Loans | Loans The following table presents the composition of loans as of June 30, 2020 and September 30, 2019. June 30, September 30, (dollars in thousands) Commercial real estate $ 5,355,493 $ 5,092,410 Agriculture 1,815,121 2,008,644 Commercial non-real estate 2,226,759 1,719,956 Residential real estate 862,821 812,208 Consumer 61,452 51,925 Other 34,713 47,541 Ending balance 10,356,359 9,732,684 Less: Unamortized discount on acquired loans (9,098) (13,655) Unearned net deferred fees and costs and loans in process (33,262) (12,266) Total $ 10,313,999 $ 9,706,763 The loan segments above include loans covered by a FDIC non-commercial loss sharing agreement, which ended June 4, 2020, totaling $31.9 million as of September 30, 2019, residential real estate loans held for sale totaling $12.8 million and $7.4 million at June 30, 2020 and September 30, 2019, respectively, and $735.4 million and $813.0 million of loans accounted for at fair value at June 30, 2020 and September 30, 2019, respectively. Unearned net deferred fees and costs totaled $33.8 million and $13.9 million as of June 30, 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 $(0.5) million and $(1.6) million at June 30, 2020 and September 30, 2019, respectively. Loans guaranteed by agencies of the U.S. government totaled $865.8 million and $154.2 million at June 30, 2020 and September 30, 2019, respectively. Principal balances of residential real estate loans sold totaled $50.6 million and $69.8 million for the three months ended June 30, 2020 and 2019, respectively, and $226.0 million and $170.4 million for the nine months ended June 30, 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 June 30, 2020 and September 30, 2019, excluding ASC 310-30 loans. Loans greater than 90 days past due and still accruing interest as of June 30, 2020 and September 30, 2019, were $0.0 million and $11.2 million, respectively. June 30, September 30, (dollars in thousands) Nonaccrual loans Commercial real estate $ 96,765 $ 14,973 Agriculture 150,009 77,880 Commercial non-real estate 20,414 9,502 Residential real estate 4,607 2,661 Consumer 79 74 Total $ 271,874 $ 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 June 30, 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 $735.4 million at June 30, 2020 and $813.0 million at September 30, 2019. As of June 30, 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 $ 4,544,252 $ 1,095,048 $ 1,936,134 $ 835,956 $ 60,512 $ 34,713 $ 8,506,615 Watchlist 175,893 234,251 48,334 11,392 710 — 470,580 Substandard 173,324 344,027 99,828 13,156 102 — 630,437 Doubtful 49 3,394 799 14 3 — 4,259 Loss — — — — — — — Ending balance 4,893,518 1,676,720 2,085,095 860,518 61,327 34,713 9,611,891 Loans covered by a FDIC loss sharing agreement — — — — — — — Total $ 4,893,518 $ 1,676,720 $ 2,085,095 $ 860,518 $ 61,327 $ 34,713 $ 9,611,891 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 June 30, 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 $735.4 million at June 30, 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 June 30, 2020 Commercial real estate $ 93 $ 30,393 $ 28,683 $ 59,169 $ 4,834,349 $ 4,893,518 Agriculture 82,476 5,842 69,351 157,669 1,519,051 1,676,720 Commercial non-real estate 21 323 15,595 15,939 2,069,156 2,085,095 Residential real estate 916 1,143 3,407 5,466 855,052 860,518 Consumer 15 13 20 48 61,279 61,327 Other — — — — 34,713 34,713 Ending balance 83,521 37,714 117,056 238,291 9,373,600 9,611,891 Loans covered by a FDIC loss sharing agreement — — — — — — Total $ 83,521 $ 37,714 $ 117,056 $ 238,291 $ 9,373,600 $ 9,611,891 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. June 30, 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 $ 84,064 $ 85,941 $ 18,993 $ 26,003 $ 26,297 $ 4,159 Agriculture 88,107 91,439 10,835 98,392 104,350 8,234 Commercial non-real estate 28,684 32,127 9,846 21,331 21,777 6,062 Residential real estate 5,513 6,034 2,101 3,829 4,311 1,795 Consumer 106 116 32 207 214 97 Total impaired loans with an allowance recorded 206,474 215,657 41,807 149,762 156,949 20,347 With no allowance recorded: Commercial real estate 89,000 127,589 — 28,272 66,631 — Agriculture 260,026 278,906 — 231,087 255,308 — Commercial non-real estate 72,458 80,692 — 21,579 31,414 — Residential real estate 5,389 7,801 — 3,290 5,454 — Consumer 1 108 — 1 108 — Total impaired loans with no allowance recorded 426,874 495,096 — 284,229 358,915 — Total impaired loans $ 633,348 $ 710,753 $ 41,807 $ 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 nine months ended June 30, 2020 and 2019. Three Months Ended June 30, Nine Months Ended June 30, 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 $ 152,871 $ 1,684 $ 40,199 $ 718 $ 113,146 $ 5,350 $ 39,399 $ 1,415 Agriculture 348,006 3,421 253,240 7,147 354,202 16,722 196,563 10,349 Commercial non-real estate 97,310 678 26,381 468 84,849 5,079 24,518 1,146 Residential real estate 10,901 120 6,911 123 9,957 513 6,831 305 Consumer 117 2 261 8 148 6 237 19 Total $ 609,205 $ 5,905 $ 326,992 $ 8,464 $ 562,302 $ 27,670 $ 267,548 $ 13,234 Valuation adjustment reductions made to repossessed properties totaled $2.0 million and $0.1 million for the three months ended June 30, 2020 and 2019, respectively. Valuation adjustment reductions made to repossessed properties totaled $6.8 million and $2.0 million for the nine months ended June 30, 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 $7.9 million and $10.3 million at June 30, 2020 and September 30, 2019, respectively. There were nominal and $0.2 million of commitments to lend additional funds to borrowers whose loans were modified in a TDR as of June 30, 2020 and September 30, 2019, respectively. The following table presents the recorded value of the Company’s TDR balances as of June 30, 2020 and September 30, 2019. June 30, 2020 September 30, 2019 Accruing Nonaccrual Accruing Nonaccrual (dollars in thousands) Commercial real estate $ 31,627 $ 1,762 $ 17,145 $ 904 Agriculture 2,989 47,791 22,929 24,762 Commercial non-real estate 8,645 5,508 4,398 4,257 Residential real estate 285 86 263 102 Consumer 4 36 107 48 Total $ 43,550 $ 55,183 $ 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 nine months ended June 30, 2020 and 2019. Three Months Ended June 30, Nine Months Ended June 30, 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 $ 12,001 $ 12,001 2 $ 15,466 $ 15,466 2 $ 14,880 $ 14,880 2 $ 15,466 $ 15,466 Agriculture — — — 16 11,537 11,537 2 993 993 16 11,537 11,537 Commercial non-real estate — — — — — — 4 5,096 5,096 — — — Residential real estate — — — — — — 1 50 50 — — — Consumer — — — — — — — — — 1 89 89 Total accruing 1 $ 12,001 $ 12,001 18 $ 27,003 $ 27,003 9 $ 21,019 $ 21,019 19 $ 27,092 $ 27,092 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 nine months ended June 30, 2020 and 2019. Three Months Ended June 30, Nine Months Ended June 30, 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 $ 882 $ 882 1 $ 2,216 $ 2,216 1 $ 882 $ 882 Agriculture 1 19,342 19,342 9 5,802 5,802 11 20,797 20,797 9 5,802 5,802 Commercial non-real estate 3 922 922 2 3,699 3,699 5 1,752 1,752 2 3,699 3,699 Residential real estate — — — — — — — — — — — — Consumer — — — — — — — — — — — — Total nonaccruing 4 $ 20,264 $ 20,264 12 $ 10,383 $ 10,383 17 $ 24,765 $ 24,765 12 $ 10,383 $ 10,383 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 nine months ended June 30, 2020 and 2019, respectively. Three Months Ended June 30, Nine Months Ended June 30, 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 1 $ 1,720 — $ — 1 $ 1,720 — $ — Agriculture 5 166 — — 10 1,261 — — Commercial non-real estate 4 1,308 — — 4 1,308 — — Residential real estate — — — — — — — — Consumer — — — — — — — — Total 10 $ 3,194 — $ — 15 $ 4,289 — $ — 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 $0.0 million for both the three months ended June 30, 2020 and 2019, respectively, and $0.3 million and $0.0 million for the nine months ended June 30, 2020 and 2019, respectively, of loans removed from TDR status as they were restructured at market terms and are performing. |