Loans (Tables)

6 Months Ended

Jun. 30, 2016

Summary of loan portfolio and allowance for loan losses

The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for loan losses as of June 30, 2016 and December 31, 2015 (in thousands):

June 30, 2016	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	203,980	$	518	$	34	$	203,428
Commercial and agricultural		309,287		6,404		2,753		300,130
Construction		10,481		-		-		10,481
Consumer		11,439		-		6		11,433
Other commercial and agricultural loans		74,089		5,682		876		67,531
State and political subdivision loans		99,839		-		-		99,839
Total		709,115		12,604		3,669		692,842
Allowance for loan losses		7,359		587		-		6,772
Net loans	$	701,756	$	12,017	$	3,669	$	686,070

December 31, 2015	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	203,407	$	304	$	35	$	203,068
Commercial and agricultural		295,364		6,235		2,908		286,221
Construction		15,011		-		-		15,011
Consumer		11,543		-		9		11,534
Other commercial and agricultural loans		71,206		5,745		866		64,595
State and political subdivision loans		98,500		-		-		98,500
Total		695,031		12,284		3,818		678,929
Allowance for loan losses		7,106		355		-		6,751
Net loans	$	687,925	$	11,929	$	3,818	$	672,178

Accretable yield for purchased credit impaired loans

Changes in the accretable yield for purchased credit-impaired loans were as follows for the three and six months ended June 30, 2016 (in thousands):

	Three Months Ended			Six Months Ended
Balance at beginning of period	$	551		$	637
Accretion		(87	)		(173	)
Balance at end of period	$	464		$	464

Loans acquired with specific evidence of deterioration in credit quality

The following table presents additional information regarding loans acquired with specific evidence of deterioration in credit quality under ASC 310-30 (in thousands):

	June 30, 2016		December 31, 2015
Outstanding balance	$	6,616	$	6,950
Carrying amount		3,669		3,818

Impaired financing receivables with associated allowance amount

The following table includes the recorded investment and unpaid principal balances for impaired financing receivables by class, with the associated allowance amount, if applicable (in thousands):

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
June 30, 2016	Balance		Allowance		Allowance		Investment		Allowance
Real estate loans:
Mortgages	$	502	$	114	$	345	$	459	$	35
Home Equity		59		-		59		59		11
Commercial		8,888		5,944		295		6,239		126
Agricultural		165		165		-		165		-
Construction		-		-		-		-		-
Consumer		-		-		-		-		-
Other commercial loans		5,717		4,547		1,031		5,578		415
Other agricultural loans		104		104		-		104		-
State and political subdivision loans		-		-		-		-		-
Total	$	15,435	$	10,874	$	1,730	$	12,604	$	587

December 31, 2015
Real estate loans:
Mortgages	$	281	$	114	$	129	$	243	$	26
Home Equity		61		-		61		61		11
Commercial		8,654		5,843		225		6,068		62
Agricultural		167		167		-		167		-
Construction		-		-		-		-		-
Consumer		-		-		-		-		-
Other commercial loans		5,535		4,653		987		5,640		256
Other agricultural loans		105		105		-		105		-
State and political subdivision loans		-		-		-		-		-
Total	$	14,803	$	10,882	$	1,402	$	12,284	$	355

The following tables includes the average balance of impaired financing receivables by class and the income recognized on impaired loans for the three and six month periods ended June 30, 2016 and 2015(in thousands):

	For the Six Months ended
	June 30, 2016						June 30, 2015
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		Cash Basis		Investment		Recognized		Cash Basis
Real estate loans:
Mortgages	$	425	$	9	$	-	$	224	$	4	$	5
Home Equity		60		2		-		114		2		-
Commercial		6,142		52		-		5,862		32		-
Agricultural		165		5		-		-		-		-
Construction		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Other commercial loans		5,942		134		3		2,678		49		3
Other agricultural loans		104		3		-		-		-		-
State and political
subdivision loans		-		-		-		-		-		-
Total	$	12,838	$	205	$	3	$	8,878	$	87	$	8

	For the Three Months Ended
	June 30, 2016						June 30, 2015
Real estate loans:
Mortgages	$	460	$	5	$	-	$	259	$	2	$	5
Home Equity		59		1		-		103		1		-
Commercial		6,158		26		-		5,700		19		-
Agricultural		165		3		-		-		-		-
Construction		-		-		-		-		-		-
Consumer		-		-		-		-		-		-
Other commercial loans		5,933		68		2		2,629		24		2
Other agricultural loans		104		2		-		-		-		-
State and political
subdivision loans		-		-		-		-		-		-
Total	$	12,879	$	105	$	2	$	8,691	$	46	$	7

Summary of financing receivable credit exposures by internally assigned grades

The following tables represent credit exposures by internally assigned grades as of June 30, 2016 and December 31, 2015 (in thousands):

June 30, 2016	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	228,452	$	3,619	$	14,796	$	28	$	-	$	246,895
Agricultural		53,701		5,951		2,740		-		-		62,392
Construction		10,481		-		-		-		-		10,481
Other commercial loans		48,344		2,148		5,061		133		-		55,686
Other agricultural loans		14,454		2,320		1,629		-		-		18,403
State and political
subdivision loans		91,639		8,200		-		-		-		99,839
Total	$	447,071	$	22,238	$	24,226	$	161	$	-	$	493,696

December 31, 2015
Real estate loans:
Commercial	$	217,544	$	4,150	$	15,816	$	32	$	-	$	237,542
Agricultural		53,695		2,865		1,262		-		-		57,822
Construction		14,422		589		-		-		-		15,011
Other commercial loans		51,297		446		5,669		137		-		57,549
Other agricultural loans		13,318		234		105		-		-		13,657
State and political
subdivision loans		98,500		-		-		-		-		98,500
Total	$	448,776	$	8,284	$	22,852	$	169	$	-	$	480,081

For residential real estate mortgages, home equity and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail below, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loan classes based on payment activity as of June 30, 2016 and December 31, 2015 (in thousands):

June 30, 2016	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	142,633	$	1,474	$	34	$	144,141
Home Equity		59,709		130		-		59,839
Consumer		11,385		48		6		11,439
Total	$	213,727	$	1,652	$	40	$	215,419

December 31, 2015	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	139,734	$	1,270	$	35	$	141,039
Home Equity		62,236		132		-	$	62,368
Consumer		11,470		64		9	$	11,543
Total	$	213,440	$	1,466	$	44	$	214,950

Aging analysis of past due financing receivables

The following table includes an aging analysis of the recorded investment of past due financing receivables as of June 30, 2016 and December 31, 2015 (in thousands):

													Total		90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Financing		Greater and
June 30, 2016	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	1,564	$	25	$	704	$	2,293	$	141,814	$	34	$	144,141	$	195
Home Equity		478		74		77		629		59,210		-		59,839		24
Commercial		1,257		958		4,147		6,362		238,517		2,016		246,895		461
Agricultural		166		58		165		389		61,266		737		62,392		165
Construction		-		-		-		-		10,481		-		10,481		-
Consumer		210		39		48		297		11,136		6		11,439		9
Other commercial loans		15		3,062		1,012		4,089		50,721		876		55,686		146
Other agricultural loans		66		91		104		261		18,142		-		18,403		104
State and political
subdivision loans		-		-		-		-		99,839		-		99,839		-
Total	$	3,756	$	4,307	$	6,257	$	14,320	$	691,126	$	3,669	$	709,115	$	1,104

Loans considered non-accrual	$	373	$	3,759	$	5,153	$	9,285	$	921	$	-	$	10,206
Loans still accruing		3,383		548		1,104		5,035		690,205		3,669		698,909
Total	$	3,756	$	4,307	$	6,257	$	14,320	$	691,126	$	3,669	$	709,115

													Total		90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Financing		Greater and
December 31, 2015	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	487	$	283	$	687	$	1,457	$	139,547	$	35	$	141,039	$	321
Home Equity		630		15		121		766		61,602		-		62,368		73
Commercial		824		57		4,139		5,020		230,352		2,170		237,542		60
Agricultural		177		167		-		344		56,740		738		57,822		-
Construction		-		-		-		-		15,011		-		15,011		-
Consumer		239		37		49		325		11,209		9		11,543		9
Other commercial loans		143		214		1,010		1,367		55,316		866		57,549		160
Other agricultural loans		9		-		-		9		13,648		-		13,657		-
State and political
subdivision loans		-		-		-		-		98,500		-		98,500		-
Total	$	2,509	$	773	$	6,006	$	9,288	$	681,925	$	3,818	$	695,031	$	623

Loans considered non-accrual	$	54	$	171	$	5,383	$	5,608	$	923	$	-	$	6,531
Loans still accruing		2,455		602		623		3,680		681,002		3,818		688,500
Total	$	2,509	$	773	$	6,006	$	9,288	$	681,925	$	3,818	$	695,031

Summary of financing receivables on nonaccrual status

The following table reflects the financing receivables on non-accrual status as of June 30, 2016 and December 31, 2015, respectively. The balances are presented by class of financing receivable (in thousands):

	June 30, 2016		December 31, 2015
Real estate loans:
Mortgages	$	1,279	$	949
Home Equity		106		59
Commercial		4,711		4,422
Agricultural		29		34
Consumer		39		55
Other commercial loans		4,042		1,012
	$	10,206	$	6,531

Summary of troubled debt restructurings on financing receivables

Loan modifications that are considered TDRs completed during the three and six months ended June 30, 2016 and 2015 were as follows (dollars in thousands):

	For the Three Months Ended June 30, 2016
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		3	$	-		438	$	-		438
Total		-		3	$	-	$	438	$	-	$	438

	For the Six Months Ended June 30, 2016
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		3	$	-		438	$	-		438
Total		-		3	$	-	$	438	$	-	$	438

	For the Three Months Ended June 30, 2015
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Mortgages		-		1	$	-	$	19	$	-	$	19
Total		-		1	$	-	$	19	$	-	$	19

	For the Six Months Ended June 30, 2015
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Mortgages		1		1	$	71	$	19	$	71	$	19
Total		1		1	$	71	$	19	$	71	$	19

Allowance for loan losses by impairment method

The following table segregates the allowance for loan losses (ALLL) into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of June 30, 2016 and December 31, 2015, respectively (in thousands):

	June 30, 2016						December 31, 2015
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Real estate loans:
Residential	$	46	$	944	$	990	$	37	$	868	$	905
Commercial and agricultural		126		3,793		3,919		62		3,723		3,785
Construction		-		18		18		-		24		24
Consumer		-		104		104		-		102		102
Other commercial and agricultural loans		415		1,149		1,564		256		1,049		1,305
State and political
subdivision loans		-		764		764		-		593		593
Unallocated		-		-		-		-		392		392
Total	$	587	$	6,772	$	7,359	$	355	$	6,751	$	7,106

Roll forward of allowance for loan losses by portfolio segment

The following tables roll forward the balance of the ALLL by portfolio segment for the three and six month periods ended June 30, 2016 and 2015, respectively (in thousands):

	Balance at March 31, 2016		Charge-offs			Recoveries		Provision			Balance at June 30, 2016
Real estate loans:
Residential	$	966	$	(43	)	$	-	$	67		$	990
Commercial and agricultural		3,938		-			4		(23	)		3,919
Construction		14		-			-		4			18
Consumer		96		(23	)		29		2			104
Other commercial and agricultural loans		1,347		(18	)		-		235			1,564
State and political									-
subdivision loans		666		-			-		98			764
Unallocated		248		-			-		(248	)		-
Total	$	7,275	$	(84	)	$	33	$	135		$	7,359

	Balance at December 31, 2015		Charge-offs			Recoveries		Provision			Balance at June 30, 2016
Real estate loans:
Residential	$	905	$	(43	)	$	-	$	128		$	990
Commercial and agricultural		3,785		-			8		126			3,919
Construction		24		-			-		(6	)		18
Consumer		102		(38	)		68		(28	)		104
Other commercial and agricultural loans		1,305		(18	)		6		271			1,564
State and political									-
subdivision loans		593		-			-		171			764
Unallocated		392		-			-		(392	)		-
Total	$	7,106	$	(99	)	$	82	$	270		$	7,359

	Balance at March 31, 2015		Charge-offs			Recoveries		Provision			Balance at June 30, 2015
Real estate loans:
Residential	$	923	$	(17	)	$	-	$	25		$	931
Commercial and agricultural		3,699		(56	)		3		33			3,679
Construction		11		-			-		3			14
Consumer		82		(17	)		4		20			89
Other commercial and agricultural loans		1,286		-			-		216			1,502
State and political									-
subdivision loans		572		-			-		(4	)		568
Unallocated		349		-			-		(173	)		176
Total	$	6,922	$	(90	)	$	7	$	120		$	6,959

	Balance at December 31, 2014		Charge-offs			Recoveries		Provision			Balance at June 30, 2015
Real estate loans:
Residential	$	878	$	(34	)	$	-	$	87		$	931
Commercial and agricultural		3,870		(56	)		7		(142	)		3,679
Construction		26		-			-		(12	)		14
Consumer		84		(24	)		12		17			89
Other commercial and agricultural loans		1,224		(1	)		-		279			1,502
State and political									-
subdivision loans		545		-			-		23			568
Unallocated		188		-			-		(12	)		176
Total	$	6,815	$	(115	)	$	19	$	240		$	6,959