Loans and Allowance for Loan Losses | Note 5: Loans and Allowance for Loan Losses A summary of loans at September 30, 2018 and December 31, 2017 are as follows (dollars in thousands): September 30, 2018 December 31, 2017 Real estate $ 328,876 $ 323,216 Commercial 229,480 205,229 Agricultural 25,963 33,760 Consumer 2,372 2,372 Gross loans 586,691 564,577 Less allowance for loan losses (7,728 ) (7,654 ) Less deferred loan fees (1,852 ) (1,576 ) Net loans $ 577,111 $ 555,347 The following table presents, by portfolio segment, the activity in the allowance for loan losses for the three months ended September 30, 2018 and 2017 (dollars in thousands): Real Estate Commercial Agricultural Consumer Total September 30, 2018 Balance, beginning of period $ 4,337 $ 3,010 $ 324 $ 30 $ 7,701 Charge-offs (2 ) (12 ) - - (14 ) Recoveries 1 39 1 - 41 Net charge-offs (1 ) 27 1 - 27 Provision (credit) for loan losses (4 ) (14 ) 17 1 - Balance, end of period $ 4,332 $ 3,023 $ 342 $ 31 $ 7,728 Real Estate Commercial Agricultural Consumer Total September 30, 2017 Balance, beginning of period $ 4,017 $ 2,909 $ 442 $ 37 $ 7,405 Charge-offs - (55 ) - (14 ) (69 ) Recoveries 9 1 - - 10 Net charge-offs 9 (54 ) - (14 ) (59 ) Provision (credit) for loan losses 363 (267 ) 42 12 150 Balance, end of period $ 4,389 $ 2,588 $ 484 $ 35 $ 7,496 The following table presents, by portfolio segment, the activity in the allowance for loan losses for the nine months ended September 30, 2018 and 2017 (dollars in thousands): Real Estate Commercial Agricultural Consumer Total September 30, 2018 Balance, beginning of period $ 4,382 $ 2,782 $ 458 $ 32 $ 7,654 Charge-offs (28 ) (74 ) - - (101 ) Recoveries 5 69 1 1 75 Net charge-offs (23 ) (5 ) 1 1 (26 ) Provision (credit) for loan losses (27 ) 246 (117 ) (2 ) 100 Balance, end of period $ 4,332 $ 3,023 $ 342 $ 31 $ 7,728 Real Estate Commercial Agricultural Consumer Total September 30, 2017 Balance, beginning of period $ 3,754 $ 2,512 $ 537 $ 70 $ 6,873 Charge-offs (199 ) (295 ) - (13 ) (507 ) Recoveries 24 6 - 4 34 Net charge-offs (175 ) (289 ) - (9 ) (473 ) Provision (credit) for loan losses 810 365 (53 ) (26 ) 1,096 Balance, end of period $ 4,389 $ 2,588 $ 484 $ 35 $ 7,496 The following table presents, by portfolio segment, the balance in allowance for loan losses and the gross loans based upon portfolio segment and impairment method as of September 30, 2018 and December 31, 2017 (dollars in thousands). Real Estate Commercial Agricultural Consumer Total September 30, 2018 Allowance Balance Ending balance individually evaluated for impairment $ - $ 14 $ - $ 1 $ 15 Collectively evaluated for impairment 4,332 3,009 342 30 7,713 Total $ 4,332 $ 3,023 $ 342 $ 31 $ 7,728 Gross Loans Ending balance individually evaluated for impairment $ 1,563 $ 8,051 $ - $ 4 $ 9,618 Collectively evaluated for impairment 327,313 221,429 25,963 2,368 577,073 Total $ 328,876 $ 229,480 $ 25,963 $ 2,372 $ 586,691 December 31, 2017 Allowance Balance Ending balance individually evaluated for impairment $ 300 $ 22 $ 64 $ 10 $ 396 Collectively evaluated for impairment 4,082 2,760 394 22 7,258 Total $ 4,382 $ 2,782 $ 458 $ 32 $ 7,654 Gross Loans Ending balance individually evaluated for impairment $ 1,517 $ 1,031 $ 1,893 $ 15 $ 4,456 Collectively evaluated for impairment 321,699 204,198 31,867 2,357 560,121 Total $ 323,216 $ 205,229 $ 33,760 $ 2,372 $ 564,577 Internal Risk Categories Risk characteristics applicable to each segment of the loan portfolio are described as follows: Real Estate Commercial Agricultural Consumer Loan grades are numbered 1 through 4. Grade 1 is considered satisfactory. The grades of 2 and 3, or Watch and Special Mention, respectively, represent loans of lower quality and are considered criticized. Grade of 4, or Substandard, refers to loans that are classified. · Grade 1 (Pass) · Grade 2 (Watch) · Grade 3 (Special Mention) · Grade 4 (Substandard) The Company evaluates the definitions of loan grades and the allowance for loan losses methodology on an ongoing basis. No changes were made to either during period ended September 30, 2018. The following table presents the credit risk profile of the Company’s loan portfolio based on internal rating category as of September 30, 2018 and December 31, 2017 (dollars in thousands): Real Estate Commercial Agricultural Consumer Total September 30, 2018 Grade 1 (Pass) $ 308,141 $ 216,959 $ 25,079 $ 2,368 $ 552,547 2 (Watch) 15,594 4,470 623 - 20,687 3 (Special Mention) 3,578 - 261 - 3,839 4 (Substandard) 1,563 8,051 - 4 9,618 Total $ 328,876 $ 229,480 $ 25,963 $ 2,372 $ 586,691 Real Estate Commercial Agricultural Consumer Total December 31, 2017 Grade 1 (Pass) $ 296,828 $ 192,287 $ 31,676 $ 2,358 $ 523,149 2 (Watch) 17,744 7,764 90 - 25,598 3 (Special Mention) 7,126 4,147 101 - 11,374 4 (Substandard) 1,518 1,031 1,893 14 4,456 Total $ 323,216 $ 205,229 $ 33,760 $ 2,372 $ 564,577 The following table presents the Company’s loan portfolio aging analysis of the recorded investment in loans as of September 30, 2018 and December 31, 2017 (dollars in thousands): Past Due Total Loans > 90 Days & Accruing 30–59 Days 60–89 Days Greater than 90 Days Total Current Total September 30, 2018 Real estate $ 89 $ - $ - $ 89 $ 328,787 $ 328,876 $ - Commercial - 208 - 208 229,272 229,480 - Agricultural - - - - 25,963 25,963 - Consumer - - - - 2,372 2,372 - Total $ 89 $ 208 $ - $ 297 $ 586,394 $ 586,691 $ - December 31, 2017 Real estate $ 47 $ - $ 111 $ 158 $ 323,058 $ 323,216 $ - Commercial 2 - - 2 205,227 205,229 - Agricultural - - - - 33,760 33,760 - Consumer 7 - - 7 2,365 2,372 - Total $ 56 $ - $ 111 $ 167 $ 564,410 $ 564,577 $ - The following table presents impaired loans as of September 30, 2018 and December 31, 2017 (dollars in thousands): Unpaid Principal Balance Recorded Investment with No Allowance Recorded Investment with an Allowance Total Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 September 30, 2018 Real estate $ 1,563 $ 1,563 $ - $ 1,563 $ - $ 1,538 $ 31 $ 1,717 $ 89 Commercial 8,271 8,024 27 8,051 14 8,231 141 6,933 425 Agricultural - - - - - - - 197 - Consumer 9 - 4 4 1 5 - 8 1 Total $ 9,843 $ 9,587 $ 31 $ 9,618 $ 15 $ 9,774 $ 172 $ 8,855 $ 515 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 December 31, 2017 Real estate $ 1,525 $ 355 $ 675 $ 1,031 $ 300 $ 2,048 $ 47 $ 3,060 $ 136 Commercial 1,207 1,477 41 1,517 22 1,255 21 3,991 83 Agricultural 1,908 1,604 290 1,893 64 1,819 113 1,610 96 Consumer 19 - 15 15 10 19 1 23 1 Total $ 4,659 $ 3,436 $ 1,021 $ 4,456 $ 396 $ 5,141 $ 182 $ 8,684 $ 316 Impaired loans include nonperforming loans and also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired. At September 30, 2018, the Company had $950,000 of commercial loans that were modified in troubled debt restructurings and impaired and $1.5 million of commercial loans that were modified in troubled debt restructurings and impaired as of December 31, 2017. There were no newly modified troubled debt restructurings during the three and nine month periods ended September 30, 2018 and 2017. There were no troubled debt restructurings modified in the three months ended September 30, 2018 that subsequently defaulted for the period ended September 30, 2018. |