Loans | Loans The following table presents the composition of loans as of March 31, 2020 and September 30, 2019. March 31, September 30, (dollars in thousands) Commercial real estate $ 5,222,819 $ 5,092,410 Agriculture 1,881,792 2,008,644 Commercial non-real estate 1,699,197 1,719,956 Residential real estate 820,759 812,208 Consumer 52,640 51,925 Other 39,908 47,541 Ending balance 9,717,115 9,732,684 Less: Unamortized discount on acquired loans (10,468) (13,655) Unearned net deferred fees and costs and loans in process (13,352) (12,266) Total $ 9,693,295 $ 9,706,763 The loan segments above include loans covered by a FDIC non-commercial loss sharing agreement totaling $29.7 million and $31.9 million as of March 31, 2020 and September 30, 2019, respectively, residential real estate loans held for sale totaling $4.3 million and $7.4 million at March 31, 2020 and September 30, 2019, respectively, and $792.1 million and $813.0 million of loans accounted for at fair value at March 31, 2020 and September 30, 2019, respectively. Unearned net deferred fees and costs totaled $13.7 million and $13.9 million as of March 31, 2020 and September 30, 2019, respectively. Loans in process represent loans that have been funded as of the balance sheet dates but not classified into a loan category and loan payments received as of the balance sheet dates that have not been applied to individual loan accounts. Loans in process totaled $(0.4) million and $(1.6) million at March 31, 2020 and September 30, 2019, respectively. Loans guaranteed by agencies of the U.S. government totaled $146.2 million and $154.2 million at March 31, 2020 and September 30, 2019, respectively. Principal balances of residential real estate loans sold totaled $68.4 million and $46.8 million for the three months ended March 31, 2020 and 2019, respectively, and $175.4 million and $100.7 million for the six months ended March 31, 2020 and 2019, respectively. Nonaccrual Interest income on loans is accrued daily on the outstanding balances. A loan is placed on nonaccrual status when management believes, after considering collection efforts and other factors, the borrowers' condition is such that collection of interest is doubtful, which is generally 90 days past due. When loans are placed on nonaccrual status, accrual of interest is discontinued and interest receivable is reversed against interest income in the current period. Interest payments received thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal. Loans are removed from nonaccrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest. The following table presents the Company’s nonaccrual loans at March 31, 2020 and September 30, 2019, excluding ASC 310-30 loans. Loans greater than 90 days past due and still accruing interest as of March 31, 2020 and September 30, 2019, were $2.3 million and $11.2 million, respectively. March 31, September 30, (dollars in thousands) Nonaccrual loans Commercial real estate $ 41,541 $ 14,973 Agriculture 143,198 77,880 Commercial non-real estate 21,334 9,502 Residential real estate 4,437 2,661 Consumer 97 74 Total $ 210,607 $ 105,090 Credit Quality Information The Company assigns all non-consumer loans a credit quality risk rating. These ratings are Pass, Watch, Substandard, Doubtful and Loss. Loans with a Pass and Watch rating represent those loans not classified on the Company’s rating scale as problem credits, with loans with a Watch rating being monitored and updated at least quarterly by management. Substandard loans are those where a well-defined weakness has been identified that may put full collection of contractual debt at risk. Doubtful loans are those where a well-defined weakness has been identified and a loss of contractual debt is probable. Substandard and doubtful loans are monitored and updated monthly. All non-consumer loan risk ratings are monitored by management and updated as deemed appropriate. The Company generally does not risk rate residential real estate or consumer loans unless a default event such as bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans. The following table presents the composition of the loan portfolio by internally assigned grade as of March 31, 2020 and September 30, 2019. This table is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of $792.1 million at March 31, 2020 and $813.0 million at September 30, 2019. As of March 31, 2020 Commercial Real Estate Agriculture Commercial Residential Real Estate ¹ Consumer ¹ Other Total (dollars in thousands) Credit Risk Profile by Internally Assigned Grade Grade: Pass $ 4,478,193 $ 1,157,671 $ 1,431,706 $ 776,696 $ 51,657 $ 39,908 $ 7,935,831 Watchlist 104,941 229,606 28,859 986 728 — 365,120 Substandard 132,937 345,674 92,849 10,694 122 — 582,276 Doubtful 51 1,437 99 16 4 — 1,607 Loss — — — — — — — Ending balance 4,716,122 1,734,388 1,553,513 788,392 52,511 39,908 8,884,834 Loans covered by a FDIC loss sharing agreement — — — 29,691 — — 29,691 Total $ 4,716,122 $ 1,734,388 $ 1,553,513 $ 818,083 $ 52,511 $ 39,908 $ 8,914,525 1 The Company generally does not risk rate residential real estate or consumer loans unless a default event such as a bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans. As of September 30, 2019 Commercial Real Estate Agriculture Commercial Residential Real Estate ¹ Consumer ¹ Other Total (dollars in thousands) Credit Risk Profile by Internally Assigned Grade Grade: Pass $ 4,433,530 $ 1,346,436 $ 1,424,357 $ 763,797 $ 50,796 $ 47,541 $ 8,066,457 Watchlist 85,256 179,965 103,514 6,297 755 — 375,787 Substandard 54,242 322,327 42,048 6,863 205 — 425,685 Doubtful 56 5,811 296 55 2 — 6,220 Loss — — — — — — — Ending balance 4,573,084 1,854,539 1,570,215 777,012 51,758 47,541 8,874,149 Loans covered by a FDIC loss sharing agreement — — — 31,891 — — 31,891 Total $ 4,573,084 $ 1,854,539 $ 1,570,215 $ 808,903 $ 51,758 $ 47,541 $ 8,906,040 1 The Company generally does not risk rate residential real estate or consumer loans unless a default event such as a bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans. Past Due Loans The following table presents the Company’s past due loans at March 31, 2020 and September 30, 2019. This table is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of $792.1 million at March 31, 2020 and $813.0 million at September 30, 2019. 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Current Total Financing Receivables (dollars in thousands) As of March 31, 2020 Commercial real estate $ 25,351 $ 4,056 $ 13,752 $ 43,159 $ 4,672,963 $ 4,716,122 Agriculture 30,196 10,160 60,176 100,532 1,633,856 1,734,388 Commercial non-real estate 2,538 956 20,497 23,991 1,529,522 1,553,513 Residential real estate 3,702 252 2,550 6,504 781,888 788,392 Consumer 42 5 29 76 52,435 52,511 Other — — — — 39,908 39,908 Ending balance 61,829 15,429 97,004 174,262 8,710,572 8,884,834 Loans covered by a FDIC loss sharing agreement 1,201 319 757 2,277 27,414 29,691 Total $ 63,030 $ 15,748 $ 97,761 $ 176,539 $ 8,737,986 $ 8,914,525 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Current Total Financing Receivables (dollars in thousands) As of September 30, 2019 Commercial real estate $ 3,587 $ 570 $ 2,475 $ 6,632 $ 4,566,452 $ 4,573,084 Agriculture 13,411 1,267 33,089 47,767 1,806,772 1,854,539 Commercial non-real estate 3,932 120 4,424 8,476 1,561,739 1,570,215 Residential real estate 311 676 939 1,926 775,086 777,012 Consumer 61 110 7 178 51,580 51,758 Other — — — — 47,541 47,541 Ending balance 21,302 2,743 40,934 64,979 8,809,170 8,874,149 Loans covered by a FDIC loss sharing agreement 536 410 331 1,277 30,614 31,891 Total $ 21,838 $ 3,153 $ 41,265 $ 66,256 $ 8,839,784 $ 8,906,040 Impaired Loans The following table presents the Company’s impaired loans. This table excludes purchased credit impaired loans and loans measured at fair value with changes in fair value reported in earnings of $792.1 million at March 31, 2020 and $813.0 million at September 30, 2019. March 31, 2020 September 30, 2019 Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance (dollars in thousands) Impaired loans: With an allowance recorded: Commercial real estate $ 60,619 $ 61,828 $ 7,020 $ 26,003 $ 26,297 $ 4,159 Agriculture 35,013 36,267 8,136 98,392 104,350 8,234 Commercial non-real estate 34,227 37,737 8,601 21,331 21,777 6,062 Residential real estate 5,426 5,923 2,115 3,829 4,311 1,795 Consumer 125 133 36 207 214 97 Total impaired loans with an allowance recorded 135,410 141,888 25,908 149,762 156,949 20,347 With no allowance recorded: Commercial real estate 72,060 110,873 — 28,272 66,631 — Agriculture 312,866 331,126 — 231,087 255,308 — Commercial non-real estate 59,250 67,488 — 21,579 31,414 — Residential real estate 5,475 7,870 — 3,290 5,454 — Consumer 2 110 — 1 108 — Total impaired loans with no allowance recorded 449,653 517,467 — 284,229 358,915 — Total impaired loans $ 585,063 $ 659,355 $ 25,908 $ 433,991 $ 515,864 $ 20,347 The following table presents the average recorded investment on impaired loans and interest income recognized on impaired loans for the three and six months ended March 31, 2020 and 2019. Three Months Ended March 31, Six Months Ended March 31, 2020 2019 2020 2019 Average Recorded Investment Interest Income Recognized While on Impaired Status Average Recorded Investment Interest Income Recognized While on Impaired Status Average Recorded Investment Interest Income Recognized While on Impaired Status Average Recorded Investment Interest Income Recognized While on Impaired Status (dollars in thousands) Commercial real estate $ 112,623 $ 1,287 $ 34,475 $ 345 $ 93,174 $ 3,666 $ 36,616 $ 697 Agriculture 369,598 4,784 151,021 2,203 356,225 13,301 146,423 3,202 Commercial non-real estate 97,672 1,531 22,556 312 79,418 4,401 22,731 678 Residential real estate 10,904 127 6,724 93 9,642 393 6,711 182 Consumer 139 3 237 6 162 4 212 11 Total $ 590,936 $ 7,732 $ 215,013 $ 2,959 $ 538,621 $ 21,765 $ 212,693 $ 4,770 Valuation adjustment reductions made to repossessed properties totaled $4.8 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively. Valuation adjustment reductions made to repossessed properties totaled $4.8 million and $2.0 million for the six months ended March 31, 2020 and 2019, respectively. The adjustments are included in net loss on repossessed property and other related expenses in noninterest expense. Troubled Debt Restructurings Included in certain loan categories in the impaired loans are TDRs that were classified as impaired. These TDRs do not include purchased credit impaired loans. When the Company grants concessions to borrowers such as reduced interest rates or extensions of loan periods that would not be considered other than because of borrowers’ financial difficulties, the modification is considered a TDR. Specific reserves included in the allowance for loan and lease losses for TDRs were $6.9 million and $10.3 million at March 31, 2020 and September 30, 2019, respectively. There were $0.1 million and $0.2 million of commitments to lend additional funds to borrowers whose loans were modified in a TDR as of March 31, 2020 and September 30, 2019, respectively. The following table presents the recorded value of the Company’s TDR balances as of March 31, 2020 and September 30, 2019. March 31, 2020 September 30, 2019 Accruing Nonaccrual Accruing Nonaccrual (dollars in thousands) Commercial real estate $ 19,843 $ 3,088 $ 17,145 $ 904 Agriculture 11,838 20,357 22,929 24,762 Commercial non-real estate 9,402 4,465 4,398 4,257 Residential real estate 294 92 263 102 Consumer 5 40 107 48 Total $ 41,382 $ 28,042 $ 44,842 $ 30,073 TDRs are generally restructured through either a rate modification, term extension, payment modification or due to a bankruptcy. The following table presents a summary of all accruing loans restructured in TDRs for the three and six months ended March 31, 2020 and 2019. Three Months Ended March 31, Six Months Ended March 31, 2020 2019 2020 2019 Recorded Investment Recorded Investment Recorded Investment Recorded Investment Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification (dollars in thousands) Commercial real estate 1 $ 2,879 $ 2,879 — $ — $ — 1 $ 2,879 $ 2,879 — $ — $ — Agriculture 2 993 993 — — — 2 993 993 — — — Commercial non-real estate 2 3,952 3,952 — — — 4 5,096 5,096 — — — Residential real estate 1 50 50 — — — 1 50 50 — — — Consumer — — — — — — — — — 1 89 89 Total accruing 6 $ 7,874 $ 7,874 — $ — $ — 8 $ 9,018 $ 9,018 1 $ 89 $ 89 Change in recorded investment due to principal paydown at time of modification — $ — $ — — $ — $ — — $ — $ — — $ — $ — Change in recorded investment due to chargeoffs at time of modification — — — — — — — — — — — — The following table presents a summary of all nonaccruing loans restructured in TDRs for the three and six months ended March 31, 2020 and 2019. Three Months Ended March 31, Six Months Ended March 31, 2020 2019 2020 2019 Recorded Investment Recorded Investment Recorded Investment Recorded Investment Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification (dollars in thousands) Commercial real estate — $ — $ — — $ — $ — 1 $ 2,216 $ 2,216 — $ — $ — Agriculture — — — — — — 10 1,455 1,455 — — — Commercial non-real estate — — — — — — 2 830 830 — — — Residential real estate — — — — — — — — — — — — Consumer — — — — — — — — — — — — Total nonaccruing — $ — $ — — $ — $ — 13 $ 4,501 $ 4,501 — $ — $ — Change in recorded investment due to principal paydown at time of modification — $ — $ — — $ — $ — — $ — $ — — $ — $ — Change in recorded investment due to chargeoffs at time of modification — — — — — — — — — — — — The following table presents loans that were modified as TDRs within the previous 12 months and for which there was a payment default for the three and six months ended March 31, 2020 and 2019, respectively. Three Months Ended March 31, Six Months Ended March 31, 2020 2019 2020 2019 Number of Loans Recorded Investment Number of Loans Recorded Investment Number of Loans Recorded Investment Number of Loans Recorded Investment (dollars in thousands) Commercial real estate — $ — — $ — — $ — — $ — Agriculture 17 2,106 — — 19 11,180 — — Commercial non-real estate — — — — 1 2,834 — — Residential real estate — — — — — — — — Consumer — — — — — — — — Total 17 $ 2,106 — $ — 20 $ 14,014 — $ — For purposes of the table above, a loan is considered to be in payment default once it is 90 days or more contractually past due under the modified terms. The table includes loans that experienced a payment default during the period, but may be performing in accordance with the modified terms as of the balance sheet date. There were $0.3 million and $0.0 million for the three months ended March 31, 2020 and 2019, respectively, and $0.3 million and $0.0 million for the six months ended March 31, 2020 and 2019, respectively, of loans removed from TDR status as they were restructured at market terms and are performing. |