Group C loans range from those that are likely to sustain some loss if the shortcomings are not corrected, to those for which loss is imminent and non-accrual treatment is warranted. Group C loans include individually rated commercial purpose loans and retail loans adversely rated in accordance with the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification Policy. Group C retail loans include 1-4 family residential real estate loans and home equity loans past due 90 days or more with loan-to-value ratios greater than 60%, home equity loans 90 days or more past due where the bank does not hold first mortgage, irrespective of loan-to-value, loans in bankruptcy where repayment is likely but not yet established, and lastly consumer loans that are 90 days or more past due.

Commercial purpose loan ratings are assigned by the commercial account officer; for larger and more complex commercial loans, the credit rating is a collaborative assignment by the lender and the credit analyst. The credit risk rating is based on the borrower's expected performance, i.e., the likelihood that the borrower will be able to service its obligations in accordance with the loan terms. Credit risk ratings are meant to measure risk versus simply record history.  Assessment of expected future payment performance requires consideration of numerous factors.  While past performance is part of the overall evaluation, expected performance is based on an analysis of the borrower's financial strength, and historical and projected factors such as size and financing alternatives, capacity and cash flow, balance sheet and income statement trends, the quality and timeliness of financial reporting, and the quality of the borrower’s management.  Other factors influencing the credit risk rating to a lesser degree include collateral coverage and control, guarantor strength and commitment, documentation, structure and covenants and industry conditions.  There are uncertainties inherent in this process.

Credit risk ratings are dynamic and require updating whenever relevant information is received.  The risk ratings of larger or more complex loans, and Group B and C rated loans, are assessed at the time of their respective annual reviews, during quarterly updates, in action plans or at any other time that relevant information warrants update. Lenders are required to make immediate disclosure to the Chief Credit Officer of any known increase in loan risk, even if considered temporary in nature.

The risk ratings within the loan portfolio, by segment, as of the balance sheet dates were as follows:

As of March 31, 2016

					Residential		Residential
	Commercial		Commercial		Real Estate		Real Estate
	& Industrial		Real Estate		1st Lien		Jr Lien		Consumer		Total
Group A	$	58,289,285	$	165,816,389	$	159,255,456	$	43,197,130	$	6,790,425	$	433,348,685
Group B		4,448,662		4,638,741		593,394		184,734		0		9,865,531
Group C		802,393		7,750,190		2,745,525		535,861		0		11,833,969
Total	$	63,540,340	$	178,205,320	$	162,594,375	$	43,917,725	$	6,790,425	$	455,048,185

As of December 31, 2015

					Residential		Residential
	Commercial		Commercial		Real Estate		Real Estate
	& Industrial		Real Estate		1st Lien		Jr Lien		Consumer		Total
Group A	$	59,764,081	$	168,326,527	$	158,834,849	$	44,041,594	$	7,241,224	$	438,208,275
Group B		4,724,729		4,529,493		599,516		212,508		0		10,066,246
Group C		702,314		5,350,522		3,325,908		466,164		0		9,844,908
Total	$	65,191,124	$	178,206,542	$	162,760,273	$	44,720,266	$	7,241,224	$	458,119,429

March 31, 2015

					Residential		Residential
	Commercial		Commercial		Real Estate		Real Estate
	& Industrial		Real Estate		1st Lien		Jr Lien		Consumer		Total
Group A	$	63,693,155	$	160,845,487	$	158,579,882	$	43,991,054	$	7,392,306	$	434,501,884
Group B		2,900,660		4,873,360		233,858		269,395		0		8,277,273
Group C		853,522		5,734,257		2,780,571		418,507		7,580		9,794,437
Total	$	67,447,337	$	171,453,104	$	161,594,311	$	44,678,956	$	7,399,886	$	452,573,594

Modifications of Loans and TDRs

A loan is classified as a TDR if, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider.

The Company is deemed to have granted such a concession if it has modified a troubled loan in any of the following ways:

●   Reduced accrued interest;

●   Reduced the original contractual interest rate to a rate that is below the current market rate for the borrower;

●   Converted a variable-rate loan to a fixed-rate loan;

●   Extended the term of the loan beyond an insignificant delay;

●   Deferred or forgiven principal in an amount greater than three months of payments; or

●   Performed a refinancing and deferred or forgiven principal on the original loan.

An insignificant delay or insignificant shortfall in the amount of payments typically would not require the loan to be accounted for as a TDR.  However, pursuant to regulatory guidance, any payment delay longer than three months is generally not considered insignificant. Management’s assessment of whether a concession has been granted also takes into account payments expected to be received from third parties, including third-party guarantors, provided that the third party has the ability to perform on the guarantee.

 The Company’s TDRs are principally a result of extending loan repayment terms to relieve cash flow difficulties. The Company has only, on a limited basis, reduced interest rates for borrowers below the current market rate for the borrower.  The Company has not forgiven principal or reduced accrued interest within the terms of original restructurings, nor has it converted variable rate terms to fixed rate terms.  However, the Company evaluates each TDR situation on its own merits and does not foreclose the granting of any particular type of concession.

New TDRs, by portfolio segment, during the periods presented were as follows:

	Three months ended March 31, 2016
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
Residential real estate - 1st lien		5	$	395,236	$	412,923
Residential real estate - Jr lien		1		10,261		10,340
Total		6	$	405,497	$	423,263

	Year ended December 31, 2015
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
Commercial & industrial		2	$	199,134	$	204,142
Commercial real estate		3		581,431		616,438
Residential real estate - 1st lien		12		1,229,100		1,303,228
Residential real estate - Jr lien		2		117,746		121,672
Total		19	$	2,127,411	$	2,245,480

	Three months ended March 31, 2015
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment
Residential real estate - 1st lien		5	$	344,329	$	360,905
Residential real estate - Jr lien		2		117,745		121,673
Total		7	$	462,074	$	482,578

The TDR’s for which there was a payment default during the twelve month periods presented were as follows:

Twelve months ended March 31, 2016

	Number of		Recorded
	Contracts		Investment
Commercial		1	$	79,158
Commercial real estate		1		146,519
Residential real estate - 1st lien		1		59,838
Total		3	$	285,515

Year ended December 31, 2015

	Number of		Recorded
	Contracts		Investment
Commercial real estate		1	$	149,514
Residential real estate - 1st lien		4		286,803
Residential real estate - Jr lien		1		69,828
Total		6	$	506,145

Twelve months ended March 31, 2015

	Number of		Recorded
	Contracts		Investment
Residential real estate - 1st lien		4	$	306,874

TDRs are treated as other impaired loans and carry individual specific reserves with respect to the calculation of the allowance for loan losses.  These loans are categorized as non-performing, may be past due, and are generally adversely risk rated. The TDRs that have defaulted under their restructured terms are generally in collection status and their reserve is typically calculated using the fair value of collateral method. At December 31, 2015, the specific allocation related to TDRs was approximately $25,100.  There was no specific allowance related to TDRs at March 31, 2016 and 2015.

As of the balance sheet dates, the Company was not contractually committed to lend additional funds to debtors with impaired, non-accrual or modified loans.