NOTE 4 – LOANS AND THE ALLOWANCE FOR LOAN LOSSES

Major categories of loans as of December 31, 2020 and 2019 are summarized as follows:


	December 31,		December 31,
	2020		2019
	(dollars in thousands)
Commercial and industrial	$	393,312	$	307,175
Agricultural and farmland		222,723		207,776
Commercial real estate - owner occupied		222,360		231,162
Commercial real estate - non-owner occupied		520,395		579,757
Multi-family		236,391		179,073
Construction and land development		225,652		224,887
One-to-four family residential		306,775		313,580
Municipal, consumer, and other		119,398		120,416
Loans, before allowance for loan losses		2,247,006		2,163,826
Allowance for loan losses		(31,838)		(22,299)
Loans, net of allowance for loan losses	$	2,215,168	$	2,141,527

Paycheck Protection Program (PPP) loans (included above)
Commercial and industrial	$	153,860	$	—
Agricultural and farmland		3,049		—
Municipal, consumer, and other		6,587		—
Total PPP loans	$	163,496	$	—

The following tables detail activity in the allowance for loan losses for the years ended December 31:


					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total
Allowance for loan losses:	(dollars in thousands)
Balance, December 31, 2017	$	5,411	$	2,385	$	1,510	$	2,476	$	997	$	2,981	$	2,723	$	1,282	$	19,765
Provision for loan losses		(532)		265		3,294		264		109		993		984		320		5,697
Charge-offs		(1,446)		—		(2,352)		(237)		(194)		(58)		(1,415)		(783)		(6,485)
Recoveries		315		—		54		141		—		260		490		272		1,532
Balance, December 31, 2018		3,748		2,650		2,506		2,644		912		4,176		2,782		1,091		20,509
Provision for loan losses		1,139		146		(376)		1,110		153		(1,640)		513		2,359		3,404
Charge-offs		(886)		(30)		(407)		(111)		(41)		(9)		(1,105)		(684)		(3,273)
Recoveries		440		—		56		20		—		450		350		343		1,659
Balance, December 31, 2019		4,441		2,766		1,779		3,663		1,024		2,977		2,540		3,109		22,299
Provision for loan losses		677		(1,946)		961		7,862		933		1,032		(894)		1,907		10,532
Charge-offs		(1,784)		(27)		(39)		(349)		—		(27)		(155)		(587)		(2,968)
Recoveries		595		—		440		75		—		250		310		305		1,975
Balance, December 31, 2020	$	3,929	$	793	$	3,141	$	11,251	$	1,957	$	4,232	$	1,801	$	4,734	$	31,838

The following tables present the recorded investments in loans and the allowance for loan losses by category as of December 31:


					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
December 31, 2020	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total
Loan balances:	(dollars in thousands)
Collectively evaluated for impairment	$	387,072	$	217,077	$	201,417	$	480,165	$	234,252	$	219,822	$	287,845	$	105,796	$	2,133,446
Individually evaluated for impairment		5,312		4,793		13,132		25,993		876		3,809		10,343		13,546		77,804
Acquired with deteriorated credit quality		928		853		7,811		14,237		1,263		2,021		8,587		56		35,756
Total	$	393,312	$	222,723	$	222,360	$	520,395	$	236,391	$	225,652	$	306,775	$	119,398	$	2,247,006

Allowance for loan losses:
Collectively evaluated for impairment	$	2,736	$	771	$	2,306	$	6,736	$	1,950	$	3,984	$	1,237	$	1,432	$	21,152
Individually evaluated for impairment		1,193		22		429		4,255		—		222		560		3,301		9,982
Acquired with deteriorated credit quality		—		—		406		260		7		26		4		1		704
Total	$	3,929	$	793	$	3,141	$	11,251	$	1,957	$	4,232	$	1,801	$	4,734	$	31,838

					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
December 31, 2019	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total
Loan balances:	(dollars in thousands)
Collectively evaluated for impairment	$	294,006	$	192,722	$	211,744	$	561,277	$	176,273	$	217,708	$	291,624	$	106,448	$	2,051,802
Individually evaluated for impairment		10,733		13,966		10,927		3,398		1,324		3,782		11,349		13,872		69,351
Acquired with deteriorated credit quality		2,436		1,088		8,491		15,082		1,476		3,397		10,607		96		42,673
Total	$	307,175	$	207,776	$	231,162	$	579,757	$	179,073	$	224,887	$	313,580	$	120,416	$	2,163,826

Allowance for loan losses:
Collectively evaluated for impairment	$	1,926	$	2,576	$	1,486	$	3,591	$	1,019	$	2,283	$	1,684	$	931	$	15,496
Individually evaluated for impairment		2,170		105		270		70		—		567		822		2,176		6,180
Acquired with deteriorated credit quality		345		85		23		2		5		127		34		2		623
Total	$	4,441	$	2,766	$	1,779	$	3,663	$	1,024	$	2,977	$	2,540	$	3,109	$	22,299

The following tables present loans individually evaluated for impairment by category of loans as of December 31:


	Unpaid
	Principal		Recorded		Related
December 31, 2020	Balance		Investment		Allowance
With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	2,737	$	2,725	$	1,193
Agricultural and farmland		169		168		22
Commercial real estate - owner occupied		3,072		3,040		429
Commercial real estate - non-owner occupied		20,726		20,394		4,255
Multi-family		—		—		—
Construction and land development		2,081		2,055		222
One-to-four family residential		2,963		2,739		560
Municipal, consumer, and other		12,207		12,181		3,301
Total	$	43,955	$	43,302	$	9,982

With no related allowance:
Commercial and industrial	$	3,322	$	2,587	$	—
Agricultural and farmland		4,625		4,625		—
Commercial real estate - owner occupied		10,164		10,092		—
Commercial real estate - non-owner occupied		5,727		5,599		—
Multi-family		876		876		—
Construction and land development		1,762		1,754		—
One-to-four family residential		9,325		7,604		—
Municipal, consumer, and other		1,431		1,365		—
Total	$	37,232	$	34,502	$	—

Total
Commercial and industrial	$	6,059	$	5,312	$	1,193
Agricultural and farmland		4,794		4,793		22
Commercial real estate - owner occupied		13,236		13,132		429
Commercial real estate - non-owner occupied		26,453		25,993		4,255
Multi-family		876		876		—
Construction and land development		3,843		3,809		222
One-to-four family residential		12,288		10,343		560
Municipal, consumer, and other		13,638		13,546		3,301
Total	$	81,187	$	77,804	$	9,982


	Unpaid
	Principal		Recorded		Related
December 31, 2019	Balance		Investment		Allowance
With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	4,292	$	4,292	$	2,170
Agricultural and farmland		590		590		105
Commercial real estate - owner occupied		830		830		270
Commercial real estate - non-owner occupied		99		99		70
Multi-family		—		—		—
Construction and land development		3,679		3,679		567
One-to-four family residential		3,401		3,390		822
Municipal, consumer, and other		9,138		9,111		2,176
Total	$	22,029	$	21,991	$	6,180

With no related allowance:
Commercial and industrial	$	6,438	$	6,441	$	—
Agricultural and farmland		13,369		13,376		—
Commercial real estate - owner occupied		10,089		10,097		—
Commercial real estate - non-owner occupied		3,297		3,299		—
Multi-family		1,328		1,324		—
Construction and land development		104		103		—
One-to-four family residential		7,986		7,959		—
Municipal, consumer, and other		4,775		4,761		—
Total	$	47,386	$	47,360	$	—

Total
Commercial and industrial	$	10,730	$	10,733	$	2,170
Agricultural and farmland		13,959		13,966		105
Commercial real estate - owner occupied		10,919		10,927		270
Commercial real estate - non-owner occupied		3,396		3,398		70
Multi-family		1,328		1,324		—
Construction and land development		3,783		3,782		567
One-to-four family residential		11,387		11,349		822
Municipal, consumer, and other		13,913		13,872		2,176
Total	$	69,415	$	69,351	$	6,180

The following table presents the average recorded investment and interest income recognized for loans individually evaluated for impairment by category of loans during the years ended December 31:


	Year Ended December 31,
	2020				2019				2018
	Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized		Investment		Recognized
With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	3,031	$	169	$	5,275	$	152	$	4,274	$	106
Agricultural and farmland		273		9		464		12		566		16
Commercial real estate - owner occupied		1,622		98		874		43		3,574		67
Commercial real estate - non-owner occupied		6,345		220		101		7		640		7
Multi-family		—		—		—		—		1,472		66
Construction and land development		2,441		116		3,988		171		2,593		161
One-to-four family residential		3,120		110		3,414		79		3,377		82
Municipal, consumer, and other		10,617		286		9,284		396		302		5
Total	$	27,449	$	1,008	$	23,400	$	860	$	16,798	$	510

With no related allowance:
Commercial and industrial	$	4,004	$	251	$	6,744	$	206	$	5,093	$	59
Agricultural and farmland		11,061		561		14,826		824		8,815		526
Commercial real estate - owner occupied		11,056		528		10,190		483		12,217		384
Commercial real estate - non-owner occupied		14,412		458		3,465		131		7,110		147
Multi-family		447		10		1,344		9		355		17
Construction and land development		892		23		107		4		528		3
One-to-four family residential		8,022		316		8,360		240		10,706		168
Municipal, consumer, and other		3,089		115		4,874		104		297		5
Total	$	52,983	$	2,262	$	49,910	$	2,001	$	45,121	$	1,309

Total
Commercial and industrial	$	7,035	$	420	$	12,019	$	358	$	9,367	$	165
Agricultural and farmland		11,334		570		15,290		836		9,381		542
Commercial real estate - owner occupied		12,678		626		11,064		526		15,791		451
Commercial real estate - non-owner occupied		20,757		678		3,566		138		7,750		154
Multi-family		447		10		1,344		9		1,827		83
Construction and land development		3,333		139		4,095		175		3,121		164
One-to-four family residential		11,142		426		11,774		319		14,083		250
Municipal, consumer, and other		13,706		401		14,158		500		599		10
Total	$	80,432	$	3,270	$	73,310	$	2,861	$	61,919	$	1,819

The following tables present the recorded investment in loans by category based on current payment and accrual status as of December 31:


	Accruing Interest
			30 - 89 Days		90+ Days				Total
December 31, 2020	Current		Past Due		Past Due		Nonaccrual		Loans
	(dollars in thousands)
Commercial and industrial	$	392,490	$	—	$	—	$	822	$	393,312
Agricultural and farmland		222,723		—		—		—		222,723
Commercial real estate - owner occupied		221,308		112		—		940		222,360
Commercial real estate - non-owner occupied		516,387		—		—		4,008		520,395
Multi-family		236,391		—		—		—		236,391
Construction and land development		225,508		—		—		144		225,652
One-to-four family residential		301,282		984		595		3,914		306,775
Municipal, consumer, and other		119,055		211		21		111		119,398
Total	$	2,235,144	$	1,307	$	616	$	9,939	$	2,247,006


	Accruing Interest
			30 - 89 Days		90+ Days				Total
December 31, 2019	Current		Past Due		Past Due		Nonaccrual		Loans
	(dollars in thousands)
Commercial and industrial	$	301,975	$	558	$	—	$	4,642	$	307,175
Agricultural and farmland		201,519		—		—		6,257		207,776
Commercial real estate - owner occupied		228,218		941		—		2,003		231,162
Commercial real estate - non-owner occupied		579,626		131		—		—		579,757
Multi-family		177,696		—		—		1,377		179,073
Construction and land development		224,716		140		—		31		224,887
One-to-four family residential		307,712		1,329		75		4,464		313,580
Municipal, consumer, and other		119,898		247		26		245		120,416
Total	$	2,141,360	$	3,346	$	101	$	19,019	$	2,163,826

The following tables present total loans by category based on their assigned risk ratings determined by management as of December 31:


December 31, 2020	Pass		Pass-Watch		Substandard		Doubtful		Total
	(dollars in thousands)
Commercial and industrial	$	368,843	$	18,258	$	6,211	$	—	$	393,312
Agricultural and farmland		191,662		25,540		5,521		—		222,723
Commercial real estate - owner occupied		176,823		31,990		13,547		—		222,360
Commercial real estate - non-owner occupied		432,752		58,699		28,944		—		520,395
Multi-family		204,449		31,066		876		—		236,391
Construction and land development		193,646		28,193		3,813		—		225,652
One-to-four family residential		280,198		14,526		12,051		—		306,775
Municipal, consumer, and other		105,539		312		13,547		—		119,398
Total	$	1,953,912	$	208,584	$	84,510	$	—	$	2,247,006


December 31, 2019	Pass		Pass-Watch		Substandard		Doubtful		Total
	(dollars in thousands)
Commercial and industrial	$	267,645	$	27,114	$	12,416	$	—	$	307,175
Agricultural and farmland		180,735		12,267		14,774		—		207,776
Commercial real estate - owner occupied		198,710		21,745		10,707		—		231,162
Commercial real estate - non-owner occupied		531,694		46,092		1,971		—		579,757
Multi-family		175,807		1,771		1,495		—		179,073
Construction and land development		217,120		3,582		4,185		—		224,887
One-to-four family residential		287,036		13,546		12,998		—		313,580
Municipal, consumer, and other		106,063		479		13,874		—		120,416
Total	$	1,964,810	$	126,596	$	72,420	$	—	$	2,163,826

The following tables present the financial effect of troubled debt restructurings for the years ended December 31:


						Charge-offs
		Recorded Investment				and Specific
Year Ended December 31, 2020	Number	Pre-Modification		Post-Modification		Reserves
	(dollars in thousands)
Commercial real estate - owner occupied	1	$	853	$	853	$	—
Total	1	$	853	$	853	$	—

						Charge-offs
		Recorded Investment				and Specific
Year Ended December 31, 2019	Number	Pre-Modification		Post-Modification		Reserves
	(dollars in thousands)
Commercial and industrial	3	$	516	$	516	$	—
Agricultural and farmland	2		392		392		—
Commercial real estate - owner occupied	1		170		170		—
One-to-four family residential	1		21		21		—
Total	7	$	1,099	$	1,099	$	—

						Charge-offs
		Recorded Investment				and Specific
Year Ended December 31, 2018	Number	Pre-Modification		Post-Modification		Reserves
	(dollars in thousands)
Commercial and industrial	2	$	296	$	296	$	157
Agricultural and farmland	1		171		171		—
Commercial real estate - owner occupied	2		5,173		5,189		47
One-to-four family residential	4		1,230		1,255		480
Total	9	$	6,870	$	6,911	$	684

During the years ended December 31, 2020, 2019, and 2018, all troubled debt restructurings were the result of a payment concession.

The following table presents the recorded investment of troubled debt restructurings which had subsequent payment defaults within 12 months following the modification as of December 31:


	December 31,		December 31,		December 31,
	2020		2019		2018
	(dollars in thousands)
Commercial and industrial	$	—	$	—	$	47
Agricultural and farmland		—		98		166
Commercial real estate - owner occupied		—		—		172
One-to-four family residential		—		—		542
Total	$	—	$	98	$	927

For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due as to interest or principal or were on nonaccrual status subsequent to restructuring.

As of December 31, 2020 and 2019, the Company had $8,950,000 and $9,315,000 of troubled debt restructurings, respectively. Restructured loans are evaluated for impairment quarterly as part of the Company’s determination of the allowance for loan losses. There were no material commitments to lend additional funds to debtors owing receivables whose terms have been modified in troubled debt restructurings.

Changes in the accretable yield for loans acquired with deteriorated credit quality were as follows for the years ended December 31:


	Year Ended December 31,
	2020		2019		2018
	(dollars in thousands)
Beginning balance	$	1,662	$	2,101	$	2,723
Reclassification from non-accretable difference		288		822		2,092
Accretion income		(553)		(1,261)		(2,714)
Ending balance	$	1,397	$	1,662	$	2,101