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Loans and Allowance for Credit Losses
 3 Months Ended
Sep. 30, 2022
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, 2022% of Total
Loans		December 31, 2021% of Total
Loans
Commercial:    
Commercial and industrial$147,715 12.1 %$136,847 13.2 %
Agricultural production35,125 2.9 %40,860 3.9 %
Total commercial182,840 15.0 %177,707 17.1 %
Real estate:    
Owner occupied195,272 15.9 %212,234 20.4 %
Real estate construction and other land loans97,169 7.9 %61,586 5.9 %
Commercial real estate451,588 37.0 %369,529 35.6 %
Agricultural real estate115,477 9.4 %98,481 9.5 %
Other real estate24,776 2.0 %26,084 2.5 %
Total real estate884,282 72.2 %767,914 73.9 %
Consumer:    
Equity loans and lines of credit121,305 9.9 %55,620 5.4 %
Consumer and installment35,546 2.9 %36,999 3.6 %
Total consumer156,851 12.8 %92,619 9.0 %
Net deferred origination fees 1,297  871  
Total gross loans1,225,270 100.0 %1,039,111 100.0 %
Allowance for credit losses(10,366) (9,600) 
Total loans$1,214,904  $1,029,511  
 
    At September 30, 2022 and December 31, 2021, loans originated under Small Business Administration (SBA) programs totaling $21,090,000 and $23,024,000, respectively, were included in the real estate and commercial categories, of which, $16,242,000 or 77% and $17,720,000 or 77%, 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, 2022, two PPP loans totaling $350,000 were outstanding and included in the commercial and industrial line item above. At December 31, 2021, 70 PPP loans totaling $18,553,000 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 55 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, 2022 and 2021 by portfolio segment (in thousands):
 CommercialReal EstateConsumerUnallocatedTotal
Allowance for credit losses:     
Beginning balance, July 01, 2022$1,973 $6,994 $769 $137 $9,873 
Provision (reversal) charged to operations118 418 (29)(7)500 
Charge-offs— — (20)— (20)
Recoveries— — 13 — 13 
Ending balance, September 30, 2022$2,091 $7,412 $733 $130 $10,366 
Allowance for credit losses:     
Beginning balance, July 1, 2021$2,210 $7,050 $828 $351 $10,439 
Provision (reversal) 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 
The following table shows the summary of activities for the Allowance as of and for the nine months ended September 30, 2022 and 2021 by portfolio segment (in thousands):
 
 CommercialReal EstateConsumerUnallocatedTotal
Allowance for credit losses:     
Beginning balance, January 1, 2022$2,011 $6,741 $568 $280 $9,600 
(Reversal) provision charged to operations(269)671 248 (150)500 
Losses charged to allowance(18)— (120)— (138)
Recoveries367 — 37 — 404 
Ending balance, September 30, 2022$2,091 $7,412 $733 $130 $10,366 
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)
Losses charged to allowance(46)— (215)— (261)
Recoveries682 319 206 — 1,207 
Ending balance, September 30, 2021$2,334 $6,616 $714 $397 $10,061 


    The following is a summary of the Allowance by impairment methodology and portfolio segment as of September 30, 2022 and December 31, 2021 (in thousands):
 CommercialReal EstateConsumerUnallocatedTotal
Allowance for credit losses:     
Ending balance, September 30, 2022$2,091 $7,412 $733 $130 $10,366 
Ending balance: individually evaluated for impairment$337 $7 $— $— $344 
Ending balance: collectively evaluated for impairment$1,754 $7,405 $733 $130 $10,022 
Ending balance, December 31, 2021$2,011 $6,741 $568 $280 $9,600 
Ending balance: individually evaluated for impairment$607 $38 $4 $— $649 
Ending balance: collectively evaluated for impairment$1,404 $6,703 $564 $280 $8,951 
    
The following table shows the ending balances of loans as of September 30, 2022 and December 31, 2021 by portfolio segment and by impairment methodology (in thousands):
 CommercialReal EstateConsumerTotal
Loans:    
Ending balance, September 30, 2022$182,840 $884,282 $156,851 $1,223,973 
Ending balance: individually evaluated for impairment$1,490 $150 $1,025 $2,665 
Ending balance: collectively evaluated for impairment$181,350 $884,132 $155,826 $1,221,308 
Loans:    
Ending balance, December 31, 2021$177,707 $767,914 $92,619 $1,038,240 
Ending balance: individually evaluated for impairment$7,086 $450 $1,050 $8,586 
Ending balance: collectively evaluated for impairment
$170,621 $767,464 $91,569 $1,029,654 

The following table shows the loan portfolio by class allocated by management’s internal risk ratings at September 30, 2022 (in thousands):
PassSpecial MentionSub-StandardDoubtfulTotal
Commercial:
Commercial and industrial$135,972 $10,044 $1,699 $— $147,715 
Agricultural production27,738 4,339 3,048 — 35,125 
Real Estate:
Owner occupied189,648 3,441 2,183 — 195,272 
Real estate construction and other land loans83,956 — 13,213 — 97,169 
Commercial real estate446,273 2,881 2,434 — 451,588 
Agricultural real estate105,521 9,956 — — 115,477 
Other real estate24,776 — — — 24,776 
Consumer:
Equity loans and lines of credit121,036 224 45 — 121,305 
Consumer and installment35,502 9 35 — 35,546 
Total$1,170,422 $30,894 $22,657 $— $1,223,973 
    The following table shows the loan portfolio by class allocated by management’s internally assigned risk grade ratings at December 31, 2021 (in thousands):
PassSpecial MentionSub-StandardDoubtfulTotal
Commercial:
Commercial and industrial$125,537 $8,724 $2,586 $— $136,847 
Agricultural production37,179 1,325 2,356 — 40,860 
Real Estate:
Owner occupied205,092 3,582 3,560 — 212,234 
Real estate construction and other land loans
54,066 7,520 — — 61,586 
Commercial real estate351,395 18,134 — — 369,529 
Agricultural real estate96,949 1,532 — — 98,481 
Other real estate26,084 — — — 26,084 
Consumer:
Equity loans and lines of credit55,611 9 — — 55,620 
Consumer and installment36,942 19 38 — 36,999 
Total$988,855 $40,845 $8,540 $— $1,038,240 
The following table shows an aging analysis of the loan portfolio by class and the time past due at September 30, 2022 (in thousands):
 30-59 Days
Past Due		60-89
Days Past
Due
Greater
Than
 90 Days
Past Due
Total Past
Due		CurrentTotal
Loans		Recorded
Investment
> 90 Days
Accruing		Non-accrual
Commercial:        
Commercial and industrial$— $— $— $— $147,715 $147,715 $— $251 
Agricultural production— — — — 35,125 35,125 — — 
Real estate:—   —  
Owner occupied251 — — 251 195,021 195,272 — — 
Real estate construction and other land loans— — — — 97,169 97,169 — — 
Commercial real estate— — — — 451,588 451,588 — — 
Agricultural real estate— — — — 115,477 115,477 — — 
Other real estate— — — — 24,776 24,776 — — 
Consumer:   —  
Equity loans and lines of credit— — — — 121,305 121,305 — — 
Consumer and installment235 — — 235 35,311 35,546 — — 
Total$486 $— $— $486 $1,223,487 $1,223,973 $— $251 
    The following table shows an aging analysis of the loan portfolio by class and the time past due at December 31, 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 $136,846 $136,847 $— $312 
Agricultural production— — — — 40,860 40,860 — 634 
Real estate:—       
Owner occupied— — — — 212,234 212,234 — — 
Real estate construction and other land loans— — — — 61,586 61,586 — — 
Commercial real estate— — — — 369,529 369,529 — — 
Agricultural real estate— — — — 98,481 98,481 — — 
Other real estate— — — — 26,084 26,084 — — 
Consumer:       
Equity loans and lines of credit
— — — — 55,620 55,620 — — 
Consumer and installment79 — — 79 36,920 36,999 — — 
Total$80 $— $— $80 $1,038,160 $1,038,240 $— $946 
 
The following table shows information related to impaired loans by class at September 30, 2022 (in thousands):
Recorded
Investment		Unpaid
Principal
Balance		Related
Allowance
With no related allowance recorded:   
Consumer:   
Equity loans and lines of credit$1,025 $1,060 $— 
Total with no related allowance recorded1,025 1,060 — 
With an allowance recorded:   
Commercial:   
Commercial and industrial1,490 1,543 337 
Real estate:   
Commercial real estate129 129 2 
Agricultural real estate21 21 5 
Total real estate150 150 7 
Total with an allowance recorded1,640 1,693 344 
Total$2,665 $2,753 $344 
    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, 2021 (in thousands):
Recorded
Investment		Unpaid
Principal
Balance		Related
Allowance
With no related allowance recorded:   
Consumer:   
Equity loans and lines of credit$136 $172 $— 
Total with no related allowance recorded136 172 — 
With an allowance recorded:   
Commercial:   
Commercial and industrial6,452 6,491 544 
Agricultural production634 714 63 
Total commercial7,086 7,205 607 
Real estate:   
Real estate construction and other land loans292 292 30 
Commercial real estate137 138 3 
Agricultural real estate21 21 5 
Total real estate450 451 38 
Consumer:   
Equity loans and lines of credit914 914 4 
Total consumer914 914 4 
Total with an allowance recorded8,450 8,570 649 
Total$8,586 $8,742 $649 
 
    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, 2022 and 2021 (in thousands).
 Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
With no related allowance recorded:    
Commercial:    
Commercial and industrial$— $— $123 $— 
Total commercial— — 123 — 
Real estate:    
Real estate construction and other land loans$— $— $234 $— 
Commercial real estate— — 365 — 
Total real estate— — 599 — 
Consumer:    
Equity loans and lines of credit1,036 24 139 3 
Total consumer1,036 24 139 3 
Total with no related allowance recorded1,036 24 861 3 
With an allowance recorded:    
Commercial:    
Commercial and industrial2,270 48 5,538 129 
Agricultural production— — 1,063 — 
Total commercial2,270 48 6,601 129 
Real estate:    
Real estate construction and other land loans— — 76 5 
Commercial real estate132 2 141 2 
Agricultural real estate21 1 28 — 
Total real estate153 3 245 7 
Consumer:    
Equity loans and lines of credit— — 922 14 
Total consumer— — 922 14 
Total with an allowance recorded2,423 51 7,768 150 
Total$3,459 $75 $8,629 $153 
Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021
Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
With no related allowance recorded:    
Commercial:    
Commercial and industrial$57 $— $56 $— 
Agricultural land and production33 — — — 
Total commercial90 — 56 — 
Real estate:    
Owner occupied— — 72 — 
Real estate construction and other land loans— — 203 — 
Commercial real estate— — 446 — 
Total real estate— — 721 — 
Consumer:    
Equity loans and lines of credit673 56 141 9 
Total with no related allowance recorded763 56 918 9 
With an allowance recorded:    
Commercial:    
Commercial and industrial2,612 103 6,217 282 
Agricultural land and production63 — 983 — 
Total commercial2,675 103 7,200 282 
Real estate:    
Real estate construction and other land loans114 — 785 16 
Commercial real estate133 6 144 7 
Agricultural real estate21 1 29 1 
Total real estate268 7 958 24 
Consumer:    
Equity loans and lines of credit364 — 928 40 
Consumer and installment— — 18 — 
Total consumer364 — 946 40 
Total with an allowance recorded3,307 110 9,104 346 
Total$4,070 $166 $10,022 $355 
Foregone interest on nonaccrual loans totaled $132,000 and $101,000 for the nine month period ended September 30, 2022 and 2021, respectively. Foregone interest on nonaccrual loans totaled 75,000 and 30,000 for the three month period ended September 30, 2022 and 2021, respectively.

Troubled Debt Restructurings:

    As of September 30, 2022 and December 31, 2021, the Company has a recorded investment in troubled debt restructurings (“TDR”) of $2,415,000 and $7,640,000, respectively. The Company has allocated $525,000 and $538,000 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of September 30, 2022 and December 31, 2021, respectively.
    For the nine months ended September 30, 2022 and 2021, the terms of certain loans were modified as TDRs. 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. In accordance with such guidance, during 2020 and throughout 2021 the Company offered short-term modifications in response to COVID-19 to borrowers who were current and otherwise not past due. As of September 30, 2022, there were no such loans remaining on deferral.

During the nine months ended September 30, 2022, no loans were modified as troubled debt restructuring.

    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 loans1 333 — 333 305 
Total2 $3,322 $— $2,822 $2,794 
(1)Amounts represent the recorded investment in loans before recognizing effects of the TDR, 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.

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 September 30, 2022 or September 30, 2021.