Loans and Allowance for Credit Losses | NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES Types of loans and normal collateral securing those loans are listed below. Commercial real estate : Commercial real estate loans include all loans secured by nonfarm, nonresidential properties and by multifamily residential properties, as well as 1-4 family investment-purpose real estate loans. Commercial and industrial : Commercial and industrial loans include loans used to purchase fixed assets, provide working capital or meet other financing needs of the business. Loans are normally secured by the assets being purchased or already owned by the borrower, inventory or accounts receivable. These may include SBA and other guaranteed or partially guaranteed types of loans. Residential real estate : Residential real estate loans include loans secured by primary or secondary personal residences. Agricultural real estate : Agricultural real estate loans are loans typically secured by farmland. Agricultural : Agricultural loans are primarily operating lines subject to annual farming revenues including productivity/yield of the agricultural commodities produced. These loans may be secured by growing crops, stored crops, livestock, equipment, and miscellaneous receivables. Consumer : Consumer loans may include installment loans, unsecured and secured personal lines of credit, overdraft protection and letters of credit. These loans are generally secured by consumer assets but may be unsecured. The following table lists categories of loans at September 30, 2022, and December 31, 2021. September 30, 2022 December 31, 2021 Commercial real estate $ 1,655,646 $ 1,486,148 Commercial and industrial 607,722 567,497 Residential real estate 573,431 638,087 Agricultural real estate 200,415 198,330 Agricultural 115,048 166,975 Consumer 102,761 98,590 Total loans 3,255,023 3,155,627 Allowance for credit losses ( 46,499 ) ( 48,365 ) Net loans $ 3,208,524 $ 3,107,262 Include d in the commercial and industrial loan balances at September 30, 2022, and December 31, 2021, are $ 7,152 and $ 44,783 of loans that were originated under the SBA PPP program. At September 30, 2022, and December 31, 2021, unamortized loan fees on these loans were $ 114 and $ 1,252 . From time to time, the Company has purchased pools of residential real estate loans originated by other financial institutions to hold for investment with the intent to diversify the residential real estate portfolio. During the nine months ended September 30, 2022, the Company purchased one pool of residential mortgage loans totaling $ 795 . During the first nine months of 2021, the Company purchased five pools of residential real estate loans totaling $ 214,181 . As of September 30, 2022, and December 31, 2021, residential real estate loans include $ 334,241 and $ 372,069 of purchased residential real estate loans. The Company occasionally purchases the government guaranteed portion of loans originated by other financial institutions to hold for investment. During the nine months ended September 30, 2022, the Company purchased $ 2,293 in loans guaranteed by governmental agencies. Government guaranteed loans totaling $ 10,958 were purchased in the nine months ended September 30, 2021. The unamortized discount of merger purchase accounting adjustments related to non-purchase credit deteriorated loans included in the loan totals above are $ 3,947 with related loans of $ 312,707 at September 30, 2022, and $ 6,649 with related loans of $ 527,422 at December 31, 2021. Overdraft deposit accounts are reclassified and included in consumer loans above. These accounts totaled $ 642 at Septe mber 30, 2022, and $ 886 at December 31, 2021. The following tables present the activity in the allowance for credit losses by class for the three month periods ended September 30, 2022 and 2021. September 30, 2022 Commercial Commercial Residential Agricultural Agricultural Consumer Total Allowance for credit losses: Beginning balance $ 22,665 $ 13,209 $ 6,818 $ 1,007 $ 2,289 $ 2,250 $ 48,238 Provision for credit losses ( 1,712 ) 911 486 40 ( 202 ) 341 ( 136 ) Loans charged-off ( 612 ) ( 706 ) ( 51 ) — ( 44 ) ( 266 ) ( 1,679 ) Recoveries 7 1 7 1 — 60 76 Total ending allowance balance $ 20,348 $ 13,415 $ 7,260 $ 1,048 $ 2,043 $ 2,385 $ 46,499 September 30, 2021 Commercial Commercial Residential Agricultural Agricultural Consumer Total Allowance for credit losses: Beginning balance $ 15,225 $ 18,690 $ 9,808 $ 847 $ 4,695 $ 2,569 $ 51,834 Provision for credit losses ( 2,723 ) 5,473 ( 1,473 ) 145 ( 366 ) 2 1,058 Loans charged-off ( 116 ) ( 37 ) — ( 3 ) — ( 200 ) ( 356 ) Recoveries 96 1 4 15 — 111 227 Total ending allowance balance $ 12,482 $ 24,127 $ 8,339 $ 1,004 $ 4,329 $ 2,482 $ 52,763 The following tables present the activity in the allowance for credit losses by class for the nine month periods ended September 30, 2022 and 2021. September 30, 2022 Commercial Commercial Residential Agricultural Agricultural Consumer Total Allowance for credit losses: Beginning balance $ 22,478 $ 12,248 $ 5,560 $ 2,235 $ 3,756 $ 2,088 $ 48,365 Provision for credit losses ( 1,293 ) 1,833 1,758 ( 1,195 ) ( 1,668 ) 841 276 Loans charged-off ( 906 ) ( 785 ) ( 99 ) — ( 45 ) ( 760 ) ( 2,595 ) Recoveries 69 119 41 8 — 216 453 Total ending allowance balance $ 20,348 $ 13,415 $ 7,260 $ 1,048 $ 2,043 $ 2,385 $ 46,499 September 30, 2021 Commercial Commercial Residential Agricultural Agricultural Consumer Total Allowance for credit losses: Beginning balance, prior to adoption $ 9,012 $ 12,456 $ 4,559 $ 904 $ 758 $ 6,020 $ 33,709 Cumulative effect adjustment of adopting 5,612 4,167 8,870 167 ( 207 ) ( 2,877 ) 15,732 Impact of adopting ASC 326 - PCD loans 4,571 ( 218 ) 220 960 4,905 — 10,438 Provision for credit losses ( 6,767 ) 7,749 ( 5,307 ) ( 555 ) ( 1,130 ) ( 345 ) ( 6,355 ) Loans charged-off ( 169 ) ( 98 ) ( 12 ) ( 505 ) ( 1 ) ( 575 ) ( 1,360 ) Recoveries 223 71 9 33 4 259 599 Total ending allowance balance $ 12,482 $ 24,127 $ 8,339 $ 1,004 $ 4,329 $ 2,482 $ 52,763 The following tables present the recorded investment in loans and the balance in the allowance for credit losses by portfolio and class based on method to determine allowance for credit loss as of September 30, 2022, and December 31, 2021. September 30, 2022 Commercial Commercial Residential Agricultural Agricultural Consumer Total Allowance for credit losses: Individually evaluated for credit losses $ 856 $ 1,606 $ 816 $ 253 $ 1,745 $ 67 $ 5,343 Collectively evaluated for credit losses 19,492 11,809 6,444 795 298 2,318 41,156 Total $ 20,348 $ 13,415 $ 7,260 $ 1,048 $ 2,043 $ 2,385 $ 46,499 Loan Balance: Individually evaluated for credit losses $ 5,528 $ 8,345 $ 3,407 $ 3,882 $ 4,558 $ 289 $ 26,009 Collectively evaluated for credit losses 1,650,118 599,377 570,024 196,533 110,490 102,472 3,229,014 Total $ 1,655,646 $ 607,722 $ 573,431 $ 200,415 $ 115,048 $ 102,761 $ 3,255,023 December 31, 2021 Commercial Commercial Residential Agricultural Agricultural Consumer Total Allowance for credit losses: Individually evaluated for credit losses $ 4,381 $ 3,650 $ 892 $ 1,488 $ 3,546 $ 75 $ 14,032 Collectively evaluated for credit losses 18,097 8,598 4,668 747 210 2,013 34,333 Total $ 22,478 $ 12,248 $ 5,560 $ 2,235 $ 3,756 $ 2,088 $ 48,365 Loan Balance: Individually evaluated for credit losses $ 45,421 $ 13,786 $ 5,362 $ 14,959 $ 13,049 $ 357 $ 92,934 Collectively evaluated for credit losses 1,440,727 553,711 632,725 183,371 153,926 98,233 3,062,693 Total $ 1,486,148 $ 567,497 $ 638,087 $ 198,330 $ 166,975 $ 98,590 $ 3,155,627 The following table presents information related to nonaccrual loans at September 30, 2022, and December 31, 2021. September 30, 2022 Unpaid Recorded Allowance for With no related allowance recorded: Commercial real estate $ 4,590 $ 2,965 $ — Commercial and industrial 2,745 1,995 — Residential real estate 30 — — Agricultural real estate 2,812 1,758 — Agricultural 9 9 — Consumer 17 10 — Subtotal 10,203 6,737 — With an allowance recorded: Commercial real estate 2,574 2,376 775 Commercial and industrial 9,903 5,541 1,246 Residential real estate 3,534 3,269 807 Agricultural real estate 1,965 1,510 237 Agricultural 6,231 3,432 1,478 Consumer 324 264 66 Subtotal 24,531 16,392 4,609 Total $ 34,734 $ 23,129 $ 4,609 December 31, 2021 Unpaid Recorded Allowance for With no related allowance recorded: Commercial real estate $ — $ — $ — Commercial and industrial 6,060 1,964 — Residential real estate 609 429 — Agricultural real estate 1,795 1,660 — Agricultural — — — Consumer 49 49 — Subtotal 8,513 4,102 — With an allowance recorded: Commercial real estate 7,690 6,833 1,632 Commercial and industrial 4,976 4,593 1,800 Residential real estate 5,170 4,646 888 Agricultural real estate 3,726 2,738 637 Agricultural 8,836 6,175 2,307 Consumer 314 274 74 Subtotal 30,712 25,259 7,338 Total $ 39,225 $ 29,361 $ 7,338 The table below presents average recorded investment and interest income related to nonaccrual loans for the three and nine months ended September 30, 2022, and 2021. Interest income recognized in the following table was substantially recognized on the cash basis. The recorded investment in loans excludes accrued interest receivable due to immateriality. As of and for the three months ended September 30, 2022 September 30, 2021 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 2,646 $ — $ — $ — Commercial and industrial 1,979 157 — — Residential real estate — — — — Agricultural real estate 1,449 — 3,022 — Agricultural 5 — 884 — Consumer 5 1 — — Subtotal 6,084 158 3,906 — With an allowance recorded: Commercial real estate 2,577 20 7,107 1 Commercial and industrial 3,464 97 36,720 — Residential real estate 3,086 18 2,870 24 Agricultural real estate 1,924 2 2,501 — Agricultural 3,594 — 7,576 69 Consumer 266 2 215 1 Subtotal 14,911 139 56,989 95 Total $ 20,995 $ 297 $ 60,895 $ 95 As of and for the nine months ended September 30, 2022 September 30, 2021 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 1,528 $ — $ 421 $ 3 Commercial and industrial 1,480 157 161 35 Residential real estate 384 1 51 2 Agricultural real estate 1,554 — 2,307 82 Agricultural 2 — 2,156 — Consumer 15 1 — — Subtotal 4,963 159 5,096 122 With an allowance recorded: Commercial real estate 3,702 20 7,022 19 Commercial and industrial 3,808 97 31,203 119 Residential real estate 3,559 19 2,843 26 Agricultural real estate 2,251 5 3,346 54 Agricultural 4,437 — 5,991 113 Consumer 291 2 245 2 Subtotal 18,048 143 50,650 333 Total $ 23,011 $ 302 $ 55,746 $ 455 The following tables present the aging of the recorded investment in past due loans as of September 30, 2022, and December 31, 2021, by portfolio and class of loans. September 30, 2022 30 - 59 60 - 89 Greater Nonaccrual Loans Not Total Commercial real estate $ 787 $ 940 $ — $ 5,341 $ 1,648,578 $ 1,655,646 Commercial and industrial 1,545 201 — 7,536 598,440 607,722 Residential real estate 626 2,525 — 3,269 567,011 573,431 Agricultural real estate 26 2 — 3,268 197,119 200,415 Agricultural 200 117 — 3,441 111,290 115,048 Consumer 490 77 — 274 101,920 102,761 Total $ 3,674 $ 3,862 $ — $ 23,129 $ 3,224,358 $ 3,255,023 December 31, 2021 30 - 59 60 - 89 Greater Nonaccrual Loans Not Total Commercial real estate $ 4,633 $ 408 $ 256 $ 6,833 $ 1,474,018 $ 1,486,148 Commercial and industrial 424 88 — 6,557 560,428 567,497 Residential real estate 620 1,126 — 5,075 631,266 638,087 Agricultural real estate 28 57 — 4,398 193,847 198,330 Agricultural 5 — — 6,175 160,795 166,975 Consumer 316 61 — 323 97,890 98,590 Total $ 6,026 $ 1,740 $ 256 $ 29,361 $ 3,118,244 $ 3,155,627 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 loans individually by classifying the loans as to credit risk. Consumer loans are considered pass credits unless downgraded due to payment status or reviewed as part of a larger credit relationship. Loans that participated in the short-term deferral program are not automatically considered classified solely due to a deferral, are subject to ongoing monitoring and will be downgraded or placed on nonaccrual if a noted weakness exists. The Company uses the following definitions for risk ratings. Pass: Loans classified as pass include all loans that do not fall under one of the three following categories. 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 Company’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 institution 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 characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Based on the most recent analysis performed, the risk category of loans, by type and year of origination, at September 30, 2022, is as follows. September 30, 2022 2022 2021 2020 2019 2018 Prior Revolving Loans Revolving Loans Total Commercial real estate Risk rating Pass $ 301,156 $ 266,358 $ 204,570 $ 101,138 $ 122,674 $ 183,136 $ 466,019 $ 762 $ 1,645,813 Special mention 294 220 — — — 572 — — 1,086 Substandard 79 4,346 364 119 — 3,506 333 — 8,747 Doubtful — — — — — — — — — Total commercial real estate $ 301,529 $ 270,924 $ 204,934 $ 101,257 $ 122,674 $ 187,214 $ 466,352 $ 762 $ 1,655,646 Commercial and industrial Risk rating Pass $ 154,208 $ 93,861 $ 73,112 $ 43,101 $ 7,352 $ 12,248 $ 187,129 $ 6,857 $ 577,868 Special mention — — — — 683 3,857 — — 4,540 Substandard 314 4,227 2,208 10,144 1,470 811 6,140 — 25,314 Doubtful — — — — — — — — — Total commercial and industrial $ 154,522 $ 98,088 $ 75,320 $ 53,245 $ 9,505 $ 16,916 $ 193,269 $ 6,857 $ 607,722 Residential real estate Risk rating Pass $ 24,760 $ 304,919 $ 6,340 $ 14,632 $ 49,317 $ 109,027 $ 60,725 $ 277 $ 569,997 Special mention — — — — — — — — — Substandard — — 50 188 313 2,800 83 — 3,434 Doubtful — — — — — — — — — Total residential real estate $ 24,760 $ 304,919 $ 6,390 $ 14,820 $ 49,630 $ 111,827 $ 60,808 $ 277 $ 573,431 Agricultural real estate Risk rating Pass $ 26,733 $ 21,192 $ 29,551 $ 13,296 $ 7,995 $ 20,043 $ 75,339 $ 300 $ 194,449 Special mention 874 — — — — 612 750 — 2,236 Substandard 31 1,353 — 116 491 1,702 37 — 3,730 Doubtful — — — — — — — — — Total agricultural real estate $ 27,638 $ 22,545 $ 29,551 $ 13,412 $ 8,486 $ 22,357 $ 76,126 $ 300 $ 200,415 Agricultural Risk rating Pass $ 17,159 $ 9,796 $ 10,165 $ 3,363 $ 2,484 $ 2,353 $ 62,356 $ 150 $ 107,826 Special mention — — 1 92 22 375 665 — 1,155 Substandard — 1,017 1,838 2,003 397 230 582 — 6,067 Doubtful — — — — — — — — — Total agricultural $ 17,159 $ 10,813 $ 12,004 $ 5,458 $ 2,903 $ 2,958 $ 63,603 $ 150 $ 115,048 Consumer Risk rating Pass $ 48,732 $ 19,701 $ 9,513 $ 4,002 $ 1,752 $ 3,820 $ 14,976 $ 1 $ 102,497 Special mention — — — — — — — — — Substandard — 102 25 86 16 35 — — 264 Doubtful — — — — — — — — — Total consumer $ 48,732 $ 19,803 $ 9,538 $ 4,088 $ 1,768 $ 3,855 $ 14,976 $ 1 $ 102,761 Total loans Risk rating Pass $ 572,748 $ 715,827 $ 333,251 $ 179,532 $ 191,574 $ 330,627 $ 866,544 $ 8,347 $ 3,198,450 Special mention 1,168 220 1 92 705 5,416 1,415 — 9,017 Substandard 424 11,045 4,485 12,656 2,687 9,084 7,175 — 47,556 Doubtful — — — — — — — — — Total loans $ 574,340 $ 727,092 $ 337,737 $ 192,280 $ 194,966 $ 345,127 $ 875,134 $ 8,347 $ 3,255,023 Based on the analysis performed at December 31, 2021, the risk category of loans, by type and year of origination is as follows. December 31, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Revolving Loans Total Commercial real estate Risk rating Pass $ 301,947 $ 212,444 $ 159,374 $ 134,465 $ 72,249 $ 164,363 $ 409,109 $ 594 $ 1,454,545 Special mention 126 885 — 11,817 1,168 8,705 — — 22,701 Substandard 1,687 401 145 77 828 5,764 — — 8,902 Doubtful — — — — — — — — — Total commercial real estate $ 303,760 $ 213,730 $ 159,519 $ 146,359 $ 74,245 $ 178,832 $ 409,109 $ 594 $ 1,486,148 Commercial and industrial Risk rating Pass $ 170,263 $ 100,457 $ 57,955 $ 11,019 $ 17,327 $ 8,855 $ 155,181 $ 9,726 $ 530,783 Special mention 19 — 1,958 1,482 284 5,750 — — 9,493 Substandard 4,200 5,410 10,238 1,417 444 43 5,469 — 27,221 Doubtful — — — — — — — — — Total commercial and industrial $ 174,482 $ 105,867 $ 70,151 $ 13,918 $ 18,055 $ 14,648 $ 160,650 $ 9,726 $ 567,497 Residential real estate Risk rating Pass $ 336,775 $ 24,633 $ 22,520 $ 60,461 $ 34,453 $ 102,363 $ 51,584 $ 184 $ 632,973 Special mention — — — — — 25 — — 25 Substandard — 79 48 159 1,909 2,740 154 — 5,089 Doubtful — — — — — — — — — Total residential real estate $ 336,775 $ 24,712 $ 22,568 $ 60,620 $ 36,362 $ 105,128 $ 51,738 $ 184 $ 638,087 Agricultural real estate Risk rating Pass $ 38,412 $ 36,667 $ 18,442 $ 12,142 $ 14,432 $ 21,792 $ 42,541 $ — $ 184,428 Special mention 682 — — — 40 456 32 — 1,210 Substandard 1,705 206 6,020 592 2,530 554 1,085 — 12,692 Doubtful — — — — — — — — — Total agricultural real estate $ 40,799 $ 36,873 $ 24,462 $ 12,734 $ 17,002 $ 22,802 $ 43,658 $ — $ 198,330 Agricultural Risk rating Pass $ 27,637 $ 17,393 $ 6,391 $ 2,399 $ 2,930 $ 1,593 $ 93,982 $ 172 $ 152,497 Special mention — — 90 1,299 — 645 — — 2,034 Substandard 3,456 2,112 1,414 1,651 137 1,164 2,510 — 12,444 Doubtful — — — — — — — — — Total agricultural $ 31,093 $ 19,505 $ 7,895 $ 5,349 $ 3,067 $ 3,402 $ 96,492 $ 172 $ 166,975 Consumer Risk rating Pass $ 40,692 $ 15,171 $ 7,186 $ 3,640 $ 2,228 $ 3,551 $ 25,799 $ 1 $ 98,268 Special mention — — — — — — — — — Substandard 6 154 94 15 24 29 — — 322 Doubtful — — — — — — — — — Total consumer $ 40,698 $ 15,325 $ 7,280 $ 3,655 $ 2,252 $ 3,580 $ 25,799 $ 1 $ 98,590 Total loans Risk rating Pass $ 915,726 $ 406,765 $ 271,868 $ 224,126 $ 143,619 $ 302,517 $ 778,196 $ 10,677 $ 3,053,494 Special mention 827 885 2,048 14,598 1,492 15,581 32 — 35,463 Substandard 11,054 8,362 17,959 3,911 5,872 10,294 9,218 — 66,670 Doubtful — — — — — — — — — Total loans $ 927,607 $ 416,012 $ 291,875 $ 242,635 $ 150,983 $ 328,392 $ 787,446 $ 10,677 $ 3,155,627 Troubled Debt Restructurings (“TDR”) Consistent with accounting and regulatory guidance, the Company recognizes a TDR when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to a borrower that would not normally be considered. Regardless of the form of concession granted, the Company’s objective in offering a TDR is to increase the probability of repayment of a borrower’s loans. Qualified modifications under the CARES Act or Consolidated Appropriations Act ("CAA") are not considered TDRs and have been separately disclosed following the TDR discussion. The following table summarizes the Company’s TDRs by accrual status at September 30, 2022, and December 31, 2021. The allowance for credit losses on nonaccrual loans represents specific loan reserves, while the allowance on accrual loans represents collectively evaluated estimated losses. September 30, 2022 Nonaccrual Loan Balance Nonaccural Related Accrual Loan Balance Accrual Related Total TDR Total Related Commercial real estate $ 4,653 $ 610 $ 2,937 $ 90 $ 7,590 $ 700 Commercial and industrial 4,103 888 — — 4,103 888 Residential real estate — — — — — — Agricultural real estate 2,863 126 — — 2,863 126 Agricultural 946 265 1,650 271 2,596 536 Total troubled debt restructurings $ 12,565 $ 1,889 $ 4,587 $ 361 $ 17,152 $ 2,250 December 31, 2021 Nonaccrual Related Commercial real estate $ 5,784 $ 1,370 Commercial and industrial 54 27 Residential real estate 1,547 13 Agricultural real estate 2,122 488 Agricultural 1,292 480 Total troubled debt restructurings $ 10,799 $ 2,378 At September 30, 2022, and December 31, 2021, there were no commitments to lend additional amounts on these loans. There were no loan modifications during the three month period ending September 30, 2 022, and $ 8,328 in loan modifications during the nine month period ending September 30, 2022, that were considered to be troubled debt restructurings. There was a total of $ 1,460 in loan modifications considered to be troubled debt restructurings that occurred during the three and nine month periods ended September 30, 2021. There w as $ 89 and $ 104 i n interest income recognized on loans modified as TDRs during the three and nine month periods ended September 30, 2022. The following table shows loans that subsequently defaulted on their modified terms within the twelve months preceding September 30, 2022, and September 30, 2021. Default is determined at 90 or more days past due, charge-off, or foreclosure. As of September 30, 2022 2021 Commercial and industrial $ 3,778 $ — Agricultural 1,329 — Total TDR loans subsequently defaulted $ 5,107 $ — As of September 30, 2022, in connection with the COVID-19 relief provided by the CARES Act, the Company had no loans deferred as compared to December 31, 2021, with 20 deferrals of either the full loan payment or the principal component of the loan payment on outstanding loan balances of $ 36.3 million. These deferrals were not considered troubled debt restructurings based on the CARES Act or regulatory guidance. The following table lists loans included in the payment deferral program under the CARES Act by deferment type and category at December 31, 2021. There were no CARES Act deferred loans at September 30, 2022. December 31, 2021 Commercial Commercial Total 3 months principal and interest, then 6 months principal only $ 31,884 $ 3,052 $ 34,936 6 months principal and interest, then 9 months principal only 971 398 1,369 Total loans $ 32,855 $ 3,450 $ 36,305 The classification status of loans participating in the payment deferral program at December 31, 2021, is listed below. There were no such deferrals at September 30, 2022. December 31, 2021 Unclassified Classified Total Commercial real estate $ 32,855 $ — $ 32,855 Commercial and industrial 3,450 — 3,450 Total loans $ 36,305 $ — $ 36,305 Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk from a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance-sheet credit exposures is adjusted as a provision for credit loss expense recognized within other non-interest expense on the consolidated statements of income and included in other liabilities on the consolidated balance sheets. The estimated credit loss includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate of expected credit loss is based on the historical loss rate for the class of loan the commitments would be classified as if funded. The following table lists allowance for credit losses on off-balance-sheet credit exposures as of September 30, 2022, and December 31, 2021. Allowance for September 30, 2022 December 31, 2021 Commercial real estate $ 319 $ 484 Commercial and industrial 851 1,323 Residential real estate 46 16 Agricultural 2 3 Consumer 285 397 Total allowance for credit losses $ 1,503 $ 2,223 |