Loans (Tables)

6 Months Ended

Jun. 30, 2017

Summary of loan portfolio and allowance for loan losses

The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for loan losses as of June 30, 2017 and December 31, 2016 (in thousands):

June 30, 2017	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	205,725	$	1,254	$	35	$	204,436
Commercial		271,342		13,680		1,989		255,673
Agricultural		188,547		3,728		734		184,085
Construction		25,569		-		-		25,569
Consumer		10,603		4		-		10,599
Other commercial loans		56,952		4,902		868		51,182
Other agricultural loans		32,974		1,466		-		31,508
State and political subdivision loans		96,337		-		-		96,337
Total		888,049		25,024		3,626		859,389
Allowance for loan losses		9,979		457		-		9,522
Net loans	$	878,070	$	24,577	$	3,626	$	849,867

December 31, 2016
Real estate loans:
Residential	$	207,423	$	957	$	35	$	206,431
Commercial		252,577		5,742		1,969		244,866
Agricultural		123,624		3,346		738		119,540
Construction		25,441		-		-		25,441
Consumer		11,005		-		4		11,001
Other commercial loans		58,639		5,994		621		52,024
Other agricultural loans		23,388		1,654		-		21,734
State and political subdivision loans		97,514		-		-		97,514
Total		799,611		17,693		3,367		778,551
Allowance for loan losses		8,886		487		-		8,399
Net loans	$	790,725	$	17,206	$	3,367	$	770,152

Accretable yield for purchased credit impaired loans

Changes in the accretable yield for PCI loans were as follows for the three and six months ended June 30, 2017 and 2016, respectively (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2017			2016			2017			2016
Balance at beginning of period	$	275		$	551		$	389		$	637
Accretion		(108	)		(87	)		(222	)		(173	)
Balance at end of period	$	167		$	464		$	167		$	464

Loans acquired with specific evidence of deterioration in credit quality

The following table presents additional information regarding loans acquired with specific evidence of deterioration in credit quality under ASC 310-30 (in thousands):

	June 30, 2017		December 31, 2016
Outstanding balance	$	6,660	$	6,487
Carrying amount		3,626		3,367

Impaired financing receivables with associated allowance amount

The following table includes the recorded investment and unpaid principal balances for impaired financing receivables by class, excluding PCI loans, with the associated allowance amount, if applicable (in thousands):

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
June 30, 2017	Balance		Allowance		Allowance		Investment		Allowance
Real estate loans:
Mortgages	$	1,246	$	281	$	903	$	1,184	$	67
Home Equity		70		16		54		70		10
Commercial		16,037		13,093		587		13,680		58
Agricultural		3,744		2,405		1,323		3,728		95
Construction		-		-		-		-		-
Consumer		4		2		2		4		2
Other commercial loans		5,423		4,431		471		4,902		207
Other agricultural loans		1,466		1,448		18		1,466		18
State and political
subdivision loans		-		-		-		-		-
Total	$	27,990	$	21,676	$	3,358	$	25,034	$	457

December 31, 2016
Real estate loans:							$	-
Mortgages	$	953	$	570	$	330		900	$	22
Home Equity		57		-		57		57		10
Commercial		7,958		5,697		45		5,742		45
Agricultural		3,347		2,000		1,347		3,347		54
Construction		-		-		-		-		-
Consumer		-		-		-		-		-
Other commercial loans		6,159		5,135		859		5,994		326
Other agricultural loans		1,653		1,629		24		1,653		30
State and political
subdivision loans		-		-		-		-		-
Total	$	20,127	$	15,031	$	2,662	$	17,693	$	487

The following tables includes the average balance of impaired financing receivables by class and the income recognized on these receivables for the three and six month periods ended June 30, 2017 and 2016(in thousands):

	For the Three Months Ended
	June 30, 2017						June 30, 2016
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		Cash Basis		Investment		Recognized		Cash Basis
Real estate loans:
Mortgages	$	986	$	3	$	-	$	460	$	5	$	-
Home Equity		60		1		-		59		1		-
Commercial		12,980		134		-		6,158		26		-
Agricultural		3,641		32		-		165		3		-
Construction		-		-		-		-		-		-
Consumer		3		-		-		-		-		-
Other commercial loans		5,029		37		17		5,933		68		2
Other agricultural loans		1,515		22		-		104		2		-
State and political
subdivision loans		-		-		-		-		-		-
Total	$	24,214	$	229	$	17	$	12,879	$	105	$	2

	For the Six Months ended
	June 30, 2017						June 30, 2016
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		Cash Basis		Investment		Recognized		Cash Basis
Real estate loans:
Mortgages	$	940	$	6	$	-	$	425	$	9	$	-
Home Equity		58		2		-		60		2		-
Commercial		9,387		158		3		6,142		52		-
Agricultural		3,513		63		-		165		5		-
Construction		-		-		-		-		-		-
Consumer		2		-		-		-		-		-
Other commercial loans		5,313		77		27		5,942		134		3
Other agricultural loans		1,571		45		-		104		3		-
State and political
subdivision loans		-		-		-		-		-		-
Total	$	20,784	$	351	$	30	$	12,838	$	205	$	3

Summary of financing receivable credit exposures by internally assigned grades

The following tables represent credit exposures by internally assigned grades as of June 30, 2017 and December 31, 2016 (in thousands):

June 30, 2017	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	244,957	$	13,913	$	12,472	$	-	$	-	$	271,342
Agricultural		176,551		5,457		6,539		-		-		188,547
Construction		25,569		-		-		-		-		25,569
Other commercial loans		51,577		608		4,684		83		-		56,952
Other agricultural loans		30,641		195		2,138		-		-		32,974
State and political
subdivision loans		82,665		2,926		10,746		-		-		96,337
Total	$	611,960	$	23,099	$	36,579	$	83	$	-	$	671,721

December 31, 2016	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	225,185	$	14,045	$	13,347	$	-	$	-	$	252,577
Agricultural		110,785		8,231		4,608		-		-		123,624
Construction		25,441		-		-		-		-		25,441
Other commercial loans		51,396		2,049		5,105		89		-		58,639
Other agricultural loans		20,178		1,733		1,477		-		-		23,388
State and political
subdivision loans		83,620		13,066		828		-		-		97,514
Total	$	516,605	$	39,124	$	25,365	$	89	$	-	$	581,183

For residential real estate mortgages, home equity and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail below, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loan classes based on payment activity as of June 30, 2017 and December 31, 2016 (in thousands):

June 30, 2017	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	146,736	$	1,509	$	35	$	148,280
Home Equity		57,256		189		-		57,445
Consumer		10,459		144		-		10,603
Total	$	214,451	$	1,842	$	35	$	216,328

December 31, 2016
Real estate loans:
Mortgages	$	147,047	$	1,648	$	35	$	148,730
Home Equity		58,438		255		-	$	58,693
Consumer		10,892		109		4	$	11,005
Total	$	216,377	$	2,012	$	39	$	218,428

Aging analysis of past due financing receivables

The following table includes an aging analysis of the recorded investment of past due financing receivables as of June 30, 2017 and December 31, 2016 (in thousands):

													Total		90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Financing		Greater and
June 30, 2017	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	223	$	165	$	879	$	1,267	$	146,978	$	35	$	148,280	$	-
Home Equity		280		8		96		384		57,061		-		57,445		43
Commercial		1,219		302		4,389		5,910		263,443		1,989		271,342		553
Agricultural		454		100		1,163		1,717		186,096		734		188,547		159
Construction		-		-		-		-		25,569		-		25,569		-
Consumer		91		-		144		235		10,368		-		10,603		57
Other commercial loans		45		-		2,620		2,665		53,419		868		56,952		-
Other agricultural loans		283		-		739		1,022		31,952		-		32,974		-
State and political
subdivision loans		-		-		-		-		96,337		-		96,337		-
Total	$	2,595	$	575	$	10,030	$	13,200	$	871,223	$	3,626	$	888,049	$	812

Loans considered non-accrual	$	144	$	99	$	9,218	$	9,461	$	2,050	$	-	$	11,511
Loans still accruing		2,451		476		812		3,739		869,173		3,626		876,538
Total	$	2,595	$	575	$	10,030	$	13,200	$	871,223	$	3,626	$	888,049

December 31, 2016
Real estate loans:
Mortgages	$	630	$	36	$	1,109	$	1,775	$	146,920	$	35	$	148,730	$	173
Home Equity		384		49		209		642		58,051		-		58,693		160
Commercial		1,757		58		4,302		6,117		244,491		1,969		252,577		-
Agricultural		-		-		1,145		1,145		121,741		738		123,624		-
Construction		-		-		-		-		25,441		-		25,441		-
Consumer		115		40		83		238		10,763		4		11,005		67
Other commercial loans		95		35		4,004		4,134		53,884		621		58,639		-
Other agricultural loans		43		34		5		82		23,306		-		23,388		5
State and political
subdivision loans		-		-		-		-		97,514		-		97,514		-
Total	$	3,024	$	252	$	10,857	$	14,133	$	782,111	$	3,367	$	799,611	$	405

Loans considered non-accrual	$	172	$	105	$	10,452	$	10,729	$	725	$	-	$	11,454
Loans still accruing		2,852		147		405		3,404		781,386		3,367		788,157
Total	$	3,024	$	252	$	10,857	$	14,133	$	782,111	$	3,367	$	799,611

Summary of financing receivables on nonaccrual status

The following table reflects the financing receivables, excluding PCI loans, on non-accrual status as of June 30, 2017 and December 31, 2016, respectively. The balances are presented by class of financing receivable (in thousands):

	June 30, 2017		December 31, 2016
Real estate loans:
Mortgages	$	1,509	$	1,475
Home Equity		146		95
Commercial		4,588		4,445
Agricultural		1,314		1,340
Construction		-		-
Consumer		87		42
Other commercial loans		3,128		4,057
Other agricultural loans		739		-
State and political subdivision		-		-
	$	11,511	$	11,454

Summary of troubled debt restructurings on financing receivables

Loan modifications that are considered TDRs completed during the three and six months ended June 30, 2017 and 2016 were as follows (dollars in thousands):

	For the Three Months Ended June 30, 2017
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		5	$	-	$	6,093	$	-	$	6,093
Total		-		5	$	-	$	6,093	$	-	$	6,093

	For the Six Months Ended June 30, 2017
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		7	$	-	$	6,797	$	-	$	6,797
Total		-		7	$	-	$	6,797	$	-	$	6,797

	For the Three Months Ended June 30, 2016
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		3	$	-	$	438	$	-	$	438
Total		-		3	$	-	$	438	$	-	$	438

	For the Six Months Ended June 30, 2016
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Commercial		-		3	$	-		438	$	-		438
Total		-		3	$	-	$	438	$	-	$	438

Allowance for loan losses by impairment method

The following table segregates the allowance for loan losses (ALLL) into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of June 30, 2017 and December 31, 2016, respectively (in thousands):

	June 30, 2017						December 31, 2016
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Real estate loans:
Residential	$	77	$	1,027	$	1,104	$	32	$	1,032	$	1,064
Commercial		58		3,483		3,541		45		3,544		3,589
Agricultural		95		2,357		2,452		54		1,440		1,494
Construction		-		45		45		-		47		47
Consumer		2		123		125		-		122		122
Other commercial loans		207		924		1,131		326		1,001		1,327
Other agricultural loans		18		413		431		30		282		312
State and political
subdivision loans		-		838		838		-		833		833
Unallocated		-		312		312		-		98		98
Total	$	457	$	9,522	$	9,979	$	487	$	8,399	$	8,886

Roll forward of allowance for loan losses by portfolio segment

The following tables roll forward the balance of the ALLL by portfolio segment for the three and six month periods ended June 30, 2017 and 2016, respectively (in thousands):

	Balance at March 31, 2017		Charge-offs			Recoveries		Provision			Balance at June 30, 2017
Real estate loans:
Residential	$	1,042	$	(48	)	$	-	$	110		$	1,104
Commercial		3,665		-			2		(126	)		3,541
Agricultural		1,952		-			-		500			2,452
Construction		46		-			-		(1	)		45
Consumer		123		(17	)		12		7			125
Other commercial loans		1,215		-			-		(84	)		1,131
Other agricultural loans		306		-			-		125			431
State and political subdivision loans		824		-			-		14			838
Unallocated		232		-			-		80			312
Total	$	9,405	$	(65	)	$	14	$	625		$	9,979

	Balance at December 31, 2016		Charge-offs			Recoveries		Provision			Balance at June 30, 2017
Real estate loans:
Residential	$	1,064	$	(93	)	$	-	$	133		$	1,104
Commercial		3,589		(41	)		6		(13	)		3,541
Agricultural		1,494		-			-		958			2,452
Construction		47		-			-		(2	)		45
Consumer		122		(45	)		22		26			125
Other commercial loans		1,327		-			9		(205	)		1,131
Other agricultural loans		312		(5	)				124			431
State and political subdivision loans		833		-			-		5			838
Unallocated		98		-			-		214			312
Total	$	8,886	$	(184	)	$	37	$	1,240		$	9,979

	Balance at March 31, 2016		Charge-offs			Recoveries		Provision			Balance at June 30, 2016
Real estate loans:
Residential	$	966	$	(43	)	$	-	$	67		$	990
Commercial		3,533		-			4		(199	)		3,338
Agricultural		405							176			581
Construction		14		-			-		4			18
Consumer		96		(23	)		29		2			104
Other commercial loans		1,222		(18	)		-		112			1,316
Other agricultural loans		125							123			248
State and political subdivision loans		666		-			-		98			764
Unallocated		248		-			-		(248	)		-
Total	$	7,275	$	(84	)	$	33	$	135		$	7,359

	Balance at December 31, 2016		Charge-offs			Recoveries		Provision			Balance at June 30, 2016
Real estate loans:
Residential	$	905	$	(43	)	$	-	$	128		$	990
Commercial		3,376		-			8		(46	)		3,338
Agricultural		409		-					172			581
Construction		24		-			-		(6	)		18
Consumer		102		(38	)		68		(28	)		104
Other commercial loans		1,183		(18	)		6		145			1,316
Other agricultural loans		122							126			248
State and political subdivision loans		593		-			-		171			764
Unallocated		392		-			-		(392	)		-
Total	$	7,106	$	(99	)	$	82	$	270		$	7,359