Allowance for Loan Losses | Allowance for Credit Losses The following table presents the activity of the allowance for credit losses by portfolio segment for the three months ended June 30. Allowance for Credit Losses: June 30, 2021 (Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total Beginning balance $ 16,715 $ 18,839 $ 11,058 $ 164 $ 46,776 Provision for credit losses (1,058) (928) (260) 50 (2,196) Loans charged-off (113) (243) (795) — (1,151) Recoveries 149 169 985 — 1,303 Ending Balance $ 15,693 $ 17,837 $ 10,988 $ 214 $ 44,732 Allowance for Credit Losses: June 30, 2020 (Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total Beginning balance $ 9,323 $ 1,452 $ 8,757 $ 1,531 $ 21,063 Provision for credit losses 813 527 1,950 (325) 2,965 Loans charged-off (141) (166) (1,233) — (1,540) Recoveries 154 63 580 — 797 Ending Balance $ 10,149 $ 1,876 $ 10,054 $ 1,206 $ 23,285 The following table presents the activity of the allowance for credit losses by portfolio segment for the six months ended June 30. Allowance for Credit Losses: June 30, 2021 (Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total Beginning balance $ 16,901 $ 19,142 $ 11,009 $ — $ 47,052 Provision for credit losses (1,536) (1,190) 768 214 (1,744) Loans charged -off (299) (431) (2,759) — (3,489) Recoveries 627 316 1,970 — 2,913 Ending Balance $ 15,693 $ 17,837 $ 10,988 $ 214 $ 44,732 Allowance for Credit Losses: June 30, 2020 (Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total Beginning balance $ 8,945 $ 1,302 $ 8,304 $ 1,392 $ 19,943 Provision for credit losses 1,333 778 3,730 (186) 5,655 Loans charged -off (674) (423) (3,347) — (4,444) Recoveries 545 219 1,367 — 2,131 Ending Balance $ 10,149 $ 1,876 $ 10,054 $ 1,206 $ 23,285 The following table presents loans individually evaluated for impairment by class of loans. Three Months Ended Six Months Ended Average Interest Cash Basis Average Interest Cash Basis (Dollar amounts in thousands) Investment Recognized Recognized Investment Recognized Recognized With no related allowance recorded: Commercial Commercial & Industrial $ 1,137 $ — $ — $ 1,087 $ — $ — Farmland 1,324 — — 1,548 — — Non Farm, Non Residential 3,512 — — 2,341 — — Agriculture — — — — — — All Other Commercial 26 — — 26 — — Residential First Liens 3,469 — — 3,630 — — Home Equity — — — — — — Junior Liens — — — — — — Multifamily — — — — — — All Other Residential — — — — — — Consumer Motor Vehicle — — — — — — All Other Consumer — — — — — — With an allowance recorded: Commercial Commercial & Industrial 332 — — 271 — — Farmland — — — — — — Non Farm, Non Residential 86 — — 57 — — Agriculture — — — — — — All Other Commercial 377 — — 251 — — Residential First Liens — — — — — — Home Equity — — — — — — Junior Liens — — — — — — Multifamily 656 — — 437 — — All Other Residential — — — — — — Consumer Motor Vehicle — — — — — — All Other Consumer — — — — — — TOTAL $ 10,919 $ — $ — $ 9,648 $ — $ — The tables below present the recorded investment in non-performing loans by class of loans. June 30, 2021 Loans Past Nonaccrual (Dollar amounts in thousands) Accruing Nonaccrual For Credit Loss Commercial Commercial & Industrial $ 68 $ 3,835 $ 792 Farmland — 111 — Non Farm, Non Residential — 3,201 3,082 Agriculture — 1,214 — All Other Commercial — 253 — Residential First Liens 1,067 2,696 59 Home Equity 4 85 — Junior Liens 22 305 — Multifamily — 1,414 — All Other Residential — 121 — Consumer Motor Vehicle 103 628 — All Other Consumer 4 493 — TOTAL $ 1,268 $ 14,356 $ 3,933 December 31, 2020 Loans Past Nonaccrual (Dollar amounts in thousands) Accruing Nonaccrual For Credit Loss Commercial Commercial & Industrial $ — $ 4,838 $ 1,080 Farmland — 195 — Non Farm, Non Residential — 3,729 3,267 Agriculture — 409 — All Other Commercial — 533 24 Residential First Liens 1,746 2,604 86 Home Equity 88 30 — Junior Liens 252 206 — Multifamily — 1,380 — All Other Residential — 135 — Consumer Motor Vehicle 372 754 — All Other Consumer — 554 — TOTAL $ 2,458 $ 15,367 $ 4,457 The following tables present the amortized cost basis of collateral dependent loans by class of loans: June 30, 2021 Collateral Type (Dollar amounts in thousands) Real Estate Other Commercial Commercial & Industrial $ 3,037 $ 1,379 Farmland 2,726 Non Farm, Non Residential 6,516 Agriculture — 190 All Other Commercial 248 — Residential First Liens 59 — Home Equity — — Junior Liens — — Multifamily 1,414 — All Other Residential — — Consumer Motor Vehicle — — All Other Consumer — — Total $ 14,000 $ 1,569 December 31, 2020 Collateral Type (Dollar amounts in thousands) Real Estate Other Commercial Commercial & Industrial $ 3,293 $ 2,221 Farmland 2,771 Non Farm, Non Residential 6,838 Agriculture — 599 All Other Commercial 528 24 Residential First Liens 86 — Home Equity — — Junior Liens — — Multifamily 1,380 — All Other Residential — — Consumer Motor Vehicle — — All Other Consumer — — Total $ 14,896 $ 2,844 The following tables presents the aging of the recorded investment in loans by past due category and class of loans. June 30, 2021 30-59 Days 60-89 Days Greater Total (Dollar amounts in thousands) Past Due Past Due Past Due Past Due Current Total Commercial Commercial & Industrial $ 682 $ 306 $ 2,783 $ 3,771 $ 622,283 $ 626,054 Farmland 106 220 87 413 116,265 116,678 Non Farm, Non Residential — 68 7 75 355,350 355,425 Agriculture 578 375 1,188 2,141 117,485 119,626 All Other Commercial — — — — 310,781 310,781 Residential First Liens 761 1,186 1,511 3,458 310,711 314,169 Home Equity 140 20 78 238 58,552 58,790 Junior Liens 59 26 177 262 51,591 51,853 Multifamily — — — — 125,344 125,344 All Other Residential — — — — 16,130 16,130 Consumer Motor Vehicle 4,224 853 231 5,308 447,023 452,331 All Other Consumer 153 21 4 178 31,627 31,805 TOTAL $ 6,703 $ 3,075 $ 6,066 $ 15,844 $ 2,563,142 $ 2,578,986 December 31, 2020 30-59 Days 60-89 Days Greater Total (Dollar amounts in thousands) Past Due Past Due Past Due Past Due Current Total Commercial Commercial & Industrial $ 685 $ 746 $ 3,364 $ 4,795 $ 603,777 $ 608,572 Farmland 22 — 91 113 118,528 118,641 Non Farm, Non Residential 155 — 271 426 350,681 351,107 Agriculture 28 30 275 333 146,147 146,480 All Other Commercial — — 24 24 305,612 305,636 Residential First Liens 5,506 1,866 2,365 9,737 314,730 324,467 Home Equity 260 29 104 393 60,362 60,755 Junior Liens 421 68 341 830 53,346 54,176 Multifamily — — — — 151,042 151,042 All Other Residential — 50 — 50 15,918 15,968 Consumer Motor Vehicle 6,975 1,294 560 8,829 441,283 450,112 All Other Consumer 164 19 13 196 31,401 31,597 TOTAL $ 14,216 $ 4,102 $ 7,408 $ 25,726 $ 2,592,827 $ 2,618,553 During the three and six months ended June 30, 2021 and 2020, the terms of certain loans were modified as troubled debt restructurings (TDRs). The following tables present the activity for TDRs. 2021 (Dollar amounts in thousands) Commercial Residential Consumer Total April 1, $ — $ 3,888 $ 576 $ 4,464 Added — 113 74 187 Charged Off — (27) (32) (59) Payments — (70) (62) (132) June 30, $ — $ 3,904 $ 556 $ 4,460 2021 (Dollar amounts in thousands) Commercial Residential Consumer Total January 1, $ — $ 3,589 $ 617 $ 4,206 Added — 491 122 613 Charged Off — (27) (75) (102) Payments — (149) (108) (257) June 30, $ — $ 3,904 $ 556 $ 4,460 2020 (Dollar amounts in thousands) Commercial Residential Consumer Total April 1, 4 3,438 714 4,156 Added — 63 41 104 Charged Off — — (15) (15) Payments (4) (270) (72) (346) June 30, — 3,231 668 3,899 A 2020 (Dollar amounts in thousands) Commercial Residential Consumer Total January 1, 11 3,485 698 4,194 Added — 123 135 258 Charged Off — (6) (50) (56) Payments (11) (371) (115) (497) June 30, — 3,231 668 3,899 Modification of the terms of such loans typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. No modification in 2021 or 2020 resulted in the permanent reduction of the recorded investment in the loan. Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from twelve months to five years. Modifications involving an extension of the maturity date were for periods ranging from twelve months to ten years. Troubled debt restructurings during the three months ended June 30, 2021 and 2020 did not result in any material charge-offs or additional provision expense. The Corporation has no allocations of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2021 and 2020. The Corporation has not committed to lend additional amounts as of June 30, 2021 and 2020 to customers with outstanding loans that are classified as troubled debt restructurings. None of the charge-offs during the three and six months ended June 30, 2021 and 2020 were of restructurings that had occurred in the previous 12 months. The CARES Act includes a provision that permits a financial institution to elect to suspend temporarily troubled debt restructuring accounting under ASC Subtopic 310-40 in certain circumstances (“section 4013”). To be eligible under section 4013, a loan modification must be (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) December 31, 2020. In response to this section of the CARES Act, the federal banking agencies issued a revised interagency statement on April 7, 2020 that, in consultation with the Financial Accounting Standards Board, confirmed that for loans not subject to section 4013, short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not troubled debt restructurings under ASC Subtopic 310-40. This includes short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. As of June 30, 2021, 1,454 loans totaling $285 million were modified, related to COVID-19, that were not considered troubled debt restructurings. 1,147 loans totaling $222 million have resumed normal scheduled payments. 247 remaining loans are still under a debt relief plan, which include 22 commercial loans totaling $52 million that have been provided additional payment relief since the initial payment relief plan. 14 loans totaling $2 million are under the original payment relief plan. Credit Quality Indicators: The Corporation 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 Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $100 thousand. Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated. This analysis is performed on a quarterly basis. The Corporation uses the following definitions for risk ratings: Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard: Loans classified as substandard are inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral. These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended. They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected. Doubtful: Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard. Loans included in homogeneous pools, such as residential or consumer may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring. The following tables present the commercial loan portfolio by risk category: June 30, 2021 Term Loans at Amortized Cost Basis by Origination Year Revolving 2021 2020 2019 2018 2017 Prior Loans Total Commercial Commercial and Industrial Pass $125,769 $71,333 $83,160 $49,922 $36,469 $109,164 $103,454 $579,271 Special Mention 2,400 275 1,109 7,683 213 4,290 7,350 $23,320 Substandard 3,222 15 246 3,547 457 4,483 189 $12,159 Doubtful — — — — — — — $0 Not Rated 4,686 2,046 1,233 913 368 212 — $9,458 Subtotal $136,077 $73,669 $85,748 $62,065 $37,507 $118,149 $110,993 $624,208 Farmland Pass $8,582 $10,841 $11,366 $11,677 $8,849 $48,201 $290 $99,806 Special Mention — — 914 — 221 3,644 — $4,779 Substandard 3,455 1,697 2,303 — 694 2,323 — $10,472 Doubtful — — — — — — — $0 Not Rated — — — — — 69 — $69 Subtotal $12,037 $12,538 $14,583 $11,677 $9,764 $54,237 $290 $115,126 Non Farm, Non Residential Pass $38,194 $37,729 $29,150 $35,444 $61,095 $113,770 $7,268 $322,650 Special Mention — — 1,123 — 2,009 12,221 — $15,353 Substandard — — 943 — 1,472 13,657 — $16,072 Doubtful — — — — — — — $0 Not Rated 1 — — — — 531 — $532 Subtotal $38,195 $37,729 $31,216 $35,444 $64,576 $140,179 $7,268 $354,607 Agriculture Pass $2,345 $11,388 $10,525 $2,862 $4,712 $19,823 $51,080 $102,735 Special Mention — — 1,483 — 649 3,588 3,856 $9,576 Substandard — — 340 2 13 1,324 3,827 $5,506 Doubtful — — — — — — — $0 Not Rated — 163 165 67 5 8 — $408 Subtotal $2,345 $11,551 $12,513 $2,931 $5,379 $24,743 $58,763 $118,225 Other Commercial Pass $14,702 $54,969 $46,696 $37,465 $57,965 $90,733 $5,942 $308,472 Special Mention — — — — 5 — — $5 Substandard — — — — — 265 — $265 Doubtful — — — — — — — $0 Not Rated — — — 45 36 718 — $799 Subtotal $14,702 $54,969 $46,696 $37,510 $58,006 $91,716 $5,942 $309,541 Residential Multifamily >5 Residential Pass $3,552 $41,229 $9,514 $25,918 $10,134 $20,880 $1,942 $113,169 Special Mention — — — — — 10,513 — $10,513 Substandard — — — 1,414 — — — $1,414 Doubtful — — — — — — — $0 Not Rated — — — — — — — $0 Subtotal $3,552 $41,229 $9,514 $27,332 $10,134 $31,393 $1,942 $125,096 Total Pass $193,144 $227,489 $190,411 $163,288 $179,224 $402,571 $169,976 $1,526,103 Special Mention 2,400 275 4,629 7,683 3,097 34,256 11,206 $63,546 Substandard 6,677 1,712 3,832 4,963 2,636 22,052 4,016 $45,888 Doubtful — — — — — — — $0 Not Rated 4,687 2,209 1,398 1,025 409 1,538 — $11,266 Total commercial loans $206,908 $231,685 $200,270 $176,959 $185,366 $460,417 $185,198 $1,646,803 December 31, 2020 Term Loans at Amortized Cost Basis by Origination Year Revolving 2020 2019 2018 2017 2016 Prior Loans Total Commercial Commercial and Industrial Pass $159,494 $77,253 $64,298 $41,806 $20,564 $103,598 $91,615 $558,628 Special Mention 4,848 1,331 4,427 216 1,278 4,566 3,695 $20,361 Substandard 3,780 323 4,187 1,148 3,543 2,565 3,124 $18,670 Doubtful — — — — — — — $0 Not Rated 2,618 1,772 1,446 580 105 2,255 — $8,776 Subtotal $170,740 $80,679 $74,358 $43,750 $25,490 $112,984 $98,434 $606,435 Farmland Pass $10,010 $12,775 $12,149 $10,089 $15,863 $40,338 $1,386 $102,610 Special Mention 988 947 — 230 1,900 2,656 — $6,721 Substandard 1,718 2,303 — 716 1,628 826 — $7,191 Doubtful — — — — — — — $0 Not Rated — — — — — — — $0 Subtotal $12,716 $16,025 $12,149 $11,035 $19,391 $43,820 $1,386 $116,522 Non Farm, Non Residential Pass $39,914 $33,261 $38,111 $63,371 $49,511 $83,052 $4,092 $311,312 Special Mention — 998 — 305 9,982 6,811 — $18,096 Substandard — 1,188 — 4,310 7,484 7,028 — $20,010 Doubtful — — — — — — — $0 Not Rated — — — — — 682 — $682 Subtotal $39,914 $35,447 $38,111 $67,986 $66,977 $97,573 $4,092 $350,100 Agriculture Pass $13,336 $8,330 $3,485 $5,329 $3,732 $16,792 $67,052 $118,056 Special Mention — 1,483 1,203 664 5 428 7,611 $11,394 Substandard — 3,834 18 223 2,435 1,988 5,926 $14,424 Doubtful — — — — — — — $0 Not Rated 159 216 110 6 13 — — $504 Subtotal $13,495 $13,863 $4,816 $6,222 $6,185 $19,208 $80,589 $144,378 Other Commercial Pass $44,673 $57,200 $41,470 $61,442 $40,196 $50,325 $5,162 $300,468 Special Mention — — — 7 — 2,786 — $2,793 Substandard — — — 24 528 24 — $576 Doubtful — — — — — — — $0 Not Rated — 3 52 39 345 — — $439 Subtotal $44,673 $57,203 $41,522 $61,512 $41,069 $53,135 $5,162 $304,276 Residential Multifamily >5 Residential Pass $44,599 $9,892 $36,563 $19,749 $4,676 $21,704 $1,293 $138,476 Special Mention — — — — 102 10,662 — $10,764 Substandard — — 1,380 — — — — $1,380 Doubtful — — — — — — — $0 Not Rated — — — — — — — $0 Subtotal $44,599 $9,892 $37,943 $19,749 $4,778 $32,366 $1,293 $150,620 Total Pass $312,026 $198,711 $196,076 $201,786 $134,542 $315,809 $170,600 $1,529,550 Special Mention 5,836 4,759 5,630 1,422 13,267 27,909 11,306 $70,129 Substandard 5,498 7,648 5,585 6,421 15,618 12,431 9,050 $62,251 Doubtful — — — — — — — $0 Not Rated 2,777 1,991 1,608 625 463 2,937 — $10,401 Total commercial loans $326,137 $213,109 $208,899 $210,254 $163,890 $359,086 $190,956 $1,672,331 The Corporation evaluates the credit quality of its other loan portfolios, which includes residential real estate, consumer and lease financing loans, based primarily on the aging status of the loan and payment activity. Accordingly, loans on non-accrual status, loans past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings are considered to be nonperforming for purposes of credit quality evaluation. The following table presents the balance of our other loan portfolio based on the credit risk profile of loans that are performing and loans that are nonperforming: June 30, 2021 Term Loans at Amortized Cost Basis by Origination Year Revolving 2021 2020 2019 2018 2017 Prior Loans Total Residential First Liens Performing $40,527 $42,894 $24,772 $27,034 $28,361 $143,179 $2,710 $309,477 Non-performing — — 418 71 325 2,962 — $3,776 Subtotal $40,527 $42,894 $25,190 $27,105 $28,686 $146,141 $2,710 $313,253 Home Equity Performing $1,702 $9 $129 $96 $86 $1,392 $55,175 $58,589 Non-performing — — — — — 81 8 $89 Subtotal $1,702 $9 $129 $96 $86 $1,473 $55,183 $58,678 Junior Liens Performing $6,641 $11,703 $10,288 $9,426 $5,155 $7,070 $1,136 $51,419 Non-performing — 7 39 83 125 72 — $326 Subtotal $6,641 $11,710 $10,327 $9,509 $5,280 $7,142 $1,136 $51,745 Other Residential Performing $4,900 $6,673 $1,683 $1,304 $285 $1,104 $0 $15,949 Non-performing — — 59 46 — 33 — $138 Subtotal $4,900 $6,673 $1,742 $1,350 $285 $1,137 $0 $16,087 Consumer Motor Vehicle Performing $109,757 $200,383 $83,688 $34,784 $15,639 $5,509 $— $449,760 Non-performing 26 158 309 148 60 16 — $717 Subtotal $109,783 $200,541 $83,997 $34,932 $15,699 $5,525 $— $450,477 Other Consumer Performing $8,566 $11,255 $4,603 $1,393 $438 $1,136 $3,782 $31,173 Non-performing 88 189 144 48 24 4 — $497 Subtotal $8,654 $11,444 $4,747 $1,441 $462 $1,140 $3,782 $31,670 Total Performing $172,093 $272,917 $125,163 $74,037 $49,964 $159,390 $62,803 $916,367 Non-performing 114 354 969 396 534 3,168 8 $5,543 Total other loans $172,207 $273,271 $126,132 $74,433 $50,498 $162,558 $62,811 $921,910 December 31, 2020 Term Loans at Amortized Cost Basis by Origination Year Revolving 2020 2019 2018 2017 2016 Prior Loans Total Residential First Liens Performing $47,875 $33,737 $31,634 $36,426 $30,419 $135,456 $3,235 $318,782 Non-performing — 40 95 343 107 4,062 — $4,647 Subtotal $47,875 $33,777 $31,729 $36,769 $30,526 $139,518 $3,235 $323,429 Home Equity Performing $854 $135 $644 $20 $— $1,525 $57,334 $60,512 Non-performing — — 1 — — 91 24 $116 Subtotal $854 $135 $645 $20 $— $1,616 $57,358 $60,628 Junior Liens Performing $13,125 $12,742 $11,139 $6,214 $3,948 $5,099 $1,333 $53,600 Non-performing — 129 48 198 9 66 — $450 Subtotal $13,125 $12,871 $11,187 $6,412 $3,957 $5,165 $1,333 $54,050 Other Residential Performing $9,773 $2,775 $1,372 $292 $178 $733 $651 $15,774 Non-performing — 62 50 — — 39 — $151 Subtotal $9,773 $2,837 $1,422 $292 $178 $772 $651 $15,925 Consumer Motor Vehicle Performing $245,839 $113,293 $51,649 $24,786 $10,026 $1,600 $— $447,193 Non-performing 318 355 257 127 36 11 — $1,104 Subtotal $246,157 $113,648 $51,906 $24,913 $10,062 $1,611 $— $448,297 Other Consumer Performing $15,298 $7,328 $2,622 $724 $854 $703 $3,352 $30,881 Non-performing 231 200 92 22 — 8 19 $572 Subtotal $15,529 $7,528 $2,714 $746 $854 $711 $3,371 $31,453 Total Performing $332,764 $170,010 $99,060 $68,462 $45,425 $145,116 $65,905 $926,742 Non-performing 549 786 543 690 152 4,277 43 $7,040 Total other loans $333,313 $170,796 $99,603 $69,152 $45,577 $149,393 $65,948 $933,782 |