NOTE

LOANS AND ALLOWANCE FOR LOAN LOSSES

December

31,

2016,

the Company’s gross loan portfolio was

$5.63

billion, compared to

$4.92

billion at

December

31,

2015.

The various categories of loans are summarized as follows:

(In thousands)	2016		2015

Consumer:
Credit cards	$	184,591	$	177,288
Other consumer		303,972		208,380
Total consumer		488,563		385,668
Real estate:
Construction		336,759		279,740
Single family residential		904,245		696,180
Other commercial		1,787,075		1,229,072
Total real estate		3,028,079		2,204,992
Commercial:
Commercial		639,525		500,116
Agricultural		150,378		148,563
Total commercial		789,903		648,679
Other		20,662		7,115
Loans		4,327,207		3,246,454
Loans acquired, net of discount and allowance (1)		1,305,683		1,672,901

Total loans	$	5,632,890	$	4,919,355

__________________________________

(1)

See Note

Loans Acquired, for segregation of loans acquired by loan class.

Loan Origination/Risk Management

– The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral; obtaining and monitoring collateral; providing an adequate allowance for loans losses by regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry. The Company seeks to use diversification within the loan portfolio to reduce its credit risk, thereby minimizing the adverse impact on the portfolio, if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and

may

be used to recover the debt in case of default. Furthermore, a factor that influenced the Company’s judgment regarding the allowance for loan losses consists of a

seven

-year historical loss average segregated by each primary loan sector. On an annual basis, historical loss rates are calculated for each sector.

Consumer

– The consumer loan portfolio consists of credit card loans and other consumer loans. Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to be impacted by economic downturns resulting in increasing unemployment. Other consumer loans include direct and indirect installment loans and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

Real estate

– The real estate loan portfolio consists of construction loans, single family residential loans and commercial loans. Construction and development loans (“C&D”) and commercial real estate loans (“CRE”) can be particularly sensitive to valuation of real estate. Commercial real estate cycles are inevitable. The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent

tension

between supply and demand for commercial properties. While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market. CRE cycles

tend

to be local in nature and longer than other credit cycles. Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for

one

market based on the other difficult. Additionally, submarkets within commercial real estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans. Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and length. The Company monitors these loans closely.

Commercial

– The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchase or other expansion projects. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers’ business or farming operations. The Company continues its efforts to keep loan terms short, reducing the negative impact of upward movement in interest rates. Term loans are generally set up with

one

three

year balloons, and the Company has instituted a pricing mechanism for commercial loans. It is standard practice to require personal guaranties on all commercial loans, particularly as they relate to closely-held or limited liability entities.

Nonaccrual and Past Due Loans

– Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower

may

be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans

may

be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Nonaccrual loans, excluding loans acquired, at

December

31,

2016

and

2015,

segregated by class of loans, are as follows:

(In thousands)	2016		2015

Consumer:
Credit cards	$	373	$	212
Other consumer		1,793		442
Total consumer		2,166		654
Real estate:
Construction		3,411		4,955
Single family residential		12,139		5,453
Other commercial		12,385		4,420
Total real estate		27,935		14,828
Commercial:
Commercial		7,765		1,968
Agricultural		1,238		264
Total commercial		9,003		2,232

Total	$	39,104	$	17,714

An age analysis of past due loans, excluding loans acquired, segregated by class of loans, is as follows:

(In thousands)	Gross 30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due & Accruing

December 31, 2016
Consumer:
Credit cards	$	716	$	275	$	991	$	183,600	$	184,591	$	275
Other consumer		3,786		1,027		4,813		299,159		303,972		11
Total consumer		4,502		1,302		5,804		482,759		488,563		286
Real estate:
Construction		1,420		1,246		2,666		334,093		336,759		--
Single family residential		6,310		5,927		12,237		892,008		904,245		14
Other commercial		4,212		6,722		10,934		1,776,141		1,787,075		--
Total real estate		11,942		13,895		25,837		3,002,242		3,028,079		14
Commercial:
Commercial		2,040		5,296		7,336		632,189		639,525		--
Agricultural		121		1,215		1,336		149,042		150,378		--
Total commercial		2,161		6,511		8,672		781,231		789,903		--
Other		--		--		--		20,662		20,662		--

Total	$	18,605	$	21,708	$	40,313	$	4,286,894	$	4,327,207	$	300

December 31, 2015
Consumer:
Credit cards	$	639	$	479	$	1,118	$	176,170	$	177,288	$	267
Other consumer		1,879		648		2,527		205,853		208,380		374
Total consumer		2,518		1,127		3,645		382,023		385,668		641
Real estate:
Construction		1,328		4,511		5,839		273,901		279,740		--
Single family residential		4,856		3,342		8,198		687,982		696,180		364
Other commercial		869		3,302		4,171		1,224,901		1,229,072		25
Total real estate		7,053		11,155		18,208		2,186,784		2,204,992		389
Commercial:
Commercial		3,427		637		4,064		496,052		500,116		90
Agricultural		285		243		528		148,035		148,563		56
Total commercial		3,712		880		4,592		644,087		648,679		146
Other		108		93		201		6,914		7,115		15

Total	$	13,391	$	13,255	$	26,646	$	3,219,808	$	3,246,454	$	1,191

Impaired Loans

– A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loans, including scheduled principal and interest payments. This includes loans that are delinquent

days or more, nonaccrual loans and certain other loans identified by management. Certain other loans identified by management consist of performing loans with specific allocations of the allowance for loan losses. Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate, or the fair value of the collateral if the loan is collateral dependent.

Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. Impaired loans, or portions thereof, are charged-off when deemed uncollectible.

Impaired loans, net of government guarantees and excluding loans acquired, segregated by class of loans, are as follows:

(In thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Investment in Impaired Loans		Interest Income Recognized

December 31, 2016
Consumer:
Credit cards	$	373	$	373	$	--	$	373	$	--	$	346	$	20
Other consumer		1,836		1,797		3		1,800		1		1,066		47
Total consumer		2,209		2,170		3		2,173		1		1,412		67
Real estate:
Construction		4,275		1,038		2,374		3,412		156		4,436		196
Single family residential		12,970		10,630		1,753		12,383		162		9,486		419
Other commercial		20,993		6,891		7,315		14,206		99		14,932		659
Total real estate		38,238		18,559		11,442		30,001		417		28,854		1,274
Commercial:
Commercial		11,848		2,734		7,573		10,307		262		4,666		206
Agricultural		2,226		1,215		--		1,215		--		1,046		46
Total commercial		14,074		3,949		7,573		11,522		262		5,712		252

Total	$	54,521	$	24,678	$	19,018	$	43,696	$	680	$	35,978	$	1,593

December 31, 2015
Consumer:
Credit cards	$	479	$	479	$	--	$	479	$	7	$	411	$	30
Other consumer		459		423		19		442		85		562		40
Total consumer		938		902		19		921		92		973		70
Real estate:
Construction		5,678		1,636		3,318		4,954		441		5,417		390
Single family residential		5,938		4,702		945		5,647		1,034		5,148		370
Other commercial		5,688		4,328		88		4,416		832		3,147		227
Total real estate		17,304		10,666		4,351		15,017		2,307		13,712		987
Commercial:
Commercial		2,656		1,654		334		1,988		387		1,736		125
Agricultural		264		264		--		264		45		254		18
Total commercial		2,920		1,918		334		2,252		432		1,990		143

Total	$	21,162	$	13,486	$	4,704	$	18,190	$	2,831	$	16,675	$	1,200

December

31,

2016,

and

December

31,

2015,

impaired loans, net of government guarantees and excluding loans acquired, totaled

$43.7

million and

$18.2

million, respectively. Allocations of the allowance for loan losses relative to impaired loans were

$680,000

and

$2.8

million at

December

31,

2016

and

2015,

respectively. Approximately

$1.6

million,

$1.2

million and

$0.8

million of interest income was recognized on average impaired loans of

$36.0

million,

$16.7

million and

$17.5

million for

2016,

2015

and

2014,

respectively. Interest recognized on impaired loans on a cash basis during

2016,

2015

and

2014

was not material.

Included in certain impaired loan categories are troubled debt restructurings (“TDRs”). When the Company restructures a loan to a borrower that is experiencing financial difficulty and grants a concession that it would not otherwise consider, a “troubled debt restructuring” results and the Company classifies the loan as a TDR. The Company grants various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

Under ASC Topic

310

–

Subsequent Measurement

, a TDR is considered to be impaired, and an impairment analysis must be performed. The Company assesses the exposure for each modification, either by collateral discounting or by calculation of the present value of future cash flows, and determines if a specific allocation to the allowance for loan losses is needed.

Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full; or, if an obligation yields a market interest rate and no longer has any concession regarding payment amount or amortization, then it is not considered a TDR at the beginning of the calendar year after the year in which the improvement takes place. The Company returns TDRs to accrual status only if

(1)

all contractual amounts due can reasonably be expected to be repaid within a prudent period, and

(2)

repayment has been in accordance with the contract for a sustained period, typically at least

six

months.

The following table presents a summary of troubled debt restructurings, excluding loans acquired, segregated by class of loans.

	Accruing TDR Loans				Nonaccrual TDR Loans				Total TDR Loans
(Dollars in thousands)	Number		Balance		Number		Balance		Number		Balance

December 31, 2016
Consumer:
Other consumer		--	$	--		1	$	3		1	$	3
Total consumer		--		--		1		3		1		3
Real estate:
Construction		--		--		1		18		1		18
Single-family residential		3		167		29		2,078		32		2,245
Other commercial		23		9,048		2		780		25		9,828
Total real estate		26		9,215		32		2,876		58		12,091
Commercial:
Commercial		15		1,783		5		297		20		2,080
Total commercial		15		1,783		5		297		20		2,080
Total		41	$	10,998		38	$	3,176		79	$	14,174

December 31, 2015
Consumer:
Other consumer		--	$	--		1	$	13		1	$	13
Total consumer		--		--		1		13		1		13
Real estate:
Construction		--		--		1		253		1		253
Single-family residential		2		137		11		1,335		13		1,472
Other commercial		4		2,894		1		597		5		3,491
Total real estate		6		3,031		13		2,185		19		5,216
Commercial:
Commercial		--		--		5		332		5		332
Total commercial		--		--		5		332		5		332
Total		6	$	3,031		19	$	2,530		25	$	5,561

The following table presents loans that were restructured as TDRs during the years ended

December

31,

2016

and

2015,

excluding loans acquired, segregated by class of loans.

							Modification Type
(Dollars in thousands)	Number of Loans		Balance Prior to TDR		Balance at December 31		Change in Maturity Date		Change in Rate		Financial Impact on Date of Restructure

Year Ended December 31, 2016
Consumer:
Other consumer		2	$	50	$	11	$	11	$	--	$	--
Total consumer		2		50		11		11		--		--
Real estate:
Single-family residential		23		1,570		1,518		964		554		--
Other commercial		28		10,291		10,260		9,128		1,132		--
Total real estate		51		11,861		11,778		10,092		1,686		--
Commercial:
Commercial		17		1,996		1,968		1,968		--		--
Total commercial		17		1,996		1,968		1,968		--		--
Total		70	$	13,907	$	13,757	$	12,071	$	1,686	$	--

Year Ended December 31, 2015
Consumer:
Other consumer		1	$	13	$	13	$	13	$	--	$	--
Total consumer		1		13		13		13		--		--
Real estate:
Single-family residential		11		1,179		1,103		1,103		--		--
Other commercial		1		1,097		1,097		1,097		--		--
Total real estate		12		2,276		2,200		2,200		--		--
Commercial:
Commercial		5		347		332		332		--		--
Total commercial		5		347		332		332		--		--
Total		18	$	2,636	$	2,545	$	2,545	$	--	$	--

During year ended

December

31,

2016,

the Company modified

seventy

loans with a total recorded investment of

$13.9

million prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by various terms, including changing the maturity date, deferring amortized principal payments and requiring interest only payments for a period of

months. Based on the fair value of the collateral, a specific reserve of

$402,000

was determined necessary for these loans. Also, there was no immediate financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure. During the year ended

December

31,

2016,

fifteen

of the previously restructured loans with prior balances of

$3.7

million were paid off.

During year ended

December

31,

2015,

the Company modified

eighteen

loans with a total recorded investment of

$2.6

months. Based on the fair value of the collateral, a specific reserve of

$113,000

There was

one

consumer loan for which a payment default occurred during the year ended

December

31,

2016,

that had been modified as a TDR within

months or less of the payment default. A charge off of

$39,000

was recorded for this loan. There was also

one

single-family residential loan for which a payment default occurred during the year ended

December

31,

2016,

that had been modified as a TDR within

months or less of the payment default. A charge off of

$31,000

was recorded for this loan and

$69,000

was transferred to OREO. There were

loans for which a payment default occurred during the year ended

December

31,

2015,

and that had been modified as a TDR within

months or less of the payment default, excluding loans acquired. We define a payment default as a payment received more than

days after its due date.

In addition to the TDRs that occurred during the period provided in the preceding tables, the Company had TDRs with pre-modification loan balances of

$236,000

and

$167,000

December

31,

2016

and

2015,

respectively, for which other real estate owned (“OREO”) was received in full or partial satisfaction of the loans. The majority of such TDRs were in commercial real estate and residential real estate. At

December

31,

2016

and

2015,

the Company had

$1,714,000

and

$1,064,000,

respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At

December

31,

2016

and

2015,

the Company had

$5,094,000

and

$5,916,000,

respectively, of OREO secured by residential real estate properties.

Credit Quality Indicators

– As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions in the States of Arkansas, Kansas, Missouri and Tennessee.

The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. Loans are rated on a scale of

A description of the general characteristics of the

risk ratings is as follows:

Risk Rate

– Pass (Excellent)

– This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength.

Risk Rate

– Pass (Good)

- Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated "excellent”).

Risk Rate

– Pass (Acceptable – Average)

- Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.

Risk Rate

– Pass (Monitor)

- Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk

may

be increased by certain conditions, which represent "red flags". These "red flags" require a higher level of supervision or monitoring than the normal "Pass" rated credit. The borrower

may

be experiencing these conditions for the

first

time, or it

may

be recovering from weakness, which at

one

time justified a harsher rating. These conditions

may

include: weaknesses in financial trends; marginal cash flow;

one

-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.

Risk Rate

– Special Mention

- A loan in this category has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses

may

result in deterioration of the repayment prospects for the asset or in the institution's credit position at some future date. Special Mention loans are not adversely classified (although they are "criticized") and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers

may

be experiencing adverse operating trends, or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating

may

include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.

Risk Rate

– Substandard

- A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but

may

involve burdensome administrative expenses and the accompanying cost to carry the loan.

Risk Rate

– Doubtful

- A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that

may

strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status.

Risk Rate

– Loss

- Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery

may

be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible.

Loans acquired are evaluated using this internal grading system. Loans acquired are evaluated individually and include purchased credit impaired loans of

$17.8

million and

$23.5

million that are accounted for under ASC Topic

310

and are classified as substandard (Risk Rating

as of

December

31,

2016

and

2015,

respectively. Of the remaining loans acquired and accounted for under ASC Topic

310

20,

$47.8

million and

$49.9

million were classified (Risk Ratings

and

– see classified loans discussion below) at

December

31,

2016

and

2015,

respectively.

Loans acquired, covered by loss share agreements, had additional protection provided by the FDIC prior to the termination of the loss share agreements. During the

2014

quarterly impairment testing on the estimated cash flows of the credit impaired loans, the Company established that some of the loans covered by loss share from our FDIC-assisted transactions had experienced material projected credit deterioration. As a result, the Company established a

$954,000

allowance for loan losses on covered loans by recording a provision for loan losses of

$0.4

million (net of FDIC-loss share adjustments) during the period ended

December

31,

2014.

There was no further projected credit deterioration and no addition to the allowance for covered loans in

2015

2016.

The

$954,000

allowance was reclassified to allowance on acquired non-covered loans subsequent to the agreement with the FDIC to terminate the loss share agreements. See Note

Loans Acquired, for further discussion of the acquired loans, loan pools and loss sharing agreements.

Purchased credit impaired loans are loans that showed evidence of deterioration of credit quality prior to acquisition and for which it is probable, at acquisition, that the Company will be unable to collect all amounts contractually owed. Their fair value was initially based on the estimate of cash flows, both principal and interest, expected to be collected or estimated collateral values if cash flows are not estimable, discounted at prevailing market rates of interest. The difference between the undiscounted cash flows expected at acquisition and the fair value at acquisition is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition are not recognized as a yield adjustment. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment.

Classified loans for the Company include loans in Risk Ratings

and

Loans

may

be classified, but not considered impaired, due to

one

of the following reasons:

(1)

The Company has established minimum dollar amount thresholds for loan impairment testing. Loans rated

–

that fall under the threshold amount are not tested for impairment and therefore are not included in impaired loans.

(2)

Of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be impaired and are not included in impaired loans. Total classified loans, excluding loans accounted for under ASC Topic

310

30,

were

$166.0

million and

$153.7

million as of

December

31,

2016

and

December

31,

2015,

respectively.

The following table presents a summary of loans by credit risk rating, segregated by class of loans. Loans accounted for under ASC Topic

310

are all included in Risk Rate

in this table.

(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total

December 31, 2016
Consumer:
Credit cards	$	183,943	$	--	$	648	$	--	$	--	$	184,591
Other consumer		301,632		26		2,314		--		--		303,972
Total consumer		485,575		26		2,962		--		--		488,563
Real estate:
Construction		330,080		98		6,565		16		--		336,759
Single family residential		875,603		4,024		24,460		158		--		904,245
Other commercial		1,738,207		6,874		41,994		--		--		1,787,075
Total real estate		2,943,890		10,996		73,019		174		--		3,028,079
Commercial:
Commercial		616,805		558		22,162		--		--		639,525
Agricultural		148,218		104		2,033		--		23		150,378
Total commercial		765,023		662		24,195		--		23		789,903
Other		20,662		--		--		--		--		20,662
Loans acquired		1,217,886		22,181		64,075		1,541		--		1,305,683

Total	$	5,433,036	$	33,865	$	164,251	$	1,715	$	23	$	5,632,890

(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total

December 31, 2015
Consumer:
Credit cards	$	176,809	$	--	$	479	$	--	$	--	$	177,288
Other consumer		207,069		--		1,262		49		--		208,380
Total consumer		383,878		--		1,741		49		--		385,668
Real estate:
Construction		270,386		319		9,019		16		--		279,740
Single family residential		679,484		2,701		13,824		171		--		696,180
Other commercial		1,178,817		5,404		44,261		590		--		1,229,072
Total real estate		2,128,687		8,424		67,104		777		--		2,204,992
Commercial:
Commercial		487,563		2,760		9,787		6		--		500,116
Agricultural		147,788		--		775		--		--		148,563
Total commercial		635,351		2,760		10,562		6		--		648,679
Other		7,022		--		93		--		--		7,115
Loans acquired, not covered by FDIC loss share		1,590,384		9,150		69,219		3,689		459		1,672,901

Total	$	4,745,322	$	20,334	$	148,719	$	4,521	$	459	$	4,919,355

Net (charge-offs)/recoveries for the years ended

December

31,

2016

and

2015,

excluding loans acquired, segregated by class of loans, were as follows:

(In thousands)	2016			2015

Consumer:
Credit cards	$	(2,288	)	$	(2,217	)
Other consumer		(1,459	)		(1,134	)
Total consumer		(3,747	)		(3,351	)
Real estate:
Construction		(16	)		(44	)
Single family residential		(706	)		(407	)
Other commercial		(6,444	)		(926	)
Total real estate		(7,166	)		(1,377	)
Commercial:
Commercial		(1,255	)		(1,202	)
Agricultural		(2,336	)		(33	)
Total commercial		(3,591	)		(1,235	)

Total	$	(14,504	)	$	(5,963	)

Allowance for Loan Losses

– The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The Company’s allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic

310

10,

Receivables

, and allowance allocations calculated in accordance with ASC Topic

450

20,

Loss Contingencies

. Accordingly, the methodology is based on the Company’s internal grading system, specific impairment analysis, qualitative and quantitative factors.

As mentioned above, allocations to the allowance for loan losses are categorized as either specific allocations or general allocations.

A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loan, including scheduled principal and interest payments. For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis. This valuation is compared to the remaining outstanding principal balance of the loan. If a loss is determined to be probable, the loss is included in the allowance for loan losses as a specific allocation. If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan.

The general allocation is calculated monthly based on management’s assessment of several factors such as

(1)

historical loss experience based on volumes and types,

(2)

volume and trends in delinquencies and nonaccruals,

(3)

lending policies and procedures including those for loan losses, collections and recoveries,

(4)

national, state and local economic trends and conditions,

(5)

external factors and pressure from competition,

(6)

the experience, ability and depth of lending management and staff,

(7)

seasoning of new products obtained and new markets entered through acquisition and

(8)

other factors and trends that will affect specific loans and categories of loans. The Company establishes general allocations for each major loan category. This category also includes allocations to loans which are collectively evaluated for loss such as credit cards,

one

-to-

four

family owner occupied residential real estate loans and other consumer loans.

The following table details activity in the allowance for loan losses, excluding loans acquired, by portfolio segment for the year ended

December

31,

2016.

Allocation of a portion of the allowance to

one

category of loans does not preclude its availability to absorb losses in other categories.

(In thousands)	Commercial			Real Estate			Credit Card			Other Consumer and Other			Total
December 31, 2016 (1)
Balance, beginning of year	$	5,985		$	19,522		$	3,893		$	1,951		$	31,351

Provision for loan losses (1)		5,345			9,461			2,174			2,459			19,439

Charge-offs		(3,956	)		(7,517	)		(3,195	)		(1,975	)		(16,643	)
Recoveries		365			351			907			516			2,139

Net charge-offs		(3,591	)		(7,166	)		(2,288	)		(1,459	)		(14,504	)

Balance, end of year (1)	$	7,739		$	21,817		$	3,779		$	2,951		$	36,286

Period-end amount allocated to:
Loans individually evaluated for impairment	$	262		$	417		$	--		$	1		$	680
Loans collectively evaluated for impairment		7,477			21,400			3,779			2,950			35,606

Balance, end of year (1)	$	7,739		$	21,817		$	3,779		$	2,951		$	36,286

December 31, 2015 (2)
Balance, beginning of year	$	6,962		$	15,161		$	5,445		$	1,460		$	29,028

Provision for loan losses (1)		258			5,738			665			1,625			8,286

Charge-offs		(1,415	)		(1,580	)		(3,107	)		(1,672	)		(7,774	)
Recoveries		180			203			890			538			1,811

Net charge-offs		(1,235	)		(1,377	)		(2,217	)		(1,134	)		(5,963	)

Balance, end of year (2)	$	5,985		$	19,522		$	3,893		$	1,951		$	31,351

Period-end amount allocated to:
Loans individually evaluated for impairment	$	432		$	2,307		$	7		$	85		$	2,831
Loans collectively evaluated for impairment		5,553			17,215			3,886			1,866			28,520

Balance, end of year (2)	$	5,985		$	19,522		$	3,893		$	1,951		$	31,351

(1)

Provision for loan losses of

$626,000

attributable to loans acquired was excluded from this table for the year ended

December

31,

2016

(total provision for loan losses for the year ended

December

31,

2016

was

$20,065,000).

The

$626,000

was subsequently charged-off, resulting in

increase to the ending balance in the allowance related to loans acquired. Provision for loan losses of

$736,000

attributable to acquired loans, covered by FDIC loss share, was excluded from this table for the year ended

December

31,

2015

(total provision for loan losses for the year ended

December

31,

2015

$9,022,000).

(2)

Allowance for loan losses at

December

31,

2016,

2015

and

2014

includes

$954,000

allowance for loans acquired (not shown in the table above). The total allowance for loan losses at

December

31,

2016,

2015

and

2014

was

$37,240,000,

$32,305,000

and

$29,982,000,

respectively.

Activity in the allowance for loan losses, excluding allowance on loans acquired, for the year ended

December

31,

2014

was as follows:

(In thousands)	Commercial			Real Estate			Credit Card			Other Consumer and Other			Total
December 31, 2014
Balance, beginning of year	$	3,205		$	16,885		$	5,430		$	1,922		$	27,442

Provision for loan losses		4,475			(606	)		2,307			706			6,882

Charge-offs		(1,044	)		(2,684	)		(3,188	)		(1,638	)		(8,554	)
Recoveries		326			1,566			896			470			3,258

Net charge-offs		(718	)		(1,118	)		(2,292	)		(1,168	)		(5,296	)

Balance, end of year	$	6,962		$	15,161		$	5,445		$	1,460		$	29,028

The Company’s recorded investment in loans, excluding loans acquired, as of

December

31,

2016

and

2015

related to each balance in the allowance for loan losses by portfolio segment on the basis of the Company’s impairment methodology is as follows:

(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total

December 31, 2016
Loans individually evaluated for impairment	$	11,522	$	30,001	$	373	$	1,800	$	43,696
Loans collectively evaluated for impairment		778,381		2,998,078		184,218		322,834		4,283,511

Balance, end of period	$	789,903	$	3,028,079	$	184,591	$	324,634	$	4,327,207

December 31, 2015
Loans individually evaluated for impairment	$	2,252	$	15,017	$	479	$	442	$	18,190
Loans collectively evaluated for impairment		646,427		2,189,975		176,809		215,053		3,228,264

Balance, end of period	$	648,679	$	2,204,992	$	177,288	$	215,495	$	3,246,454