Loans and Allowance for Loan Losses | NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES Categories of loans at December 31, 2015 and 2014 include: 2015 2014 Commercial real estate $ 397,017 $ 364,096 Commercial and industrial 262,032 183,100 Residential real estate 250,216 134,455 Agricultural real estate 18,180 17,083 Consumer 17,103 7,875 Agricultural 15,807 19,267 Total loans 960,355 725,876 Allowance for loan losses (5,506 ) (5,963 ) Net loans $ 954,849 $ 719,913 In 2015, the Company began to participate in mortgage finance loans with another institution, “the originator.” These mortgage finance loans consist of ownership interests purchased in single family residential mortgages funded through the originator’s mortgage finance group. These loans are typically on the Company’s balance sheet for 10 to 20 days. As of December 31, 2015, the Company had balances of $18.9 million in mortgage finance loans classified as commercial and industrial. During 2015 and 2014, the Company purchased four pools of residential real estate loans totaling $60.6 million and $26.2 million. As of December 31, 2015 and 2014, residential real estate loans include $74.7 million and $23.9 million of purchased residential real estate loans from these pools of residential real estate loans. Over-draft deposit accounts are reclassified and included in consumer loans above. These accounts totaled $280 and $224 at December 31, 2015 and 2014. The following tables present the activity in the allowance for loan losses by class for the years ended December 31, 2015, 2014 and 2013: December 31, 2015 Commercial Commercial Residential Agricultural Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 2,897 $ 1,559 $ 1,190 $ 148 $ 81 $ 88 $ 5,963 Provision for loan losses 694 1,252 899 (119 ) 362 (41 ) 3,047 Loans charged-off (1,668 ) (1,468 ) (296 ) — (309 ) — (3,741 ) Recoveries 128 23 31 — 53 2 237 Total ending allowance balance $ 2,051 $ 1,366 $ 1,824 $ 29 $ 187 $ 49 $ 5,506 December 31, 2014 Commercial Commercial Residential Agricultural Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 2,866 $ 990 $ 1,360 $ 217 $ 63 $ 118 $ 5,614 Provision for loan losses 184 579 359 (69 ) 160 (13 ) 1,200 Loans charged-off (241 ) (46 ) (668 ) — (360 ) (19 ) (1,334 ) Recoveries 88 36 139 — 218 2 483 Total ending allowance balance $ 2,897 $ 1,559 $ 1,190 $ 148 $ 81 $ 88 $ 5,963 December 31, 2013 Commercial Commercial Residential Agricultural Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 2,159 $ 1,448 $ 745 $ 2 $ 57 $ 60 $ 4,471 Provision for loan losses 1,574 (371 ) 845 215 226 94 2,583 Loans charged-off (926 ) (126 ) (522 ) — (374 ) (37 ) (1,985 ) Recoveries 59 39 292 — 154 1 545 Total ending allowance balance $ 2,866 $ 990 $ 1,360 $ 217 $ 63 $ 118 $ 5,614 The following tables present the recorded investment in loans and the balance in the allowance for loan losses by portfolio and class based on impairment method as of December 31, 2015 and 2014: Loan Balance Allowance for Loan Losses December 31, 2015 Individually Collectively Total Individually Collectively Total Commercial real estate $ 7,261 $ 389,756 $ 397,017 $ 190 $ 1,861 $ 2,051 Commercial and industrial 1,182 260,850 262,032 6 1,360 1,366 Residential real estate 2,848 247,368 250,216 66 1,758 1,824 Agricultural real estate — 18,180 18,180 — 29 29 Consumer 103 17,000 17,103 7 180 187 Agricultural 95 15,712 15,807 — 49 49 Total $ 11,489 $ 948,866 $ 960,355 $ 269 $ 5,237 $ 5,506 Loan Balance Allowance for Loan Losses December 31, 2014 Individually Collectively Total Individually Collectively Total Commercial real estate $ 10,694 $ 353,402 $ 364,096 $ 1,044 $ 1,853 $ 2,897 Commercial and industrial 1,710 181,390 183,100 523 1,036 1,559 Residential real estate 2,175 132,280 134,455 95 1,095 1,190 Agricultural real estate 258 16,825 17,083 16 132 148 Consumer 29 7,846 7,875 3 78 81 Agricultural — 19,267 19,267 — 88 88 Total $ 14,866 $ 711,010 $ 725,876 $ 1,681 $ 4,282 $ 5,963 The following table presents information related to impaired loans, excluding purchased credit impaired loans which have not deteriorated since acquisition, by class of loans as of and for the year ended December 31, 2015: December 31, 2015 Unpaid Recorded Allowance for Average Interest With no related allowance recorded: Commercial real estate $ 563 $ 536 $ — $ 803 $ 23 Commercial and industrial 2,668 1,119 — 648 33 Residential real estate 984 585 — 556 3 Agricultural real estate — — — 51 — Consumer — — — 3 — Agricultural 95 95 — 7 5 Subtotal 4,310 2,335 — 2,068 64 With an allowance recorded: Commercial real estate 4,217 3,176 190 3,792 46 Commercial and industrial 93 63 6 1,400 3 Residential real estate 697 660 66 790 12 Agricultural real estate — — — 60 — Consumer 75 72 7 34 3 Agricultural — — — — — Subtotal 5,082 3,971 269 6,076 64 Total $ 9,392 $ 6,306 $ 269 $ 8,144 $ 128 The above table presents interest income for the twelve months ended December 31, 2015. Interest income recognized in the above table was substantially recognized on the cash basis. The recorded investment in loans excludes accrued interest receivable due to immateriality. The following table presents information related to impaired loans, excluding purchased credit impaired loans which have not deteriorated since acquisition, by portfolio and class of loans as of and for the year ended December 31, 2014: December 31, 2014 Unpaid Recorded Allowance for Average Interest With no related allowance recorded: Commercial real estate $ 2,496 $ 1,837 $ — $ 1,159 $ 64 Commercial and industrial 553 524 — 906 — Residential real estate 778 523 — 1,055 — Agricultural real estate 114 111 — 112 — Consumer — — — 5 — Agricultural — — — — — Subtotal 3,941 2,995 — 3,237 64 With an allowance recorded: Commercial real estate 5,717 5,430 1,044 5,504 21 Commercial and industrial 1,225 1,186 523 284 36 Residential real estate 988 896 95 1,526 14 Agricultural real estate 154 148 16 35 8 Consumer 30 29 3 11 2 Agricultural — — — 12 — Subtotal 8,114 7,689 1,681 7,372 81 Total $ 12,055 $ 10,684 $ 1,681 $ 10,609 $ 145 The above table presents interest income for the twelve months ended December 31, 2014. Interest income recognized in the above table was substantially recognized on the cash basis. The recorded investment in loans excludes accrued interest receivable due to immateriality. The following tables present the aging of the recorded investment in past due loans as of December 31, 2015 and 2014, by portfolio and class of loans: December 31, 2015 30 – 59 Days 60 – 89 Days Greater Than Nonaccrual Loans Not Total Commercial real estate $ 645 $ 108 $ — $ 4,448 $ 391,816 $ 397,017 Commercial and industrial 2 164 — 1,182 260,684 262,032 Residential real estate 166 545 35 2,369 247,101 250,216 Agricultural real estate 138 — — — 18,042 18,180 Consumer 96 97 — 103 16,807 17,103 Agricultural — — — 95 15,712 15,807 Total $ 1,047 $ 914 $ 35 $ 8,197 $ 950,162 960,355 December 31, 2014 30 – 59 60 – 89 Greater Than Nonaccrual Loans Not Total Commercial real estate $ 1,010 $ 1,958 $ — $ 7,294 $ 353,834 $ 364,096 Commercial and industrial 83 165 39 1,710 181,103 183,100 Residential real estate 765 497 — 1,499 131,694 134,455 Agricultural real estate — — — 258 16,825 17,083 Consumer 22 — — 29 7,824 7,875 Agricultural — 44 — — 19,223 19,267 Total $ 1,880 $ 2,664 $ 39 $ 10,790 $ 710,503 $ 725,876 Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers 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 loans individually by classifying the loans as to credit risk. Consumer loans are considered pass credits unless downgraded due to payment status or reviewed as part of a larger credit relationship. The Company uses the following definitions for risk ratings: Special Mention Substandard: Doubtful: The risk category of loans by class of loans is as follows as of December 31, 2015 and 2014: December 31, 2015 Pass Special Substandard Doubtful Total Commercial real estate $ 386,917 $ — $ 10,100 $ — $ 397,017 Commercial and industrial 260,669 — 1,363 — 262,032 Residential real estate 246,901 — 3,315 — 250,216 Agricultural real estate 17,810 — 370 — 18,180 Consumer 17,000 — 103 — 17,103 Agricultural 15,707 — 100 — 15,807 Total $ 945,004 $ — $ 15,351 $ — 960,355 December 31, 2014 Pass Special Substandard Doubtful Total Commercial real estate $ 340,853 $ 147 $ 23,096 $ — $ 364,096 Commercial and industrial 181,272 — 1,828 — 183,100 Residential real estate 132,285 — 2,170 — 134,455 Agricultural real estate 16,708 — 375 — 17,083 Consumer 7,846 — 29 — 7,875 Agricultural 15,432 — 3,835 — 19,267 Total $ 694,396 $ 147 $ 31,333 $ — $ 725,876 Purchased Credit Impaired Loans The Company has acquired loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The recorded investments in purchased credit impaired loans as of December 31, 2015, 2014 and 2013 were as follows: 2015 2014 2013 Contractually required principal payments $ 7,550 $ 7,278 $ 9,063 Discount (1,794 ) (2,167 ) (2,536 ) Recorded investment $ 5,756 $ 5,111 $ 6,527 The accretable yield associated with these loans as of December 31, 2015 was $935. As of December 31, 2014, the accretable yield was $265, and the accretable yield as of December 31, 2013 was $0. The interest income recognized on these loans for the year ended December 31, 2015 was $866. For the years ended December 31, 2014 and 2013 the interest income recognized was $331 and $0. For the years ended December 31, 2015, 2014 and 2013, no provision for loan losses was recorded for these loans. Troubled Debt Restructurings The company had no material loans modified under troubled debt restructurings as of December 31, 2015 and 2014. |