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Loans | 12 Months Ended
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Dec. 31, 2018
Receivables [Abstract] |
Loans | Note 4 - Loans The Company had $495 thousand in loans held for sale at December 31, 2018 as compared to $1.2 million in loans held for sale at December 31, 2017. Loans at December 31 are summarized below:
|  | (In Thousands) |
Loans: |  | 2018 |  |  | 2017 |
Consumer Real Estate |  | $ | 80,766 |  |  | $ | 83,620 |
Agricultural Real Estate |  |  | 68,609 |  |  |  | 64,073 |
Agricultural |  |  | 108,495 |  |  |  | 95,111 |
Commercial Real Estate |  |  | 419,784 |  |  |  | 410,520 |
Commercial and Industrial |  |  | 121,793 |  |  |  | 126,275 |
Consumer |  |  | 41,953 |  |  |  | 37,757 |
Industrial Development Bonds |  |  | 5,889 |  |  |  | 6,415 |
|  | $ | 847,289 |  |  | $ | 823,771 |
Less: Net deferred loan fees and costs |  |  | (915 | ) |  |  | (747 | )
|  |  | 846,374 |  |  |  | 823,024 |
Less: Allowance for loan losses |  |  | (6,775 | ) |  |  | (6,868 | )
Loans - Net |  | $ | 839,599 |  |  | $ | 816,156 |
Following are the characteristics and underwriting criteria for each major type of loan the Bank offers: Consumer Real Estate: Purchase, refinance, or equity financing of one to four family owner occupied dwelling. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and others. Agricultural Real Estate: Purchase of farm real estate or for permanent improvements to the farm real estate. Cash flow from the farm operation is the repayment source and is therefore subject to the financial success of the farm operation. Agricultural: Loans for the production and housing of crops, fruits, vegetables, and livestock or to fund the purchase or re-finance of capital assets such as machinery and equipment and livestock. The production of crops and livestock is especially vulnerable to commodity prices and weather. The vulnerability to commodity prices is offset by the farmer’s ability to hedge their position by the use of the future contracts. The risk related to weather is often mitigated by requiring crop insurance. Commercial Real Estate: Construction, purchase, and refinance of business purpose real estate. Risks include potential construction delays and overruns, vacancies, collateral value subject to market value fluctuations, interest rate, market demands, borrower’s ability to repay in orderly fashion, and others. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer’s ability to repay in a changing rate environment before granting loan approval. Commercial and Industrial: Loans to proprietorships, partnerships, or corporations to provide temporary working capital and seasonal loans as well as long term loans for capital asset acquisition. Risks include adequacy of cash flow, reasonableness of projections, financial leverage, economic trends, management ability and estimated capital expenditures during the fiscal year. The Bank does employ stress testing on higher balance loans to mitigate risk by ensuring the customer's ability to repay in a changing rate environment before granting loan approval. Consumer: Funding for individual and family purposes. Success in repayment is subject to borrower’s income, debt level, character in fulfilling payment obligations, employment, and others. Industrial Development Bonds (IDB): Funds for public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment. The following is a maturity schedule by major category of loans at December 31, 2018:
|  | (In Thousands) |
|  |  |  |  |  | After One |  |  |  |  |  |  |  |  |
|  | Within |  |  | Year Within |  |  | After |  |  |  |  |
|  | One Year |  |  | Five Years |  |  | Five Years |  |  | Total |
Consumer Real Estate |  | $ | 4,226 |  |  | $ | 16,495 |  |  | $ | 60,045 |  |  | $ | 80,766 |
Agricultural Real Estate |  |  | 615 |  |  |  | 4,818 |  |  |  | 63,176 |  |  |  | 68,609 |
Agricultural |  |  | 70,505 |  |  |  | 28,073 |  |  |  | 9,917 |  |  |  | 108,495 |
Commercial Real Estate |  |  | 16,339 |  |  |  | 160,783 |  |  |  | 242,662 |  |  |  | 419,784 |
Commercial and Industrial |  |  | 61,382 |  |  |  | 52,678 |  |  |  | 7,733 |  |  |  | 121,793 |
Consumer |  |  | 5,211 |  |  |  | 27,369 |  |  |  | 9,373 |  |  |  | 41,953 |
Industrial Development Bonds |  |  | 600 |  |  |  | 270 |  |  |  | 5,019 |  |  |  | 5,889 |
|  | $ | 158,878 |  |  | $ | 290,486 |  |  | $ | 397,925 |  |  | $ | 847,289 |
The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2018:
|  | (In Thousands) |
|  | Fixed |  |  | Variable |
|  | Rate |  |  | Rate |
Consumer Real Estate |  | $ | 35,174 |  |  | $ | 45,592 |
Agricultural Real Estate |  |  | 49,717 |  |  |  | 18,892 |
Agricultural |  |  | 37,053 |  |  |  | 71,442 |
Commercial Real Estate |  |  | 265,197 |  |  |  | 154,587 |
Commercial and Industrial |  |  | 45,934 |  |  |  | 75,859 |
Consumer |  |  | 37,487 |  |  |  | 4,466 |
Industrial Development Bonds |  |  | 5,889 |  |  |  | - |
Industrial Development Bonds are included in the commercial and industrial category for the remainder of the tables in this Note 4, unless specifically noted separately. The following table represents the contractual aging of the recorded investment in past due loans by portfolio classification of loans as of December 31, 2018 and 2017, net of deferred loan fees and costs:
December 31, 2018 |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater Than 90 Days |  |  | Total Past Due |  |  | Current |  |  | Total Financing Receivables |  |  | Recorded Investment > 90 Days and Accruing |
Consumer Real Estate |  | $ | 342 |  |  | $ | 24 |  |  | $ | 254 |  |  | $ | 620 |  |  | $ | 79,612 |  |  | $ | 80,232 |  |  | $ | - |
Agricultural Real Estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 68,588 |  |  |  | 68,588 |  |  |  | - |
Agricultural |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 108,616 |  |  |  | 108,616 |  |  |  | - |
Commercial Real Estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 419,131 |  |  |  | 419,131 |  |  |  | - |
Commercial and Industrial |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 127,752 |  |  |  | 127,752 |  |  |  | - |
Consumer |  |  | 85 |  |  |  | 24 |  |  |  | 8 |  |  |  | 117 |  |  |  | 41,938 |  |  |  | 42,055 |  |  |  | - |
Total |  | $ | 427 |  |  | $ | 48 |  |  | $ | 262 |  |  | $ | 737 |  |  | $ | 845,637 |  |  | $ | 846,374 |  |  | $ | - |
December 31, 2017 |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater Than 90 Days |  |  | Total Past Due |  |  | Current |  |  | Total Financing Receivables |  |  | Recorded Investment > 90 Days and Accruing |
Consumer Real Estate |  | $ | 565 |  |  | $ | 212 |  |  | $ | 113 |  |  | $ | 890 |  |  | $ | 82,310 |  |  | $ | 83,200 |  |  | $ | - |
Agricultural Real Estate |  |  | - |  |  |  | - |  |  |  | 101 |  |  |  | 101 |  |  |  | 63,943 |  |  |  | 64,044 |  |  |  | - |
Agricultural |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 95,238 |  |  |  | 95,238 |  |  |  | - |
Commercial Real Estate |  |  | - |  |  |  | - |  |  |  | 38 |  |  |  | 38 |  |  |  | 409,915 |  |  |  | 409,953 |  |  |  | - |
Commercial and Industrial |  |  | - |  |  |  | 42 |  |  |  | - |  |  |  | 42 |  |  |  | 132,745 |  |  |  | 132,787 |  |  |  | - |
Consumer |  |  | 34 |  |  |  | 2 |  |  |  | 7 |  |  |  | 43 |  |  |  | 37,759 |  |  |  | 37,802 |  |  |  | - |
Total |  | $ | 599 |  |  | $ | 256 |  |  | $ | 259 |  |  | $ | 1,114 |  |  | $ | 821,910 |  |  | $ | 823,024 |  |  | $ | - |
The following table presents the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2018 and December 31, 2017:
|  | (In Thousands) |
|  | 2018 |  |  | 2017 |
Consumer Real Estate |  | $ | 462 |  |  | $ | 708 |
Agricultural Real Estate |  |  | - |  |  |  | 101 |
Agriculture |  |  | - |  |  |  | - |
Commercial Real Estate |  |  | - |  |  |  | 38 |
Commercial and Industrial |  |  | 72 |  |  |  | 149 |
Consumer |  |  | 8 |  |  |  | 7 |
Total |  | $ | 542 |  |  | $ | 1,003 |
The Bank uses a nine tier risk rating system to grade its loans. The grade of a loan may change during the life of the loan. The risk ratings are described as follows.
| 1. | Zero (0) Unclassified. Any loan which has not been assigned a classification.
| 2. | One (1) Excellent. Credit to premier customers having the highest credit rating based on an extremely strong financial condition, which compares favorably with industry standards (upper quartile of Risk Management Association ratios). Financial statements indicate a sound earnings and financial ratio trend for several years with satisfactory profit margins and excellent liquidity exhibited. Prime credits may also be borrowers with loans fully secured by highly liquid collateral such as traded stocks, bonds, certificates of deposit, savings account, etc. No credit or collateral exceptions exist and the loan adheres to the Bank's loan policy in every respect. Financing alternatives would be readily available and would qualify for unsecured credit. This grade is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.
| 3. | Two (2) Good. Desirable loans of somewhat less stature than Grade 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets, generally with a leverage position less than 1.50, and a history of profitability. Probability of serious financial deterioration is unlikely. Possessing a sound repayment source (and a secondary source), which would allow repayment in a reasonable period of time. Individual loans backed by liquid personal assets, established history and unquestionable character.
| 4. | Three (3) Satisfactory. Satisfactory loans of average or slightly above average risk – having some deficiency or vulnerability to changing economic conditions, but still fully collectible. Projects should normally demonstrate acceptable debt service coverage. Generally, customers should have a leverage position less than 2.00. May be some weakness but with offsetting features of other support readily available. Loans are meeting the terms of repayment.
Loans may be graded 3 when there is no recent information on which to base a current risk evaluation and the following conditions apply: At inception, the loan was properly underwritten and did not possess an unwarranted level of credit risk:
| a. | At inception, the loan was secured with collateral possessing a loan-to-value adequate to protect the Bank from loss;
| b. | The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;
| c. | During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the business is in an industry which is known to be experiencing problems. If any of these credit weaknesses are observed, a lower risk grade is warranted.
| 1. | Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk grade may be established for a loan considered satisfactory but which is of average credit risk due to financial weakness or uncertainty. The loans warrant a higher than average level of monitoring to ensure that weaknesses do not advance. The level of risk in Satisfactory/Monitored classification is considered acceptable and within normal underwriting guidelines so long as the loan is given management supervision.
| 2. | Five (5) Special Mention. Loans that possess some credit deficiency or potential weakness which deserve close attention but do not yet warrant substandard classification. Such loans pose unwarranted financial risk that if not corrected could weaken the loan and increase risk in the future. The key distinctions of a 5 (Special Mention) classification are that (1) it is indicative of an unwarranted level of risk, and (2) weaknesses are considered “potential” versus “defined” impairments to the primary source of loan repayment and collateral.
| 3. | Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:
| a. | Loans which possess a defined credit weakness and the likelihood that a loan will be paid from the primary source and are uncertain. Financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss.
| b. | Loans are inadequately protected by the current net worth and paying capacity of the borrower.
| c. | The primary source of repayment is weakened, and the Bank is forced to rely on a secondary source of repayment such as collateral liquidation or guarantees.
| d. | Loans are characterized by the distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.
| e. | Unusual courses of action are needed to maintain a high probability of repayment.
| f. | The borrower is not generating enough cash flow to repay loan principal but continues to make interest payments.
| g. | The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.
| h. | Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.
| i. | The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan
| j. | There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.
| 1. | Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:
| a. | Loans have all of the weaknesses of those classified as Substandard. Additionally, these weaknesses make collection or liquidation in full based on existing conditions improbable.
| b. | The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.
| c. | The possibility of loss is high, but, because of certain important pending factors which may strengthen the loan, loss classification is deferred until its exact status is known. A Doubtful classification is established deferring the realization of the loss.
| 1. | Eight (8) Loss. Loans are considered uncollectable and of such little value that continuing to carry them as assets on the institution’s financial statements is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.
The following table represents the risk category of loans by portfolio class, net of deferred fees, based on the most recent analysis performed as of the time periods shown of December 31, 2018 and December 31, 2017.
|  | (In Thousands) |
|  | Agricultural Real Estate |  |  | Agricultural |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Industrial Development Bonds |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
1-2 |  | $ | 4,442 |  |  | $ | 4,143 |  |  | $ | 5,753 |  |  | $ | 6,558 |  |  | $ | 4,698 |  |  | $ | 1,244 |  |  | $ | 3,199 |  |  | $ | 9,205 |  |  | $ | - |  |  | $ | - |
3 |  |  | 14,118 |  |  |  | 15,244 |  |  |  | 38,852 |  |  |  | 37,267 |  |  |  | 64,341 |  |  |  | 32,498 |  |  |  | 16,284 |  |  |  | 15,277 |  |  |  | 3,135 |  |  |  | 3,489 |
4 |  |  | 49,596 |  |  |  | 43,416 |  |  |  | 63,380 |  |  |  | 51,312 |  |  |  | 346,072 |  |  |  | 359,600 |  |  |  | 100,644 |  |  |  | 99,581 |  |  |  | 2,754 |  |  |  | 2,926 |
5 |  |  | 422 |  |  |  | 1,125 |  |  |  | 631 |  |  |  | 101 |  |  |  | 2,171 |  |  |  | 7,758 |  |  |  | 308 |  |  |  | 1,381 |  |  |  | - |  |  |  | - |
6 |  |  | 10 |  |  |  | 116 |  |  |  | - |  |  |  | - |  |  |  | 1,849 |  |  |  | 8,853 |  |  |  | 542 |  |  |  | 817 |  |  |  | - |  |  |  | - |
7 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 886 |  |  |  | 111 |  |  |  | - |  |  |  | - |
8 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total |  | $ | 68,588 |  |  | $ | 64,044 |  |  | $ | 108,616 |  |  | $ | 95,238 |  |  | $ | 419,131 |  |  | $ | 409,953 |  |  | $ | 121,863 |  |  | $ | 126,372 |  |  | $ | 5,889 |  |  | $ | 6,415 |
For consumer residential real estate, and other, the Company also evaluates credit quality based on the aging status of the loan, which was previously stated, and by payment activity. The following tables present the recorded investment in those classes based on payment activity and assigned risk grading as of December 31, 2018 and December 31, 2017.
|  | (In Thousands) |
|  | Consumer Real Estate |
|  | 2018 |  |  | 2017 |
Grade |  |  |  |  |  |  |  |
Pass |  | $ | 79,121 |  |  | $ | 82,300 |
Special mention (5) |  |  | 232 |  |  |  | - |
Substandard (6) |  |  | 879 |  |  |  | 820 |
Doubtful (7) |  |  | - |  |  |  | 80 |
Total |  | $ | 80,232 |  |  | $ | 83,200 |
|  | (In Thousands) |
|  | Consumer - Credit Card |  |  | Consumer - Other |
|  | 2018 |  |  | 2017 |  |  | 2018 |  |  | 2017 |
Performing |  | $ | 3,909 |  |  | $ | 4,108 |  |  | $ | 38,073 |  |  | $ | 33,666 |
Nonperforming |  |  | 19 |  |  |  | - |  |  |  | 54 |  |  |  | 28 |
Total |  | $ | 3,928 |  |  | $ | 4,108 |  |  | $ | 38,127 |  |  | $ | 33,694 |
Information about impaired loans as of and for the years ended December 31, 2018 and 2017 are as follows:
|  | (In Thousands) |
|  | 2018 |  |  | 2017 |
Impaired loans without a valuation allowance |  | $ | 1,808 |  |  | $ | 1,131 |
Impaired loans with a valuation allowance |  |  | 246 |  |  |  | 614 |
Total impaired loans |  | $ | 2,054 |  |  | $ | 1,745 |
Valuation allowance related to impaired loans |  | $ | 31 |  |  | $ | 106 |
Total non-accrual loans |  | $ | 542 |  |  | $ | 1,003 |
Total loans past-due ninety days or more and still accruing |  | $ | - |  |  | $ | - |
|  | (In Thousands) |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Average investment in impaired loans |  | $ | 1,958 |  |  | $ | 1,885 |  |  | $ | 1,802 |
Interest income recognized on impaired loans |  | $ | 69 |  |  | $ | 57 |  |  | $ | 64 |
Interest income recognized on a cash basis on impaired loans |  | $ | 17 |  |  | $ | 23 |  |  | $ | 27 |
Additional funds of $7 thousand are committed to be advanced in connection with impaired loans. The Bank had approximately $178 thousand and $0.7 million of its impaired loans classified as troubled debt restructured as of December 31, 2018 and December 31, 2017. The following table represents the years ended December 31, 2018 and 2017.
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  | December 31, 2017 |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | (In thousands) |  |  |  |  |  |  |  |  | (In thousands) |
Troubled Debt Restructurings |  | Number of Contracts Modified in the Last 12 Months |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |  |  | Troubled Debt Restructurings |  | Number of Contracts Modified in the Last 12 Months |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |
Commercial and Industrial |  |  | - |  |  |  | - |  |  |  | - |  |  | Commercial and Industrial |  |  | 1 |  |  |  | 38 |  |  |  | 38 |
For the years ended December 31, 2018 and 2017, there were no TDR’s that subsequently defaulted after modification. For the Bank’s impaired TDR loans, the Bank may utilize a measurement incorporating the present value of expected future cash flows discounted at the loan's effective rate of interest or the fair value of collateral if the loan is collateral dependent. To determine the fair value of collateral, collateral asset values securing an impaired loan are periodically evaluated. Maximum time of re-evaluation is every 12 months for chattels and titled vehicles and every two years for real estate. In this process, third party evaluations are obtained and heavily relied upon. Until such time that updated appraisals are received, the Bank may discount the collateral value used. The Bank uses the following guidelines as stated in policy to determine when to realize a charge-off, whether a partial or full loan balance. A charge down in whole or in part is realized when unsecured consumer loans, credit card credits and overdraft lines of credit reach 90 days delinquency. At 120 days delinquent, secured consumer loans are charged down to the value of the collateral, if repossession of the collateral is assured and/or in the process of repossession. Consumer mortgage loan deficiencies are charged down upon the sale of the collateral or sooner upon the recognition of collateral deficiency. Commercial and agricultural credits are charged down at 120 days delinquency, unless an established and approved work-out plan is in place or litigation of the credit will likely result in recovery of the loan balance. Upon notification of bankruptcy, unsecured debt is charged off. Additional charge-off may be realized as further unsecured positions are recognized. The following tables present loans individually evaluated for impairment by portfolio class of loans as of December 31, 2018 and 2017:
|  | (In Thousands) |
2018 |  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |  |  | Interest Income Recognized |  |  | Interest Income Recognized Cash Basis |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer Real Estate |  | $ | 583 |  |  | $ | 583 |  |  | $ | - |  |  | $ | 562 |  |  | $ | 31 |  |  | $ | 17 |
Agricultural Real Estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 17 |  |  |  | - |  |  |  | - |
Agricultural |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Commercial Real Estate |  |  | 194 |  |  |  | 194 |  |  |  | - |  |  |  | 198 |  |  |  | 11 |  |  |  | - |
Commercial and Industrial |  |  | 1,031 |  |  |  | 1,031 |  |  |  | - |  |  |  | 438 |  |  |  | 25 |  |  |  | - |
Consumer |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
With a specific allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer Real Estate |  |  | 174 |  |  |  | 174 |  |  |  | 26 |  |  |  | 158 |  |  |  | - |  |  |  | - |
Agricultural Real Estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Agricultural |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Commercial Real Estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 140 |  |  |  | - |  |  |  | - |
Commercial and Industrial |  |  | 72 |  |  |  | 72 |  |  |  | 5 |  |  |  | 445 |  |  |  | 2 |  |  |  | - |
Consumer |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Totals: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer Real Estate |  | $ | 757 |  |  | $ | 757 |  |  | $ | 26 |  |  | $ | 720 |  |  | $ | 31 |  |  | $ | 17 |
Agricultural Real Estate |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 17 |  |  | $ | - |  |  | $ | - |
Agricultural |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Commercial Real Estate |  | $ | 194 |  |  | $ | 194 |  |  | $ | - |  |  | $ | 338 |  |  | $ | 11 |  |  | $ | - |
Commercial and Industrial |  | $ | 1,103 |  |  | $ | 1,103 |  |  | $ | 5 |  |  | $ | 883 |  |  | $ | 27 |  |  | $ | - |
Consumer |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
|  | (In Thousands) |
2017 |  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |  |  | Interest Income Recognized |  |  | Interest Income Recognized Cash Basis |
With no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer Real Estate |  | $ | 495 |  |  | $ | 495 |  |  | $ | - |  |  | $ | 911 |  |  | $ | 30 |  |  | $ | 21 |
Agricultural Real Estate |  |  | 101 |  |  |  | 101 |  |  |  | - |  |  |  | 123 |  |  |  | - |  |  |  | - |
Agricultural |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 27 |  |  |  | - |  |  |  | - |
Commercial Real Estate |  |  | 202 |  |  |  | 202 |  |  |  | - |  |  |  | 51 |  |  |  | 1 |  |  |  | - |
Commercial and Industrial |  |  | 333 |  |  |  | 333 |  |  |  | - |  |  |  | 85 |  |  |  | 2 |  |  |  | - |
Consumer |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
With a specific allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer Real Estate |  |  | 80 |  |  |  | 80 |  |  |  | 21 |  |  |  | 88 |  |  |  | - |  |  |  | - |
Agricultural Real Estate |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Agricultural |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Commercial Real Estate |  |  | 423 |  |  |  | 423 |  |  |  | 46 |  |  |  | 486 |  |  |  | 24 |  |  |  | 2 |
Commercial and Industrial |  |  | 111 |  |  |  | 111 |  |  |  | 39 |  |  |  | 114 |  |  |  | - |  |  |  | - |
Consumer |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Totals: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer Real Estate |  | $ | 575 |  |  | $ | 575 |  |  | $ | 21 |  |  | $ | 999 |  |  | $ | 30 |  |  | $ | 21 |
Agricultural Real Estate |  | $ | 101 |  |  | $ | 101 |  |  | $ | - |  |  | $ | 123 |  |  | $ | - |  |  | $ | - |
Agricultural |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 27 |  |  | $ | - |  |  | $ | - |
Commercial Real Estate |  | $ | 625 |  |  | $ | 625 |  |  | $ | 46 |  |  | $ | 537 |  |  | $ | 25 |  |  | $ | 2 |
Commercial and Industrial |  | $ | 444 |  |  | $ | 444 |  |  | $ | 39 |  |  | $ | 199 |  |  | $ | 2 |  |  | $ | - |
Consumer |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
As of December 31, 2018 the Company had $61 thousand of foreclosed residential real estate property obtained by physical possession and $278 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions. This compares to the Company having $25 thousand of foreclosed residential real estate property obtained by physical possession and $55 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions as of December 31, 2017. The ALLL has a direct impact on the provision expense. An increase in the ALLL is funded through recoveries and provision expense. The following tables summarize the activities in the allowance for credit losses. The following is an analysis of the allowance for credit losses for the years ended December 31:
|  | (In Thousands) |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Allowance for Loan Losses |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of year |  | $ | 6,868 |  |  | $ | 6,784 |  |  | $ | 6,057 |
Provision for loan loss |  |  | 324 |  |  |  | 222 |  |  |  | 1,121 |
Loans charged off |  |  | (580 | ) |  |  | (288 | ) |  |  | (550 | )
Recoveries |  |  | 163 |  |  |  | 150 |  |  |  | 156 |
Balance at ending of year |  | $ | 6,775 |  |  | $ | 6,868 |  |  | $ | 6,784 |
Allowance for Unfunded Loan Commitments & Letters of Credit |  | $ | 274 |  |  | $ | 227 |  |  | $ | 217 |
Total Allowance for Credit Losses |  | $ | 7,049 |  |  | $ | 7,095 |  |  | $ | 7,001 |
The Company segregates its Allowance for Loan and Lease Losses (ALLL) into two reserves: The ALLL and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total Allowance for Credit Losses (ACL). The AULC is reported within other liabilities on the balance sheet while the ALLL is netted within the loans on the consolidated balance sheet. The ACL presented above represents the full amount of reserves available to absorb possible credit losses. The following table breaks down the activity within ALLL for each loan portfolio segment and shows the contribution provided by both the recoveries and the provision along with the reduction of the allowance caused by charge-offs. Additional analysis related to the allowance for credit losses as of December 31, 2018 and 2017 is as follows:
|  | (In Thousands) |
2018 |  | Consumer Real Estate |  |  |  |  | Agricultural Real Estate |  |  | Agricultural |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Unfunded Loan Commitment & Letters of Credit |  |  |  |  | Unallocated |  |  | Total |
ALLOWANCE FOR CREDIT LOSSES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 343 |  |  |  |  | $ | 244 |  |  | $ | 667 |  |  | $ | 3,149 |  |  | $ | 1,546 |  |  | $ | 441 |  |  | $ | 227 |  |  |  |  | $ | 478 |  |  | $ | 7,095 |
Charge Offs |  |  | (63 | ) |  |  |  |  | - |  |  |  | - |  |  |  | (16 | ) |  |  | (142 | ) |  |  | (359 | ) |  |  | - |  |  |  |  |  | - |  |  |  | (580 | )
Recoveries |  |  | 18 |  |  |  |  |  | - |  |  |  | 8 |  |  |  | 10 |  |  |  | 13 |  |  |  | 114 |  |  |  | - |  |  |  |  |  | - |  |  |  | 163 |
Provision (Credit) |  |  | (51 | ) |  |  |  |  | 6 |  |  |  | 93 |  |  |  | 74 |  |  |  | (112 | ) |  |  | 288 |  |  |  | - |  |  |  |  |  | 26 |  |  |  | 324 |
Other Non-interest expense related to unfunded |  |  | - |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 47 |  |  |  |  |  | - |  |  |  | 47 |
Ending Balance |  | $ | 247 |  |  |  |  | $ | 250 |  |  | $ | 768 |  |  | $ | 3,217 |  |  | $ | 1,305 |  |  | $ | 484 |  |  | $ | 274 |  |  |  |  | $ | 504 |  |  | $ | 7,049 |
Ending balance: individually evaluated for impairment |  | $ | 26 |  |  |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 5 |  |  | $ | - |  |  | $ | - |  |  |  |  | $ | - |  |  | $ | 31 |
Ending balance: collectively evaluated for impairment |  | $ | 221 |  |  |  |  | $ | 250 |  |  | $ | 768 |  |  | $ | 3,217 |  |  | $ | 1,300 |  |  | $ | 484 |  |  | $ | 274 |  |  |  |  | $ | 504 |  |  | $ | 7,018 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | - |  |  |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  |  |  | $ | - |  |  | $ | - |
FINANCING RECEIVABLES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 80,232 |  |  |  |  | $ | 68,588 |  |  | $ | 108,616 |  |  | $ | 419,131 |  |  | $ | 127,752 |  |  | $ | 42,055 |  |  | $ | - |  |  |  |  | $ | - |  |  | $ | 846,374 |
Ending balance: individually evaluated for impairment |  | $ | 757 |  |  |  |  | $ | - |  |  | $ | - |  |  | $ | 194 |  |  | $ | 1,103 |  |  | $ | - |  |  | $ | - |  |  |  |  | $ | - |  |  | $ | 2,054 |
Ending balance: collectively evaluated for impairment |  | $ | 79,475 |  |  |  |  | $ | 68,588 |  |  | $ | 108,616 |  |  | $ | 418,937 |  |  | $ | 126,649 |  |  | $ | 42,055 |  |  | $ | - |  |  |  |  | $ | - |  |  | $ | 844,320 |
|  | (In Thousands) |
2017 |  | Consumer Real Estate |  |  | Agricultural Real Estate |  |  | Agricultural |  |  | Commercial Real Estate |  |  | Commercial and Industrial |  |  | Consumer |  |  | Unfunded Loan Commitment & Letters of Credit |  |  | Unallocated |  |  | Total |
ALLOWANCE FOR CREDIT LOSSES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 316 |  |  | $ | 241 |  |  | $ | 616 |  |  | $ | 3,250 |  |  | $ | 1,318 |  |  | $ | 394 |  |  | $ | 217 |  |  | $ | 649 |  |  | $ | 7,001 |
Charge Offs |  |  | (4 | ) |  |  | - |  |  |  | - |  |  |  | (21 | ) |  |  | - |  |  |  | (263 | ) |  |  | - |  |  |  | - |  |  |  | (288 | )
Recoveries |  |  | 13 |  |  |  | - |  |  |  | 8 |  |  |  | 15 |  |  |  | 12 |  |  |  | 102 |  |  |  | - |  |  |  | - |  |  |  | 150 |
Provision (Credit) |  |  | 18 |  |  |  | 3 |  |  |  | 43 |  |  |  | (95 | ) |  |  | 216 |  |  |  | 208 |  |  |  | - |  |  |  | (171 | ) |  |  | 222 |
Other Non-interest expense related to unfunded |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10 |  |  |  | - |  |  |  | 10 |
Ending Balance |  | $ | 343 |  |  | $ | 244 |  |  | $ | 667 |  |  | $ | 3,149 |  |  | $ | 1,546 |  |  | $ | 441 |  |  | $ | 227 |  |  | $ | 478 |  |  | $ | 7,095 |
Ending balance: individually evaluated for impairment |  | $ | 21 |  |  | $ | - |  |  | $ | - |  |  | $ | 46 |  |  | $ | 39 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 106 |
Ending balance: collectively evaluated for impairment |  | $ | 322 |  |  | $ | 244 |  |  | $ | 667 |  |  | $ | 3,103 |  |  | $ | 1,507 |  |  | $ | 441 |  |  | $ | 227 |  |  | $ | 478 |  |  | $ | 6,989 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
FINANCING RECEIVABLES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 83,200 |  |  | $ | 64,044 |  |  | $ | 95,238 |  |  | $ | 409,953 |  |  | $ | 132,787 |  |  | $ | 37,802 |  |  | $ | - |  |  | $ | - |  |  | $ | 823,024 |
Ending balance: individually evaluated for impairment |  | $ | 575 |  |  | $ | 101 |  |  | $ | - |  |  | $ | 625 |  |  | $ | 444 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 1,745 |
Ending balance: collectively evaluated for impairment |  | $ | 82,625 |  |  | $ | 63,943 |  |  | $ | 95,238 |  |  | $ | 409,328 |  |  | $ | 132,343 |  |  | $ | 37,802 |  |  | $ | - |  |  | $ | - |  |  | $ | 821,279 |

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