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Loans

12 Months Ended

Dec. 31, 2024

Note 4 - Loans

The Company had $3.0 million in loans held for sale at December 31, 2024 as compared to $1.6 million in loans held for sale at December 31, 2023.

Loans at December 31 are summarized below:


	(In Thousands)
Loans:	2024			2023
Consumer Real Estate	$	520,114		$	521,895
Agricultural Real Estate		216,401			223,791
Agricultural		152,080			132,560
Commercial Real Estate		1,310,811			1,337,766
Commercial and Industrial		275,152			254,935
Consumer		63,009			79,591
Other		24,978			30,136
		2,562,545			2,580,674
Less: Net deferred loan fees and costs and other*		(676	)		517
		2,561,869			2,581,191
Less: Allowance for credit losses		(25,826	)		(25,024	)
Loans - Net	$	2,536,043		$	2,556,167

*This chart contains fair value adjustments to the basis of derivatives in the amount of $1.1 million and $2.7 million at December 31, 2024 and December 31, 2023, respectively.

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 other factors.

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.

The following is a maturity schedule by major category of loans excluding fair value adjustments at December 31, 2024:


	(In Thousands)
			After One		After Five
	Within		Year Within		Years Within		After
	One Year		Five Years		Fifteen Years		Fifteen Years		Total
Consumer Real Estate	$	19,180	$	25,777	$	156,930	$	320,327	$	522,214
Agricultural Real Estate		6,490		7,715		65,320		137,074		216,599
Agricultural		82,568		55,905		8,888		4,741		152,102
Commercial Real Estate		138,177		403,661		565,194		203,829		1,310,861
Commercial and Industrial		127,540		83,964		63,867		148		275,519
Consumer		2,274		50,750		10,138		41		63,203
Other		77		956		23,949		-		24,982
	$	376,306	$	628,728	$	894,286	$	666,160	$	2,565,480

The distribution of fixed rate loans and variable rate loans by major loan category is as follows as of December 31, 2024:


	(In Thousands)
	Fixed		Variable
	Rate		Rate
Consumer Real Estate	$	305,062	$	215,052
Agricultural Real Estate		118,808		97,593
Agricultural		54,099		97,981
Commercial Real Estate		934,197		376,614
Commercial and Industrial		148,542		126,610
Consumer		62,977		32
Other		15,270		9,708

Variable rate loans that have reached ceiling or floor limits are reported as fixed rate loans until such time as their rates adjust away from those limits. Other loans 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, 2024 and 2023, net of deferred loan fees and costs:


	(In Thousands)
December 31, 2024	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables
Consumer Real Estate	$	2,533	$	547	$	559	$	3,639	$	516,753	$	520,392
Agricultural Real Estate		651		-		-		651		215,486		216,137
Agricultural		44		-		79		123		152,258		152,381
Commercial Real Estate		54		141		360		555		1,307,906		1,308,461
Commercial and Industrial		122		5		57		184		299,613		299,797
Consumer		365		19		62		446		63,181		63,627
Total	$	3,769	$	712	$	1,117	$	5,598	$	2,555,197	$	2,560,795


	(In Thousands)
December 31, 2023	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Financing Receivables
Consumer Real Estate	$	1,914	$	137	$	670	$	2,721	$	519,187	$	521,908
Agricultural Real Estate		-		3,429		55		3,484		219,995		223,479
Agricultural		-		1,132		2,977		4,109		128,654		132,763
Commercial Real Estate		380		-		255		635		1,334,440		1,335,075
Commercial and Industrial		145		-		199		344		284,550		284,894
Consumer		218		37		26		281		80,072		80,353
Total	$	2,657	$	4,735	$	4,182	$	11,574	$	2,566,898	$	2,578,472

The following tables present the recorded investment in nonaccrual loans by portfolio class of loans as of December 31, 2024 and December 31, 2023:


	(In Thousands)
	December 31, 2024
	Nonaccrual				Loans Past
	With No				Due Over
	Allowance				89 Days
	for Credit Loss		Nonaccrual		Still Accruing

Consumer Real Estate	$	1,637	$	2,369	$	-
Agricultural Real Estate		130		130		-
Agricultural		90		90		-
Commercial Real Estate		360		360		-
Commercial & Industrial		57		57		-
Consumer		118		118		-
Total	$	2,392	$	3,124	$	-


	(In Thousands)
	December 31, 2023
	Nonaccrual				Loans Past
	With No				Due Over
	Allowance				89 Days
	for Credit Loss		Nonaccrual		Still Accruing

Consumer Real Estate	$	1,006	$	1,190	$	-
Agricultural Real Estate		15,949		15,949		-
Agricultural		4,671		4,671		-
Commercial Real Estate		254		254		-
Commercial & Industrial		198		198		-
Consumer		91		91		-
Total	$	22,169	$	22,353	$	-

Interest income on nonaccrual loans, recognized on a cash basis, was $93 thousand and $338 thousand for the years ended December 31, 2024 and 2023, respectively.

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 RMA 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 rate is summarized by high liquidity, minimum risk, strong ratios, and low handling costs.

Two (2) Good. Desirable loans of somewhat less stature than rate 1, but with strong financial statements. Loan supported by financial statements containing strong balance sheets 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. There may be some weakness but with offsetting features of other support readily available. Loans that are meeting the terms of repayment.

Loans may be rated 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 is observed, a lower risk rating is warranted.

Four (4) Satisfactory / Monitored. A “4” (Satisfactory/Monitored) risk rating 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 which 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 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; however, 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, however, 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.

The following table reflects the risk category of loans by portfolio class based on the most recent analysis performed as of December 31, 2024 and 2023 based on year of origination:


	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
															Revolving		Revolving
															Loans		Loans
													Term		Amortized		Converted		Grand
	2024		2023		2022		2021		2020		Prior		Total		Cost Basis		to Term		Total

Consumer Real Estate
Risk Rating
Pass (1-4)	$	40,257	$	64,316	$	79,503	$	89,800	$	74,996	$	106,007	$	454,879	$	61,097	$	237	$	516,213
Special Mention (5)		-		-		37		551		-		119		707		19		-		726
Substandard (6)		143		239		529		786		465		1,040		3,202		236		15		3,453
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Consumer Real Estate	$	40,400	$	64,555	$	80,069	$	91,137	$	75,461	$	107,166	$	458,788	$	61,352	$	252	$	520,392
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	13	$	13	$	-	$	-	$	13

Agricultural Real Estate
Risk Rating
Pass (1-4)	$	23,817	$	28,088	$	34,469	$	22,983	$	23,639	$	76,964	$	209,960	$	92	$	-	$	210,052
Special Mention (5)		-		-		-		-		-		13		13		-		-		13
Substandard (6)		5,696		-		371		-		-		5		6,072		-		-		6,072
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural Real Estate	$	29,513	$	28,088	$	34,840	$	22,983	$	23,639	$	76,982	$	216,045	$	92	$	-	$	216,137
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Risk Rating
Pass (1-4)	$	14,915	$	10,500	$	14,381	$	5,616	$	3,204	$	3,911	$	52,527	$	98,283	$	-	$	150,810
Special Mention (5)		-		13		-		8		-		-		21		30		-		51
Substandard (6)		-		21		-		-		29		-		50		1,470		-		1,520
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural	$	14,915	$	10,534	$	14,381	$	5,624	$	3,233	$	3,911	$	52,598	$	99,783	$	-	$	152,381
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
															Revolving		Revolving
															Loans		Loans
													Term		Amortized		Converted		Grand
	2024		2023		2022		2021		2020		Prior		Total		Cost Basis		to Term		Total

Commercial Real Estate
Risk Rating
Pass (1-4)	$	128,608	$	200,192	$	413,106	$	218,309	$	110,435	$	188,239	$	1,258,889	$	-	$	-	$	1,258,889
Special Mention (5)		-		-		12,590		-		1,352		753		14,695		-		-		14,695
Substandard (6)		-		34,299		-		-		-		578		34,877		-		-		34,877
Doubtful (7)		-		-		-		-		-				-		-		-		-
Total Commercial Real Estate	$	128,608	$	234,491	$	425,696	$	218,309	$	111,787	$	189,570	$	1,308,461	$	-	$	-	$	1,308,461
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	15	$	15	$	-	$	-	$	15

Commercial & Industrial
Risk Rating
Pass (1-4)	$	31,933	$	54,581	$	39,665	$	15,047	$	13,480	$	1,294	$	156,000	$	113,446	$	222	$	269,668
Special Mention (5)		-		137		-		188		26		416		767		459		-		1,226
Substandard (6)		39		348		29		-		-		28		444		3,481		-		3,925
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Commercial & Industrial	$	31,972	$	55,066	$	39,694	$	15,235	$	13,506	$	1,738	$	157,211	$	117,386	$	222	$	274,819
Gross charge-offs YTD	$	-	$	-	$	-			$	101	$	-	$	101	$	-	$	5	$	106

Other
Risk Rating
Pass (1-4)	$	-	$	-	$	-	$	15,829	$	5,068	$	4,081	$	24,978	$	-	$	-	$	24,978
Special Mention (5)		-		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Other	$	-	$	-	$	-	$	15,829	$	5,068	$	4,081	$	24,978	$	-	$	-	$	24,978
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
															Revolving		Revolving
															Loans		Loans
													Term		Amortized		Converted		Grand
	2023		2022		2021		2020		2019		Prior		Total		Cost Basis		to Term		Total

Consumer Real Estate
Risk Rating
Pass (1-4)	$	77,298	$	88,695	$	90,139	$	82,680	$	32,302	$	94,294	$	465,408	$	52,904	$	-	$	518,312
Special Mention (5)		1,228		40		-		-		-		134		1,402		-		-		1,402
Substandard (6)		-		261		558		163		246		952		2,180		14		-		2,194
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Consumer Real Estate	$	78,526	$	88,996	$	90,697	$	82,843	$	32,548	$	95,380	$	468,990	$	52,918	$	-	$	521,908
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural Real Estate
Risk Rating
Pass (1-4)	$	30,504	$	37,199	$	25,168	$	25,874	$	18,456	$	68,651	$	205,852	$	97	$	-	$	205,949
Special Mention (5)		-		861		14		-		149		359		1,383		-		-		1,383
Substandard (6)		-		-		12,196		186		259		3,506		16,147		-		-		16,147
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural Real Estate	$	30,504	$	38,060	$	37,378	$	26,060	$	18,864	$	72,516	$	223,382	$	97	$	-	$	223,479
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Agricultural
Risk Rating
Pass (1-4)	$	17,787	$	20,330	$	8,356	$	4,476	$	3,856	$	1,880	$	56,685	$	69,824	$	-	$	126,509
Special Mention (5)		38		621		112		-		-		-		771		330		-		1,101
Substandard (6)		514		634		2,009		498		-		-		3,655		1,498		-		5,153
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Agricultural	$	18,339	$	21,585	$	10,477	$	4,974	$	3,856	$	1,880	$	61,111	$	71,652	$	-	$	132,763
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-


	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
															Revolving		Revolving
															Loans		Loans
													Term		Amortized		Converted		Grand
	2023		2022		2021		2020		2019		Prior		Total		Cost Basis		to Term		Total

Commercial Real Estate
Risk Rating
Pass (1-4)	$	224,232	$	438,716	$	245,273	$	122,656	$	136,225	$	99,378	$	1,266,480	$	-	$	-	$	1,266,480
Special Mention (5)		34,864		9,100		-		10,793		626		12,342		67,725		-		-		67,725
Substandard (6)		-		-		-		-		-		795		795		-		-		795
Doubtful (7)		-		-		-		75		-		-		75		-		-		75
Total Commercial Real Estate	$	259,096	$	447,816	$	245,273	$	133,524	$	136,851	$	112,515	$	1,335,075	$	-	$	-	$	1,335,075
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial & Industrial
Risk Rating
Pass (1-4)	$	56,224	$	51,663	$	24,876	$	20,071	$	2,142	$	932	$	155,908	$	90,018	$	-	$	245,926
Special Mention (5)		716		69		211		146		437		357		1,936		6,016		-		7,952
Substandard (6)		74		454		-		-		31		17		576		122		-		698
Doubtful (7)		-		-		-		182		-		-		182		-		-		182
Total Commercial & Industrial	$	57,014	$	52,186	$	25,087	$	20,399	$	2,610	$	1,306	$	158,602	$	96,156	$	-	$	254,758
Gross charge-offs YTD	$	-	$	-	$	-	$	565	$	-	$	-	$	565	$	-	$	-	$	565

Other
Risk Rating
Pass (1-4)	$	2,810	$	-	$	16,761	$	5,790	$	445	$	4,330	$	30,136	$	-	$	-	$	30,136
Special Mention (5)		-		-		-		-		-		-		-		-		-		-
Substandard (6)		-		-		-		-		-		-		-		-		-		-
Doubtful (7)		-		-		-		-		-		-		-		-		-		-
Total Other	$	2,810	$	-	$	16,761	$	5,790	$	445	$	4,330	$	30,136	$	-	$	-	$	30,136
Gross charge-offs YTD	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

The following tables presents payment performance as of December 31, 2024 and 2023 by year of origination:


	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Term		Amortized		Grand
	2024		2023		2022		2021		2020		Prior		Total		Cost Basis		Total

Consumer
Payment Performance
Performing	$	13,437	$	13,521	$	27,264	$	5,917	$	2,310	$	582	$	63,031	$	477	$	63,508
Nonperforming		40		-		40		35		4		-		119		-		119
Total Consumer	$	13,477	$	13,521	$	27,304	$	5,952	$	2,314	$	582	$	63,150	$	477	$	63,627
Gross charge-offs YTD	$	201	$	69	$	62	$	14	$	-	$	-	$	346	$	-	$	346



	(In Thousands)
	Term Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Term		Amortized		Grand
	2023		2022		2021		2020		2019		Prior		Total		Cost Basis		Total

Consumer
Payment Performance
Performing	$	21,511	$	40,729	$	10,666	$	5,006	$	1,825	$	480	$	80,217	$	44	$	80,261
Nonperforming		26		58		-		6		-		2		92		-		92
Total Consumer	$	21,537	$	40,787	$	10,666	$	5,012	$	1,825	$	482	$	80,309	$	44	$	80,353
Gross charge-offs YTD	$	236	$	51	$	100	$	38	$	-	$	-	$	425	$	-	$	425

The following table presents collateral-dependent loans grouped by collateral as of December 31, 2024 and 2023:


	(In Thousands)
	Collateral
	Dependent Loans
	December 31, 2024		December 31, 2023
Consumer Real Estate	$	2,384	$	1,518
Agricultural Real Estate		125		15,888
Agricultural		50		4,998
Commercial Real Estate		360		255
Commercial & Industrial		28		17
Consumer		41		-
Total	$	2,988	$	22,676

Information about impaired loans as of and for the year ended December 31, 2022 is as follows:


	(In Thousands)
	2022
Average investment in impaired loans	$	10,710
Interest income recognized on impaired loans	$	361
Interest income recognized on a cash basis on impaired loans	$	97

The Bank had approximately $3.6 million of its impaired loans classified as modifications to borrowers experiencing financial difficulty as of December 31, 2022.

Under ASC 310-40, TDRs were eliminated from being classified as such for 2023 and were no longer be reported as such. 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. No modifications to borrowers experiencing financial difficulty were made during 2024. During 2023, one new loan was considered a modification to a borrower experiencing financial difficulty. The modification consisted of refinancing at a higher balance to a borrower experiencing financial difficulty that would not have otherwise been granted to a borrower. The amount of new money increase to the loan balance was $411 thousand. This loan was subsequently paid off during 2023.


December 31, 2024							December 31, 2023
			(In Thousands)							(In Thousands)
Modified Loans for Borrowers Experiencing Financial Difficulty	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 Real Estate		-	$	-	$	-	Commercial Real Estate		1	$	1,024	$	1,024

For the years ended December 31, 2024 and 2023, there were no modifications to borrowers experiencing financial difficulty that subsequently defaulted after modification.

The Bank applies 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 90 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. A broker's price opinion or appraisal will be completed on all home loans in litigation and any deficiency will be charged off before reaching 150 days delinquent. Commercial and agricultural credits are charged down/allocated 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.

As of December 31, 2024, the Company had no foreclosed residential real estate property obtained by physical possession and $890 thousand of consumer real estate loans secured by residential real estate properties for which foreclosure proceedings were in process according to local jurisdictions. This compares to the Company having no foreclosed residential real estate property obtained by physical possession and $679 thousand of consumer real estate loans secured by residential real estate properties for which foreclosure proceedings were in process according to local jurisdictions as of December 31, 2023.

On January 1, 2023, the Company adopted Accounting Standards Update ("ASU") No. 2016-13 - "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and implemented the current expected credit losses accounting standard. As a result, the Company recorded a one-time adjustment from equity into the allowance for credit losses and unfunded commitment liability in the amount of $4.5 million, or $3.4 million, net of tax.

Allowance for Credit Losses (ACL) has a direct impact on the provision expense. An increase in the ACL is funded through recoveries and provision expense.

The Company segregates its allowance into two reserves: The Allowance for Credit Losses (ACL) and the Allowance for Unfunded Loan Commitments and Letters of Credit (AULC). When combined, these reserves constitute the total Current Expected Credit Losses (CECL).

Additional analysis related to the allowance for credit losses as of December 31, 2024 and 2023 is as follows:


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate		Agricultural			Commercial Real Estate			Commercial and Industrial			Consumer			Total
2024
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	3,581		$	312	$	336		$	17,400		$	2,093		$	1,302		$	25,024
Provision for (recovery of) credit losses - loans		(31	)		583		(52	)		(834	)		1,411			(133	)		944
Charge-offs		(13	)		-		-			(15	)		(106	)		(346	)		(480	)
Recoveries		6			-		1			9			133			189			338
Ending Balance	$	3,543		$	895	$	285		$	16,560		$	3,531		$	1,012		$	25,826


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
2024
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	2,212
Provision for (recovery of) credit losses - off balance sheet credit exposures		(671	)
Charge-offs		-
Recoveries		-
Ending Balance	$	1,541


	(In Thousands)
	Consumer Real Estate			Agricultural Real Estate			Agricultural			Commercial Real Estate		Commercial and Industrial			Consumer			Total
2023
ALLOWANCE FOR CREDIT LOSSES
Beginning balance	$	998		$	349		$	751		$	11,924	$	5,382		$	909		$	20,313
Adoption of ASU 2016-13		2,874			(166	)		(650	)		3,501		(2,165	)		170			3,564
Provision for (recovery of) credit losses - loans		(326	)		24			225			1,967		(643	)		451			1,698
Charge-offs		-			-			-			-		(565	)		(425	)		(990	)
Recoveries		35			105			10			8		84			197			439
Ending Balance	$	3,581		$	312		$	336		$	17,400	$	2,093		$	1,302		$	25,024


	(In Thousands)
	Unfunded Loan Commitment & Letters of Credit
2023
ALLOWANCE FOR UNFUNDED LOAN COMMITMENTS AND LETTERS OF CREDIT
Beginning balance	$	1,262
Adoption of ASU 2016-13		904
Provision for (recovery of) credit losses - off balance sheet credit exposures		46
Charge-offs		-
Recoveries		-
Ending Balance	$	2,212