Loans | Loans Classes of loans are as follows: March 31, December 31, (Amounts In Thousands) Agricultural $ 87,934 $ 92,871 Commercial and financial 199,702 192,995 Real estate: Construction, 1 to 4 family residential 63,784 57,864 Construction, land development and commercial 125,144 121,561 Mortgage, farmland 205,334 202,340 Mortgage, 1 to 4 family first liens 780,407 767,469 Mortgage, 1 to 4 family junior liens 127,721 125,400 Mortgage, multi-family 303,653 302,831 Mortgage, commercial 334,067 334,198 Loans to individuals 24,710 25,157 Obligations of state and political subdivisions 54,709 54,462 $ 2,307,165 $ 2,277,148 Net unamortized fees and costs 826 827 $ 2,307,991 $ 2,277,975 Less allowance for loan losses 26,450 26,530 $ 2,281,541 $ 2,251,445 Changes in the allowance for loan losses, the allowance for loan losses applicable to impaired loans and the related loan balance of impaired loans for the three months ended March 31, 2017 were as follows: Three Months Ended March 31, 2017 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) Allowance for loan losses: Beginning balance $ 2,947 $ 4,531 $ 2,890 $ 3,417 $ 7,677 $ 4,045 $ 1,023 $ 26,530 Charge-offs — (220 ) — — (145 ) — (188 ) (553 ) Recoveries 38 454 381 — 133 180 101 1,287 Provision (480 ) (866 ) (177 ) 90 507 133 (21 ) (814 ) Ending balance $ 2,505 $ 3,899 $ 3,094 $ 3,507 $ 8,172 $ 4,358 $ 915 $ 26,450 Ending balance, individually evaluated for impairment $ 587 $ 144 $ 72 $ 345 $ 62 $ 15 $ 36 $ 1,261 Ending balance, collectively evaluated for impairment $ 1,918 $ 3,755 $ 3,022 $ 3,162 $ 8,110 $ 4,343 $ 879 $ 25,189 Loans: Ending balance $ 87,934 $ 199,702 $ 188,928 $ 205,334 $ 908,128 $ 637,720 $ 79,419 $ 2,307,165 Ending balance, individually evaluated for impairment $ 11,388 $ 1,787 $ 671 $ 8,502 $ 5,521 $ 2,034 $ 36 $ 29,939 Ending balance, collectively evaluated for impairment $ 76,546 $ 197,915 $ 188,257 $ 196,832 $ 902,607 $ 635,686 $ 79,383 $ 2,277,226 Changes in the allowance for loan losses for the three months ended March 31, 2016 were as follows: Three Months Ended March 31, 2016 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) Allowance for loan losses: Beginning balance $ 3,082 $ 4,517 $ 2,280 $ 3,342 $ 8,172 $ 4,223 $ 894 $ 26,510 Charge-offs — (55 ) — (10 ) (344 ) (66 ) (169 ) (644 ) Recoveries 142 253 52 — 213 11 44 715 Provision (270 ) (404 ) 427 612 (5 ) 22 167 549 Ending balance $ 2,954 $ 4,311 $ 2,759 $ 3,944 $ 8,036 $ 4,190 $ 936 $ 27,130 Ending balance, individually evaluated for impairment $ 868 $ 268 $ 32 $ 670 $ 310 $ 88 $ 22 $ 2,258 Ending balance, collectively evaluated for impairment $ 2,086 $ 4,043 $ 2,727 $ 3,274 $ 7,726 $ 4,102 $ 914 $ 24,872 Loans: Ending balance $ 90,620 $ 173,736 $ 163,900 $ 189,882 $ 844,039 $ 600,680 $ 74,582 $ 2,137,439 Ending balance, individually evaluated for impairment $ 12,647 $ 2,406 $ 1,450 $ 8,098 $ 5,594 $ 3,649 $ 22 $ 33,866 Ending balance, collectively evaluated for impairment $ 77,973 $ 171,330 $ 162,450 $ 181,784 $ 838,445 $ 597,031 $ 74,560 $ 2,103,573 The following table presents the credit quality indicators by type of loans in each category as of March 31, 2017 and December 31, 2016 , respectively (amounts in thousands): Agricultural Commercial and Financial Real Estate: Construction, 1 to 4 family residential Real Estate: Construction, land development and commercial March 31, 2017 Grade: Excellent $ 3,256 $ 9,520 $ — $ 635 Good 14,292 38,506 5,753 22,777 Satisfactory 37,290 115,447 45,876 51,858 Monitor 15,562 25,704 9,256 45,207 Special Mention 4,372 6,328 1,311 4,215 Substandard 13,162 4,197 1,588 452 Total $ 87,934 $ 199,702 $ 63,784 $ 125,144 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 March 31, 2017 Grade: Excellent $ 2,829 $ 1,183 $ 130 $ 5,882 Good 49,476 15,354 3,342 72,006 Satisfactory 104,287 659,704 115,372 182,985 Monitor 36,334 68,035 4,891 38,867 Special Mention 3,136 12,523 1,506 3,611 Substandard 9,272 23,608 2,480 302 Total $ 205,334 $ 780,407 $ 127,721 $ 303,653 Real Estate: Mortgage, commercial Loans to individuals Obligations of state and political subdivisions Total March 31, 2017 Grade: Excellent $ 15,424 $ — $ — $ 38,859 Good 89,922 97 34,395 345,920 Satisfactory 186,099 23,903 17,160 1,539,981 Monitor 34,981 340 3,154 282,331 Special Mention 3,925 193 — 41,120 Substandard 3,716 177 — 58,954 Total $ 334,067 $ 24,710 $ 54,709 $ 2,307,165 Agricultural Commercial and Financial Real Estate: Construction, 1 to 4 family residential Real Estate: Construction, land development and commercial December 31, 2016 Grade: Excellent $ 4,205 $ 4,241 $ — $ 244 Good 13,611 43,472 1,701 25,337 Satisfactory 40,008 108,800 44,138 46,758 Monitor 12,699 20,023 8,896 44,487 Special Mention 8,381 11,177 972 4,250 Substandard 13,967 5,282 2,157 485 Total $ 92,871 $ 192,995 $ 57,864 $ 121,561 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 December 31, 2016 Grade: Excellent $ 2,916 $ 1,196 $ 65 $ 5,970 Good 47,569 15,725 3,002 71,822 Satisfactory 105,971 647,191 113,433 180,651 Monitor 29,778 66,164 4,877 40,444 Special Mention 7,004 12,914 1,566 3,636 Substandard 9,102 24,279 2,457 308 Total $ 202,340 $ 767,469 $ 125,400 $ 302,831 Real Estate: Mortgage, commercial Loans to individuals Obligations of state and political subdivisions Total December 31, 2016 Grade: Excellent $ 15,873 $ — $ — $ 34,710 Good 89,801 65 37,539 349,644 Satisfactory 185,650 24,446 16,417 1,513,463 Monitor 34,979 293 506 263,146 Special Mention 3,797 195 — 53,892 Substandard 4,098 158 — 62,293 Total $ 334,198 $ 25,157 $ 54,462 $ 2,277,148 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 March 31, 2017 and December 31, 2016 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) March 31, 2017 Agricultural $ 293 $ — $ 81 $ 374 $ 87,560 $ 87,934 $ — Commercial and financial 1,350 547 120 2,017 197,685 199,702 — Real estate: Construction, 1 to 4 family residential 1,411 — — 1,411 62,373 63,784 — Construction, land development and commercial 679 — 60 739 124,405 125,144 60 Mortgage, farmland 586 — — 586 204,748 205,334 — Mortgage, 1 to 4 family first liens 3,761 694 1,680 6,135 774,272 780,407 221 Mortgage, 1 to 4 family junior liens 132 21 136 289 127,432 127,721 — Mortgage, multi-family 4,354 — 40 4,394 299,259 303,653 — Mortgage, commercial 694 16 163 873 333,194 334,067 — Loans to individuals 97 9 — 106 24,604 24,710 — Obligations of state and political subdivisions — — — — 54,709 54,709 — $ 13,357 $ 1,287 $ 2,280 $ 16,924 $ 2,290,241 $ 2,307,165 $ 281 December 31, 2016 Agricultural $ 56 $ — $ 302 $ 358 $ 92,513 $ 92,871 $ — Commercial and financial 24 121 718 863 192,132 192,995 — Real estate: Construction, 1 to 4 family residential — — — — 57,864 57,864 — Construction, land development and commercial — 231 85 316 $ 121,245 121,561 — Mortgage, farmland 319 — — 319 202,021 202,340 — Mortgage, 1 to 4 family first liens 5,649 978 1,943 8,570 $ 758,899 767,469 192 Mortgage, 1 to 4 family junior liens 330 51 579 960 124,440 125,400 443 Mortgage, multi-family — — 40 40 $ 302,791 302,831 — Mortgage, commercial 371 — 207 578 333,620 334,198 — Loans to individuals 203 32 — 235 $ 24,922 25,157 — Obligations of state and political subdivisions — — — — 54,462 54,462 — $ 6,952 $ 1,413 $ 3,874 $ 12,239 $ 2,264,909 $ 2,277,148 $ 635 The Company does not have a material 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. Certain impaired loan information by loan type at March 31, 2017 and December 31, 2016 , was as follows: March 31, 2017 December 31, 2016 Non-accrual loans (1) Accruing loans past due 90 days or more TDR loans Non- accrual loans (1) Accruing loans past due 90 days or more TDR loans (Amounts In Thousands) (Amounts In Thousands) Agricultural $ 1,528 $ — $ 7,212 $ 1,741 $ — $ 91 Commercial and financial 1,278 — 509 1,354 — 1,057 Real estate: Construction, 1 to 4 family residential — — 265 — — 265 Construction, land development and commercial — 60 346 85 — 118 Mortgage, farmland 1,410 — 1,662 1,205 — 1,389 Mortgage, 1 to 4 family first liens 3,921 221 1,362 4,097 192 1,375 Mortgage, 1 to 4 family junior liens 149 — 26 136 443 26 Mortgage, multi-family 239 — — 243 — — Mortgage, commercial 719 — 1,075 1,077 — 1,087 $ 9,244 $ 281 $ 12,457 $ 9,938 $ 635 $ 5,408 (1) There were $4.17 million and $4.23 million of TDR loans included within nonaccrual loans as of March 31, 2017 and December 31, 2016 , respectively. Loans 90 days or more past due that are still accruing interest decreased $0.35 million from December 31, 2016 to March 31, 2017 due to a decrease in the number of loans past due greater than 90 days. As of March 31, 2017 there were 3 accruing loans past due 90 days or more. The average accruing loans past due as of March 31, 2017 are $0.09 million . There were 6 accruing loans past due 90 days or more as of December 31, 2016 and the average loan balance was $0.11 million . The accruing loans past due 90 days or more balances are believed to be adequately collateralized and the Company expects to collect all principal and interest as contractually due under these loans. The Company may modify the terms of a loan to maximize the collection of amounts due. Such a modification is considered a troubled debt restructuring (“TDR”). In most cases, the modification is either 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 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 March 31, 2017 and December 31, 2016 : March 31, 2017 December 31, 2016 Number of contracts Recorded investment Commitments outstanding Number of contracts Recorded investment Commitments outstanding (Amounts In Thousands) (Amounts In Thousands) Agricultural 7 $ 8,596 $ 143 4 $ 1,460 $ 167 Commercial and financial 11 1,426 551 14 2,053 117 Real estate: Construction, 1 to 4 family residential 3 265 119 3 265 1,225 Construction, land development and commercial 2 346 6 1 118 107 Mortgage, farmland 8 3,073 — 7 2,594 — Mortgage, 1 to 4 family first liens 12 1,454 — 12 1,471 — Mortgage, 1 to 4 family junior liens 1 26 16 1 26 65 Mortgage, multi-family — — — — — — Mortgage, commercial 8 1,440 — 10 1,650 — Loans to individuals — — — — — — 52 $ 16,626 $ 835 52 $ 9,637 $ 1,681 The following is a summary of TDR loans that were modified during the three months ended March 31, 2017 : Three Months Ended March 31, 2017 Number of contracts Pre-modification recorded investment Post-modification recorded investment (Amounts In Thousands) Agricultural 3 $ 8,783 $ 8,783 Commercial and financial — — — Real estate: Construction, 1 to 4 family residential — — — Construction, land development and commercial 1 231 231 Mortgage, farmland 2 598 598 Mortgage, 1 to 4 family first lien — — — Mortgage, 1 to 4 family junior liens — — — Mortgage, multi-family — — — Mortgage, commercial — — — 6 $ 9,612 $ 9,612 The Company had commitments to lend $0.84 million in additional borrowings to restructured loan customers as of March 31, 2017 . The Company had commitments to lend $1.68 million in additional borrowings to restructured loan customers as of December 31, 2016 . These commitments were in the normal course of business. The additional borrowings were not used to facilitate payments on these loans. There were no TDR loans that were in payment default (defined as past due 90 days or more) during the period ended March 31, 2017 and year ended December 31, 2016 . Information regarding impaired loans as of and for the three months ended March 31, 2017 is as follows: March 31, 2017 Three Months Ended Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized With no related allowance recorded: (Amounts In Thousands) Agricultural $ 1,528 $ 1,748 $ — $ 1,524 $ — Commercial and financial 1,531 2,163 — 1,555 5 Real estate: Construction, 1 to 4 family residential 117 151 — 117 1 Construction, land development and commercial 117 167 — 118 1 Mortgage, farmland 2,753 3,062 — 2,636 16 Mortgage, 1 to 4 family first liens 4,682 5,796 — 4,726 13 Mortgage, 1 to 4 family junior liens 149 645 — 151 — Mortgage, multi-family 239 361 — 241 — Mortgage, commercial 1,700 2,283 — 1,722 11 Loans to individuals — 18 — — — $ 12,816 $ 16,394 $ — $ 12,790 $ 47 With an allowance recorded: Agricultural $ 9,860 $ 9,860 $ 587 $ 9,967 $ 111 Commercial and financial 256 275 144 272 1 Real estate: Construction, 1 to 4 family residential 289 289 32 290 3 Construction, land development and commercial 148 148 40 148 2 Mortgage, farmland 5,749 5,749 345 5,751 61 Mortgage, 1 to 4 family first liens 664 703 59 684 4 Mortgage, 1 to 4 family junior liens 26 26 3 26 1 Mortgage, multi-family — — — — — Mortgage, commercial 95 97 15 97 1 Loans to individuals 36 36 36 33 1 $ 17,123 $ 17,183 $ 1,261 $ 17,268 $ 185 Total: Agricultural $ 11,388 $ 11,608 $ 587 $ 11,491 $ 111 Commercial and financial 1,787 2,438 144 1,827 6 Real estate: Construction, 1 to 4 family residential 406 440 32 407 4 Construction, land development and commercial 265 315 40 266 3 Mortgage, farmland 8,502 8,811 345 8,387 77 Mortgage, 1 to 4 family first liens 5,346 6,499 59 5,410 17 Mortgage, 1 to 4 family junior liens 175 671 3 177 1 Mortgage, multi-family 239 361 — 241 — Mortgage, commercial 1,795 2,380 15 1,819 12 Loans to individuals 36 54 36 33 1 $ 29,939 $ 33,577 $ 1,261 $ 30,058 $ 232 Information regarding impaired loans as of December 31, 2016 is as follows: Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance recorded: (Amounts In Thousands) Agricultural $ 800 $ 971 $ — Commercial and financial 1,540 2,175 — Real estate: Construction, 1 to 4 family residential 117 151 — Construction, land development and commercial 204 290 — Mortgage, farmland 2,594 2,887 — Mortgage, 1 to 4 family first liens 5,011 6,137 — Mortgage, 1 to 4 family junior liens 153 646 — Mortgage, multi-family 243 362 — Mortgage, commercial 1,901 2,727 — Loans to individuals — 19 — $ 12,563 $ 16,365 $ — With an allowance recorded: Agricultural $ 10,920 $ 10,978 $ 856 Commercial and financial 937 955 718 Real estate: Construction, 1 to 4 family residential 815 815 105 Construction, land development and commercial — — — Mortgage, farmland 5,434 5,434 390 Mortgage, 1 to 4 family first liens 1,266 1,374 79 Mortgage, 1 to 4 family junior liens 612 667 11 Mortgage, multi-family — — — Mortgage, commercial 967 1,004 34 Loans to individuals 150 150 150 $ 21,101 $ 21,377 $ 2,343 Total: Agricultural $ 11,720 $ 11,949 $ 856 Commercial and financial 2,477 3,130 718 Real estate: Construction, 1 to 4 family residential 932 966 105 Construction, land development and commercial 204 290 — Mortgage, farmland 8,028 8,321 390 Mortgage, 1 to 4 family first liens 6,277 7,511 79 Mortgage, 1 to 4 family junior liens 765 1,313 11 Mortgage, multi-family 243 362 — Mortgage, commercial 2,868 3,731 34 Loans to individuals 150 169 150 $ 33,664 $ 37,742 $ 2,343 Impaired loans decreased $3.73 million from December 31, 2016 to March 31, 2017 . 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 Company expects to be unable to collect in full according to the contractual terms of the original loan agreement. Impaired loans were 1.30% of loans held for investment as of March 31, 2017 and 1.48% as of December 31, 2016 . The decrease in impaired loans is due mainly to a decrease in nonaccrual loans of $0.70 million , a decrease of $9.45 million in relationships with a specific allowance for losses, and is offset by an increase in TDR loans of $7.05 million from December 31, 2016 to March 31, 2017 . The Company regularly reviews a substantial portion of the loans in the portfolio and assesses whether the loans are impaired in accordance with ASC 310. If the loans are impaired, the Company determines if a specific allowance is appropriate. In addition, the Company's management also reviews and, where determined necessary, provides allowances for particular loans based upon (1) reviews of specific borrowers and (2) management’s assessment of areas that management considers are of higher credit risk, including loans that have been restructured. Loans that are determined not to be impaired and for which there are no specific allowances are classified into one or more risk categories. Based upon the risk category assigned, the Company allocates a percentage, as determined by management, for a required allowance needed. The determination of the appropriate percentage begins with historical loss experience factors, which are then adjusted for levels and trends in past due loans, levels and trends in charged-off and recovered loans, trends in volume growth, trends in problem and watch loans, trends in restructured loans, local economic trends and conditions, industry and other conditions, and effects of changing interest rates. Specific allowances for losses on impaired loans are established if the loan balances exceed the net present value of the relevant future cash flows or the fair value of the relevant collateral based on updated appraisals and/or updated collateral analysis for the properties if the loan is collateral dependent. The Company may recognize a charge off or record a specific allowance related to an impaired loan if there is a collateral shortfall or it is unlikely the borrower can make all principal and interest payments as contractually due. 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. In general, this is the amount that the carrying value of the loan exceeds the related appraised value less estimated costs to sell the collateral. 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 an additional charge off or specific reserve based on the applicable facts and circumstances. In instances where there is an estimated decline in value, a specific reserve may be 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 specific reserve 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. |