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LOANS AND ALLOWANCE
 6 Months Ended
Jun. 30, 2015
LOANS AND ALLOWANCE  
LOANS AND ALLOWANCE

 

NOTE 4 - LOANS AND ALLOWANCE

 

Loans were as follows:

 

 

 

June 30,
2015

 

December 31,
2014

 

Commercial

 

 

 

 

 

Commercial and industrial

 

$
339,460

 

$
275,646

 

Agricultural

 
32,823

 
46,784

 

Commercial Real Estate

 

 

 

 

 

Farm

 
76,361

 
76,849

 

Hotel

 
56,661

 
74,962

 

Construction and development

 
78,899

 
61,640

 

Other

 
652,325

 
666,417

 

Residential

 

 

 

 

 

1-4 family

 
430,750

 
435,336

 

Home equity

 
280,007

 
274,159

 

Consumer

 

 

 

 

 

Direct

 
47,233

 
45,360

 

Indirect

 
528

 
612

 

 

 

 

 

 

 

Total loans

 
1,995,047

 
1,957,765

 

Allowance for loan losses

 
(22,473

)
(23,250

)

 

 

 

 

 

 

Net loans

 

$
1,972,574

 

$
1,934,515

 

 

 

 

 

 

 

 

 

 

The Company purchased some financing receivables in the fourth quarter of 2014. The investment by portfolio class at June 30, 2015 is as follows.  These loans are included in the above table and all other tables below in the recorded investment amount.

 

Commercial and industrial

 

$
23,413 

 

Construction and development

 
2,746 

 

Other real estate

 
88,537 

 

1-4 family

 
31,512 

 

Home equity

 
14,943 

 

Direct

 
1,385 

 

 

 

$
162,536 

 

 

The Company also purchased some credit impaired loans during 2014. These loans had a net balance of under $1,000 so additional disclosures were not made due to their immateriality.

 

Activity in the allowance for loan losses for the three months ended June 30, 2015 and 2014 was as follows:

 

 

 

Commercial

 

Commercial
Real Estate

 

Residential

 

Consumer

 

Total

 

Allowance for loan loss

 

 

 

 

 

 

 

 

 

 

 

Balance, April 1, 2015

 

$
3,675

 

$
14,718

 

$
3,328

 

$
917

 

$
22,638

 

Provision charged to expense

 
1,718

 
(2,944

)
600

 
626

 

—

 

Losses charged off

 
(20

)
(379

)
(711

)
(803

)
(1,913

)

Recoveries

 
21

 
1,294

 
47

 
386

 
1,748

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2015

 

$
5,394

 

$
12,689

 

$
3,264

 

$
1,126

 

$
22,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

Commercial
Real Estate

 

Residential

 

Consumer

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan loss

 

 

 

 

 

 

 

 

 

 

 

Balance, April 1, 2014

 

$
3,009

 

$
20,439

 

$
3,196

 

$
603

 

$
27,247

 

Provision charged to expense

 
149

 
(393

)
718

 
276

 
750

 

Losses charged off

 
(3

)
(4,047

)
(834

)
(628

)
(5,512

)

Recoveries

 
46

 
995

 
30

 
311

 
1,382

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2014

 

$
3,201

 

$
16,994

 

$
3,110

 

$
562

 

$
23,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Activity in the allowance for loan losses for the six months ended June 30, 2015 and 2014 and the recorded investment of loans and allowances by portfolio segment and impairment method as of June 30, 2015 and December 31, 2014 were as follows:

 

 

 

Commercial

 

Commercial
Real Estate

 

Residential

 

Consumer

 

Total

 

Allowance for loan loss

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2015

 

$
2,977

 

$
15,605

 

$
3,501

 

$
1,167

 

$
23,250

 

Provision charged to expense

 
2,491

 
(3,949

)
773

 
685

 

—

 

Losses charged off

 
(127

)
(437

)
(1,205

)
(1,500

)
(3,269

)

Recoveries

 
53

 
1,470

 
195

 
774

 
2,492

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2015

 

$
5,394

 

$
12,689

 

$
3,264

 

$
1,126

 

$
22,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

Commercial
Real Estate

 

Residential

 

Consumer

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan loss

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2014

 

$
3,291

 

$
20,210

 

$
3,409

 

$
699

 

$
27,609

 

Provision charged to expense

 
(14

)

—

 
963

 
551

 
1,500

 

Losses charged off

 
(149

)
(4,655

)
(1,377

)
(1,371

)
(7,552

)

Recoveries

 
73

 
1,439

 
115

 
683

 
2,310

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2014

 

$
3,201

 

$
16,994

 

$
3,110

 

$
562

 

$
23,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

Commercial
Real Estate

 

Residential

 

Consumer

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

Ending Balance individually evaluated for impairment

 

$
812

 

$
733

 

$
177

 

$

—

 

$
1,722

 

Ending Balance collectively evaluated for impairment

 
4,582

 
11,956

 
3,087

 
1,126

 
20,751

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ending allowance balance

 

$
5,394

 

$
12,689

 

$
3,264

 

$
1,126

 

$
22,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

Ending Balance individually evaluated for impairment

 

$
2,199

 

$
9,887

 

$
10,726

 

$
206

 

$
23,018

 

Ending Balance collectively evaluated for impairment

 
370,084

 
854,359

 
700,031

 
47,555

 
1,972,029

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ending loan balance excludes $5,903 of accrued interest

 

$
372,283

 

$
864,246

 

$
710,757

 

$
47,761

 

$
1,995,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014

 

Commercial

 

Commercial
Real Estate

 

Residential

 

Consumer

 

Total

 

Ending Balance individually evaluated for impairment

 

$
162 

 

$
705 

 

$
183 

 

$

—

 

$
1,050 

 

Ending Balance collectively evaluated for impairment

 
2,815 

 
14,900 

 
3,318 

 
1,167 

 
22,200 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ending allowance balance

 

$
2,977 

 

$
15,605 

 

$
3,501 

 

$
1,167 

 

$
23,250 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

 

 

 

 

 

 

 

 

 

Ending Balance individually evaluated for impairment

 

$
705 

 

$
24,722 

 

$
10,662 

 

$
220 

 

$
36,309 

 

Ending Balance collectively evaluated for impairment

 
321,725 

 
855,146 

 
698,833 

 
45,752 

 
1,921,456 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total ending loan balance excludes $5,605 of accrued interest

 

$
322,430 

 

$
879,868 

 

$
709,495 

 

$
45,972 

 

$
1,957,765 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The allowance for loans collectively evaluated for impairment consists of reserves on groups of similar loans based on historical loss experience adjusted for other factors, as well as reserves on certain loans that are classified but determined not to be impaired based on an analysis which incorporates probability of default with a loss given default scenario. The reserves on these loans totaled $2,650 at June 30, 2015 and $2,426 at December 31, 2014.

 

The recorded investment in loans excludes accrued interest receivable due to immateriality.

 

The following tables present loans individually evaluated for impairment by class of loans as of June 30, 2015 and December 31, 2014.  Performing troubled debt restructurings totaling $2,842 and $7,499 were excluded as allowed by ASC 310-40.

 

June 30, 2015

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses Allocated

 

With an allowance recorded

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Commercial and industrial

 

$
1,338 

 

$
1,316 

 

$
812 

 

Agricultural

 

—

 

—

 

—

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 

—

 

—

 

—

 

Hotel

 

—

 

—

 

—

 

Construction and development

 

—

 

—

 

—

 

Other

 
1,890 

 
1,808 

 
733 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
1,523 

 
1,445 

 
172 

 

Home Equity

 
163 

 
163 

 
5 

 

Consumer

 

 

 

 

 

 

 

Direct

 

—

 

—

 

—

 

 

 

 

 

 

 

 

 

Subtotal — impaired with allowance recorded

 
4,914 

 
4,732 

 
1,722 

 

With no related allowance recorded

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Commercial & industrial

 
1,170 

 
883 

 

 

 

Agricultural

 

—

 

—

 

 

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 
716 

 
462 

 

 

 

Hotel

 

—

 

—

 

 

 

Construction and development

 

 

 

 

 

 

 

Other

 
6,461 

 
4,775 

 

 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
7,424 

 
6,449 

 

 

 

Home Equity

 
2,960 

 
2,669 

 

 

 

Consumer

 

 

 

 

 

 

 

Direct

 
217 

 
206 

 

 

 

Indirect

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

Subtotal — impaired with allowance recorded

 
18,948 

 
15,444 

 

—

 

 

 

 

 

 

 

 

 

Total impaired loans

 

$
23,862 

 

$
20,176 

 

$
1,722 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses Allocated

 

 

 

 

 

 

 

 

 

With an allowance recorded

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Commercial and industrial

 

$
82 

 

$
64 

 

$
12 

 

Agriculture

 
397 

 
150 

 
150 

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 
76 

 
76 

 
21 

 

Hotel

 

—

 

—

 

—

 

Construction and development

 

—

 

—

 

—

 

Other

 
979 

 
889 

 
684 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
1,543 

 
1,478 

 
178 

 

Home Equity

 
167 

 
167 

 
5 

 

Consumer

 

 

 

 

 

 

 

Direct

 

—

 

—

 

—

 

Indirect

 

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal — impaired with allowance recorded

 
3,244 

 
2,824 

 
1,050 

 

With no related allowance recorded

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Commercial & industrial

 
761 

 
491 

 

 

 

Agricultural

 

—

 

—

 

 

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 
864 

 
616 

 

 

 

Hotel

 
11,423 

 
11,377 

 

 

 

Construction and development

 
84 

 
78 

 

 

 

Other

 
5,848 

 
4,186 

 

 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
7,325 

 
6,400 

 

 

 

Home Equity

 
2,847 

 
2,618 

 

 

 

Consumer

 

 

 

 

 

 

 

Direct

 
238 

 
213 

 

 

 

Indirect

 
7 

 
7 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal — impaired with allowance recorded

 
29,397 

 
25,986 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total impaired loans

 

$
32,641 

 

$
28,810 

 

$
1,050 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following tables present the average balance of impaired loans and interest income and cash basis interest recognized for the six months ending June 30, 2015 and June 30, 2014, excluding performing troubled debt restructurings as allowed by ASC 310-40.

 

Six months ended June 30, 2015

 

Average
Balance
Impaired Loans

 

Interest
Income
Recognized

 

Cash Basis
Income
Recognized

 

Commercial

 

 

 

 

 

 

 

Commercial & Industrial

 

$
1,289 

 

$
6 

 

$
6 

 

Agricultural

 
50 

 

—

 

—

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 
450 

 
4 

 
4 

 

Hotel

 
4,750 

 

—

 

—

 

Construction and development

 
26 

 
47 

 
47 

 

Other

 
5,668 

 
55 

 
55 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
7,772 

 
35 

 
35 

 

Home Equity

 
2,100 

 
8 

 
8 

 

Consumer

 

 

 

 

 

 

 

Direct

 
140 

 
10 

 
10 

 

Indirect

 
2 

 
4 

 
4 

 

 

 

 

 

 

 

 

 

 

 

$
22,247 

 

$
169 

 

$
169 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2014

 

Average
Balance
Impaired Loans

 

Interest
Income
Recognized

 

Cash Basis
Income
Recognized

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Commercial & Industrial

 

$
287 

 

$
8 

 

$
8 

 

Agricultural

 
137 

 

—

 

—

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 
945 

 

—

 

—

 

Hotel

 
3,850 

 

—

 

—

 

Construction and development

 
398 

 

—

 

—

 

Other

 
11,324 

 
71 

 
71 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
8,258 

 
5 

 
5 

 

Home Equity

 
2,460 

 
7 

 
7 

 

Consumer

 

 

 

 

 

 

 

Direct

 
330 

 
5 

 
5 

 

Indirect

 
7 

 
1 

 
1 

 

 

 

 

 

 

 

 

 

 

 

$
27,996 

 

$
97 

 

$
97 

 

 

The following tables present the average balance of impaired loans and interest income and cash basis interest recognized for the three months ending June 30, 2015 and June 30, 2014, excluding performing troubled debt restructurings as allowed by ASC 310-40.

 

Three months ended June 30, 2015

 

Average
Balance
Impaired Loans

 

Interest
Income
Recognized

 

Cash Basis
Income
Recognized

 

Commercial

 

 

 

 

 

 

 

Commercial & Industrial

 

$
1,656 

 

$
4 

 

$
4 

 

Agricultural

 

—

 

—

 

—

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 
328 

 

—

 

—

 

Hotel

 
1,437 

 

—

 

—

 

Construction and development

 

—

 

—

 

—

 

Other

 
5,964 

 
30 

 
30 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
7,720 

 
14 

 
14 

 

Home Equity

 
1,758 

 
4 

 
4 

 

Consumer

 

 

 

 

 

 

 

Direct

 
103 

 
6 

 
6 

 

Indirect

 

—

 
1 

 
1 

 

 

 

 

 

 

 

 

 

 

 

$
18,966 

 

$
59 

 

$
59 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2014

 

Average
Balance
Impaired Loans

 

Interest
Income
Recognized

 

Cash Basis
Income
Recognized

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

Commercial & Industrial

 

$
280 

 

$
4 

 

$
4 

 

Agricultural

 
206 

 

—

 

—

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 
871 

 

—

 

—

 

Hotel

 
5,775 

 

—

 

—

 

Construction and development

 
200 

 

—

 

—

 

Other

 
10,612 

 
23 

 
23 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
7,890 

 
1 

 
1 

 

Home Equity

 
2,783 

 
6 

 
6 

 

Consumer

 

 

 

 

 

 

 

Direct

 
106 

 
2 

 
2 

 

Indirect

 
5 

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

$
28,728 

 

$
36 

 

$
36 

 

 

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of June 30, 2015 and December 31, 2014:

 

 

 

Non-accrual

 

Past due over
90 days and
still accruing

 

 

 

June 30, 2015

 

December 31,
2014

 

June 30, 2015

 

December 31,
2014

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
2,161 

 

$
479 

 

$

—

 

$

—

 

Agricultural

 

—

 
150 

 

—

 

—

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

Farm

 
461 

 
692 

 

—

 

—

 

Hotel

 

—

 

—

 

—

 

—

 

Construction and development

 

—

 
78 

 

—

 

—

 

Other

 
4,816 

 
3,744 

 
40 

 

—

 

Residential

 

 

 

 

 

 

 

 

 

1-4 Family

 
6,299 

 
6,428 

 

—

 

—

 

Home Equity

 
1,922 

 
1,841 

 

—

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

Direct

 
173 

 
177 

 

—

 

—

 

Indirect

 

—

 
7 

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

Total

 

$
15,832 

 

$
13,596 

 

$
40 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following tables present the aging of the recorded investment in past due loans as of June 30, 2015 and December 31, 2014 by class of loans:

 

June 30, 2015

 

Total
Loans

 

30-59 Days
Past Due

 

60-89 Days
Past Due

 

Greater than
90 Days
Past Due

 

Total
Past Due

 

Loans Not
Past Due

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
339,460 

 

$
586 

 

$
451 

 

$
705 

 

$
1,742 

 

$
337,718 

 

Agricultural

 
32,823 

 

—

 
87 

 

—

 
87 

 
32,736 

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm

 
76,361 

 
1,945 

 

—

 
214 

 
2,159 

 
74,202 

 

Hotel

 
56,661 

 

—

 

—

 

—

 

—

 
56,661 

 

Construction and development

 
78,899 

 

—

 

—

 

—

 

—

 
78,899 

 

Other

 
652,325 

 
1,075 

 
761 

 
2,315 

 
4,151 

 
648,174 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 Family

 
430,750 

 
1,689 

 
1,922 

 
3,743 

 
7,354 

 
423,396 

 

Home Equity

 
280,007 

 
718 

 
229 

 
1,236 

 
2,183 

 
277,824 

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 
47,233 

 
119 

 
14 

 
135 

 
268 

 
46,965 

 

Indirect

 
528 

 
3 

 

—

 

—

 
3 

 
525 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total — excludes $5,903 of accrued interest

 

$
1,995,047 

 

$
6,135 

 

$
3,464 

 

$
8,348 

 

$
17,947 

 

$
1,977,100 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

Total
Loans

 

30-59 Days
Past Due

 

60-89 Days
Past Due

 

Greater than
90 Days
Past Due

 

Total
Past Due

 

Loans Not
Past Due

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
275,646 

 

$
441 

 

$
75 

 

$
210 

 

$
726 

 

$
274,920 

 

Agricultural

 
46,784 

 

—

 

—

 

—

 

—

 
46,784 

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm

 
76,849 

 

—

 

—

 
327 

 
327 

 
76,522 

 

Hotel

 
74,962 

 

—

 

—

 

—

 

—

 
74,962 

 

Construction and development

 
61,640 

 

—

 
78 

 

—

 
78 

 
61,562 

 

Other

 
666,417 

 
933 

 
755 

 
1,919 

 
3,607 

 
662,810 

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 Family

 
435,336 

 
6,217 

 
1,719 

 
3,186 

 
11,122 

 
424,214 

 

Home Equity

 
274,159 

 
751 

 
250 

 
1,521 

 
2,522 

 
271,637 

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 
45,360 

 
91 

 
17 

 
162 

 
270 

 
45,090 

 

Indirect

 
612 

 
6 

 
7 

 

—

 
13 

 
599 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total — excludes $5,605 of accrued interest

 

$
1,957,765 

 

$
8,439 

 

$
2,901 

 

$
7,325 

 

$
18,665 

 

$
1,939,100 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Troubled Debt Restructurings

 

From time to time, the terms of certain loans are modified as troubled debt restructurings. The modification of the terms of such loans include one or a combination of the following: a reduction of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk.

 

The total of troubled debt restructurings at June 30, 2015 and December 31, 2014 was $8,655 and $23,325 respectively. Included in the TDR totals are non-accrual loans of $1,461 and $575 at June 30, 2015 and December 31, 2014 and performing loans of $2,842 at June 30, 2015 and $7,499 at December 31, 2014. The Company has allocated $497 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2015. The Company has committed to lend additional amounts totaling $0 to customers with outstanding loans that are classified as troubled debt restructurings. At December 31, 2014, the comparable numbers were $485 of specific reserves and $0 of commitments.

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the three and six month period ending June 30, 2015:

 

 

 

 

 

Pre-Modification

 

Post-Modification

 

For the three and

 

 

 

Outstanding Recorded

 

Outstanding Recorded

 

six month period ending June 30, 2015

 

Number of Loans

 

Investment

 

Investment

 

Commercial

 

 

 

 

 

 

 

Commercial and industrial

 
3 

 

$
216 

 

$
216 

 

Commercial real estate

 

 

 

 

 

 

 

Other

 
7 

 
1,568 

 
1,307 

 

Residential

 

 

 

 

 

 

 

Home Equity

 
1 

 
6 

 
6 

 

 

 

 

 

 

 

 

 

Total

 
11 

 

$
1,790 

 

$
1,529 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the three and six month period ending June 30, 2014:

 

 

 

 

 

Pre-Modification

 

Post-Modification

 

For the three and

 

 

 

Outstanding Recorded

 

Outstanding Recorded

 

six month period ending June 30, 2014 

 

Number of Loans

 

Investment

 

Investment

 

Commercial real estate

 

 

 

 

 

 

 

Hotel

 
2 

 

$
15,362 

 

$
11,550 

 

Other

 
2 

 
1,015 

 
1,015 

 

Residential

 

 

 

 

 

 

 

1-4 Family

 
1 

 
140 

 
140 

 

 

 

 

 

 

 

 

 

Total

 
5 

 

$
16,517 

 

$
12,705 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the six month period ending June 30, 2015:

 

For the six month period ending June 30, 2015

 

Number of Loans

 

Recorded Investment

 

Commercial real estate:

 

 

 

 

 

Other

 
1 

 

$
28 

 

 

 

 

 

 

 

 

Total

 
1 

 

$
28 

 

 

 

 

 

 

 

 

 

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the six month period ending June 30, 2014:

 

For the six month period ending June 30, 2014

 

Number of Loans

 

Recorded Investment

 

Commercial real estate:

 

 

 

 

 

Other

 
1 

 

$
1,431 

 

Residential

 

 

 

 

 

 

1-4 Family

 
1 

 

 
53 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 
2 

 

$
1,484 

 

 

 

 

 

 

 

 

 

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three month period ending June 30, 2015:

 

June 30, 2015

 

Number of Loans

 

Recorded Investment

 

Commercial real estate:

 

 

 

 

 

Other

 
1 

 

$
28 

 

 

 

 

 

 

 

 

Total

 
1 

 

$
28 

 

 

 

 

 

 

 

 

 

There were no troubled debt restructurings where there was a payment default during the three month period ending June 30, 2014. 

 

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.  The troubled debt restructurings that subsequently defaulted described above increased the allowance for loan losses by $0 and $0 and resulted in charge offs of $0 and $0 during the three month period ending June 30, 2015 and 2014, respectively.  For the six month periods ending June 30, 2015 and 2014, the troubled debt restructurings that subsequently defaulted increased the allowance for loan losses by $0 and $0 and resulted in charge offs of $0 and $36.

 

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

 

The terms of certain other loans were modified during the three month period ending June 30, 2015 that did not meet the definition of a troubled debt restructuring. These loans have a total recorded investment as of June 30, 2015 of $924. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be significant.

 

Credit Quality Indicators

 

The Company categorizes loans into risk categories based on relevant information about the ability of the borrower to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial and commercial real estate loans individually by classifying the loans as to credit risk. This analysis includes credit relationships with an outstanding balance greater than $1 million on an annual basis. The Company uses the following definitions for risk ratings:

 

Special Mention — Loans classified as special mention have above average risk that requires management’s ongoing attention. The borrower may have demonstrated the inability to generate profits or to maintain net worth, chronic delinquency and/or a demonstrated lack of willingness or capacity to meet obligations.

 

Substandard — Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are classified by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

 

Non-accrual — Loans classified as non-accrual are loans where the further accrual of interest is stopped because payment in full of principal and interest is not expected. In most cases, the principal and interest has been in default for a period of 90 days or more.

 

As of June 30, 2015, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

June 30, 2015

 

Pass

 

Special
Mention

 

Substandard

 

Non-accrual

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
289,095 

 

$
9,495 

 

$
1,676 

 

$
1,861 

 

Agricultural

 
32,823 

 

—

 

—

 

—

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

Farm

 
75,635 

 
265 

 

—

 
461 

 

Hotel

 
53,908 

 
2,753 

 

—

 

—

 

Construction and development

 
78,899 

 

—

 

—

 

—

 

Other

 
525,788 

 
9,462 

 
9,316 

 
3,345 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$
1,056,148 

 

$
21,975 

 

$
10,992 

 

$
5,667 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2014, the risk category of loans by class of loans was as follows:

 

December 31, 2014

 

Pass

 

Special
Mention

 

Substandard

 

Non-accrual

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
226,731 

 

$
9,926 

 

$
1,596 

 

$
35 

 

Agricultural

 
46,634 

 

—

 

—

 
150 

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

Farm

 
75,191 

 
966 

 

—

 
692 

 

Hotel

 
60,704 

 
2,835 

 
11,423 

 

—

 

Construction and development

 
60,971 

 
372 

 
219 

 
78 

 

Other

 
525,758 

 
20,823 

 
9,689 

 
2,323 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$
995,989 

 

$
34,922 

 

$
22,927 

 

$
3,278 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans not analyzed individually as part of the above described process are classified by delinquency. These loans are primarily smaller (<$250) commercial, smaller commercial real estate (<$250), residential mortgage and consumer loans. All commercial, commercial real estate, consumer loans fully or partially secured by 1-4  family residential real estate that are 60-89 days will be classified as Watch. If loans are greater than 90 days past due, they will be classified as Substandard. Smaller commercial and commercial real estate loans on non-accrual are included in the non-accrual tables above.  Consumer loans not secured by 1-4 family residential real estate that are 60-119 days past due will be classified Substandard while loans greater than 119 days will be classified as Loss. As of June 30, 2015 and December 31, 2014, the grading of loans by category of loans is as follows:

 

June 30, 2015

 

Performing

 

Watch

 

Substandard

 

Commercial

 

 

 

 

 

 

 

Commercial and industrial

 

$
37,023 

 

$
10 

 

$
300 

 

Commercial Real Estate

 

 

 

 

 

 

 

Other

 
102,738 

 
205 

 
1,471 

 

 

 

 

 

 

 

 

 

Total

 

$
139,761 

 

$
215 

 

$
1,771 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

Performing

 

Watch

 

Substandard

 

Commercial

 

 

 

 

 

 

 

Commercial and industrial

 

$
36,839 

 

$
75 

 

$
444 

 

Commercial Real Estate

 

 

 

 

 

 

 

Other

 
106,247 

 
156 

 
1,421 

 

 

 

 

 

 

 

 

 

Total

 

$
143,086 

 

$
231 

 

$
1,865 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

Performing

 

Watch

 

Substandard

 

Residential

 

 

 

 

 

 

 

1-4 Family

 

$
425,085 

 

$
1,922 

 

$
3,743 

 

Home Equity

 
278,542 

 
229 

 
1,236 

 

 

 

 

 

 

 

 

 

Total

 

$
703,627 

 

$
2,151 

 

$
4,979 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

Performing

 

Watch

 

Substandard

 

Residential

 

 

 

 

 

 

 

1-4 Family

 

$
430,431 

 

$
1,719 

 

$
3,186 

 

Home Equity

 
272,388 

 
250 

 
1,521 

 

 

 

 

 

 

 

 

 

Total

 

$
702,819 

 

$
1,969 

 

$
4,707 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

Performing

 

Substandard

 

Loss

 

Consumer

 

 

 

 

 

 

 

Direct

 

$
47,084 

 

$
14 

 

$
135 

 

Indirect

 
528 

 

—

 

—

 

 

 

 

 

 

 

 

 

Total

 

$
47,612 

 

$
14 

 

$
135 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

Performing

 

Substandard

 

Loss

 

Consumer

 

 

 

 

 

 

 

Direct

 

$
45,181 

 

$
142 

 

$
37 

 

Indirect

 
605 

 
7 

 

—

 

 

 

 

 

 

 

 

 

Total

 

$
45,786 

 

$
149 

 

$
37