58 / 146
42
As shown in the table above, the Company did not record a provision for loan and lease losses in 2015 but had a
provision of $350,000 in 2014. There were net loan charge-offs of $825,000 in 2015, relative to $779,000 in 2014.
Any shortfall in the allowance resulting from loan charge-offs, or a deficit identified pursuant to our analysis of remain-
ing probable losses, is always covered by quarter-end. Our allowance for probable losses on specifically identified
impaired loans was reduced by $1.536 million, or 28%, during 2015, due to the charge-off of losses against the allow-
ance and the release of reserves subsequent to the resolution of certain non-performing loans. The allowance for prob-
able losses inherent in non-impaired loans increased by $711,000, or 12%, during 2015 as a result of higher loan
balances, as well as qualitative factor adjustments for the estimated impact of the drought and the drop in oil prices on
credit quality. The “Provision for Loan and Lease Losses” section above includes additional details on our provision
and its relationship to actual charge-offs.
Provided below is a summary of the allocation of the allowance for loan and lease losses for specific loan categories at
the dates indicated. The allocation presented should not be viewed as an indication that charges to the allowance will
be incurred in these amounts or proportions, or that the portion of the allowance allocated to a particular loan category
represents the total amount available for charge-offs that may occur within that category.
Allocation of Allowance for Loan andLease Losses
(dollars in thousands)
Real Estate
4,783 $
68.68% 6,243 $
72.55% 5,544 $
71.94% 8,034 $
62.04% 8,260 $
76.19%
Agricultural
722
4.08% 986
2.86% 978
3.13% 258
2.56% 19
2.26%
Commercial and Industrial
(2)
2,533
25.92% 1,944
22.64% 3,787
22.00% 3,467
32.12% 6,396
16.78%
Consumer Loans
1,263
1.32% 1,765
1.95% 1,117
2.93% 2,114
3.28% 2,608
4.77%
Unallocated
1,122
-
310
-
251
-
-
-
-
-
Total
$10,423
100.00% $11,248
100.00% $11,677
100.00% $13,873
100.00% $ 17,283
100.00%
(1)
Represents percentage of loans in category to total loans
(2)
Includes mortgage warehouse lines
As of December 31,
2015
2014
2013
2012
2011
Amount
%Total
(1)
Loans
Amount
%Total
(1)
Loans
Amount
%Total
(1)
Loans
Amount
%Total
(1)
Loans
Amount
%Total
(1)
Loans
The Company’s allowance for loan and lease losses at December 31, 2015 represents management’s best estimate of
probable losses in the loan portfolio as of that date, but no assurance can be given that the Company will not experience
substantial losses relative to the size of the allowance. Furthermore, fluctuations in credit quality, changes in economic
conditions, updated accounting or regulatory requirements, and/or other factors could induce us to augment or reduce
the allowance.
Investments
The Company’s investments can at any given time consist of debt and marketable equity securities (together, the
“investment portfolio”), investments in the time deposits of other banks, surplus interest-earning balances in our Federal
Reserve Bank account, and overnight fed funds sold. Surplus FRB balances and fed funds sold to correspondent banks
represent the temporary investment of excess liquidity. The Company’s investments serve several purposes: 1) they
provide liquidity to even out cash flows from the loan and deposit activities of customers; 2) they provide a source of
pledged assets for securing public deposits, bankruptcy deposits and certain borrowed funds which require collateral;
3) they constitute a large base of assets with maturity and interest rate characteristics that can be changed more readily
than the loan portfolio, to better match changes in the deposit base and other funding sources of the Company; 4) they
are another interest-earning option for surplus funds when loan demand is light; and 5) they can provide partially tax
exempt income. Aggregate investments totaled $510 million, or 28% of total assets at December 31, 2015, compared
to $514 million, or 31% of total assets at December 31, 2014.