Loans and ALLL

We grant commercial, agricultural, residential real estate, and consumer loans to customers situated primarily in Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan. The ability of the borrowers to honor their repayment obligations is often dependent upon the real estate, agricultural, manufacturing, retail, gaming, tourism, higher education, and general economic conditions of this region. Substantially all of our consumer and residential real estate loans are secured by various items of property, while commercial loans are secured primarily by real estate, business assets, and personal guarantees; a portion of loans are unsecured.

Loans that we have the intent and ability to hold in our portfolio are reported at their outstanding principal balance adjusted for any charge-offs, the ALLL, and any deferred fees or costs. Interest income is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the level yield method.

The accrual of interest on commercial, agricultural, and residential real estate loans is discontinued at the time the loan is 90 days or more past due unless the credit is well-secured and in the process of collection. Upon transferring the loans to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if any charge-offs are necessary. Consumer loans are typically charged-off no later than 180 days past due. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful.

For loans that are placed on nonaccrual status or charged-off, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected, is charged against the ALLL. Loans may be returned to accrual status after six months of continuous performance.

Commercial and agricultural loans include loans for commercial real estate, commercial operating loans, farmland and agricultural production, and states and political subdivisions. Repayment of these loans is dependent upon the successful operation and management of a business. We minimize our risk by limiting the amount of direct credit exposure to any one borrower to $15,000. Borrowers with direct credit needs of more than $15,000 are serviced through the use of loan participations with other commercial banks. Commercial and agricultural real estate loans commonly require loan-to-value limits of 80% or less. Depending upon the type of loan, past credit history, and current operating results, we may require the borrower to pledge accounts receivable, inventory, and property and equipment. Personal guarantees are generally required from the owners of closely held corporations, partnerships, and sole proprietorships. In addition, we require annual financial statements, prepare cash flow analyses, and review credit reports.

We offer adjustable rate mortgages, construction loans, and fixed rate residential real estate loans which have amortization periods up to a maximum of 30 years. We consider the anticipated direction of interest rates, balance sheet duration, the sensitivity of our balance sheet to changes in interest rates, and overall loan demand to determine whether or not to sell fixed rate loans to Freddie Mac.

Our lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 97% of the lower of the appraised value of the property or the purchase price, with the condition that private mortgage insurance is required on loans with loan-to-value ratios in excess of 80%.

Underwriting criteria for residential real estate loans include:


•	Evaluation of the borrower’s ability to make monthly payments.


•	Evaluation of the value of the property securing the loan.


•	Ensuring the payment of principal, interest, taxes, and hazard insurance does not exceed 28% of a borrower’s gross income.


•	Ensuring all debt servicing does not exceed 36% of income.


•	Verification of acceptable credit reports.


•	Verification of employment, income, and financial information.

Appraisals are performed by independent appraisers and reviewed for appropriateness. All mortgage loan requests are reviewed by our mortgage loan committee or through a secondary market underwriting system; loans in excess of $500 require the approval of our Internal Loan Committee, the Executive Loan Committee, the Board of Directors’ Loan Committee, or the Board of Directors.

Consumer loans include secured and unsecured personal loans. Loans are amortized for a period of up to 12 years based on the age and value of the underlying collateral. The underwriting emphasis is on a borrower’s perceived intent and ability to pay rather than collateral value. No consumer loans are sold to the secondary market.

The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the ALLL when we believe the uncollectability of the loan balance is confirmed. Subsequent recoveries, if any, are credited to the ALLL.

The appropriateness of the ALLL is evaluated on a quarterly basis and is based upon a periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The primary factors behind the determination of the level of the ALLL are specific allocations for impaired loans, historical loss percentages, as well as unallocated components. Specific allocations for impaired loans are primarily determined based on the difference between the loan’s outstanding balance to the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral, less cost to sell. Historical loss allocations are calculated at the loan class and segment levels based on a migration analysis of the loan portfolio over the preceding five years. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

A summary of changes in the ALLL and the recorded investment in loans by segments follows:



	Allowance for Loan Losses
	Three Months Ended June 30, 2016
	Commercial			Agricultural		Residential Real Estate			Consumer			Unallocated		Total
April 1, 2016	$	2,421		$	336	$	3,130		$	540		$	1,073	$	7,500
Charge-offs	(32		)	—		(128		)	(48		)	—		(208		)
Recoveries	189			—		45			62			—		296
Provision for loan losses	(459		)	198		83			(13		)	203		12
June 30, 2016	$	2,119		$	534	$	3,130		$	541		$	1,276	$	7,600



	Allowance for Loan Losses
	Six Months Ended June 30, 2016
	Commercial			Agricultural		Residential Real Estate			Consumer			Unallocated		Total
January 1, 2016	$	2,171		$	329	$	3,330		$	522		$	1,048	$	7,400
Charge-offs	(48		)	—		(369		)	(132		)	—		(549		)
Recoveries	278			92		95			116			—		581
Provision for loan losses	(282		)	113		74			35			228		168
June 30, 2016	$	2,119		$	534	$	3,130		$	541		$	1,276	$	7,600



	Allowance for Loan Losses and Recorded Investment in Loans
	June 30, 2016
	Commercial		Agricultural		Residential Real Estate		Consumer		Unallocated		Total
ALLL
Individually evaluated for impairment	$	811	$	15	$	1,776	$	—	$	—	$	2,602
Collectively evaluated for impairment	1,308		519		1,354		541		1,276		4,998
Total	$	2,119	$	534	$	3,130	$	541	$	1,276	$	7,600
Loans
Individually evaluated for impairment	$	6,714	$	4,229	$	9,431	$	32			$	20,406
Collectively evaluated for impairment	493,660		122,288		245,685		37,555				899,188
Total	$	500,374	$	126,517	$	255,116	$	37,587			$	919,594



	Allowance for Loan Losses
	Three Months Ended June 30, 2015
	Commercial			Agricultural		Residential Real Estate			Consumer			Unallocated			Total
April 1, 2015	$	3,808		$	206	$	3,728		$	711		$	1,147		$	9,600
Charge-offs	(11		)	—		(205		)	(80		)	—			(296		)
Recoveries	106			—		86			39			—			231
Provision for loan losses	(421		)	157		(97		)	(79		)	(95		)	(535		)
June 30, 2015	$	3,482		$	363	$	3,512		$	591		$	1,052		$	9,000



	Allowance for Loan Losses
	Six Months Ended June 30, 2015
	Commercial			Agricultural		Residential Real Estate			Consumer			Unallocated			Total
January 1, 2015	$	3,821		$	216	$	4,235		$	645		$	1,183		$	10,100
Charge-offs	(28		)	—		(255		)	(173		)	—			(456		)
Recoveries	319			72		119			107			—			617
Provision for loan losses	(630		)	75		(587		)	12			(131		)	(1,261		)
June 30, 2015	$	3,482		$	363	$	3,512		$	591		$	1,052		$	9,000



	Allowance for Loan Losses and Recorded Investment in Loans
	December 31, 2015
	Commercial		Agricultural		Residential Real Estate		Consumer		Unallocated		Total
ALLL
Individually evaluated for impairment	$	829	$	2	$	1,989	$	—	$	—	$	2,820
Collectively evaluated for impairment	1,342		327		1,341		522		1,048		4,580
Total	$	2,171	$	329	$	3,330	$	522	$	1,048	$	7,400
Loans
Individually evaluated for impairment	$	7,969	$	4,068	$	10,266	$	35			$	22,338
Collectively evaluated for impairment	440,412		111,843		241,235		34,664				828,154
Total	$	448,381	$	115,911	$	251,501	$	34,699			$	850,492

The following table displays the credit quality indicators for commercial and agricultural credit exposures based on internally assigned credit risk ratings as of:



	June 30, 2016
	Commercial						Agricultural
	Real Estate		Other		Total		Real Estate		Other		Total
Rating
1 - Excellent	$	—	$	982	$	982	$	—	$	—	$	—
2 - High quality	11,359		10,318		21,677		3,963		1,428		5,391
3 - High satisfactory	100,031		31,861		131,892		24,288		11,052		35,340
4 - Low satisfactory	257,872		75,720		333,592		46,446		24,514		70,960
5 - Special mention	4,464		477		4,941		5,631		6,338		11,969
6 - Substandard	6,936		227		7,163		2,108		603		2,711
7 - Vulnerable	127		—		127		146		—		146
8 - Doubtful	—		—		—		—		—		—
Total	$	380,789	$	119,585	$	500,374	$	82,582	$	43,935	$	126,517



	December 31, 2015
	Commercial						Agricultural
	Real Estate		Other		Total		Real Estate		Other		Total
Rating
1 - Excellent	$	—	$	499	$	499	$	—	$	—	$	—
2 - High quality	7,397		11,263		18,660		4,647		2,150		6,797
3 - High satisfactory	99,136		29,286		128,422		28,886		13,039		41,925
4 - Low satisfactory	222,431		62,987		285,418		37,279		22,166		59,445
5 - Special mention	4,501		473		4,974		3,961		1,875		5,836
6 - Substandard	9,941		256		10,197		1,623		139		1,762
7 - Vulnerable	211		—		211		146		—		146
8 - Doubtful	—		—		—		—		—		—
Total	$	343,617	$	104,764	$	448,381	$	76,542	$	39,369	$	115,911

Internally assigned credit risk ratings are reviewed, at a minimum, when loans are renewed or when management has knowledge of improvements or deterioration of the credit quality of individual credits. Descriptions of the internally assigned credit risk ratings for commercial and agricultural loans are as follows:

1. EXCELLENT – Substantially Risk Free

Credit has strong financial condition and solid earnings history, characterized by:


•	High liquidity, strong cash flow, low leverage.


•	Unquestioned ability to meet all obligations when due.


•	Experienced management, with management succession in place.


•	Secured by cash.

2. HIGH QUALITY – Limited Risk

Credit with sound financial condition and a positive trend in earnings supplemented by:


•	Favorable liquidity and leverage ratios.


•	Ability to meet all obligations when due.


•	Management with successful track record.


•	Steady and satisfactory earnings history.


•	If loan is secured, collateral is of high quality and readily marketable.


•	Access to alternative financing.


•	Well defined primary and secondary source of repayment.


•	If supported by guaranty, the financial strength and liquidity of the guarantor(s) are clearly evident.

3. HIGH SATISFACTORY – Reasonable Risk

Credit with satisfactory financial condition and further characterized by:


•	Working capital adequate to support operations.


•	Cash flow sufficient to pay debts as scheduled.


•	Management experience and depth appear favorable.


•	Loan performing according to terms.


•	If loan is secured, collateral is acceptable and loan is fully protected.

4. LOW SATISFACTORY – Acceptable Risk

Credit with bankable risks, although some signs of weaknesses are shown:


•	Would include most start-up businesses.


•	Occasional instances of trade slowness or repayment delinquency – may have been 10-30 days slow within the past year.


•	Management’s abilities are apparent, yet unproven.


•	Weakness in primary source of repayment with adequate secondary source of repayment.


•	Loan structure generally in accordance with policy.


•	If secured, loan collateral coverage is marginal.


•	Adequate cash flow to service debt, but coverage is low.

To be classified as less than satisfactory, only one of the following criteria must be met.

5. SPECIAL MENTION – Criticized

Credit constitutes an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitute an unwarranted risk in light of the circumstances surrounding a specific loan:


•	Downward trend in sales, profit levels, and margins.


•	Impaired working capital position.


•	Cash flow is strained in order to meet debt repayment.


•	Loan delinquency (30-60 days) and overdrafts may occur.


•	Shrinking equity cushion.


•	Diminishing primary source of repayment and questionable secondary source.


•	Management abilities are questionable.


•	Weak industry conditions.


•	Litigation pending against the borrower.


•	Collateral or guaranty offers limited protection.


•	Negative debt service coverage, however the credit is well collateralized and payments are current.

6. SUBSTANDARD – Classified

Credit where the borrower’s current net worth, paying capacity, and value of the collateral pledged is inadequate. There is a distinct possibility that we will implement collection procedures if the loan deficiencies are not corrected. In addition, the following characteristics may apply:


•	Sustained losses have severely eroded the equity and cash flow.


•	Deteriorating liquidity.


•	Serious management problems or internal fraud.


•	Original repayment terms liberalized.


•	Likelihood of bankruptcy.


•	Inability to access other funding sources.


•	Reliance on secondary source of repayment.


•	Litigation filed against borrower.


•	Collateral provides little or no value.


•	Requires excessive attention of the loan officer.


•	Borrower is uncooperative with loan officer.

7. VULNERABLE – Classified

Credit is considered “Substandard” and warrants placing on nonaccrual status. Risk of loss is being evaluated and exit strategy options are under review. Other characteristics that may apply:


•	Insufficient cash flow to service debt.


•	Minimal or no payments being received.


•	Limited options available to avoid the collection process.


•	Transition status, expect action will take place to collect loan without immediate progress being made.

8. DOUBTFUL – Workout

Credit has all the weaknesses inherent in a “Substandard” loan with the added characteristic that collection and/or liquidation is pending. The possibility of a loss is extremely high, but its classification as a loss is deferred until liquidation procedures are completed, or reasonably estimable. Other characteristics that may apply:


•	Normal operations are severely diminished or have ceased.


•	Seriously impaired cash flow.


•	Original repayment terms materially altered.


•	Secondary source of repayment is inadequate.


•	Survivability as a “going concern” is impossible.


•	Collection process has begun.


•	Bankruptcy petition has been filed.


•	Judgments have been filed.


•	Portion of the loan balance has been charged-off.

Our primary credit quality indicator for residential real estate and consumer loans is the individual loan’s past due aging. The following tables summarize the past due and current loans as of:



	June 30, 2016
	Accruing Interest and Past Due:								Total Past Due and Nonaccrual
	30-59 Days		60-89 Days		90 Days or More		Nonaccrual		Total Past Due and Nonaccrual		Current		Total
Commercial
Commercial real estate	$	602	$	291	$	—	$	127	$	1,020	$	379,769	$	380,789
Commercial other	75		15		194		—		284		119,301		119,585
Total commercial	677		306		194		127		1,304		499,070		500,374
Agricultural
Agricultural real estate	441		—		—		146		587		81,995		82,582
Agricultural other	342		—		14		—		356		43,579		43,935
Total agricultural	783		—		14		146		943		125,574		126,517
Residential real estate
Senior liens	1,200		527		—		701		2,428		205,928		208,356
Junior liens	40		—		—		—		40		8,607		8,647
Home equity lines of credit	287		—		—		—		287		37,826		38,113
Total residential real estate	1,527		527		—		701		2,755		252,361		255,116
Consumer
Secured	22		—		—		—		22		33,958		33,980
Unsecured	1		—		—		—		1		3,606		3,607
Total consumer	23		—		—		—		23		37,564		37,587
Total	$	3,010	$	833	$	208	$	974	$	5,025	$	914,569	$	919,594



	December 31, 2015
	Accruing Interest and Past Due:								Total Past Due and Nonaccrual
	30-59 Days		60-89 Days		90 Days or More		Nonaccrual		Total Past Due and Nonaccrual		Current		Total
Commercial
Commercial real estate	$	505	$	281	$	—	$	211	$	997	$	342,620	$	343,617
Commercial other	18		—		—		—		18		104,746		104,764
Total commercial	523		281		—		211		1,015		447,366		448,381
Agricultural
Agricultural real estate	196		890		—		146		1,232		75,310		76,542
Agricultural other	—		—		—		—		—		39,369		39,369
Total agricultural	196		890		—		146		1,232		114,679		115,911
Residential real estate
Senior liens	1,551		261		—		429		2,241		199,622		201,863
Junior liens	40		8		—		6		54		9,325		9,379
Home equity lines of credit	225		—		—		—		225		40,034		40,259
Total residential real estate	1,816		269		—		435		2,520		248,981		251,501
Consumer
Secured	27		—		—		—		27		30,839		30,866
Unsecured	4		—		—		—		4		3,829		3,833
Total consumer	31		—		—		—		31		34,668		34,699
Total	$	2,566	$	1,440	$	—	$	792	$	4,798	$	845,694	$	850,492

Impaired Loans

Loans may be classified as impaired if they meet one or more of the following criteria:


1.	There has been a charge-off of its principal balance (in whole or in part);


2.	The loan has been classified as a TDR; or


3.	The loan is in nonaccrual status.

Impairment is measured on a loan-by-loan basis for commercial and agricultural loans by comparing the loan’s outstanding balance to the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral, less cost to sell, if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Impairment is measured on a loan-by-loan basis for residential real estate and consumer loans by comparing the loan’s unpaid principal balance to the present value of expected future cash flows discounted at the loan’s effective interest rate.

We do not recognize interest income on impaired loans in nonaccrual status. For impaired loans not classified as nonaccrual, interest income is recognized daily, as earned, according to the terms of the loan agreement and the principal amount outstanding. The following is a summary of information pertaining to impaired loans as of:



	June 30, 2016						December 31, 2015
	Outstanding Balance		Unpaid Principal Balance		Valuation Allowance		Outstanding Balance		Unpaid Principal Balance		Valuation Allowance
Impaired loans with a valuation allowance
Commercial real estate	$	5,729	$	5,848	$	801	$	5,659	$	5,777	$	818
Commercial other	93		93		10		8		8		11
Agricultural real estate	181		181		15		—		—		—
Agricultural other	—		—		—		335		335		2
Residential real estate senior liens	9,183		9,959		1,750		9,996		10,765		1,959
Residential real estate junior liens	133		143		26		143		163		30
Home equity lines of credit	—		—		—		—		—		—
Consumer secured	—		—		—		—		—		—
Total impaired loans with a valuation allowance	15,319		16,224		2,602		16,141		17,048		2,820
Impaired loans without a valuation allowance
Commercial real estate	820		973				2,122		2,256
Commercial other	72		83				180		191
Agricultural real estate	3,362		3,362				3,549		3,549
Agricultural other	686		686				184		184
Home equity lines of credit	115		415				127		434
Consumer secured	32		32				35		35
Total impaired loans without a valuation allowance	5,087		5,551				6,197		6,649
Impaired loans
Commercial	6,714		6,997		811		7,969		8,232		829
Agricultural	4,229		4,229		15		4,068		4,068		2
Residential real estate	9,431		10,517		1,776		10,266		11,362		1,989
Consumer	32		32		—		35		35		—
Total impaired loans	$	20,406	$	21,775	$	2,602	$	22,338	$	23,697	$	2,820

The following is a summary of information pertaining to impaired loans for the:



	Three Months Ended June 30
	2016				2015
	Average Outstanding Balance		Interest Income Recognized		Average Outstanding Balance		Interest Income Recognized
Impaired loans with a valuation allowance
Commercial real estate	$	5,793	$	85	$	7,052	$	92
Commercial other	95		2		569		9
Agricultural real estate	91		2		44		—
Agricultural other	—		—		—		—
Residential real estate senior liens	9,508		93		10,805		99
Residential real estate junior liens	134		1		196		12
Home equity lines of credit	—		—		—		—
Consumer secured	—		—		46		1
Total impaired loans with a valuation allowance	15,621		183		18,712		213
Impaired loans without a valuation allowance
Commercial real estate	814		28		2,230		74
Commercial other	77		2		68		2
Agricultural real estate	3,454		43		1,545		20
Agricultural other	603		10		351		7
Home equity lines of credit	118		4		190		4
Consumer secured	33		1		—		—
Total impaired loans without a valuation allowance	5,099		88		4,384		107
Impaired loans
Commercial	6,779		117		9,919		177
Agricultural	4,148		55		1,940		27
Residential real estate	9,760		98		11,191		115
Consumer	33		1		46		1
Total impaired loans	$	20,720	$	271	$	23,096	$	320



	Six Months Ended June 30
	2016				2015
	Average Outstanding Balance		Interest Income Recognized		Average Outstanding Balance		Interest Income Recognized
Impaired loans with a valuation allowance
Commercial real estate	$	5,773	$	169	$	7,163	$	183
Commercial other	74		3		581		19
Agricultural real estate	46		2		44		1
Agricultural other	84		—		—		—
Residential real estate senior liens	9,711		193		11,208		217
Residential real estate junior liens	137		2		227		14
Home equity lines of credit	—		—		63		—
Consumer secured	—		—		49		2
Total impaired loans with a valuation allowance	15,825		369		19,335		436
Impaired loans without a valuation allowance
Commercial real estate	1,139		47		2,818		135
Commercial other	104		4		99		5
Agricultural real estate	3,501		88		1,513		41
Agricultural other	477		16		204		8
Home equity lines of credit	121		8		155		10
Consumer secured	34		2		3		—
Total impaired loans without a valuation allowance	5,376		165		4,792		199
Impaired loans
Commercial	7,090		223		10,661		342
Agricultural	4,108		106		1,761		50
Residential real estate	9,969		203		11,653		241
Consumer	34		2		52		2
Total impaired loans	$	21,201	$	534	$	24,127	$	635

As of June 30, 2016 and December 31, 2015, we had no commitments to advance additional funds in connection with impaired loans, which include TDRs.

Troubled Debt Restructurings

Loan modifications are considered to be TDRs when the modification includes terms outside of normal lending practices to a borrower who is experiencing financial difficulties.

Typical concessions granted include, but are not limited to:


1.	Agreeing to interest rates below prevailing market rates for debt with similar risk characteristics.


2.	Extending the amortization period beyond typical lending guidelines for loans with similar risk characteristics.


3.	Forgiving principal.


4.	Forgiving accrued interest.

To determine if a borrower is experiencing financial difficulties, factors we consider include:


1.	The borrower is currently in default on any of their debt.


2.	The borrower would likely default on any of their debt if the concession was not granted.


3.	The borrower’s cash flow was insufficient to service all of their debt if the concession was not granted.


4.	The borrower has declared, or is in the process of declaring, bankruptcy.


5.	The borrower is unlikely to continue as a going concern (if the entity is a business).

The following is a summary of information pertaining to TDRs granted for the:



	Three Months Ended June 30
	2016					2015
	Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial other	—	$	—	$	—	1	$	71	$	71
Agricultural other	3	201		201		7	770		770
Residential real estate
Senior liens	—	—		—		2	210		210
Junior liens	—	—		—		1	30		30
Home equity lines of credit	—	—		—		—	—		—
Total residential real estate	—	—		—		3	240		240
Consumer unsecured	—	—		—		—	—		—
Total	3	$	201	$	201	11	$	1,081	$	1,081



	Six Months Ended June 30
	2016					2015
	Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
Commercial other	—	$	—	$	—	5	$	585	$	585
Agricultural other	3	201		201		7	770		770
Residential real estate
Senior liens	2	26		26		4	448		448
Junior liens	—	—		—		1	30		30
Home equity lines of credit	—	—		—		1	94		94
Total residential real estate	2	26		26		6	572		572
Consumer unsecured	1	2		2		—	—		—
Total	6	$	229	$	229	18	$	1,927	$	1,927

The following tables summarize concessions we granted to borrowers in financial difficulty for the:



	Three Months Ended June 30
	2016						2015
	Below Market Interest Rate			Below Market Interest Rate and Extension of Amortization Period			Below Market Interest Rate			Below Market Interest Rate and Extension of Amortization Period
	Number of Loans	Pre-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment
Commercial other	—	$	—	—	$	—	1	$	71	—	$	—
Agricultural other	—	—		3	201		6	724		1	46
Residential real estate
Senior liens	—	—		—	—		—	—		2	210
Junior liens	—	—		—	—		—	—		1	30
Home equity lines of credit	—	—		—	—		—	—		—	—
Total residential real estate	—	—		—	—		—	—		3	240
Consumer unsecured	—	—		—	—		—	—		—	—
Total	—	$	—	3	$	201	7	$	795	4	$	286



	Six Months Ended June 30
	2016						2015
	Below Market Interest Rate			Below Market Interest Rate and Extension of Amortization Period			Below Market Interest Rate			Below Market Interest Rate and Extension of Amortization Period
	Number of Loans	Pre-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment		Number of Loans	Pre-Modification Recorded Investment
Commercial other	—	$	—	—	$	—	3	$	254	2	$	331
Agricultural other	—	—		3	201		6	724		1	46
Residential real estate
Senior liens	2	26		—	—		1	50		3	398
Junior liens	—	—		—	—		—	—		1	30
Home equity lines of credit	—	—		—	—		—	—		1	94
Total residential real estate	2	26		—	—		1	50		5	522
Consumer unsecured	—	—		1	2		—	—		—	—
Total	2	$	26	4	$	203	10	$	1,028	8	$	899

We did not restructure any loans by forgiving principal or accrued interest in the three and six month periods ended June 30, 2016 or 2015.

Based on our historical loss experience, losses associated with TDRs are not significantly different than other impaired loans within the same loan segment. As such, TDRs, including TDRs that have been modified in the past 12 months that subsequently defaulted, are analyzed in the same manner as other impaired loans within their respective loan segment.

We had no loans that defaulted in the three and six month periods ended June 30, 2016 which were modified within 12 months prior to the default date. Following is a summary of loans that defaulted in the three and six month periods ended June 30, 2015, which were modified within 12 months prior to the default date:



	Three Months Ended June 30, 2015							Six Months Ended June 30, 2015
	Number of Loans	Pre- Default Recorded Investment		Charge-Off Recorded Upon Default		Post- Default Recorded Investment		Number of Loans	Pre- Default Recorded Investment		Charge-Off Recorded Upon Default		Post- Default Recorded Investment
Residential real estate junior liens	1	$	39	$	39	$	—	1	$	39	$	39	$	—

The following is a summary of TDR loan balances as of:



	June 30, 2016		December 31, 2015
TDRs	$	19,430	$	21,325