Loans (Tables)

6 Months Ended

Jun. 30, 2019

Loan Portfolio and Allowance for Loan Losses

The following table summarizes the primary segments of the loan portfolio and how those segments are analyzed within the allowance for loan losses as of June 30, 2019 and December 31, 2018 (in thousands):

June 30, 2019	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	213,014	$	1,186	$	26	$	211,802
Commercial		347,430		11,969		1,228		334,233
Agricultural		294,332		4,816		-		289,516
Construction		20,950		-		-		20,950
Consumer		9,854		5		-		9,849
Other commercial loans		76,179		2,134		320		73,725
Other agricultural loans		41,689		1,411		-		40,278
State and political subdivision loans		96,174		-		-		96,174
Total		1,099,622		21,521		1,574		1,076,527
Allowance for loan losses		13,304		803		-		12,501
Net loans	$	1,086,318	$	20,718	$	1,574	$	1,064,026

December 31, 2018	Total Loans		Individually evaluated for impairment		Loans acquired with deteriorated credit quality		Collectively evaluated for impairment
Real estate loans:
Residential	$	215,305	$	890	$	28	$	214,387
Commercial		319,265		13,327		1,321		304,617
Agricultural		284,520		5,592		-		278,928
Construction		33,913		-		-		33,913
Consumer		9,858		-		-		9,858
Other commercial loans		74,118		2,206		510		71,402
Other agricultural loans		42,186		1,435		-		40,751
State and political subdivision loans		102,718		-		-		102,718
Total		1,081,883		23,450		1,859		1,056,574
Allowance for loan losses		12,884		676		-		12,208
Net loans	$	1,068,999	$	22,774	$	1,859	$	1,044,366

Accretable Yield for Purchased Credit Impaired Loans

Changes in the accretable yield for PCI loans were as follows for the three and six months ended June 30, 2019 and 2018, respectively (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2019			2018			2019			2018
Balance at beginning of period	$	102		$	82		$	104		$	106
Accretion		(2	)		(23	)		(4	)		(47	)
Balance at end of period	$	100		$	59		$	100		$	59

Loans Acquired with Specific Evidence of Deterioration in Credit Quality

The following table presents additional information regarding loans acquired with specific evidence of deterioration in credit quality under ASC 310-30 (in thousands):

	June 30, 2019		December 31, 2018
Outstanding balance	$	4,332	$	4,529
Carrying amount		1,574		1,859

Impaired Financing Receivables with Associated Allowance Amount

The following table includes the recorded investment and unpaid principal balances for impaired financing receivables by class, excluding PCI loans, with the associated allowance amount, if applicable (in thousands):

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
June 30, 2019	Balance		Allowance		Allowance		Investment		Allowance
Real estate loans:
Mortgages	$	1,228	$	832	$	233	$	1,065	$	10
Home Equity		269		50		71		121		13
Commercial		12,510		10,517		1,452		11,969		333
Agricultural		4,842		1,641		3,175		4,816		146
Construction		-		-		-		-		-
Consumer		5		5		-		5		-
Other commercial loans		2,715		1,821		313		2,134		143
Other agricultural loans		1,468		102		1,309		1,411		158
State and political subdivision loans		-		-		-		-		-
Total	$	23,037	$	14,968	$	6,553	$	21,521	$	803

			Recorded		Recorded
	Unpaid		Investment		Investment		Total
	Principal		With No		With		Recorded		Related
December 31, 2018	Balance		Allowance		Allowance		Investment		Allowance
Real estate loans:
Mortgages	$	932	$	515	$	288	$	803	$	10
Home Equity		106		12		75		87		14
Commercial		16,326		11,933		1,394		13,327		216
Agricultural		5,598		2,386		3,206		5,592		84
Construction		-		-		-		-		-
Consumer		-		-		-		-		-
Other commercial loans		2,711		1,836		370		2,206		193
Other agricultural loans		1,487		120		1,315		1,435		159
State and political subdivision loans		-		-		-		-		-
Total	$	27,160	$	16,802	$	6,648	$	23,450	$	676

The following tables includes the average balance of impaired financing receivables by class and the income recognized on these receivables for the three and six month periods ended June 30, 2019 and 2018(in thousands):

	For the Six Months Ended
	June 30, 2019						June 30, 2018
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		Cash Basis		Investment		Recognized		Cash Basis
Real estate loans:
Mortgages	$	1,088	$	9	$	-	$	1,034	$	7	$	-
Home Equity		90		2		-		101		2		-
Commercial		11,699		230		11		13,814		242		8
Agricultural		5,205		56		-		4,135		100		-
Construction		-		-		-		-		-		-
Consumer		1		-		-		2		-		-
Other commercial loans		2,096		1		-		4,112		52		-
Other agricultural loans		1,424		4		-		1,356		19		-
State and political subdivision loans		-		-		-		-		-		-
Total	$	21,603	$	302	$	11	$	24,554	$	422	$	8

	For the Three Months Ended
	June 30, 2019						June 30, 2018
					Interest						Interest
	Average		Interest		Income		Average		Interest		Income
	Recorded		Income		Recognized		Recorded		Income		Recognized
	Investment		Recognized		Cash Basis		Investment		Recognized		Cash Basis
Real estate loans:
Mortgages	$	1,073	$	5	$	-	$	1,045	$	3	$	-
Home Equity		95		1		-		95		1		-
Commercial		10,849		111		5		13,833		120		3
Agricultural		4,835		24		-		4,185		49		-
Construction		-		-		-		-		-		-
Consumer		2		-		-		-		-		-
Other commercial loans		2,056		-		-		4,067		26		-
Other agricultural loans		1,416		2		-		1,342		9		-
State and political subdivision loans		-		-		-		-		-		-
Total	$	20,326	$	143	$	5	$	24,567	$	208	$	3

Financing Receivable Credit Exposures by Internally Assigned Grades

The following tables represent credit exposures by internally assigned grades as of June 30, 2019 and December 31, 2018 (in thousands):

June 30, 2019	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	328,915	$	10,477	$	7,999	$	39	$	-	$	347,430
Agricultural		271,630		14,714		7,988		-		-		294,332
Construction		20,950		-		-		-		-		20,950
Other commercial loans		72,705		1,015		2,391		68		-		76,179
Other agricultural loans		38,231		1,706		1,752		-		-		41,689
State and political subdivision loans		95,667		-		507		-		-		96,174
Total	$	828,098	$	27,912	$	20,637	$	107	$	-	$	876,754

December 31, 2018	Pass		Special Mention		Substandard		Doubtful		Loss		Ending Balance
Real estate loans:
Commercial	$	297,690	$	10,792	$	10,743	$	40	$	-	$	319,265
Agricultural		264,732		10,017		9,771		-		-		284,520
Construction		33,913		-		-		-		-		33,913
Other commercial loans		70,425		777		2,800		116		-		74,118
Other agricultural loans		38,628		1,724		1,834		-		-		42,186
State and political subdivision loans		92,666		9,481		571		-		-		102,718
Total	$	798,054	$	32,791	$	25,719	$	156	$	-	$	856,720

For residential real estate mortgages, home equity and consumer loans, credit quality is monitored based on whether the loan is performing or non-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, death or significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual, described in more detail below, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loan classes based on payment activity as of June 30, 2019 and December 31, 2018 (in thousands):

June 30, 2019	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	153,059	$	1,046	$	26	$	154,131
Home Equity		58,759		124		-		58,883
Consumer		9,852		2		-		9,854
Total	$	221,670	$	1,172	$	26	$	222,868

December 31, 2018	Performing		Non-performing		PCI		Total
Real estate loans:
Mortgages	$	155,360	$	1,099	$	28	$	156,487
Home Equity		58,736		82		-	$	58,818
Consumer		9,832		26		-	$	9,858
Total	$	223,928	$	1,207	$	28	$	225,163

Aging Analysis of Past Due Financing Receivables

The following table includes an aging analysis of the recorded investment of past due financing receivables as of June 30, 2019 and December 31, 2018

													Total		90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Financing		Greater and
June 30, 2019	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	271	$	90	$	491	$	852	$	153,253	$	26	$	154,131	$	103
Home Equity		172		33		107		312		58,571		-		58,883		50
Commercial		1,293		1,274		3,292		5,859		340,343		1,228		347,430		-
Agricultural		28		79		3,174		3,281		291,051		-		294,332		-
Construction		-		-		-		-		20,950		-		20,950		-
Consumer		40		31		2		73		9,781		-		9,854		2
Other commercial loans		196		26		1,924		2,146		73,713		320		76,179		20
Other agricultural loans		349		59		1,196		1,604		40,085		-		41,689		-
State and political
subdivision loans		-		-		-		-		96,174		-		96,174		-
Total	$	2,349	$	1,592	$	10,186	$	14,127	$	1,083,921	$	1,574	$	1,099,622	$	175

Loans considered non-accrual	$	92	$	1,250	$	10,011	$	11,353	$	1,181	$	-	$	12,534
Loans still accruing		2,257		342		175		2,774		1,082,740		1,574		1,087,088
Total	$	2,349	$	1,592	$	10,186	$	14,127	$	1,083,921	$	1,574	$	1,099,622

													Total		90 Days or
	30-59 Days		60-89 Days		90 Days		Total Past						Financing		Greater and
December 31, 2018	Past Due		Past Due		Or Greater		Due		Current		PCI		Receivables		Accruing
Real estate loans:
Mortgages	$	483	$	789	$	686	$	1,958	$	154,501	$	28	$	156,487	$	20
Home Equity		257		108		63		428		58,390		-		58,818		-
Commercial		999		631		4,706		6,336		311,608		1,321		319,265		36
Agricultural		121		-		3,184		3,305		281,215		-		284,520		-
Construction		-		-		-		-		33,913		-		33,913		-
Consumer		37		14		12		63		9,795		-		9,858		12
Other commercial loans		141		53		2,061		2,255		71,353		510		74,118		-
Other agricultural loans		-		-		1,201		1,201		40,985		-		42,186		-
State and political
subdivision loans		-		-		-		-		102,718		-		102,718		-

Total	$	2,038	$	1,595	$	11,913	$	15,546	$	1,064,478	$	1,859	$	1,081,883	$	68

Loans considered non-accrual	$	72	$	253	$	11,845	$	12,170	$	1,554	$	-	$	13,724
Loans still accruing		1,966		1,342		68		3,376		1,062,924		1,859		1,068,159
Total	$	2,038	$	1,595	$	11,913	$	15,546	$	1,064,478	$	1,859	$	1,081,883

Financing Receivables on Nonaccrual Status

The following table reflects the financing receivables, excluding PCI loans, on non-accrual status as of June 30, 2019 and December 31, 2018, respectively. The balances are presented by class of financing receivable (in thousands):

	June 30, 2019		December 31, 2018
Real estate loans:
Mortgages	$	943	$	1,079
Home Equity		74		82
Commercial		4,704		5,957
Agricultural		3,566		3,206
Construction		-		-
Consumer		-		14
Other commercial loans		1,998		2,185
Other agricultural loans		1,249		1,201
State and political subdivision		-		-
	$	12,534	$	13,724

Troubled Debt Restructurings on Financing Receivables

Loan modifications that are considered TDRs completed during the three and six months ended June 30, 2019 and 2018 were as follows (dollars in thousands):

	For the Three Months Ended June 30, 2019
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Mortgages		-		1	$	-	$	4	$	-	$	4
Home Equity		-		1		-		40		-		40
Commercial		-		4		-		222		-		222
Total		-		6	$	-	$	266	$	-	$	266

	For the Six Months Ended June 30, 2019
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Mortgages		-		1	$	-	$	4	$	-	$	4
Home Equity		-		1		-		40		-		40
Commercial		-		5		-		799		-		799
Total		-		7	$	-	$	843	$	-	$	843

	For the Three Months Ended June 30, 2018
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Home Equity		-		1	$	-	$	1	$	-	$	1
Commercial		-		1		-		577		-		577
Agricultural		-		1		-		1,523		-		1,523
Other agricultural loans		-		4		-		176		-		176
Total		-		7	$	-	$	2,277	$	-	$	2,277

	For the Six Months Ended June 30, 2018
	Number of contracts				Pre-modification Outstanding Recorded Investment				Post-Modification Outstanding Recorded Investment
	Interest Modification		Term Modification		Interest Modification		Term Modification		Interest Modification		Term Modification
Real estate loans:
Mortgages		-		1	$	-	$	7	$	-	$	7
Home Equity		-		1		-		1		-		1
Commercial		-		1		-		577		-		577
Agricultural		-		1		-		1,523		-		1,523
Other agricultural loans		-		4		-		176		-		176
Total		-		8	$	-	$	2,284	$	-	$	2,284

Subsequent Default Recorded Investment

The following table presents the recorded investment in loans that were modified as TDRs during each 12-month period prior to the current reporting periods, which began January 1, 2019 and 2018 (6 month periods) and April 1, 2019 and 2018 (3 month periods), respectively, and that subsequently defaulted during these reporting periods (dollars in thousands):

	For the Three Months Ended								For the Six Months Ended
	June 30, 2019				June 30, 2018				June 30, 2019				June 30, 2018
	Number of contracts		Recorded investment		Number of contracts		Recorded investment		Number of contracts		Recorded investment		Number of contracts		Recorded investment
Real estate loans:
Commercial		1	$	542		-	$	-		1	$	542		-	$	-
Agricultural		1		1,439		-		-		1		1,439		-		-
Other agricultural loans		3		137		-		-		4		261		-		-
Total recidivism		5	$	2,118		-	$	-		6	$	2,242		-	$	-

Allowance for Loan Losses by Impairment Method

The following table segregates the allowance for loan losses (ALLL) into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of June 30, 2019 and December 31, 2018, respectively (in thousands):

	June 30, 2019						December 31, 2018
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Real estate loans:
Residential	$	23	$	1,043	$	1,066	$	24	$	1,081	$	1,105
Commercial		333		4,067		4,400		216		3,899		4,115
Agricultural		146		4,386		4,532		84		4,180		4,264
Construction		-		36		36		-		58		58
Consumer		-		118		118		-		120		120
Other commercial loans		143		1,185		1,328		193		1,161		1,354
Other agricultural loans		158		583		741		159		593		752
State and political
subdivision loans		-		539		539		-		762		762
Unallocated		-		544		544		-		354		354
Total	$	803	$	12,501	$	13,304	$	676	$	12,208	$	12,884

Roll forward of Allowance for Loan Losses by Portfolio Segment

The following tables roll forward the balance of the ALLL by portfolio segment for the three and six months ended June 30, 2019 and 2018, respectively (in thousands):

	For the three months ended June 30, 2019
	Balance at March 31, 2019		Charge-offs			Recoveries		Provision			Balance at June 30, 2019
Real estate loans:
Residential	$	1,089	$	-		$	-	$	(23	)	$	1,066
Commercial		4,130		(93	)		-		363			4,400
Agricultural		4,392		-			-		140			4,532
Construction		32		-			-		4			36
Consumer		124		(8	)		7		(5	)		118
Other commercial loans		1,283		(38	)		2		81			1,328
Other agricultural loans		756		-			-		(15	)		741
State and political				-			-
subdivision loans		565		-			-		(26	)		539
Unallocated		713		-			-		(169	)		544
Total	$	13,084	$	(139	)	$	9	$	350		$	13,304

	For the six months ended June 30, 2019
	Balance at December 31, 2018		Charge-offs			Recoveries		Provision			Balance at June 30, 2019
Real estate loans:
Residential	$	1,105	$	-		$	-	$	(39	)	$	1,066
Commercial		4,115		(293	)		-		578			4,400
Agricultural		4,264		-			-		268			4,532
Construction		58		-			-		(22	)		36
Consumer		120		(22	)		18		2			118
Other commercial loans		1,354		(38	)		5		7			1,328
Other agricultural loans		752		-			-		(11	)		741
State and political
subdivision loans		762		-			-		(223	)		539
Unallocated		354		-			-		190			544
Total	$	12,884	$	(353	)	$	23	$	750		$	13,304

	For the three months ended June 30, 2018
	Balance at March 31, 2018		Charge-offs			Recoveries		Provision			Balance at June 30, 2018
Real estate loans:
Residential	$	1,077	$	(2	)	$	69	$	(99	)	$	1,045
Commercial		4,006		-			3		(215	)		3,794
Agricultural		3,340							333			3,673
Construction		39		-			-		5			44
Consumer		123		(6	)		7		(9	)		115
Other commercial loans		1,273		(46	)		11		28			1,266
Other agricultural loans		532		(7	)		-		64			589
State and political
subdivision loans		789		-			-		(22	)		767
Unallocated		408		-			-		240			648
Total	$	11,587	$	(61	)	$	90	$	325		$	11,941

	For the six months ended June 30, 2018
	Balance at December 31, 2017		Charge-offs			Recoveries		Provision			Balance at June 30, 2018
Real estate loans:
Residential	$	1,049	$	(17	)	$	69	$	(56	)	$	1,045
Commercial		3,867		-			3		(76	)		3,794
Agricultural		3,143		-					530			3,673
Construction		23		-			-		21			44
Consumer		124		(19	)		17		(7	)		115
Other commercial loans		1,272		(91	)		14		71			1,266
Other agricultural loans		492		(50	)		-		147			589
State and political
subdivision loans		816		-			-		(49	)		767
Unallocated		404		-			-		244			648
Total	$	11,190	$	(177	)	$	103	$	825		$	11,941