UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 0-11487

LAKELAND FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Indiana			35-1559596
(State or Other Jurisdiction			(IRS Employer
of Incorporation or Organization)			Identification No.)

202 East Center Street,
Warsaw	,	Indiana	46580
(Address of principal executive offices)			(Zip Code)

(574) 267‑6144

(Registrant’s Telephone Number, Including Area Code)

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, No par value

LKFN

NASDAQ

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b–2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding at ~~July 30,~~October 22, 2021: ~~25,300,100~~25,299,178

Table of Contents

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets — ~~June~~September 30, 2021 ~~, 2021~~ and December 31, 2020	1
	Consolidated Statements of Income — three months and nine months ended September 30, 2021 and ~~six months~~ ~~ended~~ ~~June 30, 2021 and~~ 2020	2
	Consolidated Statements of Comprehensive Income — three months and nine months ended September 30, 2021 and ~~six months~~ ~~ended~~ ~~June 30, 2021 and~~ 2020	3
	Consolidated Statements of Changes in Stockholders’ Equity — three months and nine months ended September 30, 2021 and ~~six months~~ ~~ended~~ ~~June~~ 3 0 ~~, 2021 and~~ 2020	4
	Consolidated Statements of Cash Flows — ~~three~~nine months ended September 30, 2021 and ~~six months~~ ~~ended~~ ~~June 30, 2021 and~~ 2020	6
	Notes to the Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3736
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	56
Item 4.	Controls and Procedures	57
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
SIGNATURES		60

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (in thousands, except share data)


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	57,412	$	74,457	Cash and due from banks	$	78,523	$	74,457
Short-term investments	Short-term investments	515,398		175,470		Short-term investments	478,710		175,470
Total cash and cash equivalents	Total cash and cash equivalents	572,810		249,927		Total cash and cash equivalents	557,233		249,927

Securities available-for-sale (carried at fair value)	Securities available-for-sale (carried at fair value)	1,124,235		734,845		Securities available-for-sale (carried at fair value)	1,239,715		734,845
Real estate mortgage loans held-for-sale	Real estate mortgage loans held-for-sale	7,005		11,218		Real estate mortgage loans held-for-sale	7,969		11,218

Loans, net of allowance for credit losses* of $71,713 and $61,408		4,281,996		4,587,748
Loans, net of allowance for credit losses* of $73,048 and $61,408						Loans, net of allowance for credit losses* of $73,048 and $61,408	4,166,405		4,587,748

Land, premises and equipment, net	Land, premises and equipment, net	59,539		59,298		Land, premises and equipment, net	59,998		59,298
Bank owned life insurance	Bank owned life insurance	96,921		95,227		Bank owned life insurance	97,224		95,227
Federal Reserve and Federal Home Loan Bank stock	Federal Reserve and Federal Home Loan Bank stock	13,772		13,772		Federal Reserve and Federal Home Loan Bank stock	13,772		13,772
Accrued interest receivable	Accrued interest receivable	17,056		18,761		Accrued interest receivable	17,780		18,761
Goodwill	Goodwill	4,970		4,970		Goodwill	4,970		4,970
Other assets	Other assets	54,610		54,669		Other assets	57,850		54,669
Total assets	Total assets	$	6,232,914	$	5,830,435	Total assets	$	6,222,916	$	5,830,435

LIABILITIES	LIABILITIES					LIABILITIES
Noninterest bearing deposits	Noninterest bearing deposits	$	1,743,000	$	1,538,331	Noninterest bearing deposits	$	1,762,021	$	1,538,331
Interest bearing deposits	Interest bearing deposits	3,651,664		3,498,474		Interest bearing deposits	3,652,617		3,498,474
Total deposits	Total deposits	5,394,664		5,036,805		Total deposits	5,414,638		5,036,805

Borrowings	Borrowings					Borrowings
Federal Home Loan Bank advances	Federal Home Loan Bank advances	75,000		75,000		Federal Home Loan Bank advances	75,000		75,000
Miscellaneous borrowings	Miscellaneous borrowings	0		10,500		Miscellaneous borrowings	0		10,500
Total borrowings	Total borrowings	75,000		85,500		Total borrowings	75,000		85,500

Accrued interest payable	Accrued interest payable	3,871		5,959		Accrued interest payable	2,916		5,959
Other liabilities	Other liabilities	81,908		44,987		Other liabilities	47,160		44,987
Total liabilities	Total liabilities	5,555,443		5,173,251		Total liabilities	5,539,714		5,173,251

STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY
Common stock: 90,000,000 shares authorized, 0 par value
25,762,538 shares issued and 25,289,966 outstanding as of June 30, 2021
Common stock: 90,000,000 shares authorized, no par value						Common stock: 90,000,000 shares authorized, no par value
25,775,133 shares issued and 25,299,178 outstanding as of September 30, 2021						25,775,133 shares issued and 25,299,178 outstanding as of September 30, 2021
25,713,408 shares issued and 25,239,748 outstanding as of December 31, 2020	25,713,408 shares issued and 25,239,748 outstanding as of December 31, 2020	117,796		114,927		25,713,408 shares issued and 25,239,748 outstanding as of December 31, 2020	119,625		114,927
Retained earnings	Retained earnings	552,063		529,005		Retained earnings	567,518		529,005
Accumulated other comprehensive income	Accumulated other comprehensive income	22,271		27,744		Accumulated other comprehensive income	10,932		27,744
Treasury stock at cost (472,572 shares as of June 30, 2021, 473,660 shares as of December 31, 2020)		(14,748)		(14,581)
Treasury stock at cost (475,955 shares as of September 30, 2021, 473,660 shares as of December 31, 2020)						Treasury stock at cost (475,955 shares as of September 30, 2021, 473,660 shares as of December 31, 2020)	(14,962)		(14,581)
Total stockholders’ equity	Total stockholders’ equity	677,382		657,095		Total stockholders’ equity	683,113		657,095
Noncontrolling interest	Noncontrolling interest	89		89		Noncontrolling interest	89		89
Total equity	Total equity	677,471		657,184		Total equity	683,202		657,184
Total liabilities and equity	Total liabilities and equity	$	6,232,914	$	5,830,435	Total liabilities and equity	$	6,222,916	$	5,830,435

* Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
NET INTEREST INCOME	NET INTEREST INCOME									NET INTEREST INCOME
Interest and fees on loans	Interest and fees on loans									Interest and fees on loans
Taxable	Taxable	$	42,342	$	42,649	$	85,803	$	88,703	Taxable	$	43,025	$	42,056	$	128,828	$	130,759
Tax exempt	Tax exempt	101		216		205		438		Tax exempt	119		104		324		542
Interest and dividends on securities	Interest and dividends on securities									Interest and dividends on securities
Taxable	Taxable	2,177		1,869		4,012		3,842		Taxable	2,470		1,577		6,482		5,419
Tax exempt	Tax exempt	2,870		2,033		5,359		4,039		Tax exempt	3,556		2,198		8,915		6,237
Other interest income	Other interest income	135		64		223		248		Other interest income	125		44		348		292
Total interest income	Total interest income	47,625		46,831		95,602		97,270		Total interest income	49,295		45,979		144,897		143,249

Interest on deposits	Interest on deposits	3,890		7,184		8,108		18,383		Interest on deposits	3,479		5,941		11,587		24,324
Interest on borrowings	Interest on borrowings									Interest on borrowings
Short-term	Short-term	0		45		7		407		Short-term	0		51		7		458
Long-term	Long-term	74		74		147		98		Long-term	75		74		222		172
Total interest expense	Total interest expense	3,964		7,303		8,262		18,888		Total interest expense	3,554		6,066		11,816		24,954

NET INTEREST INCOME	NET INTEREST INCOME	43,661		39,528		87,340		78,382		NET INTEREST INCOME	45,741		39,913		133,081		118,295
													`
Provision for credit losses*	Provision for credit losses*	(1,700)		5,500		(223)		12,100		Provision for credit losses*	1,300		1,750		1,077		13,850

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	45,361		34,028		87,563		66,282		NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	44,441		38,163		132,004		104,445

NONINTEREST INCOME	NONINTEREST INCOME									NONINTEREST INCOME
Wealth advisory fees	Wealth advisory fees	2,078		1,805		4,256		3,664		Wealth advisory fees	2,177		1,930		6,433		5,594
Investment brokerage fees	Investment brokerage fees	575		310		1,039		727		Investment brokerage fees	521		421		1,560		1,148
Service charges on deposit accounts	Service charges on deposit accounts	2,521		2,189		5,012		4,961		Service charges on deposit accounts	2,756		2,491		7,768		7,452
Loan and service fees	Loan and service fees	3,042		2,425		5,818		4,833		Loan and service fees	3,005		2,637		8,823		7,470
Merchant card fee income	Merchant card fee income	766		594		1,388		1,263		Merchant card fee income	838		670		2,226		1,933
Bank owned life insurance income	Bank owned life insurance income	705		836		1,461		544		Bank owned life insurance income	640		932		2,101		1,476
Interest rate swap fee income	Interest rate swap fee income	505		1,309		754		1,962		Interest rate swap fee income	180		2,143		934		4,105
Mortgage banking income		415		1,354		1,788		1,940
Mortgage banking income (loss)										Mortgage banking income (loss)	(32)		1,005		1,756		2,945
Net securities gains	Net securities gains	44		49		797		49		Net securities gains	0		314		797		363
Other income	Other income	689		298		1,584		2,003		Other income	1,029		572		2,613		2,575
Total noninterest income	Total noninterest income	11,340		11,169		23,897		21,946		Total noninterest income	11,114		13,115		35,011		35,061

NONINTEREST EXPENSE	NONINTEREST EXPENSE									NONINTEREST EXPENSE
Salaries and employee benefits	Salaries and employee benefits	15,762		11,424		30,147		22,990		Salaries and employee benefits	14,230		12,706		44,377		35,696
Net occupancy expense	Net occupancy expense	1,427		1,545		2,930		2,932		Net occupancy expense	1,413		1,404		4,343		4,336
Equipment costs	Equipment costs	1,318		1,430		2,763		2,847		Equipment costs	1,371		1,369		4,134		4,216
Data processing fees and supplies	Data processing fees and supplies	3,204		2,829		6,523		5,711		Data processing fees and supplies	3,169		3,025		9,692		8,736
Corporate and business development	Corporate and business development	699		627		2,208		1,738		Corporate and business development	1,000		586		3,208		2,324
FDIC insurance and other regulatory fees	FDIC insurance and other regulatory fees	495		403		959		670		FDIC insurance and other regulatory fees	748		554		1,707		1,224
Professional fees	Professional fees	1,839		1,053		3,716		2,200		Professional fees	1,342		1,306		5,058		3,506
Other expense	Other expense	1,904		1,768		4,148		4,080		Other expense	2,694		2,175		6,842		6,255
Total noninterest expense	Total noninterest expense	26,648		21,079		53,394		43,168		Total noninterest expense	25,967		23,125		79,361		66,293

INCOME BEFORE INCOME TAX EXPENSE	INCOME BEFORE INCOME TAX EXPENSE	30,053		24,118		58,066		45,060		INCOME BEFORE INCOME TAX EXPENSE	29,588		28,153		87,654		73,213
Income tax expense	Income tax expense	5,705		4,448		10,735		8,091		Income tax expense	5,469		5,377		16,204		13,468
NET INCOME	NET INCOME	$	24,348	$	19,670	$	47,331	$	36,969	NET INCOME	$	24,119	$	22,776	$	71,450	$	59,745

BASIC WEIGHTED AVERAGE COMMON SHARES	BASIC WEIGHTED AVERAGE COMMON SHARES	25,473,497		25,412,014		25,465,621		25,517,499		BASIC WEIGHTED AVERAGE COMMON SHARES	25,479,654		25,418,712		25,472,185		25,484,329

BASIC EARNINGS PER COMMON SHARE	BASIC EARNINGS PER COMMON SHARE	$	0.96	$	0.77	$	1.86	$	1.45	BASIC EARNINGS PER COMMON SHARE	$	0.95	$	0.89	$	2.81	$	2.34

DILUTED WEIGHTED AVERAGE COMMON SHARES	DILUTED WEIGHTED AVERAGE COMMON SHARES	25,602,063		25,469,680		25,596,843		25,594,959		DILUTED WEIGHTED AVERAGE COMMON SHARES	25,635,288		25,487,302		25,608,655		25,618,401

DILUTED EARNINGS PER COMMON SHARE	DILUTED EARNINGS PER COMMON SHARE	$	0.95	$	0.77	$	1.85	$	1.44	DILUTED EARNINGS PER COMMON SHARE	$	0.94	$	0.89	$	2.79	$	2.33

* Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited - in thousands)


		Three months ended June 30,				Six months ended June 30,					Three months ended September 30,				Nine months ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
Net income	Net income	$	24,348	$	19,670	$	47,331	$	36,969	Net income	$	24,119	$	22,776	$	71,450	$	59,745
Other comprehensive income (loss)	Other comprehensive income (loss)									Other comprehensive income (loss)
Change in securities available-for-sale:	Change in securities available-for-sale:									Change in securities available-for-sale:
Unrealized holding gain (loss) on securities available-for-sale arising during the period	Unrealized holding gain (loss) on securities available-for-sale arising during the period	9,052		2,840		(6,245)		16,059		Unrealized holding gain (loss) on securities available-for-sale arising during the period	(14,411)		789		(20,656)		16,848
Reclassification adjustment for gains included in net income	Reclassification adjustment for gains included in net income	(44)		(49)		(797)		(49)		Reclassification adjustment for gains included in net income	0		(314)		(797)		(363)
Net securities gain (loss) activity during the period	Net securities gain (loss) activity during the period	9,008		2,791		(7,042)		16,010		Net securities gain (loss) activity during the period	(14,411)		475		(21,453)		16,485
Tax effect	Tax effect	(1,892)		(586)		1,479		(3,361)		Tax effect	3,026		(101)		4,505		(3,462)
Net of tax amount	Net of tax amount	7,116		2,205		(5,563)		12,649		Net of tax amount	(11,385)		374		(16,948)		13,023
Defined benefit pension plans:	Defined benefit pension plans:									Defined benefit pension plans:
Amortization of net actuarial loss	Amortization of net actuarial loss	60		63		120		126		Amortization of net actuarial loss	61		63		181		189
Net gain activity during the period	Net gain activity during the period	60		63		120		126		Net gain activity during the period	61		63		181		189
Tax effect	Tax effect	(15)		(16)		(30)		(32)		Tax effect	(15)		(15)		(45)		(47)
Net of tax amount	Net of tax amount	45		47		90		94		Net of tax amount	46		48		136		142
Total other comprehensive income (loss), net of tax	Total other comprehensive income (loss), net of tax	7,161		2,252		(5,473)		12,743		Total other comprehensive income (loss), net of tax	(11,339)		422		(16,812)		13,165
Comprehensive income	Comprehensive income	$	31,509	$	21,922	$	41,858	$	49,712	Comprehensive income	$	12,780	$	23,198	$	54,638	$	72,910

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited - in thousands, except share and per share data)


		Three Months Ended																								Three Months Ended
		Common Stock			Retained Earnings				Accumulated Other Comprehensive Income (Loss)		Treasury Stock					Total Stockholders’ Equity			Noncontrolling Interest				Total Equity			Common Stock				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Treasury Stock				Total Stockholders’ Equity				Noncontrolling Interest				Total Equity
		Shares	Stock												Shares						Stock

Balance at April 1, 2020		25,234,572	$	113,337			$	484,857					$	22,550				$	(14,261)			$	606,483			$	89	$	606,572
Balance at July 1, 2020																									Balance at July 1, 2020	25,233,280		$	113,424			$	496,891			$	24,802			$	(14,314)			$	620,803			$	89			$	620,892
Comprehensive income:	Comprehensive income:																								Comprehensive income:
Net income	Net income				19,670											19,670							19,670		Net income					22,776												22,776								22,776
Other comprehensive income, net of tax	Other comprehensive income, net of tax								2,252							2,252							2,252		Other comprehensive income, net of tax									422								422								422
Cash dividends declared and paid, $0.30 per share	Cash dividends declared and paid, $0.30 per share				(7,636)											(7,636)							(7,636)		Cash dividends declared and paid, $0.30 per share					(7,626)												(7,626)								(7,626)
Treasury shares purchased under deferred directors' plan	Treasury shares purchased under deferred directors' plan	(1,292)	53								(53)					0							0		Treasury shares purchased under deferred directors' plan	(4,709)		212										(212)				0								0
Stock activity under equity compensation plans	Stock activity under equity compensation plans															0							0		Stock activity under equity compensation plans	7,800		0														0								0
Stock based compensation expense	Stock based compensation expense		34													34							34		Stock based compensation expense			375														375								375
Balance at June 30, 2020		25,233,280	$	113,424	$	496,891			$	24,802	$	(14,314)				$	620,803		$	89			$	620,892
Balance at September 30, 2020																									Balance at September 30, 2020	25,236,371		$	114,011	$	512,041			$	25,224			$	(14,526)			$	636,750			$	89			$	636,839

Balance at April 1, 2021		25,290,908	$	114,764	$	536,390			$	15,110	$	(14,685)				$	651,579		$	89			$	651,668
Balance at July 1, 2021																									Balance at July 1, 2021	25,289,966		$	117,796	$	552,063			$	22,271			$	(14,748)			$	677,382			$	89			$	677,471

Comprehensive income:	Comprehensive income:																								Comprehensive income:
Net income	Net income				24,348											24,348							24,348		Net income					24,119												24,119								24,119
Other comprehensive income, net of tax	Other comprehensive income, net of tax								7,161							7,161							7,161		Other comprehensive income, net of tax									(11,339)								(11,339)								(11,339)
Cash dividends declared and paid, $0.34 per share	Cash dividends declared and paid, $0.34 per share				(8,675)											(8,675)							(8,675)		Cash dividends declared and paid, $0.34 per share					(8,664)												(8,664)								(8,664)
Treasury shares purchased under deferred directors' plan	Treasury shares purchased under deferred directors' plan	(942)	63								(63)					0							0		Treasury shares purchased under deferred directors' plan	(3,383)		214										(214)				0								0
Treasury shares sold and distributed under deferred directors' plan	Treasury shares sold and distributed under deferred directors' plan															0							0		Treasury shares sold and distributed under deferred directors' plan	0		0										0				0								0
Stock activity under equity compensation plans	Stock activity under equity compensation plans															0							0		Stock activity under equity compensation plans	12,595		(170)														(170)								(170)
Stock based compensation expense	Stock based compensation expense		2,969													2,969							2,969		Stock based compensation expense			1,785														1,785								1,785
Balance at June 30, 2021		25,289,966	$	117,796	$	552,063			$	22,271	$	(14,748)				$	677,382		$	89			$	677,471
Balance at September 30, 2021																									Balance at September 30, 2021	25,299,178		$	119,625	$	567,518			$	10,932			$	(14,962)			$	683,113			$	89			$	683,202

Table of Contents


		Six Months Ended																								Nine Months Ended
		Common Stock			Retained Earnings				Accumulated Other Comprehensive Income (Loss)		Treasury Stock					Total Stockholders’ Equity			Noncontrolling Interest				Total Equity			Common Stock						Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Stockholders’ Equity		Noncontrolling Interest		Total Equity
		Shares	Stock												Shares						Stock

Balance at January 1, 2020	Balance at January 1, 2020	25,444,275	$	114,858			$	475,247					$	12,059				$	(4,153)			$	598,011			$	89	$	598,100	Balance at January 1, 2020	25,444,275			$	114,858	$	475,247	$	12,059	$	(4,153)	$	598,011	$	89	$	598,100
Comprehensive income:	Comprehensive income:																								Comprehensive income:
Net income	Net income				36,969											36,969							36,969		Net income								59,745						59,745				59,745
Other comprehensive income, net of tax	Other comprehensive income, net of tax								12,743							12,743							12,743		Other comprehensive income, net of tax									13,165				13,165				13,165
Cash dividends declared and paid, $0.60 per share					(15,325)											(15,325)							(15,325)
Cash dividends declared and paid, $0.90 per share																									Cash dividends declared and paid, $0.90 per share							(22,951)						(22,951)				(22,951)
Treasury shares purchased under share repurchase plan	Treasury shares purchased under share repurchase plan	(289,101)	0								(10,012)					(10,012)							(10,012)		Treasury shares purchased under share repurchase plan	(289,101)		0								(10,012)		(10,012)				(10,012)
Treasury shares purchased under deferred directors' plan	Treasury shares purchased under deferred directors' plan	(5,741)	268								(268)					0							0		Treasury shares purchased under deferred directors' plan	(10,450)		480								(480)		0				0
Treasury shares sold and distributed under deferred directors' plan	Treasury shares sold and distributed under deferred directors' plan	5,748	(119)								119					0							0		Treasury shares sold and distributed under deferred directors' plan	5,748		(119)								119		0				0
Stock activity under equity compensation plans	Stock activity under equity compensation plans	78,099	(2,030)													(2,030)							(2,030)		Stock activity under equity compensation plans	85,899		(2,030)										(2,030)				(2,030)
Stock based compensation expense	Stock based compensation expense		447													447							447		Stock based compensation expense			822										822				822
Balance at June 30, 2020		25,233,280	$	113,424	$	496,891			$	24,802	$	(14,314)				$	620,803		$	89			$	620,892
Balance at September 30, 2020																									Balance at September 30, 2020	25,236,371		$	114,011			$	512,041	$	25,224	$	(14,526)	$	636,750	$	89	$	636,839

Balance at January 1, 2021	Balance at January 1, 2021	25,239,748	$	114,927	$	529,005			$	27,744	$	(14,581)				$	657,095		$	89			$	657,184	Balance at January 1, 2021	25,239,748		$	114,927			$	529,005	$	27,744	$	(14,581)	$	657,095	$	89	$	657,184
Adoption of ASU 2016-13	Adoption of ASU 2016-13				(6,951)											(6,951)							(6,951)		Adoption of ASU 2016-13							(6,951)						(6,951)				(6,951)
Comprehensive income:	Comprehensive income:																								Comprehensive income:
Net income	Net income				47,331											47,331							47,331		Net income							71,450						71,450				71,450
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax								(5,473)							(5,473)							(5,473)		Other comprehensive loss, net of tax									(16,812)				(16,812)				(16,812)
Cash dividends declared and paid, $0.68 per share					(17,322)											(17,322)							(17,322)
Cash dividends declared and paid, $1.02 per share																									Cash dividends declared and paid, $1.02 per share							(25,986)						(25,986)				(25,986)
Treasury shares purchased under deferred directors' plan	Treasury shares purchased under deferred directors' plan	(4,576)	282								(282)					0							0		Treasury shares purchased under deferred directors' plan	(7,959)		496								(496)		0				0
Treasury shares sold and distributed under deferred directors' plan	Treasury shares sold and distributed under deferred directors' plan	5,664	(115)								115					0							0		Treasury shares sold and distributed under deferred directors' plan	5,664		(115)								115		0				0
Stock activity under equity compensation plans	Stock activity under equity compensation plans	49,130	(1,648)													(1,648)							(1,648)		Stock activity under equity compensation plans	61,725		(1,818)										(1,818)				(1,818)
Stock based compensation expense	Stock based compensation expense		4,350													4,350							4,350		Stock based compensation expense			6,135										6,135				6,135
Balance at June 30, 2021		25,289,966	$	117,796	$	552,063			$	22,271	$	(14,748)				$	677,382		$	89			$	677,471
Balance at September 30, 2021																									Balance at September 30, 2021	25,299,178		$	119,625			$	567,518	$	10,932	$	(14,962)	$	683,113	$	89	$	683,202

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited - in thousands)


Six Months Ended June 30,		2021		2020
Nine Months Ended September 30,						Nine Months Ended September 30,	2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	47,331	$	36,969	Net income	$	71,450	$	59,745
Adjustments to reconcile net income to net cash from operating activities:	Adjustments to reconcile net income to net cash from operating activities:					Adjustments to reconcile net income to net cash from operating activities:
Depreciation	Depreciation	3,053		2,989		Depreciation	4,555		4,477
Provision for credit losses*	Provision for credit losses*	(223)		12,100		Provision for credit losses*	1,077		13,850
Gain on sale and write down of other real estate owned	Gain on sale and write down of other real estate owned	(37)		0		Gain on sale and write down of other real estate owned	(53)		0
Amortization of loan servicing rights	Amortization of loan servicing rights	705		359		Amortization of loan servicing rights	1,697		563
Net change in loan servicing rights valuation allowance	Net change in loan servicing rights valuation allowance	(197)		506		Net change in loan servicing rights valuation allowance	(197)		628
Loans originated for sale, including participations	Loans originated for sale, including participations	(64,706)		(59,288)		Loans originated for sale, including participations	(92,728)		(93,805)
Net gain on sales of loans	Net gain on sales of loans	(2,770)		(1,458)		Net gain on sales of loans	(3,609)		(3,286)
Proceeds from sale of loans, including participations	Proceeds from sale of loans, including participations	70,988		48,113		Proceeds from sale of loans, including participations	98,655		90,568
Net (gain) loss on sales of premises and equipment	Net (gain) loss on sales of premises and equipment	(1)		81		Net (gain) loss on sales of premises and equipment	4		82
Net gain on sales and calls of securities available-for-sale	Net gain on sales and calls of securities available-for-sale	(797)		(49)		Net gain on sales and calls of securities available-for-sale	(797)		(363)
Net securities amortization	Net securities amortization	2,109		1,959		Net securities amortization	3,457		3,021
Stock based compensation expense	Stock based compensation expense	4,350		447		Stock based compensation expense	6,135		822
Earnings on life insurance	Earnings on life insurance	(1,461)		(544)		Earnings on life insurance	(2,101)		(1,476)
Gain on life insurance	Gain on life insurance	(202)		(576)		Gain on life insurance	(404)		(576)
Tax benefit of stock award issuances	Tax benefit of stock award issuances	(266)		(71)		Tax benefit of stock award issuances	(266)		(71)
Net change:	Net change:					Net change:
Interest receivable and other assets	Interest receivable and other assets	1,788		(655)		Interest receivable and other assets	(2,090)		(3,987)
Interest payable and other liabilities	Interest payable and other liabilities	(599)		(142)		Interest payable and other liabilities	1,196		(8,927)
Total adjustments	Total adjustments	11,734		3,771		Total adjustments	14,531		1,520
Net cash from operating activities	Net cash from operating activities	59,065		40,740		Net cash from operating activities	85,981		61,265

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from sale of securities available- for-sale	Proceeds from sale of securities available- for-sale	13,964		1,148		Proceeds from sale of securities available- for-sale	13,964		6,413
Proceeds from maturities, calls and principal paydowns of securities available-for-sale	Proceeds from maturities, calls and principal paydowns of securities available-for-sale	66,576		40,430		Proceeds from maturities, calls and principal paydowns of securities available-for-sale	102,399		69,259
Purchases of securities available-for-sale	Purchases of securities available-for-sale	(437,680)		(47,370)		Purchases of securities available-for-sale	(640,364)		(89,934)
Purchase of life insurance	Purchase of life insurance	(586)		(242)		Purchase of life insurance	(648)		(361)
Net (increase) decrease in total loans	Net (increase) decrease in total loans	296,032		(428,472)		Net (increase) decrease in total loans	410,323		(527,886)
Proceeds from sales of land, premises and equipment	Proceeds from sales of land, premises and equipment	2		242		Proceeds from sales of land, premises and equipment	6		651
Purchases of land, premises and equipment	Purchases of land, premises and equipment	(3,295)		(3,278)		Purchases of land, premises and equipment	(5,265)		(5,154)
Proceeds from sales of other real estate	Proceeds from sales of other real estate	167		0		Proceeds from sales of other real estate	946		0
Proceeds from life insurance	Proceeds from life insurance	531		1,283		Proceeds from life insurance	931		1,285
Net cash from investing activities	Net cash from investing activities	(64,289)		(436,259)		Net cash from investing activities	(117,708)		(545,727)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in total deposits	Net increase in total deposits	357,859		509,608		Net increase in total deposits	377,833		634,135
Net increase (decrease) in short-term borrowings	Net increase (decrease) in short-term borrowings	(10,500)		35,500		Net increase (decrease) in short-term borrowings	(10,500)		10,500
Payments on short-term FHLB borrowings	Payments on short-term FHLB borrowings	0		(170,000)		Payments on short-term FHLB borrowings	0		(170,000)
Proceeds from long-term FHLB borrowings	Proceeds from long-term FHLB borrowings	0		75,000		Proceeds from long-term FHLB borrowings	0		75,000
Common dividends paid	Common dividends paid	(17,309)		(15,312)		Common dividends paid	(25,973)		(22,938)
Preferred dividends paid	Preferred dividends paid	(13)		(13)		Preferred dividends paid	(13)		(13)
Payments related to equity incentive plans	Payments related to equity incentive plans	(1,648)		(2,030)		Payments related to equity incentive plans	(1,818)		(2,030)
Purchase of treasury stock	Purchase of treasury stock	(282)		(10,280)		Purchase of treasury stock	(496)		(10,492)
Net cash from financing activities	Net cash from financing activities	328,107		422,473		Net cash from financing activities	339,033		514,162
Net change in cash and cash equivalents	Net change in cash and cash equivalents	322,883		26,954		Net change in cash and cash equivalents	307,306		29,700
Cash and cash equivalents at beginning of the period	Cash and cash equivalents at beginning of the period	249,927		99,381		Cash and cash equivalents at beginning of the period	249,927		99,381
Cash and cash equivalents at end of the period	Cash and cash equivalents at end of the period	$	572,810	$	126,335	Cash and cash equivalents at end of the period	$	557,233	$	129,081
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	10,350	$	22,045	Interest	$	14,859	$	30,255
Income taxes	Income taxes	14,262		20,000		Income taxes	20,637		14,380
Supplemental non-cash disclosures:	Supplemental non-cash disclosures:					Supplemental non-cash disclosures:
Loans transferred to other real estate owned	Loans transferred to other real estate owned	893		35		Loans transferred to other real estate owned	893		35
Securities purchases payable	Securities purchases payable	40,605		4,783		Securities purchases payable	4,982		7,712

* Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

The accompanying notes are an integral part of these consolidated financial statements.

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NOTE 1. BASIS OF PRESENTATION

This report is filed for Lakeland Financial Corporation (the "Company"), which has 2 wholly owned subsidiaries, Lake City Bank (the "Bank") and LCB Risk Management, a captive insurance company. Also included in this report are results for the Bank’s wholly owned subsidiary, LCB Investments II, Inc. ("LCB Investments"), which manages the Bank’s investment portfolio. LCB Investments owns LCB Funding, Inc. ("LCB Funding"), a real estate investment trust. All significant inter-company balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and are unaudited. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2021 are not necessarily indicative of the results that may be expected for any subsequent reporting periods, including the year ending December 31, 2021. The Company’s 2020 Annual Report on Form 10-K should be read in conjunction with these statements.

Adoption of New Accounting Standards

In June 2016, the FASB issued ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update, commonly referred to as the current expected credit losses methodology (“CECL”), ~~will change~~changes the accounting for credit losses on loans and debt securities. Under the new guidance, the Company’s measurement of expected credit losses is ~~to be~~ based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. For loans, this measurement ~~will take~~takes place at the time the financial asset is first added to the balance sheet and periodically thereafter. This differs significantly from the “incurred loss” model previously required, but still permitted, under GAAP, which delays recognition until it is probable a loss has been incurred. In addition, the guidance ~~will modify~~modifies the other-than-temporary impairment model for available-for-sale debt securities to require an allowance for credit impairment instead of a direct write-down, which ~~will allow~~allows for reversal of credit impairments in future periods. This guidance was effective, subject to optional delay discussed below, for the Company for fiscal years beginning after December 15, 2019, including interim periods in those fiscal years.

As previously disclosed, the Company implemented the CECL methodology and ran it concurrently with the historical incurred method. Under a provision provided by the CARES Act, the Company elected to delay the adoption of FASB’s new rule covering the CECL standard. On December 27, 2020, ~~President~~then-President Trump signed into law the Consolidated Appropriations Act, 2021. This law extended relief for troubled debt restructurings and provided for further delay of the current expected credit losses adoption under the CARES Act to January 1, 2022, with early adoption permitted. The Company elected to remain on the incurred loan loss methodology for 2020.

The Company adopted ASU 2016-13 during the first quarter of 2021, effective January 1, 2021. Upon adoption, the Company recognized a $9.1 million increase in the allowance for credit losses. This resulted in a one-time cumulative effect adjustment decreasing ~~beginning~~ retained earnings as of January 1, 2021 by $7.0 million, net of deferred taxes of $2.1 million. The Company did not recognize an allowance for credit impairment for available-for-sale securities.

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The following table illustrates the impact of adoption of the ASU:


	January 1, 2021
(dollars in thousands)	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Loans
Commercial and industrial loans	$	32,645	$	28,333	$	4,312
Commercial real estate and multi-family residential loans	27,223		22,907		4,316
Agri-business and agricultural loans	4,103		3,043		1,060
Other commercial loans	1,357		416		941
Consumer 1-4 family loans	3,572		2,619		953
Other consumer loans	1,300		951		349
Unallocated	258		3,139		(2,881)
Allowance for credit losses	$	70,458	$	61,408	$	9,050

The Company’s loan segmentation, as disclosed in “Note 3 – Loans”, did not change as a result of adopting this ASU.

In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC published an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company is not adopting the capital transition relief over the permissible three-year or five-year periods.

In August 2018, the FASB issued ASU 2018-14 “Compensation — Retirement Benefits — Defined Benefit Plans — General (Topic 715-20): Disclosure Framework — Changes to the Disclosure Requirements for Defined Benefit Plans.” The ASU updated the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans by adding, clarifying and removing certain disclosures. These amendments are effective for fiscal years ending after December 15, 2020, for public business entities, and are to be applied on a retrospective basis to all periods presented. The Company adopted this new accounting standard on January 1, 2021, and the adoption did not have a material impact on its financial statements.

In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” These amendments remove specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intraperiod tax allocation; exceptions to accounting for basis differences where there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. It also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to ~~tax; and~~tax. It also enacts changes in tax laws in interim periods. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this new accounting standard on January 1, 2021, and the adoption did not have a material impact on its financial statements.

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In January 2020, the FASB issued ASU No. 2020-1 “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” These amendments, among other things, clarify that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments-Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments also clarify that, when determining the accounting for certain forward contracts and purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application is permitted, including early adoption in an interim period. An entity should apply ASU 2020-1 prospectively at the beginning of the interim period that includes the adoption date. The Company adopted ASU 2020-1 on January 1, 2021 and it did not have a material impact on its financial statements.

In October 2020, the FASB issued ASU No. 2020-8, "Codification Improvements to Subtopic 310-20, Receivables—Nonrefundable Fees and Other Costs," to clarify that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and early application is not permitted. The Company adopted this new accounting standard on January 1, 2021, and the adoption did not have a material impact on its financial statements.

Newly Issued But Not Yet Effective Accounting Standards

On March 12, 2020, the FASB issued Accounting Standards Update (ASU) 2020-4, ~~Reference~~"Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." ASC 848 contains optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The Company has formed a cross-functional project team to lead the transition from LIBOR to a planned adoption of reference rates which could include Secured Overnight Financing Rate (“SOFR”), amongst ~~other indexes.~~others. The Company has identified loans that renewed prior to 2021 and obtained updated reference rate language at the time of renewal. Additionally, management is utilizing the timeline guidance published by the Alternative Reference Rates Committee to develop and achieve internal milestones during this transitional period. The Company has adhered to the International Swaps and Derivatives Association 2020 IBOR Fallbacks Protocol that was released on October 23, 2020. The Company will discontinue the use of new LIBOR-based loans no later than December 31, 2021, according to regulatory ~~guidelines.~~guidelines, and is operationally preparing for this change during the fourth quarter of 2021. The guidance under ASC-848 will be available for a limited time, generally through December 31, 2022. The Company expects to adopt the LIBOR transition relief allowed under this standard.

In August 2021, the FASB issued ASU 2021-6, "Presentation of Financial Statements (Topic 205), Financial Services - Depository and Lending (Topic 942) and Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants." The guidance is effective upon its addition to the FASB codification. The Company is currently assessing the impact of ASU 2021-6 on its disclosures.

Reclassifications

Certain amounts appearing in the consolidated financial statements and notes thereto for prior periods have been reclassified to conform with the current presentation. The reclassifications had no effect on net income or stockholders' equity as previously reported.

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NOTE 2. SECURITIES

Information related to the amortized cost, fair value and allowance for credit losses of securities available-for-sale and the related gross unrealized gains and losses recognized in accumulated other comprehensive income is provided in the tables below.


(dollars in thousands)	(dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value		(dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
June 30, 2021
September 30, 2021												September 30, 2021
U.S. Treasury securities	U.S. Treasury securities	$	900	$	0	$	0	$	0	$	900	U.S. Treasury securities	$	900	$	0	$	0	$	0	$	900
U.S. government sponsored agencies	U.S. government sponsored agencies	90,120		506		(254)		0		90,372		U.S. government sponsored agencies	118,681		17		(2,237)		0		116,461
Mortgage-backed securities: residential	Mortgage-backed securities: residential	442,803		6,558		(2,383)		0		446,978		Mortgage-backed securities: residential	430,388		5,511		(4,066)		0		431,833
Mortgage-backed securities: commercial	Mortgage-backed securities: commercial	29,480		641		0		0		30,121		Mortgage-backed securities: commercial	23,699		483		0		0		24,182
State and municipal securities	State and municipal securities	531,035		25,054		(225)		0		555,864		State and municipal securities	650,561		20,955		(5,177)		0		666,339
Total	Total	$	1,094,338	$	32,759	$	(2,862)	$	0	$	1,124,235	Total	$	1,224,229	$	26,966	$	(11,480)	$	0	$	1,239,715

December 31, 2020	December 31, 2020											December 31, 2020
U.S. government sponsored agencies	U.S. government sponsored agencies	$	36,492	$	56	$	(61)	$	0	$	36,487	U.S. government sponsored agencies	$	36,492	$	56	$	(61)	$	0	$	36,487
Mortgage-backed securities: residential	Mortgage-backed securities: residential	270,231		9,289		(17)		0		279,503		Mortgage-backed securities: residential	270,231		9,289		(17)		0		279,503
Mortgage-backed securities: commercial	Mortgage-backed securities: commercial	35,877		1,004		0		0		36,881		Mortgage-backed securities: commercial	35,877		1,004		0		0		36,881
State and municipal securities	State and municipal securities	355,306		26,696		(28)		0		381,974		State and municipal securities	355,306		26,696		(28)		0		381,974
Total	Total	$	697,906	$	37,045	$	(106)	$	0	$	734,845	Total	$	697,906	$	37,045	$	(106)	$	0	$	734,845

Information regarding the fair value and amortized cost of available-for-sale debt securities by maturity as of ~~June~~September 30, 2021 is presented below. Maturity information is based on contractual maturity for all securities other than mortgage-backed securities. Actual maturities of securities may differ from contractual maturities because borrowers may have the right to prepay the obligation without a prepayment penalty.


(dollars in thousands)	(dollars in thousands)	Amortized Cost		Fair Value		(dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	Due in one year or less	$	2,695	$	2,706	Due in one year or less	$	4,245	$	4,256
Due after one year through five years	Due after one year through five years	10,785		11,057		Due after one year through five years	11,953		12,284
Due after five years through ten years	Due after five years through ten years	58,964		61,382		Due after five years through ten years	50,464		52,987
Due after ten years	Due after ten years	549,611		571,991		Due after ten years	703,480		714,173
		622,055		647,136			770,142		783,700
Mortgage-backed securities	Mortgage-backed securities	472,283		477,099		Mortgage-backed securities	454,087		456,015
Total debt securities	Total debt securities	$	1,094,338	$	1,124,235	Total debt securities	$	1,224,229	$	1,239,715

Securities proceeds, gross gains and gross losses are presented below.


		Three months ended June 30,				Six Months Ended June 30,					Three months ended September 30,				Nine Months Ended September 30,
(dollars in thousands)	(dollars in thousands)	2021		2020		2021		2020		(dollars in thousands)	2021		2020		2021		2020
Sales of securities available-for-sale	Sales of securities available-for-sale									Sales of securities available-for-sale
Proceeds	Proceeds	$	458	$	1,148	$	13,964	$	1,148	Proceeds	$	0	$	5,265	$	13,964	$	6,413
Gross gains	Gross gains	44		49		797		49		Gross gains	0		314		797		363
Gross losses	Gross losses	0		0		0		0		Gross losses	0		0		0		0
Number of securities	Number of securities	1		3		8		3		Number of securities	0		12		8		15

In accordance with ASU No. 2017-8, purchase premiums for callable securities are amortized to the earliest call date and premiums on non-callable securities as well as discounts are recognized in interest income using the interest method over the terms of the securities or over the estimated lives of mortgage-backed securities. Gains and losses on sales are based on the amortized cost of the security sold and recorded on the trade date.

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Securities with carrying values of ~~$335.1~~$314.7 million and $382.7 ~~million~~ million were pledged as of ~~June~~September 30, 2021 and December 31, 2020, respectively, as collateral for borrowings from the Federal Home Loan Bank and Federal Reserve Bank and for other purposes as permitted or required by law.

Information regarding securities with unrealized losses as of ~~June~~September 30, 2021 and December 31, 2020 is presented below. The tables divide the securities between those with unrealized losses for less than twelve months and those with unrealized losses for twelve months or more.


		Less than 12 months				12 months or more				Total					Less than 12 months				12 months or more				Total
(dollars in thousands)	(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
June 30, 2021
September 30, 2021														September 30, 2021
U.S. government sponsored agencies	U.S. government sponsored agencies	$	35,386	$	254	$	0	$	0	$	35,386	$	254	U.S. government sponsored agencies	$	106,441	$	2,237	$	0	$	0	$	106,441	$	2,237
Mortgage-backed securities: residential	Mortgage-backed securities: residential	171,318		2,383		0		0		171,318		2,383		Mortgage-backed securities: residential	245,919		4,066		0		0		245,919		4,066
Mortgage-backed securities: commercial	Mortgage-backed securities: commercial	0		0		0		0		0		0		Mortgage-backed securities: commercial	65		0		0		0		65		0
State and municipal securities	State and municipal securities	58,684		225		0		0		58,684		225		State and municipal securities	276,881		5,177		0		0		276,881		5,177
Total temporarily impaired	Total temporarily impaired	$	265,388	$	2,862	$	0	$	0	$	265,388	$	2,862	Total temporarily impaired	$	629,306	$	11,480	$	0	$	0	$	629,306	$	11,480

December 31, 2020	December 31, 2020													December 31, 2020
U.S. government sponsored agencies	U.S. government sponsored agencies	$	19,800	$	61	$	0	$	0	$	19,800	$	61	U.S. government sponsored agencies	$	19,800	$	61	$	0	$	0	$	19,800	$	61
Mortgage-backed securities: residential	Mortgage-backed securities: residential	3		0		3,112		17		3,115		17		Mortgage-backed securities: residential	3		0		3,112		17		3,115		17
Mortgage-backed securities: commercial	Mortgage-backed securities: commercial	0		0		0		0		0		0		Mortgage-backed securities: commercial	0		0		0		0		0		0
State and municipal securities	State and municipal securities	6,921		28		0		0		6,921		28		State and municipal securities	6,921		28		0		0		6,921		28
Total temporarily impaired	Total temporarily impaired	$	26,724	$	89	$	3,112	$	17	$	29,836	$	106	Total temporarily impaired	$	26,724	$	89	$	3,112	$	17	$	29,836	$	106

The total number of securities with unrealized losses as of ~~June~~September 30, 2021 and December 31, 2020 is presented below.


		Less than 12 months	12 months or more	Total		Less than 12 months	12 months or more	Total
June 30, 2021
September 30, 2021					September 30, 2021
U.S. government sponsored agencies	U.S. government sponsored agencies	6	0	6	U.S. government sponsored agencies	12	0	12
Mortgage-backed securities: residential	Mortgage-backed securities: residential	20	0	20	Mortgage-backed securities: residential	25	0	25
Mortgage-backed securities: commercial	Mortgage-backed securities: commercial	0	0	0	Mortgage-backed securities: commercial	1	0	1
State and municipal securities	State and municipal securities	44	0	44	State and municipal securities	162	0	162
Total temporarily impaired	Total temporarily impaired	70	0	70	Total temporarily impaired	200	0	200

December 31, 2020	December 31, 2020				December 31, 2020
U.S. government sponsored agencies	U.S. government sponsored agencies	3	0	3	U.S. government sponsored agencies	3	0	3
Mortgage-backed securities: residential	Mortgage-backed securities: residential	2	1	3	Mortgage-backed securities: residential	2	1	3
Mortgage-backed securities: commercial	Mortgage-backed securities: commercial	0	0	0	Mortgage-backed securities: commercial	0	0	0
State and municipal securities	State and municipal securities	2	0	2	State and municipal securities	2	0	2
Total temporarily impaired	Total temporarily impaired	7	1	8	Total temporarily impaired	7	1	8

Available-for-sale debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly. For available-for sale debt securities in an unrealized loss position, management first ~~assess~~assesses whether it intends to sell, or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through the consolidated income statement. For available-for sale debt securities that do not meet the criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security and the issuer, among other factors. If this

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assessment indicates that a credit loss exists, management compares the present value of cash flows expected to be collected

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from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis for the security, a credit loss exists and an allowance for credit losses is recorded, limited to the amount that the fair value of the security is less than its amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes. ~~NaN~~No allowance for credit losses for available-for-sale debt securities was needed at ~~June~~September 30, 2021. Accrued interest receivable on available-for-sale debt securities totaled ~~$5.0~~$6.3 million at ~~June~~September 30, 2021 and is excluded from the estimate of credit losses.

The U.S. government sponsored agencies and mortgage-backed securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses. Therefore, for those securities, we do not record expected credit losses.

Prior to the adoption of ASC 326, there was ~~0 OTTI~~no other-than-temporary impairment ("OTTI") recorded during the ~~six~~nine months ended ~~June~~September 30, 2020.

NOTE 3. LOANS


(dollars in thousands)	(dollars in thousands)	June 30, 2021				December 31, 2020				(dollars in thousands)	September 30, 2021				December 31, 2020
Commercial and industrial loans:	Commercial and industrial loans:									Commercial and industrial loans:
Working capital lines of credit loans	Working capital lines of credit loans	$	616,401	14.1	%	$	626,023	13.5	%	Working capital lines of credit loans	$	659,166	15.5	%	$	626,023	13.5	%
Non-working capital loans	Non-working capital loans	886,284		20.3		1,165,355		25.0		Non-working capital loans	782,618		18.5		1,165,355		25.0
Total commercial and industrial loans	Total commercial and industrial loans	1,502,685		34.4		1,791,378		38.5		Total commercial and industrial loans	1,441,784		34.0		1,791,378		38.5

Commercial real estate and multi-family residential loans:	Commercial real estate and multi-family residential loans:									Commercial real estate and multi-family residential loans:
Construction and land development loans	Construction and land development loans	402,583		9.2		362,653		7.8		Construction and land development loans	378,716		8.9		362,653		7.8
Owner occupied loans	Owner occupied loans	672,903		15.5		648,019		13.9		Owner occupied loans	740,836		17.4		648,019		13.9
Nonowner occupied loans	Nonowner occupied loans	606,096		13.9		579,625		12.5		Nonowner occupied loans	582,019		13.7		579,625		12.5
Multifamily loans	Multifamily loans	300,449		6.9		304,717		6.5		Multifamily loans	252,983		6.0		304,717		6.5
Total commercial real estate and multi-family residential loans	Total commercial real estate and multi-family residential loans	1,982,031		45.5		1,895,014		40.7		Total commercial real estate and multi-family residential loans	1,954,554		46.0		1,895,014		40.7

Agri-business and agricultural loans:	Agri-business and agricultural loans:									Agri-business and agricultural loans:
Loans secured by farmland	Loans secured by farmland	167,314		3.8		195,410		4.2		Loans secured by farmland	152,099		3.5		195,410		4.2
Loans for agricultural production	Loans for agricultural production	179,338		4.1		234,234		5.0		Loans for agricultural production	171,981		4.1		234,234		5.0
Total agri-business and agricultural loans	Total agri-business and agricultural loans	346,652		7.9		429,644		9.2		Total agri-business and agricultural loans	324,080		7.6		429,644		9.2

Other commercial loans	Other commercial loans	85,356		2.0		94,013		2.0		Other commercial loans	83,595		2.0		94,013		2.0
Total commercial loans	Total commercial loans	3,916,724		89.8		4,210,049		90.4		Total commercial loans	3,804,013		89.6		4,210,049		90.4

Consumer 1-4 family mortgage loans:	Consumer 1-4 family mortgage loans:									Consumer 1-4 family mortgage loans:
Closed end first mortgage loans	Closed end first mortgage loans	169,653		3.9		167,847		3.6		Closed end first mortgage loans	173,689		4.1		167,847		3.6
Open end and junior lien loans	Open end and junior lien loans	162,327		3.7		163,664		3.5		Open end and junior lien loans	161,941		3.8		163,664		3.5
Residential construction and land development loans	Residential construction and land development loans	12,505		0.3		12,007		0.3		Residential construction and land development loans	12,542		0.3		12,007		0.3
Total consumer 1-4 family mortgage loans	Total consumer 1-4 family mortgage loans	344,485		7.9		343,518		7.4		Total consumer 1-4 family mortgage loans	348,172		8.2		343,518		7.4

Other consumer loans	Other consumer loans	100,771		2.3		103,616		2.2		Other consumer loans	92,169		2.2		103,616		2.2
Total consumer loans	Total consumer loans	445,256		10.2		447,134		9.6		Total consumer loans	440,341		10.4		447,134		9.6
Subtotal	Subtotal	4,361,980		100.0	%	4,657,183		100.0	%	Subtotal	4,244,354		100.0	%	4,657,183		100.0	%
Less: Allowance for credit losses	Less: Allowance for credit losses	(71,713)				(61,408)				Less: Allowance for credit losses	(73,048)				(61,408)
Net deferred loan fees	Net deferred loan fees	(8,271)				(8,027)				Net deferred loan fees	(4,901)				(8,027)
Loans, net	Loans, net	$	4,281,996			$	4,587,748			Loans, net	$	4,166,405			$	4,587,748

The recorded investment in loans does not include accrued interest, which totaled ~~$11.7~~$11.1 million at ~~June~~September 30, 2021.

The Company ~~had $605,000~~had $295,000 in residential real estate loans in the process of foreclosure as of ~~June~~September 30, 2021, ~~compared~~compared to $19,000 as of December 31, 2020.

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NOTE 4. ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2021 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The Company maintains an allowance for credit losses to provide for expected credit losses. Losses are charged against the allowance when management believes that the principal is uncollectable. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management’s judgment, should be charged against the allowance. A provision for credit losses is taken based on management’s ongoing evaluation of the appropriate allowance balance. A formal evaluation of the adequacy of the credit loss allowance is conducted monthly. The ultimate recovery of all loans is susceptible to future market factors beyond the Company’s control.

The level of credit loss provision is influenced by growth in the overall loan portfolio, emerging market risk, emerging concentration risk, commercial loan focus and large credit concentration, new industry lending activity, general economic conditions and historical loss analysis. In addition, management gives consideration to changes in the facts and circumstances of watch list credits, which includes the security position of the borrower, in determining the appropriate level of the credit loss provision. Furthermore, management’s overall view on credit quality is a factor in the determination of the provision.

The determination of the appropriate allowance is inherently subjective, as it requires significant estimates by management. The Company has an established process to determine the adequacy of the allowance for credit losses that generally includes consideration of changes in the nature and volume of the loan portfolio and overall portfolio quality, along with current and forecasted economic conditions that may affect borrowers’ ability to repay. Consideration is not limited to these factors although they represent the most commonly cited factors. To determine the specific allocation levels for individual credits, management considers the current valuation of collateral and the amounts and timing of expected future cash flows as the primary measures. Management also considers trends in adversely classified loans based upon an ongoing review of those credits. With respect to pools of similar loans, an appropriate level of general allowance is determined by portfolio segment using a probability of default-loss given default (“PD/LGD”) model, subject to a floor. A default can be triggered by one of several different asset quality factors, including past due status, nonaccrual status, TDR status or if the loan has had a charge-off. This PD is then combined with a LGD derived from historical charge-off data to construct a default rate. This loss rate is then supplemented with adjustments for reasonable and supportable forecasts of relevant economic indicators, particularly the unemployment rate forecast from the Federal Open Market Committee’s Summary of Economic Projections, and other environmental factors based on the risks present for each portfolio segment. These environmental factors include consideration of the following: levels of, and trends in, delinquencies and nonperforming loans; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedure, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations. It is also possible that these factors could include social, political, economic, and terrorist events or activities. All of these factors are susceptible to change, which may be significant. As a result of this detailed process, the allowance results in two forms of allocations, specific and general. These two components represent the total allowance for credit losses deemed adequate to cover probable losses inherent in the loan portfolio.

Commercial loans are subject to a dual standardized grading process administered by the credit administration function. These grade assignments are performed independent of each other and a consensus is reached by credit administration and the loan review officer. Specific allowances are established in cases where management has identified significant conditions or circumstances related to an individual credit that indicate it should be evaluated on an individual basis. Considerations with respect to specific allocations for these individual credits include, but are not limited to, the following: (a) the sufficiency of the customer’s cash flow or net worth to repay the loan; (b) the adequacy of the discounted value of collateral relative to the loan balance; (c) whether the loan has been criticized in a regulatory examination; (d) whether the loan is nonperforming; (e) any other reasons the ultimate collectability of the loan may be in question; or (f) any unique loan characteristics that require special monitoring.

Allocations are also applied to categories of loans considered not to be individually analyzed, but for which the rate of loss is expected to be consistent with or greater than historical averages. Such allocations are based on past loss experience and information about specific borrower situations and estimated collateral values. These general pooled loan allocations are performed for portfolio segments of commercial and industrial; commercial real estate, multi-family, and construction; agri-business and agricultural; other commercial loans; and consumer 1-4 family mortgage and other consumer loans. General

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allocations of the allowance are determined by a historical loss rate based on the calculation of each pool’s probability of

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default-loss given default, subject to a floor. The length of the historical period for each pool is based on the average life of the pool. The historical loss rates are supplemented with consideration of economic conditions and portfolio trends.

Due to the imprecise nature of estimating the allowance for credit losses, the Company’s allowance for credit losses includes an unallocated component. The unallocated component of the allowance for credit losses incorporates the Company’s judgmental determination of potential expected losses that may not be fully reflected in other allocations, including factors such as the level of classified credits, economic uncertainties, industry trends impacting specific portfolio segments, broad portfolio quality trends, and trends in the composition of the Company’s large commercial loan portfolio and related large dollar exposures to individual borrowers. As a practical expedient, the Company has elected to treat accrued interest the same way it is treated in the incurred loss model, wherein it is stated separately from loan principal balances on the consolidated balance sheet. Additionally, when a loan is placed on non-accrual, interest payments will be reversed through interest income, which is consistent with current practice.

For off balance sheet credit exposures outlined in the ASU at 326-20-30-11, it is the Company’s position that nearly all of the unfunded amounts on lines of credit are unconditionally cancellable, and therefore not subject to having a liability set up, which matches the current accounting conclusion in the incurred loss environment.

The following tables present the activity in the allowance for credit losses by portfolio segment for the three-month period ended ~~June~~September 30, 2021:


(dollars in thousands)	(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multifamily Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total		(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multifamily Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total
Three Months Ended June 30, 2021
Beginning balance, April 1		$	32,052	$	29,445	$	3,901	$	1,172	$	3,384	$	1,293	$	597	$	71,844
Three Months Ended September 30, 2021																		Three Months Ended September 30, 2021
Beginning balance, July 1																		Beginning balance, July 1	$	33,130	$	28,291	$	3,930	$	1,298	$	3,165	$	1,393	$	506	$	71,713

Provision for credit losses	Provision for credit losses	(187)		(1,160)		(291)		126		(221)		124		(91)		(1,700)		Provision for credit losses	3,507		(1,545)		(244)		89		(265)		(116)		(126)		1,300
Loans charged-off	Loans charged-off	(162)		0		0		0		(32)		(73)		0		(267)		Loans charged-off	(5)		0		0		0		(13)		(72)		0		(90)
Recoveries	Recoveries	1,427		6		320		0		34		49		0		1,836		Recoveries	44		0		0		0		14		67		0		125
Net loans charged-off		1,265		6		320		0		2		(24)		0		1,569
Net loans (charged-off) recovered																		Net loans (charged-off) recovered	39		0		0		0		1		(5)		0		35
Ending balance	Ending balance	$	33,130	$	28,291	$	3,930	$	1,298	$	3,165	$	1,393	$	506	$	71,713	Ending balance	$	36,676	$	26,746	$	3,686	$	1,387	$	2,901	$	1,272	$	380	$	73,048

The following tables present the activity in the allowance for credit losses by portfolio segment for the ~~six-month~~nine-month period ended ~~June~~September 30, 2021:


(dollars in thousands)	(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multifamily Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total		(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multifamily Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total
Six Months Ended June 30, 2021
Nine Months Ended September 30, 2021																		Nine Months Ended September 30, 2021
Beginning balance, January 1	Beginning balance, January 1	$	28,333	$	22,907	$	3,043	$	416	$	2,619	$	951	$	3,139	$	61,408	Beginning balance, January 1	$	28,333	$	22,907	$	3,043	$	416	$	2,619	$	951	$	3,139	$	61,408
Impact of adopting ASC 326	Impact of adopting ASC 326	4,312		4,316		1,060		941		953		349		(2,881)		9,050		Impact of adopting ASC 326	4,312		4,316		1,060		941		953		349		(2,881)		9,050
Provision for credit losses	Provision for credit losses	(727)		1,125		(493)		(59)		(454)		137		248		(223)		Provision for credit losses	2,780		(420)		(737)		30		(719)		21		122		1,077
Loans charged-off	Loans charged-off	(249)		(71)		0		0		(38)		(145)		0		(503)		Loans charged-off	(254)		(71)		0		0		(51)		(217)		0		(593)
Recoveries	Recoveries	1,461		14		320		0		85		101		0		1,981		Recoveries	1,505		14		320		0		99		168		0		2,106
Net loans charged-off		1,212		(57)		320		0		47		(44)		0		1,478
Net loans (charged-off) recovered																		Net loans (charged-off) recovered	1,251		(57)		320		0		48		(49)		0		1,513
Ending balance	Ending balance	$	33,130	$	28,291	$	3,930	$	1,298	$	3,165	$	1,393	$	506	$	71,713	Ending balance	$	36,676	$	26,746	$	3,686	$	1,387	$	2,901	$	1,272	$	380	$	73,048

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Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis for Special Mention, Substandard and Doubtful grade loans and annually on Pass grade loans over $250,000.

The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans ~~not meeting the criteria above that~~ are ~~analyzed individually~~considered to be "Pass" rated when they are reviewed as part of the ~~above-described~~previously described process ~~are considered to be “Pass” rated loans~~and do not meet the criteria above with the exception of consumer troubled debt restructurings, which are evaluated and listed with Substandard commercial grade loans and consumer nonaccrual loans which are evaluated individually and listed with “Not Rated” loans. Loans listed as Not Rated are consumer loans or commercial loans with consumer characteristics included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status.

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The following table summarizes the risk category of loans by loan segment and origination date as of ~~June~~September 30, 2021:


(dollars in thousands)	(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Term Total		Revolving		Total		(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Term Total		Revolving		Total
Commercial and industrial loans:	Commercial and industrial loans:																			Commercial and industrial loans:
Working capital lines of credit loans:	Working capital lines of credit loans:																			Working capital lines of credit loans:
Pass	Pass	$	4,222	$	7,057	$	13,084	$	2,002	$	998	$	505	$	27,868	$	494,580	$	522,448	Pass	$	8,755	$	6,467	$	11,643	$	1,646	$	834	$	82	$	29,427	$	533,140	$	562,567
Special Mention	Special Mention	0		0		0		0		0		0		0		72,310		72,310		Special Mention	0		0		0		0		0		0		0		64,240		64,240
Substandard	Substandard	0		0		86		0		173		0		259		21,482		21,741		Substandard	0		0		85		0		0		0		85		32,382		32,467

Total	Total	4,222		7,057		13,170		2,002		1,171		505		28,127		588,372		616,499		Total	8,755		6,467		11,728		1,646		834		82		29,512		629,762		659,274
Non-working capital loans:	Non-working capital loans:																			Non-working capital loans:
Pass	Pass	231,811		212,502		95,064		75,452		28,365		23,923		667,117		163,284		830,401		Pass	184,286		172,825		87,892		68,814		23,713		20,548		558,078		163,413		721,491
Special Mention	Special Mention	3,108		4,038		809		1,434		2,849		1,210		13,448		2,956		16,404		Special Mention	17,614		0		630		1,112		2,466		1,185		23,007		2,426		25,433
Substandard	Substandard	4,300		6,734		1,320		4,678		6,236		645		23,913		3,355		27,268		Substandard	4,908		7,022		1,225		4,681		5,723		512		24,071		3,208		27,279

Not Rated	Not Rated	1,261		2,235		1,004		864		274		44		5,682		0		5,682		Not Rated	1,695		1,915		920		719		191		22		5,462		0		5,462
Total	Total	240,480		225,509		98,197		82,428		37,724		25,822		710,160		169,595		879,755		Total	208,503		181,762		90,667		75,326		32,093		22,267		610,618		169,047		779,665
Commercial real estate and multi-family residential loans:	Commercial real estate and multi-family residential loans:																			Commercial real estate and multi-family residential loans:
Construction and land development loans:	Construction and land development loans:																			Construction and land development loans:
Pass	Pass	16,908		43,152		4,359		57,266		1,501		16,974		140,160		261,048		401,208		Pass	13,305		40,841		4,679		30,875		0		16,870		106,570		270,801		377,371

Owner occupied loans:	Owner occupied loans:																			Owner occupied loans:
Pass	Pass	73,686		180,146		68,583		82,093		86,853		103,342		594,703		40,081		634,784		Pass	93,789		174,606		127,573		94,853		82,439		105,570		678,830		36,226		715,056
Special Mention	Special Mention	6,360		0		2,149		1,399		18,903		2,043		30,854		0		30,854		Special Mention	6,829		0		1,809		966		7,715		1,273		18,592		0		18,592
Substandard	Substandard	0		2,004		1,072		2,106		719		931		6,832		0		6,832		Substandard	506		1,946		929		2,101		707		408		6,597		0		6,597

Total	Total	80,046		182,150		71,804		85,598		106,475		106,316		632,389		40,081		672,470		Total	101,124		176,552		130,311		97,920		90,861		107,251		704,019		36,226		740,245
Nonowner occupied loans:	Nonowner occupied loans:																			Nonowner occupied loans:
Pass	Pass	50,958		170,784		145,168		41,276		42,698		83,682		534,566		39,656		574,222		Pass	75,760		160,552		118,333		26,642		41,494		69,129		491,910		59,107		551,017
Special Mention	Special Mention	6,891		373		643		0		0		20,001		27,908		0		27,908		Special Mention	11,937		349		620		0		0		14,341		27,247		0		27,247
Substandard	Substandard	0		0		0		3,381		0		0		3,381		0		3,381		Substandard	0		0		0		3,354		0		0		3,354		0		3,354

Total	Total	57,849		171,157		145,811		44,657		42,698		103,683		565,855		39,656		605,511		Total	87,697		160,901		118,953		29,996		41,494		83,470		522,511		59,107		581,618
Multifamily loans:	Multifamily loans:																			Multifamily loans:
Pass	Pass	35,494		92,421		79,132		14,759		17,083		24,610		263,499		14,338		277,837		Pass	79,260		53,500		36,784		14,372		14,688		18,696		217,300		12,997		230,297
Special Mention	Special Mention	0		0		0		0		22,252		0		22,252		0		22,252		Special Mention	0		0		0		0		22,252		0		22,252		0		22,252

Total	Total	35,494		92,421		79,132		14,759		39,335		24,610		285,751		14,338		300,089		Total	79,260		53,500		36,784		14,372		36,940		18,696		239,552		12,997		252,549
Agri-business and agricultural loans:	Agri-business and agricultural loans:																			Agri-business and agricultural loans:
Loans secured by farmland:	Loans secured by farmland:																			Loans secured by farmland:
Pass	Pass	29,377		39,963		19,765		16,211		11,527		22,520		139,363		22,027		161,390		Pass	35,548		37,854		17,533		13,327		9,841		19,776		133,879		12,345		146,224
Special Mention	Special Mention	0		1,985		2,355		0		190		30		4,560		958		5,518		Special Mention	0		1,985		2,336		0		190		30		4,541		938		5,479
Substandard	Substandard	0		216		0		0		0		145		361		0		361		Substandard	212		0		0		0		0		145		357		0		357

Total	Total	29,377		42,164		22,120		16,211		11,717		22,695		144,284		22,985		167,269		Total	35,760		39,839		19,869		13,327		10,031		19,951		138,777		13,283		152,060
Loans for agricultural production:	Loans for agricultural production:																			Loans for agricultural production:
Pass	Pass	5,240		31,307		9,408		30,310		1,704		6,730		84,699		76,772		161,471		Pass	27,116		27,959		4,415		11,399		1,478		4,393		76,760		76,860		153,620
Special Mention	Special Mention	480		8,647		1,267		0		52		19		10,465		7,474		17,939		Special Mention	464		8,644		1,250		0		43		19		10,420		8,014		18,434

Total	Total	5,720		39,954		10,675		30,310		1,756		6,749		95,164		84,246		179,410		Total	27,580		36,603		5,665		11,399		1,521		4,412		87,180		84,874		172,054
Other commercial loans:	Other commercial loans:																			Other commercial loans:
Pass	Pass	575		29,814		5,379		2,419		9,648		9,538		57,373		23,797		81,170		Pass	1,488		30,130		3,541		1,328		8,897		8,772		54,156		25,162		79,318
Special Mention	Special Mention	0		0		0		0		0		4,091		4,091		0		4,091		Special Mention	0		0		0		0		0		3,945		3,945		0		3,945

Total	Total	575		29,814		5,379		2,419		9,648		13,629		61,464		23,797		85,261		Total	1,488		30,130		3,541		1,328		8,897		12,717		58,101		25,162		83,263
Consumer 1-4 family mortgage loans:	Consumer 1-4 family mortgage loans:																			Consumer 1-4 family mortgage loans:
Closed end first mortgage loans	Closed end first mortgage loans																			Closed end first mortgage loans
Pass	Pass	5,000		18,106		6,470		7,046		3,737		2,996		43,355		3,890		47,245		Pass	13,332		17,484		5,487		6,502		3,216		2,145		48,166		2,183		50,349

Substandard	Substandard	0		0		0		0		14		3,309		3,323		0		3,323		Substandard	0		0		0		0		0		1,821		1,821		0		1,821

Not Rated	Not Rated	20,333		30,192		11,879		12,586		12,363		30,845		118,198		589		118,787		Not Rated	35,165		28,684		10,088		7,868		9,343		29,513		120,661		562		121,223
Total	Total	25,333		48,298		18,349		19,632		16,114		37,150		164,876		4,479		169,355		Total	48,497		46,168		15,575		14,370		12,559		33,479		170,648		2,745		173,393
Open end and junior lien loans	Open end and junior lien loans																			Open end and junior lien loans
Pass	Pass	101		452		163		346		0		31		1,093		11,974		13,067		Pass	193		379		162		317		0		0		1,051		10,733		11,784

Substandard	Substandard	0		0		0		0		0		0		0		98		98		Substandard	0		0		0		0		0		0		0		0		0

Not Rated	Not Rated	8,464		7,781		7,893		5,864		3,136		2,103		35,241		115,473		150,714		Not Rated	17,212		6,732		6,885		4,814		2,394		1,678		39,715		112,024		151,739
Total	Total	8,565		8,233		8,056		6,210		3,136		2,134		36,334		127,545		163,879		Total	17,405		7,111		7,047		5,131		2,394		1,678		40,766		122,757		163,523
Residential construction loans	Residential construction loans																			Residential construction loans

Not Rated	Not Rated	5,864		3,940		1,028		257		174		1,191		12,454		0		12,454		Not Rated	7,164		2,842		982		140		173		1,177		12,478		13		12,491

Other consumer loans	Other consumer loans																			Other consumer loans
Pass	Pass	1,802		6,029		1,633		0		1,327		0		10,791		24,443		35,234		Pass	584		1,181		1,579		0		1,253		0		4,597		22,084		26,681

Substandard	Substandard	0		0		253		0		0		0		253		0		253		Substandard	36		0		257		0		0		0		293		0		293

Not Rated	Not Rated	12,728		19,224		9,998		8,388		3,125		1,729		55,192		9,870		65,062		Not Rated	18,262		17,058		8,678		6,945		2,531		1,418		54,892		10,081		64,973
Total	Total	14,530		25,253		11,884		8,388		4,452		1,729		66,236		34,313		100,549		Total	18,882		18,239		10,514		6,945		3,784		1,418		59,782		32,165		91,947

TOTAL	TOTAL	$	524,963	$	919,102	$	489,964	$	370,137	$	275,901	$	363,187	$	2,943,254	$	1,410,455	$	4,353,709	TOTAL	$	655,420	$	800,955	$	456,315	$	302,775	$	241,581	$	323,468	$	2,780,514	$	1,458,939	$	4,239,453

As of ~~June~~September 30, 2021, ~~$194.2~~$91.9 million in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans. These loans were included in this risk rating category because they are fully guaranteed by the Small Business Administration (“SBA”).

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Nonaccrual and Past Due Loans:

The Company does not record interest on nonaccrual loans until principal is recovered. For all loan classes, a loan is generally placed on nonaccrual status when principal or interest becomes 90 days past due unless it is well secured and in the process of collection, or earlier when concern exists as to the ultimate collectability of principal or interest. Interest accrued but not received is reversed against earnings. Cash interest received on these loans is applied to the principal balance until the principal is recovered or until the loan returns to accrual status. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current, remain current for a prescribed period, and future payments are reasonably assured.

The following table presents the aging of the amortized cost basis in past due loans as of ~~June~~September 30, 2021 by class of loans and loans past due 90 days or more and still accruing by class of loan:

(dollars in thousands) Loans Not Past Due 30-89 Days Past Due Greater than 89 Days Past Due and Accruing Total Accruing Total Nonaccrual Nonaccrual With No Allowance For Credit Loss Total
Commercial and industrial loans:
Working capital lines of credit loans $ 616,499 $ 0 $ 0 $ 615,885 $ 614 $ 173 $ 616,499
Non-working capital loans 879,755 0 0 874,952 4,803 351 879,755
Commercial real estate and multi-family residential loans:
Construction and land development loans 401,208 0 0 401,208 0 0 401,208
Owner occupied loans 672,470 0 0 668,141 4,329 2,650 672,470
Nonowner occupied loans 605,511 0 0 605,511 0 0 605,511
Multifamily loans 300,089 0 0 300,089 0 0 300,089
Agri-business and agricultural loans:
Loans secured by farmland 167,269 0 0 167,124 145 0 167,269
Loans for agricultural production 179,410 0 0 179,410 0 0 179,410
Other commercial loans 85,261 0 0 85,261 0 0 85,261
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans 168,793 544 18 168,888 467 71 169,355
Open end and junior lien loans 163,861 18 0 163,781 98 98 163,879
Residential construction loans 12,454 0 0 12,454 0 0 12,454
Other consumer loans 100,440 109 0 100,296 253 0 100,549
Total $ 4,353,020 $ 671 $ 18 $ 4,343,000 $ 10,709 $ 3,343 $ 4,353,709


(dollars in thousands)	Loans Not Past Due		30-89 Days Past Due		Greater than 89 Days Past Due and Accruing		Total Accruing		Total Nonaccrual		Nonaccrual With No Allowance For Credit Loss		Total
Commercial and industrial loans:
Working capital lines of credit loans	$	659,160	$	114	$	0	$	645,093	$	14,181	$	1	$	659,274
Non-working capital loans	779,551		114		0		770,709		8,956		232		779,665
Commercial real estate and multi-family residential loans:
Construction and land development loans	377,371		0		0		377,371		0		0		377,371
Owner occupied loans	740,245		0		0		736,423		3,822		986		740,245
Nonowner occupied loans	581,618		0		0		578,260		3,358		0		581,618
Multifamily loans	252,549		0		0		252,549		0		0		252,549
Agri-business and agricultural loans:
Loans secured by farmland	152,060		0		0		151,915		145		0		152,060
Loans for agricultural production	172,054		0		0		172,054		0		0		172,054
Other commercial loans	83,263		0		0		83,263		0		0		83,263
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	172,515		860		18		173,293		100		56		173,393
Open end and junior lien loans	163,489		34		0		163,425		98		98		163,523
Residential construction loans	12,491		0		0		12,491		0		0		12,491
Other consumer loans	91,829		118		0		91,629		318		0		91,947
Total	$	4,238,195	$	1,240	$	18	$	4,208,475	$	30,978	$	1,373	$	4,239,453

As of ~~June~~September 30, 2021 there were 0no loans 30-89 days past due or greater than 89 days past due on nonaccrual. Additionally, interest income recognized on nonaccrual loans was insignificant during the ~~six~~nine month period ended ~~June~~September 30, 2021.

When management determines that foreclosure is probable, expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. A loan is considered collateral dependent when the borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of the collateral. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

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The following table presents the amortized cost basis of collateral dependent loans by class of loan as of ~~June~~September 30, 2021:

(dollars in thousands) Real Estate General
Business
Assets Other Total
Commercial and industrial loans:
Working capital lines of credit loans $ 0 $ 441 $ 0 $ 441
Non-working capital loans 1,663 9,670 229 11,562
Commercial real estate and multi-family residential loans:
Owner occupied loans 1,959 1,678 1,161 4,798
Agri-business and agricultural loans:
Loans secured by farmland 0 145 0 145
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 1,585 0 0 1,585
Total $ 5,207 $ 11,934 $ 1,390 $ 18,531


(dollars in thousands)	Real Estate		General Business Assets		Other		Total
Commercial and industrial loans:
Working capital lines of credit loans	$	0	$	14,181	$	0	$	14,181
Non-working capital loans	1,632		13,757		229		15,618
Commercial real estate and multi-family residential loans:
Owner occupied loans	1,456		1,675		1,161		4,292
Nonowner occupied loans	3,358		0		0		3,358
Agri-business and agricultural loans:
Loans secured by farmland	0		145		0		145
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans	3,056		0		0		3,056
Other consumer loans	0		0		51		51
Total	9,502		29,758		1,441		40,701

Troubled Debt Restructurings:

Troubled debt restructured loans are included in the totals for individually analyzed loans. The Company has allocated ~~$5.8~~$6.1 million and $5.5 million of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of ~~June~~September 30, 2021 and December 31, 2020, respectively. The Company is not committed to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring.


(dollars in thousands)	(dollars in thousands)	June 30, 2021		December 31, 2020		(dollars in thousands)	September 30, 2021		December 31, 2020
Accruing troubled debt restructured loans	Accruing troubled debt restructured loans	$	5,040	$	5,237	Accruing troubled debt restructured loans	$	4,973	$	5,237
Nonaccrual troubled debt restructured loans	Nonaccrual troubled debt restructured loans	5,938		6,476		Nonaccrual troubled debt restructured loans	6,093		6,476
Total troubled debt restructured loans	Total troubled debt restructured loans	$	10,978	$	11,713	Total troubled debt restructured loans	$	11,066	$	11,713

During the three and ~~six~~nine months ended ~~June~~September 30, 2021, 0no loans were modified as troubled debt restructurings.

During the three months ended September 30, 2020, no loans were modified as troubled debt restructurings.

During the ~~three and six~~nine months ended ~~June~~September 30, 2020, certain loans were modified as troubled debt restructurings. The modified terms of these loans include one or a combination of the following: inadequate compensation for the terms of the restructure or renewal; a modification of the repayment terms which delays principal repayment for some period; or renewal terms offered to borrowers in financial distress where no additional credit enhancements were obtained at the time of renewal.

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The following table presents loans by class modified as new troubled debt restructurings that occurred during the ~~three~~nine months ended ~~June~~September 30, 2020:


						Modified Repayment Terms
(dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Extension Period or Range (in months)
Troubled Debt Restructurings
Commercial and industrial loans:
Working capital lines of credit loans	1	$	250	$	315	1	0
Non-working capital lines of credit loans	2	4,288		3,691		2	0
Commercial real estate and multi-family residential loans:
Owner occupied loans	1	1,528		1,527		1	0
Total	4	$	6,066	$	5,533	4	0

Modified Repayment Terms
(dollars in thousands) Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Extension Period or Range (in months)
Troubled Debt Restructurings
Commercial and industrial loans:
Working capital lines of credit loans 1 250 315 1 0
Non-working capital loans 1 3,500 3,569 1 0
Commercial real estate and multi-family residential loans:
Owner occupied loans 1 1,528 1,527 1 0
Total 3 $ 5,278 $ 5,411 3 0

For the ~~three~~nine month period ended ~~June 30, 2020, the troubled debt restructurings described above increased the allowance for loan losses by $2.3 million, and 0 charge-offs were recorded.~~

~~The following table presents loans by class modified as new troubled debt restructurings that occurred during the six months ended June 30, 2020:~~

Modified Repayment Terms
(dollars in thousands) Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Extension Period or Range (in months)
Troubled Debt Restructurings
Commercial and industrial loans:
Working capital lines of credit loans 1 250 315 1 0
Non-working capital lines of credit loans 2 4,288 3,691 2 0
Commercial real estate and multi-family residential loans:
Owner occupied loans 1 1,528 1,527 1 0
Total 4 $ 6,066 $ 5,533 4 0

~~For the six month period ended June~~September 30, 2020, the troubled debt restructurings described above increased the allowance for credit losses by $2.4 million, and charge-offs of $666,000 were recorded.

As of ~~June~~September 30, 2021, total deferrals attributed to COVID-19 were ~~$36.9~~$22.3 million representing 83 borrowers. This represented ~~0.8%~~0.5% of the total loan portfolio. ~~All 8~~NaN were commercial loan borrowers and there ~~were 0~~was 1 retail ~~borrowers~~borrower with COVID-19 deferrals. ~~The majority of all loan deferrals were for a period of 90 days.~~ Of the total commercial deferrals attributed to COVID-19, ~~$14.2~~$8.0 million ~~represented a first deferral action, $253,000~~ represented a second deferral action ~~$20.0~~and $14.3 million represented a third deferral ~~action and $2.5 million represented a fourth deferral~~ action. One borrower represented 64% of the third and fourth deferral population and was a commercial real estate nonowner occupied loan supported by adequate collateral and personal guarantors and consists of a loan to the hotel and accommodation industry. All COVID-19 related loan deferrals remain on accrual status, as each deferral is evaluated individually, and management has determined that all contractual cashflows are collectable at this time. In accordance with Section 4013 of the CARES Act, loan deferrals granted to customers that resulted from the impact of COVID-19 and who were not past due at December 31, 2019 were not considered troubled debt restructurings as of ~~June~~September 30, 2021. This provision was extended to January 1, 2022 under the Consolidated Appropriations Act, 2021. Management continues to monitor these deferrals and has adequately considered these credits in the ~~June~~September 30, 2021 allowance for credit losses balance.

~~Table of Contents~~

Allowance for Loan Losses (Prior to January 1, 2021):

Prior to the adoption of ASC 326 on January 1, 2021 the Company calculated the allowance for loan losses using the incurred losses methodology. The following tables are disclosures related to the allowance for loan losses in prior periods.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three-month period ended ~~June~~September 30, 2020:


(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multfamily Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total
Three Months Ended September 30, 2020
Beginning balance, July 1	$	26,744	$	21,063	$	3,408	$	542	$	3,434	$	774	$	3,054	$	59,019
Provision for credit losses	1,574		175		(314)		30		(50)		237		98		1,750
Loans charged-off	(6)		0		0		0		(70)		(229)		0		(305)
Recoveries	51		177		3		0		4		48		0		283
Net loans charged-off	45		177		3		0		(66)		(181)		0		(22)
Ending balance	$	28,363	$	21,415	$	3,097	$	572	$	3,318	$	830	$	3,152	$	60,747

(dollars in thousands) Commercial and Industrial Commercial Real Estate and Multfamily Residential Agri-business and Agricultural Other Commercial Consumer 1-4 Family Mortgage Other Consumer Unallocated Total
Three Months Ended June 30, 2020
Beginning balance, January 1 $ 24,739 $ 18,658 $ 3,704 $ 521 $ 2,475 $ 447 $ 3,065 $ 53,609
Provision for credit losses 2,062 2,387 (299) 21 953 387 (11) 5,500
Loans charged-off (296) 0 0 0 0 (115) 0 (411)
Recoveries 239 18 3 0 6 55 0 321
Net loans charged-off (57) 18 3 0 6 (60) 0 (90)
Ending balance $ 26,744 $ 21,063 $ 3,408 $ 542 $ 3,434 $ 774 $ 3,054 $ 59,019

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The following tables present the activity in the allowance for loan losses by portfolio segment for the ~~six-month~~nine-month period ended ~~June~~September 30, 2020:

(dollars in thousands) Commercial and Industrial Commercial Real Estate and Multfamily Residential Agri-business and Agricultural Other Commercial Consumer 1-4 Family Mortgage Other Consumer Unallocated Total
Six Months Ended June 30, 2020
Beginning balance, January 1 $ 25,789 $ 15,796 $ 3,869 $ 447 $ 2,086 $ 345 $ 2,320 $ 50,652
Provision for credit losses 4,690 5,137 (466) 95 1,348 562 734 12,100
Loans charged-off (4,031) 0 0 0 (13) (216) 0 (4,260)
Recoveries 296 130 5 0 13 83 0 527
Net loans charged-off (3,735) 130 5 0 0 (133) 0 (3,733)
Ending balance $ 26,744 $ 21,063 $ 3,408 $ 542 $ 3,434 $ 774 $ 3,054 $ 59,019


(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multfamily Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total
Nine Months Ended September 30, 2020
Beginning balance, January 1	$	25,789	$	15,796	$	3,869	$	447	$	2,086	$	345	$	2,320	$	50,652
Provision for credit losses	6,264		5,312		(780)		125		1,298		799		832		13,850
Loans charged-off	(4,037)		0		0		0		(83)		(445)		0		(4,565)
Recoveries	347		307		8		0		17		131		0		810
Net loans charged-off	(3,690)		307		8		0		(66)		(314)		0		(3,755)
Ending balance	$	28,363	$	21,415	$	3,097	$	572	$	3,318	$	830	$	3,152	$	60,747

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The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2020:


(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multfamily Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total
December 31, 2020
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	6,310	$	1,377	$	84	$	0	$	270	$	0	$	0	$	8,041
Collectively evaluated for impairment	22,023		21,530		2,959		416		2,349		951		3,139		53,367
Total ending allowance balance	$	28,333	$	22,907	$	3,043	$	416	$	2,619	$	951	$	3,139	$	61,408

Loans:
Loans individually evaluated for impairment	$	12,533	$	5,518	$	428	$	0	$	1,700	$	0	$	0	$	20,179
Loans collectively evaluated for impairment	1,772,393		1,887,054		429,234		93,912		342,999		103,385		0		4,628,977
Total ending loans balance	$	1,784,926	$	1,892,572	$	429,662	$	93,912	$	344,699	$	103,385	$	0	$	4,649,156

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The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2020:


(dollars in thousands)	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans	$	346	$	173	$	0
Non-working capital loans	2,399		968		0
Commercial real estate and multi-family residential loans:
Owner occupied loans	3,002		2,930		0
Agri-business and agricultural loans:
Loans secured by farmland	603		283		0
Consumer 1‑4 family loans:
Closed end first mortgage loans	316		236		0
Open end and junior lien loans	5		5		0
With an allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans	433		433		255
Non-working capital loans	11,644		10,959		6,055
Commercial real estate and multi-family residential loans:
Owner occupied loans	2,589		2,588		1,377
Agri-business and agricultural loans:
Loans secured by farmland	145		145		84
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	1,457		1,459		270
Total	$	22,939	$	20,179	$	8,041

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The following table presents loans individually evaluated for impairment by class of loans as of and for the three-month period ended ~~June~~September 30, 2020:


(dollars in thousands)	(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income Recognized		(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income Recognized
With no related allowance recorded:	With no related allowance recorded:							With no related allowance recorded:
Commercial and industrial loans:	Commercial and industrial loans:							Commercial and industrial loans:
Working capital lines of credit loans	Working capital lines of credit loans	$	774	$	0	$	0	Working capital lines of credit loans	$	174	$	0	$	0
Non-working capital loans	Non-working capital loans	744		10		10		Non-working capital loans	995		5		5
Commercial real estate and multi-family residential loans:	Commercial real estate and multi-family residential loans:							Commercial real estate and multi-family residential loans:
Owner occupied loans	Owner occupied loans	2,104		4		4		Owner occupied loans	2,054		4		4
Agri-business and agricultural loans:	Agri-business and agricultural loans:							Agri-business and agricultural loans:
Loans secured by farmland	Loans secured by farmland	283		0		0		Loans secured by farmland	283		0		0
Consumer 1‑4 family loans:	Consumer 1‑4 family loans:							Consumer 1‑4 family loans:
Closed end first mortgage loans	Closed end first mortgage loans	313		1		0		Closed end first mortgage loans	274		0		0
Open end and junior lien loans	Open end and junior lien loans	49		0		0		Open end and junior lien loans	54		0		0
Residential construction loans								Residential construction loans	8		0		0
With an allowance recorded:	With an allowance recorded:							With an allowance recorded:
Commercial and industrial loans:	Commercial and industrial loans:							Commercial and industrial loans:
Working capital lines of credit loans	Working capital lines of credit loans	2,171		0		0		Working capital lines of credit loans	1,546		0		0
Non-working capital loans	Non-working capital loans	11,600		63		63		Non-working capital loans	11,970		63		63
Commercial real estate and multi-family residential loans:	Commercial real estate and multi-family residential loans:							Commercial real estate and multi-family residential loans:
Owner occupied loans	Owner occupied loans	3,108		0		0		Owner occupied loans	3,994		0		0
Agri-business and agricultural loans:	Agri-business and agricultural loans:							Agri-business and agricultural loans:
Loans secured by farmland	Loans secured by farmland	147		0		0		Loans secured by farmland	146		0		0
Consumer 1‑4 family mortgage loans:	Consumer 1‑4 family mortgage loans:							Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	Closed end first mortgage loans	1,606		0		0		Closed end first mortgage loans	1,520		9		9
Open end and junior lien loans	Open end and junior lien loans	639		0		0		Open end and junior lien loans	648		0		0
Residential construction loans	Residential construction loans	52		0		0		Residential construction loans	35		0		0
Total	Total	$	23,590	$	78	$	77	Total	$	23,701	$	81	$	81

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The following table presents loans individually evaluated for impairment by class of loans as of and for the ~~six-month~~nine-month period ended ~~June~~September 30, 2020:

(dollars in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Interest Income Recognized
With no related allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans $ 577 $ 0 $ 0
Non-working capital loans 652 11 11
Commercial real estate and multi-family residential loans:
Owner occupied loans 2,124 9 8
Agri-business and agricultural loans:
Loans secured by farmland 283 0 0
Consumer 1‑4 family loans:
Closed end first mortgage loans 319 2 1
Open end and junior lien loans 67 0 0
With an allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans 3,729 0 0
Non-working capital loans 11,659 153 153
Commercial real estate and multi-family residential loans:
Owner occupied loans 2,554 30 30
Agri-business and agricultural loans:
Loans secured by farmland 147 0 0
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans 1,623 21 20
Open end and junior lien loans 638 0 0
Residential construction loans 52 0 0
Total $ 24,424 $ 226 $ 223


(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income Recognized
With no related allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans	$	442	$	0	$	0
Non-working capital loans	766		16		16
Commercial real estate and multi-family residential loans:
Owner occupied loans	2,101		13		13
Agri-business and agricultural loans:
Loans secured by farmland	283		0		0
Consumer 1‑4 family loans:
Closed end first mortgage loans	304		2		2
Open end and junior lien loans	63		0		0
Residential construction loans	3		0		0
With an allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans	3,001		0		0
Non-working capital loans	11,763		216		216
Commercial real estate and multi-family residential loans:
Owner occupied loans	3,034		30		30
Agri-business and agricultural loans:
Loans secured by farmland	147		0		0
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	1,589		28		28
Open end and junior lien loans	642		0		0
Residential construction loans	46		0		0
Total	$	24,184	$	305	$	305

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The following table presents the aging of the recorded investment in past due loans as of December 31, 2020 by class of loans:


(dollars in thousands)	Loans Not Past Due		30‑89 Days Past Due		Greater than 90 Days Past Due		Nonaccrual		Total Past Due and Nonaccrual		Total
Commercial and industrial loans:
Working capital lines of credit loans	$	625,493	$	0	$	0	$	606	$	606	$	626,099
Non-working capital loans	1,153,540		0		0		5,287		5,287		1,158,827
Commercial real estate and multi-family residential loans:
Construction and land development loans	361,664		0		0		0		0		361,664
Owner occupied loans	642,527		0		0		5,047		5,047		647,574
Nonowner occupied loans	579,050		0		0		0		0		579,050
Multifamily loans	304,284		0		0		0		0		304,284
Agri-business and agricultural loans:
Loans secured by farmland	194,935		0		0		428		428		195,363
Loans for agricultural production	234,191		108		0		0		108		234,299
Other commercial loans	93,912		0		0		0		0		93,912
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	165,895		877		116		613		1,606		167,501
Open end and junior lien loans	165,094		137		0		5		142		165,236
Residential construction loans	11,962		0		0		0		0		11,962
Other consumer loans	103,240		145		0		0		145		103,385
Total	$	4,635,787	$	1,267	$	116	$	11,986	$	13,369	$	4,649,156

(dollars in thousands) Loans Not
Past Due 30‑89
Days Past Due Greater than
90 Days Past Due Greater than 90 Days Past Due Nonaccrual Total Past Due and Nonaccrual Total
Commercial and industrial loans:
Working capital lines of credit loans $ 625,493 $ 0 $ 0 $ 0 $ 606 $ 606 $ 626,099
Non-working capital loans 1,153,540 0 0 0 5,287 5,287 1,158,827
Commercial real estate and multi-family residential loans:
Construction and land development loans 361,664 0 0 0 0 0 361,664
Owner occupied loans 642,527 0 0 0 5,047 5,047 647,574
Nonowner occupied loans 579,050 0 0 0 0 0 579,050
Multifamily loans 304,284 0 0 0 0 0 304,284
Agri-business and agricultural loans:
Loans secured by farmland 194,935 0 0 0 428 428 195,363
Loans for agricultural production 234,191 108 0 0 0 108 234,299
Other commercial loans 93,912 0 0 0 0 0 93,912
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans 165,895 877 116 116 613 1,606 167,501
Open end and junior lien loans 165,094 137 0 0 5 142 165,236
Residential construction loans 11,962 0 0 0 0 0 11,962
Other consumer loans 103,240 145 0 0 0 145 103,385
Total $ 4,635,787 $ 1,267 $ 116 $ 116 $ 11,986 $ 13,369 $ 4,649,156

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As of December 31, 2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:


(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
Commercial and industrial loans:
Working capital lines of credit loans	$	535,071	$	81,095	$	9,718	$	0	$	215	$	626,099
Non-working capital loans	1,111,989		26,523		14,820		0		5,495		1,158,827
Commercial real estate and multi-family residential loans:
Construction and land development loans	361,664		0		0		0		0		361,664
Owner occupied loans	608,845		31,355		7,374		0		0		647,574
Nonowner occupied loans	547,790		31,260		0		0		0		579,050
Multi-family loans	282,031		22,253		0		0		0		304,284
Agri-business and agricultural loans:
Loans secured by farmland	183,983		10,728		652		0		0		195,363
Loans for agricultural production	185,875		48,424		0		0		0		234,299
Other commercial loans	93,912		0		0		0		0		93,912
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	40,682		0		1,695		0		125,124		167,501
Open end and junior lien loans	8,424		0		5		0		156,807		165,236
Residential construction loans	0		0		0		0		11,962		11,962
Other consumer loans	36,979		253		0		0		66,153		103,385
Total	$	3,997,245	$	251,891	$	34,264	$	0	$	365,756	$	4,649,156

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NOTE 5. BORROWINGS

For the periods ended ~~June~~September 30, 2021 and December 31, 2020, the Company had an advance outstanding from the Federal Home Loan Bank (“FHLB”) in the amount of $75.0 million. The outstanding FHLB advance is a ten-year fixed-rate putable advance with a rate of 0.39% and is due on March 4, 2030. The advance may not be prepaid by the Company without penalty. All FHLB notes require monthly interest payments and are secured by residential real estate loans and securities.

On August 2, 2019 the Company entered into an unsecured revolving credit agreement with another financial institution allowing the Company to borrow up to $30.0 million; this credit agreement was subsequently amended and renewed on July 30, 2021. Funds provided under the agreement may be used to repurchase shares of the Company’s common stock under the share repurchase program, which was reauthorized by the Company’s board of directors on April 13, 2021. The credit agreement includes a negative pledge agreement whereby the Company agrees not to pledge or otherwise encumber the stock of the Bank. The credit agreement has a one year term which may be amended, extended, modified or renewed. Outstanding borrowings on the credit agreement were $0 and $10.5 million at ~~June~~September 30, 2021 and December 31, 2020, respectively.

NOTE 6. FAIR VALUE DISCLOSURES

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

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Level 3 Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Securities: Securities available-for-sale are valued primarily by a third party pricing service. The fair values of securities available-for-sale are determined on a recurring basis by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or pricing models which utilize significant observable inputs such as matrix pricing. This is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). These models utilize the market approach with standard inputs that include, but are not limited to benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain municipal securities that are not rated and observable inputs about the specific issuer are not available, fair values are estimated using observable data from other municipal securities presumed to be similar or other market data on other non-rated municipal securities (Level 3 inputs).

The Company’s Finance Department, which is responsible for all accounting and SEC disclosure compliance, and the Company’s Treasury Department, which is responsible for investment portfolio management and asset/liability modeling, are the two areas that determine the Company’s valuation policies and procedures. Both of these areas report directly to the Executive Vice President and Chief Financial Officer of the Company. For assets or liabilities that may be considered for Level 3 fair value measurement on a recurring basis, these two departments and the Executive Vice President and Chief Financial Officer determine the appropriate level of the assets or liabilities under consideration. If there are new assets or liabilities that are determined to be Level 3 by this group, the Risk Management Committee of the Company and the Audit Committee of the Board are made aware of such assets at their next scheduled meeting.

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Securities pricing is obtained on securities from a third party pricing service and all security prices are tested annually against prices from another third party provider and reviewed with a market value price tolerance variance that varies by sector: municipal securities +/-5%, government mbs/cmo +/-3% and U.S. treasuries +/-1%. If any securities fall outside the tolerance threshold and have a variance of $100,000 or more, a determination of materiality is made for the amount over the threshold. Any security that would have a material threshold difference would be further investigated to determine why the variance exists and if any action is needed concerning the security pricing for that individual security. Changes in market value are reviewed monthly in aggregate by security type and any material ~~differences~~changes are reviewed to determine why they exist. At least annually, the pricing methodology of the pricing service is received and reviewed to support the fair value levels used by the Company. A detailed pricing evaluation is requested and reviewed on any security determined to be fair valued using unobservable inputs by the pricing service.

Mortgage banking derivative: The fair values of mortgage banking derivatives are based on observable market data as of the measurement date (Level 2).

Interest rate swap derivatives: Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. The fair value of interest rate swap derivatives is determined by pricing or valuation models using observable market data as of the measurement date (Level 2).

Collateral dependent loans: Collateral dependent loans with specific allocations of the allowance for credit losses generally based on the fair value of the underlying collateral when repayment is expected solely from the collateral. Fair value is determined using several methods. Generally, the fair value of real estate is based on appraisals by qualified third party appraisers. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and result in a Level 3 classification of the inputs for determining fair value. In addition, the Company’s management routinely applies internal discount factors to the value of appraisals used in the fair value evaluation of collateral dependent loans. The deductions to the appraisals take into account changing business factors and market conditions, as well as value impairment in cases where the appraisal date predates a likely change in market conditions. Commercial real estate is generally discounted from its appraised

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value by 0-50% with the higher discounts applied to real estate that is determined to have a thin trading market or to be specialized collateral. In addition to real estate, the Company’s management evaluates other types of collateral as follows: (a) raw and finished inventory is discounted from its cost or book value by 35-65%, depending on the marketability of the goods (b) finished goods are generally discounted by 30-60%, depending on the ease of marketability, cost of transportation or scope of use of the finished good (c) work in process inventory is typically discounted by 50%-100%, depending on the length of manufacturing time, types of components used in the completion process, and the breadth of the user base (d) equipment is valued at a percentage of depreciated book value or recent appraised value, if available, and is typically discounted at 30-70% after various considerations including age and condition of the equipment, marketability, breadth of use, and whether the equipment includes unique components or add-ons; and (e) marketable securities are discounted by 10%-30%, depending on the type of investment, age of valuation report and general market conditions. This methodology is based on a market approach and typically results in a Level 3 classification of the inputs for determining fair value.

Mortgage servicing rights: As of ~~June~~September 30, 2021, the fair value of the Company’s Level 3 servicing assets for residential mortgage loans (“MSRs”) was ~~$3.7~~$2.9 million, carried at amortized cost of ~~$4.2~~$3.4 million less a $518,000 valuation reserve. These residential mortgage loans have a weighted average interest rate of ~~3.56%~~3.49%, a weighted average maturity of 20 years and are secured by homes generally within the Company’s market area of Northern Indiana and Indianapolis. A third-party valuation ~~model~~ is used to estimate fair value by stratifying the portfolios on the basis of certain risk characteristics, including loan type and interest rate. Impairment is estimated based on an income approach. The inputs used include estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, ancillary income, late fees and float income. The most significant assumption used to value MSRs is prepayment rate. Prepayment rates are estimated based on published industry consensus prepayment rates. The most significant unobservable assumption is the discount rate. At ~~June~~September 30, 2021, the constant prepayment speed (“PSA”) used was ~~2.20~~2.67 and discount rate used was ~~10.5%~~9.5%. At December 31, 2020, the PSA used was 2.04 and the discount rate used was 9.4%.

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Other real estate owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value less costs to sell. Fair values are generally based on third party appraisals of the property and are reviewed by the Company’s internal appraisal officer. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable properties used to determine value. Such adjustments are usually significant and result in a Level 3 classification. In addition, the Company’s management may apply discount factors to the appraisals to take into account changing business factors and market conditions, as well as value impairment in cases where the appraisal date predates a likely change in market conditions. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

Real estate mortgage loans held-for-sale: Real estate mortgage loans held-for-sale are carried at the lower of cost or fair value, as determined by outstanding commitments, from third party investors, and result in a Level 2 classification.

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The tables below presents the balances of assets measured at fair value on a recurring basis:


		June 30, 2021									September 30, 2021
		Fair Value Measurements Using						Assets at Fair Value			Fair Value Measurements Using						Assets at Fair Value
(dollars in thousands)	(dollars in thousands)	Level 1		Level 2		Level 3				(dollars in thousands)	Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
U.S. Treasury securities	U.S. Treasury securities	$	900	$	0	$	0	$	900	U.S. Treasury securities	$	900	$	0	$	0	$	900
U.S. government sponsored agency securities	U.S. government sponsored agency securities	0		90,372		0		90,372		U.S. government sponsored agency securities	0		116,461		0		116,461
Mortgage-backed securities: residential	Mortgage-backed securities: residential	0		446,978		0		446,978		Mortgage-backed securities: residential	0		431,833		0		431,833
Mortgage-backed securities: commercial	Mortgage-backed securities: commercial	0		30,121		0		30,121		Mortgage-backed securities: commercial	0		24,182		0		24,182
State and municipal securities	State and municipal securities	0		555,724		140		555,864		State and municipal securities	0		666,199		140		666,339
Total Securities	Total Securities	900		1,123,195		140		1,124,235		Total Securities	900		1,238,675		140		1,239,715
Mortgage banking derivative	Mortgage banking derivative	0		620		0		620		Mortgage banking derivative	0		719		0		719
Interest rate swap derivative	Interest rate swap derivative	0		17,028		0		17,028		Interest rate swap derivative	0		15,426		0		15,426
Total assets	Total assets	$	900	$	1,140,843	$	140	$	1,141,883	Total assets	$	900	$	1,254,820	$	140	$	1,255,860

Liabilities:	Liabilities:									Liabilities:
Mortgage banking derivative	Mortgage banking derivative	$	0	$	22	$	0	$	22	Mortgage banking derivative	$	0	$	1	$	0	$	1
Interest rate swap derivative	Interest rate swap derivative	0		17,048		0		17,048		Interest rate swap derivative	0		15,447		0		15,447
Total liabilities	Total liabilities	$	0	$	17,070	$	0	$	17,070	Total liabilities	$	0	$	15,448	$	0	$	15,448


	December 31, 2020
	Fair Value Measurements Using						Assets at Fair Value
(dollars in thousands)	Level 1		Level 2		Level 3
Assets:
U.S. government sponsored agency securities	$	0	$	36,487	$	0	$	36,487
Mortgage-backed securities: residential	0		279,503		0		279,503
Mortgage-backed securities: commercial	0		36,881		0		36,881
State and municipal securities	0		381,834		140		381,974
Total Securities	0		734,705		140		734,845
Mortgage banking derivative	0		1,182		0		1,182
Interest rate swap derivative	0		21,764		0		21,764
Total assets	$	0	$	757,651	$	140	$	757,791

Liabilities:
Mortgage banking derivative	$	0	$	111	$	0	$	111
Interest rate swap derivative	0		21,794		0		21,794
Total liabilities	$	0	$	21,905	$	0	$	21,905

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The fair value of Level 3 available-for-sale securities was immaterial and thus did not require additional recurring fair value disclosure.

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The tables below presents the balances of assets measured at fair value on a nonrecurring basis:


		June 30, 2021									September 30, 2021
		Fair Value Measurements Using						Assets at Fair Value			Fair Value Measurements Using						Assets at Fair Value
(dollars in thousands)	(dollars in thousands)	Level 1		Level 2		Level 3				(dollars in thousands)	Level 1		Level 2		Level 3
Assets	Assets									Assets
Collateral dependent loans:	Collateral dependent loans:									Collateral dependent loans:
Commercial and industrial loans:	Commercial and industrial loans:									Commercial and industrial loans:
Working capital lines of credit loans	Working capital lines of credit loans	$	0	$	0	$	163	$	163	Working capital lines of credit loans	$	0	$	0	$	9,982	$	9,982
Non-working capital loans	Non-working capital loans	0		0		4,670		4,670		Non-working capital loans	0		0		7,525		7,525
Commercial real estate and multi-family residential loans:	Commercial real estate and multi-family residential loans:									Commercial real estate and multi-family residential loans:
Owner occupied loans	Owner occupied loans	0		0		760		760		Owner occupied loans	0		0		652		652
Nonowner occupied loans										Nonowner occupied loans	0		0		3,131		3,131
Agri-business and agricultural loans:	Agri-business and agricultural loans:									Agri-business and agricultural loans:
Loans secured by farmland	Loans secured by farmland	0		0		47		47		Loans secured by farmland	0		0		43		43

Total collateral dependent loans	Total collateral dependent loans	0		0		5,640		5,640		Total collateral dependent loans	0		0		21,333		21,333
Other real estate owned	Other real estate owned	0		0		0		0		Other real estate owned	0		0		0		0
Total assets	Total assets	$	0	$	0	$	5,640	$	5,640	Total assets	$	0	$	0	$	21,333	$	21,333


	December 31, 2020
	Fair Value Measurements Using						Assets at Fair Value
(dollars in thousands)	Level 1		Level 2		Level 3
Assets
Collateral dependent loans:
Commercial and industrial loans:
Working capital lines of credit loans	$	0	$	0	$	178	$	178
Non-working capital loans	0		0		4,904		4,904
Commercial real estate and multi-family residential loans:
Owner occupied loans	0		0		1,211		1,211
Agri-business and agricultural loans:
Loans secured by farmland	0		0		61		61
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	0		0		411		411
Total collateral dependent loans	0		0		6,765		6,765
Other real estate owned	0		0		0		0
Total assets	$	0	$	0	$	6,765	$	6,765

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Table of Contents

The following table presents the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a non-recurring basis at ~~June~~September 30, 2021:

(dollars in thousands)

Fair Value

Valuation Methodology

Unobservable Inputs

Average

Range of Inputs

(dollars in thousands)

Fair Value

Valuation Methodology

Unobservable Inputs

Average

Range of Inputs

Collateral dependent loans:

Commercial and industrial

4,833

Collateral based measurements