Loans

Classes of loans are as follows:



	December 31,
	2015		2014
	(Amounts In Thousands)
Agricultural	$	101,588	$	97,645
Commercial and financial	184,199		174,738
Real estate:
Construction, 1 to 4 family residential	51,346		45,949
Construction, land development and commercial	83,121		77,020
Mortgage, farmland	187,856		162,503
Mortgage, 1 to 4 family first liens	727,160		672,674
Mortgage, 1 to 4 family junior liens	117,873		110,284
Mortgage, multi-family	271,974		245,213
Mortgage, commercial	323,409		321,601
Loans to individuals	24,019		21,342
Obligations of state and political subdivisions	52,371		55,729
	2,124,916		1,984,698
Net unamortized fees and costs	768		691
	2,125,684		1,985,389
Less allowance for loan losses	26,510		24,020
	$	2,099,174	$	1,961,369

Changes in the allowance for loan losses and the allowance for loan loss balance applicable to impaired loans and the related loan balance of impaired loans for the year ended December 31, 2015, 2014 and 2013 are as follows:



	Agricultural			Commercial and Financial			Real Estate: Construction and land development			Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family			Real Estate: Mortgage, multi-family and commercial			Other			Total
	(Amounts In Thousands)
2015
Allowance for loan losses:
Beginning balance	$	2,515		$	4,231		$	2,241		$	2,672	$	7,419		$	4,195		$	747		$	24,020
Charge-offs	(325		)	(526		)	(285		)	—		(1,108		)	(723		)	(438		)	(3,405		)
Recoveries	123			1,370			501			6		762			1,310			168			4,240
Provision	769			(558		)	(177		)	664		1,099			(559		)	417			1,655
Ending balance	$	3,082		$	4,517		$	2,280		$	3,342	$	8,172		$	4,223		$	894		$	26,510
Ending balance, individually evaluated for impairment	$	1		$	324		$	22		$	—	$	326		$	110		$	100		$	883
Ending balance, collectively evaluated for impairment	$	3,081		$	4,193		$	2,258		$	3,342	$	7,846		$	4,113		$	794		$	25,627
Loan balances:
Ending balance	$	101,588		$	184,199		$	134,467		$	187,856	$	845,033		$	595,383		$	76,390		$	2,124,916
Ending balance, individually evaluated for impairment	$	1,710		$	2,110		$	954		$	2,233	$	5,926		$	3,228		$	100		$	16,261
Ending balance, collectively evaluated for impairment	$	99,878		$	182,089		$	133,513		$	185,623	$	839,107		$	592,155		$	76,290		$	2,108,655



	Agricultural			Commercial and Financial			Real Estate: Construction and land development			Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family			Real Estate: Mortgage, multi-family and commercial			Other			Total
	(Amounts In Thousands)
2014
Allowance for loan losses:
Beginning balance	$	2,852		$	4,733		$	2,918		$	2,557	$	7,064		$	4,787		$	639		$	25,550
Charge-offs	(174		)	(3,388		)	(250		)	—		(1,195		)	(217		)	(325		)	(5,549		)
Recoveries	66			1,128			390			—		870			377			146			2,977
Provision	(229		)	1,758			(817		)	115		680			(752		)	287			1,042
Ending balance	$	2,515		$	4,231		$	2,241		$	2,672	$	7,419		$	4,195		$	747		$	24,020
Ending balance, individually evaluated for impairment	$	44		$	9		$	28		$	12	$	52		$	9		$	—		$	154
Ending balance, collectively evaluated for impairment	$	2,471		$	4,222		$	2,213		$	2,660	$	7,367		$	4,186		$	747		$	23,866
Loan balances:
Ending balance	$	97,645		$	174,738		$	122,969		$	162,503	$	782,958		$	566,814		$	77,071		$	1,984,698
Ending balance, individually evaluated for impairment	$	1,844		$	2,709		$	560		$	2,318	$	3,826		$	9,512		$	—		$	20,769
Ending balance, collectively evaluated for impairment	$	95,801		$	172,029		$	122,409		$	160,185	$	779,132		$	557,302		$	77,071		$	1,963,929



	Agricultural		Commercial and Financial			Real Estate: Construction and land development			Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family			Real Estate: Mortgage, multi-family and commercial			Other			Total
	(Amounts In Thousands)
2013
Allowance for loan losses:
Beginning balance	$	1,653	$	4,573		$	3,175		$	1,746	$	8,088		$	5,104		$	821		$	25,160
Charge-offs	—		(1,692		)	(245		)	—		(887		)	(356		)	(166		)	(3,346		)
Recoveries	35		1,002			323			—		618			464			163			2,605
Provision	1,164		850			(335		)	811		(755		)	(425		)	(179		)	1,131
Ending balance	$	2,852	$	4,733		$	2,918		$	2,557	$	7,064		$	4,787		$	639		$	25,550
Ending balance, individually evaluated for impairment	$	3	$	16		$	—		$	14	$	66		$	205		$	—		$	304
Ending balance, collectively evaluated for impairment	$	2,849	$	4,717		$	2,918		$	2,543	$	6,998		$	4,582		$	639		$	25,246
Loan balances:
Ending balance	$	82,138	$	166,102		$	99,491		$	142,685	$	711,472		$	559,277		$	64,991		$	1,826,156
Ending balance, individually evaluated for impairment	$	120	$	2,407		$	1,410		$	284	$	4,542		$	17,763		$	—		$	26,526
Ending balance, collectively evaluated for impairment	$	82,018	$	163,695		$	98,081		$	142,401	$	706,930		$	541,514		$	64,991		$	1,799,630

The Company evaluates the following loans to determine impairment: 1) all nonaccrual and TDR loans, 2) all non consumer and non 1 to 4 family residential loans with prior charge-offs, 3) all non consumer and non 1 to 4 family loan relationships classified as substandard and 4) loans with indications of or suspected deteriorating credit quality.

The following table presents the credit quality indicators by type of loans in each category as of December 31, 2015:



	Agricultural		Commercial and Financial		Real Estate: Construction, 1 to 4 family residential		Real Estate: Construction, land development and commercial
	(Amounts In Thousands)
2015
Grade:
Excellent	$	1,786	$	3,298	$	—	$	260
Good	15,959		38,764		1,898		11,570
Satisfactory	36,819		102,188		34,357		52,731
Monitor	18,064		27,181		8,684		11,550
Special Mention	25,356		8,231		5,842		6,542
Substandard	3,604		4,537		565		468
Total	$	101,588	$	184,199	$	51,346	$	83,121



	Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family first liens		Real Estate: Mortgage, 1 to 4 family junior liens		Real Estate: Mortgage, multi- family
2015
Grade:
Excellent	$	2,559	$	426	$	—	$	6,651
Good	31,186		15,773		2,992		64,002
Satisfactory	112,038		620,731		107,091		166,193
Monitor	27,304		55,499		4,198		29,732
Special Mention	11,181		16,237		1,846		4,873
Substandard	3,588		18,494		1,746		523
Total	$	187,856	$	727,160	$	117,873	$	271,974



	Real Estate: Mortgage, commercial		Loans to individuals		Obligations of state and political subdivisions		Total
2015
Grade:
Excellent	$	12,484	$	—	$	2,365	$	29,829
Good	81,305		70		37,045		300,564
Satisfactory	187,728		23,197		12,425		1,455,498
Monitor	32,141		285		518		215,156
Special Mention	6,183		198		—		86,489
Substandard	3,568		269		18		37,380
Total	$	323,409	$	24,019	$	52,371	$	2,124,916

The following table presents the credit quality indicators by type of loans in each category as of December 31, 2014:



	Agricultural		Commercial and Financial		Real Estate: Construction, 1 to 4 family residential		Real Estate: Construction, land development and commercial
	(Amounts In Thousands)
2014
Grade:
Excellent	$	1,375	$	4,820	$	—	$	276
Good	13,214		37,941		6,893		13,875
Satisfactory	51,107		94,158		27,738		47,852
Monitor	15,243		20,445		8,435		2,811
Special Mention	13,070		11,031		1,881		11,870
Substandard	3,636		6,343		1,002		336
Total	$	97,645	$	174,738	$	45,949	$	77,020



	Real Estate: Mortgage, farmland		Real Estate: Mortgage, 1 to 4 family first liens		Real Estate: Mortgage, 1 to 4 family junior liens		Real Estate: Mortgage, multi-family
2014
Grade:
Excellent	$	2,867	$	474	$	—	$	7,011
Good	36,680		22,094		2,875		73,852
Satisfactory	103,552		571,546		99,095		111,650
Monitor	11,754		41,805		3,377		35,812
Special Mention	4,721		18,428		2,520		16,611
Substandard	2,929		18,327		2,417		277
Total	$	162,503	$	672,674	$	110,284	$	245,213



	Real Estate: Mortgage, commercial		Loans to individuals		Obligations of state and political subdivisions		Total
2014
Grade:
Excellent	$	15,416	$	87	$	2,440	$	34,766
Good	87,612		94		43,108		338,238
Satisfactory	178,069		20,465		10,181		1,315,413
Monitor	25,165		251		—		165,098
Special Mention	9,371		353		—		89,856
Substandard	5,968		92		—		41,327
Total	$	321,601	$	21,342	$	55,729	$	1,984,698

The below are descriptions of the credit quality indicators:

Excellent - Excellent rated loans are prime quality loans covered by highly-liquid collateral with generous margins or supported by superior current financial conditions reflecting substantial net worth, relative to total credit extended, and based on assets of a stable and non-speculative nature whose values can be readily verified. Identified repayment source or cash flow is abundant and assured.

Good - Good rated loans are adequately secured by readily-marketable collateral or good financial condition characterized by liquidity, flexibility and sound net worth. Loans are supported by sound primary and secondary payment sources and timely and accurate financial information.

Satisfactory – Satisfactory rated loans are loans to borrowers of average financial means not especially vulnerable to changes in economic or other circumstances, where the major support for the extension is sufficient collateral of a marketable nature, and the primary source of repayment is seen to be clear and adequate.

Monitor – Monitor rated loans are identified by management as warranting special attention for a variety of reasons that may bear on ultimate collectability. This may be due to adverse trends, a particular industry, loan structure, or repayment that is dependent on projections, or a one-time occurrence.

Special Mention – Special mention rated loans are supported by a marginal payment capacity and are marginally protected by collateral. There are identified weaknesses that if not monitored and corrected may adversely affect the Company’s credit position. A special mention credit would typically have a weakness in one of the general categories (cash flow, collateral position or payment history) but not in all categories.

Substandard – Substandard loans are not adequately supported by the paying capacity of the borrower and may be inadequately collateralized. These loans have a well-defined weakness or weaknesses. For these loans, it is more probable than not that the Company could sustain some loss if the deficiency(ies) is not corrected.

Past due loans as of December 31, 2015 and 2014 were as follows:



	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(Amounts In Thousands)
December 31, 2015
Agricultural	$	3,064	$	961	$	—	$	4,025	$	97,563	$	101,588	$	—
Commercial and financial	854		71		1,312		2,237		181,962		184,199		—
Real estate:
Construction, 1 to 4 family residential	—		—		214		214		51,132		51,346		—
Construction, land development and commercial	—		—		88		88		83,033		83,121		—
Mortgage, farmland	320		88		—		408		187,448		187,856		—
Mortgage, 1 to 4 family first liens	4,526		1,192		2,085		7,803		719,357		727,160		406
Mortgage, 1 to 4 family junior liens	250		13		110		373		117,500		117,873		—
Mortgage, multi-family	135		—		113		248		271,726		271,974		—
Mortgage, commercial	1,033		—		331		1,364		322,045		323,409		61
Loans to individuals	158		40		—		198		23,821		24,019		—
Obligations of state and political subdivisions	—		—		—		—		52,371		52,371		—
	$	10,340	$	2,365	$	4,253	$	16,958	$	2,107,958	$	2,124,916	$	467



	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Accruing Loans Past Due 90 Days or More
	(Amounts In Thousands)
December 31, 2014
Agricultural	$	310	$	99	$	—	$	409	$	97,236	$	97,645	$	—
Commercial and financial	397		14		1,048		1,459		173,279		174,738		—
Real estate:
Construction, 1 to 4 family residential	—		—		—		—		45,949		45,949		—
Construction, land development and commercial	937		—		—		937		76,083		77,020		—
Mortgage, farmland	753		—		—		753		161,750		162,503		—
Mortgage, 1 to 4 family first liens	3,594		1,656		1,582		6,832		665,842		672,674		348
Mortgage, 1 to 4 family junior liens	181		12		244		437		109,847		110,284		—
Mortgage, multi-family	—		21		—		21		245,192		245,213		—
Mortgage, commercial	359		557		34		950		320,651		321,601		—
Loans to individuals	27		—		—		27		21,315		21,342		—
Obligations of state and political subdivisions	—		—		—		—		55,729		55,729		—
	$	6,558	$	2,359	$	2,908	$	11,825	$	1,972,873	$	1,984,698	$	348

The Company does not have a significant amount of loans that are past due less than 90 days where there are serious doubts as to the ability of the borrowers to comply with the loan repayment terms.

Accruing loans past due 90 days or more increased $0.12 million from December 31, 2014 to December 31, 2015. As of December 31, 2015 and 2014, accruing loans past due 90 days or more were 0.02% and 0.02% of total loans, respectively. The average balance of the past due loans also increased in 2015 as compared to 2014. The average 90 days or more past due loan balance per loan was $0.09 million as of December 31, 2015 compared to $0.07 million as of December 31, 2014. The loans 90 days or more past due and still accruing are believed to be adequately collateralized. Loans are placed on nonaccrual status when management believes the collection of future principal and interest is not reasonably assured.

Certain impaired loan information by loan type at December 31, 2015 and 2014 was as follows:



	December 31, 2015						December 31, 2014
	Nonaccrual loans (1)		Accruing loans past due 90 days or more		TDR loans		Nonaccrual loans (1)		Accruing loans past due 90 days or more		TDR loans
	(Amounts In Thousands)						(Amounts In Thousands)
Agricultural	$	—	$	—	$	1,710	$	—	$	—	$	1,942
Commercial and financial	1,498		—		612		1,343		—		1,366
Real estate:
Construction, 1 to 4 family residential	214		—		473		—		—		431
Construction, land development and commercial	145		—		122		127		—		—
Mortgage, farmland	—		—		2,233		—		—		2,220
Mortgage, 1 to 4 family first liens	3,845		406		1,369		1,912		348		1,199
Mortgage, 1 to 4 family junior liens	279		—		27		369		—		—
Mortgage, multi-family	449		—		—		55		—		5,470
Mortgage, commercial	985		61		1,733		2,275		—		1,712
Loans to individuals	—		—		—		—		—		—
	$	7,415	$	467	$	8,279	$	6,081	$	348	$	14,340


(1)	There were $2.31 million and $2.14 million of TDR loans included within nonaccrual loans as of December 31, 2015 and 2014, respectively.

The Company may modify the terms of a loan to maximize the collection of amounts due. In most cases, the modification is a reduction in interest rate, conversion to interest only payments or an extension of the maturity date. The borrower is experiencing financial difficulties or is expected to experience financial difficulties in the near-term, so a concessionary modification is granted to the borrower that would otherwise not be considered. TDR loans accrue interest as long as the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles.

Below is a summary of information for TDR loans as of December 31, 2015 and 2014:



	December 31, 2015
	Number of contracts	Recorded investment		Commitments outstanding
		(Dollar Amounts In Thousands)
Agricultural	7	$	1,710	$	32
Commercial and financial	8	1,818		241
Real estate:
Construction, 1 to 4 family residential	3	646		138
Construction, land development and commercial	1	122		—
Mortgage, farmland	5	2,233		—
Mortgage, 1 to 4 family first liens	13	1,575		—
Mortgage, 1 to 4 family junior liens	2	36		—
Mortgage, multi-family	1	71		—
Mortgage, commercial	10	2,381		—
Loans to individuals	—	—		—
	50	$	10,592	$	411



	December 31, 2014
	Number of contracts	Recorded investment		Commitments outstanding
		(Dollar Amounts In Thousands)
Agricultural	9	$	1,942	$	272
Commercial and financial	13	2,202		53
Real estate:
Construction, 1 to 4 family residential	3	431		111
Construction, land development and commercial	1	127		—
Mortgage, farmland	4	2,220		—
Mortgage, 1 to 4 family first liens	11	1,467		—
Mortgage, 1 to 4 family junior liens	1	225		65
Mortgage, multi-family	2	5,470		—
Mortgage, commercial	8	2,398		—
Loans to individuals	—	—		—
	52	$	16,482	$	501

A summary of TDR loans that were modified during the year ended December 31, 2015 and 2014 was as follows:



	December 31, 2015
	Number of Contracts	Pre-modification recorded investment		Post-modification recorded investment
		( Dollar Amounts In Thousands)
Agricultural	3	$	279	$	163
Commercial and financial	2	676		663
Real estate:
Construction, 1 to 4 family residential	1	277		277
Construction, land development and commercial	—	—		—
Mortgage, farmland	2	513		399
Mortgage, 1 to 4 family first liens	4	353		353
Mortgage, 1 to 4 family junior liens	2	41		41
Mortgage, multi-family	1	71		71
Mortgage, commercial	2	144		144
Loans to individuals	—	—		—
	17	$	2,354	$	2,111



	December 31, 2014
	Number of Contracts	Pre-modification recorded investment		Post-modification recorded investment
		( Dollar Amounts In Thousands)
Agricultural	8	$	2,033	$	2,033
Commercial and financial	5	803		803
Real estate:
Construction, 1 to 4 family residential	3	443		431
Construction, land development and commercial	1	132		132
Mortgage, farmland	3	2,007		2,007
Mortgage, 1 to 4 family first liens	3	433		433
Mortgage, 1 to 4 family junior liens	1	225		225
Mortgage, multi-family	—	—		—
Mortgage, commercial	1	319		319
Loans to individuals	—	—		—
	25	$	6,395	$	6,383

The Bank has commitments to lend additional borrowings to TDR loan customers. These commitments are in the normal course of business and allow the borrowers to build pre-sold homes and commercial property which increase their overall cash flow. The additional borrowings are not used to facilitate payments on these loans.

There were no TDR loans modified during the year that were in payment default (defined as past due 90 days or more) as of December 31, 2015 or 2014.

Information regarding impaired loans as of and for the year ended December 31, 2015 is as follows:



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Amounts in Thousands)
2015
With no related allowance recorded:
Agricultural	$	1,609	$	1,773	$	—	$	1,620	$	80
Commercial and financial	1,263		1,981		—		1,421		5
Real estate:
Construction, 1 to 4 family residential	238		238		—		173		5
Construction, land development and commercial	210		314		—		231		6
Mortgage, farmland	2,233		2,351		—		2,305		110
Mortgage, 1 to 4 family first liens	3,558		4,419		—		3,806		48
Mortgage, 1 to 4 family junior liens	189		500		—		204		—
Mortgage, multi-family	157		226		—		175		—
Mortgage, commercial	1,831		3,018		—		1,839		50
Loans to individuals	—		20		—		—		—
	$	11,288	$	14,840	$	—	$	11,774	$	304
With an allowance recorded:
Agricultural	$	101	$	101	$	1	$	106	$	5
Commercial and financial	847		847		324		990		30
Real estate:
Construction, 1 to 4 family residential	449		461		9		449		12
Construction, land development and commercial	57		58		13		58		—
Mortgage, farmland	—		—		—		—		—
Mortgage, 1 to 4 family first liens	2,062		2,156		306		2,133		36
Mortgage, 1 to 4 family junior liens	117		270		20		179		1
Mortgage, multi-family	292		332		58		316		—
Mortgage, commercial	948		1,030		52		974		38
Loans to individuals	100		100		100		67		4
	$	4,973	$	5,355	$	883	$	5,272	$	126
Total:
Agricultural	$	1,710	$	1,874	$	1	$	1,726	$	85
Commercial and financial	2,110		2,828		324		2,411		35
Real estate:
Construction, 1 to 4 family residential	687		699		9		622		17
Construction, land development and commercial	267		372		13		289		6
Mortgage, farmland	2,233		2,351		—		2,305		110
Mortgage, 1 to 4 family first liens	5,620		6,575		306		5,939		84
Mortgage, 1 to 4 family junior liens	306		770		20		383		1
Mortgage, multi-family	449		558		58		491		—
Mortgage, commercial	2,779		4,048		52		2,813		88
Loans to individuals	100		120		100		67		4
	$	16,261	$	20,195	$	883	$	17,046	$	430

Information regarding impaired loans as of and for the year ended December 31, 2014 is as follows:



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Amounts in Thousands)
2014
With no related allowance recorded:
Agricultural	$	1,634	$	1,696	$	—	$	1,496	$	71
Commercial and financial	2,076		3,695		—		1,930		29
Real estate:
Construction, 1 to 4 family residential	89		89		—		44		1
Construction, land development and commercial	128		220		—		142		—
Mortgage, farmland	2,040		2,040		—		1,897		90
Mortgage, 1 to 4 family first liens	2,951		3,705		—		2,980		47
Mortgage, 1 to 4 family junior liens	369		673		—		386		—
Mortgage, multi-family	5,525		5,632		—		5,598		249
Mortgage, commercial	3,290		4,588		—		3,534		53
Loans to individuals	—		20		—		—		—
	$	18,102	$	22,358	$	—	$	18,007	$	540
With an allowance recorded:
Agricultural	$	210	$	247	$	44	$	220	$	11
Commercial and financial	633		633		9		694		36
Real estate:
Construction, 1 to 4 family residential	343		354		28		348		19
Construction, land development and commercial	—		—		—		—		—
Mortgage, farmland	278		278		12		281		14
Mortgage, 1 to 4 family first liens	506		596		52		526		22
Mortgage, 1 to 4 family junior liens	—		—		—		—		—
Mortgage, multi-family	—		—		—		—		—
Mortgage, commercial	697		697		9		706		37
Loans to individuals	—		—		—		—		—
	$	2,667	$	2,805	$	154	$	2,775	$	139
Total:
Agricultural	$	1,844	$	1,943	$	44	$	1,716	$	82
Commercial and financial	2,709		4,328		9		2,624		65
Real estate:
Construction, 1 to 4 family residential	432		443		28		392		20
Construction, land development and commercial	128		220		—		142		—
Mortgage, farmland	2,318		2,318		12		2,178		104
Mortgage, 1 to 4 family first liens	3,457		4,301		52		3,506		69
Mortgage, 1 to 4 family junior liens	369		673		—		386		—
Mortgage, multi-family	5,525		5,632		—		5,598		249
Mortgage, commercial	3,987		5,285		9		4,240		90
Loans to individuals	—		20		—		—		—
	$	20,769	$	25,163	$	154	$	20,782	$	679

Information regarding impaired loans as of and for the year ended December 31, 2013 is as follows:



	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
	(Amounts in Thousands)
2013
With no related allowance recorded:
Agricultural	$	—	$	—	$	—	$	—	$	—
Commercial and financial	1,602		3,140		—		1,645		45
Real estate:
Construction, 1 to 4 family residential	1,270		2,974		—		1,727		4
Construction, land development and commercial	140		140		—		229		—
Mortgage, farmland	—		—		—		—		—
Mortgage, 1 to 4 family first liens	2,597		3,542		—		2,691		24
Mortgage, 1 to 4 family junior liens	177		451		—		198		—
Mortgage, multi-family	456		1,068		—		666		—
Mortgage, commercial	2,494		5,303		—		2,793		46
Loans to individuals	—		20		—		—		—
	$	8,736	$	16,638	$	—	$	9,949	$	119
With an allowance recorded:
Agricultural	$	120	$	120	$	3	$	123	$	5
Commercial and financial	805		838		16		871		46
Real estate:
Construction, 1 to 4 family residential	—		—		—		—		—
Construction, land development and commercial	—		—		—		—		—
Mortgage, farmland	284		284		14		289		14
Mortgage, 1 to 4 family first liens	1,768		1,897		66		1,821		79
Mortgage, 1 to 4 family junior liens	—		—		—		—		—
Mortgage, multi-family	5,608		5,608		188		5,673		255
Mortgage, commercial	9,205		9,205		17		9,300		535
Loans to individuals	—		—		—		—		—
	$	17,790	$	17,952	$	304	$	18,077	$	934
Total:
Agricultural	$	120	$	120	$	3	$	123	$	5
Commercial and financial	2,407		3,978		16		2,516		91
Real estate:
Construction, 1 to 4 family residential	1,270		2,974		—		1,727		4
Construction, land development and commercial	140		140		—		229		—
Mortgage, farmland	284		284		14		289		14
Mortgage, 1 to 4 family first liens	4,365		5,439		66		4,512		103
Mortgage, 1 to 4 family junior liens	177		451		—		198		—
Mortgage, multi-family	6,064		6,676		188		6,339		255
Mortgage, commercial	11,699		14,508		17		12,093		581
Loans to individuals	—		20		—		—		—
	$	26,526	$	34,590	$	304	$	28,026	$	1,053

Impaired loans decreased by $4.61 million from December 31, 2014 to December 31, 2015. Impaired loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 days or more and TDR loans. Impaired loans also include loans that, based on management’s evaluation of current information and events, the Bank expects to be unable to collect in full according to the contractual terms of the original loan agreement. The decrease in impaired loans is due mainly to a decrease in TDR Loans of $6.06 million from December 31, 2014 to December 31, 2015. The net decrease in TDR loans is primarily the result of loans reclassified from TDR loans as a result of the borrowers not experiencing financial difficulty and no concessions granted to the borrower when the loan was modified during the year ended December 31, 2015.

For loans that are collateral dependent, losses are evaluated based on the portion of a loan that exceeds the fair market value of the collateral that can be identified as uncollectible. In general, this is the amount that the carrying value of the loan exceeds the related appraised value. Generally, it is the Company’s policy not to rely on appraisals that are older than one year prior to the date the impairment is being measured. The most recent appraisal values may be adjusted if, in the Company’s judgment, experience and other market data indicate that the property’s value, use, condition, exit market or other variable affecting its value may have changed since the appraisal was performed, consistent with the December 2006 joint interagency guidance on the allowance for loan losses. The charge-off or loss adjustment supported by an appraisal is considered the minimum charge-off. Any adjustments made to the appraised value are to provide additional charge-off or loss allocations based on the applicable facts and circumstances. In instances where there is an estimated decline in value, either a loss allocation is provided or a charge-off taken pending confirmation of the amount of the loss from an updated appraisal. Upon receipt of the new appraisals, an additional loss allocation may be provided or charge-off taken based on the appraised value of the collateral. On average, appraisals are obtained within one month of order.

The Company has not experienced any significant time lapses in recognizing the required provisions for collateral dependent loans, nor has the Company delayed appropriate charge-offs. When an updated appraisal value has been obtained, the Company has used the appraisal amount in helping to determine the appropriate charge-off or required reserve. The Company also evaluates any changes in the financial condition of the borrower and guarantors (if applicable), economic conditions, and the Company’s loss experience with the type of property in question. Any information utilized in addition to the appraisal is intended to identify additional charge-offs or provisions, not to override the appraised value.

The Company separates its portfolio loans and leases into segments for determining the allowance for loan losses. The Company's portfolio segments includes agricultural, commercial and financial, real estate, loans to individuals and obligations of state and political subdivisions. The Company further separates its portfolio into classes for purposes of monitoring and assessing credit quality based on certain risk characteristics. Classes with the real estate portfolio segment includes 1 to 4 family residential constructions, land development and commercial construction, farmland, 1 to 4 family first liens, 1 to 4 family junior liens, multi-family and commercial.

Loans that exhibit probable or observed credit weaknesses, as well as loans that have been modified in a TDR, are subject to individual review for impairment. When individual loans are reviewed for impairment, the Company determines allowances based on management's estimate of the borrower's ability to repay the loan given the availability of the collateral, other sources of cash flow, as well as evaluation of legal options available. Allowances for impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or the fair value of the underlying collateral.

Historical loss rates are applied to loans that are not individually reviewed for impairment. For reporting periods prior to December 31, 2014 the Company calculated its historical loss experience using a trailing 10 quarter portfolio loss history method in which the Company tracked the net charge-offs as a percentage of total loans by loan category. The portfolio loss history method did not factor in the credit risk ratings of the loans in determination of the historical loss rate to be applied in the allowance for loan losses calculation. During the year ended December 31, 2014, to refine the Company's allowance for loan losses calculation, management performed a 20 quarter migration analysis. Management determined that increasing the look-back period to a 20 quarter period would improve the estimation of the entire credit and economic cycle of a credit relationship. The migration analysis performed by management uses loan level attributes to track the movement of loans through the various credit risk rating categories in order to estimate the percentage of historical loss to apply to each specific credit risk rating in each loan category. The credit risk rating system currently utilized for allowance analysis purposes encompasses six categories.

The Company's allowance for loan loss methodology incorporates a variety of risk considerations, both quantitative and qualitative, in establishing an allowance for loan losses that management believes is appropriate at each reporting date. Quantitative factors include the Company's historical loss experience, delinquency and charge-off trends, collateral values, changes in impaired loans, and other factors. Quantitative factors also incorporate known information about individual loans, including borrowers' sensitivity to interest rate movements. Qualitative factors include changes in lending policies and procedures; changes in national and local economic and business conditions; changes in the nature and volume of the loan portfolio; changes in the experience, ability and depth of lending management and staff; changes in the quality of the Bank's loan review system; the existence and effect of concentrations of credit; and the effect of any other identified external factors.

Determinations relating to the possible level of future loan losses are based in part on subjective judgments by management. Future loan losses in excess of current estimates, could materially adversely affect our results of operations or financial position. As the Company adds new products and increases the complexity of its loan portfolio, it will enhance its methodology accordingly. Although management believes the levels of the allowance for loan losses as of December 31, 2015 and 2014 were adequate to absorb probable losses inherent in the loan portfolio, a decline in local economic conditions, or other factors, could result in increasing losses that cannot be reasonably predicted at this time.