Loans | Loans Classes of loans are as follows: December 31, 2015 2014 (Amounts In Thousands) Agricultural $ 101,588 $ 97,645 Commercial and financial 184,199 174,738 Real estate: Construction, 1 to 4 family residential 51,346 45,949 Construction, land development and commercial 83,121 77,020 Mortgage, farmland 187,856 162,503 Mortgage, 1 to 4 family first liens 727,160 672,674 Mortgage, 1 to 4 family junior liens 117,873 110,284 Mortgage, multi-family 271,974 245,213 Mortgage, commercial 323,409 321,601 Loans to individuals 24,019 21,342 Obligations of state and political subdivisions 52,371 55,729 2,124,916 1,984,698 Net unamortized fees and costs 768 691 2,125,684 1,985,389 Less allowance for loan losses 26,510 24,020 $ 2,099,174 $ 1,961,369 Changes in the allowance for loan losses and the allowance for loan loss balance applicable to impaired loans and the related loan balance of impaired loans for the year ended December 31, 2015 , 2014 and 2013 are as follows: Agricultural Commercial and Financial Real Estate: Construction and land development Real Estate: Mortgage, farmland Real Estate: Mortgage, 1 to 4 family Real Estate: Mortgage, multi-family and commercial Other Total (Amounts In Thousands) 2015 Allowance for loan losses: Beginning balance $ 2,515 $ 4,231 $ 2,241 $ 2,672 $ 7,419 $ 4,195 $ 747 $ 24,020 Charge-offs (325 ) (526 ) (285 ) — (1,108 ) (723 ) (438 ) (3,405 ) Recoveries 123 1,370 501 6 762 1,310 168 4,240 Provision 769 (558 ) (177 ) 664 1,099 (559 ) 417 1,655 Ending balance $ 3,082 $ 4,517 $ 2,280 $ 3,342 $ 8,172 $ 4,223 $ 894 $ 26,510 Ending balance, individually evaluated for impairment $ 1 $ 324 $ 22 $ — $ 326 $ 110 $ 100 $ 883 Ending balance, collectively evaluated for impairment $ 3,081 $ 4,193 $ 2,258 $ 3,342 $ 7,846 $ 4,113 $ 794 $ 25,627 Loan balances: Ending balance $ 101,588 $ 184,199 $ 134,467 $ 187,856 $ 845,033 $ 595,383 $ 76,390 $ 2,124,916 Ending balance, individually evaluated for impairment $ 1,710 $ 2,110 $ 954 $ 2,233 $ 5,926 $ 3,228 $ 100 $ 16,261 Ending balance, collectively evaluated for impairment $ 99,878 $ 182,089 $ 133,513 $ 185,623 $ 839,107 $ 592,155 $ 76,290 $ 2,108,655 Agricultural Commercial and Financial Real Estate: Construction and land development Real Estate: Mortgage, farmland Real Estate: Mortgage, 1 to 4 family Real Estate: Mortgage, multi-family and commercial Other Total (Amounts In Thousands) 2014 Allowance for loan losses: Beginning balance $ 2,852 $ 4,733 $ 2,918 $ 2,557 $ 7,064 $ 4,787 $ 639 $ 25,550 Charge-offs (174 ) (3,388 ) (250 ) — (1,195 ) (217 ) (325 ) (5,549 ) Recoveries 66 1,128 390 — 870 377 146 2,977 Provision (229 ) 1,758 (817 ) 115 680 (752 ) 287 1,042 Ending balance $ 2,515 $ 4,231 $ 2,241 $ 2,672 $ 7,419 $ 4,195 $ 747 $ 24,020 Ending balance, individually evaluated for impairment $ 44 $ 9 $ 28 $ 12 $ 52 $ 9 $ — $ 154 Ending balance, collectively evaluated for impairment $ 2,471 $ 4,222 $ 2,213 $ 2,660 $ 7,367 $ 4,186 $ 747 $ 23,866 Loan balances: Ending balance $ 97,645 $ 174,738 $ 122,969 $ 162,503 $ 782,958 $ 566,814 $ 77,071 $ 1,984,698 Ending balance, individually evaluated for impairment $ 1,844 $ 2,709 $ 560 $ 2,318 $ 3,826 $ 9,512 $ — $ 20,769 Ending balance, collectively evaluated for impairment $ 95,801 $ 172,029 $ 122,409 $ 160,185 $ 779,132 $ 557,302 $ 77,071 $ 1,963,929 Agricultural Commercial and Financial Real Estate: Construction and land development Real Estate: Mortgage, farmland Real Estate: Mortgage, 1 to 4 family Real Estate: Mortgage, multi-family and commercial Other Total (Amounts In Thousands) 2013 Allowance for loan losses: Beginning balance $ 1,653 $ 4,573 $ 3,175 $ 1,746 $ 8,088 $ 5,104 $ 821 $ 25,160 Charge-offs — (1,692 ) (245 ) — (887 ) (356 ) (166 ) (3,346 ) Recoveries 35 1,002 323 — 618 464 163 2,605 Provision 1,164 850 (335 ) 811 (755 ) (425 ) (179 ) 1,131 Ending balance $ 2,852 $ 4,733 $ 2,918 $ 2,557 $ 7,064 $ 4,787 $ 639 $ 25,550 Ending balance, individually evaluated for impairment $ 3 $ 16 $ — $ 14 $ 66 $ 205 $ — $ 304 Ending balance, collectively evaluated for impairment $ 2,849 $ 4,717 $ 2,918 $ 2,543 $ 6,998 $ 4,582 $ 639 $ 25,246 Loan balances: Ending balance $ 82,138 $ 166,102 $ 99,491 $ 142,685 $ 711,472 $ 559,277 $ 64,991 $ 1,826,156 Ending balance, individually evaluated for impairment $ 120 $ 2,407 $ 1,410 $ 284 $ 4,542 $ 17,763 $ — $ 26,526 Ending balance, collectively evaluated for impairment $ 82,018 $ 163,695 $ 98,081 $ 142,401 $ 706,930 $ 541,514 $ 64,991 $ 1,799,630 The Company evaluates the following loans to determine impairment: 1) all nonaccrual and TDR loans, 2) all non consumer and non 1 to 4 family residential loans with prior charge-offs, 3) all non consumer and non 1 to 4 family loan relationships classified as substandard and 4) loans with indications of or suspected deteriorating credit quality. The following table presents the credit quality indicators by type of loans in each category as of December 31, 2015 : Agricultural Commercial and Financial Real Estate: Construction, 1 to 4 family residential Real Estate: Construction, land development and commercial (Amounts In Thousands) 2015 Grade: Excellent $ 1,786 $ 3,298 $ — $ 260 Good 15,959 38,764 1,898 11,570 Satisfactory 36,819 102,188 34,357 52,731 Monitor 18,064 27,181 8,684 11,550 Special Mention 25,356 8,231 5,842 6,542 Substandard 3,604 4,537 565 468 Total $ 101,588 $ 184,199 $ 51,346 $ 83,121 Real Estate: Mortgage, farmland Real Estate: Mortgage, 1 to 4 family first liens Real Estate: Mortgage, 1 to 4 family junior liens Real Estate: Mortgage, multi- family 2015 Grade: Excellent $ 2,559 $ 426 $ — $ 6,651 Good 31,186 15,773 2,992 64,002 Satisfactory 112,038 620,731 107,091 166,193 Monitor 27,304 55,499 4,198 29,732 Special Mention 11,181 16,237 1,846 4,873 Substandard 3,588 18,494 1,746 523 Total $ 187,856 $ 727,160 $ 117,873 $ 271,974 Real Estate: Mortgage, commercial Loans to individuals Obligations of state and political subdivisions Total 2015 Grade: Excellent $ 12,484 $ — $ 2,365 $ 29,829 Good 81,305 70 37,045 300,564 Satisfactory 187,728 23,197 12,425 1,455,498 Monitor 32,141 285 518 215,156 Special Mention 6,183 198 — 86,489 Substandard 3,568 269 18 37,380 Total $ 323,409 $ 24,019 $ 52,371 $ 2,124,916 The following table presents the credit quality indicators by type of loans in each category as of December 31, 2014 : Agricultural Commercial and Financial Real Estate: Construction, 1 to 4 family residential Real Estate: Construction, land development and commercial (Amounts In Thousands) 2014 Grade: Excellent $ 1,375 $ 4,820 $ — $ 276 Good 13,214 37,941 6,893 13,875 Satisfactory 51,107 94,158 27,738 47,852 Monitor 15,243 20,445 8,435 2,811 Special Mention 13,070 11,031 1,881 11,870 Substandard 3,636 6,343 1,002 336 Total $ 97,645 $ 174,738 $ 45,949 $ 77,020 Real Estate: Mortgage, farmland Real Estate: Mortgage, 1 to 4 family first liens Real Estate: Mortgage, 1 to 4 family junior liens Real Estate: Mortgage, multi-family 2014 Grade: Excellent $ 2,867 $ 474 $ — $ 7,011 Good 36,680 22,094 2,875 73,852 Satisfactory 103,552 571,546 99,095 111,650 Monitor 11,754 41,805 3,377 35,812 Special Mention 4,721 18,428 2,520 16,611 Substandard 2,929 18,327 2,417 277 Total $ 162,503 $ 672,674 $ 110,284 $ 245,213 Real Estate: Mortgage, commercial Loans to individuals Obligations of state and political subdivisions Total 2014 Grade: Excellent $ 15,416 $ 87 $ 2,440 $ 34,766 Good 87,612 94 43,108 338,238 Satisfactory 178,069 20,465 10,181 1,315,413 Monitor 25,165 251 — 165,098 Special Mention 9,371 353 — 89,856 Substandard 5,968 92 — 41,327 Total $ 321,601 $ 21,342 $ 55,729 $ 1,984,698 The below are descriptions of the credit quality indicators: Excellent - Excellent rated loans are prime quality loans covered by highly-liquid collateral with generous margins or supported by superior current financial conditions reflecting substantial net worth, relative to total credit extended, and based on assets of a stable and non-speculative nature whose values can be readily verified. Identified repayment source or cash flow is abundant and assured. Good - Good rated loans are adequately secured by readily-marketable collateral or good financial condition characterized by liquidity, flexibility and sound net worth. Loans are supported by sound primary and secondary payment sources and timely and accurate financial information. Satisfactory – Satisfactory rated loans are loans to borrowers of average financial means not especially vulnerable to changes in economic or other circumstances, where the major support for the extension is sufficient collateral of a marketable nature, and the primary source of repayment is seen to be clear and adequate. Monitor – Monitor rated loans are identified by management as warranting special attention for a variety of reasons that may bear on ultimate collectability. This may be due to adverse trends, a particular industry, loan structure, or repayment that is dependent on projections, or a one-time occurrence. Special Mention – Special mention rated loans are supported by a marginal payment capacity and are marginally protected by collateral. There are identified weaknesses that if not monitored and corrected may adversely affect the Company’s credit position. A special mention credit would typically have a weakness in one of the general categories (cash flow, collateral position or payment history) but not in all categories. Substandard – Substandard loans are not adequately supported by the paying capacity of the borrower and may be inadequately collateralized. These loans have a well-defined weakness or weaknesses. For these loans, it is more probable than not that the Company could sustain some loss if the deficiency(ies) is not corrected. Past due loans as of December 31, 2015 and 2014 were as follows: 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans Receivable Accruing Loans Past Due 90 Days or More (Amounts In Thousands) December 31, 2015 Agricultural $ 3,064 $ 961 $ — $ 4,025 $ 97,563 $ 101,588 $ — Commercial and financial 854 71 1,312 2,237 181,962 184,199 — Real estate: Construction, 1 to 4 family residential — — 214 214 51,132 51,346 — Construction, land development and commercial — — 88 88 83,033 83,121 — Mortgage, farmland 320 88 — 408 187,448 187,856 — Mortgage, 1 to 4 family first liens 4,526 1,192 2,085 7,803 719,357 727,160 406 Mortgage, 1 to 4 family junior liens 250 13 110 373 117,500 117,873 — Mortgage, multi-family 135 — 113 248 271,726 271,974 — Mortgage, commercial 1,033 — 331 1,364 322,045 323,409 61 Loans to individuals 158 40 — 198 23,821 24,019 — Obligations of state and political subdivisions — — — — 52,371 52,371 — $ 10,340 $ 2,365 $ 4,253 $ 16,958 $ 2,107,958 $ 2,124,916 $ 467 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans Receivable Accruing Loans Past Due 90 Days or More (Amounts In Thousands) December 31, 2014 Agricultural $ 310 $ 99 $ — $ 409 $ 97,236 $ 97,645 $ — Commercial and financial 397 14 1,048 1,459 173,279 174,738 — Real estate: Construction, 1 to 4 family residential — — — — 45,949 45,949 — Construction, land development and commercial 937 — — 937 76,083 77,020 — Mortgage, farmland 753 — — 753 161,750 162,503 — Mortgage, 1 to 4 family first liens 3,594 1,656 1,582 6,832 665,842 672,674 348 Mortgage, 1 to 4 family junior liens 181 12 244 437 109,847 110,284 — Mortgage, multi-family — 21 — 21 245,192 245,213 — Mortgage, commercial 359 557 34 950 320,651 321,601 — Loans to individuals 27 — — 27 21,315 21,342 — Obligations of state and political subdivisions — — — — 55,729 55,729 — $ 6,558 $ 2,359 $ 2,908 $ 11,825 $ 1,972,873 $ 1,984,698 $ 348 The Company does not have a significant amount of loans that are past due less than 90 days where there are serious doubts as to the ability of the borrowers to comply with the loan repayment terms. Accruing loans past due 90 days or more increased $0.12 million from December 31, 2014 to December 31, 2015 . As of December 31, 2015 and 2014 , accruing loans past due 90 days or more were 0.02% and 0.02% of total loans, respectively. The average balance of the past due loans also increased in 2015 as compared to 2014 . The average 90 days or more past due loan balance per loan was $0.09 million as of December 31, 2015 compared to $0.07 million as of December 31, 2014 . The loans 90 days or more past due and still accruing are believed to be adequately collateralized. Loans are placed on nonaccrual status when management believes the collection of future principal and interest is not reasonably assured. Certain impaired loan information by loan type at December 31, 2015 and 2014 was as follows: December 31, 2015 December 31, 2014 Nonaccrual loans (1) Accruing loans past due 90 days or more TDR loans Nonaccrual loans (1) Accruing loans past due 90 days or more TDR loans (Amounts In Thousands) (Amounts In Thousands) Agricultural $ — $ — $ 1,710 $ — $ — $ 1,942 Commercial and financial 1,498 — 612 1,343 — 1,366 Real estate: Construction, 1 to 4 family residential 214 — 473 — — 431 Construction, land development and commercial 145 — 122 127 — — Mortgage, farmland — — 2,233 — — 2,220 Mortgage, 1 to 4 family first liens 3,845 406 1,369 1,912 348 1,199 Mortgage, 1 to 4 family junior liens 279 — 27 369 — — Mortgage, multi-family 449 — — 55 — 5,470 Mortgage, commercial 985 61 1,733 2,275 — 1,712 Loans to individuals — — — — — — $ 7,415 $ 467 $ 8,279 $ 6,081 $ 348 $ 14,340 (1) There were $2.31 million and $2.14 million of TDR loans included within nonaccrual loans as of December 31, 2015 and 2014 , respectively. The Company may modify the terms of a loan to maximize the collection of amounts due. In most cases, the modification is a reduction in interest rate, conversion to interest only payments or an extension of the maturity date. The borrower is experiencing financial difficulties or is expected to experience financial difficulties in the near-term, so a concessionary modification is granted to the borrower that would otherwise not be considered. TDR loans accrue interest as long as the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles. Below is a summary of information for TDR loans as of December 31, 2015 and 2014 : December 31, 2015 Number of contracts Recorded investment Commitments outstanding (Dollar Amounts In Thousands) Agricultural 7 $ 1,710 $ 32 Commercial and financial 8 1,818 241 Real estate: Construction, 1 to 4 family residential 3 646 138 Construction, land development and commercial 1 122 — Mortgage, farmland 5 2,233 — Mortgage, 1 to 4 family first liens 13 1,575 — Mortgage, 1 to 4 family junior liens 2 36 — Mortgage, multi-family 1 71 — Mortgage, commercial 10 2,381 — Loans to individuals — — — 50 $ 10,592 $ 411 December 31, 2014 Number of contracts Recorded investment Commitments outstanding (Dollar Amounts In Thousands) Agricultural 9 $ 1,942 $ 272 Commercial and financial 13 2,202 53 Real estate: Construction, 1 to 4 family residential 3 431 111 Construction, land development and commercial 1 127 — Mortgage, farmland 4 2,220 — Mortgage, 1 to 4 family first liens 11 1,467 — Mortgage, 1 to 4 family junior liens 1 225 65 Mortgage, multi-family 2 5,470 — Mortgage, commercial 8 2,398 — Loans to individuals — — — 52 $ 16,482 $ 501 A summary of TDR loans that were modified during the year ended December 31, 2015 and 2014 was as follows: December 31, 2015 Number of Contracts Pre-modification recorded investment Post-modification recorded investment ( Dollar Amounts In Thousands) Agricultural 3 $ 279 $ 163 Commercial and financial 2 676 663 Real estate: Construction, 1 to 4 family residential 1 277 277 Construction, land development and commercial — — — Mortgage, farmland 2 513 399 Mortgage, 1 to 4 family first liens 4 353 353 Mortgage, 1 to 4 family junior liens 2 41 41 Mortgage, multi-family 1 71 71 Mortgage, commercial 2 144 144 Loans to individuals — — — 17 $ 2,354 $ 2,111 December 31, 2014 Number of Contracts Pre-modification recorded investment Post-modification recorded investment ( Dollar Amounts In Thousands) Agricultural 8 $ 2,033 $ 2,033 Commercial and financial 5 803 803 Real estate: Construction, 1 to 4 family residential 3 443 431 Construction, land development and commercial 1 132 132 Mortgage, farmland 3 2,007 2,007 Mortgage, 1 to 4 family first liens 3 433 433 Mortgage, 1 to 4 family junior liens 1 225 225 Mortgage, multi-family — — — Mortgage, commercial 1 319 319 Loans to individuals — — — 25 $ 6,395 $ 6,383 The Bank has commitments to lend additional borrowings to TDR loan customers. These commitments are in the normal course of business and allow the borrowers to build pre-sold homes and commercial property which increase their overall cash flow. The additional borrowings are not used to facilitate payments on these loans. There were no TDR loans modified during the year that were in payment default (defined as past due 90 days or more) as of December 31, 2015 or 2014 . Information regarding impaired loans as of and for the year ended December 31, 2015 is as follows: Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (Amounts in Thousands) 2015 With no related allowance recorded: Agricultural $ 1,609 $ 1,773 $ — $ 1,620 $ 80 Commercial and financial 1,263 1,981 — 1,421 5 Real estate: Construction, 1 to 4 family residential 238 238 — 173 5 Construction, land development and commercial 210 314 — 231 6 Mortgage, farmland 2,233 2,351 — 2,305 110 Mortgage, 1 to 4 family first liens 3,558 4,419 — 3,806 48 Mortgage, 1 to 4 family junior liens 189 500 — 204 — Mortgage, multi-family 157 226 — 175 — Mortgage, commercial 1,831 3,018 — 1,839 50 Loans to individuals — 20 — — — $ 11,288 $ 14,840 $ — $ 11,774 $ 304 With an allowance recorded: Agricultural $ 101 $ 101 $ 1 $ 106 $ 5 Commercial and financial 847 847 324 990 30 Real estate: Construction, 1 to 4 family residential 449 461 9 449 12 Construction, land development and commercial 57 58 13 58 — Mortgage, farmland — — — — — Mortgage, 1 to 4 family first liens 2,062 2,156 306 2,133 36 Mortgage, 1 to 4 family junior liens 117 270 20 179 1 Mortgage, multi-family 292 332 58 316 — Mortgage, commercial 948 1,030 52 974 38 Loans to individuals 100 100 100 67 4 $ 4,973 $ 5,355 $ 883 $ 5,272 $ 126 Total: Agricultural $ 1,710 $ 1,874 $ 1 $ 1,726 $ 85 Commercial and financial 2,110 2,828 324 2,411 35 Real estate: Construction, 1 to 4 family residential 687 699 9 622 17 Construction, land development and commercial 267 372 13 289 6 Mortgage, farmland 2,233 2,351 — 2,305 110 Mortgage, 1 to 4 family first liens 5,620 6,575 306 5,939 84 Mortgage, 1 to 4 family junior liens 306 770 20 383 1 Mortgage, multi-family 449 558 58 491 — Mortgage, commercial 2,779 4,048 52 2,813 88 Loans to individuals 100 120 100 67 4 $ 16,261 $ 20,195 $ 883 $ 17,046 $ 430 Information regarding impaired loans as of and for the year ended December 31, 2014 is as follows: Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (Amounts in Thousands) 2014 With no related allowance recorded: Agricultural $ 1,634 $ 1,696 $ — $ 1,496 $ 71 Commercial and financial 2,076 3,695 — 1,930 29 Real estate: Construction, 1 to 4 family residential 89 89 — 44 1 Construction, land development and commercial 128 220 — 142 — Mortgage, farmland 2,040 2,040 — 1,897 90 Mortgage, 1 to 4 family first liens 2,951 3,705 — 2,980 47 Mortgage, 1 to 4 family junior liens 369 673 — 386 — Mortgage, multi-family 5,525 5,632 — 5,598 249 Mortgage, commercial 3,290 4,588 — 3,534 53 Loans to individuals — 20 — — — $ 18,102 $ 22,358 $ — $ 18,007 $ 540 With an allowance recorded: Agricultural $ 210 $ 247 $ 44 $ 220 $ 11 Commercial and financial 633 633 9 694 36 Real estate: Construction, 1 to 4 family residential 343 354 28 348 19 Construction, land development and commercial — — — — — Mortgage, farmland 278 278 12 281 14 Mortgage, 1 to 4 family first liens 506 596 52 526 22 Mortgage, 1 to 4 family junior liens — — — — — Mortgage, multi-family — — — — — Mortgage, commercial 697 697 9 706 37 Loans to individuals — — — — — $ 2,667 $ 2,805 $ 154 $ 2,775 $ 139 Total: Agricultural $ 1,844 $ 1,943 $ 44 $ 1,716 $ 82 Commercial and financial 2,709 4,328 9 2,624 65 Real estate: Construction, 1 to 4 family residential 432 443 28 392 20 Construction, land development and commercial 128 220 — 142 — Mortgage, farmland 2,318 2,318 12 2,178 104 Mortgage, 1 to 4 family first liens 3,457 4,301 52 3,506 69 Mortgage, 1 to 4 family junior liens 369 673 — 386 — Mortgage, multi-family 5,525 5,632 — 5,598 249 Mortgage, commercial 3,987 5,285 9 4,240 90 Loans to individuals — 20 — — — $ 20,769 $ 25,163 $ 154 $ 20,782 $ 679 Information regarding impaired loans as of and for the year ended December 31, 2013 is as follows: Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (Amounts in Thousands) 2013 With no related allowance recorded: Agricultural $ — $ — $ — $ — $ — Commercial and financial 1,602 3,140 — 1,645 45 Real estate: Construction, 1 to 4 family residential 1,270 2,974 — 1,727 4 Construction, land development and commercial 140 140 — 229 — Mortgage, farmland — — — — — Mortgage, 1 to 4 family first liens 2,597 3,542 — 2,691 24 Mortgage, 1 to 4 family junior liens 177 451 — 198 — Mortgage, multi-family 456 1,068 — 666 — Mortgage, commercial 2,494 5,303 — 2,793 46 Loans to individuals — 20 — — — $ 8,736 $ 16,638 $ — $ 9,949 $ 119 With an allowance recorded: Agricultural $ 120 $ 120 $ 3 $ 123 $ 5 Commercial and financial 805 838 16 871 46 Real estate: Construction, 1 to 4 family residential — — — — — Construction, land development and commercial — — — — — Mortgage, farmland 284 284 14 289 14 Mortgage, 1 to 4 family first liens 1,768 1,897 66 1,821 79 Mortgage, 1 to 4 family junior liens — — — — — Mortgage, multi-family 5,608 5,608 188 5,673 255 Mortgage, commercial 9,205 9,205 17 9,300 535 Loans to individuals — — — — — $ 17,790 $ 17,952 $ 304 $ 18,077 $ 934 Total: Agricultural $ 120 $ 120 $ 3 $ 123 $ 5 Commercial and financial 2,407 3,978 16 2,516 91 Real estate: Construction, 1 to 4 family residential 1,270 2,974 — 1,727 4 Construction, land development and commercial 140 140 — 229 — Mortgage, farmland 284 284 14 289 14 Mortgage, 1 to 4 family first liens 4,365 5,439 66 4,512 103 Mortgage, 1 to 4 family junior liens 177 451 — 198 — Mortgage, multi-family 6,064 6,676 188 6,339 255 Mortgage, commercial 11,699 14,508 17 12,093 581 Loans to individuals — 20 — — — $ 26,526 $ 34,590 $ 304 $ 28,026 $ 1,053 Impaired loans decreased by $4.61 million from December 31, 2014 to December 31, 2015 . Impaired loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 days or more and TDR loans. Impaired loans also include loans that, based on management’s evaluation of current information and events, the Bank expects to be unable to collect in full according to the contractual terms of the original loan agreement. The decrease in impaired loans is due mainly to a decrease in TDR Loans of $6.06 million from December 31, 2014 to December 31, 2015 . The net decrease in TDR loans is primarily the result of loans reclassified from TDR loans as a result of the borrowers not experiencing financial difficulty and no concessions granted to the borrower when the loan was modified during the year ended December 31, 2015 . For loans that are collateral dependent, losses are evaluated based on the portion of a loan that exceeds the fair market value of the collateral that can be identified as uncollectible. In general, this is the amount that the carrying value of the loan exceeds the related appraised value. Generally, it is the Company’s policy not to rely on appraisals that are older than one year prior to the date the impairment is being measured. The most recent appraisal values may be adjusted if, in the Company’s judgment, experience and other market data indicate that the property’s value, use, condition, exit market or other variable affecting its value may have changed since the appraisal was performed, consistent with the December 2006 joint interagency guidance on the allowance for loan losses. The charge-off or loss adjustment supported by an appraisal is considered the minimum charge-off. Any adjustments made to the appraised value are to provide additional charge-off or loss allocations based on the applicable facts and circumstances. In instances where there is an estimated decline in value, either a loss allocation is provided or a charge-off taken pending confirmation of the amount of the loss from an updated appraisal. Upon receipt of the new appraisals, an additional loss allocation may be provided or charge-off taken based on the appraised value of the collateral. On average, appraisals are obtained within one month of order. The Company has not experienced any significant time lapses in recognizing the required provisions for collateral dependent loans, nor has the Company delayed appropriate charge-offs. When an updated appraisal value has been obtained, the Company has used the appraisal amount in helping to determine the appropriate charge-off or required reserve. The Company also evaluates any changes in the financial condition of the borrower and guarantors (if applicable), economic conditions, and the Company’s loss experience with the type of property in question. Any information utilized in addition to the appraisal is intended to identify additional charge-offs or provisions, not to override the appraised value. The Company separates its portfolio loans and leases into segments for determining the allowance for loan losses. The Company's portfolio segments includes agricultural, commercial and financial, real estate, loans to individuals and obligations of state and political subdivisions. The Company further separates its portfolio into classes for purposes of monitoring and assessing credit quality based on certain risk characteristics. Classes with the real estate portfolio segment includes 1 to 4 family residential constructions, land development and commercial construction, farmland, 1 to 4 family first liens, 1 to 4 family junior liens, multi-family and commercial. Loans that exhibit probable or observed credit weaknesses, as well as loans that have been modified in a TDR, are subject to individual review for impairment. When individual loans are reviewed for impairment, the Company determines allowances based on management's estimate of the borrower's ability to repay the loan given the availability of the collateral, other sources of cash flow, as well as evaluation of legal options available. Allowances for impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the underlying collateral. Historical loss rates are applied to loans that are not individually reviewed for impairment. For reporting periods prior to December 31, 2014 the Company calculated its historical loss experience using a trailing 10 quarter portfolio loss history method in which the Company tracked the net charge-offs as a percentage of total loans by loan category. The portfolio loss history method did not factor in the credit risk ratings of the loans in determination of the historical loss rate to be applied in the allowance for loan losses calculation. During the year ended December 31, 2014, to refine the Company's allowance for loan losses calculation, management performed a 20 quarter migration analysis. Management determined that increasing the look-back period to a 20 quarter period would improve the estimation of the entire credit and economic cycle of a credit relationship. The migration analysis performed by management uses loan level attributes to track the movement of loans through the various credit risk rating categories in order to estimate the percentage of historical loss to apply to each specific credit risk rating in each loan category. The credit risk rating system currently utilized for allowance analysis purposes encompasses six categories. The Company's allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan losses that management believes is appropriate at each reporting date. Quantitative factors include the Company's historical loss experience, delinquency and charge-off trends, collateral values, changes in impaired loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers' sensitivity to interest rate movements. Qualitative factors include changes in lending policies and procedures; changes in national and local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of lending management and staff; changes in the quality of the Bank's loan review system; the existence and effect of concentrations of credit; and the effect of any other identified external factors. Determinations relating to the possible level of future loan losses are based in part on subjective judgments by management. Future loan losses in excess of current estimates, could materially adversely affect our results of operations or financial position. As the Company adds new products and increases the complexity of its loan portfolio, it will enhance its methodology accordingly. Although management believes the levels of the allowance for loan losses as of December 31, 2015 and 2014 were adequate to absorb probable losses inherent in the loan portfolio, a decline in local economic conditions, or other factors, could result in increasing losses that cannot be reasonably predicted at this time. |