Loans | Loans The major classifications of loans follow: Aggregate Principal Amount September 30, 2015 December 31, 2014 Commercial $ 66,110 61,561 Agricultural & AG RE 46,323 53,193 Construction, land & development 24,844 13,860 Commercial RE 372,654 315,213 1-4 family mortgages 98,732 106,472 Consumer 3,255 2,901 Total Loans $ 611,918 553,200 Allowance for loan losses (8,403 ) (7,981 ) Loans, net $ 603,515 545,219 The credit quality indicator utilized by the Company to internally analyze the loan portfolio is the internal risk rating. Internal risk ratings of 0 to 5 are considered pass credits, a risk rating of a 6 is special mention, a risk rating of a 7 is substandard, and a risk rating of an 8 is doubtful. Loans classified as pass credits have no material weaknesses and are performing as agreed. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date. 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 characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The following table presents the commercial loan portfolio by internal risk rating: September 30, 2015 Commercial Commercial Real Estate Internal Risk Rating Closed-end Lines of Credit Agriculture & AG RE Construction, Land & Development Owner- Occupied Non-Owner Occupied Total Pass $ 23,369 $ 42,002 $ 46,323 $ 24,627 $ 151,251 $ 197,354 $ 484,926 Special Mention 329 250 — — 7,870 7,760 16,209 Substandard 160 — — 217 475 7,944 8,796 Doubtful — — — — — — — Total $ 23,858 $ 42,252 $ 46,323 $ 24,844 $ 159,596 $ 213,058 $ 509,931 December 31, 2014 Commercial Commercial Real Estate Internal Risk Rating Closed-end Lines of Credit Agriculture & AG RE Construction, Land & Development Owner- Occupied Non-Owner Occupied Total Pass $ 18,379 $ 42,076 $ 53,193 $ 13,038 $ 139,617 $ 157,340 $ 423,643 Special Mention 392 250 — — 1,225 6,620 8,487 Substandard 464 — — 822 1,480 8,931 11,697 Doubtful — — — — — — — Total $ 19,235 $ 42,326 $ 53,193 $ 13,860 $ 142,322 $ 172,891 $ 443,827 The following table presents the Retail Residential Loan Portfolio by Internal Risk Rating: Residential -- 1-4 family Senior Lien Jr. Lien & Lines of Credit Total September 30, 2015 Unrated $ 49,015 $ 43,979 $ 92,994 Special mention 3,961 157 4,118 Substandard 1,322 298 1,620 Doubtful — — — Total $ 54,298 $ 44,434 $ 98,732 Residential -- 1-4 family Senior Lien Jr. Lien & Lines of Credit Total December 31, 2014 Unrated $ 55,142 $ 45,299 $ 100,441 Special mention 3,807 120 3,927 Substandard 1,719 385 2,104 Doubtful — — — Total $ 60,668 $ 45,804 $ 106,472 The retail residential loan portfolio is generally unrated. Delinquency is a typical factor in adversely risk rating a credit to a special mention or substandard. An analysis of activity in the allowance for loan losses for the three months ended September 30, 2015 and 2014 follows: Commercial Agriculture & AG RE Construction, Land & Development Commercial RE 1-4 Family Residential Consumer Total September 30, 2015 Beginning Balance $ 1,036 $ 65 $ 396 $ 5,185 $ 1,951 $ 12 $ 8,645 Charge-offs — — — (24 ) (325 ) (1 ) (350 ) Recoveries 54 2 16 9 24 3 108 Provision (121 ) (1 ) 66 35 25 (4 ) — Ending Balance $ 969 $ 66 $ 478 $ 5,205 $ 1,675 $ 10 $ 8,403 Commercial Agriculture & AG RE Construction, Land & Development Commercial RE 1-4 Family Residential Consumer Total September 30, 2014 Beginning Balance $ 2,432 $ 60 $ 924 $ 6,936 $ 2,080 $ 29 $ 12,461 Charge-offs (431 ) — (5 ) (283 ) (88 ) (1 ) (808 ) Recoveries 68 1 — 410 53 3 535 Provision 15 3 96 416 149 (4 ) 675 Ending Balance $ 2,084 $ 64 $ 1,015 $ 7,479 $ 2,194 $ 27 $ 12,863 An analysis of activity in the allowance for loan losses for the nine months ended September 30, 2015 and 2014 follows: Commercial Agriculture & AG RE Construction, Land & Development Commercial RE 1-4 Family Residential Consumer Total September 30, 2015 Beginning Balance $ 1,117 $ 69 $ 711 $ 3,999 $ 2,075 $ 10 $ 7,981 Charge-offs (357 ) — (3 ) (639 ) (455 ) (4 ) (1,458 ) Recoveries 144 2 43 1,616 45 30 1,880 Provision 65 (5 ) (273 ) 229 10 (26 ) — Ending Balance $ 969 $ 66 $ 478 $ 5,205 $ 1,675 $ 10 $ 8,403 Commercial Agriculture & AG RE Construction, Land & Development Commercial RE 1-4 Family Residential Consumer Total September 30, 2014 Beginning Balance $ 1,413 $ 70 $ 1,127 $ 6,834 $ 2,162 $ 31 $ 11,637 Charge-offs (920 ) — (118 ) (559 ) (308 ) (6 ) (1,911 ) Recoveries 288 1 34 473 61 5 862 Provision 1,303 (7 ) (28 ) 731 279 (3 ) 2,275 Ending Balance $ 2,084 $ 64 $ 1,015 $ 7,479 $ 2,194 $ 27 $ 12,863 The following is an analysis on the balance in the allowance for loan losses and the recorded investment in impaired loans by portfolio segment based on impairment method as of September 30, 2015 and December 31, 2014 : September 30, 2015 Commercial Agriculture & AG RE Construction, Land & Development Commercial RE 1-4 Family Residential Consumer Total Allowance for loan losses: Loans individually evaluated for impairment $ 86 $ — $ 65 $ 675 $ 365 $ — $ 1,191 Loans collectively evaluated for impairment 883 66 413 4,530 1,310 10 7,212 Total allowance balance: $ 969 $ 66 $ 478 $ 5,205 $ 1,675 $ 10 $ 8,403 Loan balances: Loans individually evaluated for impairment $ 160 $ — $ 217 $ 4,106 $ 1,620 $ — $ 6,103 Loans collectively evaluated for impairment 65,950 46,323 24,627 368,548 97,112 3,255 605,815 Total loans balance: $ 66,110 $ 46,323 $ 24,844 $ 372,654 $ 98,732 $ 3,255 $ 611,918 December 31, 2014 Commercial Agriculture & AG RE Construction, Land & Development Commercial RE 1-4 Family Residential Consumer Total Allowance for loan losses: Loans individually evaluated for impairment $ 430 $ — $ 126 $ 216 $ 783 $ — $ 1,555 Loans collectively evaluated for impairment 687 69 585 3,783 1,292 10 6,426 Total allowance balance: $ 1,117 $ 69 $ 711 $ 3,999 $ 2,075 $ 10 $ 7,981 Loan balances: Loans individually evaluated for impairment $ 464 $ — $ 822 $ 5,961 $ 2,056 $ — $ 9,303 Loans collectively evaluated for impairment 61,097 53,193 13,038 309,252 104,416 2,901 543,897 Total loans balance: $ 61,561 $ 53,193 $ 13,860 $ 315,213 $ 106,472 $ 2,901 $ 553,200 Troubled Debt Restructurings: The Company had troubled debt restructurings (“TDRs”) of $0.15 million and $0.02 million as of September 30, 2015 and December 31, 2014 , respectively. Specific reserves were immaterial at September 30, 2015 and December 31, 2014 . At September 30, 2015 nonaccrual TDR loans were $0.13 million and $0.02 million at December 31, 2014 . There were $0.03 million TDRs on accrual at September 30, 2015 compared to none at December 31, 2014 . The Company had no commitments to lend additional amounts to a customer with an outstanding loan that is classified as TDR as of September 30, 2015 and December 31, 2014 . During the nine month period ended September 30, 2015 , the terms of a certain loans were modified as troubled debt restructurings. The modification of the terms of such loans may include one or a combination of the following: a reduction of the stated interest rate of the loan to a below market rate or the payment modification to interest only. A modification involving a reduction of the stated interest rate of the loan would be for periods ranging from 6 months to 16 months . During the nine month period ended September 30, 2015 , there were two TDR added in a total amount of $0.1 million compared to the year ended December 31, 2014 in which two loans were added as TDRs in the amount of $5.0 million . The $5.0 million of TDRs added in 2014 were subsequently sold in the fourth quarter of 2014 . During the three months ending September 30, 2015 there was one 1-4 family residential loan modified as a troubled debt restructuring with a recorded investment of $0.1 million ; compared to the same three month period ended September 30, 2014 when there were no loans modified as troubled debt restructurings. The following tables present loans by class modified as troubled debt restructurings that occurred during the nine months ending September 30, 2015 and 2014 : For the Nine Months Ended September 30, 2015 Number of Loans Pre-Modification Recorded Investment Post-Modification Recorded Investment 1-4 family residential Senior lien 2 127 127 Total 2 $ 127 $ 127 The troubled debt restructurings described above did not have a material impact to the allowance for loan losses and did not result in any additional charge-offs during the nine months ending September 30, 2015 . For the Nine Months Ended September 30, 2014 Number of Loans Pre-Modification Recorded Investment Post-Modification Recorded Investment Construction, land & development 1 $ 5,013 $ 5,013 1-4 family residential Jr. lien & lines of credit 1 34 34 Total 2 $ 5,047 $ 5,047 The troubled debt restructurings described above did not have a material impact to the allowance for loan losses and did not result in any additional charge-offs during the nine months ending September 30, 2014 . A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In the nine months ending September 30, 2015 and the nine months ending September 30, 2014 there were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification. The Company evaluates loan modifications to determine if the modification constitutes a troubled debt restructure. A loan modification constitutes a troubled debt restructure if the borrower is experiencing financial difficulty and the Company grants a concession it would not otherwise consider. 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 loans with the Company’s debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting guidelines. TDRs are separately identified for impairment disclosures. If a loan is considered to be collateral dependent loan, the TDR is reported, net, at the fair value of the collateral. The following tables present data on impaired loans: September 30, 2015 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized Loans with no related allowance recorded: Commercial Closed-end $ 24 $ 24 $ — $ 16 $ 1 $ 1 Line of credit — — — — — — Agricultural & AG RE — — — — — — Construction, land & development — — — 461 — — CRE - all other Owner occupied 9 9 — 131 — — Non-owner occupied — — — 1,089 — — 1-4 family residential Senior lien 305 305 — 319 1 1 Jr. lien & lines of credit 111 111 — 114 4 4 Consumer — — — — — — Subtotal 449 449 — 2,130 6 6 Loans with an allowance recorded: Commercial Closed-end $ 136 $ 136 $ 86 $ 282 $ 2 $ 2 Line of credit — — — — — — Agricultural & AG RE — — — — — — Construction, land & development 217 508 65 132 1 1 CRE - all other Owner occupied 467 735 186 676 11 7 Non-owner occupied 3,630 4,509 489 3,236 9 9 1-4 family residential Senior lien 1,017 1,342 332 1,120 12 11 Jr. lien & lines of credit 187 187 33 222 2 2 Consumer — — — — — — Subtotal 5,654 7,417 1,191 5,668 37 32 Total $ 6,103 $ 7,866 $ 1,191 $ 7,798 $ 43 $ 38 December 31, 2014 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized Loans with no related allowance recorded: Commercial Closed-end $ 5 $ 5 $ — $ 15 $ — $ — Line of credit — — — — — — Agricultural & AG RE — — — — — — Construction, land & development 648 1,122 — 221 11 11 CRE - all other Owner occupied 221 261 — 3,337 10 9 Non-owner occupied 4,354 4,753 — 4,084 74 74 1-4 family residential Senior lien 319 319 — 1,931 5 4 Jr. lien & lines of credit 120 120 — 142 6 6 Consumer — — — — — — Subtotal 5,667 6,580 — 9,730 106 104 Loans with an allowance recorded: Commercial Closed-end $ 459 $ 459 $ 430 $ 1,228 $ 4 $ 4 Line of credit — — — 940 — — Agricultural & AG RE — — — — — — Construction, land & development 174 332 126 3,833 — — CRE - all other Owner occupied 766 901 138 3,305 2 — Non-owner occupied 620 620 78 7,737 2 — 1-4 family residential Senior lien 1,352 1,352 660 2,032 36 32 Jr. lien & lines of credit 265 276 123 268 10 9 Consumer — — — — — — Subtotal 3,636 3,940 1,555 19,343 54 45 Total $ 9,303 $ 10,520 $ 1,555 $ 29,073 $ 160 $ 149 The Company determined that there were $0.1 million of loans that were classified as impaired but were considered to be performing (i.e., loans which are accruing interest) loans at September 30, 2015 compared to $1.6 million at December 31, 2014 . The following table represents information related to loan portfolio aging: September 30, 2015 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days Past Due or Nonaccrual Total Past Due Current Total Loans Commercial Closed-end $ 373 $ 49 $ 160 $ 582 $ 23,276 $ 23,858 Line of credit — — — — 42,252 42,252 Agricultural & AG RE 33 — — 33 46,290 46,323 Construction, land & development — — 217 217 24,627 24,844 CRE - all other Owner occupied — 371 475 846 158,750 159,596 Non-owner occupied — 461 3,629 4,090 208,968 213,058 1-4 family residential Senior lien 1,480 48 1,298 2,826 51,472 54,298 Jr. lien & lines of credit 416 — 231 647 43,787 44,434 Consumer 2 — — 2 3,253 3,255 Total $ 2,304 $ 929 $ 6,010 $ 9,243 $ 602,675 $ 611,918 December 31, 2014 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days Past Due or Nonaccrual Total Past Due Current Total Loans Commercial Closed-end $ 38 $ — $ 450 $ 488 $ 18,747 $ 19,235 Line of credit — — — — 42,326 42,326 Agricultural & AG RE 150 — — 150 53,043 53,193 Construction, land & development 231 — 822 1,053 12,807 13,860 CRE - all other Owner occupied 319 175 739 1,233 141,089 142,322 Non-owner occupied 153 — 4,354 4,507 168,384 172,891 1-4 family residential Senior lien 1,172 277 1,068 2,517 58,151 60,668 Jr. lien & lines of credit 423 64 316 803 45,001 45,804 Consumer — — — — 2,901 2,901 Total $ 2,486 $ 516 $ 7,749 $ 10,751 $ 542,449 $ 553,200 Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. There were no loans past due over 90 days and still accruing interest at September 30, 2015 or for the year ending December 31, 2014 . |