Loans are stated at the principal amount outstanding net of unearned discounts, unearned income and allowance for loan losses. Unearned income includes deferred loan origination fees reduced by loan origination costs and is amortized to interest income over the life of the related loan using methods that approximated the effective interest rate method. Interest on substantially all loans is credited to income based on the principal amount outstanding. A summary of loans at December 31, 2015 and 2014 follows (in thousands):



	2015		2014
Construction and land development	$	39,232	$	21,627
Farm loans	122,579		110,158
1-4 Family residential properties	231,383		179,886
Multifamily residential properties	45,765		53,129
Commercial real estate	409,487		380,173
Loans secured by real estate	848,446		744,973
Agricultural loans	75,998		68,225
Commercial and industrial loans	305,851		223,633
Consumer loans	42,097		15,118
All other loans	11,317		8,736
Gross loans	1,283,709		1,060,685
Less:
Net deferred loan fees, premiums and discounts	2,788		237
Allowance for loan losses	14,576		13,682
Net loans	$	1,266,345	$	1,046,766

Loans expected to be sold are classified as held for sale in the consolidated financial statements and are recorded at the lower of aggregate cost or market value, taking into consideration future commitments to sell the loans. These loans are primarily for 1-4 family residential properties. The balance of loans held for sale, excluded from the balances above, were $968,000 and $1,958,000 at December 31, 2015 and 2014, respectively.

Most of the Company’s business activities are with customers located within central Illinois. At December 31, 2015, the Company’s loan portfolio included $198.6 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $161.5 million was concentrated in other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $20.1 million from $178.5 million at December 31, 2014 while loans concentrated in other grain farming increased $6.4 million from $155.1 million at December 31, 2014. While the Company adheres to sound underwriting practices, including collateralization of loans, any extended period of low commodity prices, drought conditions, significantly reduced yields on crops and/or reduced levels of government assistance to the agricultural industry could result in an increase in the level of problem agriculture loans and potentially result in loan losses within the agricultural portfolio.

In addition, the Company has $62.9 million of loans to motels and hotels. The performance of these loans is dependent on borrower specific issues as well as the general level of business and personal travel within the region. While the Company adheres to sound underwriting standards, a prolonged period of reduced business or personal travel could result in an increase in nonperforming loans to this business segment and potentially in loan losses. The Company also has $109.1 million of loans to lessors of non-residential buildings and $67.5 million of loans to lessors of residential buildings and dwellings.

The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to individual loan officers, loan committees, and ultimately the Board of Directors. Outstanding balances to one borrower or affiliated borrowers are limited by federal regulation; however, limits well below the regulatory thresholds are generally observed. The vast majority of the Company’s loans are to businesses located in the geographic market areas served by the Company’s branch bank system. Additionally, a significant portion of the collateral securing the loans in the portfolio is located within the Company’s primary geographic footprint. In general, the Company adheres to loan underwriting standards consistent with industry guidelines for all loan segments. The Company’s lending can be summarized into the following primary areas:

Commercial Real Estate Loans. Commercial real estate loans are generally comprised of loans to small business entities to purchase or expand structures in which the business operations are housed, loans to owners of real estate who lease space to non-related commercial entities, loans for construction and land development, loans to hotel operators, and loans to owners of multi-family residential structures, such as apartment buildings. Commercial real estate loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. For the various types of commercial real estate loans, minimum criteria have been established within the Company’s loan policy regarding debt service coverage while maximum limits on loan-to-value and amortization periods have been defined. Maximum loan-to-value ratios range from 65% to 80% depending upon the type of real estate collateral, while the desired minimum debt coverage ratio is 1.20x. Amortization periods for commercial real estate loans are generally limited to twenty years. The Company’s commercial real estate portfolio is well below the thresholds that would designate a concentration in commercial real estate lending, as established by the federal banking regulators.

Commercial and Industrial Loans. Commercial and industrial loans are primarily comprised of working capital loans used to purchase inventory and fund accounts receivable that are secured by business assets other than real estate. These loans are generally written for one year or less. Also, equipment financing is provided to businesses with these loans generally limited to 80% of the value of the collateral and amortization periods limited to seven years. Commercial loans are often accompanied by a personal guaranty of the principal owners of a business. Like commercial real estate loans, the underlying cash flow of the business is the primary consideration in the underwriting process. The financial condition of commercial borrowers is monitored at least annually with the type of financial information required determined by the size of the relationship. Measures employed by the Company for businesses with higher risk profiles include the use of government-assisted lending programs through the Small Business Administration and U.S. Department of Agriculture.

Agricultural and Agricultural Real Estate Loans. Agricultural loans are generally comprised of seasonal operating lines to cash grain farmers to plant and harvest corn and soybeans and term loans to fund the purchase of equipment. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop. Loan-to-value ratios on loans secured by farmland generally do not exceed 65% and have amortization periods limited to twenty five years. Federal government-assistance lending programs through the Farm Service Agency are used to mitigate the level of credit risk when deemed appropriate.

Residential Real Estate Loans. Residential real estate loans generally include loans for the purchase or refinance of residential real estate properties consisting of one-to-four units and home equity loans and lines of credit. The Company sells the vast majority of its long-term fixed rate residential real estate loans to secondary market investors. The Company also releases the servicing of these loans upon sale. The Company retains all residential real estate loans with balloon payment features. Balloon periods are limited to five years. Residential real estate loans are typically underwritten to conform to industry standards including criteria for maximum debt-to-income and loan-to-value ratios as well as minimum credit scores. Loans secured by first liens on residential real estate held in the portfolio typically do not exceed 80% of the value of the collateral and have amortization periods of twenty five years or less. The Company does not originate subprime mortgage loans.

Consumer Loans. Consumer loans are primarily comprised of loans to individuals for personal and household purposes such as the purchase of an automobile or other living expenses. Minimum underwriting criteria have been established that consider credit score, debt-to-income ratio, employment history, and collateral coverage. Typically, consumer loans are set up on monthly payments with amortization periods based on the type and age of the collateral.

Other Loans. Other loans consist primarily of loans to municipalities to support community projects such as infrastructure improvements or equipment purchases. Underwriting guidelines for these loans are consistent with those established for commercial loans with the additional repayment source of the taxing authority of the municipality.

Allowance for Loan Losses

The allowance for loan losses represents the Company’s best estimate of the reserve necessary to adequately account for probable losses existing in the current portfolio. The provision for loan losses is the charge against current earnings that is determined by the Company as the amount needed to maintain an adequate allowance for loan losses. In determining the adequacy of the allowance for loan losses, and therefore the provision to be charged to current earnings, the Company relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by the overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Once identified, the magnitude of exposure to individual borrowers is quantified in the form of specific allocations of the allowance for loan losses. The Company considers collateral values and guarantees in the determination of such specific allocations. Additional factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and troubled debt restructurings, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates.

The Company estimates the appropriate level of allowance for loan losses by separately evaluating large impaired loans, large adversely classified loans and nonimpaired loans.

Impaired loans. The Company individually evaluates certain loans for impairment. In general, these loans have been internally identified via the Company’s loan grading system as credits requiring management’s attention due to underlying problems in the borrower’s business or collateral concerns. This evaluation considers expected future cash flows, the value of collateral and also other factors that may impact the borrower’s ability to make payments when due. For loans greater than $250,000 in the commercial, commercial real estate, agricultural, agricultural real estate segments, impairment is individually measured each quarter using one of three alternatives: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price, if available; or (3) the fair value of the collateral less costs to sell for collateral dependent loans and loans for which foreclosure is deemed to be probable. A specific allowance is assigned when expected cash flows or collateral do not justify the carrying amount of the loan. The carrying value of the loan reflects reductions from prior charge-offs.

Adversely classified loans. A detailed analysis is also performed on each adversely classified (substandard or doubtful rated) borrower with an aggregate, outstanding balance of $250,000 or more. This analysis includes commercial, commercial real estate, agricultural, and agricultural real estate borrowers who are not currently identified as impaired but pose sufficient risk to warrant in-depth review. Estimated collateral shortfalls are then calculated with allocations for each loan segment based on a three-year loss migration analysis of collateral shortfalls adjusted for environmental factors including changes in economic conditions, changes in credit policies or underwriting standards, and changes in the level of credit risk associated with specific industries and markets. Because the economic and business climate in any given industry or market, and its impact on any given borrower, can change rapidly, the risk profile of the loan portfolio is periodically assessed and adjusted when appropriate. Consumer loans are evaluated for adverse classification established by federal banking regulators. Classification standards are generally based on delinquency status, collateral coverage, bankruptcy and the presence of fraud.

Non-classified and Watch loans. For loans, in all segments of the portfolio, that are considered to possess levels of risk commensurate with a pass rating, management establishes base loss estimations which are derived from historical loss experience. Use of a three-year loss migration period eliminates the effect of any significant losses that can be attributed to a single event or borrower during a given reporting period. The base loss estimations for each loan segment are adjusted after consideration of several environmental factors influencing the level of credit risk in the portfolio. In addition, loans rated as watch are further segregated in the commercial / commercial real estate and agricultural / agricultural real estate segments. These loans possess potential weaknesses that, if unchecked, may result in deterioration to the point of becoming a problem asset.

Due to weakened economic conditions during recent years, the Company established allocations for each of the loan segments at levels above the base loss estimations. Some of the economic factors included the potential for reduced cash flow for commercial operating loans from reduction in sales or increased operating costs, decreased occupancy rates for commercial buildings, reduced levels of home sales for commercial land developments, the uncertainty regarding grain prices and increased operating costs for farmers, and increased levels of unemployment and bankruptcy impacting consumer’s ability to pay. Each of these economic uncertainties was taken into consideration in developing the level of the reserve. The Company has not materially changed any aspect of its overall approach in the determination of the allowance for loan losses. However, on an on-going basis the Company continues to refine the methods used in determining management’s best estimate of the allowance for loan losses.

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2015, 2014 and 2013 (in thousands):



	Commercial/ Commercial Real Estate			Agricultural/ Agricultural Real Estate			Residential Real Estate			Consumer			Unallocated			Total
December 31, 2015
Allowance for loan losses:
Balance, beginning of year	$	10,914		$	1,360		$	790		$	386		$	232		$	13,682
Provision charged to expense	451			(25		)	267			633			(8		)	1,318
Losses charged off	(289		)	—			(64		)	(553		)	—			(906		)
Recoveries	303			2			1			176			—			482
Balance, end of period	$	11,379		$	1,337		$	994		$	642		$	224		$	14,576
Ending balance:
Individually evaluated for impairment	$	134		$	—		$	—		$	—		$	—		$	134
Collectively evaluated for impairment	$	11,245		$	1,337		$	994		$	642		$	224		$	14,442
Loans:
Ending balance	$	807,736		$	198,066		$	232,348		$	43,739		$	—		$	1,281,889
Ending balance:
Individually evaluated for impairment	$	744		$	430		$	—		$	—		$	—		$	1,174
Collectively evaluated for impairment	$	806,992		$	197,636		$	232,348		$	43,739		$	—		$	1,280,715



	Commercial/ Commercial Real Estate			Agricultural/ Agricultural Real Estate			Residential Real Estate			Consumer			Unallocated			Total
December 31, 2014
Allowance for loan losses:
Balance, beginning of year	$	10,646		$	533		$	771		$	377		$	922		$	13,249
Provision charged to expense	192			825			135			167			(690		)	629
Losses charged off	(86		)	—			(140		)	(311		)	—			(537		)
Recoveries	162			2			24			153			—			341
Balance, end of period	$	10,914		$	1,360		$	790		$	386		$	232		$	13,682
Ending balance:
Individually evaluated for impairment	$	263		$	—		$	—		$	—		$	—		$	263
Collectively evaluated for impairment	$	10,651		$	1,360		$	790		$	386		$	232		$	13,419
Loans:
Ending balance	$	684,552		$	178,091		$	184,661		$	15,102		$	—		$	1,062,406
Ending balance:
Individually evaluated for impairment	$	3,301		$	—		$	—		$	—		$	—		$	3,301
Collectively evaluated for impairment	$	681,251		$	178,091		$	184,661		$	15,102		$	—		$	1,059,105
December 31, 2013
Allowance for loan losses:
Balance, beginning of year	$	9,301		$	558		$	726		$	403		$	788		$	11,776
Provision charged to expense	1,861			(30		)	171			57			134			2,193
Losses charged off	(764		)	—			(141		)	(223		)	—			(1,128		)
Recoveries	248			5			15			140			—			408
Balance, end of year	$	10,646		$	533		$	771		$	377		$	922		$	13,249
Ending balance:
Individually evaluated for impairment	$	604		$	—		$	—		$	—		$	—		$	604
Collectively evaluated for impairment	$	10,042		$	533		$	771		$	377		$	922		$	12,645
Loans:
Ending balance	$	607,062		$	172,979		$	187,796		$	14,967		$	—		$	982,804
Ending balance:
Individually evaluated for impairment	$	5,145		$	—		$	—		$	—		$	—		$	5,145
Collectively evaluated for impairment	$	601,917		$	172,979		$	187,796		$	14,967		$	—		$	977,659

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except 1-4 family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off 1-4 family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

Credit Quality

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, collateral support, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Company uses the following definitions for risk ratings:

Watch. Loans classified as watch have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current sound-worthiness and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing factors, conditions and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered pass rated loans. The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of December 31, 2015 and 2014 (in thousands):



	Construction & Land Development				Farm Loans				1-4 Family Residential Properties				Multifamily Residential Properties
	2015		2014		2015		2014		2015		2014		2015		2014
Pass	$	39,067	$	20,842	$	118,103	$	107,976	$	224,552	$	177,764	$	45,180	$	52,793
Watch	—		—		2,282		1,036		1,454		1,187		243		—
Substandard	142		785		2,089		1,181		5,565		2,970		317		336
Doubtful	—		—		—		—		—		—		—		—
Total	$	39,209	$	21,627	$	122,474	$	110,193	$	231,571	$	181,921	$	45,740	$	53,129



	Commercial Real Estate (Nonfarm/Nonresidential)				Agricultural Loans				Commercial & Industrial Loans				Consumer Loans
	2015		2014		2015		2014		2015		2014		2015		2014
Pass	$	386,769	$	357,873	$	75,437	$	67,619	$	298,633	$	218,193	$	41,278	$	15,105
Watch	10,498		18,817		210		—		4,686		4,647		—		9
Substandard	11,905		2,914		239		679		1,741		940		301		4
Doubtful	—		—		—		—		—		—		—		—
Total	$	409,172	$	379,604	$	75,886	$	68,298	$	305,060	$	223,780	$	41,579	$	15,118



	All Other Loans				Total Loans
	2015		2014		2015		2014
Pass	$	11,198	$	8,736	$	1,240,217	$	1,026,901
Watch	—		—		19,373		25,696
Substandard	—		—		22,299		9,809
Doubtful	—		—		—		—
Total	$	11,198	$	8,736	$	1,281,889	$	1,062,406

The following table presents the Company’s loan portfolio aging analysis at December 31, 2015 and 2014 (in thousands):



	30-59 days Past Due		60-89 days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 days & Accruing
December 31, 2015
Construction and land development	$	—	$	—	$	—	$	—	$	39,209	$	39,209	$	—
Farm loans	106		—		—		106		122,368		122,474		—
1-4 Family residential properties	1,059		742		154		1,955		229,616		231,571		—
Multifamily residential properties	—		—		—		—		45,740		45,740		—
Commercial real estate	251		67		31		349		408,823		409,172		—
Loans secured by real estate	1,416		809		185		2,410		845,756		848,166		—
Agricultural loans	65		74		—		139		75,747		75,886		—
Commercial and industrial loans	65		476		196		737		304,323		305,060		—
Consumer loans	137		42		13		192		41,387		41,579		—
All other loans	—		—		—		—		11,198		11,198		—
Total loans	$	1,683	$	1,401	$	394	$	3,478	$	1,278,411	$	1,281,889	$	—
December 31, 2014
Construction and land development	$	297	$	25	$	—	$	322	$	21,305	$	21,627	$	—
Farm loans	—		—		—		—		110,193		110,193		—
1-4 Family residential properties	201		224		385		810		181,111		181,921		—
Multifamily residential properties	—		—		—		—		53,129		53,129		—
Commercial real estate	60		32		945		1,037		378,567		379,604		—
Loans secured by real estate	558		281		1,330		2,169		744,305		746,474		—
Agricultural loans	16		20		—		36		68,262		68,298		—
Commercial and industrial loans	228		10		98		336		223,444		223,780		—
Consumer loans	331		10		5		346		14,772		15,118		—
All other loans	—		—		—		—		8,736		8,736		—
Total loans	$	1,133	$	321	$	1,433	$	2,887	$	1,059,519	$	1,062,406	$	—

Impaired Loans

Within all loan portfolio segments, loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Impaired loans, excluding certain troubled debt restructured loans, are placed on nonaccrual status. Impaired loans include nonaccrual loans and loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being modified remain on nonaccrual status until, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. If the restructured loan is on accrual status prior to being modified, the loan is reviewed to determine if the modified loan should remain on accrual status.

The following tables present impaired loans as of December 31, 2015 and 2014 (in thousands):



	2015						2014
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans with a specific allowance:
Construction and land development	$	—	$	—	$	—	$	785	$	2,960	$	43
Farm loans	430		430		—		—		—		—
1-4 Family residential properties	—		—		—		67		134		—
Multifamily residential properties	316		316		—		—		—		—
Commercial real estate	—		—		—		472		986		136
Loans secured by real estate	746		746		—		1,324		4,080		179
Agricultural loans	—		—		—		—		—		—
Commercial and industrial loans	405		405		134		83		181		84
Consumer loans	23		23		—		—		—		—
All other loans	—		—		—		—		—		—
Total loans	$	1,174	$	1,174	$	134	$	1,407	$	4,261	$	263
Loans without a specific allowance:
Construction and land development	$	142	$	707	$	—	$	—	$	—	$	—
Farm loans	24		28		—		73		235		—
1-4 Family residential properties	1,373		1,688		—		1,156		2,866		—
Multifamily residential properties	1		1		—		—		—		—
Commercial real estate	304		325		—		1,640		3,808		—
Loans secured by real estate	1,844		2,749		—		2,869		6,909		—
Agricultural loans	79		79		—		—		—		—
Commercial and industrial loans	670		932		—		249		933		—
Consumer loans	242		256		—		15		60		—
All other loans	—		—		—		—		—		—
Total loans	$	2,835	$	4,016	$	—	$	3,133	$	7,902	$	—
Total loans:
Construction and land development	$	142	$	707	$	—	$	785	$	2,960	$	43
Farm loans	454		458		—		73		235		—
1-4 Family residential properties	1,373		1,688		—		1,223		3,000		—
Multifamily residential properties	317		317		—		—		—		—
Commercial real estate	304		325		—		2,112		4,794		136
Loans secured by real estate	2,590		3,495		—		4,193		10,989		179
Agricultural loans	79		79		—		—		—		—
Commercial and industrial loans	1,075		1,337		134		332		1,114		84
Consumer loans	265		279		—		15		60		—
All other loans	—		—		—		—		—		—
Total loans	$	4,009	$	5,190	$	134	$	4,540	$	12,163	$	263

The Company’s policy is to discontinue the accrual of interest income on all loans for which principal or interest is ninety days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Interest on loans determined to be troubled debt restructurings is recognized on an accrual basis in accordance with the restructured terms if the loan is in compliance with the modified terms. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

The following tables present average recorded investment and interest income recognized on impaired loans for the years ended December 31, 2015, 2014 and 2013 (in thousands):



	2015				2014				2013
	Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
Construction and land development	$	142	$	—	$	933	$	—	$	1,565	$	—
Farm loans	527		2		78		2		107		—
1-4 Family residential properties	1,440		14		1,276		12		1,248		5
Multifamily residential properties	323		—		—		—		—		—
Commercial real estate	310		2		2,205		2		2,895		3
Loans secured by real estate	2,742		18		4,492		16		5,815		8
Agricultural loans	82		—		—		—		16		1
Commercial and industrial loans	1,569		8		429		—		1,240		10
Consumer loans	319		2		25		1		47		12
All other loans	—		—		—		—		—		—
Total loans	$	4,712	$	28	$	4,946	$	17	$	7,118	$	31

The amount of interest income recognized by the Company within the periods stated above was due to loans modified in a troubled debt restructuring that remained on accrual status. The balance of loans modified in a troubled debt restructuring included in the impaired loans stated above that were still accruing was $397,000 of 1-4 Family residential properties, $147,000 of commercial & industrial, $36,000 of commercial real estate, and $21,000 of consumer loans at December 31, 2015 and $345,000 of 1-4 Family residential properties, $37,000 of commercial real estate loans, $44,000 of farm loans and $9,000 of consumer loans at December 31, 2014. For the years ended December 31, 2015, 2014 and 2013, the amount of interest income recognized using a cash-basis method of accounting during the period that the loans were impaired was not material.

Non Accrual Loans

The following table presents the Company’s recorded balance of nonaccrual loans at December 31, 2015 and December 31, 2014 (in thousands). This table excludes purchased impaired loans and performing troubled debt restructurings.



	2015		2014
Construction and land development	$	142	$	785
Farm loans	454		29
1-4 Family residential properties	975		878
Multifamily residential properties	317		—
Commercial real estate	269		2,074
Loans secured by real estate	2,157		3,766
Agricultural loans	79		—
Commercial and industrial loans	928		332
Consumer loans	248		7
All other loans	—		—
Total loans	$	3,412	$	4,105

The aggregate principal balances of nonaccrual, past due ninety days or more loans were $3.4 million and $4.1 million at December 31, 2015 and 2014, respectively. Interest income that would have been recorded under the original terms of such nonaccrual loans totaled $48,000, $71,000 and $45,000 in 2015, 2014 and 2013, respectively.

Troubled Debt Restructuring

The balance of troubled debt restructurings ("TDRs") at December 31, 2015 and 2014 was $1,743,000 and $2,860,000, respectively. Approximately $0 and $234,000 in specific reserves have been established with respect to these loans as of December 31, 2015 and 2014, respectively. As troubled debt restructurings, these loans are included in nonperforming loans and are classified as impaired which requires that they be individually measured for impairment. The modification of the terms of these loans included one or a combination of the following: a reduction of stated interest rate of the loan; an extension of the maturity date and change in payment terms; or a permanent reduction of the recorded investment in the loan.

The following table presents the Company’s recorded balance of troubled debt restructurings at December 31, 2015 and 2014 (in thousands).



Troubled debt restructurings:	2015		2014
Construction and land development	$	142	$	785
Farm Loans	232		44
1-4 Family residential properties	515		503
Commercial real estate	124		1,283
Loans secured by real estate	1,013		2,615
Commercial and industrial loans	491		236
Consumer Loans	239		9
Total	$	1,743	$	2,860
Performing troubled debt restructurings:
1-4 Family residential properties	$	397	$	345
Farm Loans	—		44
Commercial real estate	36		37
Loans secured by real estate	433		426
Commercial and industrial loans	147		—
Consumer Loans	21		9
Total	$	601	$	435

The following table presents loans modified as TDRs during the years ended December 31, 2015 and 2014 as a result of various modified loan factors (in thousands):



	December 31, 2015				December 31, 2014
	Number of Modifications	Recorded Investment		Type of Modifications	Number of Modifications	Recorded Investment		Type of Modifications
Farm Loans	4	232		(b)(c)	2	44		(b)
1-4 Family residential properties	5	131		(b)(c)	4	250		(b)(c)
Commercial real estate	1	33		(b)(c)	1	501		(b)(c)
Loans secured by real estate	10	396			7	795
Commercial and industrial loans	5	375		(b)(c)	—	—
Consumer Loans	4	233		(b)(c)	—	—
Total	19	$	1,004		7	$	795

Type of modifications:

(a) Reduction of stated interest rate of loan

(b) Change in payment terms

(d) Permanent reduction of the recorded investment

A loan is considered to be in payment default once it is 90 days past due under the modified terms. There were no loans modified as troubled debt restructurings during the prior twelve months that experienced defaults during the year ended December 31, 2015 and 2014.

At December 31, 2015, the balance of real estate owned includes $477,000 of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At December 31, 2015, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds are in process is $55,000.