ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY |
NOTE 4. ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY The following tables present the activity in the allowance for loan losses by portfolio segment for the three-month periods ended September 30, 2016 and 2015: | | | Commercial | | | | | | | | | | | | | | | | Real Estate | | | | | | | | | | | | | | Commercial | | and | | Agri-business | | | | Consumer | | | | | | | | and | | Multifamily | | and | | Other | | 1-4 Family | | Other | | | | | (dollars in thousands) | Industrial | | Residential | | Agricultural | | Commercial | | Mortgage | | Consumer | | Unallocated | | Total | Three Months Ended September 30, 2016 | | | | | | | | | | | | | | | Beginning balance, July 1 | $20,935 | | $12,637 | | $3,047 | | $365 | | $2,934 | | $333 | | $2,996 | | $43,247 | Provision for loan losses | (715) | | 650 | | 56 | | 18 | | 72 | | 70 | | (151) | | 0 | Loans charged-off | (168) | | (331) | | 0 | | 0 | | (224) | | (50) | | 0 | | (773) | Recoveries | 268 | | 17 | | 5 | | 0 | | 69 | | 20 | | 0 | | 379 | Net loans charged-off | 100 | | (314) | | 5 | | 0 | | (155) | | (30) | | 0 | | (394) | Ending balance | $20,320 | | $12,973 | | $3,108 | | $383 | | $2,851 | | $373 | | $2,845 | | $42,853 | | | | Commercial | | | | | | | | | | | | | | | | Real Estate | | | | | | | | | | | | | | Commercial | | and | | Agri-business | | | | Consumer | | | | | | | | and | | Multifamily | | and | | Other | | 1-4 Family | | Other | | | | | (dollars in thousands) | Industrial | | Residential | | Agricultural | | Commercial | | Mortgage | | Consumer | | Unallocated | | Total | Three Months Ended September 30, 2015 | | | | | | | | | | | | | | | | Beginning balance, July 1 | $22,360 | | $13,112 | | $1,881 | | $358 | | $3,473 | | $392 | | $3,240 | | $44,816 | Provision for loan losses | (88) | | (235) | | 103 | | 11 | | 14 | | (13) | | 208 | | 0 | Loans charged-off | (2) | | 0 | | 0 | | 0 | | (152) | | (74) | | 0 | | (228) | Recoveries | 43 | | 14 | | 5 | | 0 | | 21 | | 23 | | 0 | | 106 | Net loans charged-off | 41 | | 14 | | 5 | | 0 | | (131) | | (51) | | 0 | | (122) | Ending balance | $22,313 | | $12,891 | | $1,989 | | $369 | | $3,356 | | $328 | | $3,448 | | $44,694 | The following tables present the activity in the allowance for loan losses by portfolio segment for the nine-month periods ended September 30, 2016 and 2015: | | | Commercial | | | | | | | | | | | | | | | | Real Estate | | | | | | | | | | | | | | Commercial | | and | | Agri-business | | | | Consumer | | | | | | | | and | | Multifamily | | and | | Other | | 1-4 Family | | Other | | | | | (dollars in thousands) | Industrial | | Residential | | Agricultural | | Commercial | | Mortgage | | Consumer | | Unallocated | | Total | Nine Months Ended September 30, 2016 | | | | | | | | | | | | | | | Beginning balance, January 1 | $21,564 | | $12,473 | | $2,445 | | $574 | | $3,395 | | $319 | | $2,840 | | $43,610 | Provision for loan losses | (1,057) | | 771 | | 649 | | (191) | | (295) | | 118 | | 5 | | 0 | Loans charged-off | (542) | | (499) | | 0 | | 0 | | (354) | | (140) | | 0 | | (1,535) | Recoveries | 355 | | 228 | | 14 | | 0 | | 105 | | 76 | | 0 | | 778 | Net loans charged-off | (187) | | (271) | | 14 | | 0 | | (249) | | (64) | | 0 | | (757) | Ending balance | $20,320 | | $12,973 | | $3,108 | | $383 | | $2,851 | | $373 | | $2,845 | | $42,853 | | | | Commercial | | | | | | | | | | | | | | | | Real Estate | | | | | | | | | | | | | | Commercial | | and | | Agri-business | | | | Consumer | | | | | | | | and | | Multifamily | | and | | Other | | 1-4 Family | | Other | | | | | (dollars in thousands) | Industrial | | Residential | | Agricultural | | Commercial | | Mortgage | | Consumer | | Unallocated | | Total | Nine Months Ended September 30, 2015 | | | | | | | | | | | | | | | | Beginning balance, January 1 | $22,785 | | $14,153 | | $1,790 | | $276 | | $3,459 | | $483 | | $3,316 | | $46,262 | Provision for loan losses | 240 | | (856) | | 184 | | 215 | | 149 | | (64) | | 132 | | 0 | Loans charged-off | (878) | | (459) | | 0 | | (122) | | (292) | | (180) | | 0 | | (1,931) | Recoveries | 166 | | 53 | | 15 | | 0 | | 40 | | 89 | | 0 | | 363 | Net loans charged-off | (712) | | (406) | | 15 | | (122) | | (252) | | (91) | | 0 | | (1,568) | Ending balance | $22,313 | | $12,891 | | $1,989 | | $369 | | $3,356 | | $328 | | $3,448 | | $44,694 | The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2016 and December 31, 2015: | | | Commercial | | | | | | | | | | | | | | | | Real Estate | | | | | | | | | | | | | | Commercial | | and | | Agri-business | | | | Consumer | | | | | | | | and | | Multifamily | | and | | Other | | 1-4 Family | | Other | | | | | (dollars in thousands) | Industrial | | Residential | | Agricultural | | Commercial | | Mortgage | | Consumer | | Unallocated | | Total | September 30, 2016 | | | | | | | | | | | | | | | | Allowance for loan losses: | | | | | | | | | | | | | | | | Ending allowance balance attributable to loans: | | | | | | | | | | | | | | | Individually evaluated for impairment | $2,770 | | $272 | | $0 | | $0 | | $331 | | $50 | | $0 | | $3,423 | Collectively evaluated for impairment | 17,550 | | 12,701 | | 3,108 | | 383 | | 2,520 | | 323 | | 2,845 | | 39,430 | Total ending allowance balance | $20,320 | | $12,973 | | $3,108 | | $383 | | $2,851 | | $373 | | $2,845 | | $42,853 | | | | | | | | | | | | | | | | | Loans: | | | | | | | | | | | | | | | | Loans individually evaluated for impairment | $8,095 | | $8,633 | | $283 | | $12 | | $1,523 | | $56 | | $0 | | $18,602 | Loans collectively evaluated for impairment | 1,242,900 | | 1,216,429 | | 309,280 | | 89,835 | | 344,335 | | 58,780 | | 0 | | 3,261,559 | Total ending loans balance | $1,250,995 | | $1,225,062 | | $309,563 | | $89,847 | | $345,858 | | $58,836 | | $0 | | $3,280,161 | | | | Commercial | | | | | | | | | | | | | | | | Real Estate | | | | | | | | | | | | | | Commercial | | and | | Agri-business | | | | Consumer | | | | | | | | and | | Multi-family | | and | | Other | | 1-4 Family | | Other | | | | | (dollars in thousands) | Industrial | | Residential | | Agricultural | | Commercial | | Mortgage | | Consumer | | Unallocated | | Total | December 31, 2015 | | | | | | | | | | | | | | | | Allowance for loan losses: | | | | | | | | | | | | | | | | Ending allowance balance attributable to loans: | | | | | | | | | | | | | | | Individually evaluated for impairment | $2,781 | | $465 | | $0 | | $5 | | $358 | | $50 | | $0 | | $3,659 | Collectively evaluated for impairment | 18,783 | | 12,008 | | 2,445 | | 569 | | 3,037 | | 269 | | 2,840 | | 39,951 | Total ending allowance balance | $21,564 | | $12,473 | | $2,445 | | $574 | | $3,395 | | $319 | | $2,840 | | $43,610 | | | | | | | | | | | | | | | | | Loans: | | | | | | | | | | | | | | | | Loans individually evaluated for impairment | $8,286 | | $9,823 | | $471 | | $12 | | $1,927 | | $60 | | $0 | | $20,579 | Loans collectively evaluated for impairment | 1,171,407 | | 1,119,150 | | 305,707 | | 85,059 | | 330,072 | | 48,955 | | 0 | | 3,060,350 | Total ending loans balance | $1,179,693 | | $1,128,973 | | $306,178 | | $85,071 | | $331,999 | | $49,015 | | $0 | | $3,080,929 | The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2016: | Unpaid | | | | Allowance for | | Principal | | Recorded | | Loan Losses | (dollars in thousands) | Balance | | Investment | | Allocated | With no related allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | $540 | | $385 | | $0 | Non-working capital loans | 3,526 | | 1,477 | | 0 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 146 | | 146 | | 0 | Owner occupied loans | 2,635 | | 2,454 | | 0 | Nonowner occupied loans | 4,674 | | 4,677 | | 0 | Multifamily loans | 381 | | 50 | | 0 | Agri-business and agricultural loans: | | | | | | Loans secured by farmland | 603 | | 283 | | 0 | Other commercial loans | 12 | | 12 | | 0 | Consumer 1-4 family loans: | | | | | | Closed end first mortgage loans | 143 | | 105 | | 0 | Open end and junior lien loans | 369 | | 156 | | 0 | With an allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | 1,311 | | 1,310 | | 414 | Non-working capital loans | 4,925 | | 4,923 | | 2,356 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 164 | | 164 | | 1 | Owner occupied loans | 1,143 | | 1,142 | | 271 | Consumer 1-4 family mortgage loans: | | | | | | Closed end first mortgage loans | 1,329 | | 1,262 | | 331 | Other consumer loans | 56 | | 56 | | 50 | Total | $21,957 | | $18,602 | | $3,423 | The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2015: | Unpaid | | | | Allowance for | | Principal | | Recorded | | Loan Losses | (dollars in thousands) | Balance | | Investment | | Allocated | With no related allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | $20 | | $20 | | $0 | Non-working capital loans | 2,390 | | 623 | | 0 | Commercial real estate and multi-family residential loans: | | | | | | Owner occupied loans | 3,762 | | 3,223 | | 0 | Nonowner occupied loans | 4,894 | | 4,898 | | 0 | Agri-business and agricultural loans: | | | | | | Loans secured by farmland | 969 | | 471 | | 0 | Consumer 1-4 family loans: | | | | | | Closed end first mortgage loans | 45 | | 45 | | 0 | With an allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | 1,318 | | 1,318 | | 535 | Non-working capital loans | 8,617 | | 6,325 | | 2,246 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 364 | | 364 | | 71 | Owner occupied loans | 949 | | 949 | | 232 | Multifamily loans | 389 | | 389 | | 162 | Other commercial loans | 12 | | 12 | | 5 | Consumer 1-4 family mortgage loans: | | | | | | Closed end first mortgage loans | 1,695 | | 1,629 | | 331 | Open end and junior lien loans | 253 | | 253 | | 27 | Other consumer loans | 60 | | 60 | | 50 | Total | $25,737 | | $20,579 | | $3,659 | The following table presents loans individually evaluated for impairment by class of loans as of and for the three-month period ended September 30, 2016: | | | | | Cash Basis | | Average | | Interest | | Interest | | Recorded | | Income | | Income | (dollars in thousands) | Investment | | Recognized | | Recognized | With no related allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | $387 | | $8 | | $0 | Non-working capital loans | 1,473 | | 8 | | 5 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 275 | | 0 | | 0 | Owner occupied loans | 2,475 | | 2 | | 2 | Nonowner occupied loans | 4,690 | | 88 | | 88 | Multifamily loans | 17 | | 0 | | 0 | Agri-business and agricultural loans: | | | | | | Loans secured by farmland | 346 | | 0 | | 0 | Loans for ag production | 676 | | 0 | | 0 | Other commercial loans | 4 | | 0 | | 0 | Consumer 1-4 family loans: | | | | | | Closed end first mortgage loans | 82 | | 0 | | 0 | Open end and junior lien loans | 52 | | 0 | | 0 | With an allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | 1,336 | | 11 | | 11 | Non-working capital loans | 4,538 | | 35 | | 33 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 55 | | 1 | | 3 | Owner occupied loans | 1,150 | | 0 | | 0 | Multifamily loans | 254 | | 2 | | 1 | Other commercial loans | 8 | | 0 | | 1 | Consumer 1-4 family mortgage loans: | | | | | | Closed end first mortgage loans | 1,378 | | 5 | | 4 | Open end and junior lien loans | 247 | | 0 | | 0 | Other consumer loans | 57 | | 1 | | 1 | Total | $19,500 | | $161 | | $149 | The following table presents loans individually evaluated for impairment by class of loans as of and for the three-month period ended September 30, 2015: | | | | | Cash Basis | | Average | | Interest | | Interest | | Recorded | | Income | | Income | (dollars in thousands) | Investment | | Recognized | | Recognized | With no related allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | $20 | | $0 | | $0 | Non-working capital loans | 709 | | 1 | | 1 | Commercial real estate and multi-family residential loans: | | | | | | Owner occupied loans | 2,442 | | 0 | | 0 | Nonowner occupied loans | 5,404 | | 26 | | 27 | Agri-business and agricultural loans: | | | | | | Loans secured by farmland | 474 | | 0 | | 0 | Consumer 1-4 family loans: | | | | | | Closed end first mortgage loans | 415 | | 0 | | 0 | Open end and junior lien loans | 130 | | 0 | | 0 | Other consumer loans | 5 | | 0 | | 0 | With an allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | 1,202 | | 3 | | 4 | Non-working capital loans | 6,092 | | 47 | | 43 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 351 | | 4 | | 2 | Owner occupied loans | 2,682 | | 0 | | 0 | Consumer 1-4 family mortgage loans: | | | | | | Closed end first mortgage loans | 2,125 | | 15 | | 14 | Other consumer loans | 99 | | 1 | | 2 | Total | $22,150 | | $97 | | $93 | The following table presents loans individually evaluated for impairment by class of loans as of and for the nine-month period ended September 30, 2016: | | | | | Cash Basis | | Average | | Interest | | Interest | | Recorded | | Income | | Income | (dollars in thousands) | Investment | | Recognized | | Recognized | With no related allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | $300 | | $8 | | $8 | Non-working capital loans | 901 | | 8 | | 5 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 92 | | 0 | | 0 | Owner occupied loans | 2,578 | | 2 | | 2 | Nonowner occupied loans | 4,760 | | 205 | | 200 | Multifamily loans | 6 | | 0 | | 0 | Agri-business and agricultural loans: | | | | | | Loans secured by farmland | 429 | | 0 | | 0 | Loans for ag production | 902 | | 5 | | 4 | Other commercial loans | 1 | | 0 | | 0 | Consumer 1-4 family loans: | | | | | | Closed end first mortgage loans | 93 | | 0 | | 0 | Open end and junior lien loans | 17 | | 0 | | 0 | With an allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | 1,176 | | 21 | | 21 | Non-working capital loans | 4,417 | | 103 | | 101 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 230 | | 8 | | 8 | Owner occupied loans | 1,023 | | 0 | | 0 | Nonowner occupied loans | 26 | | 0 | | 0 | Multifamily loans | 341 | | 12 | | 11 | Other commercial loans | 10 | | 0 | | 1 | Consumer 1-4 family mortgage loans: | | | | | | Closed end first mortgage loans | 1,456 | | 31 | | 29 | Open end and junior lien loans | 221 | | 0 | | 0 | Other consumer loans | 58 | | 3 | | 3 | Total | $19,037 | | $406 | | $393 | The following table presents loans individually evaluated for impairment by class of loans as of and for the nine-month period ended September 30, 2015: | | | | | Cash Basis | | Average | | Interest | | Interest | | Recorded | | Income | | Income | (dollars in thousands) | Investment | | Recognized | | Recognized | With no related allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | $21 | | $0 | | $0 | Non-working capital loans | 613 | | 2 | | 2 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 175 | | 0 | | 0 | Owner occupied loans | 1,950 | | 0 | | 0 | Nonowner occupied loans | 4,504 | | 80 | | 83 | Agri-business and agricultural loans: | | | | | | Loans secured by farmland | 412 | | 0 | | 0 | Consumer 1-4 family loans: | | | | | | Closed end first mortgage loans | 301 | | 0 | | 0 | Open end and junior lien loans | 238 | | 0 | | 0 | Residential construction loans | 14 | | 0 | | 0 | Other consumer loans | 3 | | 0 | | 0 | With an allowance recorded: | | | | | | Commercial and industrial loans: | | | | | | Working capital lines of credit loans | 1,069 | | 19 | | 18 | Non-working capital loans | 9,443 | | 281 | | 290 | Commercial real estate and multi-family residential loans: | | | | | | Construction and land development loans | 391 | | 12 | | 11 | Owner occupied loans | 3,695 | | 21 | | 22 | Nonowner occupied loans | 1,090 | | 0 | | 0 | Agri-business and agricultural loans: | | | | | | Loans secured by farmland | 67 | | 0 | | 0 | Other commercial loans | 3 | | 0 | | 0 | Consumer 1-4 family mortgage loans: | | | | | | Closed end first mortgage loans | 2,608 | | 48 | | 44 | Open end and junior lien loans | 23 | | 0 | | 0 | Other consumer loans | 110 | | 3 | | 4 | Total | $26,730 | | $466 | | $474 | The following table presents the aging of the recorded investment in past due loans as of September 30, 2016 by class of loans: | | | 30-89 | | Greater than | | | | | | | | Loans Not | | Days | | 90 Days | | | | Total | | | (dollars in thousands) | Past Due | | Past Due | | Past Due | | Nonaccrual | | Past Due | | Total | Commercial and industrial loans: | | | | | | | | | | | | Working capital lines of credit loans | $608,946 | | $0 | | $0 | | $441 | | $441 | | $609,387 | Non-working capital loans | 639,328 | | 0 | | 0 | | 2,280 | | 2,280 | | 641,608 | Commercial real estate and multi-family | | | | | | | | | | | | residential loans: | | | | | | | | | | | | Construction and land development loans | 220,695 | | 0 | | 0 | | 146 | | 146 | | 220,841 | Owner occupied loans | 464,521 | | 242 | | 0 | | 3,513 | | 3,755 | | 468,276 | Nonowner occupied loans | 408,150 | | 0 | | 0 | | 129 | | 129 | | 408,279 | Multifamily loans | 127,616 | | 0 | | 0 | | 50 | | 50 | | 127,666 | Agri-business and agricultural loans: | | | | | | | | | | | | Loans secured by farmland | 152,447 | | 0 | | 0 | | 283 | | 283 | | 152,730 | Loans for agricultural production | 156,833 | | 0 | | 0 | | 0 | | 0 | | 156,833 | Other commercial loans | 89,835 | | 0 | | 0 | | 12 | | 12 | | 89,847 | Consumer 1-4 family mortgage loans: | | | | | | | | | | | | Closed end first mortgage loans | 160,080 | | 1,280 | | 6 | | 242 | | 1,528 | | 161,608 | Open end and junior lien loans | 171,171 | | 153 | | 0 | | 156 | | 309 | | 171,480 | Residential construction loans | 12,770 | | 0 | | 0 | | 0 | | 0 | | 12,770 | Other consumer loans | 58,773 | | 63 | | 0 | | 0 | | 63 | | 58,836 | Total | $3,271,165 | | $1,738 | | $6 | | $7,252 | | $8,996 | | $3,280,161 | The following table presents the aging of the recorded investment in past due loans as of December 31, 2015 by class of loans: | | | 30-89 | | Greater than | | | | | | | | Loans Not | | Days | | 90 Days | | | | Total | | | (dollars in thousands) | Past Due | | Past Due | | Past Due | | Nonaccrual | | Past Due | | Total | Commercial and industrial loans: | | | | | | | | | | | | Working capital lines of credit loans | $579,081 | | $350 | | $0 | | $913 | | $1,263 | | $580,344 | Non-working capital loans | 595,154 | | 0 | | 0 | | 4,195 | | 4,195 | | 599,349 | Commercial real estate and multi-family | | | | | | | | | | | | residential loans: | | | | | | | | | | | | Construction and land development loans | 230,336 | | 0 | | 0 | | 0 | | 0 | | 230,336 | Owner occupied loans | 407,229 | | 310 | | 0 | | 4,172 | | 4,482 | | 411,711 | Nonowner occupied loans | 404,146 | | 423 | | 0 | | 3,000 | | 3,423 | | 407,569 | Multi-family loans | 79,357 | | 0 | | 0 | | 0 | | 0 | | 79,357 | Agri-business and agricultural loans: | | | | | | | | | | | | Loans secured by farmland | 163,911 | | 0 | | 0 | | 471 | | 471 | | 164,382 | Loans for agricultural production | 141,706 | | 90 | | 0 | | 0 | | 90 | | 141,796 | Other commercial loans | 85,071 | | 0 | | 0 | | 0 | | 0 | | 85,071 | Consumer 1-4 family mortgage loans: | | | | | | | | | | | | Closed end first mortgage loans | 156,525 | | 1,187 | | 0 | | 49 | | 1,236 | | 157,761 | Open end and junior lien loans | 164,582 | | 83 | | 0 | | 253 | | 336 | | 164,918 | Residential construction loans | 9,320 | | 0 | | 0 | | 0 | | 0 | | 9,320 | Other consumer loans | 48,687 | | 328 | | 0 | | 0 | | 328 | | 49,015 | Total | $3,065,105 | | $2,771 | | $0 | | $13,053 | | $15,824 | | $3,080,929 | Troubled Debt Restructurings: Troubled debt restructured loans are included in the totals for impaired loans. The Company has allocated $2.9 million and $2.3 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of September 30, 2016 and December 31, 2015. The Company is not committed to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring. | September 30 | | December 31 | (dollars in thousands) | 2016 | | 2015 | Accruing troubled debt restructured loans | $10,579 | | $6,260 | Nonaccrual troubled debt restructured loans | 5,885 | | 10,914 | Total troubled debt restructured loans | $16,464 | | $17,174 | During the period ended September 30, 2016, certain loans were modified as troubled debt restructurings. The modified terms of these loans include one or a combination of the following: inadequate compensation for the terms of the restructure or renewal; a modification of the repayment terms which delays principal repayment for some period; or renewal terms offered to borrowers in financial distress where no additional credit enhancements were obtained at the time of renewal. During the three months ending September 30, 2016, there were renewal terms, which are considered additional concessions, offered to six borrowers under financial duress with previously identified troubled debt restructured loans which did not require additional compensation or consideration, and the terms offered would not have been readily available in the marketplace for loans bearing a similar risk profile. In these instances, it was determined that a concession had been granted. The loans to five of the borrowers were for commercial real estate buildings where the collateral value and cash flows from the companies occupying the buildings do not support the loans with recorded investments of $2,309,000. The loan to the other borrower was a commercial and industrial non-working capital loan with a recorded investment of $36,000. These concessions are not included in the table below. During the three months ended June 30, 2016, there were renewal terms, which are considered additional concessions, offered to three borrowers under financial duress with previously identified troubled debt restructured loans which did not require additional compensation or consideration, and the terms offered would not have been readily available in the marketplace for loans bearing a similar risk profile. In these instances, it was determined that a concession had been granted. The loan to one of the borrowers was for a commercial real estate building where the collateral value and cash flows from the company occupying the building does not support the loan with a recorded investment of $374,000. The loans to the other two borrowers are for commercial and industrial non-working capital loans with recorded investments of $574,000. These concessions are not included in the table below. Additional concessions were granted to borrowers with previously identified troubled debt restructured loans during the three-months ended March 31, 2016. The loans to two of the borrowers are for commercial real estate buildings where the collateral value and cash flows from the companies occupying the buildings do not support the loans with recorded investments of $542,000. The other loans were to a borrower engaged in land development, where the aggregate recorded investment totaled $484,000. These concessions are not included in the table below. The following table presents loans by class modified as new troubled debt restructurings that occurred during the three months ended September 30, 2016: | | | | Modified Repayment Terms | | | | Pre-Modification | | Post-Modification | | | | | Extension | | | | Outstanding | | Outstanding | | | | | Period or | | Number of | | Recorded | | Recorded | | | Number of | | Range | (dollars in thousands) | Loans | | Investment | | Investment | | | Loans | | (in months) | Troubled Debt Restructurings | | | | | | | | | | | Commercial and industrial loans: | | | | | | | | | | | Non-working capital loans | 2 | | $1,066 | | $1,066 | | | 2 | | 60-356 | Total | 2 | | $1,066 | | $1,066 | | | 2 | | 60-356 | The following table presents loans by class modified as new troubled debt restructurings that occurred during the nine months ended September 30, 2016: | | | | Modified Repayment Terms | | | | Pre-Modification | | Post-Modification | | | | | Extension | | | | Outstanding | | Outstanding | | | | | Period or | | Number of | | Recorded | | Recorded | | | Number of | | Range | (dollars in thousands) | Loans | | Investment | | Investment | | | Loans | | (in months) | Troubled Debt Restructurings | | | | | | | | | | | Commercial and industrial loans: | | | | | | | | | | | Non-working capital loans | 5 | | $1,841 | | $1,842 | | | 5 | | 9-356 | Commercial real estate and multi- | | | | | | | | | | | family residential loans: | | | | | | | | | | | Owner occupied loans | 2 | | 640 | | 640 | | | 2 | | 13-15 | Total | 7 | | $2,481 | | $2,482 | | | 7 | | 9-356 | For the three month period ended September 30, 2016, the commercial and industrial troubled debt restructurings described above decreased the allowance for loan losses by $342,000 and the commercial real estate and multi-family residential loan troubled debt restructuring described above increased the allowance for loan losses by $111,000. For the nine month period ended September 30, 2016, the commercial and industrial troubled debt restructurings described above decreased the allowance for loan losses by $221,000 and the commercial real estate and multi-family residential loan troubled debt restructuring described above increased the allowance for loan losses by $126,000. No charge-offs resulted from any troubled debt restructurings described above during the three or nine month periods ended September 30, 2016. During the quarter ended September 30, 2015, there were renewal terms offered to one borrower under financial duress with a previously identified troubled debt restructured loan which did not require additional compensation or consideration, and the terms offered would not have been readily available in the marketplace for a loan bearing a similar risk profile. In this instance, it was determined that a concession had been granted. The loan to the borrower is for a commercial and industrial working capital loan with a recorded investment of $2.5 million. This concession is not included in the table below. During the quarter ended June 30, 2015, certain loans were modified as troubled debt restructurings. The modified terms of these loans include one or a combination of the following: inadequate compensation for the terms of the restructure or renewal; a modification of the repayment terms which delays principal repayment for some period; or renewal terms offered to borrowers in financial distress where no additional credit enhancements were obtained at the time of renewal. There were renewal terms offered to two borrowers under financial duress which did not require additional compensation or consideration, and the terms offered would not have been readily available in the marketplace for loans bearing similar risk profiles. In these instances, it was determined that a concession had been granted. It is difficult to quantify the concessions granted due to an absence of readily available market terms to be used for comparison. These loans were both commercial and industrial working capital loans with recorded investments of $379,000 and $185,000, respectively. During the quarter ended March 31, 2015 one loan was modified as a troubled debt restructuring. There were renewal terms offered to one borrower under financial duress which did not require additional compensation or consideration, and the terms offered would not have been readily available in the marketplace for loans bearing similar risk profiles. In this instance, it was determined that a concession had been granted. It is difficult to quantify the concession granted due to an absence of readily available market terms to be used for comparison. The loan to the borrower is for a commercial real estate building where the collateral value and cash flows from the company occupying the building did not support the loan with a recorded investment of $788,000. The following table presents loans by class modified as new troubled debt restructurings that occurred during the three months ended September 30, 2015: | | | Modified Repayment Terms | | | | Pre-Modification | | Post-Modification | | | | Extension | | | | Outstanding | | Outstanding | | | | Period or | | Number of | | Recorded | | Recorded | | Number of | | Range | (dollars in thousands) | Loans | | Investment | | Investment | | Loans | | (in months) | Troubled Debt Restructurings | | | | | | | | | | Consumer 1-4 family loans: | | | | | | | | | | Closed end first mortgage loans | 1 | | $65 | | $65 | | 1 | | 208 | Total | 1 | | $65 | | $65 | | 1 | | 208 | The following table presents loans by class modified as new troubled debt restructurings that occurred during the nine months ended September 30, 2015: | | | | Modified Repayment Terms | | | | Pre-Modification | | Post-Modification | | | | | Extension | | | | Outstanding | | Outstanding | | | | | Period or | | Number of | | Recorded | | Recorded | | | Number of | | Range | (dollars in thousands) | Loans | | Investment | | Investment | | | Loans | | (in months) | Troubled Debt Restructurings | | | | | | | | | | | Commercial and industrial loans: | | | | | | | | | | | Working capital lines of credit loans | 2 | | $564 | | $564 | | | | | | Non-working capital loans | 1 | | 783 | | 783 | | | 1 | | 12 | Commercial real estate and multi- | | | | | | | | | | | family residential loans: | | | | | | | | | | | Owner occupied loans | 2 | | 855 | | 855 | | | 1 | | 6 | Consumer 1-4 family loans: | | | | | | | | | | | Closed end first mortgage loans | 1 | | 65 | | 78 | | | 1 | | 208 | Total | 6 | | $2,267 | | $2,280 | | | 3 | | 6-208 | For the three month period ended September 30, 2015, the commercial and industrial troubled debt restructurings described above decreased the allowance for loan losses by $68,000, the commercial real estate and multi-family residential loan troubled debt restructurings increased the allowance for loan losses by $9,000 and the consumer 1-4 family loan troubled debt restructuring described above increased the allowance by $13,000. For the nine month period ended September 30, 2015, the commercial and industrial troubled debt restructurings described above increased the allowance for loan losses by $102,000, the commercial real estate and multi-family residential loan troubled debt restructurings decreased the allowance for loan losses by $13,000 and the consumer 1-4 family loan troubled debt restructuring increased the allowance by $11,000. No charge-offs resulted from any troubled debt restructurings described above during the three and nine month period ended September 30, 2015. There were no troubled debt restructurings that had payment defaults within the twelve months following modification during the three or nine month periods ended September 30, 2016 and 2015. Credit Quality Indicators: 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, credit documentation, public information and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis for Special Mention, Substandard and Doubtful grade loans and annually on Pass grade loans over $150,000. The Company uses the following definitions for risk ratings: Special Mention. Loans classified as Special Mention 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 net worth 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 Company 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 characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, 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 to be Pass rated loans with the exception of consumer troubled debt restructurings which are evaluated and listed with Substandard commercial grade loans and consumer nonaccrual loans which are evaluated individually and listed with Not Rated loans. Loans listed as Not Rated are consumer loans or commercial loans with consumer characteristics included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status. As of September 30, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: | | | Special | | | | | | Not | | | (dollars in thousands) | Pass | | Mention | | Substandard | | Doubtful | | Rated | | Total | Commercial and industrial loans: | | | | | | | | | | | | Working capital lines of credit loans | $558,233 | | $25,740 | | $25,397 | | $0 | | $17 | | $609,387 | Non-working capital loans | 578,091 | | 35,026 | | 24,826 | | 0 | | 3,665 | | 641,608 | Commercial real estate and multi- | | | | | | | | | | | | family residential loans: | | | | | | | | | | | | Construction and land development loans | 219,668 | | 1,027 | | 146 | | 0 | | 0 | | 220,841 | Owner occupied loans | 442,334 | | 10,656 | | 15,286 | | 0 | | 0 | | 468,276 | Nonowner occupied loans | 403,450 | | 2,723 | | 2,106 | | 0 | | 0 | | 408,279 | Multifamily loans | 127,615 | | 0 | | 51 | | 0 | | 0 | | 127,666 | Agri-business and agricultural loans: | | | | | | | | | | | | Loans secured by farmland | 149,446 | | 3,001 | | 283 | | 0 | | 0 | | 152,730 | Loans for agricultural production | 153,679 | | 3,154 | | 0 | | 0 | | 0 | | 156,833 | Other commercial loans | 89,830 | | 0 | | 12 | | 0 | | 5 | | 89,847 | Consumer 1-4 family mortgage loans: | | | | | | | | | | | | Closed end first mortgage loans | 48,575 | | 126 | | 1,367 | | 0 | | 111,540 | | 161,608 | Open end and junior lien loans | 6,542 | | 0 | | 0 | | 0 | | 164,938 | | 171,480 | Residential construction loans | 0 | | 0 | | 0 | | 0 | | 12,770 | | 12,770 | Other consumer loans | 15,176 | | 0 | | 56 | | 0 | | 43,604 | | 58,836 | Total | $2,792,639 | | $81,453 | | $69,530 | | $0 | | $336,539 | | $3,280,161 | As of December 31, 2015, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: | | | Special | | | | | | Not | | | (dollars in thousands) | Pass | | Mention | | Substandard | | Doubtful | | Rated | | Total | Commercial and industrial loans: | | | | | | | | | | | | Working capital lines of credit loans | $538,899 | | $32,601 | | $8,844 | | $0 | | $0 | | $580,344 | Non-working capital loans | 549,771 | | 35,910 | | 10,566 | | 0 | | 3,102 | | 599,349 | Commercial real estate and multi- | | | | | | | | | | | | family residential loans: | | | | | | | | | | | | Construction and land | | | | | | | | | | | | development loans | 227,996 | | 2,340 | | 0 | | 0 | | 0 | | 230,336 | Owner occupied loans | 378,847 | | 23,522 | | 9,342 | | 0 | | 0 | | 411,711 | Nonowner occupied loans | 394,387 | | 10,953 | | 2,229 | | 0 | | 0 | | 407,569 | Multi-family loans | 78,968 | | 0 | | 389 | | 0 | | 0 | | 79,357 | Agri-business and agricultural loans: | | | | | | | | | | | | Loans secured by farmland | 163,911 | | 0 | | 471 | | 0 | | 0 | | 164,382 | Loans for agricultural production | 141,796 | | 0 | | 0 | | 0 | | 0 | | 141,796 | Other commercial loans | 85,056 | | 0 | | 12 | | 0 | | 3 | | 85,071 | Consumer 1-4 family mortgage loans: | | | | | | | | | | | Closed end first mortgage loans | 43,231 | | 126 | | 1,769 | | 0 | | 112,635 | | 157,761 | Open end and junior lien loans | 8,373 | | 0 | | 1,616 | | 0 | | 154,929 | | 164,918 | Residential construction loans | 0 | | 0 | | 0 | | 0 | | 9,320 | | 9,320 | Other consumer loans | 13,940 | | 0 | | 60 | | 0 | | 35,015 | | 49,015 | Total | $2,625,175 | | $105,452 | | $35,298 | | $0 | | $315,004 | | $3,080,929 |
|