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Loans

9 Months Ended

Sep. 30, 2020

NOTE 4 LOANS

Loan balances as of September 30, 2020 and December 31, 2019 are summarized below:

	(In Thousands)
Loans:	September 30, 2020			December 31, 2019
Consumer Real Estate	$	175,963		$	165,349
Agricultural Real Estate		192,883			199,105
Agricultural		103,330			111,820
Commercial Real Estate		595,146			551,309
Commercial and Industrial		238,175			135,631
Consumer		53,320			49,237
Other		9,030			8,314
		1,367,847			1,220,765
Less: Net deferred loan fees and costs		(3,985	)		(1,766	)
		1,363,862			1,218,999
Less: Allowance for loan losses		(11,883	)		(7,228	)
Loans - Net	$	1,351,979		$	1,211,771

Other loans primarily fund public improvement in the Bank’s service area.

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of September 30, 2020:

	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	128,976	$	46,987
Agricultural Real Estate		101,191		91,692
Agricultural		89,810		13,520
Commercial Real Estate		446,886		148,260
Commercial and Industrial		210,588		27,587
Consumer		49,050		4,270
Other		8,976		54

As of September 30, 2020 and December 31, 2019 one to four family residential mortgage loans amounting to $40.5 million and $42.1 million, respectively, have been pledged as security for future loans and existing loans the Bank has received from the Federal Home Loan Bank.

Unless listed separately, Other loans are included in the Commercial and Industrial category for the remainder of the tables in this Note 4.

The following table represents the contractual aging of the recorded investment (in thousands) in past due loans by portfolio classification of loans as of September 30, 2020 and December 31, 2019, net of deferred loan fees and costs:

September 30, 2020	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	$	80	$	33	$	-	$	113	$	175,482	$	175,595	$	-
Agricultural Real Estate		-		-		-		-		192,577		192,577		-
Agricultural		-		-		-		-		103,476		103,476		-
Commercial Real Estate		169		-		-		169		593,767		593,936		-
Commercial and Industrial		-		-		-		-		244,823		244,823		-
Consumer		34		8		-		42		53,413		53,455		-

Total	$	283	$	41	$	-	$	324	$	1,363,538	$	1,363,862	$	-

December 31, 2019	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	$	355	$	70	$	-	$	425	$	164,266	$	164,691	$	-
Agricultural Real Estate		-		107		-		107		198,752		198,859		-
Agricultural		78		7		-		85		111,864		111,949		-
Commercial Real Estate		-		-		-		-		550,082		550,082		-
Commercial and Industrial		201		267		-		468		143,541		144,009		-
Consumer		54		-		-		54		49,355		49,409		-

Total	$	688	$	451	$	-	$	1,139	$	1,217,860	$	1,218,999	$	-

The following table presents the recorded investment in nonaccrual loans by class of loans as of September 30, 2020 and December 31, 2019:

	(In Thousands)
	September 30, 2020		December 31, 2019

Consumer Real Estate	$	1,523	$	1,209
Agricultural Real Estate		3,775		88
Agricultural		517		1,769
Commercial Real Estate		685		37
Commercial & Industrial		1,328		288
Consumer		42		9
Total	$	7,870	$	3,400

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 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.

Other: Primarily funds public improvements in the Bank’s service area. Repayment ability is based on the continuance of the taxation revenue as the source of repayment.

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.

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.

Zero (0) Unclassified. Any loan which has not been assigned a classification.

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.

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.

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 that 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:

At inception, the loan was secured with collateral possessing a loan-to-value adequate to protect the Bank from loss;

The loan exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance;

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.

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.

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.

Six (6) Substandard. One or more of the following characteristics may be exhibited in loans classified substandard:

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.

Loans are inadequately protected by the current net worth and paying capacity of the borrower.

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.

Loans are characterized by the distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.

Unusual courses of action are needed to maintain a high probability of repayment.

The borrower is not generating enough cash flow to repay loan principal but continues to make interest payments.

The lender is forced into a subordinate position or unsecured collateral position due to flaws in documentation.

Loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms.

The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.

There is significant deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

Seven (7) Doubtful. One or more of the following characteristics may be exhibited in loans classified Doubtful:

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.

The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.

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.

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.

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The following table represents the risk category of loans by portfolio class, net of deferred fees and costs, based on the most recent analysis performed as of September 30, 2020 (Refer to the table in the COVID-19 section for deferrals impacted by the Coronavirus Aid, Relief and Economic Security Act (CARES Act.) and December 31, 2019:

	(In Thousands)
	Agricultural				Commercial		Commercial
	Real Estate		Agricultural		Real Estate		and Industrial		Other
September 30, 2020
1-2	$	12,929	$	4,631	$	11,389	$	89,381	$	-
3		38,127		26,818		164,410		26,846		4,716
4		112,786		69,383		402,362		110,393		4,314
5		10,387		1,991		10,631		4,143		-
6		18,348		653		5,144		4,131		-
7		-		-		-		899		-
8		-		-		-		-		-
Total	$	192,577	$	103,476	$	593,936	$	235,793	$	9,030

	Agricultural				Commercial		Commercial
	Real Estate		Agricultural		Real Estate		and Industrial		Other
December 31, 2019
1-2	$	14,655	$	4,093	$	7,860	$	3,844	$	-
3		33,951		36,913		131,780		19,790		3,168
4		116,834		65,414		401,404		103,527		5,146
5		14,836		2,300		3,699		2,465		-
6		18,583		3,229		5,339		4,983		-
7		-		-		-		1,086		-
8		-		-		-		-		-
Total	$	198,859	$	111,949	$	550,082	$	135,695	$	8,314

For consumer residential real estate, and other, the Company also evaluates credit quality based on the aging status of the loan, as 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 September 30, 2020 and December 31, 2019.

	(In Thousands)
	Consumer		Consumer
	Real Estate		Real Estate
	September 30, 2020		December 31, 2019
Grade
Pass	$	172,132	$	160,930
Special Mention (5)		1,234		415
Substandard (6)		2,229		3,346
Doubtful (7)		-		-
Total	$	175,595	$	164,691

	(In Thousands)
	Consumer - Credit				Consumer - Other
	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Performing	$	3,430	$	4,076	$	49,868	$	44,831
Nonperforming		-		15		157		487
Total	$	3,430	$	4,091	$	50,025	$	45,318

Information about impaired loans as of September 30, 2020, December 31, 2019 and September 30, 2019 are as follows:

			(In Thousands)
	September 30, 2020		December 31, 2019		September 30, 2019

Impaired loans without a valuation allowance	$	5,134	$	2,420	$	1,914
Impaired loans with a valuation allowance		10,125		641		1,314
Total impaired loans	$	15,259	$	3,061	$	3,228
Valuation allowance related to impaired loans	$	1,198	$	197	$	187
Total non-accrual loans	$	7,870	$	3,400	$	3,275
Total loans past-due ninety days or more and still accruing	$	408	$	-	$	-
Quarter ended average investment in impaired loans	$	13,517	$	3,120	$	3,141
Year to date average investment in impaired loans	$	8,613	$	2,649	$	2,492

There were $1.2 million additional funds available to be advanced in connection with impaired loans as of September 30, 2020.

The Bank had approximately $6.4 million of its impaired loans classified as troubled debt restructured (TDR) as of September 30, 2020, $1.0 million as of December 31, 2019 and $1.1 million as of September 30, 2019.

Modification programs focused on payment pattern changes and/or modified maturity dates with most receiving a combination of the two concessions. The modifications did not result in the contractual forgiveness of principal. In 2020, two loans resulted in payment changes from a monthly payment to principal and interest at maturity on June 19, 2020. One loan was paid off in May with the other loan past due and in the foreclosure process. In the second quarter of 2020, three loans had a rate concession along with the amortization extended. During the third quarter of 2020, one loan was modified with a rate concession. All interest was paid current at the time of the modifications. Consequently, the financial impact of the modifications was immaterial to the ALLL. During the year to date 2020, there were 6 new loans considered TDR with one of the loans subsequently paid off in May. There were 5 new loans considered TDR year to date 2019. The following tables represents three and nine months ended September 30, 2020 and 2019:

			Pre-		Post-					Pre-		Post-
Three Months	Number of		Modification		Modification		Nine Months	Number of		Modification		Modification
September 30, 2020	Contracts		Outstanding		Outstanding		September 30, 2020	Contracts		Outstanding		Outstanding
(in thousands)	Modified in the		Recorded		Recorded		(in thousands)	Modified in the		Recorded		Recorded
Troubled Debt Restructurings	Last Three Months		Investment		Investment		Troubled Debt Restructurings	Last Nine Months		Investment		Investment
Consumer Real Estate		-	$	-	$	-	Consumer Real Estate		-	$	-	$	-
Commercial Real Estate		-		-		-	Commercial Real Estate		2		981		981
Ag Real Estate		-		-		-	Ag Real Estate		2		5,380		5,380
Commercial and Industrial		1		50		50	Commercial and Industrial		1		50		50
Agricultural		-		-		-	Agricultural		1		164		164

			Pre-		Post-					Pre-		Post-
Three Months	Number of		Modification		Modification		Nine Months	Number of		Modification		Modification
September 30, 2019	Contracts		Outstanding		Outstanding		September 30, 2019	Contracts		Outstanding		Outstanding
(in thousands)	Modified in the		Recorded		Recorded		(in thousands)	Modified in the		Recorded		Recorded
Troubled Debt Restructurings	Last Three Months		Investment		Investment		Troubled Debt Restructurings	Last Nine Months		Investment		Investment
Consumer Real Estate		1	$	74	$	74	Consumer Real Estate		1	$	74	$	74
Commercial Real Estate		-		-		-	Commercial Real Estate		-		-		-
Ag Real Estate		-		-		-	Ag Real Estate		-		-		-
Commercial and Industrial		-		-		-	Commercial and Industrial		4		812		812
Agricultural		-		-		-	Agricultural		-		-		-

For the three and nine month periods ended September 30, 2020 and 2019, there were no TDRs that subsequently defaulted after modification.

For the nine month period ended September 30, 2020, there was one impaired commercial real estate loan of $481 thousand that was classified as TDR paid off. There were no impaired loans classified as TDR paid off for the nine month period ended September 30, 2019.

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For the majority of the Bank’s impaired loans, the Bank will apply the fair value of collateral or use a measurement incorporating the present value of expected future cash flows discounted at the loan’s effective rate of interest. To determine 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. 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-off 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 class of loans for the three and nine months ended September 30, 2020 and September 30, 2019 and for the year ended December 31, 2019.

	(In Thousands)
											QTD
							QTD		QTD		Interest
Three Months Ended September 30, 2020			Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	780	$	780	$	-	$	791	$	41	$	5
Agricultural Real Estate		1,589		1,589		-		873		2		-
Agricultural		533		533		-		375		4		1
Commercial Real Estate		186		186		-		186		1		-
Commercial and Industrial		2,021		2,021		-		1,190		5		-
Consumer		25		25		-		26		21		-
With a specific allowance recorded:
Consumer Real Estate		205		205		43		119		8		-
Agricultural Real Estate		5,425		5,425		432		5,450		2		-
Agricultural		188		188		28		342		3		-
Commercial Real Estate		3,033		3,033		44		3,046		-		-
Commercial and Industrial		1,274		1,274		651		1,119		3		-
Consumer		-		-		-		-		-		-
Totals:
Consumer Real Estate	$	985	$	985	$	43	$	910	$	49	$	5
Agricultural Real Estate	$	7,014	$	7,014	$	432	$	6,323	$	4	$	-
Agricultural	$	721	$	721	$	28	$	717	$	7	$	1
Commercial Real Estate	$	3,219	$	3,219	$	44	$	3,232	$	1	$	-
Commercial and Industrial	$	3,295	$	3,295	$	651	$	2,309	$	8	$	-
Consumer	$	25	$	25	$	-	$	26	$	21	$	-

	(In Thousands)
											Interest
Year Ended December 31, 2019			Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	648	$	648	$	-	$	626	$	32	$	9
Agricultural Real Estate		-		-		-		204		-		-
Agricultural		491		491		-		124		-		-
Commercial Real Estate		299		299		-		238		19		-
Commercial and Industrial		982		982		-		637		66		-
Consumer		-		-		-		-		-		-
With a specific allowance recorded:
Consumer Real Estate		181		184		30		211		-		-
Agricultural Real Estate		-		-		-		22		1		-
Agricultural		200		200		21		29		-		-
Commercial Real Estate		-		-		-		-		-		-
Commercial and Industrial		227		377		142		555		-		-
Consumer		33		33		4		3		-		-
Totals:
Consumer Real Estate	$	829	$	832	$	30	$	837	$	32	$	9
Agricultural Real Estate	$	-	$	-	$	-	$	226	$	1	$	-
Agricultural	$	691	$	691	$	21	$	153	$	-	$	-
Commercial Real Estate	$	299	$	299	$	-	$	238	$	19	$	-
Commercial and Industrial	$	1,209	$	1,359	$	142	$	1,192	$	66	$	-
Consumer	$	33	$	33	$	4	$	3	$	-	$	-

	(In Thousands)
											QTD
							QTD		QTD		Interest
Three Months Ended September 30, 2019			Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	626	$	626	$	-	$	628	$	9	$	3
Agricultural Real Estate		406		406		-		406		-		-
Agricultural		368		368		-		368		-		-
Commercial Real Estate		304		304		-		267		7		-
Commercial and Industrial		210		210		-		219		3		-
Consumer		-		-		-		-		-		-
With a specific allowance recorded:
Consumer Real Estate		126		128		22		172		-		-
Agricultural Real Estate		-		-		-		-		-		-
Agricultural		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		14		-
Commercial and Industrial		1,188		1,188		165		1,081		-		-
Consumer		-		-		-		-		-		-
Totals:
Consumer Real Estate	$	752	$	754	$	22	$	800	$	9	$	3
Agricultural Real Estate	$	406	$	406	$	-	$	406	$	-	$	-
Agricultural	$	368	$	368	$	-	$	368	$	-	$	-
Commercial Real Estate	$	304	$	304	$	-	$	267	$	21	$	-
Commercial and Industrial	$	1,398	$	1,398	$	165	$	1,300	$	3	$	-
Consumer	$	-	$	-	$	-	$	-	$	-	$	-

	(In Thousands)
											YTD
							YTD		YTD		Interest
Nine Months Ended September 30, 2020			Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	780	$	780	$	-	$	688	$	120	$	9
Agricultural Real Estate		1,589		1,589		-		451		6		-
Agricultural		533		533		-		367		9		1
Commercial Real Estate		186		186		-		199		3		-
Commercial and Industrial		2,021		2,021		-		819		18		-
Consumer		25		25		-		21		37		-
With a specific allowance recorded:
Consumer Real Estate		205		205		43		60		10		-
Agricultural Real Estate		5,425		5,425		432		2,475		7		-
Agricultural		188		188		28		208		6		-
Commercial Real Estate		3,033		3,033		44		2,389		-		-
Commercial and Industrial		1,274		1,274		651		929		10		-
Consumer		-		-		-		7		-		-
Totals:
Consumer Real Estate	$	985	$	985	$	43	$	748	$	130	$	9
Agricultural Real Estate	$	7,014	$	7,014	$	432	$	2,926	$	13	$	-
Agricultural	$	721	$	721	$	28	$	575	$	15	$	1
Commercial Real Estate	$	3,219	$	3,219	$	44	$	2,588	$	3	$	-
Commercial and Industrial	$	3,295	$	3,295	$	651	$	1,748	$	28	$	-
Consumer	$	25	$	25	$	-	$	28	$	37	$	-

	(In Thousands)
											YTD
							YTD		YTD		Interest
Nine Months Ended September 30, 2019			Unpaid				Average		Interest		Income
	Recorded		Principal		Related		Recorded		Income		Recognized
	Investment		Balance		Allowance		Investment		Recognized		Cash Basis
With no related allowance recorded:
Consumer Real Estate	$	626	$	626	$	-	$	625	$	24	$	7
Agricultural Real Estate		406		406		-		135		-		-
Agricultural		368		368		-		123		-		-
Commercial Real Estate		304		304		-		217		14		-
Commercial and Industrial		210		210		-		697		9		-
Consumer		-		-		-		-		-		-
With a specific allowance recorded:
Consumer Real Estate		126		128		22		220		-		-
Agricultural Real Estate		-		-		-		-		-		-
Agricultural		-		-		-		24		-		-
Commercial Real Estate		-		-		-		-		-		-
Commercial and Industrial		1,188		1,188		165		451		37		-
Consumer		-		-		-		-		-		-
Totals:
Consumer Real Estate	$	752	$	754	$	22	$	845	$	24	$	7
Agricultural Real Estate	$	406	$	406	$	-	$	135	$	-	$	-
Agricultural	$	368	$	368	$	-	$	147	$	-	$	-
Commercial Real Estate	$	304	$	304	$	-	$	217	$	14	$	-
Commercial and Industrial	$	1,398	$	1,398	$	165	$	1,148	$	46	$	-
Consumer	$	-	$	-	$	-	$	-	$	-	$	-

As of September 30, 2020, the Company had $71 thousand foreclosed residential real estate property obtained by physical possession and $849 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings are in process according to local jurisdictions. As of September 30, 2019, the Company had $187 thousand of foreclosed residential real estate property obtained by physical possession and $379 thousand of consumer mortgage loans secured by residential real estate properties for which foreclosure proceedings were in process according to local jurisdictions.

The Allowance for Loan and Lease Losses (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.

	(In Thousands)
	Nine Months Ended			Twelve Months Ended
	September 30, 2020			December 31, 2019
Allowance for Loan & Lease Losses
Balance at beginning of year	$	7,228		$	6,775
Provision for loan loss		4,986			1,138
Loans charged off		(480	)		(841	)
Recoveries		149			156
Allowance for Loan & Lease Losses	$	11,883		$	7,228
Allowance for Unfunded Loan Commitments & Letters of Credit	$	633		$	479
Total Allowance for Credit Losses	$	12,516		$	7,707

The Company segregates its 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 ALLL does not include an accretable yield of $1.7 million and $2.0 million as September 30, 2020 and December 31, 2019 related to the acquisition of Bank of Geneva as previously discussed in Note 2.

The AULC is reported within other liabilities on the balance sheet while the ALLL is netted within the loans, net asset line. The ACL presented above represents the full amount of reserves available to absorb possible credit losses.

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The following table breaks down the activity within ACL for each loan portfolio classification 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, presented in thousands, related to the allowance for credit losses for the three and nine months ended September 30, 2020 and September 30, 2019 in addition to the ending balances as of December 31, 2019 is as follows:

	Consumer Real Estate			Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial		Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
Three Months Ended September 30, 2020
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	570		$	813		$	1,036		$	4,458	$	2,423	$	561		$	605	$	72	$	10,538
Charge Offs		-			-			-			-		-		(79	)		-		-		(79	)
Recoveries		2			-			-			2		10		28			-		-		42
Provision (Credit)		(42	)		(51	)		(367	)		1,275		839		94			-		239		1,987
Other Non-interest expense related to unfunded		-			-			-			-		-		-			28				28
Ending Balance	$	530		$	762		$	669		$	5,735	$	3,272	$	604		$	633	$	311	$	12,516
Ending balance: individually evaluated for impairment	$	43		$	432		$	28		$	44	$	651	$	-		$	-	$	-	$	1,198
Ending balance: collectively evaluated for impairment	$	487		$	330		$	641		$	5,691	$	2,621	$	604		$	633	$	311	$	11,318
Ending balance: loans acquired with deteriorated credit quality	$	-		$	-		$	-		$	-	$	-	$	-		$	-	$	-	$	-
FINANCING RECEIVABLES:
Ending balance	$	175,595		$	192,577		$	103,476		$	593,936	$	244,823	$	53,455		$	-	$	-	$	1,363,862
Ending balance: individually evaluated for impairment	$	985		$	7,014		$	721		$	3,219	$	3,295	$	25		$	-	$	-	$	15,259
Ending balance: collectively evaluated for impairment	$	174,567		$	185,563		$	102,755		$	590,717	$	241,528	$	53,339		$	-	$	-	$	1,348,469
Ending balance: loans acquired with deteriorated credit quality	$	43		$	-		$	-		$	-	$	-	$	91		$	-	$	-	$	134

December 31, 2019	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:
Ending Balance	$	311	$	314	$	691	$	3,634	$	1,727	$	551	$	479	$	-	$	7,707
Ending balance: individually evaluated for impairment	$	30	$	-	$	21	$	-	$	142	$	4	$	-	$	-	$	197
Ending balance: collectively evaluated for impairment	$	281	$	314	$	670	$	3,634	$	1,585	$	547	$	479	$	-	$	7,510
Ending balance: loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
FINANCING RECEIVABLES:
Ending balance	$	164,691	$	198,859	$	111,949	$	550,082	$	144,009	$	49,409	$	-	$	-	$	1,218,999
Ending balance: individually evaluated for impairment	$	829	$	-	$	691	$	299	$	1,209	$	33	$	-	$	-	$	3,061
Ending balance: collectively evaluated for impairment	$	163,816	$	198,859	$	111,258	$	549,783	$	142,694	$	49,376	$	-	$	-	$	1,215,786
Ending balance: loans acquired with deteriorated credit quality	$	46	$	-	$	-	$	-	$	106	$	-	$	-	$	-	$	152

	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
Three Months Ended September 30, 2019
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	275		$	340	$	756		$	3,320		$	1,461		$	526		$	370	$	5		$	7,053
Charge Offs		(39	)		-		(22	)		-			(55	)		(103	)		-		-			(219	)
Recoveries		-			-		1			2			13			32			-		-			48
Provision (Credit)		38			12		(2	)		(17	)		131			90			-		(5	)		247
Other Non-interest expense related to unfunded		-			-		-			-			-			-			60		-			60
Ending Balance	$	274		$	352	$	733		$	3,305		$	1,550		$	545		$	430	$	-		$	7,189
Ending balance: individually evaluated for impairment	$	22		$	-	$	-		$	-		$	165		$	-		$	-	$	-		$	187
Ending balance: collectively evaluated for impairment	$	252		$	352	$	733		$	3,305		$	1,385		$	545		$	430	$	-		$	7,002
Ending balance: loans acquired with deteriorated credit quality	$	-		$	-	$	-		$	-		$	-		$	-		$	-	$	-		$	-
FINANCING RECEIVABLES:
Ending balance	$	158,458		$	200,625	$	110,405		$	501,095		$	138,395		$	49,718		$	-	$	-		$	1,158,696
Ending balance: individually evaluated for impairment	$	752		$	406	$	368		$	304		$	1,398		$	-		$	-	$	-		$	3,228
Ending balance: collectively evaluated for impairment	$	157,659		$	200,219	$	110,037		$	500,791		$	136,997		$	49,718		$	-	$	-		$	1,155,421
Ending balance: loans acquired with deteriorated credit quality	$	47		$	-	$	-		$	-		$	-		$	-		$	-	$	-		$	47

	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated		Total
Nine Months Ended September 30, 2020
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	311		$	314	$	691		$	3,634		$	1,727		$	551		$	479	$	-	$	7,707
Charge Offs		(35	)		-		-			(8	)		(165	)		(272	)		-		-		(480	)
Recoveries		7			-		-			7			19			116			-		-		149
Provision (Credit)		247			448		(22	)		2,102			1,691			209			-		311		4,986
Other Non-interest expense related to unfunded		-			-		-			-			-			-			154		-		154
Ending Balance	$	530		$	762	$	669		$	5,735		$	3,272		$	604		$	633	$	311	$	12,516
Ending balance: individually evaluated for impairment	$	43		$	432	$	28		$	44		$	651		$	-		$	-	$	-	$	1,198
Ending balance: collectively evaluated for impairment	$	487		$	330	$	641		$	5,691		$	2,621		$	604		$	633	$	311	$	11,318
Ending balance: loans acquired with deteriorated credit quality	$	-		$	-	$	-		$	-		$	-		$	-		$	-	$	-	$	-
FINANCING RECEIVABLES:
Ending balance	$	175,595		$	192,577	$	103,476		$	593,936		$	244,823		$	53,455		$	-	$	-	$	1,363,862
Ending balance: individually evaluated for impairment	$	985		$	7,014	$	721		$	3,219		$	3,295		$	25		$	-	$	-	$	15,259
Ending balance: collectively evaluated for impairment	$	174,567		$	185,563	$	102,755		$	590,717		$	241,528		$	53,339		$	-	$	-	$	1,348,469
Ending balance: loans acquired with deteriorated credit quality	$	43		$	-	$	-		$	-		$	-		$	91		$	-	$	-	$	134

	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate		Commercial and Industrial			Consumer			Unfunded Loan Commitment & Letters of Credit		Unallocated			Total
Nine Months Ended September 30, 2019
ALLOWANCE FOR CREDIT LOSSES:
Beginning balance	$	247		$	250	$	768		$	3,217	$	1,305		$	484		$	274	$	504		$	7,049
Charge Offs		(95	)		-		(22	)		-		(55	)		(382	)		-		-			(554	)
Recoveries		-			-		3			7		21			97			-		-			128
Provision (Credit)		122			102		(16	)		81		279			346			-		(504	)		410
Other Non-interest expense related to unfunded		-			-		-			-		-			-			156		-			156
Ending Balance	$	274		$	352	$	733		$	3,305	$	1,550		$	545		$	430	$	-		$	7,189
Ending balance: individually evaluated for impairment	$	22		$	-	$	-		$	-	$	165		$	-		$	-	$	-		$	187
Ending balance: collectively evaluated for impairment	$	252		$	352	$	733		$	3,305	$	1,385		$	545		$	430	$	-		$	7,002
Ending balance: loans acquired with deteriorated credit quality	$	-		$	-	$	-		$	-	$	-		$	-		$	-	$	-		$	-
FINANCING RECEIVABLES:
Ending balance	$	158,458		$	200,625	$	110,405		$	501,095	$	138,395		$	49,718		$	-	$	-		$	1,158,696
Ending balance: individually evaluated for impairment	$	752		$	406	$	368		$	304	$	1,398		$	-		$	-	$	-		$	3,228
Ending balance: collectively evaluated for impairment	$	157,659		$	200,219	$	110,037		$	500,791	$	136,997		$	49,718		$	-	$	-		$	1,155,421
Ending balance: loans acquired with deteriorated credit quality	$	47		$	-	$	-		$	-	$	-		$	-		$	-	$	-		$	47