| Loans and Allowance | 90 Days Non-Accrual Total Past Due Total Commercial and industrial loans $ 971,571 $ 1,679 $ 5,463 $ 5,510 $ 12,652 $ 984,223 Agriculture production financing and other loans to farmers 92,302 34 50 $ 11 1,298 1,393 93,695 Real estate Loans: Construction 253,330 1,069 190 1,493 2,752 256,082 Commercial and farmland 1,685,194 3,090 17 382 16,964 20,453 1,705,647 Residential 672,593 5,470 937 106 10,515 17,028 689,621 Home equity 298,161 1,666 628 74 1,874 4,242 302,403 Individuals' loans for household and other personal expenditures 62,288 300 79 59 59 497 62,785 Lease financing receivables, net of unearned income 742 742 Other commercial loans 143,007 143,007 Loans $ 4,179,188 $ 13,308 $ 7,364 $ 632 $ 37,713 $ 59,017 $ 4,238,205 December 31, 2014 Current 30-59 Days 60-89 Days Loans > 90 Days Non-Accrual Total Past Due Total Commercial and industrial loans $ 882,596 $ 4,006 $ 53 $ 2,985 $ 7,048 $ 14,092 $ 896,688 Agriculture production financing and other loans to farmers 98,236 891 5,800 6,691 104,927 Real estate Loans: Construction 204,683 1,017 82 1,439 2,538 207,221 Commercial and farmland 1,642,016 9,846 778 671 19,350 30,645 1,672,661 Residential 626,821 4,876 1,831 854 12,933 20,494 647,315 Home equity 282,828 1,213 352 148 1,988 3,701 286,529 Individuals' loans for household and other personal expenditures 72,853 258 53 5 231 547 73,400 Lease financing receivables, net of unearned income 1,106 1,106 Other commercial loans 35,018 35,018 Loans $ 3,846,157 $ 22,107 $ 3,149 $ 4,663 $ 48,789 $ 78,708 $ 3,924,865 See the information regarding the analysis of loan loss experience in the "LOAN QUALITY/PROVISION FOR LOAN LOSSES" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included as ITEM 2 of this Form 10-Q. On occasion, borrowers experience declines in income and cash flow. As a result, these borrowers seek to reduce contractual cash outlays including debt payments. Concurrently, in an effort to preserve and protect its earning assets, specifically troubled loans, the Corporation works to maintain its relationship with certain customers who are experiencing financial difficulty by contractually modifying the borrower's debt agreement with the Corporation. In certain loan restructuring situations, the Corporation may grant a concession to a debtor experiencing financial difficulty, resulting in a trouble debt restructuring. A concession is deemed to be granted when, as a result of the restructuring, the Corporation does not expect to collect all amounts due, including interest accrued at the original contract rate. If the payment of principal at original maturity is primarily dependent on the value of collateral, the current value of the collateral is considered in determining whether the principal will be paid. The following tables summarize troubled debt restructurings in the Corporation's loan portfolio that occurred during the periods indicated: Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Commercial and industrial loans $ 1,386 $ 536 1 $ 3,748 $ 1,897 5 Real estate Loans: Construction 79 80 1 Commercial and farmland 537 537 1 537 2,280 2 Residential 20 871 2 44 895 3 Total $ 1,943 $ 1,944 4 $ 4,408 $ 5,152 11 Three Months Ended June 30, 2014 Six Months Ended June 30, 2014 Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Real estate Loans: Commercial and farmland $ 259 $ 259 1 $ 259 $ 259 1 Residential 242 242 3 372 376 6 Individuals' loans for household and other personal expenditures 11 11 1 26 26 2 Total $ 512 $ 512 5 $ 657 $ 661 9 The following tables show the recorded investment of troubled debt restructurings, by modification type, that occurred during the periods indicated: Three Months Ended June 30, 2015 Term Rate Combination Total Commercial and industrial loans $ 492 $ 492 Real estate Loans: Commercial and farmland $ 240 240 Residential 850 $ 21 871 Total $ 1,342 $ 21 $ 240 $ 1,603 Six Months Ended June 30, 2015 Term Rate Combination Total Commercial and industrial loans $ 1,234 $ 1,030 $ 2,264 Real estate Loans: Construction 199 199 Commercial and farmland 1,442 240 1,682 Residential 850 $ 47 897 Total $ 3,725 $ 47 $ 1,270 $ 5,042 Three Months Ended June 30, 2014 Term Rate Combination Total Real estate Loans: Commercial and farmland $ 272 $ 272 Residential 95 $ 122 217 Home Equity $ 23 23 Individuals loans for household and other personal expenditures 11 11 Total $ 367 $ 23 $ 133 $ 523 Six Months Ended June 30, 2014 Term Rate Combination Total Real estate Loans: Commercial and farmland $ 272 $ 272 Residential 95 $ 60 $ 122 277 Home Equity 94 94 Individuals' loans for household and other personal expenditures 25 25 Total $ 367 $ 154 $ 147 $ 668 Loans secured by commercial and farm real estate made up 44 percent of the post-modification balance of troubled debt restructured loans made in the six months ended June 30, 2015 . There were no troubled debt restructures that occurred during the twelve months ended June 30, 2015 and June 30, 2014 , that subsequently defaulted during the period indicated and remained in default at period end. For purposes of this discussion, a loan is considered in default if it is 30 or more days past due. For potential consumer loan restructures, impairment evaluation occurs prior to modification. Any subsequent impairment is typically addressed through the charge off process, or may be addressed through a specific reserve. Consumer troubled debt restructurings are generally included in the general historical allowance for loan loss at the post modification balance. Consumer non-accrual and delinquent troubled debt restructurings are also considered in the calculation of the non-accrual and delinquency trend environmental allowance allocation. Commercial troubled debt restructured loans risk graded special mention, substandard, doubtful and loss are individually evaluated for impairment under ASC 310. Any resulting specific reserves are included in the allowance for loan losses. Commercial 30 - 89 day delinquent troubled debt restructurings are included in the calculation of the delinquency trend environmental allowance allocation. All commercial non-impaired loans, including non-accrual and 90+ day delinquents, are included in the ASC 450 loss migration analysis. " id="sjs-B4" xml:space="preserve">LOANS AND ALLOWANCE The Corporation’s primary lending focus is small business and middle market commercial, commercial real estate, residential real estate and consumer lending, which results in portfolio diversification. The following tables show the composition of the loan portfolio, the allowance for loan losses and certain credit quality elements, all excluding loans held for sale. Loans held for sale as of June 30, 2015 , and December 31, 2014 , were $8,295,000 and $7,235,000 , respectively. The following table shows the composition of the Corporation’s loan portfolio by loan class for the periods indicated: June 30, 2015 December 31, 2014 Commercial and industrial loans $ 984,223 $ 896,688 Agricultural production financing and other loans to farmers 93,695 104,927 Real estate loans: Construction 256,082 207,221 Commercial and farmland 1,705,647 1,672,661 Residential 689,621 647,315 Home Equity 302,403 286,529 Individuals' loans for household and other personal expenditures 62,785 73,400 Lease financing receivables, net of unearned income 742 1,106 Other commercial loans 143,007 35,018 Loans $ 4,238,205 $ 3,924,865 Allowance for loan losses (62,550 ) (63,964 ) Net Loans $ 4,175,655 $ 3,860,901 At June 30, 2015, Other commercial loans totaled $143,007,000 , an increase of 107,989,000 from December 31, 2014. This increase was primarily a result of organic growth in the obligations of the state and political subdivisions sector of the portfolio. Allowance, Credit Quality and Loan Portfolio The Corporation maintains an allowance for loan losses to cover probable credit losses identified during its loan review process. Management believes the allowance for loan losses is appropriate to cover probable losses inherent in the loan portfolio at June 30, 2015. The process for determining the adequacy of the allowance for loan losses is critical to the Corporation’s financial results. It requires management to make difficult, subjective and complex judgments, to estimate the effect of uncertain matters. The allowance for loan losses considers current factors, including economic conditions and ongoing internal and external examinations, and will increase or decrease as deemed necessary to ensure the allowance remains adequate. In addition, the allowance as a percentage of charge offs and nonperforming loans will change at different points in time based on credit performance, loan mix and collateral values. The allowance is increased by the provision for loan losses and decreased by charge offs less recoveries. The Bank charges off a loan when a determination is made that all or a portion of the loan is uncollectible. The allowance for loan losses is maintained through the provision for loan losses, which is a charge against earnings. The amount provided for loan losses in a given period may be greater than or less than net loan losses experienced during the period, and is based on management’s judgment as to the appropriate level of the allowance for loan losses. The determination of the provision amount in a given period is based on management’s ongoing review and evaluation of the loan portfolio, including an internally administered loan "watch" list and independent loan reviews. The evaluation takes into consideration identified credit problems, the possibility of losses inherent in the loan portfolio that are not specifically identified and management’s judgment as to the impact of the current environment and economic conditions on the portfolio. In conformance with ASC 805 and ASC 820, loans purchased after December 31, 2008, are recorded at the acquisition date fair value. Such loans are only included in the allowance when deemed impaired in accordance with ASC 310-30. The allowance consists of specific impairment reserves as required by ASC 310-10-35, a component for historical losses in accordance with ASC 450 and the consideration of current environmental factors in accordance with ASC 450. A loan is deemed impaired when, based on current information or events, it is probable that all amounts due of principal and interest according to the contractual terms of the loan agreement will not be collected. The historical loss allocation for loans not deemed impaired, according to ASC 310, is the product of the volume of loans within the non-impaired criticized and non-criticized risk grade classifications, each segmented by call code, and the historical loss factor for each respective classification and call code segment. The historical loss factors are based upon actual loss experience within each risk and call code classification. The historical look back period for non-criticized loans looks to the most recent rolling-four-quarter average and aligns with the look back period for non-impaired criticized loans. Each of the rolling four quarter periods used to obtain the average, include all charge offs for the previous twelve-month period, therefore the historical look back period includes seven quarters. The resulting allocation is reflective of current conditions. Criticized loans are grouped based on the risk grade assigned to the loan. Loans with a special mention grade are assigned a loss factor, and loans with a classified grade but not impaired are assigned a separate loss factor. The loss factor computation for this allocation includes a segmented historical loss migration analysis of criticized risk grades to charge off. In addition to the specific reserves and historical loss components of the allowance, consideration is given to various environmental factors to help ensure that losses inherent in the portfolio are reflected in the allowance for loan losses. The environmental component adjusts the historical loss allocations for commercial and consumer loans to reflect relevant current conditions that, in management's opinion, have an impact on loss recognition. Environmental factors that management reviews in the analysis include: national and local economic trends and conditions; trends in growth in the loan portfolio and growth in higher risk areas; levels of, and trends in, delinquencies and non-accruals; experience and depth of lending management and staff; adequacy of, and adherence to, lending policies and procedures including those for underwriting; industry concentrations of credit; and adequacy of risk identification systems and controls through the internal loan review and internal audit processes. At June 30, 2015 , the allowance for loan losses was $62,550,000 , a decrease of $1,414,000 from the December 31, 2014 balance of $63,964,000 . Specific reserves on impaired loans increased $319,000 to $3,088,000 , from $2,769,000 at December 31, 2014. Net charge offs for the six months ended June 30, 2015 , were $1,831,000 . Comparatively, the same period in 2014 had net recoveries of $497,000 . The provision for loan losses for the six months ended June 30, 2015 was $417,000 . There was no provision for loan losses recognized for the six months ended June 30, 2014. The determination of the provision for loan losses in any period is based on management’s continuing review and evaluation of the loan portfolio, and its judgment as to the impact of current economic conditions on the portfolio. The following tables summarize changes in the allowance for loan losses by loan segment for the three and six months ended June 30, 2015 , and June 30, 2014 : Three Months Ended June 30, 2015 Commercial Commercial Consumer Residential Finance Total Allowance for loan losses: Balances, April 1, $ 30,007 $ 16,383 $ 3,138 $ 13,269 $ 4 $ 62,801 Provision for losses 1,190 (502 ) (200 ) (72 ) 1 417 Recoveries on loans 437 147 101 747 1,432 Loans charged off (155 ) (200 ) (112 ) (1,633 ) (2,100 ) Balances, June 30, 2015 $ 31,479 $ 15,828 $ 2,927 $ 12,311 $ 5 $ 62,550 Six Months Ended June 30, 2015 Commercial Commercial Consumer Residential Finance Total Allowance for loan losses: Balances, January 1 $ 28,824 $ 19,327 $ 2,658 $ 13,152 $ 3 $ 63,964 Provision for losses 3,024 (3,398 ) 327 462 2 417 Recoveries on loans 887 559 179 879 2,504 Loans charged off (1,256 ) (660 ) (237 ) (2,182 ) (4,335 ) Balances, June 30, 2015 $ 31,479 $ 15,828 $ 2,927 $ 12,311 $ 5 $ 62,550 Three Months Ended June 30, 2014 Commercial Commercial Consumer Residential Finance Total Allowance for loan losses: Balances, April 1 $ 30,907 $ 22,358 $ 2,410 $ 13,908 $ 69,583 Provision for losses (2,036 ) 552 (140 ) 1,622 $ 2 — Recoveries on loans 448 351 81 325 1,205 Loans charged off (705 ) (679 ) (108 ) (927 ) (2 ) (2,421 ) Balances, June 30, 2014 $ 28,614 $ 22,582 $ 2,243 $ 14,928 $ 68,367 Six Months Ended June 30, 2014 Commercial Commercial Consumer Residential Finance Total Allowance for loan losses: Balances, January 1 $ 27,176 $ 23,102 $ 2,515 $ 15,077 $ 67,870 Provision for losses 351 (705 ) (152 ) 524 $ (18 ) — Recoveries on loans 2,498 1,141 217 929 20 4,805 Loans charged off (1,411 ) (956 ) (337 ) (1,602 ) (2 ) (4,308 ) Balances, June 30, 2014 $ 28,614 $ 22,582 $ 2,243 $ 14,928 $ 68,367 The following tables show the Corporation’s allowance for credit losses and loan portfolio by loan segment as of the periods indicated: June 30, 2015 Commercial Commercial Consumer Residential Finance Total Allowance Balances: Individually evaluated for impairment $ 2,058 $ 328 $ 349 $ 2,735 Collectively evaluated for impairment 29,421 15,340 $ 2,927 11,769 $ 5 59,462 Loans Acquired with Deteriorated Credit Quality 160 193 353 Total Allowance for Loan Losses $ 31,479 $ 15,828 $ 2,927 $ 12,311 $ 5 $ 62,550 Loan Balances: Individually evaluated for impairment $ 8,077 $ 21,945 $ 5,012 $ 35,034 Collectively evaluated for impairment 1,205,104 1,885,287 $ 62,785 981,667 $ 742 4,135,585 Loans Acquired with Deteriorated Credit Quality 7,743 54,498 5,345 67,586 Loans $ 1,220,924 $ 1,961,730 $ 62,785 $ 992,024 $ 742 $ 4,238,205 December 31, 2014 Commercial Commercial Consumer Residential Finance Total Allowance Balances: Individually evaluated for impairment $ 1,455 $ 470 $ 194 $ 2,119 Collectively evaluated for impairment 27,369 18,207 $ 2,658 12,958 $ 3 61,195 Loans Acquired with Deteriorated Credit Quality 650 650 Total Allowance for Loan Losses $ 28,824 $ 19,327 $ 2,658 $ 13,152 $ 3 $ 63,964 Loan Balances: Individually evaluated for impairment $ 16,108 $ 23,963 $ 4,022 $ 44,093 Collectively evaluated for impairment 1,011,122 1,796,797 $ 73,400 925,282 $ 1,106 3,807,707 Loans Acquired with Deteriorated Credit Quality 9,403 59,122 4,540 73,065 Loans $ 1,036,633 $ 1,879,882 $ 73,400 $ 933,844 $ 1,106 $ 3,924,865 The risk characteristics of the Corporation’s material portfolio segments are as follows: Commercial Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. Commercial real estate These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. Management monitors and evaluates commercial real estate loans based on collateral and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. Residential and Consumer With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers. Loans are reclassified to a non-accruing status when, in management’s judgment, the collateral value and financial condition of the borrower do not justify accruing interest. Interest previously recorded, but not deemed collectible, is reversed and charged against current income. Payments subsequently received on non-accrual loans are applied to principal. A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of six consecutive months of performance. Payments received on impaired accruing or delinquent loans are applied to interest income as accrued. The following table summarizes the Corporation’s non-accrual loans by loan class as of the periods indicated: June 30, 2015 December 31, 2014 Commercial and industrial loans $ 5,510 $ 7,048 Agriculture production financing and other loans to farmers 1,298 5,800 Real estate Loans: Construction 1,493 1,439 Commercial and farmland 16,964 19,350 Residential 10,515 12,933 Home Equity 1,874 1,988 Individuals' loans for household and other personal expenditures 59 231 Total $ 37,713 $ 48,789 Commercial impaired loans include non-accrual loans, loans accounted for under ASC 310-30, as well as substandard, doubtful and loss grade loans that were still accruing but deemed impaired according to guidance set forth in ASC 310. Also included in impaired loans are accruing loans that are contractually past due 90 days or more and troubled debt restructurings. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans. If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings and or customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions. The following tables show the composition of the Corporation’s commercial impaired loans by loan class as of the periods indicated: June 30, 2015 Unpaid Recorded Related Impaired loans with no related allowance: Commercial and industrial loans $ 22,029 $ 11,311 Agriculture production financing and other loans to farmers 1,313 1,308 Real estate Loans: Construction 10,805 7,311 Commercial and farmland 91,071 66,184 Residential 10,930 7,076 Home equity 263 206 Other commercial loans 25 Total $ 136,436 $ 93,396 Impaired loans with related allowance: Commercial and industrial loans $ 3,496 $ 3,201 $ 2,058 Real estate Loans: Commercial and farmland 2,723 2,602 488 Residential 2,725 2,598 542 Total $ 8,944 $ 8,401 $ 3,088 Total Impaired Loans $ 145,380 $ 101,797 $ 3,088 December 31, 2014 Unpaid Recorded Related Impaired loans with no related allowance: Commercial and industrial loans $ 35,514 $ 18,029 Agriculture production financing and other loans to farmers 26 22 Real estate Loans: Construction 12,956 9,318 Commercial and farmland 95,856 68,187 Residential 10,591 6,839 Home equity 3,590 398 Other commercial loans 30 Total $ 158,563 $ 102,793 Impaired loans with related allowance: Commercial and industrial loans $ 1,766 $ 1,684 $ 1,055 Agriculture production financing and other loans to farmers 6,777 5,777 400 Real estate Loans: Commercial and farmland 7,159 4,971 1,120 Residential 1,001 998 194 Total $ 16,703 $ 13,430 $ 2,769 Total Impaired Loans $ 175,266 $ 116,223 $ 2,769 Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Average Interest Average Interest Impaired loans with no related allowance: Commercial and industrial loans $ 12,154 $ 111 $ 12,942 $ 200 Agriculture production financing and other loans to farmers 1,325 1,343 Real estate Loans: Construction 7,648 95 7,898 191 Commercial and farmland 66,625 894 66,957 1,765 Residential 7,114 57 7,150 107 Home equity 208 208 Total $ 95,074 $ 1,157 $ 96,498 $ 2,263 Impaired loans with related allowance: Commercial and industrial loans $ 3,204 $ 10 $ 3,214 $ 19 Real estate Loans: Commercial and farmland 2,622 2,727 Residential 2,600 2,603 Total $ 8,426 $ 10 $ 8,544 $ 19 Total Impaired Loans $ 103,500 $ 1,167 $ 105,042 $ 2,282 Three Months Ended June 30, 2014 Six Months Ended June 30, 2014 Average Interest Average Interest Impaired loans with no related allowance: Commercial and industrial loans $ 12,060 $ 84 $ 12,872 $ 185 Agriculture production financing and other loans to farmers 27 28 Real estate Loans: Construction 10,331 114 10,412 227 Commercial and farmland 77,716 970 78,288 1,956 Residential 4,017 31 4,212 57 Home equity 198 199 Total $ 104,349 $ 1,199 $ 106,011 $ 2,425 Impaired loans with related allowance: Commercial and industrial loans $ 3,575 $ 10 $ 3,590 $ 20 Real estate Loans: Commercial and farmland 5,137 5 5,204 10 Total $ 8,712 $ 15 $ 8,794 $ 30 Total Impaired Loans $ 113,061 $ 1,214 $ 114,805 $ 2,455 As part of the ongoing monitoring of the credit quality of the Corporation's loan portfolio, management tracks certain credit quality indicators including trends related to: (i) the level of criticized commercial loans, (ii) net charge offs, (iii) non-performing loans and (iv) the general national and local economic conditions. The Corporation utilizes a risk grading of pass, special mention, substandard, doubtful and loss to assess the overall credit quality of large commercial loans. All large commercial credit grades are reviewed at a minimum of once a year for pass grade loans. Loans with grades below pass are reviewed more frequently depending on the grade. A description of the general characteristics of these grades is as follows: • Pass - Loans that are considered to be of acceptable credit quality. • Special Mention - Loans which possess some credit deficiency or potential weakness, which deserves close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation's credit position at some future date. Special mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant adverse classification. The key distinctions of this category's classification are that it is indicative of an unwarranted level of risk; and weaknesses are considered “potential”, not “defined”, impairments to the primary source of repayment. Examples include businesses that may be suffering from inadequate management, loss of key personnel or significant customer or litigation. • Substandard - A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Other characteristics may include: o the likelihood that a loan will be paid from the primary source of repayment is uncertain or financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss, o the primary source of repayment is gone, and the Corporation is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees, o loans have a distinct possibility that the Corporation will sustain some loss if deficiencies are not corrected, o unusual courses of action are needed to maintain a high probability of repayment, o the borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments, o the Corporation is forced into a subordinated or unsecured position due to flaws in documentation, o loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms, o the Corporation is seriously contemplating foreclosure or legal action due to the apparent deterioration of the loan, and o there is significant deterioration in market conditions to which the borrower is highly vulnerable. • Doubtful - Loans that have all of the weaknesses of those classified as Substandard. However, based on currently existing facts, conditions and values, these weaknesses make full collection of principal highly questionable and improbable. Other credit characteristics may include the primary source of repayment is gone or there is considerable doubt as to the quality of the secondary sources of repayment. The possibility of loss is high, but because of certain important pending factors that may strengthen the loan, loss classification is deferred until the exact status of repayment is known. • Loss – Loans that are considered uncollectible and of such little value that continuing to carry them as an asset is not warranted. Loans will be classified as Loss when it is neither practical not desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future. The following tables summarize the credit quality of the Corporation’s loan portfolio, by loan class for the periods indicated. Consumer non-performing loans include accruing consumer loans 90 plus days delinquent and consumer non-accrual loans. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified date. Loans that evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected are included in the applicable categories below. June 30, 2015 Commercial Commercial Commercial Substandard Commercial Commercial Loss Consumer Performing Consumer Total Commercial and industrial loans $ 913,859 $ 24,180 $ 46,184 $ 984,223 Agriculture production financing and other loans to farmers 84,781 3,002 5,912 93,695 Real estate Loans: Construction 237,568 1,611 1,268 $ 565 $ 14,967 $ 103 256,082 Commercial and farmland 1,586,935 43,895 74,815 2 1,705,647 Residential 173,714 2,698 12,417 495,678 5,114 689,621 Home equity 7,088 66 472 293,071 1,706 302,403 Individuals' loans for household and other personal expenditures 62,666 119 62,785 Lease financing receivables, net of unearned income 643 99 742 Other commercial loans 143,007 143,007 Loans $ 3,147,595 $ 75,452 $ 141,167 $ 565 $ 866,382 $ 7,044 $ 4,238,205 December 31, 2014 Commercial Commercial Commercial Substandard Commercial Commercial Loss Consumer Performing Consumer Total Commercial and industrial loans $ 823,732 $ 24,455 $ 48,226 $ 275 $ 896,688 Agriculture production financing and other loans to farmers 96,155 1,195 7,577 104,927 Real estate Loans: Construction 185,394 3,164 2,928 $ 15,588 $ 147 207,221 Commercial and farmland 1,552,781 29,484 90,161 235 1,672,661 Residential 149,430 6,321 10,918 470,972 9,674 647,315 Home equity 6,368 12 690 277,571 1,888 286,529 Individuals' loans for household and other personal expenditures 73,165 235 73,400 Lease financing receivables, net of unearned income 998 108 1,106 Other commercial loans 35,018 35,018 Loans $ 2,849,876 $ 64,631 $ 160,608 $ 275 $ 837,296 $ 12,179 $ 3,924,865 The following table shows a past due aging of the Corporation’s loan portfolio, by loan class as of June 30, 2015 , and December 31, 2014 : June 30, 2015 Current 30-59 Days 60-89 Days Loans > 90 Days Non-Accrual Total Past Due Total Commercial and industrial loans $ 971,571 $ 1,679 $ 5,463 $ 5,510 $ 12,652 $ 984,223 Agriculture production financing and other loans to farmers 92,302 34 50 $ 11 1,298 1,393 93,695 Real estate Loans: Construction 253,330 1,069 190 1,493 2,752 256,082 Commercial and farmland 1,685,194 3,090 17 382 16,964 20,453 1,705,647 Residential 672,593 5,470 937 106 10,515 17,028 689,621 Home equity 298,161 1,666 628 74 1,874 4,242 302,403 Individuals' loans for household and other personal expenditures 62,288 300 79 59 59 497 62,785 Lease financing receivables, net of unearned income 742 742 Other commercial loans 143,007 143,007 Loans $ 4,179,188 $ 13,308 $ 7,364 $ 632 $ 37,713 $ 59,017 $ 4,238,205 December 31, 2014 Current 30-59 Days 60-89 Days Loans > 90 Days Non-Accrual Total Past Due Total Commercial and industrial loans $ 882,596 $ 4,006 $ 53 $ 2,985 $ 7,048 $ 14,092 $ 896,688 Agriculture production financing and other loans to farmers 98,236 891 5,800 6,691 104,927 Real estate Loans: Construction 204,683 1,017 82 1,439 2,538 207,221 Commercial and farmland 1,642,016 9,846 778 671 19,350 30,645 1,672,661 Residential 626,821 4,876 1,831 854 12,933 20,494 647,315 Home equity 282,828 1,213 352 148 1,988 3,701 286,529 Individuals' loans for household and other personal expenditures 72,853 258 53 5 231 547 73,400 Lease financing receivables, net of unearned income 1,106 1,106 Other commercial loans 35,018 35,018 Loans $ 3,846,157 $ 22,107 $ 3,149 $ 4,663 $ 48,789 $ 78,708 $ 3,924,865 See the information regarding the analysis of loan loss experience in the "LOAN QUALITY/PROVISION FOR LOAN LOSSES" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included as ITEM 2 of this Form 10-Q. On occasion, borrowers experience declines in income and cash flow. As a result, these borrowers seek to reduce contractual cash outlays including debt payments. Concurrently, in an effort to preserve and protect its earning assets, specifically troubled loans, the Corporation works to maintain its relationship with certain customers who are experiencing financial difficulty by contractually modifying the borrower's debt agreement with the Corporation. In certain loan restructuring situations, the Corporation may grant a concession to a debtor experiencing financial difficulty, resulting in a trouble debt restructuring. A concession is deemed to be granted when, as a result of the restructuring, the Corporation does not expect to collect all amounts due, including interest accrued at the original contract rate. If the payment of principal at original maturity is primarily dependent on the value of collateral, the current value of the collateral is considered in determining whether the principal will be paid. The following tables summarize troubled debt restructurings in the Corporation's loan portfolio that occurred during the periods indicated: Three Months Ended June 30, 2015 Six Months Ended June 30, 2015 Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Commercial and industrial loans $ 1,386 $ 536 1 $ 3,748 $ 1,897 5 Real estate Loans: Construction 79 80 1 Commercial and farmland 537 537 1 537 2,280 2 Residential 20 871 2 44 895 3 Total $ 1,943 $ 1,944 4 $ 4,408 $ 5,152 11 Three Months Ended June 30, 2014 Six Months Ended June 30, 2014 Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Real estate Loans: Commercial and farmland $ 259 $ 259 1 $ 259 $ 259 1 Residential 242 242 3 372 376 6 Individuals' loans for household and other personal expenditures 11 11 1 26 26 2 Total $ 512 $ 512 5 $ 657 $ 661 9 The following tables show the recorded investment of troubled debt restructurings, by modification type, that occurred during the periods indicated: Three Months Ended June 30, 2015 Term Rate Combination Total Commercial and industrial loans $ 492 $ 492 Real estate Loans: Commercial and farmland $ 240 240 Residential 850 $ 21 871 Total $ 1,342 $ 21 $ 240 $ 1,603 Six Months Ended June 30, 2015 Term Rate Combination Total Commercial and industrial loans $ 1,234 $ 1,030 $ 2,264 Real estate Loans: Construction 199 199 Commercial and farmland 1,442 240 1,682 Residential 850 $ 47 897 Total $ 3,725 $ 47 $ 1,270 $ 5,042 Three Months Ended June 30, 2014 Term Rate Combination Total Real estate Loans: Commercial and farmland $ 272 $ 272 Residential 95 $ 122 217 Home Equity $ 23 23 Individuals loans for household and other personal expenditures 11 11 Total $ 367 $ 23 $ 133 $ 523 Six Months Ended June 30, 2014 Term Rate Combination Total Real estate Loans: Commercial and farmland $ 272 $ 272 Residential 95 $ 60 $ 122 277 Home Equity 94 94 Individuals' loans for household and other personal expenditures 25 25 Total $ 367 $ 154 $ 147 $ 668 Loans secured by commercial and farm real estate made up 44 percent of the post-modification balance of troubled debt restructured loans made in the six months ended June 30, 2015 . There were no troubled debt restructures that occurred during the twelve months ended June 30, 2015 and June 30, 2014 , that subsequently defaulted during the period indicated and remained in default at period end. For purposes of this discussion, a loan is considered in default if it is 30 or more days past due. For potential consumer loan restructures, impairment evaluation occurs prior to modification. Any subsequent impairment is typically addressed through the charge off process, or may be addressed through a specific reserve. Consumer troubled debt restructurings are generally included in the general historical allowance for loan loss at the post modification balance. Consumer non-accrual and delinquent troubled debt restructurings are also considered in the calculation of the non-accrual and delinquency trend environmental allowance allocation. Commercial troubled debt restructured loans risk graded special mention, substandard, doubtful and loss are individually evaluated for impairment under ASC 310. Any resulting specific reserves are included in the allowance for loan losses. Commercial 30 - 89 day delinquent troubled debt restructurings are included in the calculation of the delinquency trend environmental allowance allocation. All commercial non-impaired loans, including non-accrual and 90+ day delinquents, are included in the ASC 450 loss migration analysis. |
