Loans are stated at amortized cost net of an allowance for credit losses. Amortized cost is the unpaid principal net of unearned premiums and discounts, and net deferred origination fees and costs. Deferred loan origination fees are reduced by loan origination costs and are amortized to interest income over the life of the related loan using methods that approximated the effective interest rate method. Interest on substantially all loans is credited to income based on the principal amount outstanding. A summary of loans at June 30, 2020 and December 31, 2019 follows (in thousands):

Loans expected to be sold are classified as held for sale in the consolidated financial statements and are recorded at the lower of aggregate cost or fair value, taking into consideration future commitments to sell the loans. These loans are primarily for 1-4 family residential properties.

Accrued interest on loans, which is excluded from the amortized cost of the balances above, totaled $14.1 million and $12.4 million at June 30, 2020 and December 31, 2019, respectively.

Most of the Company’s business activities are with customers located near the Company's branch locations in Illinois and Missouri. At June 30, 2020, the Company’s loan portfolio included $400.8 million of loans to borrowers whose businesses are directly related to agriculture. Of this amount, $330.5 million was concentrated in corn and other grain farming. Total loans to borrowers whose businesses are directly related to agriculture increased $24.4 million from $376.4 million at December 31, 2019 due to seasonal timing of cash flow requirements. Loans concentrated in corn and other grain farming increased $29.0 million from $301.5 million at December 31, 2019. The Company's underwriting practices include collateralization of loans, any extended period of low commodity prices, drought conditions, significantly reduced yields on crops and/or reduced levels of government assistance to the agricultural industry, however these could result in an increase in the level of problem agriculture loans and potentially result in loan losses within the agricultural portfolio.

In addition, the Company has $126.5 million of loans to motels and hotels. The performance of these loans is dependent on borrower specific issues as well as the general level of business and personal travel within the region. While the Company adheres to sound underwriting standards, a prolonged period of reduced business or personal travel could result in an increase in nonperforming loans to this business segment and potentially in loan losses. The Company also has $401.5 million of loans to lessors of non-residential buildings, $293.7 million of loans to lessors of residential buildings and dwellings, $117.4 million of loans to nursing care facilities, and $124.9 million of loans to other gambling industries.

The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to individual loan officers, loan committees, and ultimately the board of directors. Outstanding balances to one borrower or affiliated borrowers are limited by federal regulation and most borrowers are below regulatory thresholds. The Company can occasionally have outstanding balances to one borrower up to but not exceeding the regulatory threshold should underwriting guidelines warrant. Most of the the Company’s loans are to businesses located in the geographic market areas served by the Company’s branch bank system. Additionally, a significant portion of the collateral securing the loans in the portfolio is located within the Company’s primary geographic footprint. In general, the Company adheres to loan underwriting standards consistent with industry guidelines for all loan segments.

Commercial Real Estate Loans. Commercial real estate loans are generally comprised of loans to small business entities to purchase or expand structures in which the business operations are housed, loans to owners of real estate who lease space to non-related commercial entities, loans for construction and land development, loans to hotel operators, and loans to owners of multi-family residential structures, such as apartment buildings. Commercial real estate loans are underwritten based on historical and projected cash flows of the borrower and secondarily on the underlying real estate pledged as collateral on the debt. For the various types of commercial real estate loans, minimum criteria have been established within the Company’s loan policy regarding debt service coverage while maximum limits on loan-to-value and amortization periods have been defined. Maximum loan-to-value ratios range from 65% to 80% depending upon the type of real estate collateral, while the desired minimum debt coverage ratio is 1.20x. Amortization periods for commercial real estate loans are generally limited to twenty years. The Company’s commercial real estate portfolio is well below the thresholds that would designate a concentration in commercial real estate lending, as established by the federal banking regulators.

Commercial and Industrial Loans. Commercial and industrial loans are primarily comprised of working capital loans used to purchase inventory and fund accounts receivable that are secured by business assets other than real estate. These loans are generally written for one year or less. Also, equipment financing is provided to businesses with these loans generally limited to 80% of the value of the collateral and amortization periods limited to seven years. Commercial loans are often accompanied by a personal guaranty of the principal owners of a business. Like commercial real estate loans, the underlying cash flow of the business is the primary consideration in the underwriting process. The financial condition of commercial borrowers is monitored at least annually with the type of financial information required determined by the size of the relationship. Measures employed by the Company for businesses with higher risk profiles include the use of government- assisted lending programs through the Small Business Administration and U.S. Department of Agriculture.

Agricultural and Agricultural Real Estate Loans. Agricultural loans are generally comprised of seasonal operating lines to cash grain farmers to plant and harvest corn and soybeans and term loans to fund the purchase of equipment. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Specific underwriting standards have been established for agricultural-related loans including the establishment of projections for each operating year based on industry developed estimates of farm input costs and expected commodity yields and prices. Operating lines are typically written for one year and secured by the crop. Loan-to-value ratios on loans secured by farmland generally do not exceed 65% and have amortization periods limited to twenty-five years. Federal government-assistance lending programs through the Farm Service Agency are used to mitigate the level of credit risk when deemed appropriate.

Residential Real Estate Loans. Residential real estate loans generally include loans for the purchase or refinance of residential real estate properties consisting of one-to-four units and home equity loans and lines of credit. The Company sells most of its long-term fixed rate residential real estate loans to secondary market investors. The Company also releases the servicing of these loans upon sale. The Company retains all residential real estate loans with balloon payment features. Balloon periods are limited to five years. Residential real estate loans are typically underwritten to conform to industry standards including criteria for maximum debt-to-income and loan-to-value ratios as well as minimum credit scores. Loans secured by first liens on residential real estate held in the portfolio typically do not exceed 80% of the value of the collateral and have amortization periods of twenty-five years or less. The Company does not originate subprime mortgage loans.

Consumer Loans. Consumer loans are primarily comprised of loans to individuals for personal and household purposes such as the purchase of an automobile or other living expenses. Minimum underwriting criteria have been established that consider credit score, debt-to-income ratio, employment history, and collateral coverage. Typically, consumer loans are set up on monthly payments with amortization periods based on the type and age of the collateral.

Other Loans. Other loans consist primarily of loans to municipalities to support community projects such as infrastructure improvements or equipment purchases. Underwriting guidelines for these loans are consistent with those established for commercial loans with the additional repayment source of the taxing authority of the municipality.

The allowance for credit losses represents the Company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining contractual life of the assets. The provision for credit losses is the charge against current earnings that is determined by the Company as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to current earnings, the Company relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by the overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty. Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and troubled debt restructurings, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. The Company estimates the appropriate level of allowance for credit losses by evaluating large impaired loans separately from non-impaired loans.

The Company individually evaluates certain loans for impairment. In general, these loans have been internally identified via the Company’s loan grading system as credits requiring management’s attention due to underlying problems in the borrower’s business or collateral concerns. This evaluation considers expected future cash flows, the value of collateral and also other factors that may impact the borrower’s ability to make payments when due. For loans greater than $250,000, and loans identified as troubled debt restructurings, impairment is individually measured each quarter using one of three alternatives: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price, if available; or (3) the fair value of the collateral less costs to sell for collateral dependent loans and loans for which foreclosure is deemed to be probable. A specific allowance is assigned when expected cash flows or collateral are less than the carrying amount of the loan. The carrying value of the loan reflects reductions from prior charge-offs.

Non-impaired loans comprise the vast majority of the Company’s total loan portfolio and include loans in accrual status and those credits not identified as troubled debt restructurings. A small portion of these loans are considered “criticized” due to the risk rating assigned reflecting elevated credit risk due to characteristics, such as a strained cash flow position, associated with the individual borrowers. Criticized loans are those assigned risk ratings of Special Mention, Substandard, or Doubtful.

Beginning January 1, 2020, the allowance for credit losses was estimated using the current expected credit loss model ("CECL"). The Company uses the Loss Rate method to estimate the historical loss rate for all non-impaired loans. Under this method, the allowance for credit losses is measured on a collective (pool) basis for non-impaired loans with similar risk characteristics. Historical credit loss experience provides the basis for the estimate of expected credit losses. For each pool, a historical loss rate is computed based on the average remaining contractual life of the pool. Adjustments to historical loss rates are made using qualitative factors relevant to each pool including merger & acquisition activity, economic conditions, changes in policies, procedures & underwriting, and concentrations. In addition, a twelve-month forecast, using reasonable and supportable future conditions, is prepared that is used to estimate expected changes to existing and historical conditions in the current period.

The Company also considers specific current economic events occurring globally, in the U.S. and in its local markets. In March 2020, in response to the COVID-19 outbreak, its significant disruptions in the U.S. economy and impacts on local markets, First Mid Bank offered a 90-day commercial deferral program, primarily to hotel and restaurant borrowers. In accordance with interagency guidance issued in March 2020, these short-term deferrals are not considered troubled debt restructurings. These deferrals were, however, considered in the factors used to estimate the required allowance for credit losses for non-impaired loans. Other COVID-19 related impacts considered included revenue losses of businesses required to restrict or cease services, income loss to workers laid off as a result of COVID-19 restrictions, various federal and state government stimulus programs and additional deferral programs offered by First Mid Bank beginning in April 2020. Other events considered include the status of trade agreements with China, scheduled increases in minimum wage and changes to the minimum salary threshold for overtime provisions, current and projected unemployment rates, current and projected grain and oil prices and economies of local markets where customers work and operate.

Within each pool, risk elements are evaluated that have specific impacts to the borrowers within the pool. These, along with the general risks and events, and the specific lending policies and procedures by loan type described above, are analyzed to estimate the qualitative factors used to adjust the historical loss rates.

During the current period, the following assumptions and factors were considered when determining the historical loss rate and any potential adjustments by loan pool.

Construction and Land Development Loans. The average life of the construction and land development segment was determined to be twelve months. Historical losses in this segment remained very low. Current activity in this industry was deemed essential and has continued during COVID-19, however, projects may be hampered by COVID-19 restrictions which could increase costs and duration. The qualitative factor for this segment was increased to account for these potential risks.

Agricultural Real Estate Loans. The average life of the agricultural real estate segment was determined to be thirty-six months. Historical losses in the segment remain very low. Farmland values have remained steady over an extended period of time and there are no indications that this will change in the next year. More pressure on landowners to lower cash rents as farmers struggle to cover expenses is expected which would lower the return to landowners and impact the market value of the land. The qualitative factor for this segment was increased to account for this potential risk.

1- 4 Family Residential Properties Loans. The average life of the 1-4 Family Residential segment was determined to be: Residential Real Estate-non-owner occupied, sixty months; Residential Real Estate-owner occupied, sixty months; Home Equity lines of credit, thirty months. COVID-19 has impacted the finances of consumers from layoffs and furloughs resulting from employers that must reduce or suspend operations. Increased risk in this segment includes consumer ability to make mortgage and rent payments. Some of this impact has been offset by governmental actions such as stimulus payments and extended unemployment benefits. First Mid Bank has also offered short-term loan payment deferral to borrowers in this segment. The historical loss rate for this segment declined for the period but was offset by an increase in the qualitative factor to account for these potential risks.

Commercial Real Estate Loans. The average life of the commercial real estate segment was determined to be thirty-six months. This segment includes the Company's majority of exposure to the hotel industry which has been significantly impacted by COVID-19 events. Other impacted industries in this segment include restaurants and retail establishments. First Mid Bank has implemented a deferral program for borrowers in this segment in order to ease the impact to these borrowers. While there was a slight decrease in the historical loss rate, the qualitative factor for this segment was increased to account for these risks.

Agricultural Loans. The average life of the agricultural segment was determined to be eighteen months. Losses in this segment are very low and it is believed that borrowers in this segment will benefit from current governmental programs such as PPP and MFP. Many farmers are holding grain from the 2019 operating season waiting for an increase in prices, however, as of June 30, prices were down compared to the beginning of the year. It is now believed that many farmers will likely not be able to cover their operating expenses. The qualitative factor of this segment was increased to account for this new risk.

Commercial and Industrial Loans. The average life of the commercial and industrial segment was determined to be twenty-four months. The COVID-19 impacts include forced closures and scaled-back services for many industries within this segment including retailers, restaurants and video gaming establishments. Some of this risk is offset by government relief programs as well as, First Mid Bank's payment deferral program. In addition to an increase in the historical loss rate, the qualitative factor for this segment was increased to account for these new risks.

Consumer Loans. The average life of the consumer segment was determined to be thirty-six months. The financial status of many borrowers has been impacted by COVID-19 events including layoffs and reduced hours. Some of this impact has been offset by government stimulus programs, increased paid leave and increased and extended unemployment benefits. Additionally, First Mid Bank has offered a short-term payment deferral program. While the historical loss rate decreased for this period, the qualitative factor for the segment was increased to account for these risks.

Acquired Loans. Prior to January 1, 2020 loans acquired with evidence of credit deterioration since origination and for which it was probable that all contractually required payments would not be collected were considered purchased credit impaired at the time of acquisition. Purchase credit-impaired ("PCI") loans were accounted for under ASC 310-30, Receivables--Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"), and were initially measured at fair value, which included the estimated future credit losses expected to be incurred over the life of the loan.

Accordingly, an allowance for credit losses related to these loans was not carried over and recorded at the acquisition date. The cash flows expected to be collected were estimated using current key assumptions, such as default rates, value of underlying collateral, severity and prepayment speeds.

Subsequent to January 1, 2020, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. All loans considered to be PCI prior to January 1, 2020 were converted to PCD on that date. Accordingly, on January 1, 2020, the amortized cost basis of the PCD loans were adjusted to reflect the addition of $833,000 to the allowance for credit losses.

For acquired loans not deemed purchased credit deteriorated at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans. At the acquisition date, an initial allowance for expected credit losses is estimated and recorded as credit loss expense. The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans.

The following tables present the activity in the allowance for credit losses based on portfolio segment for the three and six months ended June 30, 2020 (in thousands):

	Construction & Land Development			Agricultural Real Estate		1-4 Family Residential Properties		Commercial Real Estate		Agricultural Loans			Commercial & Industrial		Consumer Loans			Total
Three months ended June 30, 2020
Beginning Balance	$	1,620		$	1,335	$	1,931	$	13,621	$	1,064		$	11,294	$	2,011		$	32,876
Provision for credit loss expense		738			299		483		3,118		259			1,286		(47	)		6,136
Loans charged off		—			—		69		467		0			311		116			963
Recoveries collected		—			—		141		—		—			91		100			332
Ending balance	$	2,358		$	1,634	$	2,486	$	16,272	$	1,323		$	12,360	$	1,948		$	38,381

Six months ended June 30, 2020
Beginning Balance	$	1,146		$	1,093	$	1,386	$	11,198	$	1,386		$	9,273	$	1,429		$	26,911
Impact of adopting ASU 2016-13		(113	)		230		756		541		(363	)		155		466			1,672
Provision for credit loss expense		1,325			311		406		5,079		300			4,101		95			11,617
Loans charged off		—			—		265		551		—			1,283		287			2,386
Recoveries collected		—			—		203		5		—			114		245			567
Ending balance	$	2,358		$	1,634	$	2,486	$	16,272	$	1,323		$	12,360	$	1,948		$	38,381

Prior to the adoption of ASU 2016-13, the appropriate level of the allowance for loan losses for all non-impaired loans was based on a migration analysis of net losses over a rolling twelve quarter period by loan segment. A weighted average of the net losses was determined by assigning more weight to the most recent quarters in order to recognize current risk factors influencing the various segments of the loan portfolio more prominently than past periods. Due to weakened economic conditions during historical years, the Company established qualitative factor adjustments for each of the loan segments at levels above the historical net loss averages. Some of the economic factors included the potential for reduced cash flow for commercial operating loans from reduction in sales or increased operating costs, decreased occupancy rates for commercial buildings, reduced levels of home sales for commercial land developments, the uncertainty regarding grain prices and increased operating costs for farmers, and increased levels of unemployment and bankruptcy impacting consumer’s ability to pay. Each of these economic uncertainties was taken into consideration in developing the level of the allowance for loan losses. The following tables present the activity in the allowance for credit losses based on portfolio segment for the three and six months ended June 30, 2019 and for the year ended December 31, 2019 (in thousands):

	Construction & Land Development		Agricultural Real Estate			1-4 Family Residential Properties		Commercial Real Estate			Agricultural Loans		Commercial & Industrial			Consumer Loans		Total
Three months ended June 30, 2019
Beginning Balance	$	552	$	1,282		$	1,341	$	10,565		$	1,130	$	10,830		$	1,004	$	26,704
Provision for credit loss expense		187		2			367		335			542		(1,558	)		216		91
Loans charged off		—		—			66		105			0		155			216		542
Recoveries collected		—		—			7		1			—		12			86		106
Ending balance	$	739	$	1,284		$	1,649	$	10,796		$	1,672	$	9,129		$	1,090	$	26,359

Six months ended June 30, 2019
Beginning Balance	$	561	$	1,246		$	1,504	$	11,102		$	951	$	9,893		$	932	$	26,189
Provision for credit loss expense		178		38			326		(146	)		730		(546	)		458		1,038
Loans charged off		—		—			197		161			9		258			485		1,110
Recoveries collected		—		—			16		1			—		40			185		242
Ending balance	$	739	$	1,284		$	1,649	$	10,796		$	1,672	$	9,129		$	1,090	$	26,359

Twelve months ended December 31, 2019
Beginning Balance	$	561	$	1,246		$	1,504	$	11,102		$	951	$	9,893		$	932	$	26,189
Provision for credit loss expense		585		(153	)		1,268		1,827			459		1,053			1,394		6,433
Loans charged off		—		—			1,478		1,743			24		1,828			1,253		6,326
Recoveries collected		—		—			92		12			—		155			356		615
Ending balance	$	1,146	$	1,093		$	1,386	$	11,198		$	1,386	$	9,273		$	1,429	$	26,911

Consistent with regulatory guidance, charge-offs on all loan segments are taken when specific loans, or portions thereof, are considered uncollectible. The Company’s policy is to promptly charge these loans off in the period the uncollectible loss is reasonably determined.

For all loan portfolio segments except 1-4 family residential properties and consumer, the Company promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Company charges-off 1-4 family residential and consumer loans, or portions thereof, when the Company reasonably determines the amount of the loss. The Company adheres to timeframes established by applicable regulatory guidance which provides for the charge-down of 1-4 family first and junior lien mortgages to the net realizable value less costs to sell when the loan is 180 days past due, charge-off of unsecured open-end loans when the loan is 180 days past due, and charge down to the net realizable value when other secured loans are 120 days past due. Loans at these respective delinquency thresholds for which the Company can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans that were individually evaluated to determine expected credit losses, and the related allowance for credit losses, as of June 30, 2020 (in thousands):

The Company 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, collateral support, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a continuous basis. The Company uses the following definitions for risk ratings which are commensurate with a loan considered “criticized”:

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 sound-worthiness and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing factors, conditions and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered pass rated loans.

The following tables present the credit risk profile of the Company’s loan portfolio on amortized cost basis based on risk rating category and year of origination as of June 30, 2020 (in thousands):

	Term Loans by Origination Year												Revolving
Risk Rating	2020		2019		2018		2017		2016		Prior		Loans		Total
June 30, 2020
Construction & Land Development Loans
Pass	$	56,357	$	61,418	$	4,145	$	2,848	$	519	$	54,361	$	—	$	179,648
Special Mention		—		0		—		—		390		—		—		390
Substandard		—		308		—		532		—		56		—		896
Total	$	56,357	$	61,726	$	4,145	$	3,380	$	909	$	54,417	$	—	$	180,934
Agricultural Real Estate Loans
Pass	$	44,876	$	42,885	$	43,297	$	18,278	$	15,940	$	69,084	$	—	$	234,360
Special Mention		300		3,110		387		143		875		11,186		—		16,001
Substandard		—		0		487		218		67		249		—		1,021
Total	$	45,176	$	45,995	$	44,171	$	18,639	$	16,882	$	80,519	$	—	$	251,382
1-4 Family Residential Property Loans
Pass	$	40,654	$	36,389	$	37,176	$	30,446	$	33,476	$	117,666	$	27,209	$	323,016
Special Mention		200		159		295		1,050		252		1,452		30		3,438
Substandard		55		635		2,036		1,871		1,991		7,719		1,275		15,582
Total	$	40,909	$	37,183	$	39,507	$	33,367	$	35,719	$	126,837	$	28,514	$	342,036
Commercial Real Estate Loans
Pass	$	111,880	$	206,159	$	174,472	$	197,260	$	174,120	$	355,666	$	—	$	1,219,557
Special Mention		1,857		23		4,158		1,781		4,818		2,822		—		15,459
Substandard		1,254		99		1,400		3,115		4,588		19,083		—		29,539
Total	$	114,991	$	206,281	$	180,030	$	202,156	$	183,526	$	377,571	$	—	$	1,264,555
Agricultural Loans
Pass	$	72,118	$	38,483	$	8,353	$	3,169	$	959	$	3,400	$	—	$	126,482
Special Mention		9,754		11,078		296		11		701		35		—		21,875
Substandard		607		43		25		—		—		11		—		686
Total	$	82,479	$	49,604	$	8,674	$	3,180	$	1,660	$	3,446	$	—	$	149,043
Commercial & Industrial Loans
Pass	$	362,238	$	148,476	$	100,766	$	84,972	$	55,893	$	138,743	$	—	$	891,088
Special Mention		1,642		33,847		185		58		407		952		—		37,091
Substandard		1,122		2,328		382		1,371		208		1,638		—		7,049
Total	$	365,002	$	184,651	$	101,333	$	86,401	$	56,508	$	141,333	$	—	$	935,228
Consumer Loans
Pass	$	20,116	$	30,739	$	17,657	$	10,147	$	148	$	9	$	—	$	78,816
Special Mention		5		—		72		1		960		1,154		—		2,192
Substandard		17		30		156		129		140		604		—		1,076
Total	$	20,138	$	30,769	$	17,885	$	10,277	$	1,248	$	1,767	$	—	$	82,084
Total Loans
Pass	$	708,239	$	564,549	$	385,866	$	347,120	$	281,055	$	738,929	$	27,209	$	3,052,967
Special Mention		13,758		48,217		5,393		3,044		8,403		17,601		30		96,446
Substandard		3,055		3,443		4,486		7,236		6,994		29,360		1,275		55,849
Total	$	725,052	$	616,209	$	395,745	$	357,400	$	296,452	$	785,890	$	28,514	$	3,205,262

The following tables present the credit risk profile of the Company’s loan portfolio based on risk rating category as of December 31, 2019 (in thousands):

The following table presents the Company’s loan portfolio aging analysis at June 30, 2020 and December 31, 2019 (in

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
June 30, 2020
Construction and land development	$	85	$	141	$	—	$	226	$	180,708	$	180,934	$	—
Agricultural real estate		6		544		—		550		250,832		251,382		—
1-4 Family residential properties		3,548		1,260		1,676		6,484		335,552		342,036		—
Multifamily residential properties		2,201		0		—		2,201		138,814		141,015		—
Commercial real estate		637		1,146		2,519		4,302		1,119,238		1,123,540		—
Loans secured by real estate		6,477		3,091		4,195		13,763		2,025,144		2,038,907		—
Agricultural loans		0		0		26		26		149,017		149,043		—
Commercial and industrial loans		715		125		2,380		3,220		807,949		811,169		—
Consumer loans		263		54		165		482		81,602		82,084		—
All other loans		—		—		—		—		124,059		124,059		—
Total loans	$	7,455	$	3,270	$	6,766	$	17,491	$	3,187,771	$	3,205,262	$	—
December 31, 2019
Construction and land development	$	235	$	—	$	—	$	235	$	93,907	$	94,142	$	—
Agricultural real estate		1,595		—		47		1,642		238,599		240,241		—
1-4 Family residential properties		3,834		2,288		4,713		10,835		325,592		336,427		—
Multifamily residential properties		1,348		46		1,131		2,525		151,423		153,948		—
Commercial real estate		602		495		2,241		3,338		992,364		995,702		—
Loans secured by real estate		7,614		2,829		8,132		18,575		1,801,885		1,820,460		—
Agricultural loans		300		—		307		607		135,517		136,124		—
Commercial and industrial loans		767		855		5,989		7,611		521,362		528,973		—
Consumer loans		454		196		150		800		82,383		83,183		—
All other loans		—		—		—		0		126,607		126,607		—
Total loans	$	9,135	$	3,880	$	14,578	$	27,593	$	2,667,754	$	2,695,347	$	—

Within all loan portfolio segments, loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Impaired loans, excluding certain troubled debt restructured loans, are placed on nonaccrual status. Impaired loans include nonaccrual loans and loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being modified remain on nonaccrual status until, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. If the restructured loan is on accrual status prior to being modified, the loan is reviewed to determine if the modified loan should remain on accrual status.

The Company’s policy is to discontinue the accrual of interest income on all loans for which principal or interest is ninety days past due. The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Interest on loans determined to be troubled debt restructurings is recognized on an accrual basis in accordance with the restructured terms if the loan is in compliance with the modified terms. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

The following tables present impaired loans as of June 30, 2020 and December 31, 2019 (in thousands):

	June 30, 2020						December 31, 2019
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans with a specific allowance:
Construction and land development	$	532	$	532	$	261	$	256	$	256	$	—
Agricultural real estate		—		—		—		—		—		—
1-4 Family residential properties		4,916		5,149		157		5,154		5,351		182
Multifamily residential properties		1,960		1,960		—		4,254		4,254		19
Commercial real estate		6,861		7,337		863		5,904		6,408		587
Loans secured by real estate		14,269		14,978		1,281		15,568		16,269		788
Agricultural loans		88		316		—		85		669		8
Commercial and industrial loans		4,087		5,673		88		7,653		8,789		301
Consumer loans		134		134		—		134		134		1
Total loans	$	18,578	$	21,101	$	1,369	$	23,440	$	25,861	$	1,098
Loans without a specific allowance:
Construction and land development	$	38	$	38	$	—	$	41	$	41	$	—
Agricultural real estate		369		369		—		479		479		—
1-4 Family residential properties		3,807		4,494		—		3,719		4,263		—
Multifamily residential properties		283		283		—		—		—		—
Commercial real estate		1,146		1,583		—		1,721		1,724		—
Loans secured by real estate		5,643		6,767		—		5,960		6,507		—
Agricultural loans		837		609		—		724		140		—
Commercial and industrial loans		817		2,892		—		916		3,065		—
Consumer loans		288		743		—		391		713		—
Total loans	$	7,585	$	11,011	$	—	$	7,991	$	10,425	$	—
Total loans:
Construction and land development	$	570	$	570	$	261	$	297	$	297	$	—
Agricultural real estate		369		369		0		479		479		—
1-4 Family residential properties		8,723		9,643		157		8,873		9,614		182
Multifamily residential properties		2,243		2,243		—		4,254		4,254		19
Commercial real estate		8,007		8,920		863		7,625		8,132		587
Loans secured by real estate		19,912		21,745		1,281		21,528		22,776		788
Agricultural loans		925		925		0		809		809		8
Commercial and industrial loans		4,904		8,565		88		8,569		11,854		301
Consumer loans		422		877		0		525		847		1
Total loans	$	26,163	$	32,112	$	1,369	$	31,431	$	36,286	$	1,098

The following tables present average recorded investment and interest income recognized on impaired loans for the three and six months ended June 30, 2020 and 2019 (in thousands):

	For the three months ended
	June 30, 2020				June 30, 2019
	Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
Construction and land development	$	590	$	8	$	629	$	8
Agricultural real estate		854		—		956		—
1-4 Family residential properties		8,920		18		9,543		26
Multifamily residential properties		2,374		0		4,522		32
Commercial real estate		8,256		42		14,414		82
Loans secured by real estate		20,994		68		30,064		148
Agricultural loans		902		—		823		1
Commercial and industrial loans		5,167		1		9,929		1
Consumer loans		457		—		742		—
All other loans		—		—		—		—
Total loans	$	27,520	$	69	$	41,558	$	150

	For the six months ended
	June 30, 2020				June 30, 2019
	Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
Construction and land development	$	595	$	15	$	632	$	16
Agricultural real estate		854		—		957		—
1-4 Family residential properties		9,062		37		9,973		51
Multifamily residential properties		2,391		0		4,804		61
Commercial real estate		8,352		84		14,844		160
Loans secured by real estate		21,254		136		31,210		288
Agricultural loans		909		—		773		1
Commercial and industrial loans		6,046		3		10,059		2
Consumer loans		499		—		781		—
All other loans		—		—		—		—
Total loans	$	28,708	$	139	$	42,823	$	291

The amount of interest income recognized by the Company within the periods stated above was due to loans modified in troubled debt restructurings that remain on accrual status. The average balances of these loans included in impaired loans at June 30, 2020 and 2019, were $2.7 million and $2.8 million, respectively.

The following table presents the amortized cost basis of loans on nonaccrual status and of nonaccrual loans individually evaluated for which no allowance was recorded as of June 30, 2020 and December 31, 2019 (in thousands). There were no loans past due over eighty-nine days that were still accruing.

Interest income that would have been recorded under the original terms of such nonaccrual loans totaled $1,044,000 and $1,335,000 for the six months ended June 30, 2020 and 2019, respectively.

The Company acquired certain loans considered to be credit-impaired ("PCI") in its business combinations prior to the adoption of ASU 2016-13. At acquisition, these loans evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of these loans was included in the consolidated balance sheet amounts for Loans. The amount of these loans at December 31, 2019 was as follows (in thousands):

For PCI loans, the difference between contractually required payments at acquisition and the cash flow expected to be collected is referred to as the non-accretable difference. Any excess of expected cash flows over the fair value is referred to as the accretable yield. Subsequent decreases to the expected cash flows result in a provision for loan and lease losses.

Subsequent increases in expected cash flows result in a reversal of the provision for loan and lease losses to the extent of prior charges and then an adjustment to accretable yield, which had a positive impact on interest income. As of December 31, 2019, subsequent changes in expected cash flows resulted in approximately $365,000 of provision recorded and approximately $1,229,000 of provision reversed.

Subsequent to adoption of ASU 2016-13 on January 1, 2020, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered PCD loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. All loans considered to be PCI prior to January 1, 2020 were converted to PCD on that date.

The balance of troubled debt restructurings ("TDRs") at June 30, 2020 and December 31, 2019 was $6.8 million and $5.8 million, respectively. There was $239,000 and $381,000 in specific reserves established with respect to these loans as of June 30, 2020 and December 31, 2019, respectively. As troubled debt restructurings, these loans are included in nonperforming loans and are classified as impaired which requires that they be individually measured for impairment. The modification of the terms of these loans included one or a combination of the following: a reduction of stated interest rate of the loan; an extension of the maturity date and change in payment terms; or a permanent reduction of the recorded investment in the loan.

The following table presents the Company’s recorded balance of troubled debt restructurings at June 30, 2020 and December 31, 2019 (in thousands).

The following table presents loans modified as TDRs during the six months ended June 30, 2020, as a result of various modified loan factors (in thousands). The change in the recorded investment from pre-modification to post- modification was not material.

A loan is considered to be in payment default once it is 90 days past due under the modified terms. There were no loans modified as troubled debt restructurings during the prior twelve months that experienced defaults for six months ended June 30, 2020. There were no loans modified as troubled debt restructuring during the prior twelve months that experienced defaults as of December 31, 2019.

The balance of real estate owned includes $2,256,000 and $3,644,000 of foreclosed real estate properties recorded as a result of obtaining physical possession of the property at June 30, 2020 and December 31, 2019, respectively. The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure procedures are in process was $1,146,000 and $667,000 at June 30, 2020 and December 31, 2019, respectively.