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LOANS AND ALLOWANCE
 9 Months Ended
Sep. 30, 2016
LOANS AND ALLOWANCE FOR LOAN LOSSES  
LOANS AND ALLOWANCE

NOTE 4 - LOANS AND ALLOWANCE

 

Loans were as follows:

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

 

2016

 

2015

 

Commercial

 

 

 

 

 

 

 

Commercial and industrial

 

$
422,614

 

$
380,960

 

Agricultural

 

 
67,745

 

 
64,704

 

Commercial Real Estate

 

 

 

 

 

 

 

Farm

 

 
109,507

 

 
97,916

 

Hotel

 

 
90,929

 

 
72,193

 

Construction and development

 

 
87,722

 

 
77,394

 

Other

 

 
837,838

 

 
678,381

 

Residential

 

 

 

 

 

 

 

1-4 family

 

 
621,259

 

 
438,808

 

Home equity

 

 
286,266

 

 
288,265

 

Consumer

 

 

 

 

 

 

 

Direct

 

 
60,675

 

 
56,312

 

Indirect

 

 
352

 

 
459

 

Total loans

 

 
2,584,907

 

 
2,155,392

 

Allowance for loan losses

 

 
(21,828)

 

 
(22,020)

 

Net loans

 

$
2,563,079

 

$
2,133,372

 

 

The Company purchased some financing receivables in the last several years.  The investment by portfolio class at September 30, 2016 is as follows.  These loans are included in the above table and all other tables below at the recorded investment amount.

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

 

2016

 

2015

 

Commercial and industrial

 

$
16,337

 

$
9,406

 

Agricultural

 

 
1,025

 

 

 —

 

Construction and development

 

 
14,136

 

 
3,666

 

Farm real estate

 

 
221

 

 

 —

 

Hotel

 

 
1,615

 

 

 —

 

Other real estate

 

 
175,387

 

 
81,831

 

1-4 family

 

 
216,057

 

 
46,967

 

Home equity

 

 
14,959

 

 
19,076

 

Direct

 

 
2,858

 

 
2,818

 

 

 

$
442,595

 

$
163,764

 

 

The remaining discount on the above loans was $7,308 and $2,198 at September 30, 2016 and December 31, 2015 respectively.

 

Activity in the allowance for loan losses for the three months ended September 30, 2016 and 2015 was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Commercial

    

 

 

    

 

 

    

 

 

 

2016

 

Commercial

 

Real Estate

 

Residential

 

Consumer

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, July 1

 

$
6,940

 

$
8,780

 

$
4,677

 

$
1,071

 

$
21,468

 

Provision charged to expense

 

 
1,525

 

 
(1,225)

 

 
(257)

 

 
107

 

 
150

 

Losses charged off

 

 
(23)

 

 
(33)

 

 
(122)

 

 
(1,031)

 

 
(1,209)

 

Recoveries

 

 
148

 

 
398

 

 
106

 

 
767

 

 
1,419

 

Balance, September 30

 

$
8,590

 

$
7,920

 

$
4,404

 

$
914

 

$
21,828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Commercial

    

 

 

    

 

 

    

 

 

 

2015

 

Commercial

 

Real Estate

 

Residential

 

Consumer

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, July 1

 

$
5,394

 

$
12,689

 

$
3,264

 

$
1,126

 

$
22,473

 

Provision charged to expense

 

 
1,331

 

 
(1,349)

 

 
154

 

 
664

 

 
800

 

Losses charged off

 

 
(773)

 

 
(101)

 

 
(401)

 

 
(1,076)

 

 
(2,351)

 

Recoveries

 

 
246

 

 
307

 

 
71

 

 
477

 

 
1,101

 

Balance, September 30

 

$
6,198

 

$
11,546

 

$
3,088

 

$
1,191

 

$
22,023

 

 

Activity in the allowance for loan losses for the nine months ended September 30, 2016 and 2015 was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Commercial

    

 

 

    

 

 

    

 

 

 

2016

 

Commercial

 

Real Estate

 

Residential

 

Consumer

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1

 

$
6,511

 

$
10,702

 

$
3,859

 

$
948

 

$
22,020

 

Provision charged to expense

 

 
2,352

 

 
(3,314)

 

 
1,214

 

 
603

 

 
855

 

Losses charged off

 

 
(650)

 

 
(614)

 

 
(967)

 

 
(2,748)

 

 
(4,979)

 

Recoveries

 

 
377

 

 
1,146

 

 
298

 

 
2,111

 

 
3,932

 

Balance, September 30

 

$
8,590

 

$
7,920

 

$
4,404

 

$
914

 

$
21,828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Commercial

    

 

 

    

 

 

    

 

 

 

2015

 

Commercial

 

Real Estate

 

Residential

 

Consumer

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1

 

$
2,977

 

$
15,605

 

$
3,501

 

$
1,167

 

$
23,250

 

Provision charged to expense

 

 
3,822

 

 
(5,298)

 

 
927

 

 
1,349

 

 
800

 

Losses charged off

 

 
(900)

 

 
(538)

 

 
(1,606)

 

 
(2,576)

 

 
(5,620)

 

Recoveries

 

 
299

 

 
1,777

 

 
266

 

 
1,251

 

 
3,593

 

Balance, September 30

 

$
6,198

 

$
11,546

 

$
3,088

 

$
1,191

 

$
22,023

 

 

 

The following table presents the balance in the allowance for loan losses and the recorded investment by portfolio segment and based on impairment method at September 30, 2016 and December 31, 2015.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Commercial

    

 

 

    

 

 

    

 

 

 

September 30, 2016

 

Commercial

 

Real Estate

 

Residential

 

Consumer

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance individually evaluated for impairment

 

$
454

 

$
650

 

$
148

 

$

 —

 

$
1,252

 

Ending Balance collectively evaluated for impairment

 

 
8,136

 

 
7,270

 

 
4,256

 

 
914

 

 
20,576

 

Total ending allowance balance

 

$
8,590

 

$
7,920

 

$
4,404

 

$
914

 

$
21,828

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance individually evaluated for impairment

 

$
2,329

 

$
7,870

 

$
10,092

 

$
121

 

$
20,412

 

Ending Balance collectively evaluated for impairment

 

 
488,030

 

 
1,118,126

 

 
897,433

 

 
60,906

 

 
2,564,495

 

Total ending loan balance excludes $6,911 of accrued interest

 

$
490,359

 

$
1,125,996

 

$
907,525

 

$
61,027

 

$
2,584,907

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Commercial

    

 

 

    

 

 

    

 

 

 

December 31, 2015

 

Commercial

 

Real Estate

 

Residential

 

Consumer

 

Total

 

Allowance for loan losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance individually evaluated for impairment

 

$
92

 

$
1,166

 

$
171

 

$

 —

 

$
1,429

 

Ending Balance collectively evaluated for impairment

 

 
6,419

 

 
9,536

 

 
3,688

 

 
948

 

 
20,591

 

Total ending allowance balance

 

$
6,511

 

$
10,702

 

$
3,859

 

$
948

 

$
22,020

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending Balance individually evaluated for impairment

 

$
812

 

$
8,909

 

$
9,155

 

$
113

 

$
18,989

 

Ending Balance collectively evaluated for impairment

 

 
444,852

 

 
916,975

 

 
717,918

 

 
56,658

 

 
2,136,403

 

Total ending loan balance excludes $5,878 of accrued interest

 

$
445,664

 

$
925,884

 

$
727,073

 

$
56,771

 

$
2,155,392

 

 

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 $2,410 at September 30, 2016 and $1,583 at December 31, 2015.

 

In connection with the acquisition of Cheviot Financial Corp. (see Note 12), the Company acquired $16,175 of purchased credit impaired loans with $4,615 of non accretable yield and no accretable yield.  The Company provided no allowance for loan losses on these loans at September 30, 2016.

 

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 September 30, 2016 and December 31, 2015.  Performing troubled debt restructurings totaling $1,954 and $2,760 were excluded as allowed by ASC 310-40.

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Allowance

 

 

 

Unpaid

 

 

 

 

for Loan

 

 

 

Principal

 

Recorded

 

Losses

 

September 30, 2016

 

Balance

 

Investment

 

Allocated

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
371

 

$
344

 

$
85

 

Agricultural

 

 
1,450

 

 
1,450

 

 
369

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Farm

 

 
1,106

 

 
1,105

 

 
282

 

Hotel

 

 

 —

 

 

 —

 

 

 —

 

Construction and development

 

 

 —

 

 

 —

 

 

 —

 

Other

 

 
1,788

 

 
1,682

 

 
368

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

 
1,100

 

 
1,059

 

 
147

 

Home Equity

 

 
107

 

 
107

 

 
1

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

 

 —

 

 

 —

 

 

 —

 

Indirect

 

 

 —

 

 

 —

 

 

 —

 

Subtotal — impaired with allowance recorded

 

 
5,922

 

 
5,747

 

 
1,252

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
1,078

 

$
352

 

$

 —

 

Agricultural

 

 
183

 

 
183

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Farm

 

 
501

 

 
246

 

 

 —

 

Hotel

 

 
64

 

 
64

 

 

 —

 

Construction and development

 

 
158

 

 
84

 

 

 —

 

Other

 

 
3,872

 

 
2,736

 

 

 —

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

 
8,984

 

 
7,040

 

 

 —

 

Home Equity

 

 
2,127

 

 
1,886

 

 

 —

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

 
127

 

 
120

 

 

 —

 

Indirect

 

 

 —

 

 

 —

 

 

 —

 

Subtotal — impaired with no allowance recorded

 

 
17,094

 

 
12,711

 

 

 —

 

Total impaired loans

 

$
23,016

 

$
18,458

 

$
1,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Allowance

 

 

 

Unpaid

 

 

 

 

for Loan

 

 

 

Principal

 

Recorded

 

Losses

 

December 31, 2015

 

Balance

 

Investment

 

Allocated

 

With an allowance recorded

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
150

 

$
150

 

$
92

 

Agricultural

 

 

 —

 

 

 —

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Farm

 

 

 —

 

 

 —

 

 

 —

 

Hotel

 

 

 —

 

 

 —

 

 

 —

 

Construction and development

 

 

 —

 

 

 —

 

 

 —

 

Other

 

 
2,480

 

 
2,363

 

 
1,166

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

 
1,357

 

 
1,309

 

 
167

 

Home Equity

 

 
159

 

 
159

 

 
4

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

 

 —

 

 

 —

 

 

 —

 

Indirect

 

 

 —

 

 

 —

 

 

 —

 

Subtotal — impaired with allowance recorded

 

 
4,146

 

 
3,981

 

 
1,429

 

With no related allowance recorded

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
676

 

$
655

 

$

 —

 

Agricultural

 

 
7

 

 
7

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Farm

 

 
496

 

 
309

 

 

 —

 

Hotel

 

 

 —

 

 

 —

 

 

 —

 

Construction and development

 

 
189

 

 
186

 

 

 —

 

Other

 

 
4,429

 

 
3,291

 

 

 —

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

 
6,718

 

 
5,391

 

 

 —

 

Home Equity

 

 
2,589

 

 
2,296

 

 

 —

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

 
126

 

 
113

 

 

 —

 

Indirect

 

 

 —

 

 

 —

 

 

 —

 

Subtotal — impaired with no allowance recorded

 

 
15,230

 

 
12,248

 

 

 —

 

Total impaired loans

 

$
19,376

 

$
16,229

 

$
1,429

 

 

The following tables present the average balance of impaired loans and interest income and cash basis interest recognized for the nine months ending September 30, 2016 and September 30, 2015, excluding performing troubled debt restructurings as allowed by ASC 310-40.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

Interest

 

Cash Basis

 

 

 

Balance

 

Income

 

Income

 

Nine months ended September 30, 2016

 

Impaired Loans

 

Recognized

 

Recognized

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
753

 

$
43

 

$
43

 

Agricultural

 

 
824

 

 

 —

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Farm

 

 
830

 

 

 —

 

 

 —

 

Hotel

 

 
16

 

 

 —

 

 

 —

 

Construction and development

 

 
155

 

 

 —

 

 

 —

 

Other

 

 
4,898

 

 
152

 

 
152

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 family

 

 
7,433

 

 
44

 

 
44

 

Home equity

 

 
2,270

 

 
20

 

 
20

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

 
121

 

 
9

 

 
9

 

Indirect

 

 

 —

 

 
1

 

 
1

 

Total loans

 

$
17,300

 

$
269

 

$
269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Average

    

Interest

    

Cash Basis

 

 

 

Balance

 

Income

 

Income

 

Nine months ended September 30, 2015

 

Impaired Loans

 

Recognized

 

Recognized

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
1,256

 

$
12

 

$
12

 

Agricultural

 

 
38

 

 

 —

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Farm

 

 
424

 

 
4

 

 
4

 

Hotel

 

 
3,563

 

 

 —

 

 

 —

 

Construction and development

 

 
20

 

 
47

 

 
47

 

Other

 

 
5,753

 

 
141

 

 
141

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 family

 

 
7,527

 

 
43

 

 
43

 

Home equity

 

 
2,221

 

 
10

 

 
10

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

 
134

 

 
14

 

 
14

 

Indirect

 

 
2

 

 
5

 

 
5

 

Total loans

 

$
20,938

 

$
276

 

$
276

 

 

The following tables present the average balance of impaired loans and interest income and cash basis interest recognized for the three months ending September 30, 2016 and September 30, 2015, excluding performing troubled debt restructurings as allowed by ASC 310-40.

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Average

    

Interest

    

Cash Basis

 

 

 

Balance

 

Income

 

Income

 

Three months ended  September 30, 2016

 

Impaired Loans

 

Recognized

 

Recognized

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
725

 

$
12

 

$
12

 

Agricultural

 

 
1,640

 

 

 —

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Farm

 

 
1,357

 

 

 —

 

 

 —

 

Hotel

 

 
32

 

 

 —

 

 

 —

 

Construction and development

 

 
124

 

 

 —

 

 

 —

 

Other

 

 
4,791

 

 
35

 

 
35

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 family

 

 
8,299

 

 
17

 

 
17

 

Home equity

 

 
2,083

 

 
4

 

 
4

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

 
126

 

 
3

 

 
3

 

Indirect

 

 

 —

 

 

 —

 

 

 —

 

Total loans

 

$
19,177

 

$
71

 

$
71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Average

    

Interest

    

Cash Basis

 

 

 

Balance

 

Income

 

Income

 

Three months ended  September 30, 2015

 

Impaired Loans

 

Recognized

 

Recognized

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
1,677

 

$
6

 

$
6

 

Agricultural

 

 

 —

 

 

 —

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Farm

 

 
405

 

 

 —

 

 

 —

 

Hotel

 

 

 —

 

 

 —

 

 

 —

 

Construction and development

 

 

 —

 

 

 —

 

 

 —

 

Other

 

 
6,298

 

 
86

 

 
86

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 family

 

 
7,343

 

 
8

 

 
8

 

Home equity

 

 
2,707

 

 
2

 

 
2

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

 
162

 

 
4

 

 
4

 

Indirect

 

 

 —

 

 
1

 

 
1

 

Total loans

 

$
18,592

 

$
107

 

$
107

 

 

 

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 September 30, 2016 and December 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Past due over

 

 

 

 

 

 

 

 

 

90 days and

 

 

 

Non-accrual

still accruing

 

 

    

September 30, 2016

    

December 31, 2015

    

September 30, 2016

    

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

    

 

 

    

 

 

    

 

 

    

 

Commercial and industrial

 

$
569

 

$
654

 

$

 —

 

$

 —

 

Agricultural

 

 
1,548

 

 
7

 

 

 —

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm

 

 
1,352

 

 
308

 

 

 —

 

 

 —

 

Hotel

 

 
63

 

 

 —

 

 

 —

 

 

 —

 

Construction and development

 

 
44

 

 
144

 

 

 —

 

 

 —

 

Other

 

 
3,219

 

 
4,791

 

 

 —

 

 

 —

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

 
6,810

 

 
5,211

 

 

 —

 

 

 —

 

Home Equity

 

 
1,242

 

 
1,639

 

 

 —

 

 

 —

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 
97

 

 
89

 

 

 —

 

 

 —

 

Indirect

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Total

 

$
14,944

 

$
12,843

 

$

 —

 

$

 —

 

 

Included in the above non-accrual loans at September 30, 2016 are $3,544 of loans from the Cheviot acquisition.

 

The following tables present the aging of the recorded investment in past due loans as of September 30, 2016 and December 31, 2015 by class of loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

Greater than

    

 

 

    

 

 

 

 

 

Total

 

30-59 Days

 

60-89 Days

 

90 Days

 

Total

 

Loans Not

 

September 30, 2016

 

Loans

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
422,614

 

$
172

 

$
98

 

$
209

 

$
479

 

$
422,135

 

Agricultural

 

 
67,745

 

 
17

 

 
49

 

 
1,548

 

 
1,614

 

 
66,131

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm

 

 
109,507

 

 

 —

 

 
316

 

 
933

 

 
1,249

 

 
108,258

 

Hotel

 

 
90,929

 

 

 —

 

 

 —

 

 
64

 

 
64

 

 
90,865

 

Construction and development

 

 
87,722

 

 

 —

 

 
23

 

 
44

 

 
67

 

 
87,655

 

Other

 

 
837,838

 

 
445

 

 
344

 

 
1,592

 

 
2,381

 

 
835,457

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

 
621,259

 

 
1,795

 

 
1,766

 

 
4,039

 

 
7,600

 

 
613,659

 

Home Equity

 

 
286,266

 

 
586

 

 
206

 

 
762

 

 
1,554

 

 
284,712

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 
60,675

 

 
42

 

 
20

 

 
67

 

 
129

 

 
60,546

 

Indirect

 

 
352

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 
352

 

Total — excludes $6,911 of accrued interest

 

$
2,584,907

 

$
3,057

 

$
2,822

 

$
9,258

 

$
15,137

 

$
2,569,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

Greater than

    

 

 

    

 

 

 

 

 

Total

 

30-59 Days

 

60-89 Days

 

90 Days

 

Total

 

Loans Not

 

December 31, 2015

 

Loans

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Past Due

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
380,960

 

$
93

 

$

 —

 

$
249

 

$
342

 

$
380,618

 

Agricultural

 

 
64,704

 

 
20

 

 

 —

 

 
7

 

 
27

 

 
64,677

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm

 

 
97,916

 

 

 —

 

 

 —

 

 
119

 

 
119

 

 
97,797

 

Hotel

 

 
72,193

 

 

 —

 

 
13

 

 

 —

 

 
13

 

 
72,180

 

Construction and development

 

 
77,394

 

 

 —

 

 
67

 

 
144

 

 
211

 

 
77,183

 

Other

 

 
678,381

 

 
873

 

 
102

 

 
2,601

 

 
3,576

 

 
674,805

 

Residential

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1-4 Family

 

 
438,808

 

 
3,726

 

 
1,904

 

 
2,771

 

 
8,401

 

 
430,407

 

Home Equity

 

 
288,265

 

 
410

 

 
446

 

 
1,133

 

 
1,989

 

 
286,276

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

 
56,312

 

 
40

 

 
65

 

 
68

 

 
173

 

 
56,139

 

Indirect

 

 
459

 

 
2

 

 

 —

 

 

 —

 

 
2

 

 
457

 

Total — excludes $5,878 of accrued interest

 

$
2,155,392

 

$
5,164

 

$
2,597

 

$
7,092

 

$
14,853

 

$
2,140,539

 

 

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 includes 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 September 30, 2016 and December 31, 2015 was $6,669 and $8,389 respectively. The Company has allocated $501 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2016. 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, 2015, the comparable numbers were $863 of specific reserves and $0 of commitments.

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine month period ending September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Pre-Modification

    

Post-Modification

 

 

 

 

 

Outstanding Recorded

 

Outstanding Recorded

 

For the nine months ended September 30, 2016

 

Number of Loans

 

Investment

 

Investment

 

Commercial

 

 

 

 

 

 

 

 

 

Agricultural

 
1

 

$
89

 

$
89

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

Other

 
2

 

 
298

 

 
298

 

Residential

 

 

 

 

 

 

 

 

 

1-4 Family

 
1

 

 
124

 

 
124

 

Home Equity

 
4

 

 
76

 

 
76

 

Total

 
8

 

$
587

 

$
587

 

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine month period ending September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Pre-Modification

    

Post-Modification

 

 

 

 

 

Outstanding Recorded

 

Outstanding Recorded

 

For the nine months ended September 30, 2015

 

Number of Loans

 

Investment

 

Investment

 

Commercial

 

 

 

 

 

 

 

 

 

Commercial and industrial

 
3

 

$
216

 

$
216

 

Commercial real estate

 

 

 

 

 

 

 

 

 

Other

 
8

 

 
1,610

 

 
1,349

 

Residential

 

 

 

 

 

 

 

 

 

1-4 Family

 
3

 

 
215

 

 
215

 

Home Equity

 
2

 

 
44

 

 
44

 

Total

 
16

 

$
2,085

 

$
1,824

 

 

The following table presents loans by class modified as troubled debt restructurings that occurred during the three month period ending September 30, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Pre-Modification

    

Post-Modification

 

 

 

 

 

Outstanding Recorded

 

Outstanding Recorded

 

For the three months ended September 30, 2016

 

Number of Loans

 

Investment

 

Investment

 

Commercial real estate

 

 

 

 

 

 

 

 

 

Other

 
2

 

$
298

 

$
298

 

Total

 
2

 

$
298

 

$
298

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Pre-Modification

    

Post-Modification

 

 

 

 

 

Outstanding Recorded

 

Outstanding Recorded

 

For the three months ended September 30, 2015

 

Number of Loans

 

Investment

 

Investment

 

Commercial real estate

 

 

 

 

 

 

 

 

 

Other

 
1

 

$
42

 

$
42

 

Residential

 

 

 

 

 

 

 

 

 

1-4 Family

 
3

 

 
215

 

 
215

 

Home Equity

 
1

 

 
38

 

 
38

 

Total

 
5

 

$
295

 

$
295

 

 

 

 

 

 

 

 

 

 

 

 

 

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 nine month period ending September 30, 2016: 

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2016

    

Number of Loans

    

Recorded Investment

 

Commercial real estate

 

 

 

 

 

 

Other

 
1

 

$
125

 

Residential

 

 

 

 

 

 

1-4 Family

 
2

 

 
250

 

Total

 
3

 

$
375

 

 

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 nine month period ending September 30, 2015:

 

 

 

 

 

 

 

 

For the nine months ended September 30, 2015

    

Number of Loans

    

Recorded Investment

 

Commercial real estate

 

 

 

 

 

 

Other

 
3

 

$
863

 

Residential

 

 

 

 

 

 

1-4 Family

 
1

 

 
152

 

Home Equity

 
1

 

 
47

 

Total

 
5

 

$
1,062

 

 

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 September 30, 2016:

 

 

 

 

 

 

 

 

For the three months ended September 30, 2016

    

Number of Loans

    

Recorded Investment

 

Residential

 

 

 

 

 

 

1-4 Family

 
1

 

$
104

 

Total

 
1

 

$
104

 

 

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 September 30, 2015:

 

 

 

 

 

 

 

 

For the three months ended September 30, 2015

    

Number of Loans

    

Recorded Investment

 

Commercial real estate:

 

 

 

 

 

 

Other

 
2

 

$
835

 

Residential

 

 

 

 

 

 

1-4 Family

 
1

 

 
152

 

Home Equity

 
1

 

 
47

 

Total

 
4

 

$
1,034

 

 

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 did not increase the allowance for loan losses or result in any charge offs during the three or nine month periods ending September 30, 2016 and 2015, respectively.

 

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 and nine month periods ending September 30, 2016 and 2015 that did not meet the definition of a troubled debt restructuring. These modified loans had a total recorded investment of $7,895 and $5,511 for the three month period ending September 30, 2016 and 2015 respectively. These modified loans had a total recorded investment of $10,784 and $6,586 for the nine month period ending September 30, 2016 and 2015 respectively.  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. Only credit relationships over $250 are risk graded.  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 September 30, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Special

    

 

 

    

 

 

 

September 30, 2016

 

Pass

 

Mention

 

Substandard

 

Non-accrual

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
376,585

 

$
2,526

 

$
5,845

 

$
507

 

Agricultural

 

 
55,797

 

 
2,461

 

 

 —

 

 
1,450

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm

 

 
86,685

 

 
2,238

 

 
696

 

 
1,352

 

Hotel

 

 
87,883

 

 

 —

 

 
2,983

 

 

 —

 

Construction and development

 

 
61,333

 

 
3,596

 

 
2,344

 

 
31

 

Other

 

 
729,149

 

 
9,229

 

 
7,937

 

 
2,417

 

Total

 

$
1,397,432

 

$
20,050

 

$
19,805

 

$
5,757

 

 

At December 31, 2015, the risk category of loans by class of loans was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Special

    

 

 

    

 

 

 

December 31, 2015

 

Pass

 

Mention

 

Substandard

 

Non-accrual

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
338,436

 

$
8,324

 

$
636

 

$
555

 

Agricultural

 

 
58,253

 

 

 —

 

 

 —

 

 

 —

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

Farm

 

 
75,924

 

 
328

 

 
713

 

 
308

 

Hotel

 

 
72,193

 

 

 —

 

 

 —

 

 

 —

 

Construction and development

 

 
60,246

 

 

 —

 

 
2,499

 

 
113

 

Other

 

 
576,619

 

 
10,367

 

 
3,309

 

 
3,811

 

Total

 

$
1,181,671

 

$
19,019

 

$
7,157

 

$
4,787

 

 

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 and are subsequently charged off. As of September 30, 2016 and December 31, 2015, the grading of loans by category of loans is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2016

    

Performing

    

Watch

    

Substandard

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
37,072

 

$
17

 

$
62

 

Agricultural

 

 
7,929

 

 
10

 

 
98

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Construction and development

 

 
20,391

 

 
14

 

 
13

 

Farm

 

 
18,536

 

 

 —

 

 

 —

 

Hotel

 

 

 —

 

 

 —

 

 
63

 

Other

 

 
87,844

 

 
460

 

 
802

 

Total

 

$
171,772

 

$
501

 

$
1,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

    

Performing

    

Watch

    

Substandard

 

Commercial

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$
32,910

 

$

 —

 

$
99

 

Agricultural

 

 
6,444

 

 

 —

 

 
7

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

Construction and development

 

 
14,438

 

 
67

 

 
31

 

Farm

 

 
20,643

 

 

 —

 

 

 —

 

Other

 

 
83,193

 

 
102

 

 
980

 

Total

 

$
157,628

 

$
169

 

$
1,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2016

    

Performing

    

Watch

    

Substandard

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 family

 

$
615,454

 

$
1,766

 

$
4,039

 

Home equity

 

 
285,298

 

 
206

 

 
762

 

Total

 

$
900,752

 

$
1,972

 

$
4,801

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2016

    

Performing

    

Substandard

    

Loss

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

$
60,588

 

$
20

 

$
67

 

Indirect

 

 
352

 

 

 —

 

 

 —

 

Total

 

$
60,940

 

$
20

 

$
67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

    

Performing

    

Watch

    

Substandard

 

Residential

 

 

 

 

 

 

 

 

 

 

1-4 family

 

$
434,133

 

$
1,904

 

$
2,771

 

Home equity

 

 
286,686

 

 
446

 

 
1,133

 

Total

 

$
720,819

 

$
2,350

 

$
3,904

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

    

Performing

    

Substandard

    

Loss

 

Consumer

 

 

 

 

 

 

 

 

 

 

Direct

 

$
56,179

 

$
101

 

$
32

 

Indirect

 

 
459

 

 

 —

 

 

 —

 

Total

 

$
56,638

 

$
101

 

$
32