Loans and Allowance for Loan Losses | NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES The following table lists categories of loans at June 30, 2018 and December 31, 2017. June 30, 2018 December 31, 2017 Commercial real estate $ 1,226,397 $ 987,661 Commercial and industrial 503,716 507,519 Residential real estate 409,571 376,705 Agricultural real estate 118,241 86,486 Consumer 54,464 49,361 Agricultural 99,082 95,547 Total loans 2,411,471 2,103,279 Allowance for loan losses (10,083 ) (8,498 ) Net loans $ 2,401,388 $ 2,094,781 The Company has participated in mortgage finance loans with another institution, (the “originator”). These mortgage finance loans consist of ownership interests purchased in single family residential mortgages funded through the originator’s mortgage finance group. These loans are typically on the Company’s balance sheet for 10 to 20 days. As of June 30, 2018 and December 31, 2017, the Company had balances of $10,000 and $10,000 in mortgage finance loans classified as commercial and industrial. 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. As of June 30, 2018 and December 31, 2017, residential real estate loans include $74,944 and $85,868 of purchased residential real estate loans. The unamortized balance of merger purchase accounting adjustments related to non-purchase credit impaired loans included in the loan totals above are $11,070 with related loans of $895,686 at June 30, 2018, and $6,842 with related loans of $796,064 at December 31, 2017. Over-draft deposit accounts are reclassified and included in consumer loans above. These accounts totaled $1,367 at June 30, 2018 and $741 at December 31, 2017. The following tables present the activity in the allowance for loan losses by class for the three-month periods ended June 30, 2018 and 2017. June 30, 2018 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 3,010 $ 2,388 $ 2,442 $ 267 $ 878 $ 331 $ 9,316 Provision for loan losses 216 (64 ) 185 147 247 19 750 Loans charged-off — (77 ) (148 ) (80 ) (203 ) (4 ) (512 ) Recoveries 269 7 184 — 61 8 529 Total ending allowance balance $ 3,495 $ 2,254 $ 2,663 $ 334 $ 983 $ 354 $ 10,083 June 30, 2017 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 2,592 $ 2,059 $ 1,875 $ 66 $ 391 $ 65 $ 7,048 Provision for loan losses (245 ) 397 58 46 298 74 628 Loans charged-off (29 ) (409 ) (27 ) (3 ) (242 ) — (710 ) Recoveries 406 23 93 — 75 5 602 Total ending allowance balance $ 2,724 $ 2,070 $ 1,999 $ 109 $ 522 $ 144 $ 7,568 The following tables present the activity in the allowance for loan losses by class for the six-month periods ended June 30, 2018 and 2017. June 30, 2018 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 2,740 $ 2,136 $ 2,262 $ 319 $ 768 $ 273 $ 8,498 Provision for loan losses 507 196 475 92 535 115 1,920 Loans charged-off (29 ) (86 ) (271 ) (80 ) (509 ) (43 ) (1,018 ) Recoveries 277 8 197 3 189 9 683 Total ending allowance balance $ 3,495 $ 2,254 $ 2,663 $ 334 $ 983 $ 354 $ 10,083 June 30, 2017 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 2,420 $ 1,881 $ 1,765 $ 35 $ 266 $ 65 $ 6,432 Provision for loan losses (78 ) 585 374 77 650 115 1,723 Loans charged-off (92 ) (422 ) (238 ) (3 ) (601 ) (41 ) (1,397 ) Recoveries 474 26 98 — 207 5 810 Total ending allowance balance $ 2,724 $ 2,070 $ 1,999 $ 109 $ 522 $ 144 $ 7,568 The following tables present the recorded investment in loans and the balance in the allowance for loan losses by portfolio and class based on impairment method as of June 30, 2018 and December 31, 2017. June 30, 2018 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Individually evaluated for impairment $ 28 $ 27 $ 411 $ 25 $ 49 $ 12 $ 552 Collectively evaluated for impairment 3,460 2,212 2,235 306 934 336 9,483 Purchase credit impaired loans 7 15 17 3 — 6 48 Total $ 3,495 $ 2,254 $ 2,663 $ 334 $ 983 $ 354 $ 10,083 Loan Balance: Individually evaluated for impairment $ 2,029 $ 5,242 $ 4,851 $ 2,496 $ 523 $ 280 $ 15,421 Collectively evaluated for impairment 1,209,070 491,874 402,324 110,974 53,936 96,436 2,364,614 Purchase credit impaired loans 15,298 6,600 2,396 4,771 5 2,366 31,436 Total $ 1,226,397 $ 503,716 $ 409,571 $ 118,241 $ 54,464 $ 99,082 $ 2,411,471 December 31, 2017 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Individually evaluated for impairment $ 130 $ 87 $ 386 $ 46 $ 56 $ 36 $ 741 Collectively evaluated for impairment 2,582 2,028 1,815 190 712 236 7,563 Purchase credit impaired loans 28 21 61 83 — 1 194 Total $ 2,740 $ 2,136 $ 2,262 $ 319 $ 768 $ 273 $ 8,498 Loan Balance: Individually evaluated for impairment $ 2,728 $ 7,886 $ 4,829 $ 533 $ 556 $ 1,050 $ 17,582 Collectively evaluated for impairment 971,376 493,903 369,471 82,493 48,802 90,795 2,056,840 Purchase credit impaired loans 13,557 5,730 2,405 3,460 3 3,702 28,857 Total $ 987,661 $ 507,519 $ 376,705 $ 86,486 $ 49,361 $ 95,547 $ 2,103,279 The following table presents information related to impaired loans, excluding purchased credit impaired loans which have not deteriorated since acquisition, by class of loans as of June 30, 2018 and December 31, 2017. The recorded investment in loans excludes accrued interest receivable due to immateriality. June 30, 2018 December 31, 2017 Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated With no related allowance recorded: Commercial real estate $ 1,690 $ 1,629 $ — $ 1,878 $ 1,567 $ — Commercial and industrial 6,271 4,970 — 8,679 8,020 — Residential real estate 747 742 — 1,230 969 — Agricultural real estate 2,273 2,242 — 52 52 — Consumer 41 38 — 1 — — Agricultural 162 158 — 7 7 — Subtotal 11,184 9,779 — 11,847 10,615 — With an allowance recorded: Commercial real estate 628 466 35 4,049 1,597 158 Commercial and industrial 511 423 42 1,310 1,113 108 Residential real estate 4,492 4,276 428 4,868 4,468 447 Agricultural real estate 300 283 28 1,266 1,034 129 Consumer 592 486 49 677 559 56 Agricultural 210 182 18 1,798 1,444 37 Subtotal 6,733 6,116 600 13,968 10,215 935 Total $ 17,917 $ 15,895 $ 600 $ 25,815 $ 20,830 $ 935 The tables below present average recorded investment and interest income related to impaired loans for the three months and six months ended June 30, 2018 and 2017. 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 June 30, 2018 June 30, 2017 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 1,773 $ 118 $ 1,099 $ — Commercial and industrial 6,186 56 1,034 — Residential real estate 565 9 330 1 Agricultural real estate 1,189 11 31 12 Consumer 19 — — — Agricultural 307 18 7 — Subtotal 10,039 212 2,501 13 With an allowance recorded: Commercial real estate 665 1 2,229 7 Commercial and industrial 514 — 558 — Residential real estate 3,774 22 3,563 13 Agricultural real estate 313 2 339 — Consumer 473 3 383 2 Agricultural 218 4 150 — Subtotal 5,957 32 7,222 22 Total $ 15,996 $ 244 $ 9,723 $ 35 As of and for the six months ended June 30, 2018 June 30, 2017 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 1,704 $ 118 $ 841 $ 7 Commercial and industrial 6,797 66 667 3 Residential real estate 700 10 688 1 Agricultural real estate 810 12 437 12 Consumer 13 — 26 — Agricultural 207 18 6 — Subtotal 10,231 224 2,665 23 With an allowance recorded: Commercial real estate 975 2 2,195 9 Commercial and industrial 714 — 378 1 Residential real estate 4,005 22 3,207 15 Agricultural real estate 553 2 211 — Consumer 502 3 368 2 Agricultural 627 4 141 — Subtotal 7,376 33 6,500 27 Total $ 17,607 $ 257 $ 9,165 $ 50 The following tables present the aging of the recorded investment in past due loans as of June 30, 2018 and December 31, 2017, by portfolio and class of loans. June 30, 2018 30 - 59 Days Past Due 60 - 89 Days Past Due Greater Than 90 Days Past Due Still On Accrual Nonaccrual Loans Not Past Due Total Commercial real estate $ 1,762 $ 301 $ — $ 12,603 $ 1,211,731 $ 1,226,397 Commercial and industrial 208 754 302 11,114 491,338 503,716 Residential real estate 710 627 — 5,371 402,863 409,571 Agricultural real estate — — — 5,690 112,551 118,241 Consumer 336 62 — 524 53,542 54,464 Agricultural 52 99 — 2,646 96,285 99,082 Total $ 3,068 $ 1,843 $ 302 $ 37,948 $ 2,368,310 $ 2,411,471 December 31, 2017 30 - 59 Days Past Due 60 - 89 Days Past Due Greater Than 90 Days Past Due Still On Accrual Nonaccrual Loans Not Past Due Total Commercial real estate $ 1,284 $ 22 $ — $ 11,607 $ 974,748 $ 987,661 Commercial and industrial 251 6 — 13,217 494,045 507,519 Residential real estate 1,457 1,176 — 6,148 367,924 376,705 Agricultural real estate 123 — — 3,993 82,370 86,486 Consumer 359 112 — 559 48,331 49,361 Agricultural 415 — — 4,752 90,380 95,547 Total $ 3,889 $ 1,316 $ — $ 40,276 $ 2,057,798 $ 2,103,279 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. The Company uses the following definitions for risk ratings: Pass Special Mention Substandard Doubtful The risk category of loans by class of loans is as follows as of June 30, 2018 and December 31, 2017. June 30, 2018 Unclassified Classified Total Commercial real estate $ 1,211,285 $ 15,112 $ 1,226,397 Commercial and industrial 486,469 17,247 503,716 Residential real estate 403,988 5,583 409,571 Agricultural real estate 108,349 9,892 118,241 Consumer 53,931 533 54,464 Agricultural 92,555 6,527 99,082 Total $ 2,356,577 $ 54,894 $ 2,411,471 December 31, 2017 Unclassified Classified Total Commercial real estate $ 971,458 $ 16,203 $ 987,661 Commercial and industrial 486,150 21,369 507,519 Residential real estate 370,151 6,554 376,705 Agricultural real estate 77,084 9,402 86,486 Consumer 48,777 584 49,361 Agricultural 88,261 7,286 95,547 Total $ 2,041,881 $ 61,398 $ 2,103,279 Purchased Credit Impaired Loans The Company has acquired loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The table below lists recorded investments in purchase credit impaired loans as of June 30, 2018 and December 31, 2017. June 30, 2018 December 31, 2017 Contractually required principal payments $ 43,601 $ 41,349 Discount (12,165 ) (12,492 ) Recorded investment $ 31,436 $ 28,857 The accretable yield associated with these loans was $2,537 and $1,980 as of June 30, 2018 and December 31, 2017. The interest income recognized on these loans for the three-month and six-month periods ended June 30, 2018 and 2017 was $813, $1,378, $699 and $1,412. For the three month period ended June 30, 2018 there was a $25 provision for loan loss recorded for these loans and for the six month period ended June 30, 2018 there was a provision for loan loss reversal of $146 for these loans. For the three and six-month periods ended June 30, 2017, there was a provision for loan losses of $8 and $61 recorded for these loans. Troubled Debt Restructurings The Company had no loans modified under troubled debt restructurings as of June 30, 2018 or December 31, 2017. |