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Loans and Allowance for Loan Losses | 3 Months Ended
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Mar. 31, 2016
Loans and Leases Receivable Disclosure [Abstract] |
Loans and Allowance for Loan Losses |
(2) | Loans and Allowance for Loan Losses
Loans A summary of loans, by major class within the Company’s loan portfolio, at March 31, 2016 and December 31, 2015 is as follows:
|  | March 31, |  |  | December 31, |
(in thousands) |  | 2016 |  |  | 2015 |
Commercial, financial, and agricultural |  | $ | 148,040 |  |  | $ | 149,091 |
Real estate construction - residential |  |  | 18,017 |  |  |  | 16,895 |
Real estate construction - commercial |  |  | 36,322 |  |  |  | 33,943 |
Real estate mortgage - residential |  |  | 254,933 |  |  |  | 256,086 |
Real estate mortgage - commercial |  |  | 392,991 |  |  |  | 385,869 |
Installment and other consumer |  |  | 25,009 |  |  |  | 23,196 |
Total loans |  | $ | 875,312 |  |  | $ | 865,080 |
The Bank grants real estate, commercial, installment, and other consumer loans to customers located within the communities surrounding Jefferson City, Columbia, Clinton, Warsaw, Springfield, Branson and the greater Kansas City metropolitan area. As such, the Bank is susceptible to changes in the economic environment in these communities. The Bank does not have a concentration of credit in any one economic sector. Installment and other consumer loans consist primarily of the financing of automotive vehicles. At March 31, 2016, loans with a carrying value of $435.7 million, or $362.4 million fair value, were pledged to the Federal Home Loan Bank as collateral for borrowings and letters of credit. Allowance for Loan Losses The following is a summary of the allowance for loan losses during the periods indicated.
|  | Three Months Ended March 31, 2016 |
|  | Commercial, |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Installment |  |  |  |  |  |  |
|  | Financial, & |  |  | Construction - |  |  | Construction - |  |  | Mortgage - |  |  | Mortgage - |  |  | Loans to |  |  | Un- |  |  |  |
(in thousands) |  | Agricultural |  |  | Residential |  |  | Commercial |  |  | Residential |  |  | Commercial |  |  | Individuals |  |  | allocated |  |  | Total |
Balance at beginning of period |  | $ | 2,153 |  |  | $ | 59 |  |  | $ | 644 |  |  | $ | 2,439 |  |  | $ | 2,935 |  |  | $ | 273 |  |  | $ | 101 |  |  | $ | 8,604 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | (12 | ) |  |  | (15 | ) |  |  | 33 |  |  |  | 32 |  |  |  | 276 |  |  |  | (6 | ) |  |  | (58 | ) |  |  | 250 |
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off |  |  | 103 |  |  |  | 0 |  |  |  | 1 |  |  |  | 206 |  |  |  | 82 |  |  |  | 56 |  |  |  | 0 |  |  |  | 448 |
Less recoveries on loans |  |  | (97 | ) |  |  | 0 |  |  |  | (11 | ) |  |  | (8 | ) |  |  | (61 | ) |  |  | (48 | ) |  |  | 0 |  |  |  | (225 | )
Net loans charged off |  |  | 6 |  |  |  | 0 |  |  |  | (10 | ) |  |  | 198 |  |  |  | 21 |  |  |  | 8 |  |  |  | 0 |  |  |  | 223 |
Balance at end of period |  | $ | 2,135 |  |  | $ | 44 |  |  | $ | 687 |  |  | $ | 2,273 |  |  | $ | 3,190 |  |  | $ | 259 |  |  | $ | 43 |  |  | $ | 8,631 |
|  | Three Months Ended March 31, 2015 |
|  | Commercial, |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Installment |  |  |  |  |  |  |
|  | Financial, & |  |  | Construction - |  |  | Construction - |  |  | Mortgage - |  |  | Mortgage - |  |  | Loans to |  |  | Un- |  |  |  |
(in thousands) |  | Agricultural |  |  | Residential |  |  | Commercial |  |  | Residential |  |  | Commercial |  |  | Individuals |  |  | allocated |  |  | Total |
Balance at beginning of period |  | $ | 1,779 |  |  | $ | 171 |  |  | $ | 466 |  |  | $ | 2,527 |  |  | $ | 3,846 |  |  | $ | 270 |  |  | $ | 40 |  |  | $ | 9,099 |
Additions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for loan losses |  |  | (185 | ) |  |  | (300 | ) |  |  | (92 | ) |  |  | 241 |  |  |  | 259 |  |  |  | (67 | ) |  |  | 144 |  |  |  | 0 |
Deductions: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans charged off |  |  | 28 |  |  |  | 0 |  |  |  | 0 |  |  |  | 71 |  |  |  | 24 |  |  |  | 48 |  |  |  | 0 |  |  |  | 171 |
Less recoveries on loans |  |  | (575 | ) |  |  | (177 | ) |  |  | 0 |  |  |  | (12 | ) |  |  | (34 | ) |  |  | (35 | ) |  |  | 0 |  |  |  | (833 | )
Net loans charged off |  |  | (547 | ) |  |  | (177 | ) |  |  | 0 |  |  |  | 59 |  |  |  | (10 | ) |  |  | 13 |  |  |  | 0 |  |  |  | (662 | )
Balance at end of period |  | $ | 2,141 |  |  | $ | 48 |  |  | $ | 374 |  |  | $ | 2,709 |  |  | $ | 4,115 |  |  | $ | 190 |  |  | $ | 184 |  |  | $ | 9,761 |
Loans, or portions of loans, are charged off to the extent deemed uncollectible or a loss is confirmed. Loan charge-offs reduce the allowance for loan losses, and recoveries of loans previously charged off are added back to the allowance. If management determines that it is probable that all amounts due on a loan will not be collected under the original terms of the loan agreement, the loan is considered to be impaired. These loans are evaluated individually for impairment, and in conjunction with current economic conditions and loss experience, specific reserves are estimated as further discussed below. Loans not individually evaluated are aggregated by risk characteristics and reserves are recorded using a consistent methodology that considers historical loan loss experience by loan type, delinquencies, current economic conditions, loan risk ratings and industry concentration. Beginning in the first quarter of 2016, the Company began to lengthen its look-back period with the intent to increase such period from three to five years over the next two years. The Company believes that the five-year look-back period, which is consistent with the Company’s practices prior to the start of the economic recession in 2008, provides a representative historical loss period in the current economic environment. The following table provides the balance in the allowance for loan losses at March 31, 2016 and December 31, 2015, and the related loan balance by impairment methodology.
|  | Commercial, |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Real Estate |  |  | Installment |  |  |  |  |  |  |
|  | Financial, and |  |  | Construction - |  |  | Construction - |  |  | Mortgage - |  |  | Mortgage - |  |  | Loans to |  |  | Un- |  |  |  |
(in thousands) |  | Agricultural |  |  | Residential |  |  | Commercial |  |  | Residential |  |  | Commercial |  |  | Individuals |  |  | allocated |  |  | Total |
March 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 260 |  |  | $ | 0 |  |  | $ | 8 |  |  | $ | 980 |  |  | $ | 69 |  |  | $ | 31 |  |  | $ | 0 |  |  | $ | 1,348 |
Collectively evaluated for impairment |  |  | 1,875 |  |  |  | 44 |  |  |  | 679 |  |  |  | 1,293 |  |  |  | 3,121 |  |  |  | 228 |  |  |  | 43 |  |  |  | 7,283 |
Total |  | $ | 2,135 |  |  | $ | 44 |  |  | $ | 687 |  |  | $ | 2,273 |  |  | $ | 3,190 |  |  | $ | 259 |  |  | $ | 43 |  |  | $ | 8,631 |
Loans outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
impairment |  | $ | 941 |  |  | $ | 0 |  |  | $ | 52 |  |  | $ | 5,365 |  |  | $ | 2,435 |  |  | $ | 131 |  |  | $ | 0 |  |  | $ | 8,924 |
Collectively evaluated for impairment |  |  | 147,099 |  |  |  | 18,017 |  |  |  | 36,270 |  |  |  | 249,568 |  |  |  | 390,556 |  |  |  | 24,878 |  |  |  | 0 |  |  |  | 866,388 |
Total |  | $ | 148,040 |  |  | $ | 18,017 |  |  | $ | 36,322 |  |  | $ | 254,933 |  |  | $ | 392,991 |  |  | $ | 25,009 |  |  | $ | 0 |  |  | $ | 875,312 |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 285 |  |  | $ | 0 |  |  | $ | 15 |  |  | $ | 955 |  |  | $ | 266 |  |  | $ | 19 |  |  | $ | 0 |  |  | $ | 1,540 |
Collectively evaluated for impairment |  |  | 1,868 |  |  |  | 59 |  |  |  | 629 |  |  |  | 1,484 |  |  |  | 2,669 |  |  |  | 254 |  |  |  | 101 |  |  |  | 7,064 |
Total |  | $ | 2,153 |  |  | $ | 59 |  |  | $ | 644 |  |  | $ | 2,439 |  |  | $ | 2,935 |  |  | $ | 273 |  |  | $ | 101 |  |  | $ | 8,604 |
Loans outstanding: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 1,005 |  |  | $ | 0 |  |  | $ | 102 |  |  | $ | 5,936 |  |  | $ | 3,081 |  |  | $ | 144 |  |  | $ | 0 |  |  | $ | 10,268 |
Collectively evaluated for impairment |  |  | 148,086 |  |  |  | 16,895 |  |  |  | 33,841 |  |  |  | 250,150 |  |  |  | 382,788 |  |  |  | 23,052 |  |  |  | 0 |  |  |  | 854,812 |
Total |  | $ | 149,091 |  |  | $ | 16,895 |  |  | $ | 33,943 |  |  | $ | 256,086 |  |  | $ | 385,869 |  |  | $ | 23,196 |  |  | $ | 0 |  |  | $ | 865,080 |
Impaired Loans Loans evaluated under ASC 310-10-35 include loans which are individually evaluated for impairment. All other loans are collectively evaluated for impairment under ASC 450-20. Impaired loans individually evaluated for impairment totaled $8.9 million and $10.3 million at March 31, 2016 and December 31, 2015, respectively, and are comprised of loans on non-accrual status and loans which have been classified as troubled debt restructurings (TDRs). The net carrying value of impaired loans is generally based on the fair values of collateral obtained through independent appraisals or internal evaluations, or by discounting the total expected future cash flows. At March 31, 2016 and December 31, 2015, $5.5 million and $6.4 million, respectively, of impaired loans were evaluated based on the fair value less estimated selling costs of the loan’s collateral. Once the impairment amount is calculated a specific reserve allocation is recorded. At March 31, 2016, $1.3 million of the Company’s allowance for loan losses was allocated to impaired loans totaling $8.9 million compared to $1.5 million of the Company's allowance for loan losses allocated to impaired loans totaling approximately $10.3 million at December 31, 2015. Management determined that $3.8 million, or 42%, of total impaired loans required no reserve allocation at March 31, 2016 compared to $4.5 million, or 44%, at December 31, 2015 primarily due to adequate collateral values, acceptable payment history and adequate cash flow ability. The categories of impaired loans at March 31, 2016 and December 31, 2015 are as follows:
|  | March 31, |  |  | December 31, |
(in thousands) |  | 2016 |  |  | 2015 |
Non-accrual loans |  | $ | 3,072 |  |  | $ | 4,418 |
Performing TDRs |  |  | 5,852 |  |  |  | 5,850 |
Total impaired loans |  | $ | 8,924 |  |  | $ | 10,268 |
The following tables provide additional information about impaired loans at March 31, 2016 and December 31, 2015, respectively, segregated between loans for which an allowance has been provided and loans for which no allowance has been provided.
|  |  |  |  | Unpaid |  |  |  |
|  | Recorded |  |  | Principal |  |  | Specific |
(in thousands) |  | Investment |  |  | Balance |  |  | Reserves |
March 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 433 |  |  | $ | 433 |  |  | $ | 0 |
Real estate - residential |  |  | 1,215 |  |  |  | 1,219 |  |  |  | 0 |
Real estate - commercial |  |  | 2,123 |  |  |  | 2,523 |  |  |  | 0 |
Total |  | $ | 3,771 |  |  | $ | 4,175 |  |  | $ | 0 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 508 |  |  | $ | 526 |  |  | $ | 260 |
Real estate - construction commercial |  |  | 52 |  |  |  | 56 |  |  |  | 8 |
Real estate - residential |  |  | 4,150 |  |  |  | 4,178 |  |  |  | 980 |
Real estate - commercial |  |  | 312 |  |  |  | 371 |  |  |  | 69 |
Consumer |  |  | 131 |  |  |  | 171 |  |  |  | 31 |
Total |  | $ | 5,153 |  |  | $ | 5,302 |  |  | $ | 1,348 |
Total impaired loans |  | $ | 8,924 |  |  | $ | 9,477 |  |  | $ | 1,348 |
|  |  |  |  | Unpaid |  |  |  |
|  | Recorded |  |  | Principal |  |  | Specific |
(in thousands) |  | Investment |  |  | Balance |  |  | Reserves |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 448 |  |  | $ | 450 |  |  | $ | 0 |
Real estate - residential |  |  | 1,645 |  |  |  | 1,712 |  |  |  | 0 |
Real estate - commercial |  |  | 2,446 |  |  |  | 2,572 |  |  |  | 0 |
Total |  | $ | 4,539 |  |  | $ | 4,734 |  |  | $ | 0 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 557 |  |  | $ | 572 |  |  | $ | 285 |
Real estate - construction commercial |  |  | 102 |  |  |  | 115 |  |  |  | 15 |
Real estate - residential |  |  | 4,291 |  |  |  | 4,320 |  |  |  | 955 |
Real estate - commercial |  |  | 635 |  |  |  | 884 |  |  |  | 266 |
Consumer |  |  | 144 |  |  |  | 182 |  |  |  | 19 |
Total |  | $ | 5,729 |  |  | $ | 6,073 |  |  | $ | 1,540 |
Total impaired loans |  | $ | 10,268 |  |  | $ | 10,807 |  |  | $ | 1,540 |
The following table presents by class, information related to the average recorded investment and interest income recognized on impaired loans during the periods indicated.
|  | Three Months Ended March 31, |
|  | 2016 |  |  | 2015 |
|  |  |  |  | Interest |  |  |  |  |  | Interest |
|  | Average |  |  | Recognized |  |  | Average |  |  | Recognized |
|  | Recorded |  |  | For the |  |  | Recorded |  |  | For the |
(in thousands) |  | Investment |  |  | Period Ended |  |  | Investment |  |  | Period Ended |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 1,520 |  |  | $ | 15 |  |  | $ | 5,525 |  |  | $ | 20 |
Real estate - construction residential |  |  | 0 |  |  |  | 0 |  |  |  | 2,143 |  |  |  | 0 |
Real estate - construction commercial |  |  | 118 |  |  |  | 0 |  |  |  | 2,319 |  |  |  | 0 |
Real estate - residential |  |  | 1,513 |  |  |  | 39 |  |  |  | 3,180 |  |  |  | 12 |
Real estate - commercial |  |  | 2,622 |  |  |  | 42 |  |  |  | 10,899 |  |  |  | 65 |
Consumer |  |  | 0 |  |  |  | 0 |  |  |  | 28 |  |  |  | 0 |
Total |  | $ | 5,773 |  |  | $ | 96 |  |  | $ | 24,094 |  |  | $ | 97 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  | $ | 984 |  |  | $ | 12 |  |  | $ | 1,798 |  |  | $ | 6 |
Real estate - construction commercial |  |  | 65 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate - residential |  |  | 4,553 |  |  |  | 120 |  |  |  | 4,457 |  |  |  | 26 |
Real estate - commercial |  |  | 764 |  |  |  | 0 |  |  |  | 1,286 |  |  |  | 0 |
Consumer |  |  | 135 |  |  |  | 0 |  |  |  | 237 |  |  |  | 0 |
Total |  | $ | 6,501 |  |  | $ | 132 |  |  | $ | 7,778 |  |  | $ | 32 |
Total impaired loans |  | $ | 12,274 |  |  | $ | 228 |  |  | $ | 31,872 |  |  | $ | 129 |
The recorded investment varies from the unpaid principal balance primarily due to partial charge-offs taken resulting from current appraisals received. The amount recognized as interest income on impaired loans continuing to accrue interest, primarily related to troubled debt restructurings, was $228,000 and $129,000, for the three months ended March 31, 2016 and 2015, respectively. The average recorded investment in impaired loans is calculated on a monthly basis during the periods reported. Delinquent and Non-Accrual Loans The delinquency status of loans is determined based on the contractual terms of the notes. Borrowers are generally classified as delinquent once payments become 30 days or more past due. The Company’s policy is to discontinue the accrual of interest income on any loan when, in the opinion of management, the ultimate collectibility of interest or principal is no longer probable. In general, loans are placed on non-accrual when they become 90 days or more past due. However, management considers many factors before placing a loan on non-accrual, including the delinquency status of the loan, the overall financial condition of the borrower, the progress of management’s collection efforts and the value of the underlying collateral. Non-accrual loans are returned to accrual status when, in the opinion of management, the financial condition of the borrower indicates that the timely collectibility of interest and principal is probable and the borrower demonstrates the ability to pay under the terms of the note through a sustained period of repayment performance, which is generally six months. The following table provides aging information for the Company’s past due and non-accrual loans at March 31, 2016 and December 31, 2015.
|  | Current or |  |  |  |  |  | 90 Days |  |  |  |  |  |  |
|  | Less Than |  |  |  |  |  | Past Due |  |  |  |  |  |  |
|  | 30 Days |  |  | 30 - 89 Days |  |  | And Still |  |  |  |  |  |  |
(in thousands) |  | Past Due |  |  | Past Due |  |  | Accruing |  |  | Non-Accrual |  |  | Total |
March 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, Financial, and Agricultural |  | $ | 147,386 |  |  | $ | 395 |  |  | $ | 0 |  |  | $ | 259 |  |  | $ | 148,040 |
Real Estate Construction - Residential |  |  | 18,017 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 18,017 |
Real Estate Construction - Commercial |  |  | 36,270 |  |  |  | 0 |  |  |  | 0 |  |  |  | 52 |  |  |  | 36,322 |
Real Estate Mortgage - Residential |  |  | 251,366 |  |  |  | 1,783 |  |  |  | 58 |  |  |  | 1,726 |  |  |  | 254,933 |
Real Estate Mortgage - Commercial |  |  | 391,798 |  |  |  | 289 |  |  |  | 0 |  |  |  | 904 |  |  |  | 392,991 |
Installment and Other Consumer |  |  | 24,766 |  |  |  | 104 |  |  |  | 8 |  |  |  | 131 |  |  |  | 25,009 |
Total |  | $ | 869,603 |  |  | $ | 2,571 |  |  | $ | 66 |  |  | $ | 3,072 |  |  | $ | 875,312 |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, Financial, and Agricultural |  | $ | 148,597 |  |  | $ | 185 |  |  | $ | 1 |  |  | $ | 308 |  |  | $ | 149,091 |
Real Estate Construction - Residential |  |  | 16,830 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 16,830 |
Real Estate Construction - Commercial |  |  | 33,472 |  |  |  | 65 |  |  |  | 0 |  |  |  | 102 |  |  |  | 33,639 |
Real Estate Mortgage - Residential |  |  | 251,253 |  |  |  | 2,511 |  |  |  | 0 |  |  |  | 2,322 |  |  |  | 256,086 |
Real Estate Mortgage - Commercial |  |  | 384,053 |  |  |  | 643 |  |  |  | 0 |  |  |  | 1,542 |  |  |  | 386,238 |
Installment and Other Consumer |  |  | 22,840 |  |  |  | 207 |  |  |  | 5 |  |  |  | 144 |  |  |  | 23,196 |
Total |  | $ | 857,045 |  |  | $ | 3,611 |  |  | $ | 6 |  |  | $ | 4,418 |  |  | $ | 865,080 |
Credit Quality The Company categorizes loans into risk categories based upon an internal rating system reflecting management’s risk assessment. Loans are placed on watch status when one or more weaknesses that may result in the deterioration of the repayment exits or the Company’s credit position at some future date. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified may have a well defined weakness or weaknesses that jeopardize the repayment of the debt. Such loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected. A loan is classified as a troubled debt restructuring (TDR) when a borrower is experiencing financial difficulties that lead to the restructuring of a loan, and the Company grants concessions to the borrower in the restructuring that it would not otherwise consider. Loans classified as TDRs which are accruing interest are classified as performing TDRs. Loans classified as TDRs which are not accruing interest are classified as nonperforming TDRs and are included with all other nonaccrual loans for presentation purposes. It is the Company’s policy to discontinue the accrual of interest income on loans when management believes that the collection of interest or principal is doubtful. Loans are placed on non-accrual status when (1) deterioration in the financial condition of the borrower exists for which payment of full principal and interest is not expected, or (2) payment of principal or interest has been in default for a period of 90 days or more and the asset is not both well secured and in the process of collection. Subsequent interest payments received on such loans are applied to principal if any doubt exists as to the collectability of such principal; otherwise, such receipts are recorded as interest income on a cash basis. The following table presents the risk categories by class at March 31, 2016 and December 31, 2015.
(in thousands) |  | Commercial, Financial, & Agricultural |  |  | Real Estate Construction - Residential |  |  | Real Estate Construction - Commercial |  |  | Real Estate Mortgage - Residential |  |  | Real Estate Mortgage - Commercial |  |  | Installment and other Consumer |  |  | Total |
At March 31, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Watch |  | $ | 7,152 |  |  | $ | 1,064 |  |  | $ | 1,162 |  |  | $ | 23,291 |  |  | $ | 22,909 |  |  | $ | 0 |  |  | $ | 55,578 |
Substandard |  |  | 230 |  |  |  | 0 |  |  |  | 37 |  |  |  | 1,929 |  |  |  | 1,613 |  |  |  | 0 |  |  |  | 3,809 |
Performing TDRs |  |  | 683 |  |  |  | 0 |  |  |  | 0 |  |  |  | 3,639 |  |  |  | 1,530 |  |  |  | 0 |  |  |  | 5,852 |
Non-accrual |  |  | 259 |  |  |  | 0 |  |  |  | 52 |  |  |  | 1,726 |  |  |  | 904 |  |  |  | 131 |  |  |  | 3,072 |
Total |  | $ | 8,324 |  |  | $ | 1,064 |  |  | $ | 1,251 |  |  | $ | 30,585 |  |  | $ | 26,956 |  |  | $ | 131 |  |  | $ | 68,311 |
At December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Watch |  | $ | 8,663 |  |  | $ | 1,267 |  |  | $ | 1,296 |  |  | $ | 22,191 |  |  | $ | 24,303 |  |  | $ | 186 |  |  | $ | 57,906 |
Substandard |  |  | 421 |  |  |  | 0 |  |  |  | 37 |  |  |  | 3,737 |  |  |  | 1,485 |  |  |  | 36 |  |  |  | 5,716 |
Performing TDRs |  |  | 697 |  |  |  | 0 |  |  |  | 0 |  |  |  | 3,615 |  |  |  | 1,538 |  |  |  | 0 |  |  |  | 5,850 |
Non-accrual |  |  | 308 |  |  |  | 0 |  |  |  | 102 |  |  |  | 2,322 |  |  |  | 1,542 |  |  |  | 144 |  |  |  | 4,418 |
Total |  | $ | 10,089 |  |  | $ | 1,267 |  |  | $ | 1,435 |  |  | $ | 31,865 |  |  | $ | 28,868 |  |  | $ | 366 |  |  | $ | 73,890 |
Troubled Debt Restructurings At March 31, 2016, loans classified as TDRs totaled $6.0 million, of which $194,000 were classified as nonperforming TDRs and included in non-accrual loans and $5.9 million were classified as performing TDRs. At December 31, 2015, loans classified as TDRs totaled $6.4 million, of which $527,000 were classified as nonperforming TDRs and included in non-accrual loans and $5.9 million were classified as performing TDRs. Both performing and nonperforming TDRs are considered impaired loans. When an individual loan is determined to be a TDR, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the underlying collateral less applicable selling costs. Accordingly, specific reserves of $764,000 and $910,000 related to TDRs were allocated to the allowance for loan losses at March 31, 2016 and December 31, 2015, respectively. The following table summarizes loans that were modified as TDRs during the periods indicated.
|  | Three Months Ended March 31, |
|  | 2016 |  |  | 2015 |
|  | Recorded Investment (1) |  |  | Recorded Investment (1) |
(in thousands) |  | Number of Contracts |  |  | Pre- Modification |  |  | Post- Modification |  |  | Number of Contracts |  |  | Pre- Modification |  |  | Post- Modification |
Troubled Debt Restructurings |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial and agricultural |  |  | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  |  | 3 |  |  | $ | 250 |  |  | $ | 250 |
Real estate mortgage - residential |  |  | 1 |  |  |  | 78,148 |  |  |  | 78,148 |  |  |  | 2 |  |  |  | 144 |  |  |  | 144 |
Real estate mortgage - commercial |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 3 |  |  |  | 473 |  |  |  | 473 |
Total |  |  | 1 |  |  | $ | 78,148 |  |  | $ | 78,148 |  |  |  | 8 |  |  | $ | 867 |  |  | $ | 867 |
(1) The amounts reported post-modification are inclusive of all partial pay-downs and charge-offs, and no portion of the debt was forgiven. Loans modified as a TDR that were fully paid down, charged-off or foreclosed upon during the period ended are not reported. The Company’s portfolio of loans classified as TDRs include concessions for the borrower given financial condition such as interest rates below the current market rate, deferring principal payments, and extending maturity dates. During the three months ended March 31, 2016, one loan meeting the TDR criteria was modified compared to eight loans during the three months ended March 31, 2015. There were no loans modified as a TDR that defaulted during the three months ended March 31, 2016 and 2015, respectively, and within twelve months of their modification date. See Lending and Credit Management section for further information.

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