| Loans | Loans Classes of loans are as follows: June 30, 2021 December 31, (Amounts In Thousands) Agricultural $ 89,694 $ 94,842 Commercial and financial 269,752 286,242 Real estate: Construction, 1 to 4 family residential 73,866 71,117 Construction, land development and commercial 117,633 111,913 Mortgage, farmland 250,610 247,142 Mortgage, 1 to 4 family first liens 883,095 892,089 Mortgage, 1 to 4 family junior liens 115,894 127,833 Mortgage, multi-family 387,747 374,014 Mortgage, commercial 410,870 417,139 Loans to individuals 31,868 31,325 Obligations of state and political subdivisions 52,740 56,488 $ 2,683,769 $ 2,710,144 Net unamortized fees and costs 1,096 938 $ 2,684,865 $ 2,711,082 Less allowance for credit losses (2021) and loan losses (2020) 35,940 37,070 $ 2,648,925 $ 2,674,012 As of June 30, 2021 and December 31, 2020, the Company has outstanding balances of $67.53 million and $86.50 million, respectively, of loans issued under the Paycheck Protection Program (PPP) and $2.58 million and $2.12 million, respectively, of deferred PPP loan fees recorded with commercial and financial loans. For the six months ended June 30, 2021, the Company has recognized $3.23 million of deferred PPP loan fees in interest income and has received total forgiveness payments of $117.53 million from the SBA. For the six months ended June 30, 2020, there were $0.61 PPP loan fees recognized and no forgiveness payments received from the SBA. Changes in the allowance for credit losses, the allowance for credit losses applicable to individually evaluated loans and the related loan balance of individually evaluated loans for the three and six months ended June 30, 2021 were as follows: Three Months Ended June 30, 2021 Agricultural Commercial and Real Estate: Real Estate: Real Estate: Real Estate: Other Total (Amounts In Thousands) Allowance for credit losses: Beginning balance $ 2,147 $ 5,114 $ 2,288 $ 4,668 $ 11,496 $ 9,621 $ 1,286 $ 36,620 Charge-offs — (46) (3) (1) (7) (10) (30) (97) Recoveries 57 301 57 25 269 77 40 826 Credit loss expense (149) (567) 141 212 (879) 19 (186) (1,409) Ending balance $ 2,055 $ 4,802 $ 2,483 $ 4,904 $ 10,879 $ 9,707 $ 1,110 $ 35,940 Six Months Ended June 30, 2021 Agricultural Commercial and Real Estate: Real Estate: Real Estate: Real Estate: Other Total (Amounts In Thousands) Allowance for credit losses: Beginning balance, prior to adoption of ASC 326 $ 2,508 $ 4,885 $ 2,319 $ 4,173 $ 12,368 $ 9,415 $ 1,402 $ 37,070 Impact of adopting ASC 326 (328) 298 327 763 522 1,396 (232) 2,746 Charge-offs — (76) (3) (1) (82) (10) (96) (268) Recoveries 89 535 91 25 508 216 77 1,541 Credit loss expense (214) (840) (251) (56) (2,437) (1,310) (41) (5,149) Ending balance $ 2,055 $ 4,802 $ 2,483 $ 4,904 $ 10,879 $ 9,707 $ 1,110 $ 35,940 Ending balance, individually evaluated for credit losses $ — $ 54 $ 125 $ — $ 51 $ 162 $ 6 $ 398 Ending balance, collectively evaluated for credit losses $ 2,055 $ 4,748 $ 2,358 $ 4,904 $ 10,828 $ 9,545 $ 1,104 $ 35,542 Loans: Ending balance $ 89,694 $ 269,752 $ 191,499 $ 250,610 $ 998,989 $ 798,617 $ 84,608 $ 2,683,769 Ending balance, individually evaluated for credit losses $ 1,094 $ 1,601 $ 611 $ 1,575 $ 6,175 $ 6,294 $ 6 $ 17,356 Ending balance, collectively evaluated for credit losses $ 88,600 $ 268,151 $ 190,888 $ 249,035 $ 992,814 $ 792,323 $ 84,602 $ 2,666,413 Changes in the allowance for loan losses for the three and six months ended June 30, 2020 were as follows: Three Months Ended June 30, 2020 Agricultural Commercial and Real Estate: Real Estate: Real Estate: Real Estate: Other Total (Amounts In Thousands) Allowance for loan losses: Beginning balance $ 2,760 $ 6,680 $ 2,621 $ 4,096 $ 11,752 $ 9,063 $ 1,368 $ 38,340 Charge-offs (31) (760) (43) (1) (231) (78) (23) (1,167) Recoveries 8 101 53 — 247 9 21 439 Provision (190) (244) (198) (6) 514 179 (47) 8 Ending balance $ 2,547 $ 5,777 $ 2,433 $ 4,089 $ 12,282 $ 9,173 $ 1,319 $ 37,620 Six Months Ended June 30, 2020 Agricultural Commercial and Real Estate: Real Estate: Real Estate: Real Estate: Other Total (Amounts In Thousands) Allowance for loan losses: Beginning balance $ 2,400 $ 4,988 $ 2,599 $ 3,950 $ 10,638 $ 7,859 $ 1,326 $ 33,760 Charge-offs (35) (775) (43) (1) (460) (80) (213) (1,607) Recoveries 19 209 54 — 434 23 71 810 Provision 163 1,355 (177) 140 1,670 1,371 135 4,657 Ending balance $ 2,547 $ 5,777 $ 2,433 $ 4,089 $ 12,282 $ 9,173 $ 1,319 $ 37,620 Ending balance, individually evaluated for impairment $ 94 $ 747 $ 6 $ 3 $ 140 $ 1 $ — $ 991 Ending balance, collectively evaluated for impairment $ 2,453 $ 5,030 $ 2,427 $ 4,086 $ 12,142 $ 9,172 $ 1,319 $ 36,629 Loans: Ending balance $ 94,101 $ 335,784 $ 188,183 $ 246,781 $ 1,029,876 $ 772,322 $ 85,844 $ 2,752,891 Ending balance, individually evaluated for impairment $ 2,035 $ 2,575 $ 1,614 $ 2,948 $ 8,263 $ 3,866 $ — $ 21,301 Ending balance, collectively evaluated for impairment $ 92,066 $ 333,209 $ 186,569 $ 243,833 $ 1,021,613 $ 768,456 $ 85,844 $ 2,731,590 Changes in the allowance for credit losses for off-balance sheet credit exposures for the three and six months ended June 30, 2021 were as follows: Three Months Ended June 30, 2021 Agricultural Commercial and Real Estate: Real Estate: Real Estate: Real Estate: Other Total (Amounts In Thousands) Allowance for credit losses for off-balance sheet credit exposures: Beginning balance $ 443 $ 1,824 $ 933 $ 202 $ 646 $ 250 $ 42 $ 4,340 Credit loss expense 51 (295) (69) (95) 145 25 (12) (250) (Charge-offs), net recoveries — — — — — — — — Ending balance $ 494 $ 1,529 $ 864 $ 107 $ 791 $ 275 $ 30 $ 4,090 Six Months Ended June 30, 2021 Agricultural Commercial and Real Estate: Real Estate: Real Estate: Real Estate: Other Total (Amounts In Thousands) Allowance for credit losses for off-balance sheet credit exposures: Beginning balance, prior to adoption of ASC 326 $ — $ — $ — $ — $ — $ — $ — $ — Impact of adopting ASC 326 385 1,585 736 180 471 212 15 3,584 Credit loss expense 109 (56) 128 (73) 320 63 15 506 (Charge-offs), net recoveries — — — — — — — — Ending balance $ 494 $ 1,529 $ 864 $ 107 $ 791 $ 275 $ 30 $ 4,090 Credit loss expense for off-balance sheet credit exposures is included in credit loss expense on the consolidated statement of income for the three and six months ended June 30, 2021. Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with applicable bank regulations. The Company's risk rating methodology assigns risk ratings ranging from 1 to 6, where a higher rating represents higher risk. The Company differentiates its lending portfolios into loans sharing common risk characteristics for which expected credit loss is measured on a pool basis and loans not sharing common risk characteristics for which credit loss is measured individually. The below are descriptions of the credit quality indicators: Excellent – Excellent rated loans are prime quality loans covered by highly liquid collateral with generous margins or supported by superior current financial conditions reflecting substantial net worth, relative to total credit extended, and based on assets of a stable and non-speculative nature whose values can be readily verified. Identified repayment source or cash flow is abundant and assured. Loans are secured with cash, cash equivalents, or collateral with very low loan to values. The borrower would qualify for unsecured debt and guarantors provide excellent secondary support to the relationship. The borrower has a long-term relationship with Hills Bank, maintains high deposit balances and has an established payment history with Hills Bank and an established business in an established industry. Good – Good rated loans are adequately secured by readily marketable collateral or good financial condition characterized by liquidity, flexibility and sound net worth. Loans are supported by sound primary and secondary payment sources and timely and accurate financial information. The relationship is not quite as strong as a borrower that is assigned an excellent rating but still has a very strong liquidity position, low leverage, and track record of strong performance. These loans have a strong collateral position with limited risk to bank capital. The collateral will not materially lose value in a distressed liquidation. Guarantors provide additional secondary support to mitigate possible bank losses. The borrower has a long-term relationship with Hills Bank with an established track record of payments; loans with shorter remaining loan amortization; deposit balances are consistent; loan payments could be made from cash reserves in the interim period; and source of income is coming from a stable industry. Satisfactory – Satisfactory rated loans are loans to borrowers of average financial means not especially vulnerable to changes in economic or other circumstances, where the major support for the extension is sufficient collateral of a marketable nature, and the primary source of repayment is seen to be clear and adequate. The borrower's financial performance is consistent, ratios and trends are positive and the primary repayment source can clearly be identified and supported with acceptable financial information. The loan relationship could be vulnerable to changes in economic or industry conditions but have the ability to absorb unexpected issues. The loan collateral coverage is considered acceptable and guarantors can provide financial support but net worth might not be as liquid as a 1 or 2 rated relationship. The borrower has an established relationship with Hills Bank. The relationship is making timely loan payments, any operating line is revolving and deposit balances are positive with limited to no overdrafts. Management and industry is considered stable. Monitor – Monitor rated loans are identified by management as warranting special attention for a variety of reasons that may bear on ultimate collectability. This may be due to adverse trends, a particular industry, loan structure, or repayment that is dependent on projections, or a one-time occurrence . The relationship l iquidity levels are minimal and the borrower’s leverage position is brought into question. The primary repayment source is showing signs of being stressed or is not proven. If the borrower performs as planned, the loan will be repaid. The collateral coverage is still considered acceptable but there might be some concern with the type of real estate securing the debt or highly dependent on chattel assets. Some loans may be better secured than others. Guarantors still provide some support but there is not an abundance of financial strength supporting the guaranty. A monitor credit may be appropriate when the borrower is experiencing rapid growth which is impacting liquidity levels and increasing debt levels. Other attributes to consider would include if the business is a start-up or newly acquired, if the relationship has significant financing relationships with other financial institutions, the quality of financial information being received, management depth of the company, and changes to the business model. The track history with Hills Bank has some deficiencies such as slow payments or some overdrafts. Special Mention – Special mention rated loans are supported by a marginal payment capacity and are marginally protected by collateral. There are identified weaknesses that if not monitored and corrected may adversely affect the Company’s credit position. A special mention credit would typically have a weakness in one of the general categories (cash flow, collateral position or payment history) but not in all categories. Potential indicators of a special mention would include past due payments, overdrafts, management issues, poor financial performance, industry issues, or the need for additional short-term borrowing. The ability to continue to make payments is in question; there are “red flags” such as past due payments, non-revolving credit lines, overdrafts, and the inability to sell assets. The borrower is experiencing delinquent taxes, legal issues, etc., obtaining financial information has become a challenge, collateral coverage is marginal at best, and the value and condition could be brought into question. Collateral document deficiencies have been noted and if not addressed, could become material. Guarantors provide minimal support for this relationship. The credit may include an action plan or follow up established in the asset quality process. There is a change in the borrower’s communication pattern. Industry issues may be impacting the relationship. Adverse credit scores or history of payment deficiencies could be noted. Substandard – Substandard loans are not adequately supported by the paying capacity of the borrower and may be inadequately collateralized. These loans have a well-defined weakness or weaknesses. Full repayment of the loan(s) according to the original terms and conditions is in question or not expected. For these loans, it is more probable than not that the Company could sustain some loss if the deficiency(ies) is not corrected. There are identified shortfalls in the primary repayment source such as carry over debt, past due payments, and overdrafts. Obtaining quality and timely financial information is a weakness. The loan is under secured with exposure that could impact bank capital. It appears the liquidation of collateral has become the repayment source. The collateral may be difficult to foreclose or have little to no value. Collateral documentation deficiencies have been noted during the review process. Guarantor(s) provide minimal to no support of the relationship. The borrower’s communication with the bank continues to decrease and the borrower is not addressing the situation. There is some concern about the borrower’s ability and willingness to repay the loans. Problems may be the result of external issues such as economic or industry related issues. The following tables present the credit quality indicators and origination years by type of loan in each category as of June 30, 2021 (amounts in thousands): Agricultural June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ 436 $ 235 $ 40 $ 20 $ — $ — $ 4,337 $ 5,068 Good 593 1,732 656 75 77 33 4,565 7,731 Satisfactory 4,786 7,916 2,182 2,148 633 247 20,878 38,790 Monitor 4,558 6,042 1,221 752 179 419 17,359 30,530 Special Mention 1,563 454 87 167 17 — 3,750 6,038 Substandard 882 121 222 116 — — 196 1,537 Total $ 12,818 $ 16,500 $ 4,408 $ 3,278 $ 906 $ 699 $ 51,085 $ 89,694 Commercial and Financial June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ 6,903 $ 1,350 $ 5 $ 275 $ 54 $ — $ 3,990 $ 12,577 Good 9,584 13,495 3,234 1,158 471 2,529 12,527 42,998 Satisfactory 57,786 36,028 9,453 4,638 3,020 1,227 36,634 148,786 Monitor 15,172 19,315 5,573 1,655 1,032 856 13,122 56,725 Special Mention 975 1,103 408 100 — 8 296 2,890 Substandard 1,731 1,210 309 75 142 — 2,309 5,776 Total $ 92,151 $ 72,501 $ 18,982 $ 7,901 $ 4,719 $ 4,620 $ 68,878 $ 269,752 Real Estate: Construction, 1 to 4 Family Residential June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ — $ — $ — $ — $ — $ — $ — $ — Good 733 727 — — — — 14,017 15,477 Satisfactory 4,362 5,725 — — — — 34,626 44,713 Monitor 1,127 — — — — — 11,803 12,930 Special Mention — — — — — — 635 635 Substandard 111 — — — — — — 111 Total $ 6,333 $ 6,452 $ — $ — $ — $ — $ 61,081 $ 73,866 Real Estate: Construction, Land Development and Commercial June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ 56 $ — $ — $ — $ 152 $ 8 $ — $ 216 Good 1,224 2,699 — — 155 172 10,489 14,739 Satisfactory 12,216 10,262 4,073 359 1,040 212 34,929 63,091 Monitor 3,132 4,916 7 168 263 — 22,923 31,409 Special Mention 86 — — — — — — 86 Substandard 7,000 301 199 — — — 592 8,092 Total $ 23,714 $ 18,178 $ 4,279 $ 527 $ 1,610 $ 392 $ 68,933 $ 117,633 Real Estate: Mortgage, Farmland June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ — $ 3,664 $ 139 $ 59 $ 104 $ 58 $ 143 $ 4,167 Good 4,704 18,018 2,135 2,404 5,742 5,041 3,843 41,887 Satisfactory 36,416 46,393 13,084 9,938 10,367 16,265 9,359 141,822 Monitor 2,557 22,564 7,418 4,801 2,136 7,786 5,831 53,093 Special Mention 4,031 697 — — 1,174 211 — 6,113 Substandard 2,522 455 296 50 — 205 — 3,528 Total $ 50,230 $ 91,791 $ 23,072 $ 17,252 $ 19,523 $ 29,566 $ 19,176 $ 250,610 Real Estate: Mortgage, 1 to 4 Family First Liens June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ 468 $ 1,382 $ 441 $ 25 $ 153 $ 313 $ — $ 2,782 Good 3,576 13,241 3,505 3,438 4,304 11,554 4,198 43,816 Satisfactory 106,368 200,444 83,748 81,819 72,313 144,363 7,186 696,241 Monitor 13,870 55,698 7,374 8,330 10,969 17,671 2,684 116,596 Special Mention 587 3,193 1,013 1,282 569 2,110 — 8,754 Substandard 1,578 1,961 1,494 1,584 808 7,481 — 14,906 Total $ 126,447 $ 275,919 $ 97,575 $ 96,478 $ 89,116 $ 183,492 $ 14,068 $ 883,095 Real Estate: Mortgage, 1 to 4 Family Junior Liens June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ — $ 16 $ — $ — $ — $ — $ 504 $ 520 Good 34 876 294 — 111 510 1,575 3,400 Satisfactory 6,176 11,585 7,138 9,239 6,531 8,205 55,083 103,957 Monitor 179 1,261 317 449 280 318 2,348 5,152 Special Mention 108 529 60 111 108 140 212 1,268 Substandard 111 381 92 410 106 198 299 1,597 Total $ 6,608 $ 14,648 $ 7,901 $ 10,209 $ 7,136 $ 9,371 $ 60,021 $ 115,894 Real Estate: Mortgage, Multi-Family June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ 2,584 $ 6,334 $ — $ — $ — $ 733 $ — $ 9,651 Good 5,730 35,638 1,868 1,280 2,865 9,989 — 57,370 Satisfactory 44,791 108,424 22,099 1,640 7,612 18,577 14,575 217,718 Monitor 27,383 30,137 760 1,187 1,612 1,479 7,257 69,815 Special Mention — 13,529 1,688 — — — — 15,217 Substandard 12,324 — — — — 5,652 — 17,976 Total $ 92,812 $ 194,062 $ 26,415 $ 4,107 $ 12,089 $ 36,430 $ 21,832 $ 387,747 Real Estate: Mortgage, Commercial June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ 2,205 $ 17,473 $ — $ — $ 3,557 $ 1,001 $ — $ 24,236 Good 11,298 45,661 3,522 3,410 5,560 6,937 10,222 86,610 Satisfactory 37,854 58,532 17,241 15,581 19,350 28,205 14,242 191,005 Monitor 8,250 59,519 6,210 1,845 2,554 4,332 3,713 86,423 Special Mention 158 8,448 306 921 2,015 6,488 — 18,336 Substandard 1,389 2,490 — 217 — 164 — 4,260 Total $ 61,154 $ 192,123 $ 27,279 $ 21,974 $ 33,036 $ 47,127 $ 28,177 $ 410,870 Loans to Individuals June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ — $ — $ — $ — $ — $ — $ — $ — Good — — 78 26 9 — 2 115 Satisfactory 7,296 8,487 3,358 1,601 275 9,875 58 30,950 Monitor 271 209 56 61 13 — 2 612 Special Mention 18 67 28 7 — — 2 122 Substandard — 38 18 3 5 4 1 69 Total $ 7,585 $ 8,801 $ 3,538 $ 1,698 $ 302 $ 9,879 $ 65 $ 31,868 Obligations of State and Political Subdivisions June 30, 2021 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Grade: Excellent $ — $ — $ — $ — $ — $ 6,439 $ — $ 6,439 Good — 3,261 — — — 9,397 — 12,658 Satisfactory 276 2,165 1,785 877 11,566 1,337 6,288 24,294 Monitor — 846 213 104 184 4,476 3,382 9,205 Special Mention — — — — — 144 — 144 Substandard — — — — — — — — Total $ 276 $ 6,272 $ 1,998 $ 981 $ 11,750 $ 21,793 $ 9,670 $ 52,740 The following table presents the credit quality indicators by type of loans in each category as of December 31, 2020 (amounts in thousands): Agricultural Commercial and Real Estate: Real Estate: December 31, 2020 Grade: Excellent $ 3,761 $ 9,024 $ — $ 227 Good 12,369 62,310 13,675 15,187 Satisfactory 42,015 144,999 41,616 64,301 Monitor 29,381 56,439 13,654 23,368 Special Mention 5,143 8,258 1,857 7,137 Substandard 2,173 5,212 315 1,693 Total $ 94,842 $ 286,242 $ 71,117 $ 111,913 Real Estate: Real Estate: Real Estate: Mortgage, Real Estate: December 31, 2020 Grade: Excellent $ 5,706 $ 2,303 $ 204 $ 14,650 Good 41,878 47,233 3,707 57,281 Satisfactory 129,210 701,273 115,731 197,493 Monitor 61,298 114,207 5,153 70,885 Special Mention 6,074 12,890 1,307 15,374 Substandard 2,976 14,183 1,731 18,331 Total $ 247,142 $ 892,089 $ 127,833 $ 374,014 Real Estate: Loans to Obligations of state and Total December 31, 2020 Grade: Excellent $ 26,940 $ 1 $ 6,752 $ 69,568 Good 92,699 145 13,094 359,578 Satisfactory 196,310 30,487 26,571 1,690,006 Monitor 77,125 479 9,924 461,913 Special Mention 19,731 127 147 78,045 Substandard 4,334 86 — 51,034 Total $ 417,139 $ 31,325 $ 56,488 $ 2,710,144 Past due loans as of June 30, 2021 and December 31, 2020 were as follows: 30 - 59 Days 60 - 89 Days 90 Days Total Past Current Total Accruing Loans (Amounts In Thousands) June 30, 2021 Agricultural $ 152 $ 36 $ 97 $ 285 $ 89,409 $ 89,694 $ — Commercial and financial 1,160 44 23 1,227 268,525 269,752 — Real estate: Construction, 1 to 4 family residential 496 — — 496 73,370 73,866 — Construction, land development and commercial 892 — 96 988 116,645 117,633 — Mortgage, farmland 205 241 — 446 250,164 250,610 — Mortgage, 1 to 4 family first liens 827 1,022 2,646 4,495 878,600 883,095 411 Mortgage, 1 to 4 family junior liens 249 24 107 380 115,514 115,894 — Mortgage, multi-family — 5,323 — 5,323 382,424 387,747 — Mortgage, commercial 3,933 — — 3,933 406,937 410,870 — Loans to individuals 186 23 5 214 31,654 31,868 — Obligations of state and political subdivisions — — — — 52,740 52,740 — $ 8,100 $ 6,713 $ 2,974 $ 17,787 $ 2,665,982 $ 2,683,769 $ 411 December 31, 2020 Agricultural $ 438 $ — $ 629 $ 1,067 $ 93,775 $ 94,842 $ 111 Commercial and financial 867 195 140 1,202 285,040 286,242 20 Real estate: Construction, 1 to 4 family residential 190 — 536 726 70,391 71,117 536 Construction, land development and commercial — — — — 111,913 111,913 — Mortgage, farmland 279 28 — 307 246,835 247,142 — Mortgage, 1 to 4 family first liens 4,969 1,342 2,486 8,797 883,292 892,089 342 Mortgage, 1 to 4 family junior liens 436 21 155 612 127,221 127,833 47 Mortgage, multi-family — — — — 374,014 374,014 — Mortgage, commercial 783 — 461 1,244 415,895 417,139 — Loans to individuals 218 59 4 281 31,044 31,325 — Obligations of state and political subdivisions — — — — 56,488 56,488 — $ 8,180 $ 1,645 $ 4,411 $ 14,236 $ 2,695,908 $ 2,710,144 $ 1,056 The Company does not have a material amount of loans that are past due less than 90 days where there are serious doubts as to the ability of the borrowers to comply with the loan repayment terms. Certain nonaccrual and TDR loan information by loan type at June 30, 2021 and December 31, 2020, was as follows: June 30, 2021 December 31, 2020 Non-accrual Interest income recognized on non-accrual Accruing loans TDR loans Non- Accruing loans TDR loans (Amounts In Thousands) (Amounts In Thousands) Agricultural $ 714 — $ — $ 380 $ 1,252 $ 111 $ 85 Commercial and financial 104 — — 1,211 479 20 1,263 Real estate: Construction, 1 to 4 family residential 111 — — — 315 536 — Construction, land development and commercial 295 — — 205 204 — 211 Mortgage, farmland 368 — — 1,207 446 — 1,616 Mortgage, 1 to 4 family first liens 4,195 — 411 1,362 4,331 342 1,751 Mortgage, 1 to 4 family junior liens 187 — — 20 193 47 20 Mortgage, multi-family — — — 1,688 79 — 1,695 Mortgage, commercial 2,354 — — 2,253 1,550 — 3,610 $ 8,328 $ — $ 411 $ 8,326 $ 8,849 $ 1,056 $ 10,251 (1) There were $3.15 million and $2.97 million of TDR loans included within nonaccrual loans as of June 30, 2021 and December 31, 2020, respectively. Loans 90 days or more past due that are still accruing interest decreased $0.65 million from December 31, 2020 to June 30, 2021. As of June 30, 2021 there were seven accruing loans past due 90 days or more. The average accruing loans past due as of June 30, 2021 are $0.06 million. There were 12 accruing loans past due 90 days or more as of December 31, 2020 and the average loan balance was $0.09 million. The accruing loans past due 90 days or more balances are believed to be adequately collateralized and the Company expects to collect all principal and interest as contractually due under these loans. The Company may modify the terms of a loan to maximize the collection of amounts due. Such a modification is considered a troubled debt restructuring (“TDR”). In most cases, the modification is either a reduction in interest rate, conversion to interest only payments or an extension of the maturity date. The borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term, so a concessionary modification is granted to the borrower that would otherwise not be considered. TDR loans accrue interest as long as the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles. Section 4013 of the CARES Act, “Temporary Relief From Troubled Debt Restructurings,” allows financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time during the COVID-19 pandemic. In March 2020, various regulatory agencies, including the FRB and the FDIC, issued an interagency statement, effective immediately, on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The agencies confirmed with the staff of the FASB that 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 to be considered TDRs. This includes short-term (e.g., six months) modifications, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. As of June 30, 2021, the total amount of the eligible loans in deferral (deferral of principal and/or interest) that met the requirements set forth under the CARES Act and therefore were not considered TDRs was 17 loans, totaling $9.8 million. As of December 31, 2020, there were 13 loans, totaling $9.4 million. Throughout 2020, COVID-19 related payment deferrals provided for customers totaled approximately 14.82% of total loans. As of June 30, 2021 and December 31, 2020, COVID-19 related payment deferrals were approximately 0.17% and 1.20% of total loans, respectively. Below is a summary of information for TDR loans as of June 30, 2021 and December 31, 2020: June 30, 2021 December 31, 2020 Number Recorded Commitments Number Recorded Commitments (Amounts In Thousands) (Amounts In Thousands) Agricultural 4 $ 983 $ — 6 $ 1,028 $ — Commercial and financial 14 1,283 60 17 1,743 35 Real estate: Construction, 1 to 4 family residential — — — — — — Construction, land development and commercial 1 205 52 1 211 4 Mortgage, farmland 5 1,525 — 6 2,009 — Mortgage, 1 to 4 family first liens 14 1,455 — 17 1,898 — Mortgage, 1 to 4 family junior liens 1 20 — 1 20 — Mortgage, multi-family 2 1,688 — 2 1,695 — Mortgage, commercial 11 4,313 — 13 4,621 — Loans to individuals — — — — — — 52 $ 11,472 $ 112 63 $ 13,225 $ 39 The following is a summary of TDR loans that were modified during the three and six months ended June 30, 2021: Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 Number Pre-modification Post-modification Number Pre-modification Post-modification (Amounts In Thousands) (Amounts In Thousands) Agricultural — $ — $ — 1 $ 178 $ 178 Commercial and financial — — — — — — Real estate: Construction, 1 to 4 family residential — — — — — — Construction, land development and commercial — — — — — — Mortgage, farmland 1 319 319 1 319 319 Mortgage, 1 to 4 family first lien — — — — — — Mortgage, 1 to 4 family junior liens — — — — — — Mortgage, multi-family — — — — — — Mortgage, commercial 1 232 232 1 232 232 2 $ 551 $ 551 3 $ 729 $ 729 The Company has allocated $0.18 million of allowance for TDR loans and the Company had commitments to lend $0.11 million in additional borrowings to restructured loan customers as of June 30, 2021. The Company had commitments to lend $0.04 million in additional borrowings to restructured loan customers as of December 31, 2020. These commitments were in the normal course of business. The additional borrowings were not used to facilitate payments on these loans. The modifications of the terms of loans performed during the six months ended June 30, 2021 included extensions of the maturity date. There were no TDR loans that were in payment default (defined as past due 90 days or more) during the period ended June 30, 2021 and the year ended December 31, 2020. The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans: Primary Type of Collateral Real Estate Accounts Receivable Equipment Other Total ACL Allocation (Amounts In Thousands) June 30, 2021 Agricultural $ 1,040 $ — $ 54 $ — $ 1,094 $ — Commercial and financial 1,402 — 199 — 1,601 54 Real estate: Construction, 1 to 4 family residential 111 — — — 111 — Construction, land development and commercial 500 — — — 500 125 Mortgage, farmland 1,575 — — — 1,575 — Mortgage, 1 to 4 family first liens 5,968 — — — 5,968 38 Mortgage, 1 to 4 family junior liens 207 — — — 207 13 Mortgage, multi-family 1,688 — — — 1,688 — Mortgage, commercial 4,606 — — — 4,606 162 Loans to individuals 6 — — — 6 6 Obligations of state and political subdivisions — — — — — — $ 17,103 $ — $ 253 $ — $ 17,356 $ 398 Pre-ASC 326 (CECL) adoption impaired loans information as of December 31, 2020 is as follows: Recorded Unpaid Principal Related With no related allowance recorded: (Amounts In Thousands) Agricultural $ 1,337 $ 1,928 $ — Commercial and financial 1,520 2,907 — Real estate: Construction, 1 to 4 family residential 315 337 — Construction, land development and commercial 415 421 — Mortgage, farmland 2,061 2,598 — Mortgage, 1 to 4 family first liens 6,253 8,013 — Mortgage, 1 to 4 family junior liens 108 350 — Mortgage, multi-family 1,773 1,898 — Mortgage, commercial 4,124 4,960 — Loans to individuals — 47 — $ 17,906 $ 23,459 $ — With an allowance recorded: Agricultural $ 206 $ 206 $ 86 Commercial and financial 671 724 411 Real estate: Construction, 1 to 4 family residential 536 536 7 Construction, land development and commercial — — — Mortgage, farmland — — — Mortgage, 1 to 4 family first liens 924 975 56 Mortgage, 1 to 4 family junior liens 132 158 37 Mortgage, multi-family — — — Mortgage, commercial 303 304 14 Loans to individuals 51 51 51 $ 2,823 $ 2,954 $ 662 Total: Agricultural $ 1,543 $ 2,134 $ 86 Commercial and financial 2,191 3,631 411 Real estate: Construction, 1 to 4 family residential 851 873 7 Construction, land development and commercial 415 421 — Mortgage, farmland 2,061 2,598 — Mortgage, 1 to 4 family first liens 7,177 8,988 56 Mortgage, 1 to 4 family junior liens 240 508 37 Mortgage, multi-family 1,773 1,898 — Mortgage, commercial 4,427 5,264 14 Loans to individuals 51 98 51 $ 20,729 $ 26,413 $ 662 Post-ASC 326 CECL Adoption: The changes in the ACL in 2021 compared to December 31, 2020 is the result of the following factors: $2.75 million increase upon adoption of ASC 326 (CECL) on January 1, 2021; changes after adoption for the six months ended June 30, 2021 include improvements in the economic factor forecasts, primarily Iowa unemployment, used in the ACL calculation which resulted in a decrease of $1.14 million; decrease in loan volume which resulted in a decrease of $0.70 million; changes in prepayment and curtailment rates resulting in a decrease of $0.70 million; decreases in historical loss rates along with net recoveries in the first half of 2021 resulting in a decrease of $1.83 million; decreases in the individually analyzed loans reserve of $0.21 million; and increases in qualitative factors determined necessary by management which resulted in an increase of $0.71 million. The extent to which collateral secures collateral-dependent loans is provided in the previous individually analyzed loans table and changes in the extent to which collateral secures its collateral-dependent loans are described below. Collateral-dependent loans decreased $3.37 million from December 31, 2020 to June 30, 2021. Collateral-dependent loans include any loan that has been placed on nonaccrual status, accruing loans past due 90 da |
