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Loans and Allowance for Credit Losses
 3 Months Ended
Sep. 30, 2021
Receivables [Abstract]  
Loans and Allowance for Credit Losses Loans and Allowance for Credit Losses
 
Outstanding loans are summarized as follows:
Loan Type (Dollars in thousands)September 30, 2021% of Total
Loans		December 31, 2020% of Total
Loans
Commercial:    
Commercial and industrial$184,830 17.0 %$273,994 24.9 %
Agricultural production32,178 3.0 %21,971 2.0 %
Total commercial217,008 20.0 %295,965 26.9 %
Real estate:    
Owner occupied210,577 19.4 %208,843 18.9 %
Real estate construction and other land loans65,912 6.1 %55,419 5.0 %
Commercial real estate365,564 33.7 %338,886 30.7 %
Agricultural real estate98,150 9.1 %84,258 7.6 %
Other real estate33,612 3.1 %28,718 2.6 %
Total real estate773,815 71.4 %716,124 64.8 %
Consumer:    
Equity loans and lines of credit54,833 5.1 %55,634 5.0 %
Consumer and installment38,250 3.5 %37,236 3.3 %
Total consumer93,083 8.6 %92,870 8.3 %
Net deferred origination fees (409) (2,612) 
Total gross loans1,083,497 100.0 %1,102,347 100.0 %
Allowance for credit losses(10,061) (12,915) 
Total loans$1,073,436  $1,089,432  
 
    At September 30, 2021 and December 31, 2020, loans originated under Small Business Administration (SBA) programs totaling $24,499,000 and $24,220,000, respectively, were included in the real estate and commercial categories, of which, $18,826,000 or 77% and $18,180,000 or 75%, respectively, are secured by government guarantees. In addition, the Company participated in the SBA Paycheck Protection Program (PPP) to help provide loans to our business customers to provide them with additional working capital. At September 30, 2021, 341 PPP loans totaling $64,260,000 were outstanding and included in the commercial and industrial line item above. At December 31, 2020, 989 PPP loans totaling $192,916,000 were outstanding and included in the commercial and industrial line item above.
Allowance for Credit Losses

    The allowance for credit losses (the “Allowance”) is a valuation allowance for probable incurred credit losses in the Company’s loan portfolio. The Allowance is established through a provision for credit losses which is charged to expense. Additions to the Allowance are expected to maintain the adequacy of the total Allowance after credit losses and loan growth. Credit exposures determined to be uncollectible are charged against the Allowance. Cash received on previously charged-off credits is recorded as a recovery to the Allowance. The overall Allowance consists of two primary components, specific reserves related to impaired loans and general reserves for probable incurred losses related to loans that are not impaired.
    For all portfolio segments, the determination of the general reserve for loans that are not impaired is based on estimates made by management, including but not limited to, consideration of historical losses by portfolio segment (and in certain cases peer data) over the most recent 51 quarters, and qualitative factors including economic trends in the Company’s service areas, industry experience and trends, geographic concentrations, estimated collateral values, the Company’s underwriting policies, the character of the loan portfolio, and probable losses inherent in the portfolio taken as a whole.
    The following table shows the summary of activities for the Allowance as of and for the three months ended September 30, 2021 and 2020 by portfolio segment (in thousands):
 CommercialReal EstateConsumerUnallocatedTotal
Allowance for credit losses:     
Beginning balance, July 1, 2021$2,210 $7,050 $828 $351 $10,439 
(Reversal) provision charged to operations118 (434)(230)46 (500)
Charge-offs(15)— (19)— (34)
Recoveries21 — 135 — 156 
Ending balance, September 30, 2021$2,334 $6,616 $714 $397 $10,061 
Allowance for credit losses:     
Beginning balance, July 1, 2020$2,087 $10,389 $1,280 $181 $13,937 
Provision (reversal) charged to operations(30)267 60 303 600 
Charge-offs(43)— (2)— (45)
Recoveries146 — 19 — 165 
Ending balance, September 30, 2020$2,160 $10,656 $1,357 $484 $14,657 

The following table shows the summary of activities for the Allowance as of and for the nine months ended September 30, 2021 and 2020 by portfolio segment (in thousands):
 CommercialReal EstateConsumerUnallocatedTotal
Allowance for credit losses:     
Beginning balance, January 1, 2021$2,019 $9,174 $1,091 $631 $12,915 
Reversal charged to operations(321)(2,877)(368)(234)(3,800)
Charge-offs(46)— (215)— (261)
Recoveries682 319 206 — 1,207 
Ending balance, September 30, 2021$2,334 $6,616 $714 $397 $10,061 
Allowance for credit losses:     
Beginning balance, January 1, 2020$1,428 $6,769 $897 $36 $9,130 
Provision charged to operations203 3,887 437 448 4,975 
Charge-offs(72)— (97)— (169)
Recoveries601 — 120 — 721 
Ending balance, September 30, 2020$2,160 $10,656 $1,357 $484 $14,657 
    The following is a summary of the Allowance by impairment methodology and portfolio segment as of September 30, 2021 and December 31, 2020 (in thousands):
 CommercialReal EstateConsumerUnallocatedTotal
Allowance for credit losses:     
Ending balance, September 30, 2021$2,334 $6,616 $714 $397 $10,061 
Ending balance: individually evaluated for impairment$877 $50 $4 $— $931 
Ending balance: collectively evaluated for impairment$1,457 $6,566 $710 $397 $9,130 
Ending balance, December 31, 2020$2,019 $9,174 $1,091 $631 $12,915 
Ending balance: individually evaluated for impairment$339 $271 $21 $— $631 
Ending balance: collectively evaluated for impairment$1,680 $8,903 $1,070 $631 $12,284 
    The following table shows the ending balances of loans as of September 30, 2021 and December 31, 2020 by portfolio segment and by impairment methodology (in thousands):
 CommercialReal EstateConsumerTotal
Loans:    
Ending balance, September 30, 2021$217,008 $773,815 $93,083 $1,083,906 
Ending balance: individually evaluated for impairment$8,051 $952 $1,057 $10,060 
Ending balance: collectively evaluated for impairment$208,957 $772,863 $92,026 $1,073,846 
Loans:    
Ending balance, December 31, 2020$295,965 $716,124 $92,870 $1,104,959 
Ending balance: individually evaluated for impairment$7,402 $2,616 $1,168 $11,186 
Ending balance: collectively evaluated for impairment
$288,563 $713,508 $91,702 $1,093,773 
The following table shows the loan portfolio by class allocated by management’s internal risk ratings at September 30, 2021 (in thousands):
PassSpecial MentionSub-StandardDoubtfulTotal
Commercial:
Commercial and industrial$173,016 $667 $11,147 $— $184,830 
Agricultural production27,732 1,170 3,276 — 32,178 
Real Estate:
Owner occupied202,100 2,993 5,484 — 210,577 
Real estate construction and other land loans60,180 5,732 — — 65,912 
Commercial real estate349,831 13,785 1,948 — 365,564 
Agricultural real estate94,985 2,021 1,144 — 98,150 
Other real estate33,612 — — — 33,612 
Consumer:
Equity loans and lines of credit54,589 244 — — 54,833 
Consumer and installment38,184 — 66 — 38,250 
Total$1,034,229 $26,612 $23,065 $— $1,083,906 
    The following table shows the loan portfolio by class allocated by management’s internally assigned risk grade ratings at December 31, 2020 (in thousands):
PassSpecial MentionSub-StandardDoubtfulTotal
Commercial:
Commercial and industrial$258,587 $5,004 $10,403 $— $273,994 
Agricultural production18,289 377 3,305 — 21,971 
Real Estate:
Owner occupied197,721 3,870 7,252 — 208,843 
Real estate construction and other land loans
50,560 1,622 3,237 — 55,419 
Commercial real estate314,710 14,537 9,639 — 338,886 
Agricultural real estate72,875 10,195 1,188 — 84,258 
Other real estate28,557 161 — — 28,718 
Consumer:
Equity loans and lines of credit54,034 640 960 — 55,634 
Consumer and installment37,084 — 152 — 37,236 
Total$1,032,417 $36,406 $36,136 $— $1,104,959 
The following table shows an aging analysis of the loan portfolio by class and the time past due at September 30, 2021 (in thousands):
 30-59 Days
Past Due		60-89
Days Past
Due
Greater
Than
 90 Days
Past Due
Total Past
Due		CurrentTotal
Loans		Recorded
Investment
> 90 Days
Accruing		Non-accrual
Commercial:        
Commercial and industrial$1 $— $— $1 $184,829 $184,830 $— $333 
Agricultural production— — — — 32,178 32,178 — 779 
Real estate:—   —  
Owner occupied161 — — 161 210,416 210,577 — — 
Real estate construction and other land loans— — — — 65,912 65,912 — — 
Commercial real estate— — — — 365,564 365,564 — 485 
Agricultural real estate— — — — 98,150 98,150 — — 
Other real estate— — — — 33,612 33,612 — — 
Consumer:   —  
Equity loans and lines of credit104 — — 104 54,729 54,833 — — 
Consumer and installment47 — — 47 38,203 38,250 — — 
Total$313 $— $— $313 $1,083,593 $1,083,906 $— $1,597 
    The following table shows an aging analysis of the loan portfolio by class and the time past due at December 31, 2020 (in thousands):
 30-59 Days
Past Due		60-89
Days Past
Due
Greater
Than
 90 Days
Past Due
Total Past
Due		CurrentTotal
Loans		Recorded
Investment
> 90 Days
Accruing		Non-
accrual
Commercial:        
Commercial and industrial$— $— $60 $60 $273,934 $273,994 $— $752 
Agricultural production— — — — 21,971 21,971 — — 
Real estate:—       
Owner occupied— — — — 208,843 208,843 — 370 
Real estate construction and other land loans— — — — 55,419 55,419 — 1,556 
Commercial real estate— — — — 338,886 338,886 — 512 
Agricultural real estate— — — — 84,258 84,258 — — 
Other real estate— — — — 28,718 28,718 — — 
Consumer:       
Equity loans and lines of credit
— 24 — 24 55,610 55,634 — — 
Consumer and installment5 — — 5 37,231 37,236 — 88 
Total$5 $24 $60 $89 $1,104,870 $1,104,959 $— $3,278 
 
The following table shows information related to impaired loans by class at September 30, 2021 (in thousands):
Recorded
Investment		Unpaid
Principal
Balance		Related
Allowance
With no related allowance recorded:   
Real estate:   
Commercial real estate$486 $553 $— 
Consumer:   
Equity loans and lines of credit138 174 — 
Total with no related allowance recorded624 727 — 
With an allowance recorded:   
Commercial:   
Commercial and industrial7,272 7,307 772 
Agricultural production779 843 105 
Total commercial8,051 8,150 877 
Real estate:   
Real estate construction and other land loans305 305 42 
Commercial real estate140 141 3 
Agricultural real estate21 21 5 
Total real estate466 467 50 
Consumer:   
Equity loans and lines of credit919 919 4 
Total with an allowance recorded9,436 9,536 931 
Total$10,060 $10,263 $931 
    The recorded investment in loans excludes accrued interest receivable and net loan origination fees, due to immateriality.
    The following table shows information related to impaired loans by class at December 31, 2020 (in thousands):
Recorded
Investment		Unpaid
Principal
Balance		Related
Allowance
With no related allowance recorded:   
Commercial:   
Commercial and industrial$60 $61 $— 
Real estate:   
Owner occupied370 409 — 
Real estate construction and other land loans28 28 — 
Commercial real estate512 561 — 
Total real estate910 998 — 
Consumer:   
Equity loans and lines of credit144 180 — 
Total with no related allowance recorded1,114 1,239 — 
With an allowance recorded:   
Commercial:   
Commercial and industrial7,342 7,373 339 
Real estate:   
Real estate construction and other land loans1,528 1,552 268 
Commercial real estate148 149 3 
Agricultural real estate30 29 — 
Total real estate1,706 1,730 271 
Consumer:   
Equity loans and lines of credit936 936 9 
Consumer and installment88 93 12 
Total consumer1,024 1,029 21 
Total with an allowance recorded10,072 10,132 631 
Total$11,186 $11,371 $631 
 
    The recorded investment in loans excludes accrued interest receivable and net loan origination fees, due to immateriality.
    
The following tables present by class, information related to the average recorded investment and interest income recognized on impaired loans for the three months ended September 30, 2021 and 2020 (in thousands).
 Three Months Ended September 30, 2021 Three Months Ended September 30, 2020
Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
With no related allowance recorded:    
Commercial:    
Commercial and industrial$123 $— $4,157 $— 
Real estate:    
Owner occupied— — 385 — 
Real estate construction and other land loans234 — 7 — 
Commercial real estate365 — 689 — 
Agricultural real estate— — 120 — 
Total real estate599 — 1,201 — 
Consumer:    
Equity loans and lines of credit139 3 178 3 
Total with no related allowance recorded861 3 5,536 3 
With an allowance recorded:    
Commercial:    
Commercial and industrial5,538 129 5,440 138 
Agricultural production1,063 — 778 11 
Total commercial6,601 129 6,218 149 
Real estate:    
Real estate construction and other land loans76 5 656 — 
Commercial real estate141 2 150 3 
Agricultural real estate28 — 28 1 
Total real estate245 7 834 4 
Consumer:    
Equity loans and lines of credit922 14 944 14 
Consumer and installment— — 70 — 
Total consumer922 14 1,014 14 
Total with an allowance recorded7,768 150 8,066 167 
Total$8,629 $153 $13,602 $170 
The following tables present by class, information related to the average recorded investment and interest income recognized on impaired loans for the nine months ended September 30, 2021 and 2020 (in thousands).

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020
Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
With no related allowance recorded:    
Commercial:    
Commercial and industrial$56 $— $1,712 $— 
Agricultural land and production— — 85 — 
Total commercial56 — 1,797 — 
Real estate:    
Owner occupied72 — 400 — 
Real estate construction and other land loans203 — 3 — 
Commercial real estate446 — 860 — 
Agricultural real estate— — 189 — 
Total real estate721 — 1,452 — 
Consumer:    
Equity loans and lines of credit141 9 237 9 
Total with no related allowance recorded918 9 3,486 9 
With an allowance recorded:    
Commercial:    
Commercial and industrial6,217 282 5,743 482 
Agricultural land and production983 — 481 36 
Total commercial7,200 282 6,224 518 
Real estate:    
Real estate construction and other land loans785 16 281 — 
Commercial real estate144 7 223 8 
Agricultural real estate29 1 26 2 
Total real estate958 24 530 10 
Consumer:    
Equity loans and lines of credit928 40 1,019 41 
Consumer and installment18 — 45 — 
Total consumer946 40 1,064 41 
Total with an allowance recorded9,104 346 7,818 569 
Total$10,022 $355 $11,304 $578 
Foregone interest on nonaccrual loans totaled $101,000 and $135,000 for the nine month period ended September 30, 2021 and 2020, respectively. Foregone interest on nonaccrual loans totaled 30,000 and 82,000 for the three month period ended September 30, 2021 and 2020, respectively.
Troubled Debt Restructurings:
    As of September 30, 2021 and December 31, 2020, the Company has a recorded investment in troubled debt restructurings of $8,463,000 and $7,908,000, respectively. The Company has allocated $678,000 and $20,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of September 30, 2021 and December 31, 2020, respectively.
    During the nine months ended September 30, 2021, two loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with
similar risk. During the same period, there were no troubled debt restructurings in which the amount of principal or accrued interest owed from the borrower was forgiven or which resulted in a charge-off or change to the allowance for loan losses.
As discussed in Note 1 to these financial statements, Section 4013 of the CARES Act and the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)” provided banks an option to elect to not account for certain loan modifications related to COVID-19 as TDRs as long as the borrowers were not more than 30 days past due as of December 31, 2019 or at the time of modification program implementation, respectively, and the borrowers meet other applicable criteria. The remaining TDRs disclosed below were not related to COVID-19 modifications. The Company executed loan deferrals on outstanding balances of $335,950 resulting from the COVID-19 pandemic that were not classified as a TDRs at September 30, 2021.

    The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2021 (in thousands):
Troubled Debt Restructurings:Number of LoansPre-Modification Outstanding Recorded Investment (1)Principal Modification (2)Post Modification Outstanding Recorded Investment (3)Outstanding Recorded Investment
Commercial:
Commercial and industrial1 $2,989 $— $2,489 $2,489 
Real Estate:
Real estate-construction and other land loans1333 — 333 305 
Total2 $3,322 $— $2,822 $2,794 
(1)Amounts represent the recorded investment in loans before recognizing effects of the Troubled Debt Restructurings, if any.
(2)Principal modification includes principal forgiveness at the time of modification, contingent principal forgiveness granted over the life of the loan based on borrower performance, and principal that has been legally separated and deferred to the end of the loan, with zero percent contractual interest rate.
(3)Balance outstanding after principal modification, if any borrower reduction to recorded investment.

    The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2020 (in thousands):
Troubled Debt Restructurings:Number of LoansPre-Modification Outstanding Recorded Investment (1)Principal Modification (2)Post Modification Outstanding Recorded Investment (3)Outstanding Recorded Investment
Commercial:
Commercial and Industrial1 $12,925 $— $12,925 $7,175 
Agricultural production1850— 850779
Total2 $13,775 $— $13,775 $7,954 

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended September 30, 2021 (in thousands):
Troubled Debt Restructurings:Number of LoansPre-Modification Outstanding Recorded Investment (1)Principal Modification (2)Post Modification Outstanding Recorded Investment (3)Outstanding Recorded Investment
Commercial:
Commercial and Industrial1 $2,989 $— $2,489 $2,489 
Total1 $2,989 $— $2,489 $2,489 
During the quarter ended September 30, 2020, no loans were modified as troubled debt restructurings.
Consumer:

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. There were no defaults on troubled debt restructurings, within twelve months following the modification, during the nine months ended and three months ended September 30, 2021 or September 30, 2020.