Loans and Allowance for Loan Losses | NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES Categories of loans at March 31, 2017 and December 31, 2016 include: March 31, 2017 December 31, 2016 Commercial real estate $ 615,941 $ 593,108 Commercial and industrial 366,648 348,465 Residential real estate 329,549 338,387 Agricultural real estate 61,644 38,331 Consumer 42,067 40,902 Agricultural 102,727 24,412 Total loans 1,518,576 1,383,605 Allowance for loan losses (7,048 ) (6,432 ) Net loans $ 1,511,528 $ 1,377,173 The Company has participated 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 March 31, 2017 and December 31, 2016, the Company had balances of $10,000 and $10,000 in mortgage finance loans classified as commercial and industrial. From time to time the Company has purchased pools of residential real estate loans originated by other financial institutions to hold for investment with the intent to diversify the residential real estate portfolio. As of March 31, 2017 and December 31, 2016, residential real estate loans include $87,317 and $90,705 of purchased residential real estate loans from these pools of residential real estate loans. The unamortized balance of merger purchase accounting adjustments related to non-purchase credit impaired loans included in the loan totals above are $3,541 at March 31, 2017, and $3,043 at December 31, 2016. Over-draft deposit accounts are reclassified and included in consumer loans above. These accounts totaled $585 at March 31, 2017 and $567 at December 31, 2016. The following tables present the activity in the allowance for loan losses by class for the three-month periods ended March 31, 2017 and 2016: March 31, 2017 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 2,420 $ 1,881 $ 1,765 $ 35 $ 266 $ 65 $ 6,432 Provision for loan losses 167 188 316 31 352 41 1,095 Loans charged-off (63 ) (13 ) (211 ) — (359 ) (41 ) (687 ) Recoveries 68 3 5 — 132 — 208 Total ending allowance balance $ 2,592 $ 2,059 $ 1,875 $ 66 $ 391 $ 65 $ 7,048 March 31, 2016 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 2,051 $ 1,366 $ 1,824 $ 29 $ 187 $ 49 $ 5,506 Provision for loan losses 253 245 158 35 (3 ) 35 723 Loans charged-off (34 ) (55 ) (48 ) (23 ) (128 ) (3 ) (291 ) Recoveries 5 7 6 — 23 1 42 Total ending allowance balance $ 2,275 $ 1,563 $ 1,940 $ 41 $ 79 $ 82 $ 5,980 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 March 31, 2017 and December 31, 2016: March 31, 2017 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Individually evaluated for impairment $ 255 $ 56 $ 245 $ 22 $ 40 $ 2 $ 620 Collectively evaluated for impairment 2,336 2,003 1,569 38 350 63 6,359 Purchase credit impaired loans 1 — 61 6 1 — 69 Total $ 2,592 $ 2,059 $ 1,875 $ 66 $ 391 $ 65 $ 7,048 Loan Balance: Individually evaluated for impairment $ 3,755 $ 1,642 $ 2,716 $ 216 $ 401 $ 21 $ 8,751 Collectively evaluated for impairment 599,775 360,580 324,770 57,985 41,659 98,346 1,483,115 Purchase credit impaired loans 12,411 4,426 2,063 3,443 7 4,360 26,710 Total $ 615,941 $ 366,648 $ 329,549 $ 61,644 $ 42,067 $ 102,727 $ 1,518,576 December 31, 2016 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Individually evaluated for impairment $ 270 $ 22 $ 288 $ 2 $ 45 $ — $ 627 Collectively evaluated for impairment 2,150 1,859 1,477 33 221 65 5,805 Purchase credit impaired loans — — — — — — — Total $ 2,420 $ 1,881 $ 1,765 $ 35 $ 266 $ 65 $ 6,432 Loan Balance: Individually evaluated for impairment $ 3,182 $ 550 $ 3,321 $ 834 $ 429 $ 3 $ 8,319 Collectively evaluated for impairment 577,863 344,414 332,962 36,668 40,471 24,409 1,356,787 Purchase credit impaired loans 12,063 3,501 2,104 829 2 — 18,499 Total $ 593,108 $ 348,465 $ 338,387 $ 38,331 $ 40,902 $ 24,412 $ 1,383,605 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 March 31, 2017 and December 31, 2016. The recorded investment in loans excludes accrued interest receivable due to immateriality. March 31, 2017 December 31, 2016 Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated With no related allowance recorded: Commercial real estate $ 1,423 $ 1,194 $ — $ 904 $ 676 $ — Commercial and industrial 1,127 1,042 — 510 309 — Residential real estate 519 263 — 1,230 980 — Agricultural real estate — — — 824 812 — Consumer 29 — — 53 51 — Agricultural 1 1 — — — — Subtotal 3,099 2,500 — 3,521 2,828 — With an allowance recorded: Commercial real estate 4,696 2,572 256 4,493 2,506 270 Commercial and industrial 745 600 56 265 240 22 Residential real estate 3,296 3,054 306 2,433 2,341 288 Agricultural real estate 380 280 28 23 23 2 Consumer 512 408 41 449 378 45 Agricultural 21 21 2 3 3 — Subtotal 9,650 6,935 689 7,666 5,491 627 Total $ 12,749 $ 9,435 $ 689 $ 11,187 $ 8,319 $ 627 The tables below present average recorded investment and interest income related to impaired loans for the three months ended March 31, 2017 and 2016. Interest income recognized in the following table was substantially recognized on the cash basis. The recorded investment in loans excludes accrued interest receivable due to immateriality. As of and for the three months ended March 31, 2017 March 31, 2016 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 936 $ 7 $ 1,068 $ — Commercial and industrial 676 4 944 — Residential real estate 621 4 681 — Agricultural real estate 406 — 186 — Consumer 26 1 13 — Agricultural — — 71 — Subtotal 2,665 16 2,963 — With an allowance recorded: Commercial real estate 2,538 2 3,091 — Commercial and industrial 420 1 107 — Residential real estate 2,698 2 789 — Agricultural real estate 151 — — — Consumer 393 — 139 — Agricultural 12 — 23 — Subtotal 6,212 5 4,149 — Total $ 8,877 $ 21 $ 7,112 $ — The following tables present the aging of the recorded investment in past due loans as of March 31, 2017 and December 31, 2016, by portfolio and class of loans: March 31, 2017 30 - 59 Days Past Due 60 - 89 Days Past Due Greater Than 90 Days Past Due Still On Accrual Nonaccrual Loans Not Past Due Total Commercial real estate $ 752 $ 225 $ — $ 10,427 $ 604,537 $ 615,941 Commercial and industrial 1,202 6,968 — 6,062 352,416 366,648 Residential real estate 970 68 — 3,702 324,809 329,549 Agricultural real estate 120 57 — 3,176 58,291 61,644 Consumer 283 41 — 408 41,335 42,067 Agricultural 294 15 — 4,381 98,037 102,727 Total $ 3,621 $ 7,374 $ — $ 28,156 $ 1,479,425 $ 1,518,576 December 31, 2016 30 - 59 Days Past Due 60 - 89 Days Past Due Greater Than 90 Days Past Due Still On Accrual Nonaccrual Loans Not Past Due Total Commercial real estate $ 2,955 $ 788 $ — $ 12,258 $ 577,107 $ 593,108 Commercial and industrial 419 — — 4,051 343,995 348,465 Residential real estate 368 847 — 4,285 332,887 338,387 Agricultural real estate — — — 1,664 36,667 38,331 Consumer 303 43 — 432 40,124 40,902 Agricultural 52 — — 3 24,357 24,412 Total $ 4,097 $ 1,678 $ — $ 22,693 $ 1,355,137 $ 1,383,605 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: Pass Special Mention Substandard Doubtful The risk category of loans by class of loans is as follows as of March 31, 2017 and December 31, 2016: March 31, 2017 Unclassified Classified Total Commercial real estate $ 598,366 $ 17,575 $ 615,941 Commercial and industrial 350,464 16,184 366,648 Residential real estate 325,534 4,015 329,549 Agricultural real estate 57,613 4,031 61,644 Consumer 41,618 449 42,067 Agricultural 97,882 4,845 102,727 Total $ 1,471,477 $ 47,099 $ 1,518,576 December 31, 2016 Unclassified Classified Total Commercial real estate $ 576,070 $ 17,038 $ 593,108 Commercial and industrial 341,307 7,158 348,465 Residential real estate 333,298 5,089 338,387 Agricultural real estate 36,190 2,141 38,331 Consumer 40,382 520 40,902 Agricultural 24,134 278 24,412 Total $ 1,351,381 $ 32,224 $ 1,383,605 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 purchase credit impaired loans as of March 31, 2017 and December 31, 2016 were as follows: March 31, 2017 December 31, 2016 Contractually required principal payments $ 38,006 $ 27,413 Discount (11,296 ) (8,914 ) Recorded investment $ 26,710 $ 18,499 The accretable yield associated with these loans was $1,602 and $1,063 as of March 31, 2017 and December 31, 2016. The interest income recognized on these loans for the three month periods ended March 31, 2017 and 2016 was $422 and $152. For the three month periods ended March 31, 2017 and 2016, there was a provision for loan losses of $69 and $0 recorded for these loans. Troubled Debt Restructurings The Company had no loans modified under troubled debt restructurings as of March 31, 2017 or December 31, 2016. |