Loans (Tables)

9 Months Ended

Sep. 30, 2017

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 September 30, 2017 and December 31, 2016 (in thousands):

September 30, 2017	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	206,389	$	864	$	34	$	205,491
Commercial		273,624		13,759		2,016		257,849
Agricultural		207,052		3,964		733		202,355
Construction		17,074		-		-		17,074
Consumer		10,784		4		-		10,780
Other commercial loans		56,222		4,228		538		51,456
Other agricultural loans		34,066		1,418		-		32,648
State and political subdivision loans		101,951		-		-		101,951
Total		907,162		24,237		3,321		879,604
Allowance for loan losses		10,447		442		-		10,005
Net loans	$	896,715	$	23,795	$	3,321	$	869,599

December 31, 2016
Real estate loans:
Residential	$	207,423	$	957	$	35	$	206,431
Commercial		252,577		5,742		1,969		244,866
Agricultural		123,624		3,346		738		119,540
Construction		25,441		-		-		25,441
Consumer		11,005		-		4		11,001
Other commercial loans		58,639		5,994		621		52,024
Other agricultural loans		23,388		1,654		-		21,734
State and political subdivision loans		97,514		-		-		97,514
Total		799,611		17,693		3,367		778,551
Allowance for loan losses		8,886		487		-		8,399
Net loans	$	790,725	$	17,206	$	3,367	$	770,152

Accretable yield for purchased credit impaired loans

Changes in the accretable yield for PCI loans were as follows for the three and nine months ended September 30, 2017 and 2016, respectively (in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2017			2016			2017			2016
Balance at beginning of period	$	167		$	464		$	389		$	637
Accretion		(90	)		(88	)		(312	)		(261	)
Balance at end of period	$	77		$	376		$	77		$	376

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):

	September 30, 2017		December 31, 2016
Outstanding balance	$	6,328	$	6,487
Carrying amount		3,321		3,367

Impaired financing receivables with associated allowance amount

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

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
September 30, 2017	Balance		Allowance		Allowance		Investment		Allowance
Real estate loans:
Mortgages	$	865	$	280	$	515	$	795	$	17
Home Equity		69		16		53		69		9
Commercial		16,240		13,329		430		13,759		67
Agricultural		3,983		1,933		2,031		3,964		99
Construction		-		-		-		-		-
Consumer		4		2		2		4		2
Other commercial loans		4,690		3,759		469		4,228		208
Other agricultural loans		1,442		1,309		109		1,418		40
State and political
subdivision loans		-		-		-		-		-
Total	$	27,293	$	20,628	$	3,609	$	24,237	$	442

December 31, 2016
Real estate loans:							$	-
Mortgages	$	953	$	570	$	330		900	$	22
Home Equity		57		-		57		57		10
Commercial		7,958		5,697		45		5,742		45
Agricultural		3,347		2,000		1,347		3,347		54
Construction		-		-		-		-		-
Consumer		-		-		-		-		-
Other commercial loans		6,159		5,135		859		5,994		326
Other agricultural loans		1,653		1,629		24		1,653		30
State and political
subdivision loans		-		-		-		-		-
Total	$	20,127	$	15,031	$	2,662	$	17,693	$	487

The following tables includes the average balance of impaired financing receivables by class and the income recognized on these receivables for the three and nine month periods ended September 30, 2017 and 2016(in thousands):

	For the Three Months Ended
	September 30, 2017						September 30, 2016
					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	$	741	$	3	$	-	$	607	$	1	$	-
Home Equity		70		1		-		58		1		-
Commercial		13,663		122		2		5,980		35		-
Agricultural		3,799		27		-		-		2		-
Construction		-		-		-		-		-		-
Consumer		4		-		-		-		-		-
Other commercial loans		4,337		54		25		5,298		53		2
Other agricultural loans		1,443		10		-		-		-		-
State and political
subdivision loans		-		-		-		-		-		-
Total	$	24,057	$	217	$	27	$	11,943	$	92	$	2

	For the Nine Months ended
	September 30, 2017						September 30, 2016
					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	$	874	$	9	$	-	$	486	$	10	$	-
Home Equity		62		3		-		59		3		-
Commercial		10,812		280		5		6,088		87		-
Agricultural		3,609		90		-		110		7		-
Construction		-		-		-		-		-		-
Consumer		2		-		-		-		-		-
Other commercial loans		4,988		131		52		5,743		187		5
Other agricultural loans		1,528		55		-		70		3		-
State and political
subdivision loans		-		-		-		-		-		-
Total	$	21,875	$	568	$	57	$	12,556	$	297	$	5

Summary of financing receivable credit exposures by internally assigned grades

The following tables represent credit exposures by internally assigned grades as of September 30, 2017 and December 31, 2016 (in thousands):

September 30, 2017	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	246,405	$	15,069	$	12,150	$	-	$	-	$	273,624
Agricultural		195,469		4,824		6,759		-		-		207,052
Construction		17,074		-		-		-		-		17,074
Other commercial loans		51,341		635		4,165		81		-		56,222
Other agricultural loans		31,791		198		2,077		-		-		34,066
State and political
subdivision loans		88,251		2,891		10,809		-		-		101,951
Total	$	630,331	$	23,617	$	35,960	$	81	$	-	$	689,989

December 31, 2016	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	225,185	$	14,045	$	13,347	$	-	$	-	$	252,577
Agricultural		110,785		8,231		4,608		-		-		123,624
Construction		25,441		-		-		-		-		25,441
Other commercial loans		51,396		2,049		5,105		89		-		58,639
Other agricultural loans		20,178		1,733		1,477		-		-		23,388
State and political
subdivision loans		83,620		13,066		828		-		-		97,514
Total	$	516,605	$	39,124	$	25,365	$	89	$	-	$	581,183

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 September 30, 2017 and December 31, 2016 (in thousands):

September 30, 2017	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	147,785	$	1,254	$	34	$	149,073
Home Equity		57,148		168		-		57,316
Consumer		10,683		101		-		10,784
Total	$	215,616	$	1,523	$	34	$	217,173

December 31, 2016	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	147,047	$	1,648	$	35	$	148,730
Home Equity		58,438		255		-	$	58,693
Consumer		10,892		109		4	$	11,005
Total	$	216,377	$	2,012	$	39	$	218,428

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 September 30, 2017 and December 31, 2016 (in thousands):

													Total		90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Financing		Greater and
September 30, 2017	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	1,087	$	242	$	612	$	1,941	$	147,098	$	34	$	149,073	$	49
Home Equity		347		33		80		460		56,856		-		57,316		30
Commercial		1,184		211		3,814		5,209		266,399		2,016		273,624		80
Agricultural		-		17		1,165		1,182		205,137		733		207,052		-
Construction		-		-		-		-		17,074		-		17,074		-
Consumer		115		48		100		263		10,521		-		10,784		14
Other commercial loans		230		43		2,634		2,907		52,777		538		56,222		-
Other agricultural loans		187		-		-		187		33,879		-		34,066		-
State and political
subdivision loans		-		-		-		-		101,951		-		101,951		-
Total	$	3,150	$	594	$	8,405	$	12,149	$	891,692	$	3,321	$	907,162	$	173

Loans considered non-accrual	$	317	$	67	$	8,232	$	8,616	$	3,205	$	-	$	11,821
Loans still accruing		2,833		527		173		3,533		888,487		3,321		895,341
Total	$	3,150	$	594	$	8,405	$	12,149	$	891,692	$	3,321	$	907,162


															90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Total Financing		Greater and
December 31, 2016	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	630	$	36	$	1,109	$	1,775	$	146,920	$	35	$	148,730	$	173
Home Equity		384		49		209		642		58,051		-		58,693		160
Commercial		1,757		58		4,302		6,117		244,491		1,969		252,577		-
Agricultural		-		-		1,145		1,145		121,741		738		123,624		-
Construction		-		-		-		-		25,441		-		25,441		-
Consumer		115		40		83		238		10,763		4		11,005		67
Other commercial loans		95		35		4,004		4,134		53,884		621		58,639		-
Other agricultural loans		43		34		5		82		23,306		-		23,388		5
State and political
subdivision loans		-		-		-		-		97,514		-		97,514		-
Total	$	3,024	$	252	$	10,857	$	14,133	$	782,111	$	3,367	$	799,611	$	405

Loans considered non-accrual	$	172	$	105	$	10,452	$	10,729	$	725	$	-	$	11,454
Loans still accruing		2,852		147		405		3,404		781,386		3,367		788,157
Total	$	3,024	$	252	$	10,857	$	14,133	$	782,111	$	3,367	$	799,611

Summary of financing receivables on nonaccrual status

The following table reflects the financing receivables, excluding PCI loans, on non-accrual status as of September 30, 2017 and December 31, 2016, respectively. The balances are presented by class of financing receivable (in thousands):

	September 30, 2017		December 31, 2016
Real estate loans:
Mortgages	$	1,205	$	1,475
Home Equity		138		95
Commercial		5,262		4,445
Agricultural		1,464		1,340
Construction		-		-
Consumer		88		42
Other commercial loans		3,008		4,057
Other agricultural loans		656		-
State and political subdivision		-		-
	$	11,821	$	11,454

Summary of troubled debt restructurings on financing receivables

Loan modifications that are considered TDRs completed during the three and nine months ended September 30, 2017 and 2016 were as follows (dollars in thousands):

	For the Three Months Ended September 30, 2017
	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:
Agricultural		-		2	$	-	$	150	$	-	$	150
Other agricultural loans		-		1		-		161		-		161
Total		-		3	$	-	$	311	$	-	$	311

	For the Nine Months Ended September 30, 2017
	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		-		7	$	-	$	6,797	$	-	$	6,797
Agricultural		-		2		-		150		-		150
Other agricultural loans		-		1		-		161		-		161
Total		-		10	$	-	$	7,108	$	-	$	7,108

	For the Three Months Ended September 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		-		1	$	-	$	750	$	-	$	750
Other commercial loans		-		3		-		3,076		-		3,076
Total		-		4	$	-	$	3,826	$	-	$	3,826

	For the Nine Months Ended September 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		-		4	$	-	$	1,188	$	-	$	1,188
Other commercial loans		-		3		-		3,076		-		3,076
Total		-		7	$	-	$	4,264	$	-	$	4,264

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 September 30, 2017 and December 31, 2016, respectively (in thousands):

	September 30, 2017						December 31, 2016
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Real estate loans:
Residential	$	26	$	1,054	$	1,080	$	32	$	1,032	$	1,064
Commercial		67		3,515		3,582		45		3,544		3,589
Agricultural		99		2,595		2,694		54		1,440		1,494
Construction		-		31		31		-		47		47
Consumer		2		135		137		-		122		122
Other commercial loans		208		904		1,112		326		1,001		1,327
Other agricultural loans		40		422		462		30		282		312
State and political
subdivision loans		-		874		874		-		833		833
Unallocated		-		475		475		-		98		98
Total	$	442	$	10,005	$	10,447	$	487	$	8,399	$	8,886

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 nine month periods ended September 30, 2017 and 2016, respectively (in thousands):

	Balance at June 30, 2017		Charge-offs			Recoveries		Provision			Balance at September 30, 2017
Real estate loans:
Residential	$	1,104	$	(11	)	$	-	$	(13	)	$	1,080
Commercial		3,541		-			5		36			3,582
Agricultural		2,452		-			-		242			2,694
Construction		45		-			-		(14	)		31
Consumer		125		(45	)		13		44			137
Other commercial loans		1,131		-			5		(24	)		1,112
Other agricultural loans		431		-			1		30			462
State and political subdivision loans		838		-			-		36			874
Unallocated		312		-			-		163			475
Total	$	9,979	$	(56	)	$	24	$	500		$	10,447

	Balance at June 30, 2016		Charge-offs			Recoveries		Provision			Balance at September 30, 2016
Real estate loans:
Residential	$	990	$	(9	)	$	-	$	32		$	1,013
Commercial		3,338		(100	)		467		(90	)		3,615
Agricultural		581							410			991
Construction		18		-			-		16			34
Consumer		104		(27	)		16		16			109
Other commercial loans		1,316		(37	)		25		39			1,343
Other agricultural loans		248							51			299
State and political subdivision loans		764		-			-		7			771
Unallocated		-		-			-		19			19
Total	$	7,359	$	(173	)	$	508	$	500		$	8,194

	Balance at December 31, 2016		Charge-offs			Recoveries		Provision			Balance at September 30, 2017
Real estate loans:
Residential	$	1,064	$	(104	)	$	-	$	120		$	1,080
Commercial		3,589		(41	)		11		23			3,582
Agricultural		1,494		-			-		1,200			2,694
Construction		47		-			-		(16	)		31
Consumer		122		(90	)		35		70			137
Other commercial loans		1,327		-			14		(229	)		1,112
Other agricultural loans		312		(5	)		1		154			462
State and political subdivision loans		833		-			-		41			874
Unallocated		98		-			-		377			475
Total	$	8,886	$	(240	)	$	61	$	1,740		$	10,447

	Balance at December 31, 2015		Charge-offs			Recoveries		Provision			Balance at September 30, 2016
Real estate loans:
Residential	$	905	$	(52	)	$	-	$	160		$	1,013
Commercial		3,376		(100	)		475		(136	)		3,615
Agricultural		409		-					582			991
Construction		24		-			-		10			34
Consumer		102		(65	)		84		(12	)		109
Other commercial loans		1,183		(55	)		31		184			1,343
Other agricultural loans		122							177			299
State and political subdivision loans		593		-			-		178			771
Unallocated		392		-			-		(373	)		19
Total	$	7,106	$	(272	)	$	590	$	770		$	8,194