Loans and Allowance for Loan Losses | NOTE 3 – LOANS AND ALLOWANCE FOR LOAN LOSSES The following table lists categories of loans at September 30, 2019 and December 31, 2018. September 30, 2019 December 31, 2018 Commercial real estate $ 1,183,305 $ 1,231,217 Commercial and industrial 585,797 601,782 Residential real estate 531,257 446,060 Agricultural real estate 143,718 139,332 Consumer 70,944 62,894 Agricultural 85,903 94,123 Total loans 2,600,924 2,575,408 Allowance for loan losses (17,875 ) (11,454 ) Net loans $ 2,583,049 $ 2,563,954 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 first nine months of 2019, the Company purchased eight pools of residential real estate loans totaling $130,502. As of September 30, 2019 and December 31, 2018, residential real estate loans include $161,548 and $64,558 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 $8,990 with related loans of $666,671 at September 30, 2019, and $11,372 with related loans of $827,676 at December 31, 2018. Overdraft deposit accounts are reclassified and included in consumer loans above. These accounts totaled $916 at September 30, 2019 and $1,279 at December 31, 2018. The following tables present the activity in the allowance for loan losses by class for the three-month periods ended September 30, 2019 and 2018. September 30, 2019 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 4,712 $ 7,948 $ 2,908 $ 525 $ 1,344 $ 340 $ 17,777 Provision for loan losses 396 49 (324 ) 131 241 186 679 Loans charged-off (506 ) (18 ) (355 ) (9 ) (313 ) (5 ) (1,206 ) Recoveries 47 17 450 38 73 — 625 Total ending allowance balance $ 4,649 $ 7,996 $ 2,679 $ 685 $ 1,345 $ 521 $ 17,875 September 30, 2018 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 3,495 $ 2,254 $ 2,663 $ 334 $ 983 $ 354 $ 10,083 Provision for loan losses 734 287 (20 ) 28 330 (68 ) 1,291 Loans charged-off (90 ) (3 ) (91 ) (13 ) (526 ) — (723 ) Recoveries 11 22 56 13 256 1 359 Total ending allowance balance $ 4,150 $ 2,560 $ 2,608 $ 362 $ 1,043 $ 287 $ 11,010 The following tables present the activity in the allowance for loan losses by class for the nine-month periods ended September 30, 2019 and 2018. September 30, 2019 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Beginning balance $ 4,662 $ 2,707 $ 2,320 $ 391 $ 1,070 $ 304 $ 11,454 Provision for loan losses 981 13,979 805 299 973 262 17,299 Loans charged-off (1,114 ) (8,756 ) (934 ) (43 ) (994 ) (47 ) (11,888 ) Recoveries 120 66 488 38 296 2 1,010 Total ending allowance balance $ 4,649 $ 7,996 $ 2,679 $ 685 $ 1,345 $ 521 $ 17,875 September 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 1,241 483 455 120 865 47 3,211 Loans charged-off (119 ) (89 ) (362 ) (93 ) (1,035 ) (43 ) (1,741 ) Recoveries 288 30 253 16 445 10 1,042 Total ending allowance balance $ 4,150 $ 2,560 $ 2,608 $ 362 $ 1,043 $ 287 $ 11,010 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 September 30, 2019 and December 31, 2018. September 30, 2019 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Individually evaluated for impairment $ 436 $ 5,238 $ 364 $ 157 $ 63 $ 101 $ 6,359 Collectively evaluated for impairment 3,343 2,744 2,293 430 1,282 325 10,417 Purchased credit impaired loans 870 14 22 98 — 95 1,099 Total $ 4,649 $ 7,996 $ 2,679 $ 685 $ 1,345 $ 521 $ 17,875 Loan Balance: Individually evaluated for impairment $ 5,327 $ 21,341 $ 8,682 $ 1,115 $ 624 $ 749 $ 37,838 Collectively evaluated for impairment 1,165,740 558,958 519,818 137,063 70,292 83,044 2,534,915 Purchased credit impaired loans 12,238 5,498 2,757 5,540 28 2,110 28,171 Total $ 1,183,305 $ 585,797 $ 531,257 $ 143,718 $ 70,944 $ 85,903 $ 2,600,924 December 31, 2018 Commercial Real Estate Commercial and Industrial Residential Real Estate Agricultural Real Estate Consumer Agricultural Total Allowance for loan losses: Individually evaluated for impairment $ 242 $ 185 $ 391 $ 22 $ 62 $ 10 $ 912 Collectively evaluated for impairment 3,695 2,493 1,861 367 925 293 9,634 Purchased credit impaired loans 725 29 68 2 83 1 908 Total $ 4,662 $ 2,707 $ 2,320 $ 391 $ 1,070 $ 304 $ 11,454 Loan Balance: Individually evaluated for impairment $ 4,068 $ 24,275 $ 4,434 $ 856 $ 678 $ 2,252 $ 36,563 Collectively evaluated for impairment 1,213,653 571,171 438,739 133,415 61,978 89,194 2,508,150 Purchased credit impaired loans 13,496 6,336 2,887 5,061 238 2,677 30,695 Total $ 1,231,217 $ 601,782 $ 446,060 $ 139,332 $ 62,894 $ 94,123 $ 2,575,408 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 September 30, 2019 and December 31, 2018. The recorded investment in loans excludes accrued interest receivable due to immateriality. September 30, 2019 December 31, 2018 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 $ 3,287 $ 2,962 $ — $ 1,685 $ 1,647 $ — Commercial and industrial 557 546 — 22,701 22,651 — Residential real estate 5,072 5,040 — 533 527 — Agricultural real estate 964 933 — 2,038 2,035 — Consumer 32 — — 61 55 — Agricultural — — — 756 756 — Subtotal 9,912 9,481 — 27,774 27,671 — With an allowance recorded: Commercial real estate 8,434 6,830 1,305 8,700 7,179 967 Commercial and industrial 21,108 20,933 5,252 2,255 1,911 214 Residential real estate 4,073 3,859 387 4,934 4,582 459 Agricultural real estate 1,560 1,439 255 261 242 24 Consumer 689 624 63 1,144 859 145 Agricultural 1,843 1,591 196 162 106 11 Subtotal 37,707 35,276 7,458 17,456 14,879 1,820 Total $ 47,619 $ 44,757 $ 7,458 $ 45,230 $ 42,550 $ 1,820 The tables below present average recorded investment and interest income related to impaired loans for the three and nine months ended September 30, 2019 and 2018. 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, 2019 September 30, 2018 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 3,327 $ 3 $ 1,938 $ 14 Commercial and industrial 808 — 4,664 — Residential real estate 7,800 19 918 6 Agricultural real estate 1,750 — 2,299 6 Consumer 15 — 53 — Agricultural 161 — 417 — Subtotal 13,861 22 10,289 26 With an allowance recorded: Commercial real estate 7,032 — 2,463 79 Commercial and industrial 21,066 9 856 16 Residential real estate 3,891 20 4,309 16 Agricultural real estate 1,296 2 264 — Consumer 728 4 480 1 Agricultural 1,128 — 143 — Subtotal 35,141 35 8,515 112 Total $ 49,002 $ 57 $ 18,804 $ 138 As of and for the nine months ended September 30, 2019 September 30, 2018 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related allowance recorded: Commercial real estate $ 7,427 $ 82 $ 1,840 $ 132 Commercial and industrial 2,064 5 6,188 66 Residential real estate 4,161 50 798 16 Agricultural real estate 1,804 — 1,196 18 Consumer 31 — 26 — Agricultural 300 — 324 18 Subtotal 15,787 137 10,372 250 With an allowance recorded: Commercial real estate 7,140 74 1,847 81 Commercial and industrial 18,528 12 858 16 Residential real estate 6,965 28 4,090 38 Agricultural real estate 907 2 476 2 Consumer 772 9 495 4 Agricultural 663 2 496 4 Subtotal 34,975 127 8,262 145 Total $ 50,762 $ 264 $ 18,634 $ 395 The following tables present the aging of the recorded investment in past due loans as of September 30, 2019 and December 31, 2018, by portfolio and class of loans. September 30, 2019 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 $ 2,514 $ 704 $ — $ 12,311 $ 1,167,776 $ 1,183,305 Commercial and industrial 413 315 — 21,945 563,124 585,797 Residential real estate 779 1,582 3 9,342 519,551 531,257 Agricultural real estate 67 46 — 5,206 138,399 143,718 Consumer 246 147 49 624 69,878 70,944 Agricultural 73 — — 1,591 84,239 85,903 Total $ 4,092 $ 2,794 $ 52 $ 51,019 $ 2,542,967 $ 2,600,924 December 31, 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 $ 1,302 $ 259 $ — $ 12,768 $ 1,216,888 $ 1,231,217 Commercial and industrial 509 2,467 — 6,954 591,852 601,782 Residential real estate 782 2,188 18 5,257 437,815 446,060 Agricultural real estate — 30 — 4,857 134,445 139,332 Consumer 501 157 — 914 61,322 62,894 Agricultural 186 3 — 2,453 91,481 94,123 Total $ 3,280 $ 5,104 $ 18 $ 33,203 $ 2,533,803 $ 2,575,408 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 September 30, 2019 and December 31, 2018. September 30, 2019 Unclassified Classified Total Commercial real estate $ 1,165,707 $ 17,598 $ 1,183,305 Commercial and industrial 535,939 49,858 585,797 Residential real estate 521,906 9,351 531,257 Agricultural real estate 130,920 12,798 143,718 Consumer 70,320 624 70,944 Agricultural 80,259 5,644 85,903 Total $ 2,505,051 $ 95,873 $ 2,600,924 December 31, 2018 Unclassified Classified Total Commercial real estate $ 1,194,240 $ 36,977 $ 1,231,217 Commercial and industrial 572,300 29,482 601,782 Residential real estate 440,704 5,356 446,060 Agricultural real estate 129,285 10,047 139,332 Consumer 61,976 918 62,894 Agricultural 90,848 3,275 94,123 Total $ 2,489,353 $ 86,055 $ 2,575,408 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 purchased credit impaired loans as of September 30, 2019 and December 31, 2018. September 30, 2019 December 31, 2018 Contractually required principal payments $ 36,150 $ 40,772 Discount (7,979 ) (10,077 ) Recorded investment $ 28,171 $ 30,695 The accretable yield associated with these loans was $3,758 and $3,785 as of September 30, 2019 and December 31, 2018. The interest income recognized on these loans for the three-month periods ended September 30, 2019, and 2018, was $1,479 and $631. The interest income recognized on these loans for the nine-month periods ended September 30, 2019, and 2018, was $2,011 and $2,009. For the three and nine-month periods ended September 30, 2019, there was a provision for loan losses of $28 and $191 recorded for these loans. For the three and nine-month periods ended September 30, 2018, there was a provision for loan losses of $612 and $466 for these loans. Troubled Debt Restructurings The Company had no loans modified under troubled debt restructurings as of September 30, 2019 or December 31, 2018. |