| Loans and Allowance | 90 Days Non-Accrual Total Past Due Total Commercial and industrial loans $ 1,080,184 $ 998 $ 282 $ 13 $ 3,413 $ 4,706 $ 1,084,890 Agriculture production financing and other loans to farmers 92,979 250 431 1,471 2,152 95,131 Real estate Loans: Construction 351,147 1,112 721 1,833 352,980 Commercial and farmland 1,850,882 2,384 896 15,541 18,821 1,869,703 Residential 743,951 3,847 888 232 9,952 14,919 758,870 Home equity 370,602 628 467 117 2,345 3,557 374,159 Individuals' loans for household and other personal expenditures 74,744 297 42 122 461 75,205 Lease financing receivables, net of unearned income 388 388 Other commercial loans 180,103 180,103 Loans $ 4,744,980 $ 8,404 $ 4,118 $ 362 $ 33,565 $ 46,449 $ 4,791,429 December 31, 2015 Current 30-59 Days 60-89 Days Loans > 90 Days Non-Accrual Total Past Due Total Commercial and industrial loans $ 1,052,275 $ 166 $ 4,634 $ 4,800 $ 1,057,075 Agriculture production financing and other loans to farmers 96,884 827 827 97,711 Real estate Loans: Construction 362,084 3,884 736 4,620 366,704 Commercial and farmland 1,786,092 5,552 11,277 16,829 1,802,921 Residential 765,634 6,090 $ 2,061 $ 502 11,818 20,471 786,105 Home equity 344,344 1,433 560 324 1,952 4,269 348,613 Individuals' loans for household and other personal expenditures 73,990 445 56 81 145 727 74,717 Lease financing receivables, net of unearned income 588 588 Other commercial loans 159,324 64 64 159,388 Loans $ 4,641,215 $ 17,570 $ 2,741 $ 907 $ 31,389 $ 52,607 $ 4,693,822 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 Quarterly Report on 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 original 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, 2016 Six Months Ended June 30, 2016 Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Commercial and industrial loans $ 260 $ 260 3 Agriculture production financing and other loans to farmers $ 1,141 $ 1,141 3 1,606 1,472 5 Real estate Loans: Commercial and farmland 3,539 3,508 5 3,891 3,860 6 Residential 113 133 3 Home Equity 174 146 1 174 146 1 Total $ 4,854 $ 4,795 9 $ 6,044 $ 5,871 18 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 The following tables summarize the recorded investment of troubled debt restructurings as of June 30, 2016 and 2015 , by modification type, that occurred during the periods indicated: Three Months Ended June 30, 2016 Term Rate Combination Total Agriculture production financing and other loans to farmers $ 1,141 $ 1,141 Real estate Loans: Commercial and farmland 418 $ 3,086 3,504 Home Equity $ 143 143 Total $ 1,559 $ 143 $ 3,086 $ 4,788 Six Months Ended June 30, 2016 Term Rate Combination Total Commercial and industrial loans $ 198 $ 198 Agriculture production financing and other loans to farmers $ 1,141 $ 49 1,190 Real estate Loans: Commercial and farmland 418 3,433 3,851 Residential 112 112 Home Equity 143 143 Total $ 1,559 $ 304 $ 3,631 $ 5,494 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 Commercial and farmland real estate loans made up 66 percent of the post-modification balance of troubled debt restructured loans made in the six months ended June 30, 2016 . The following tables summarize troubled debt restructures that occurred during the three and six months ended June 30, 2016 , that subsequently defaulted during the period indicated and remained in default at period end. There were no troubled debt restructures that occurred during the three and six months ended June 30, 2015 that subsequently defaulted during this period. For purposes of this discussion, a loan is considered in default if it is 30 or more days past due. Three Months Ended June 30, 2016 Six Months Ended June 30, 2016 Number of Recorded Number of Recorded Commercial and industrial loans 1 $ 72 4 $ 269 Real estate Loans: Residential 1 55 1 55 Total 2 $ 127 5 $ 324 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. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $2,735,000 and $1,391,000 at June 30, 2016 and December 31, 2015, respectively. 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">LOANS AND ALLOWANCE The Corporation’s primary lending focus is small business and middle market commercial, commercial real estate, residential real estate and consumer, which results in portfolio diversification. The following tables show the composition of the loan portfolio, the allowance for loan losses and certain credit quality aspects, all excluding loans held for sale. Loans held for sale as of June 30, 2016 , and December 31, 2015 , were $18,854,000 and $9,894,000 , respectively. The following table shows the composition of the Corporation’s loan portfolio by loan class for the periods indicated: June 30, 2016 December 31, 2015 Commercial and industrial loans $ 1,084,890 $ 1,057,075 Agricultural production financing and other loans to farmers 95,131 97,711 Real estate loans: Construction 352,980 366,704 Commercial and farmland 1,869,703 1,802,921 Residential 758,870 786,105 Home Equity 374,159 348,613 Individuals' loans for household and other personal expenditures 75,205 74,717 Lease financing receivables, net of unearned income 388 588 Other commercial loans 180,103 159,388 Loans $ 4,791,429 $ 4,693,822 Allowance for loan losses (62,186 ) (62,453 ) Net Loans $ 4,729,243 $ 4,631,369 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 adequate to cover probable losses inherent in the loan portfolio at June 30, 2016 . 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 it 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, portfolio mix and collateral values. The allowance for loan losses is maintained through the provision for loan losses, which is a charge against earnings. The allowance is increased by provision expense and decreased by charge offs less recoveries. All charge offs are approved by the Bank’s senior loan officers or loan committees, depending on the amount of the charge off. The Bank charges off a loan when a determination is made that all or a portion of the loan is uncollectible. 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 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. 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 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 ensure that losses inherent in the portfolio are reflected in the allowance for loan losses. The environmental component adjusts the historical loss allocations for non-impaired 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. 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 included in the allowance to the extent a specific impairment is identified that exceeds the fair value adjustment on an impaired loan or the historical loss and environmental factor analysis indicates losses inherent in a purchased portfolio exceeds the fair value adjustment on the portion of the purchased portfolio not deemed impaired. The following tables summarize changes in the allowance for loan losses by loan segment for the three and six months ended June 30, 2016 , and June 30, 2015 : Three Months Ended June 30, 2016 Commercial Commercial Consumer Residential Finance Total Allowance for loan losses: Balances, April 1 $ 26,264 $ 22,317 $ 2,647 $ 10,856 $ 2 $ 62,086 Provision for losses 400 200 44 146 790 Recoveries on loans 683 276 107 273 1,339 Loans charged off (1,026 ) (513 ) (114 ) (376 ) (2,029 ) Balances, June 30, 2016 $ 26,321 $ 22,280 $ 2,684 $ 10,899 $ 2 $ 62,186 Six Months Ended June 30, 2016 Commercial Commercial Consumer Residential Finance Total Allowance for loan losses: Balances, January 1 $ 26,478 $ 22,145 $ 2,689 $ 11,139 $ 2 $ 62,453 Provision for losses 539 414 77 310 1,340 Recoveries on loans 975 1,228 185 585 2,973 Loans charged off (1,671 ) (1,507 ) (267 ) (1,135 ) (4,580 ) Balances, June 30, 2016 $ 26,321 $ 22,280 $ 2,684 $ 10,899 $ 2 $ 62,186 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 The following tables show the Corporation’s allowance for loan losses and loan portfolio by segment as of the periods indicated: June 30, 2016 Commercial Commercial Consumer Residential Finance Total Allowance Balances: Individually evaluated for impairment $ 1,573 $ 276 $ 69 $ 1,918 Collectively evaluated for impairment 24,748 21,824 $ 2,684 10,808 $ 2 60,066 Loans Acquired with Deteriorated Credit Quality 180 22 202 Total Allowance for Loan Losses $ 26,321 $ 22,280 $ 2,684 $ 10,899 $ 2 $ 62,186 Loan Balances: Individually evaluated for impairment $ 7,841 $ 21,118 $ 3,462 $ 32,421 Collectively evaluated for impairment 1,345,826 2,155,077 $ 75,205 1,126,707 $ 388 4,703,203 Loans Acquired with Deteriorated Credit Quality 6,457 46,488 2,860 55,805 Loans $ 1,360,124 $ 2,222,683 $ 75,205 $ 1,133,029 $ 388 $ 4,791,429 December 31, 2015 Commercial Commercial Consumer Residential Finance Total Allowance Balances: Individually evaluated for impairment $ 1,277 $ 243 $ 169 $ 1,689 Collectively evaluated for impairment 25,201 21,753 $ 2,689 10,966 $ 2 60,611 Loans Acquired with Deteriorated Credit Quality 149 4 153 Total Allowance for Loan Losses $ 26,478 $ 22,145 $ 2,689 $ 11,139 $ 2 $ 62,453 Loan Balances: Individually evaluated for impairment $ 7,877 $ 16,670 $ 4,020 $ 28,567 Collectively evaluated for impairment 1,298,988 2,096,089 $ 74,717 1,125,316 $ 588 4,595,698 Loans Acquired with Deteriorated Credit Quality 7,309 56,866 5,382 69,557 Loans $ 1,314,174 $ 2,169,625 $ 74,717 $ 1,134,718 $ 588 $ 4,693,822 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 typically 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. Uncollected 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, 2016 December 31, 2015 Commercial and industrial loans $ 3,413 $ 4,634 Agriculture production financing and other loans to farmers 1,471 827 Real estate Loans: Construction 721 736 Commercial and farmland 15,541 11,277 Residential 9,952 11,818 Home Equity 2,345 1,952 Individuals' loans for household and other personal expenditures 122 145 Total $ 33,565 $ 31,389 Commercial impaired loans include non-accrual loans, loans accounted for under ASC 310-30, and loans risk graded as substandard, doubtful and loss that were still accruing but deemed impaired according to the 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, 2016 Unpaid Recorded Related Impaired loans with no related allowance: Commercial and industrial loans $ 19,322 $ 10,183 Agriculture production financing and other loans to farmers 709 701 Real estate Loans: Construction 8,089 4,091 Commercial and farmland 83,028 61,319 Residential 8,650 5,016 Home equity 176 139 Other commercial loans 16 Total $ 119,990 $ 81,449 Impaired loans with related allowance: Commercial and industrial loans $ 2,491 $ 2,114 $ 1,007 Agriculture production financing and other loans to farmers 1,331 1,301 566 Real estate Loans: Commercial and farmland 2,145 1,978 456 Residential 877 801 91 Total $ 6,844 $ 6,194 $ 2,120 Total Impaired Loans $ 126,834 $ 87,643 $ 2,120 December 31, 2015 Unpaid Recorded Related Impaired loans with no related allowance: Commercial and industrial loans $ 22,151 $ 11,669 Agriculture production financing and other loans to farmers 370 361 Real estate Loans: Construction 4,551 2,336 Commercial and farmland 95,930 69,024 Residential 11,262 7,338 Home equity 297 247 Other commercial loans 20 Total $ 134,581 $ 90,975 Impaired loans with related allowance: Commercial and industrial loans $ 3,043 $ 2,690 $ 1,247 Agriculture production financing and other loans to farmers 466 466 30 Real estate Loans: Commercial and farmland 2,144 1,933 392 Residential 2,300 1,463 173 Total $ 7,953 $ 6,552 $ 1,842 Total Impaired Loans $ 142,534 $ 97,527 $ 1,842 Three Months Ended June 30, 2016 Six Months Ended June 30, 2016 Average Interest Average Interest Impaired loans with no related allowance: Commercial and industrial loans $ 10,372 $ 128 $ 10,307 $ 231 Agriculture production financing and other loans to farmers 834 2 882 2 Real estate Loans: Construction 4,085 74 4,074 147 Commercial and farmland 62,173 861 63,136 1,706 Residential 5,069 54 5,390 107 Home equity 138 139 Total $ 82,671 $ 1,119 $ 83,928 $ 2,193 Impaired loans with related allowance: Commercial and industrial loans $ 2,120 $ 9 $ 2,129 $ 19 Agriculture production financing and other loans to farmers 1,321 1,405 Real estate Loans: Commercial and farmland 1,986 2,008 Residential 840 860 Total $ 6,267 $ 9 $ 6,402 $ 19 Total Impaired Loans $ 88,938 $ 1,128 $ 90,330 $ 2,212 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 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, 2016 Commercial Commercial Commercial Substandard Commercial Commercial Loss Consumer Performing Consumer Total Commercial and industrial loans $ 1,022,507 $ 29,117 $ 33,266 $ 1,084,890 Agriculture production financing and other loans to farmers 37,114 32,784 25,233 95,131 Real estate Loans: Construction 328,366 5,023 1,606 $ 17,908 $ 77 352,980 Commercial and farmland 1,733,503 51,793 84,407 1,869,703 Residential 157,186 7,953 6,352 579,403 7,976 758,870 Home equity 7,377 97 743 363,618 2,324 374,159 Individuals' loans for household and other personal expenditures 75,084 121 75,205 Lease financing receivables, net of unearned income 300 88 388 Other commercial loans 180,103 180,103 Loans $ 3,466,456 $ 126,767 $ 151,695 $ 1,036,013 $ 10,498 $ 4,791,429 December 31, 2015 Commercial Commercial Commercial Substandard Commercial Commercial Loss Consumer Performing Consumer Total Commercial and industrial loans $ 962,340 $ 48,432 $ 45,984 $ 319 $ 1,057,075 Agriculture production financing and other loans to farmers 77,884 6,665 13,162 97,711 Real estate Loans: Construction 345,449 1,271 1,790 $ 18,114 $ 80 366,704 Commercial and farmland 1,679,141 46,442 77,338 1,802,921 Residential 171,576 3,107 10,428 593,533 7,461 786,105 Home equity 8,218 48 600 337,718 2,029 348,613 Individuals' loans for household and other personal expenditures 74,491 226 74,717 Lease financing receivables, net of unearned income 495 93 588 Other commercial loans 159,388 159,388 Loans $ 3,404,491 $ 105,965 $ 149,395 $ 319 $ 1,023,856 $ 9,796 $ 4,693,822 The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of June 30, 2016 , and December 31, 2015 . June 30, 2016 Current 30-59 Days 60-89 Days Loans > 90 Days Non-Accrual Total Past Due Total Commercial and industrial loans $ 1,080,184 $ 998 $ 282 $ 13 $ 3,413 $ 4,706 $ 1,084,890 Agriculture production financing and other loans to farmers 92,979 250 431 1,471 2,152 95,131 Real estate Loans: Construction 351,147 1,112 721 1,833 352,980 Commercial and farmland 1,850,882 2,384 896 15,541 18,821 1,869,703 Residential 743,951 3,847 888 232 9,952 14,919 758,870 Home equity 370,602 628 467 117 2,345 3,557 374,159 Individuals' loans for household and other personal expenditures 74,744 297 42 122 461 75,205 Lease financing receivables, net of unearned income 388 388 Other commercial loans 180,103 180,103 Loans $ 4,744,980 $ 8,404 $ 4,118 $ 362 $ 33,565 $ 46,449 $ 4,791,429 December 31, 2015 Current 30-59 Days 60-89 Days Loans > 90 Days Non-Accrual Total Past Due Total Commercial and industrial loans $ 1,052,275 $ 166 $ 4,634 $ 4,800 $ 1,057,075 Agriculture production financing and other loans to farmers 96,884 827 827 97,711 Real estate Loans: Construction 362,084 3,884 736 4,620 366,704 Commercial and farmland 1,786,092 5,552 11,277 16,829 1,802,921 Residential 765,634 6,090 $ 2,061 $ 502 11,818 20,471 786,105 Home equity 344,344 1,433 560 324 1,952 4,269 348,613 Individuals' loans for household and other personal expenditures 73,990 445 56 81 145 727 74,717 Lease financing receivables, net of unearned income 588 588 Other commercial loans 159,324 64 64 159,388 Loans $ 4,641,215 $ 17,570 $ 2,741 $ 907 $ 31,389 $ 52,607 $ 4,693,822 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 Quarterly Report on 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 original 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, 2016 Six Months Ended June 30, 2016 Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Commercial and industrial loans $ 260 $ 260 3 Agriculture production financing and other loans to farmers $ 1,141 $ 1,141 3 1,606 1,472 5 Real estate Loans: Commercial and farmland 3,539 3,508 5 3,891 3,860 6 Residential 113 133 3 Home Equity 174 146 1 174 146 1 Total $ 4,854 $ 4,795 9 $ 6,044 $ 5,871 18 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 The following tables summarize the recorded investment of troubled debt restructurings as of June 30, 2016 and 2015 , by modification type, that occurred during the periods indicated: Three Months Ended June 30, 2016 Term Rate Combination Total Agriculture production financing and other loans to farmers $ 1,141 $ 1,141 Real estate Loans: Commercial and farmland 418 $ 3,086 3,504 Home Equity $ 143 143 Total $ 1,559 $ 143 $ 3,086 $ 4,788 Six Months Ended June 30, 2016 Term Rate Combination Total Commercial and industrial loans $ 198 $ 198 Agriculture production financing and other loans to farmers $ 1,141 $ 49 1,190 Real estate Loans: Commercial and farmland 418 3,433 3,851 Residential 112 112 Home Equity 143 143 Total $ 1,559 $ 304 $ 3,631 $ 5,494 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 Commercial and farmland real estate loans made up 66 percent of the post-modification balance of troubled debt restructured loans made in the six months ended June 30, 2016 . The following tables summarize troubled debt restructures that occurred during the three and six months ended June 30, 2016 , that subsequently defaulted during the period indicated and remained in default at period end. There were no troubled debt restructures that occurred during the three and six months ended June 30, 2015 that subsequently defaulted during this period. For purposes of this discussion, a loan is considered in default if it is 30 or more days past due. Three Months Ended June 30, 2016 Six Months Ended June 30, 2016 Number of Recorded Number of Recorded Commercial and industrial loans 1 $ 72 4 $ 269 Real estate Loans: Residential 1 55 1 55 Total 2 $ 127 5 $ 324 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. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $2,735,000 and $1,391,000 at June 30, 2016 and December 31, 2015, respectively. 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. |
