XML 22 R12.htm IDEA: XBRL DOCUMENT

LOANS AND THE ALLOWANCE FOR LOAN LOSSES

6 Months Ended

Jun. 30, 2022

LOANS AND THE ALLOWANCE FOR LOAN LOSSES

NOTE 4 – LOANS AND THE ALLOWANCE FOR LOAN LOSSES

Major categories of loans are summarized as follows:


	June 30, 2022		December 31, 2021

	(dollars in thousands)
Commercial and industrial	$	249,839	$	286,946
Agricultural and farmland		230,370		247,796
Commercial real estate - owner occupied		228,997		234,544
Commercial real estate - non-owner occupied		656,093		684,023
Multi-family		269,452		263,911
Construction and land development		332,041		298,048
One-to-four family residential		325,047		327,837
Municipal, consumer, and other		159,987		156,584
Loans, before allowance for loan losses		2,451,826		2,499,689
Allowance for loan losses		(24,734)		(23,936)
Loans, net of allowance for loan losses	$	2,427,092	$	2,475,753

Paycheck Protection Program (PPP) loans (included above)
Commercial and industrial	$	2,823	$	28,404
Agricultural and farmland		9		913
Municipal, consumer, and other		—		171
Total PPP loans	$	2,832	$	29,488

The following tables detail activity in the allowance for loan losses for the three and six months ended June 30:


					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
Three Months Ended June 30, 2022	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Allowance for loan losses:	(dollars in thousands)
Balance, March 31, 2022	$	2,491	$	842	$	1,511	$	7,014	$	1,354	$	4,493	$	1,583	$	5,220	$	24,508
Provision for loan losses		450		82		(287)		(408)		21		(434)		51		670		145
Charge-offs		—		—		—		—		—		—		(47)		(112)		(159)
Recoveries		40		—		—		5		—		—		109		86		240
Balance, June 30, 2022	$	2,981	$	924	$	1,224	$	6,611	$	1,375	$	4,059	$	1,696	$	5,864	$	24,734

					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
Three Months Ended June 30, 2021	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Allowance for loan losses:	(dollars in thousands)
Balance, March 31, 2021	$	2,420	$	865	$	2,715	$	11,330	$	2,090	$	4,006	$	1,573	$	3,760	$	28,759
Provision for loan losses		578		(84)		(769)		(1,511)		(81)		(261)		(45)		11		(2,162)
Charge-offs		(295)		—		—		—		—		—		(41)		(66)		(402)
Recoveries		14		—		—		6		—		179		33		80		312
Balance, June 30, 2021	$	2,717	$	781	$	1,946	$	9,825	$	2,009	$	3,924	$	1,520	$	3,785	$	26,507


					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
Six Months Ended June 30, 2022	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Allowance for loan losses:	(dollars in thousands)
Balance, December 31, 2021	$	2,440	$	845	$	1,840	$	8,145	$	1,263	$	4,914	$	1,311	$	3,178	$	23,936
Provision for loan losses		(203)		79		(716)		(1,804)		112		(855)		171		2,777		(439)
Charge-offs		(5)		—		—		—		—		—		(49)		(239)		(293)
Recoveries		749		—		100		270		—		—		263		148		1,530
Balance, June 30, 2022	$	2,981	$	924	$	1,224	$	6,611	$	1,375	$	4,059	$	1,696	$	5,864	$	24,734

					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate								Consumer
	and		and		Owner		Non-owner				Construction		Residential		and
Six Months Ended June 30, 2021	Industrial		Farmland		Occupied		Occupied		Multi-Family		and Land		Real Estate		Other		Total

Allowance for loan losses:	(dollars in thousands)
Balance, December 31, 2020	$	3,929	$	793	$	3,141	$	11,251	$	1,957	$	4,232	$	1,801	$	4,734	$	31,838
Provision for loan losses		(1,224)		(12)		(1,195)		(1,439)		52		(577)		(243)		(929)		(5,567)
Charge-offs		(295)		—		—		—		—		—		(113)		(189)		(597)
Recoveries		307		—		—		13		—		269		75		169		833
Balance, June 30, 2021	$	2,717	$	781	$	1,946	$	9,825	$	2,009	$	3,924	$	1,520	$	3,785	$	26,507

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


					Commercial		Commercial								Municipal,
	Commercial		Agricultural		Real Estate		Real Estate				Construction		One-to-four		Consumer,
	and		and		Owner		Non-owner				and Land		Family		and
June 30, 2022	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Loan balances:	(dollars in thousands)
Collectively evaluated for impairment	$	240,604	$	229,409	$	211,886	$	611,614	$	268,880	$	328,912	$	311,353	$	147,226	$	2,349,884
Individually evaluated for impairment		9,101		247		12,524		32,430		—		2,008		8,560		12,737		77,607
Acquired with deteriorated credit quality		134		714		4,587		12,049		572		1,121		5,134		24		24,335
Total	$	249,839	$	230,370	$	228,997	$	656,093	$	269,452	$	332,041	$	325,047	$	159,987	$	2,451,826

Allowance for loan losses:
Collectively evaluated for impairment	$	2,827	$	924	$	993	$	3,968	$	1,372	$	4,056	$	1,594	$	1,873	$	17,607
Individually evaluated for impairment		154		—		208		2,641		—		—		100		3,991		7,094
Acquired with deteriorated credit quality		—		—		23		2		3		3		2		—		33
Total	$	2,981	$	924	$	1,224	$	6,611	$	1,375	$	4,059	$	1,696	$	5,864	$	24,734

					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, 2021	Industrial		Farmland		Occupied		Occupied		Multi-Family		Development		Residential		Other		Total

Loan balances:	(dollars in thousands)
Collectively evaluated for impairment	$	272,064	$	247,021	$	216,794	$	641,555	$	262,701	$	293,548	$	314,807	$	143,510	$	2,392,000
Individually evaluated for impairment		14,744		12		12,332		29,575		—		2,018		6,897		13,041		78,619
Acquired with deteriorated credit quality		138		763		5,418		12,893		1,210		2,482		6,133		33		29,070
Total	$	286,946	$	247,796	$	234,544	$	684,023	$	263,911	$	298,048	$	327,837	$	156,584	$	2,499,689

Allowance for loan losses:
Collectively evaluated for impairment	$	2,253	$	845	$	1,480	$	5,138	$	1,259	$	4,895	$	1,099	$	1,302	$	18,271
Individually evaluated for impairment		187		—		327		2,999		—		—		210		1,875		5,598
Acquired with deteriorated credit quality		—		—		33		8		4		19		2		1		67
Total	$	2,440	$	845	$	1,840	$	8,145	$	1,263	$	4,914	$	1,311	$	3,178	$	23,936

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


	Unpaid
	Principal		Recorded		Related
June 30, 2022	Balance		Investment		Allowance

With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	254	$	254	$	154
Agricultural and farmland		—		—		—
Commercial real estate - owner occupied		742		742		208
Commercial real estate - non-owner occupied		14,526		14,513		2,641
Multi-family		—		—		—
Construction and land development		—		—		—
One-to-four family residential		576		534		100
Municipal, consumer, and other		8,312		8,289		3,991
Total	$	24,410	$	24,332	$	7,094

With no related allowance:
Commercial and industrial	$	8,861	$	8,847	$	—
Agricultural and farmland		247		247		—
Commercial real estate - owner occupied		11,936		11,782		—
Commercial real estate - non-owner occupied		17,997		17,917		—
Multi-family		—		—		—
Construction and land development		2,108		2,008		—
One-to-four family residential		9,337		8,026		—
Municipal, consumer, and other		4,488		4,448		—
Total	$	54,974	$	53,275	$	—

Total loans individually evaluated for impairment:
Commercial and industrial	$	9,115	$	9,101	$	154
Agricultural and farmland		247		247		—
Commercial real estate - owner occupied		12,678		12,524		208
Commercial real estate - non-owner occupied		32,523		32,430		2,641
Multi-family		—		—		—
Construction and land development		2,108		2,008		—
One-to-four family residential		9,913		8,560		100
Municipal, consumer, and other		12,800		12,737		3,991
Total	$	79,384	$	77,607	$	7,094


	Unpaid
	Principal		Recorded		Related
December 31, 2021	Balance		Investment		Allowance

With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	303	$	303	$	187
Agricultural and farmland		—		—		—
Commercial real estate - owner occupied		3,013		3,013		327
Commercial real estate - non-owner occupied		14,912		14,893		2,999
Multi-family		—		—		—
Construction and land development		—		—		—
One-to-four family residential		1,421		1,314		210
Municipal, consumer, and other		8,523		8,498		1,875
Total	$	28,172	$	28,021	$	5,598

With no related allowance:
Commercial and industrial	$	14,452	$	14,441	$	—
Agricultural and farmland		12		12		—
Commercial real estate - owner occupied		9,534		9,319		—
Commercial real estate - non-owner occupied		14,755		14,682		—
Multi-family		—		—		—
Construction and land development		2,112		2,018		—
One-to-four family residential		7,129		5,583		—
Municipal, consumer, and other		4,603		4,543		—
Total	$	52,597	$	50,598	$	—

Total loans individually evaluated for impairment:
Commercial and industrial	$	14,755	$	14,744	$	187
Agricultural and farmland		12		12		—
Commercial real estate - owner occupied		12,547		12,332		327
Commercial real estate - non-owner occupied		29,667		29,575		2,999
Multi-family		—		—		—
Construction and land development		2,112		2,018		—
One-to-four family residential		8,550		6,897		210
Municipal, consumer, and other		13,126		13,041		1,875
Total	$	80,769	$	78,619	$	5,598

The following tables present the average recorded investment and interest income recognized for loans individually evaluated for impairment by category of loans:


	Three Months Ended June 30,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	267	$	4	$	1,888	$	27
Agricultural and farmland		—		—		165		2
Commercial real estate - owner occupied		745		11		2,744		46
Commercial real estate - non-owner occupied		14,603		185		15,564		197
Multi-family		—		—		—		—
Construction and land development		—		—		—		—
One-to-four family residential		548		4		2,165		23
Municipal, consumer, and other		8,344		46		8,726		39
Total	$	24,507	$	250	$	31,252	$	334

With no related allowance:
Commercial and industrial	$	15,156	$	156	$	7,393	$	76
Agricultural and farmland		252		3		383		5
Commercial real estate - owner occupied		11,887		141		5,530		70
Commercial real estate - non-owner occupied		17,947		340		5,586		70
Multi-family		—		—		874		—
Construction and land development		2,012		26		1,971		—
One-to-four family residential		8,181		84		6,600		48
Municipal, consumer, and other		4,480		33		4,704		22
Total	$	59,915	$	783	$	33,041	$	291

Total loans individually evaluated for impairment:
Commercial and industrial	$	15,423	$	160	$	9,281	$	103
Agricultural and farmland		252		3		548		7
Commercial real estate - owner occupied		12,632		152		8,274		116
Commercial real estate - non-owner occupied		32,550		525		21,150		267
Multi-family		—		—		874		—
Construction and land development		2,012		26		1,971		—
One-to-four family residential		8,729		88		8,765		71
Municipal, consumer, and other		12,824		79		13,430		61
Total	$	84,422	$	1,033	$	64,293	$	625


	Six Months Ended June 30,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized

With an allowance recorded:	(dollars in thousands)
Commercial and industrial	$	280	$	8	$	2,076	$	58
Agricultural and farmland		—		—		166		4
Commercial real estate - owner occupied		1,580		44		2,993		87
Commercial real estate - non-owner occupied		14,728		371		17,949		405
Multi-family		—		—		—		—
Construction and land development		—		—		1,118		27
One-to-four family residential		597		9		2,404		46
Municipal, consumer, and other		8,426		85		8,764		79
Total	$	25,611	$	517	$	35,470	$	706

With no related allowance:
Commercial and industrial	$	17,316	$	356	$	4,248	$	90
Agricultural and farmland		244		3		383		11
Commercial real estate - owner occupied		11,460		247		7,554		192
Commercial real estate - non-owner occupied		16,728		538		5,625		138
Multi-family		—		—		875		10
Construction and land development		2,014		48		1,868		26
One-to-four family residential		8,453		141		6,789		97
Municipal, consumer, and other		4,511		54		4,725		44
Total	$	60,726	$	1,387	$	32,067	$	608

Total loans individually evaluated for impairment:
Commercial and industrial	$	17,596	$	364	$	6,324	$	148
Agricultural and farmland		244		3		549		15
Commercial real estate - owner occupied		13,040		291		10,547		279
Commercial real estate - non-owner occupied		31,456		909		23,574		543
Multi-family		—		—		875		10
Construction and land development		2,014		48		2,986		53
One-to-four family residential		9,050		150		9,193		143
Municipal, consumer, and other		12,937		139		13,489		123
Total	$	86,337	$	1,904	$	67,537	$	1,314

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


	Accruing Interest
			30 - 89 Days		90+ Days				Total
June 30, 2022	Current		Past Due		Past Due		Nonaccrual		Loans

	(dollars in thousands)
Commercial and industrial	$	249,547	$	21	$	182	$	89	$	249,839
Agricultural and farmland		229,878		492		—		—		230,370
Commercial real estate - owner occupied		228,997		—		—		—		228,997
Commercial real estate - non-owner occupied		655,089		—		—		1,004		656,093
Multi-family		269,452		—		—		—		269,452
Construction and land development		331,393		131		—		517		332,041
One-to-four family residential		322,580		869		23		1,575		325,047
Municipal, consumer, and other		159,726		198		—		63		159,987
Total	$	2,446,662	$	1,711	$	205	$	3,248	$	2,451,826


	Accruing Interest
			30 - 89 Days		90+ Days				Total
December 31, 2021	Current		Past Due		Past Due		Nonaccrual		Loans

	(dollars in thousands)
Commercial and industrial	$	286,563	$	9	$	—	$	374	$	286,946
Agricultural and farmland		247,772		24		—		—		247,796
Commercial real estate - owner occupied		234,441		103		—		—		234,544
Commercial real estate - non-owner occupied		683,029		823		—		171		684,023
Multi-family		263,911		—		—		—		263,911
Construction and land development		297,465		64		—		519		298,048
One-to-four family residential		325,780		383		32		1,642		327,837
Municipal, consumer, and other		156,297		214		16		57		156,584
Total	$	2,495,258	$	1,620	$	48	$	2,763	$	2,499,689

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


June 30, 2022	Pass		Pass-Watch		Substandard		Doubtful		Total

	(dollars in thousands)
Commercial and industrial	$	231,925	$	8,813	$	9,101	$	—	$	249,839
Agricultural and farmland		215,962		13,530		878		—		230,370
Commercial real estate - owner occupied		199,482		17,815		11,700		—		228,997
Commercial real estate - non-owner occupied		609,298		11,543		35,252		—		656,093
Multi-family		264,487		4,965		—		—		269,452
Construction and land development		329,700		332		2,009		—		332,041
One-to-four family residential		309,631		6,280		9,136		—		325,047
Municipal, consumer, and other		146,964		286		12,737		—		159,987
Total	$	2,307,449	$	63,564	$	80,813	$	—	$	2,451,826


December 31, 2021	Pass		Pass-Watch		Substandard		Doubtful		Total

	(dollars in thousands)
Commercial and industrial	$	267,088	$	5,114	$	14,744	$	—	$	286,946
Agricultural and farmland		221,898		25,213		685		—		247,796
Commercial real estate - owner occupied		198,862		24,098		11,584		—		234,544
Commercial real estate - non-owner occupied		619,212		32,372		32,439		—		684,023
Multi-family		241,362		22,549		—		—		263,911
Construction and land development		268,556		27,474		2,018		—		298,048
One-to-four family residential		308,951		11,221		7,665		—		327,837
Municipal, consumer, and other		143,299		244		13,041		—		156,584
Total	$	2,269,228	$	148,285	$	82,176	$	—	$	2,499,689

There were no new troubled debt restructurings during the three and six months ended June 30, 2022 or 2021.

Of the troubled debt restructurings entered into during the last 12 months, there were none which had subsequent payment defaults during the three and six months ended June 30, 2022 or 2021. 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 June 30, 2022 and December 31, 2021, the Company had $3.3 million and $3.5 million 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 loans whose terms have been modified in troubled debt restructurings.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), along with a joint statement issued by banking regulatory agencies, provided that short-term loan payment modifications made prior to December 31, 2021 to borrowers experiencing financial hardship due to the COVID-19 pandemic generally do not need to be accounted for as a troubled debt restructuring. As of June 30, 2022, the Company had no loans that were granted a payment modification due to a COVID-19 related financial hardship which had not returned to regular payments. As of December 31, 2021, the Company had $0.2 million of loans that were granted a

payment modification due to a COVID-19 related financial hardship and had not returned to regular payments. Substantially all modifications were in the form of a three-month interest-only period or a one-month payment deferral. Some borrowers have received more than one loan payment modification.

As of June 30, 2022 and December 31, 2021, the Company pledged loans totaling $570.7 million and $567.0 million, respectively, to the Federal Home Loan Bank of Chicago (“FHLB”) to secure available FHLB advance borrowing capacity.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

	(dollars in thousands)
Beginning balance	$	484	$	1,338	$	413	$	1,397
Reclassification from non-accretable difference		100		79		217		153
Accretion income		(47)		(67)		(93)		(200)
Ending balance	$	537	$	1,350	$	537	$	1,350